<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1998
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10
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GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
INSIGNIA/ESG HOLDINGS, INC.
(TO BE RENAMED "INSIGNIA FINANCIAL GROUP, INC.")
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 56-2084290
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
</TABLE>
200 PARK AVENUE, NEW YORK, NEW YORK 10166
(Address of Principal Executive Offices) (Zip Code)
(212) 984-8000
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE, INC.
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
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<PAGE> 2
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
INSIGNIA/ESG HOLDINGS, INC.
By: /s/ RONALD URETTA
----------------------------------
Ronald Uretta
Chief Operating Officer
Date: August 4, 1998
<PAGE> 3
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger by and
among Apartment Investment and Management Company, AIMCO
Properties, L.P., Insignia Financial Group, Inc. and
Insignia/ESG Holdings, Inc., dated as of May 26, 1998
(incorporated by reference to Exhibit 2.1 to the
registration statement on Form S-4 (the "Form S-4") filed by
Apartment Investment and Management Company on August 4,
1998)
2.2 Form of Agreement and Plan of Distribution by and between
Insignia Financial Group, Inc. and Insignia/ESG Holdings,
Inc. dated as of , 1998 (incorporated by
reference to Appendix A to the Information Statement
included in this registration statement on Form 10 filed by
Insignia/ESG Holdings, Inc. on August 4 , 1998 (the "Form
10"))
3.1 Certificate of Incorporation of Insignia/ESG Holdings, Inc.
3.2 By-laws of Insignia/ESG Holdings, Inc.
10.1 Asset and Stock Purchase Agreement, dated as of June 17,
1996, among Insignia Financial Group, Inc., Insignia Buyer
Corporation, Edward S. Gordon Company Incorporated, Edward
S. Gordon Company of New Jersey, Inc. and Edward S. Gordon
(incorporated herein by reference to Exhibit 10.15 of Form
10-K of Insignia Financial Group, Inc., dated March 24,
1998)
10.2 Stock Purchase Agreement, dated March 19, 1997, by and among
Insignia Commercial Group, Inc., Insignia Financial Group,
Inc., Kirkland B. Armour, Scott J. Brandwein, Harvey B.
Camins, James L. Deiter, Lyan Homewood Fender, Ronald T.
Frain, Jay Hinshaw, Thomas E. Moxley, Robert B. Rosen, James
H. Swartchild, Jr., David Tropp, Gregg F. Witt, Frain,
Camins & Swartchild Incorporated, FC&S Management Company
and Construction Interiors, Incorporated (incorporated
herein by reference to Exhibit 10.22 to Form 10-K of
Insignia Financial Group, Inc. filed March 24, 1998)
10.3 Stock Purchase Agreement, dated as of September 18, 1997, by
and among Insignia Financial Group, Inc., Insignia RO, Inc.,
Joseph T. Aveni, Vincent T. Aveni, James C. Miller, Richard
A. Golbach, Joseph T. Aveni as Trustee of the Joseph T.
Aveni Declaration of Trust dated April 25, 1988, as amended
on August 10, 1995, Vincent T. Aveni as Trustee of the
Vincent T. Aveni Declaration of Trust dated February 11,
1988, as restated on September 14, 1995, Joseph T. Aveni as
Trustee of the Vincent T. Aveni Declaration Trust, dated
July 13, 1994 and Vincent T. Aveni as Trustee of the Joseph
T. Aveni Declaration Trust, dated July 13, 1994
(incorporated herein by reference to Exhibit 10.27 to Form
10-K of Insignia Financial Group, Inc. filed March 24, 1998)
10.4 Deed of Warranty & Indemnity by and among Insignia Financial
Group, Inc. and each of the Shareholders of Richard Ellis
Group Limited dated February 25, 1998
10.5 Amended and Restated Indemnification Agreement by and
between AIMCO and Insignia/ESG Holdings, Inc. dated as of
May 26, 1998 (incorporated by reference to Exhibit 2.2 to
the Form S-4)
10.6 Form of Second Amended and Restated Employment Agreement,
dated as of July 31, 1998, by and between Insignia/ESG
Holdings, Inc., Insignia/ESG, Inc. and Stephen B. Siegel
10.7 Form of Employment Agreement by and between Insignia/ESG
Holdings, Inc. and Ronald Uretta, dated as of August 3, 1998
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
10.8 Employment Agreement, dated as of June 17, 1996, by and
among Insignia Financial Group, Inc., Insignia Buyer
Corporation and Edward S. Gordon (incorporated by reference
to Exhibit 10.16 to Form 10-K of Insignia Financial Group,
Inc. dated March 24, 1998)
10.9 Amendment No. 1 to Employment Agreement, dated April 1,
1997, by and among Insignia Financial Group, Inc.,
Insignia/Edward S. Gordon Co., Inc. and Edward S. Gordon
(incorporated by reference to Exhibit 10.24 to Form 10-K of
Insignia Financial Group, Inc. dated March 24, 1998)
10.10 Assignment, Assumption, Consent and Release Agreement by and
among Insignia Financial Group, Inc., Insignia/ESG Holdings,
Inc. and Edward S. Gordon, dated as of July 1, 1998 (Exhibit
A thereto is omitted because it is the same document as
Exhibit 10.7 to this Form 10)
10.11 Form of Employment Agreement by and between Insignia/ESG
Holdings, Inc. and Andrew L. Farkas dated as of August 3,
1998
10.12 Form of Employment Agreement by and between Insignia/ESG
Holdings, Inc. and Frank M. Garrison, dated as of August 3,
1998.
10.13 Form of Employment Agreement by and between Insignia/ESG
Holdings, Inc. and James A. Aston, dated as of August 3,
1998.
10.14 Insignia/ESG Holdings, Inc. 1998 Stock Incentive Plan
10.15 Insignia/ESG Holdings, Inc. 1998 Supplemental Stock Purchase
and Loan Program Under the Insignia/ESG Holdings, Inc. 1998
Stock Incentive Plan
10.16 Insignia/ESG Holdings, Inc. Executive Performance Incentive
Plan
10.17 Insignia/ESG Holdings, Inc. 1998 Employee Stock Purchase
Plan
10.18 Form of Indemnification Agreement to be entered into
separately by and between Insignia/ESG Holdings, Inc. and
each of the directors and executive officers listed on the
schedule annexed thereto
10.19 Technical Services Agreement, dated as of June 29, 1998, by
and among Insignia Financial Group, Inc., Insignia/ESG
Holdings, Inc. and Apartment Investment and Management
Company
10.20 Amendment No. 1 to Technical Services Agreement, dated as of
July 28, 1998, 1998, by and among Insignia Financial Group,
Inc., Insignia/ESG Holdings, Inc. and Apartment Investment
and Management Company
21.1 Subsidiaries of Insignia/ESG Holdings, Inc.
27.1 Financial Data Schedule for the year ended December 31, 1997
and for the three months ended March 31, 1998 (for SEC use
only)
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
INSIGNIA/ESG HOLDINGS, INC.
-----------------------------------------------------
FIRST. The name of the Corporation is "Insignia/ESG Holdings,
Inc."
SECOND. The address of the Corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH. Authorized Shares:
1. The aggregate number of shares which the Corporation shall
have authority to issue is 100,000,000, of which 80,000,000 shares
shall be designated "Common Stock,"
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and shall have a par value of $.01 per share and 20,000,000 shares
shall be designated "Preferred Stock," and shall have a par value of
$.01 per share.
2. The Board of Directors is authorized to provide for the
issuance of Preferred Stock from time to time in one or more series
with such distinctive voting powers, designations, preferences, rights,
qualifications, limitations and restrictions of each such series as the
Board of Directors shall establish. The authority of the Board of
Directors with respect to each such series shall include, without
limiting the generality of the foregoing, the determination of any or
all of the following:
(a) the number of shares constituting such series and the
distinctive designation of such series;
(b) the extent, if any, to which the shares of such
series shall have voting rights;
(c) whether dividends, if any, with respect to such
series shall be cumulative or noncumulative, the
dividend rate or method of determining the dividend
rate of such series, and the dates and preferences of
dividends on such series;
(d) the rights of the shares of such series in the event
of voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, or upon any
distribution of the Corporation's assets;
(e) whether the shares of such series shall have
conversion privileges and, if so, the terms and
conditions of such conversion privileges, including a
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provision, if any, for adjustment of the conversion
rate and for payment of additional amounts by holders
of Preferred Stock of such series upon exercise of
such conversion privileges;
(f) whether or not the shares of such series shall be
redeemable, and, if so, the price at and the terms
and conditions upon which such shares shall be
redeemable, and whether such series shall have a
sinking fund for the redemption or purchase of shares
of such series, and, if so, the terms and amount of
such sinking fund; and
(g) any other preference and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, in each case as
shall be determined from time to time by the Board of
Directors and as shall be stated in a resolution or
resolutions thereof providing for the issuance of
such Preferred Stock (a "Preferred Stock
Designation").
Except as may be provided by the Board of Directors in a
Preferred Stock Designation or as required by law, shares of any series
of Preferred Stock that have been redeemed (whether through the
operation of a sinking fund or otherwise) or purchased by the
Corporation, or which, if convertible or exchangeable, have been
converted into or exchanged for shares of stock of any other class or
classes, shall have the status of authorized and unissued shares of
Preferred Stock and may be reissued as a part of the series of which
they were originally a part or may be reissued as part of a new series
of
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Preferred Stock to be created by resolution or resolutions of the Board
of Directors or as part of any other series of Preferred Stock.
3. Except as otherwise provided herein, as required by law or
in any resolution of the Board of Directors (or a duly authorized
committee thereof) creating any series of Preferred Stock, the holders
of shares of Preferred Stock and all series thereof who are entitled to
vote shall vote together with the holders of shares of Common Stock,
and not separately by class.
FIFTH. The name and mailing address of the incorporator is
Jeffrey P. Cohen, Insignia Financial Group, Inc., 375 Park Avenue, Suite 3401,
New York, New York 10152. The powers of the incorporator are to terminate upon
the filing of this Certificate of Incorporation.
SIXTH. Board of Directors:
1. Management. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
The Board of Directors may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by
statute or this Certificate of Incorporation directed or required to be
exercised or done by the stockholders. In taking action, including
without limitation action which may involve or relate to a change or
potential change in the control of the Corporation, a director shall be
entitled to consider, without limitation, (1) both the long-term and
the short-term interests of the Corporation and its stockholders and
(2) the effects that the
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Corporation's actions may have in the long-term and in the short-term
upon any of the following:
(a) the prospects for potential growth, development,
productivity and profitability of the Corporation;
(b) the Corporation's current employees;
(c) the Corporation's retired employees and other
beneficiaries receiving or entitled to receive
retirement, welfare or similar benefits from or
pursuant to any plan sponsored, or agreement entered
into, by the Corporation;
(d) the Corporation's customers and creditors; and
(e) the ability of the Corporation to provide, as a going
concern, goods, services, employment opportunities
and employment benefits and otherwise to contribute
to the communities in which it does business.
Nothing in this paragraph shall create any duties owed by any
director to any person or entity to consider or afford any particular
weight to any of the foregoing.
For purposes of this paragraph, "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the corporation, whether
through the ownership of voting stock, by contract or otherwise.
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<PAGE> 6
2. Number of Directors. The number of directors of the
Corporation shall be fixed from time to time by action of not less than
a majority of the members of the Board of Directors then in office,
even if less than a quorum, but in no event shall be less than three.
The number of directors constituting the initial Bboard of Directors is
six, and the persons who are to serve as director until the applicable
annual meeting of stockholders or until their respective successors are
elected and qualified are Andrew L. Farkas, Stephen B. Siegel, Robin L.
Farkas, Robert J. Denison, Andrew J.M. Huntley and Robert G. Koen. The
mailing address of each is: c/o Insignia/ESG Holdings, Inc., 200 Park
Avenue, New York, New York 10166.
3. Classes of Directors. The directors shall be divided into
three classes, designated Class I, Class II and Class III. The initial
directors of each class are as follows:
<TABLE>
<CAPTION>
Name Class
---- -----
<S> <C>
Andrew L. Farkas Class III
Stephen B. Siegel Class III
Robin L. Farkas Class II
Robert J. Denison Class II
Andrew J.M. Huntley Class I
Robert G. Koen Class I
</TABLE>
The directors of Class I shall hold office for a term expiring
at the first annual meeting of the stockholders following the adoption
of this Certificate of Incorporation. The directors of Class II shall
hold office for a term expiring at the second annual meeting
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<PAGE> 7
of the stockholders following the adoption of this Certificate of
Incorporation. The directors of Class III shall hold office for a term
expiring at the third annual meeting of the stockholders following the
adoption of this Certificate of Incorporation.
Commencing with the first annual meeting of stockholders
following the adoption of this Certificate of Incorporation, and at
each subsequent annual meeting of stockholders, directors for each
class whose term shall then expire shall be elected to hold office for
a three year term. In the case of increase in the number of directors,
the number of directors in each class shall be as nearly equal as
possible. As to any directors added by increase in the number of
directors prior to the first annual meeting of stockholders following
the adoption of this Certificate of Incorporation, the class of such
directors shall be designated by the then-current Board of Directors.
4. Vacancies in Board of Directors. Newly created
directorships resulting from any increase in the authorized number of
directors, or any vacancies in the Board of Directors resulting from
death, resignation, disqualification or removal may be filled only by a
majority vote of the directors then in office, even if less than a
quorum, or by a sole remaining director; and any director so chosen
shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which he has
been elected expires and until such director's successor shall have
been duly elected and qualified.
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SEVENTH. The By-laws of the Corporation may be adopted,
amended or repealed by the Board of Directors or by the affirmative vote of not
less than eighty percent (80%) of the aggregate voting power of the outstanding
stock of the Corporation, except as and to the extent provided in this
Certificate of Incorporation or in the By-laws.
EIGHTH. The Corporation shall not enter into any Transaction
(as hereinafter defined) with or benefitting any Interested Stockholder (as
hereinafter defined) unless (a) the Transaction has been approved by the
affirmative vote of not less than eighty percent (80%) of the aggregate voting
power of the outstanding stock of the Corporation or (b) the Continuing
Directors (as hereinafter defined) by a two-thirds vote thereof have expressly
approved the Transaction. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a lesser
percentage may be specified by law, the rules of any national securities
exchange or otherwise.
For these purposes:
The term "Continuing Director" shall mean a director
who is not affiliated with an Interested Stockholder and either (i) was
a member of the Board of Directors of the Corporation immediately prior
to the time that such Interested Stockholder became an Interested
Stockholder or (ii) was elected by or recommended for election by a
majority of the then Continuing Directors in office at the time such
director was elected or nominated for election.
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The term "Interested Stockholder" shall mean any
person or group (other than (i) a trustee of an employee benefit plan
of the Corporation, (ii) a trustee of an employee benefit plan of an
affiliate of the Corporation, and (iii) Andrew L. Farkas and his
affiliates) that is the beneficial owner of more than ten percent (10%)
of the voting power of the Corporation (those of the foregoing terms
which are defined in the rules under Section 13 of the Exchange Act
shall have the same meanings as set forth in such rules).
When used in reference to the Corporation and any
Interested Stockholder, the term "Transaction" shall mean:
(i) any merger or consolidation of the Corporation or
any direct or indirect majority-owned subsidiary of the
Corporation (A) with such Interested Stockholder or (B) with
any other corporation if the merger or consolidation is caused
by such Interested Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions), except proportionately as a stockholder of
the Corporation, to or with such Interested Stockholder,
whether as part of a dissolution or otherwise, of assets of
the Corporation or of any direct or indirect majority-owned
subsidiary of the Corporation, which assets have an aggregate
market value equal to ten percent (10%) or more of either the
aggregate
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market value of all the assets of the Corporation determined
on a consolidated basis or the aggregate market value of all
the outstanding stock of the Corporation;
(iii) any transaction involving the Corporation or
any direct or indirect majority-owned subsidiary of the
Corporation which has the effect, directly or indirectly, of
increasing the proportionate share of the stock of any class
or series, or securities convertible into the stock of any
class or series, of the Corporation or of any such subsidiary
which is owned by such Interested Stockholder, except (A) as a
result of immaterial changes due to fractional share
adjustments, (B) as a result of any purchase or redemption of
any shares of stock not caused, directly or indirectly, by
such Interested Stockholder or (C) pursuant to the exercise,
exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the Corporation
or any such subsidiary which securities were outstanding prior
to the time that such Interested Stockholder became such; or
(iv) any receipt by the Interested Stockholder of the
benefit, directly or indirectly (except proportionately as a
stockholder of such corporation), of any loans, advances,
guarantees, pledges or other financial benefits (other than
those expressly permitted in subparagraph (iii) above)
provided by or through the Corporation or any direct or
indirect majority-owned subsidiary of the Corporation.
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NINTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation; provided,
however, that this Article NINTH and Article SIXTH, Article SEVENTH, Article
TENTH, Article ELEVENTH, Article TWELFTH, Article THIRTEENTH Article FOURTEENTH,
and Article FIFTEENTH may be amended, altered or repealed, and any provision
inconsistent therewith may be adopted, only by the affirmative vote of not less
than eighty percent (80%) of the aggregate voting power of the outstanding stock
of the Corporation.
TENTH. Any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (whether or not by or
in the right of the Corporation), by reason of the fact that he is or was a
director, officer, incorporator, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
incorporator, employee, partner, trustee, member or agent of another
corporation, partnership, joint venture, trust, limited liability company or
other enterprise (including an employee benefit plan), shall be entitled to be
indemnified by the Corporation to the full extent then permitted by law against
expenses (including counsel fees and disbursements), judgments, fines (including
excise taxes assessed on a person with respect to an employee benefit plan) and
amounts paid in settlement incurred by him in connection with such action, suit
or proceeding. Such right of indemnification shall inure whether or not the
claim asserted is based on matters which arose prior to the adoption of this
Article TENTH. Such right of indemnification shall continue as to a person
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who has ceased to be a director, officer, incorporator, employee, partner,
trustee, member or agent and shall inure to the benefit of the heirs and
personal representatives of such a person. The indemnification provided by this
Article TENTH shall not be deemed exclusive of any other rights which may be
provided now or in the future under any provision currently in effect or
hereafter adopted of the By-laws, by any agreement, by vote of stockholders, by
resolution of disinterested directors, by provision of law or otherwise.
Notwithstanding the foregoing, the Corporation shall be required to indemnify a
person in connection with the proceeding initiated by such person only if such
proceeding was authorized by the Board of Directors.
ELEVENTH. No director of the Corporation shall be liable to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that this provision does not
eliminate the liability of any director (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of Title 8 of the Delaware Code, or
(iv) for any transaction from which the director derived an improper personal
benefit. For purposes of the prior sentence, the term "damages" shall, to the
extent permitted by law, include without limitation any judgment, fine, amount
paid in settlement, penalty, punitive damages, excise or other tax assessed with
respect to an employee benefit plan or expense of any nature (including without
limitation counsel fees and disbursements). Each person who serves as a director
of the Corporation while this Article ELEVENTH is in effect shall be deemed to
be doing so in reliance on the provisions of this Article ELEVENTH and neither
the amendment or repeal of this Article ELEVENTH nor the
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adoption of any provision of this Certificate of Incorporation inconsistent with
this Article ELEVENTH shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for, arising out of, based
upon or in connection with any acts or omissions of such director occurring
prior to such amendment, repeal or adoption of an inconsistent provision. The
provisions of this Article ELEVENTH are cumulative and shall be in addition to
and independent of any and all other limitations on or eliminations of the
liabilities of directors of the Corporation, as such, whether such limitations
or eliminations arise under or are created by any law, rule, regulation, By-law,
agreement, vote of stockholders or disinterested directors or otherwise.
TWELFTH. At the annual meeting of stockholders only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been properly brought before the annual meeting of stockholders (i)
by or at the direction of the Board of Directors or (ii) by a stockholder of the
Corporation in accordance with the procedures set forth in the By-laws. The
chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that the business was not properly brought before the meeting in
accordance with the procedures set forth in this Certificate of Incorporation or
in the By-laws, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted. Notwithstanding the foregoing, nothing in this Article TWELFTH
shall be interpreted or construed to require the inclusion of information about
any stockholder proposal in any proxy statement distributed by, at the direction
of or on behalf of the Board of Directors.
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<PAGE> 14
THIRTEENTH. Special meetings of stockholders may be called
only by such persons, and in accordance with such procedures, as set forth in
the By-laws. At a special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
properly brought before the special meeting of stockholders by such persons, and
in accordance with such procedures, as set forth in the By-laws. The chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that the business was not properly brought before the meeting in accordance with
the procedures set forth in this Certificate of Incorporation or in the By-laws,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
FOURTEENTH. No action required or permitted to be taken at a
meeting of the stockholders of the Corporation may be taken without a meeting,
prior notice and a vote. No action by written consent of the stockholders shall
be permitted or effective.
FIFTEENTH. Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be
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<PAGE> 15
summoned in such manner as such court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, such
compromise or arrangement or such reorganization shall, if sanctioned by the
court to which such application has been made, be binding on all the creditors
or class of creditors and/or on all the stockholders or class of stockholders,
as the case may be, of the Corporation and also on the Corporation.
IN WITNESS WHEREOF, I have made, signed and sealed this
Certificate of Incorporation on the 6th day of May, 1998.
/s/ Jeffrey P. Cohen
------------------------------
Jeffrey P. Cohen, Incorporator
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<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
INSIGNIA/ESG HOLDINGS, INC.
Effective as of May 6, 1998
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meetings.
(a) Annual meetings of the stockholders shall be held at such
dates and times as determined by the Board of Directors.
(b) If present at the meeting, the Chairman of the Board shall
serve as chairman of the meeting. If the Chairman of the Board is not present
at the meeting, the Chief Executive Officer shall serve as chairman of the
meeting. If the Chief Executive Officer is not present at the meeting, the
President shall serve as chairman of the meeting. If the President is not
present at the meeting, a majority of the members of the Board of Directors
present at the meeting shall select a chairman of the meeting.
(c) At each annual meeting the stockholders shall elect qualified
successors for directors whose terms have expired or are due to expire within
six months after the date of the meeting and may transact any other business
described in Subsection (d) of this Section 1.01; provided, however, that no
business with respect to which special notice is required by law shall be
transacted unless such notice shall have been given.
(d) At the annual meeting of stockholders only such business shall
be conducted, and only such proposals shall be acted upon, as shall have been
properly brought before the annual meeting of stockholders (i) by or at the
direction of the Board of Directors or (ii) by a stockholder of the Corporation
in accordance with the procedures set forth in this Subsection (d) of Section
1.01. For business or a proposal to be properly brought before an annual
meeting of stockholders by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than fifty (50)
days nor more than eighty (80) days prior to the scheduled date of the annual
meeting, regardless of any postponement, deferral or adjournment of that
meeting to a later date; provided, however, that if less than sixty (60) days'
notice or prior public disclosure of the date of the annual meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
delivered or mailed and received not later than the close of business on the
tenth (10th) day following the earlier of (i) the day on which such notice of
the date of the meeting was mailed or (ii) the day on which such public
disclosure was made. A
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stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before an annual meeting of stockholders (i) a
description, in 500 words or less, of the business or proposal desired to be
brought before the annual meeting, (ii) the name and address, as such
information appears on the Corporation's books, of the stockholder proposing
such business and any other stockholder known by such stockholder to be
supporting such proposal, (iii) the class and number of shares of the
Corporation that are beneficially owned by such stockholder and each other
stockholder to be supporting such proposal on the date of such stockholder's
notice, (iv) a description, in 500 words or less, of any interest of the
stockholder in such proposal, and (v) a representation that the stockholder is
a holder of record of stock of the Corporation and intends to appear in person
or by proxy at the meeting to present the proposal specified in the notice.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that the business or proposal was not properly brought before
the meeting in accordance with these procedures, and if he should so determine
he shall so declare to the meeting and any such business or proposal not
properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing, nothing in this Section 1.01 shall be interpreted or construed
to require the inclusion of information about any stockholder business or
proposal in any proxy statement distributed by, at the direction of, or on
behalf of, the Board of Directors.
Section 1.02 Special Meetings:
(a) Special meetings of stockholders may be called only by the
Board of Directors, the Chairman of the Board, the Chief Executive Officer or
the President of the Corporation. Any such call for a special meeting shall
state the purpose or purposes of the proposed meeting. The business transacted
at a special meeting of stockholders shall be limited to the purposes stated in
the notice of the meeting. Business transacted at a special meeting shall be
confined to the purpose or purposes stated in the notice of meeting distributed
to stockholders.
(b) If present at the meeting, the Chairman of the Board shall
serve as chairman of the meeting. If the Chairman of the Board is not present
at the meeting, the Chief Executive Officer shall serve as chairman of the
meeting. If the Chief Executive Officer is not present at the meeting, the
President shall serve as chairman of the meeting. If the President is not
present at the meeting, a majority of the members of the Board of Directors
present at the meeting shall select a chairman of the meeting.
Section 1.03 Place of Meetings. Each meeting of the stockholders
shall be held at the principal executive office of the Corporation or at such
other place, within or without the State of Delaware, as may be designated by
the Board of Directors, the Chairman of the Board, the Chief Executive Officer
or the President.
Section 1.04 Adjournments. Any meeting of the stockholders may be
adjourned from time to time to another date, time and place. If any meeting of
the stockholders is so adjourned, no notice as to such adjourned meeting need
be given if the date, time and place at which the meeting will be reconvened
are announced at the time of adjournment.
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Section 1.05 Notice of Meetings. Unless otherwise required by
law, written notice of each meeting of the stockholders, stating the date, time
and place and, in the case of a special meeting, the purpose or purposes, shall
be given at least 10 days and not more than 60 days prior to the meeting to
every holder of shares entitled to vote at such meeting, except as specified in
Section 1.04 or as otherwise permitted by law. If action is proposed to be
taken that might entitle stockholders to payment for their shares, the notice
shall include a statement of that purpose and to that effect.
Section 1.06 Waiver of Notice. A stockholder may waive notice of
the date, time, place and purpose or purposes of a meeting of stockholders. A
waiver of notice by a stockholder entitled to notice is effective whether given
before, at or after the meeting, and whether given in writing, orally or by
attendance. Attendance by a stockholder at a meeting is a waiver of notice of
that meeting, unless the stockholder objects at the beginning of the meeting to
the transaction of business because the meeting is not lawfully called or
convened, or objects before a vote on an item of business because the item may
not lawfully be considered at that meeting and does not participate in the
consideration of the item at that meeting.
Section 1.07 Voting Rights; Acts of Stockholders. (a) Except as
otherwise required by law or by the Certificate of Incorporation, a stockholder
shall have one vote for each share held which is entitled to vote, and a
stockholder entitled to vote may vote any portion of the shares in any way such
stockholder chooses. If a stockholder votes without designating the proportion
or number of shares voted in a particular way, such stockholder shall be deemed
to have voted all of the shares in that way.
(b) Except as otherwise required by law, regulation, the
Certificate of Incorporation or the rules of any applicable stock exchange,
corporate action to be taken by a stockholder vote, other than the election of
directors, shall be authorized by a majority of the voting power of the shares
present and entitled to vote on that item of business at a duly held meeting of
stockholders.
(c) All elections for directors shall be decided by a plurality of
the votes cast at a meeting of stockholders by the holders of shares entitled
to vote in the election.
Section 1.08 Fixing Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date for
any such determination of stockholders. Such date shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. If no record date is fixed, one shall be determined
in accordance with the provisions of law.
Section 1.09 Proxies.
(a) A stockholder may cast or authorize the casting of a vote by
filing a written appointment of a proxy with an officer of the Corporation at
or before the meeting at which the appointment is to be effective. The
stockholder may sign or authorize the written appointment by telegram,
cablegram or other means of electronic transmission setting forth or submitted
with information
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sufficient to determine that the stockholder authorized such transmission. Any
copy, facsimile, telecommunication or other reproduction of the original of
either the writing or transmission may be used in lieu of the original,
provided that it is a complete and legible reproduction of the entire original.
No proxy shall be valid after expiration of three years from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the stockholder executing it, except as otherwise provided in such
proxy or required by law.
(b) A stockholder voting by proxy authorized to vote on less than all
items of business considered at the meeting shall be considered to be present
and entitled to vote only with respect to those items of business for which the
proxy has authority to vote. A proxy who is given authority by a stockholder
who abstains with respect to an item of business shall be considered to have
authority to vote on that item of business.
Section 1.10 Quorum.
(a) Except as otherwise required by law, the Certificate of
Incorporation or by these By-laws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the Corporation entitled to
vote shall constitute a quorum at all meetings of the stockholders, provided
that when a specified item of business is required to be voted on by a class or
classes, the holders of a majority of the shares of such class or classes shall
constitute a quorum for the transaction of such specified item of business.
(b) When a quorum is once present to organize a meeting, it will
not be deemed broken by the subsequent withdrawal of any stockholders.
(c) In case a quorum shall not be present at any meeting, a
majority in interest of the stockholders entitled to vote thereat, present in
person or by proxy, shall have power to adjourn the meeting until the requisite
amount of stock entitled to vote shall be present.
ARTICLE II
DIRECTORS
Section 2.01 Qualifications. Except as may otherwise be required
by law or provided in the Certificate of Incorporation, the business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, the members of which shall be at least 21 years of age.
Directors shall be natural persons.
Section 2.02 Number. The Board of Directors shall consist of not
less than three directors. The number of directors shall initially be six, and
thereafter shall be determined from time to time solely by a resolution adopted
by an affirmative vote of a majority of the entire Board of Directors.
Section 2.03 Newly Created Directorships and Vacancies. Unless
otherwise provided in the Certificate of Incorporation, any newly created
directorship resulting from an increase in the number of directors and any
vacancy occurring on the Board for any reason may be filled for the
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unexpired term by a majority vote of the remaining directors, even if less than
a quorum, or by a sole remaining director. If there are no directors then in
office due to such a vacancy, the stockholders may elect a successor who shall
hold office for the unexpired term. No decrease in the number of directors
shall shorten the term of any incumbent directors.
Section 2.04 Nominations.
(a) Nominations of persons for election to the Board of Directors
may be made at an annual meeting of stockholders or special meeting of
stockholders called by the Board of Directors for the purpose of electing
directors. Nominations may be made only (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the Corporation entitled to
vote for the election of directors at such meeting who complies with the notice
procedures set forth in this Section 2.04. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant
to timely notice in writing to the Secretary of the Corporation. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than fifty (50) days
nor more than eighty (80) days prior to the scheduled date of the stockholders'
meeting, regardless of any postponement, deferral or adjournment of that
meeting to a later date; provided, however, that if less than sixty (60) days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so delivered or
mailed and received not later than the close of business on the tenth (10th)
day following the earlier of (i) the day on which such notice of the date of
the meeting was mailed or (ii) the day on which such public disclosure was
made.
(b) A stockholder's notice to the Secretary shall set forth: (i)
as to each person whom the stockholder proposes to nominate for election or
reelection as a director, (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the Corporation which are
beneficially owned by such person on the date of such stockholder's notice, and
(D) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or any successor statute thereto
(the "Exchange Act"), including without limitation such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected; (ii) as to the stockholder giving notice, (A) the name and
address, as such information appears on the Corporation's books, of such
stockholder and any other stockholders known by such stockholder to be
supporting such nominee(s), (B) the class and number of shares of the
Corporation which are beneficially owned by such stockholder and each other
stockholder known by such stockholder to be supporting such nominee(s) on the
date of such stockholder notice, and (C) a representation that the stockholder
is a holder of record of stock of the Corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; and (iii) a description of all
arrangements or understandings between the stockholder and each nominee and
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder.
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(c) Subject to the rights, if any, of the holders of any series of
Preferred Stock then outstanding, no person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth in this Section 2.04. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 2.04, and if he
should so determine he shall so declare to the meeting and the defective
nomination shall be disregarded.
Section 2.05 Removal. No member of the Board of Directors shall
be removed from the Board of Directors prior to the expiration of the term of
his class other than for Cause. No member of the Board of Directors shall be
removed from the Board of Directors prior to the expiration of the term of his
class other than at an annual meeting of stockholders, or a special meeting of
the stockholders the notice of which shall state that the removal of a director
or directors is among the purposes of the meeting. At such meeting, the
affirmative vote of the holders of a majority of all the shares of stock
outstanding and entitled to vote may remove such director or directors for
Cause. For the purposes of this Section 2.05, "Cause" shall mean a judicial
determination that the director (i) breached the duty of loyalty owed by a
director to the Corporation or its stockholders or (ii) committed acts or
omissions which involved intentional misconduct or a knowing violation of law.
Section 2.06 Resignation. Any director may resign at any time.
Such resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the Board of Directors, the Chief Executive Officer, the President or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
Section 2.07 Place of Meetings; Means of Participation.
(a) Each meeting of the Board of Directors shall be held at the
principal executive office of the Corporation or at such other place as may be
designated from time to time by the Chairman of the Board, by a majority of the
members of the Board, by the Chief Executive Officer or by the President.
(b) Any director or directors may participate in a Board of
Directors meeting by any means of communication through which the director,
other directors so participating and all directors, if any, physically present
at the meeting may simultaneously hear each other during the meeting. A
director so participating shall be deemed present in person at the meeting.
Section 2.08 Chairman of the Board. The directors may elect one
of their members to be Chairman of the Board of Directors. The Chairman shall
be subject to the control of and may be removed by the Board of Directors. He
shall perform such duties as may from time to time be assigned to him by the
Board of Directors. The Chairman of the Board, in such capacity, shall not be
an officer of the Corporation.
Section 2.09 Notice of Meetings of the Board. Annual meetings of
the Board of Directors may be held without notice at such places and times as
shall be determined from time to time by the
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Chairman of the Board or by resolution of the directors. Special meetings of
the Board of Directors shall be held upon notice to the directors and may be
called by the Chairman of the Board, the Chief Executive Officer or the
President upon three days' notice to each director either personally or by mail
or by wire; special meetings shall be called by the Chairman of the Board, the
President or the Secretary in a like manner on the written request of a
majority of the directors.
Section 2.10 Waiver of Notice; Previously Scheduled Meetings.
(a) A director of the Corporation may waive notice of the date,
time and place of a meeting of the Board of Directors. A waiver of notice by a
director entitled to notice is effective whether given before, at or after the
meeting, and whether given in writing, orally or by attendance. Attendance by
a director at a meeting is a waiver of notice of that meeting, unless the
director objects at the beginning of the meeting to the transaction of business
because the meeting is not lawfully called or convened and thereafter does not
participate in the meeting.
(b) If the date, time and place of a Board of Directors meeting
have been provided herein or announced at a previous meeting of the Board of
Directors, no notice is required. Notice of an adjourned meeting need not be
given other than by announcement at the meeting at which adjournment is taken
of the date, time and place at which the meeting will be reconvened.
Section 2.11 Quorum. The presence in person of a majority of the
directors currently holding office shall be necessary to constitute a quorum
for the transaction of business. In the absence of a quorum, a majority of the
directors present may adjourn a meeting from time to time without further
notice until a quorum is present. If a quorum is present when a duly called or
held meeting is convened, the directors present may continue to transact
business until conclusion of the meeting, even though the withdrawal of a
number of the directors originally present leaves less than the proportion or
number otherwise required for a quorum.
Section 2.12 Acts of Board of Directors. Except as otherwise
required by law or specified in the Certificate of Incorporation or these
By-laws, the Board of Directors shall take action by the affirmative vote of a
majority of the directors present at a duly held meeting.
Section 2.13 Action Without a Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting by written action signed by all of the directors. The
written action will be effective when signed by all of the directors, unless a
different effective time is provided in the written action.
Section 2.14 Committees.
(a) A resolution approved by the affirmative vote of a majority of
the Board of Directors may establish committees having the authority of the
Board of Directors in the management of the business of the Corporation only
to the extent provided in the resolution. Committees shall be subject at all
times to the direction and control of the Board of Directors.
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(b) A committee shall consist of one or more directors, appointed
by affirmative vote of a majority of the directors present at a duly held Board
of Directors meeting.
(c) Sections 2.06 to 2.13 of these By-laws shall apply to
committees and members of committees to the same extent as those sections apply
to the Board of Directors and directors.
(d) Minutes, if any, of committee meetings shall be made available
upon request to members of the committee and to any director.
Section 2.16 Compensation. The Board of Directors may fix the
compensation, if any, of directors and of committee members.
ARTICLE III
OFFICERS
Section 3.01 Executive Officers. The Board of Directors shall elect
or appoint one or more natural persons to hold the following executive offices
of the Corporation: Chief Executive Officer, President, Chief Financial
Officer, Treasurer and Secretary; and may, as it deems necessary or advisable
for the operation and management of the Corporation, elect or appoint one or
more natural persons to hold the following additional executive offices of the
Corporation: Office of the Chairman, Executive Vice President, Controller,
Chief Operating Officer and Chief Information Officer (the foregoing executive
offices of the Corporation are referred to herein as "Executive Offices," and
the persons holding such offices are referred to as "Executive Officers"). The
Executive Officers shall have the powers, rights, duties and responsibilities
set forth in these By-laws (unless otherwise determined by the Board of
Directors), as well as such additional powers, rights, duties and
responsibilities as may be prescribed by the Board of Directors from time to
time.
(a) Chief Executive Officer. Unless provided otherwise by a
resolution adopted by the Board of Directors, the Chief Executive Officer shall
(a) have general active management of the business of the Corporation, (b) when
present, preside at all meetings of the stockholders, (c) see that all orders
and resolutions of the Board are carried into effect, and (d) perform such
other duties as may from time to time be assigned by the Board. In addition,
the Chief Executive Officer may maintain records and certify proceedings of the
stockholders.
(b) President. Unless otherwise determined by the Board of
Directors, the President shall be the Chief Executive Officer of the
Corporation. If a person other than the President is designated Chief
Executive Officer, the President shall be responsible for the day-to-day
management of the business and affairs of the Corporation, shall enjoy all
other powers commonly incident to the office, and shall perform such duties as
may from time to time be assigned by the Board of Directors. During the
absence or disability of the Chief Executive Officer, it shall be the duty of
the President to perform the duties of Chief Executive Officer.
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(c) Chief Financial Officer. Unless provided otherwise by
resolution adopted by the Board of Directors, the Chief Financial Officer shall
have the care and custody of all funds and securities of the Corporation, and
shall oversee (a) the maintenance of accurate financial records for the
Corporation, (b) the deposit of all monies, drafts and checks in the name of
and to the credit of the Corporation in such banks and depositories as the
Board shall designate from time to time, (c) the endorsement for deposit all
notes, checks and drafts received by the Corporation as ordered by the Board of
Directors, and the making of proper vouchers therefor and (d) the disbursement
of corporate funds and issuance of checks and drafts in the name of the
Corporation, as ordered or authorized by the Board of Directors. The Chief
Financial Officer shall render to the Chief Executive Officer, the President
and the Board of Directors, whenever requested, an account of all of the
foregoing transactions and of the financial condition of the Corporation, and
shall have such other rights and powers and perform such other duties as may be
prescribed by the Board of Directors, the Chief Executive Officer or the
President from time to time.
(d) Office of the Chairman. Any member of the Office of the
Chairman shall have such rights and powers and perform such duties as may from
time to time be assigned by the Board of Directors.
(e) Executive Vice Presidents. An Executive Vice Presidents shall
have such rights and powers and perform such duties as may from time to time be
prescribed by the Board of Directors, the Chief Executive Officer or the
President. During the absence or disability of the President, it shall be the
duty of the highest ranking Executive Vice President who shall be present at
the time and able to act, to perform the duties of the President. The
determination of who is the highest ranking of two or more Executive Vice
Presidents shall, in the absence of specific designation of order of rank by
the Board of Directors or the Chief Executive Officer, be made on the basis of
the earliest date of appointment or election, or, in the event of simultaneous
appointment or election, on the basis of the longest continuous employment by
the Corporation.
(f) Secretary. The Secretary, unless otherwise determined by the
Board of Directors, shall attend all meetings of the stockholders and all
meetings of the Board of Directors, shall record or cause to be recorded all
proceedings thereof in a book to be kept for that purpose, and may certify such
proceedings. Except as otherwise required or permitted by law or by these
By-laws, the Secretary shall give or cause to be given notice of all meetings
of the stockholders and all meetings of the Board of Directors.
(g) Treasurer. Unless otherwise determined by the Chief Executive
Officer, the Treasurer shall be the Chief Financial Officer of the Corporation.
If an officer other than the Treasurer is designated Chief Financial Officer,
the Treasurer shall perform such duties as may from time to time be assigned by
the Chief Financial Officer.
(h) Controller. The Controller shall be the Chief Accounting
Officer of the Corporation and shall have control of all books of account of
the Corporation (other than those to be kept by the Chief Financial Officer or
the Treasurer), render accounts of the financial condition of the Corporation
and shall perform such other duties as may be prescribed by the Chief Executive
Officer from time to time.
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Section 3.02 Other Officers. The Chief Executive Officer and/or
the President may from time to time appoint one or more natural persons to hold
such other non-executive offices of the Corporation as they deem necessary or
advisable for the operation and management of the Corporation, including
without limitation the offices of Senior Vice President, Vice President,
Assistant Secretary, Assistant Treasurer and Assistant Controller. A person
appointed to any such office shall have such powers, rights, duties and
responsibilities as may be prescribed by the Chief Executive Officer or the
President from time to time.
Section 3.03 Delegation of Duties. Unless prohibited by a
resolution of the Board of Directors, an Executive Officer elected or appointed
by the Board of Directors may, without the approval of the Board of Directors,
delegate some or all of the duties and powers of his Executive Office to other
persons.
Section 3.04 Term.
(a) Each Executive Officer shall each hold office until the next
annual meeting of the Board of Directors after his installation in such office.
(b) All other officers of the Corporation shall hold office until
their respective successors are chosen and have qualified or until the earlier
of their death, resignation or removal.
(c) An officer may resign at any time by giving written notice to
the Corporation. The resignation is effective without acceptance when the
notice is given to the Corporation, unless a later effective date is specified
in the notice.
(d) An officer may be removed at any time, with or without cause,
by a resolution duly adopted by the Board of Directors.
(e) A vacancy in an Executive Office because of death,
resignation, removal, disqualification or other cause may, or in the case of a
vacancy in the office of Chief Executive Officer, President, Chief Financial
Officer, Treasurer or Secretary shall be filled by the Board of Directors.
Section 3.05 Compensation. Except as otherwise required by law,
compensation of all Executive Officers of the Corporation shall be fixed by, or
under authority of, the Board of Directors.
Section 3.06 Shares of Other Companies. Whenever the Corporation
is the holder of shares of any other equity interests in any other companies,
any or all rights and powers of the Corporation as such equity holder
(including the attendance, acting and voting at meetings, and execution of
waivers, consents and proxies) may be exercised on behalf of the Corporation by
the Chairman of the Board of Directors, any Executive Officer, or such other
person as the Board of Directors may authorize.
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ARTICLE IV
INDEMNIFICATION
Section 4.01 Indemnification.
(a) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (whether or not by or
in the right of the Corporation), by reason of the fact that he is or was a
director, officer, incorporator, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
incorporator, employee partner, trustee, member or agent of another
corporation, partnership, joint venture, trust, limited liability company or
other enterprise (including an employee benefit plan), shall be entitled to be
indemnified by the Corporation to the full extent then permitted by law against
expenses (including counsel fees and disbursements), judgments, fines
(including excise taxes assessed on a person with respect to an employee
benefit plan) and amounts paid in settlement incurred by him in connection with
such action, suit or proceeding. Such right of indemnification shall inure
whether or not the claim asserted is based on matters which antedate the
adoption of this Section 4.01. Such right of indemnification shall continue as
to a person who has ceased to be a director, officer, incorporator, employee,
partner, trustee, member or agent and shall inure to the benefit of the heirs
and personal representatives of such person. The indemnification provided by
this Section 4.01 shall not be deemed exclusive of any other rights which may
be provided now or in the future under any provision currently in effect or
hereafter adopted of the Certificate of Incorporation or the By-laws, or by any
agreement, vote of stockholders, resolution of disinterested directors,
provision of law or otherwise. Notwithstanding the foregoing, the Corporation
shall be required to indemnify a person in connection with the proceeding
initiated by such person only if such proceeding was authorized by the Board of
Directors.
(b) The right of indemnification conferred by this Section 4.01
shall also include the right of such persons to be paid in advance by the
Corporation for their expenses to the fullest extent permitted by the laws of
the State of Delaware. The right to indemnification conferred on persons by
this section shall be a contractual right.
(c) The rights to indemnification and to the advancement of
expenses conferred in this Section 4.01 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation or these By-laws, agreement, vote
of stockholders or disinterested directors or otherwise. References in this
Section 4.01 to the laws of the State of Delaware shall mean such laws as from
time to time in effect.
(d) Neither any amendment or repeal of the foregoing provisions of
this Section 4.01 or the provisions of Section 4.02 below, nor adoption of any
provision of the Certificate of
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Incorporation or these By-laws which is inconsistent with the foregoing
provisions of this Section 4.01 or the provisions of Section 4.02 below shall
adversely affect any right or protection for a person existing at the time of
such amendment, repeal or adoption.
Section 4.02 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person in such person's official capacity against
any liability asserted against and incurred by such person in or arising from
that capacity, regardless of whether the Corporation would otherwise be
required to indemnify the person against the liability.
ARTICLE V
SHARES
Section 5.01 Certificated Shares.
(a) The shares of the Corporation shall be certificated shares.
Each holder of duly issued certificated shares is entitled to a certificate
evidencing such shares.
(b) Each certificate evidencing shares of the Corporation shall be
signed by (i) the Chairman of the Board of Directors, any Vice-Chairman of the
Board of Directors, the President or any Executive Vice President and (ii) the
Treasurer, the Secretary or any Assistant Secretary, but when a certificate is
signed by a transfer agent or a registrar, the signatures of such officers
upon such certificate may be facsimiles, engraved or printed. If a person
signs or has a facsimile signature placed upon a certificate while an officer,
transfer agent or registrar of the Corporation, the certificate may be issued
by the Corporation even if the person has ceased to serve in that capacity
before the certificate is issued, with the same effect as if the person had
that capacity at the date of its issue.
(c) A certificate evidencing shares issued by the Corporation
shall, if the Corporation is authorized to issue shares of more than one class
or series, set forth upon the face or back of the certificate, or shall state
that the Corporation will furnish to any stockholder upon request and without
charge, a full statement of the designations, preferences, limitations and
relative rights of the shares of each class or series authorized to be issued,
so far as they have been determined, and the authority of the Board of
Directors to determine the relative rights and preferences of subsequent
classes or series.
Section 5.02 Declaration of Dividends and Other Distributions.
The Board of Directors shall have the authority to declare dividends and other
distributions upon the shares of the Corporation to the extent permitted by law
and subject to the provisions of the Certificate of Incorporation.
Section 5.03 Transfer of Shares. Shares of the Corporation may be
transferred only on the books of the Corporation by the holder thereof, in
person or by such person's attorney, only upon surrender and cancellation of
certificates for a like number of shares. The Board of Directors may,
12
<PAGE> 13
however, appoint one or more transfer agents and registrars to maintain the
share records of the Corporation and to effect transfers of shares.
Section 5.04 Record Date. The Board of Directors may fix a time,
not exceeding 60 days preceding the date fixed for the payment of any dividend
or other distribution, as a record date for the determination of the
stockholders entitled to receive payment of such dividend or other
distribution, and in such case only stockholders of record on the date so fixed
shall be entitled to receive payment of such dividend or other distribution,
notwithstanding any transfer of any shares on the books of the Corporation
after any record date so fixed.
Section 5.05 Lost or Destroyed Certificates. A new certificate
evidencing shares may be issued in the place of any certificate theretofore
issued by the Corporation alleged to have been lost or destroyed, and the
directors may, in their discretion, require the owner of the lost or destroyed
certificate, or his legal representatives, to give the Corporation a bond in
such sum as they may direct, but not exceeding double the value of the stock,
to indemnify the Corporation against any claim that may be made against it on
account of the alleged loss of any such certificate or the issuance of any such
new certificate.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Execution of Instruments.
(a) All deeds, mortgages, bonds, checks, contracts and other
instruments pertaining to the business and affairs of the Corporation shall be
signed on behalf of the Corporation by an Executive or by such other person or
persons as may be designated from time to time by the Board of Directors, the
Chief Executive Officer or the President.
(b) If a document must be executed by persons holding different
offices or functions and one person holds such offices or exercises such
functions, that person may execute the document in more than one capacity if
the document indicates each such capacity.
Section 6.02 Advances. The Corporation may, without a vote of the
Board of Directors, advance money to its directors, officers or employees to
cover expenses that can reasonably be anticipated to be incurred by them in the
performance of their duties and for which they would be entitled to
reimbursement in the absence of an advance.
Section 6.03 Corporate Seal. The seal of the Corporation, if any,
shall be a circular embossed seal having inscribed thereon the name of the
Corporation, the year of its creation and the following words:
"Corporate Seal Delaware"
13
<PAGE> 14
Section 6.04 Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 6.05 Amendments. These By-laws may be amended by the
Board of Directors or by stockholders owning eighty percent (80%) of the
outstanding Common Stock of the Corporation.
Section 6.06 References to Certificate of Incorporation.
References to the Certificate of Incorporation in these By-laws shall include
all amendments thereto or changes thereof unless specifically excepted.
-------------------------------
14
<PAGE> 1
EXHIBIT 10.4
DATED February 25, 1998
INSIGNIA FINANCIAL GROUP, INC.
- and -
ANDREW HUNTLEY AND OTHERS
----------------------------------------
DEED OF WARRANTY AND INDEMNITY
collateral to offers for the
whole of the issued share
capital of Richard Ellis Group Limited
----------------------------------------
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171-638 1111
Fax: 0171-972 7990
PVB/I31200067
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C>
1. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. YOUR WATCH INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. NAME INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. SURMIA INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. PENSIONS INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7. GROSS UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8. EARN OUT PROTECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 14
9. MANAGEMENT OF THE GROUP POST COMPLETION . . . . . . . . . . . . . . . 18
10. COVENANTORS' REPRESENTATIVE . . . . . . . . . . . . . . . . . . . . . 19
11. ANNOUNCEMENTS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13. EFFECT OF COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . . 21
14. WAIVER, AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
18. GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . 23
19. INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
20. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Warranty and Indemnity Defences . . . . . . . . . . . . . . . . . . . . . . . 65
SCHEDULE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Taxation Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SCHEDULE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
The Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SCHEDULE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Part A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Part B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>
<PAGE> 3
THIS DEED is made on
1998
BETWEEN:-
(1) INSIGNIA FINANCIAL GROUP, INC. whose registered office is at One
Insignia Financial Plaza, Greenville, South Carolina 29601 (the
"OFFEROR"); and
(2) The Shareholders (other than the B Ordinary Shareholders) and the
holders of Options who accept the Offers contained in the Offer
Document (the "COVENANTORS").
(together the "PARTIES")
RECITALS
(A) Richard Ellis Group Limited ("REGL") is a private company
incorporated in England under the Companies Acts under number
3350437.
(B) The Covenantors are at the date hereof the registered holders
and/or beneficial owners of all of the Covenantors' Shares.
(C) The Offeror has made an offer to acquire all of the Ordinary
Shares, B Ordinary Shares, C Ordinary Shares and Convertible Shares
of the Company issued and to be issued subject to, and on the terms
set out in, the Offer Document. The Offeror has also made the
Cancellation Alternative Offer to participants holding outstanding
options under the REGL Wider Share Ownership Scheme for shares in
the Company.
(D) The Covenantors have warranted to the Offeror in the terms of the
Warranties to the intent that the Offeror should rely on such
Warranties in making the Offers.
(E) Irrevocable undertakings have been given to the Offeror by certain
Covenantors and other Shareholders to accept the Offers with the
intention of inducing the Offeror to make the Offer.
(F) The obligations contained in this Deed are part of the Offers and
the signing and returning of the form of acceptance in accordance
with the Offer Document includes the giving of a power of attorney
for the purpose of signing this Deed on a Covenantor's behalf as
confirmation of the obligations set out herein.
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
1.1 The following provisions shall have effect for the interpretation of
this Deed, in addition to the definitions included within the text of
this Deed.
- 1 -
<PAGE> 4
1.2 The following words and expressions and abbreviations shall, unless
the context otherwise requires, have the following meanings:-
"ACCOUNTS" means the consolidated financial statements of the Company,
comprising the consolidated balance sheet, profit and loss account and
cash flow statement of the Group, together with the notes thereon as
at and for the six month period ended on the Accounts Date;
"ACCOUNTS DATE" means 31 October 1997;
"AMOUNT OF THE RELEVANT CLAIM" means the amount Finally Determined or
agreed by the Offeror and the Covenantors' Representative;
"APPROPRIATE PROPORTION" has the meaning set out in paragraph 1(d) of
Schedule 2;
"ASSOCIATED COMPANY" has the meaning set out in Sections 416 et seq.
T.A.;
"BASE AMOUNT" has the meaning ascribed to it in Appendix III of the
Offer Document (as amended from time to time by agreement between the
Offeror and the Covenantors' Representative);
"BUDGET" means the financial budget of the Company for the year ending
31 December 1998, to be approved by the Offeror;
"BUSINESS" means the businesses presently carried on by the Group
being those of real estate property advisers and related activities,
and any businesses acquired by the Group and not rejected under Clause
8.1(p);
"BUSINESS DAY" means a day on which clearing banks in both London and
New York are open for normal banking business;
"BUSINESS PLAN" means the qualitative analysis of the Budget for the
forthcoming financial year, as approved in writing by the Offeror;
"B ORDINARY SHARES" means the B class of ordinary shares of the
Company created by a shareholders' resolution passed on 20
February1998 and designated "B Ordinary Shares";
"B ORDINARY SHAREHOLDERS" means the holders of B Ordinary Shares;
"C ORDINARY SHARES" means the C class of ordinary shares of the
Company created by a shareholders' resolution passed on 20 February
1998 and designated "C Ordinary Shares";
"CAA" means the Capital Allowances Act 1990;
- 2 -
<PAGE> 5
"CANCELLATION ALTERNATIVE" means the cancellation alternative offered
to participants holding Options under the REGL Wider Share Ownership
Scheme whereby, conditional on the Offers becoming unconditional, the
holders of Options will receive cash and Deferred Loan Notes in
exchange for cancellation of the Options held;
"COMMON STOCK" means Class 'A' common stock of $0.01 par value each in
the capital of the Offeror;
"COMPANY" means the company described in Recital (A) and, for the
purposes of the Indemnities and Schedule 1 includes the Richard Ellis
Partnership prior to the transfer of the business and assets of the
business to the Company on 1 May 1997, and the Subsidiaries, all of
them and each of them as the context admits;
"COMPANIES ACTS" as defined in Section 744 of the Companies Act 1985,
together with the Companies Act 1989;
"COMPLETION" means the opening of business on the business day after
the Offers become or are declared unconditional in all respects;
"COMPLETION ACCOUNTS" means the unaudited consolidated financial
statements of the Company comprising the consolidated balance sheet,
profit and loss account and cash flow statement of the Group, together
with the notes thereon as at the end of the period ended on the
Completion Accounts Date and compiled in accordance with Schedule 5;
"COMPLETION ACCOUNTS DATE" means the last day of that month which is
closest to the date of Completion;
"CONNECTED PERSON" means a person shall be deemed to be connected with
another if that person is connected with another within the meaning of
Section 839 T.A.;
"CONSIDERATION" means the total consideration to be paid by the Offeror
pursuant to the Offer Document;
"CONVERTIBLE SHARES" means convertible shares in the capital of the
Company as specified in the Document of Company Details;
"COVENANTORS' REPRESENTATIVE" means the person appointed pursuant to
Clause 10;
"COVENANTORS' SHARES" means the Shares of which the Covenantors are
the registered holders and/or beneficial owners;
"COVENANTORS' SOLICITORS" means Messrs Gouldens, 22 Tudor Street,
London EC4Y OJJ;
- 3 -
<PAGE> 6
"DEFERRED LOAN NOTES" means the loan notes to be issued by the Offeror
pursuant to the terms set out in the Offer Document;
"DISCLOSURE LETTER" means a letter as of the date the Offers are made
pursuant to the Offer Document together with the agreed bundle
addressed by the Covenantors' Solicitors on behalf of the Covenantors
to the Offeror's Solicitors on behalf of the Offeror limiting the
scope of the Warranties;
"DISTRIBUTION" means a distribution as defined by Sections 209 to 211
(inclusive), T.A. and Section 418 T.A.;
"DOCUMENT OF COMPANY DETAILS" means the agreed document containing the
details of the Company and Subsidiaries including specific information
in respect of the Shares, Convertible Shares, Options, B Ordinary
Shares and C Ordinary Shares.
"EARN OUT" means that part of the Consideration potentially achievable
by the Covenantors in the form of Deferred Loan Notes;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating),
pledge, lien, security interest or other third party right or interest
(legal or equitable) over or in respect of the relevant asset,
security or right;
"ERA" has the meaning defined in Warranty D.1 of Schedule 1;
"ESCROW AGENT" means the agent appointed by the Offeror in accordance
with the terms of the Escrow Mandate for the purpose of administering
the Escrow Fund;
"ESCROW MANDATE" means the Escrow Mandate in the agreed form entered
into by the Offeror and The Royal Bank of Scotland or such other
financial institution as shall be reasonably acceptable to the
Covenantors' Representative, as escrow agent, and certain shareholders
of the Company;
"ESCROW FUND" means the fund operated pursuant to the Escrow Mandate;
"FINAL DETERMINATION" and "FINALLY DETERMINED" means a final decision
of a court or tribunal of competent jurisdiction from which there is
no appeal or the right to appeal has not been made within the
applicable time limit exclusive of any extension of time granted at
the discretion of the Court;
"GROUP" means the Company and the Subsidiaries;
"HOLDING COMPANY" has the meaning set out in Section 736 Companies Act
1985;
"THE INDEMNITIES" means the indemnities set out in Clauses 3, 4, 5 and
6 of this Deed;
- 4 -
<PAGE> 7
"I.T.A." means the Inheritance Tax Act 1984;
"INTELLECTUAL PROPERTY" means the following in any part of the world
which, or the subject matter of which are used in the Business as
conducted at the date hereof:-
(i) patents, trade or service marks (whether registered or not),
registered designs, business names and applications and rights
to apply for registrations of any of the same;
(ii) copyrights, typographical rights, unregistered design rights,
rights in databases and all rights in the nature of the same;
(iii) know-how, inventions and confidential information; and
(iv) all intellectual property rights of a similar nature in any
jurisdiction howsoever called;
"MANAGEMENT" means Messrs Huntley, Froggatt, Ellingham, Harvey and
Osman and, if any of them leaves employment with the Group, such
individual in employment with the Group as the others choose to
replace the person leaving;
"MARKET PRICE" as of any date means the average of the closing price of
the Common Stock over the five business days prior to such date;
"NET ASSET VALUE" means the amount determined on the basis set forth on
the consolidated balance sheet of the Group included in the Accounts
less work-in-progress and intangible assets, provided, however, that
any net assets or liabilities included on such balance sheet
attributable to the Transaction Loyalty Bonus, the REGL 1997 Unapproved
Share Option Scheme or any amounts comprising the Offers and other
consideration payable to the holders of B Ordinary Shares, in each case
net of any tax benefit therefrom, shall not be reflected in the
calculation of Net Asset Value, nor shall any capital provided to the
Group by the Offeror be included in such Net Asset Value.
"NON-ALTERNATIVE STOCK" means the Common Stock save for the Common
Stock issued as part of the Common Share Alternative (as that term is
defined in the Offer Document);
"OFFERS" means the offers made subject to and on the terms of the Offer
Document;
"OFFER DOCUMENT" means the document which contains the Offers made by
the Offeror for, inter alia, the Shares;
"OFFEROR'S GROUP" means the Offeror and its subsidiaries and subsidiary
undertakings from time to time;
"OFFEROR GROUP'S BUSINESS" means the business of the Offeror's Group
after Completion;
- 5 -
<PAGE> 8
"OFFEROR'S SOLICITORS" means Ashurst Morris Crisp of Broadwalk House, 5
Appold Street, London EC2A 2HA;
"OPTIONS" means the outstanding options to subscribe for Shares;
"ORDINARY SHARES" means the class of ordinary shares of the Company;
"PARTNERSHIP ACCOUNTS" means the audited financial accounts of the
Richard Ellis partnership prepared for the financial year ended 30
April 1997;
"PENSION FUND INDEMNITY" means the indemnity set out in Clause 6;
"PRINCIPAL AMOUNT OF DEFERRED LOAN NOTES TO BE ISSUED" shall have the
meaning ascribed to it in the Offer Document;
"PROPERTIES" means the properties described in Schedule 4;
"PENSION SCHEMES" has the meaning defined in Warranty F.1 of Schedule
1;
"RELEVANT BENEFITS" has the meaning defined in Warranty F.1. of
Schedule 1;
"REGL MODIFIED PRE-TAX PROFIT" has the meaning ascribed to it in
Appendix III of the Offer Document (as amended from time to time by
agreement between the Offeror and the Covenantors' Representative);
"REGL WIDER SHARE OWNERSHIP SCHEME" means the REGL Wider Share
Ownership Scheme;
"SCHEDULE OF LIABILITIES" means the schedule of liabilities and
provisions agreed between the Offeror and the Board of the Company and
which is set out in Schedule 5, Part B;
"SCHEMES" has the meaning set out in Warranty D.2 of Schedule 1;
"SHAREHOLDERS" means the holders of the Shares;
"SHARES" means the whole of the issued and to be issued share capital
of the Company as specified in the Document of Company Details;
"SUBSIDIARY" has the meaning set out in Section 736 of the Companies
Act 1985;
"SUBSIDIARY" means a subsidiary undertaking of the Company;
- 6 -
<PAGE> 9
"SUBSIDIARY UNDERTAKING" has the meaning set out in Section 258
Companies Act 1985 as amended by the Companies Act 1989;
"T.A." means the Income and Corporation Taxes Act 1988;
"TAX RETURN" means any return, report or similar statement required to
be filed by or with respect to any Tax, (including any attached
schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax;
"T.C.G.A." means the Taxation of Chargeable Gains Act 1992 and any
reference thereto shall include any enactment repealed or modified
thereby;
"TAX" OR "TAXATION" means:-
(a) any supranational, national, federal, state, local or other
tax, custom duty, impost, levy, governmental fee or other like
assessment or charge of any kind whatsoever, whether domestic or
foreign, and any fine, penalty or interest connected therewith,
including (without prejudice to the foregoing) corporation tax,
advance corporation tax, national insurance and social security
contribution, capital gains tax, inheritance tax, petroleum
revenue tax, value added tax, turnover tax, customs excise and
import duties, stamp duty, stamp duty reserve tax, property tax,
excise tax, franchise tax, payroll tax, withholding tax,
transfer tax, net worth tax or registration tax, or
environmental tax and any other payment whatsoever which the
Company is or may be or become bound to make to any person by
reason of any taxation statutes but excluding rates and water
rates; and
(b) any liability of the Company for the payment of amounts with
respect to payments of a type described in clause (a) as a
result of being a member of an affiliated, consolidated,
combined or unitary group, or as a result of any obligation of
the Company under any Tax sharing arrangement or Tax indemnity
arrangement or any secondary liability of the Company arising as
a result of the failure by the Covenantors or any person
connected with any of them to discharge or pay any liability for
tax;
"TAXATION STATUTES" means all statutes, decrees, orders and
regulations, whether domestic or foreign, providing for or imposing
any Tax;
"TAXATION AUTHORITY" means any local, municipal, governmental, state,
federal or fiscal revenue, customs or excise authority, body or
official anywhere in the world having powers or authority in relation
to Tax;
"TAXATION INDEMNITY" means the indemnities set out in Schedule 3;
"V.A.T.A." means the Value Added Tax Act 1994;
"VAT LEGISLATION" has the meaning defined in Warranty I.42 of Schedule
1;
- 7 -
<PAGE> 10
"WARRANTIES" means the warranties set out in Schedule 1.
1.3 References to "F.A." followed by a stated year mean the
Finance Act of that year.
1.4 References to income being earned accrued or received before a
particular date shall include deemed income treated as earned accrued
or received prior thereto.
1.5 References to the parties hereto include their respective permitted
assignees and/or the respective successors in title to substantially
the whole of their respective undertakings and, in the case of
individuals, to their respective estates and personal representatives.
1.6 References to persons shall include bodies corporate and
unincorporated, associations, partnerships and individuals. Words
denoting the singular shall include the plural and words denoting any
gender shall include all genders.
1.7 References to statutes or statutory provisions include references to
any orders or regulations made thereunder and references to any
statute, provision, order or regulation include references to that
statute, provision, order or regulation as amended, modified,
re-enacted or replaced from time to time whether before or after the
date hereof (subject as otherwise expressly provided herein) and to
any previous statute, statutory provision, order or regulation
amended, modified, re-enacted or replaced by such statute, provision,
order or regulation.
1.8 Headings to clauses, sub-clauses and paragraphs and descriptive notes
in brackets relating to provisions of taxation statutes are for
information only and shall not form part of the operative provisions
of this Deed and shall be ignored in construing the same.
1.9 References to Recitals, Clauses, Schedules are to recitals to, clauses
of and schedules to this Deed. The Recitals and Schedules form part
of the operative provisions of this Deed and references to this Deed
shall, unless the context otherwise requires, include references to
the Recitals and the Schedules.
1.10 Each of the Warranties in Schedule 1 expressed to be given "to the
best of the knowledge and belief of the Covenantors" or "so far as the
Covenantors are aware" or otherwise qualified by reference to the
knowledge of the Covenantors shall be deemed to be given by reference
to the knowledge of the Management, the Management having made all
reasonable enquiries to establish the truth and accuracy of each
statement.
1.11 The obligations and liabilities of the Covenantors under this Deed are
given on a several basis.
- 8 -
<PAGE> 11
2. WARRANTIES
2.1 The Covenantors warrant to the Offeror in the terms of the Warranties
and so that the remedies of the Offeror in respect of any breach of
any of the Warranties shall continue to subsist notwithstanding
completion of the acquisition of the Shares.
2.2 Any information supplied by or on behalf of the Group to the
Covenantors or their agents or accountants, solicitors or other
advisers in connection with the Warranties, the Disclosure Letter or
otherwise in relation to the business and affairs of the Company or
the Subsidiaries shall not constitute a representation or warranty or
guarantee as to the accuracy thereof by the Group or any of the
Subsidiaries and the Covenantors hereby waive any and all claims which
they might otherwise have against the Group or any of their respective
agents or employees in respect thereof.
2.3 The provisions of Schedule 2 shall be operative provisions of this
Deed and deemed incorporated in the body hereof.
2.4 Each of the Warranties shall be construed as a separate warranty and
(save as expressly provided to the contrary in this Deed (including
Schedule 2) or the Disclosure Letter) shall not be limited by the
terms of any of the other Warranties or by any other term of this
Deed.
2.5 The Covenantors shall be under no liability under the Warranties in
relation to any matter forming the subject matter of a claim
thereunder to the extent that the same or circumstances giving rise
thereto are fairly disclosed in the Disclosure Letter, the Schedule of
Liabilities or in the Accounts or expressly provided for or stated to
be exceptions under the terms of this Deed. No letter, document or
other communication shall be deemed to constitute a disclosure for the
purposes of the Warranties unless the same is included or referred to
in the Disclosure Letter.
2.6 No information relating to the Company or the Subsidiaries of which
the Offeror has knowledge (actual or constructive), subject to Clause
2.5 above, and no investigation by or on behalf of the Offeror shall
prejudice any claim by the Offeror under the Warranties or Indemnities
or otherwise under this Deed or operate to reduce any amount
recoverable thereunder.
2.7 The Covenantors acknowledge that the Offeror has made the Offers in
reliance upon the Warranties, the Indemnities and the Taxation
Indemnity, contained in this Deed; however the Offeror acknowledges
that it shall have no right of rescission after Completion for breach
of any of the Warranties and the Offeror's only remedy will be in
damages.
2.8 Each of the Covenantors shall give to the Offeror and its
representatives (insofar as they are reasonably able so to do) both
before and after Completion all such information and documentation
relating to the Company and its Subsidiaries as he/it has in his/its
possession or control and as the Offeror shall reasonably require to
enable it to satisfy itself as to the accuracy and observance of the
Warranties.
- 9 -
<PAGE> 12
2.9 In the event the Offeror makes a relevant claim under the Warranties
and if such claim has been Finally Determined or agreed by the Offeror
and the Covenantors' Representative there shall be added to the Amount
of the Relevant Claim all reasonable third party costs of making,
investigating, pursuing and enforcing that claim against the
Covenantors.
3. YOUR WATCH INDEMNITY
3.1 Subject to Clause 3.2 and Schedule 2 (and, for the avoidance of doubt,
notwithstanding any information provided pursuant to the Disclosure
Letter) each Covenantor covenants severally with the Offeror that he
will pay, as the Offeror may direct to the Company or relevant
Subsidiary as the case may be, his appropriate proportion of an amount
or amounts (on a pound for pound basis) equal to:
(a) the amount or amounts of any payments made by the Offeror,
Company or any Subsidiary to third parties as a result of any
dispute with or claim made by a third party (not being the
Offeror or any member of the Offeror's Group) in relation to the
Company or the Subsidiaries arising out of or in respect of any
event, act or omission occurring on or prior to the date of
Completion;
(b) the amount or amounts of any and all third party costs and
expenses reasonably incurred or payable by the Offeror, the
Company or any Subsidiary in connection with investigating,
assessing, contesting or in settlement of any dispute or claim
referred to in paragraph (a) above or in connection with all
proceedings in relation thereto or steps taken to avoid or
mitigate the same.
3.2 Any claim relating to Tax shall be dealt with under the terms of the
Taxation Indemnity and not under this Clause 3.
4. NAME INDEMNITY
4.1 Subject to Schedule 2, notwithstanding any information provided
pursuant to the Disclosure Letter, each Covenantor shall indemnify and
keep indemnified the Offeror and/or the Company and/or each
Subsidiary, and/or its or their officers, servants and/or agents (the
"INDEMNIFIED PARTIES") against his appropriate proportion of any and
all liability, loss, damages, costs, legal costs, professional and
other expenses of any nature whatsoever (including without limitation
any indirect or consequential loss whatsoever) ("LIABILITIES")
incurred or suffered by the Indemnified Parties arising out of any
contractual or tortious proceedings brought by or against the
Indemnified Parties which claim actual or alleged infringement of
statutory or common law rights in the RICHARD ELLIS name and mark in
the UK ("PROCEEDINGS") where it follows from a Final Determination of
a court or tribunal of competent jurisdiction that the Company does
not have the exclusive right to use the RICHARD ELLIS name and mark in
relation to the Business in the United Kingdom. Unless and until any
such Final Determination the Covenantors shall have no liability to
the Indemnified Parties under this Clause other than the liability to
pay costs under Clause 4.2(e) below. For the avoidance of doubt, the
Covenantors
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shall have no liability under this Clause 4 or otherwise to compensate
or indemnify any of the Indemnified Parties in relation to any
Liabilities suffered or incurred by any of the Indemnified Parties if
and to the extent that they arise as a result of the Company and/or
any Subsidiary not having the exclusive right to use the RICHARD ELLIS
name and mark (a) in the United Kingdom in relation to any business
other than the Business; and/or (b) outside of the United Kingdom.
4.2 In relation to Clause 4.1 above, in the event that Proceedings are
threatened or commenced:-
(a) the Offeror shall as soon as reasonably practicable give the
Covenantors' Representative reasonable details of the
Proceedings and shall at all times promptly give to the
Covenantors' Representative and professional advisers appointed
by the Covenantors' Representative all material information and
copies of documents in its or the Company's possession or under
its or the Company's control relevant to the Proceedings as may
be reasonably requested by the Covenantors' Representative from
time to time;
(b) the Offeror shall consult with the Covenantors' Representative
in relation to all material aspects of the Proceedings and
afford the Covenantors' Representative every opportunity to
comment in relation to the Proceedings which the Offeror will
take reasonable consideration of in the handling of the
Proceedings;
(c) the Offeror will not and shall procure that no other of the
Indemnified Parties shall make an admission, agreement,
settlement or compromise or other action in relation to the
Proceedings without the prior written consent of the
Covenantors' Representative (not to be unreasonably withheld);
(d) the Offeror and/or the Company and/or each Subsidiary shall
use all commercially reasonable endeavours to mitigate the
amount of any liability (whether actual or contingent) on the
part of the Covenantors under this Clause 4; and
(e) if, following a final decision at first instance by a court or
tribunal of competent jurisdiction (which, for the avoidance of
doubt, shall not include a decision made pursuant to any interim
motions or applications), it follows that the Company does not
have the exclusive right to use the RICHARD ELLIS name and mark
in relation to the Business in the United Kingdom (an "ADVERSE
FINDING"), the Covenantors' Representative shall have the right
to require those of the Indemnified Parties which are parties to
the Proceedings to appeal such Adverse Finding (in the absence
of an appeal by the Indemnified Parties) until such time as
there has been a Final Determination Provided That the
Covenantors shall bear the legal costs out of the Escrow Fund of
all appeals made against any such Adverse Finding which the
Indemnified Parties are required to make by the Covenantors. If
it subsequently follows from a Final Determination that the
Company has the exclusive right to use the RICHARD ELLIS name
and mark in relation to the Business in the United Kingdom then
to the extent that the Covenantors do not recover the full
amount of the costs incurred by them in relation
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to all such appeals, the Offeror shall forthwith reimburse the
amount of any shortfall to the Covenantors.
4.3 The benefit of this indemnity may be assigned to any purchaser of all
or substantially all of the business of the Company, whether by sale
of shares or assets.
4.4 For the purpose of this Clause 4, a "Final Determination" shall mean a
final decision of a court or tribunal of competent jurisdiction from
which there is no appeal or from which the Covenantors have notified
the Offeror that they do not wish the final decisions to be appealed.
5. SURMIA INDEMNITY
Subject to Schedule 2 (and, for the avoidance of doubt,
notwithstanding any information provided pursuant to the Disclosure
Letter) each Covenantor covenants severally with the Offeror that he
will pay to the Offeror (or as the Offeror may direct, to the Company
or relevant Subsidiary as the case may be) his appropriate proportion
of an amount or amounts (on a pound for pound basis) equal to the
amount or amounts of sums demanded from the Company or any Subsidiary
by or on behalf of the Surveyors Mutual Insurance Association Limited
(or its successors or assigns) (together "SURMIA") and/or of any other
liability of the Company or any Subsidiary and/or of any payment made
by the Company or any Subsidiary to or in respect of SURMIA, including
for the avoidance of doubt liabilities or payments pursuant to
indemnities given by the Company or any Subsidiary in relation to
SURMIA, to the extent that the aggregate of such demands, liabilities
and payments exceeds L.207,866 as provided for in the Accounts plus
L.17,530 disclosed in Part B of Schedule 5. For the avoidance of
doubt, under this Clause 5, the Offeror, the Company or any Subsidiary
as the case may be, shall be entitled to be indemnified upon the
making of any demand by or on behalf of SURMIA or upon the
notification of any other liability, and without the Company or any
Subsidiary as the case may be having first made payment thereof, nor,
in the absence of manifest error, shall the Offeror, the Company or
any Subsidiary be required to challenge or otherwise question the
demand or the amount of any other liability or payment in order to be
entitled to indemnity in respect thereof.
6. PENSIONS INDEMNITY
6.1 The Offeror shall procure that an actuarial valuation ("THE 1999
VALUATION") of the Richard Ellis Retirement Fund ("THE FUND") is
carried out as at 1 May 1999 ("THE 1999 VALUATION DATE") no later than
30 June 1999 using the same assumptions as are set out in the draft
valuation report of the Fund dated 4 December 1997 ("THE VALUATION
REPORT") and on the further assumptions that:-
(a) the Company and its Subsidiaries have continued to pay
contributions to the Fund to the 1999 Valuation Date at the
rate recommended in the Valuation Report;
(b) benefits have not been improved from those applying at the
date of Completion;
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<PAGE> 15
(c) basic salaries have increased at the lower of the rate assumed
in the Valuation Report and the actual rate of increase since
the date of Completion;
(d) the Final Salary Section of the fund continues to remain
closed to new entrants, provided it is legal and proper to do
so.
6.2 In the event that the 1999 Valuation reveals that the value of the
assets of the Fund does not exceed the value of the benefits which are
payable from the Fund in respect of service to 1 May 1999 (such
shortfall being referred to herein as "THE 1999 DEFICIT") the Offeror
shall be entitled to procure that a further actuarial valuation of the
Fund is carried out as at the date of Completion using the same
assumptions as are set out in the Valuation Report ("THE COMPLETION
VALUATION") no later than 31 August 1999.
6.3 In the event that the Completion Valuation reveals that the value of
the assets of the Fund does not exceed the value of the benefits which
are payable from the Fund in respect of service to the date of
Completion (such shortfall being referred to herein as the "COMPLETION
DEFICIT") and subject to Schedule 2 (and for the avoidance of doubt
notwithstanding any information provided pursuant to the Disclosure
Letter) each Covenantor covenants severally with the Offeror that he
will pay as the Offeror may direct to the Company or the relevant
Subsidiary, as the case may be, his appropriate proportion of an
amount equal to the lower of the Completion Deficit and the 1999
Deficit ("THE SHORTFALL").
6.4 The Offeror shall procure that the Company and/or the relevant
Subsidiary shall forthwith upon receipt of the Shortfall pay an
equivalent amount to the Fund subject to Inland Revenue approval not
being prejudiced.
6.5 In the event that any liability of the Company and/or the relevant
Subsidiary to corporation tax is reduced as a result of any
contribution to the Fund (by the Company and/or the relevant
Subsidiary to the Fund as envisaged in Clause 6.4 derived from payment
made under Clause 6.3) the Offeror shall procure that the Company
and/or the relevant Subsidiary shall repay to each of the Covenantors
his appropriate proportion of an amount equal to the corporation tax
saving thereby arising to the Company and such repayment shall be made
on the day or days on which the corporation tax thereby saved would
otherwise have been due and payable.
7. GROSS UP
7.1 Where the Covenantors are obliged to indemnify the Offeror, the
Company or any Subsidiary (the "INDEMNIFIED PARTY") under this Deed:
(a) any amount due shall be paid free and clear of all deductions
or withholdings unless such deductions or withholdings are
required by law in which case the Covenantors shall pay to the
Indemnified Party such additional amount as shall be required
to ensure that the amount received by the Indemnified Party
will, after such deduction or withholding,
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<PAGE> 16
be sufficient to indemnify the Indemnified Party against the matter or
circumstance in question;
(b) if any Tax Authority brings the sum paid by way of indemnity
into charge to Tax (or would bring such sum into charge to Tax
but for any Relief as defined in the Tax Covenant), then the
Covenantors shall pay to the Indemnified Party such additional
amount as shall be required to ensure that the total amount
paid, less the tax chargeable (or which would be so chargeable
but for the Relief) is sufficient to indemnify and hold harmless
the Indemnified Party; and
(c) if following the payment of an additional amount under either
Clauses 7.1(a) or (b) above, the Indemnified Party subsequently
obtains a saving, reduction, credit or payment in respect of Tax
(other than a reduction in taxation which would have given rise
to a claim or been taken into account in a claim for damages
under the Warranties or under the Tax Indemnity) in consequence
of which the net after tax amount received by the Indemnified
Party is greater than the amount required to indemnify and hold
harmless the Indemnified Party against the matter indemnified,
the Indemnified Party shall pay to the Covenantors'
Representative such sum as shall leave the Indemnified Party
fully indemnified within seven days of the receipt of the
repayment or reduction of tax as the case may be.
7.2 Clause 7.1 shall not apply if the Offeror assigns the benefit of this
Deed or any rights deriving from this Deed.
8. EARN OUT PROTECTIONS
8.1 In recognition of the Covenantors' interest in achieving the maximum
amount payable in respect of the Deferred Loan Notes, the Offeror
hereby undertakes to the Covenantors that following Completion and
until the earlier of 31 December 2002 and the date on which no further
Deferred Loan Notes may be issued, save with the prior written consent
of the Covenantors' Representative (which may only be withheld to the
extent legitimate to protect the interests of the Covenantors
achieving the maximum amount payable in respect of the Deferred Loan
Notes) or as provided in Clauses 8.2 to 8.4 inclusive below:-
(a) it will not deliberately and knowingly do any act or thing or
procure the Company or any member of the Group to do any act or
thing not properly done for the purpose of the Offeror Group's
business the effect of which distorts unfairly the financial
results of the Company so as to reduce the amount of Deferred
Loan Notes to be issued as part of the Earn Out;
(b) it will not require or permit the declaration, making or
payment by the Company or any member of the Group of any
dividend or similar distribution in respect of the Company's
share capital save to the extent of net income of the Company
calculated for this purpose
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<PAGE> 17
without deduction for any amounts (net of any associated tax
benefit) incurred by the Offeror or REGL from amounts
contributed by the Offeror after the Completion Date;
(c) it will not require or permit the payment of management
charges to the Offeror's Group by the Company or any member of
the Group save:-
(i) with respect to services requested by the Company,
with any such charges subject to the consent of the
Covenantors' Representative, such consent not to be
unreasonably withheld; or
(ii) corporate allocations for travel expenses, accounting
services and similar items actually incurred, not to
exceed L.100,000 per year;
(d) it will not deliberately and knowingly do any act or thing or
procure the Company or any member of the Group to do any act or
thing which results in the provision of additional capital to
the Company and/or any Subsidiaries such that there is a
material increase in the Base Amount provided that the Business
is being managed prudently and in accordance with the Budget and
Business Plan;
(e) conducting a business operation to cease carrying on its
business in whole or in part except to the extent that the
Company and/or any member of the Group:-
(i) fails to satisfy the requirements specified in the
Budget or the Business Plan; or
(ii) without prejudice to Clause 8.1(a) above, it is
considered by the Offeror (acting reasonably) to be
necessary to effect an acquisition, disposal,
reorganisation or similar restructuring of assets or
shares provided that the financial results of the
Business after completion of such a restructuring or
acquisition are separately identifiable for the
purpose of the Earn Out;
(f) it will not solicit or endeavour to entice away, offer
employment to or offer to conclude any contract for services
with any of the employees of the Group except with the consent
of the Covenantors' Representative save for Andrew Huntley;
(g) it will not knowingly interfere with or do anything the sole
or main purpose of which is to impair or adversely affect the
relationship of the Company or any member of the Group with any
of its or their customers and clients;
(h) it will not require the Company or any member of the Group to
give any guarantee or indemnity for the obligations of any third
party save to the extent that the Offeror considers (acting
reasonably) it necessary for the Company and/or any of the
Subsidiaries to provide collateral guarantees in respect of:-
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<PAGE> 18
(i) the financing facilities available to the Offeror's
Group; or
(ii) liabilities relating to acquisitions completed after
Completion by the Group;
(i) it will maintain the Company and any member of the Group as
separate operating companies save to the extent that those
companies may be merged, amalgamated, reorganised or structured
within the Group in a more tax efficient way for the Group as a
whole provided that the financial results of the Business after
completion of any such restructuring are separately identifiable
for the purposes of determining the Earn Out;
(j) it will (insofar as he is permitted to act as such by law and
except where the Company or any member of the Group has
dismissed or is entitled to dismiss him summarily from his
employment) allow each member of the Management to have access
to all matters relating to the Business (except where the
information is held by the Offeror in which case a written
request for the information must be made, and such request
cannot be unreasonably withheld) and (insofar as consistent with
his fiduciary duties as a director) to pursue and maintain
trading policies (so long as consistent with the trading
policies of the Offeror and the Group over the year prior to the
date hereof and not to conflict with the interest of the
Business) to enable the Company to maximise the amount of the
Deferred Loan Notes issuable pursuant to the Offer Document
subject to overall control by the board of the Company in
respect of financial and policy matters relating to the
Offeror's Group (including the Group) such overall control not
to be unreasonably exercised to the material detriment of the
Covenantors in respect of the realisation of the maximum amount
possible in respect of the Deferred Loan Notes;
(k) it will not pass any resolution for the winding up,
dissolution or reconstruction of the Company or any member of
the Group except to the extent that the Company and/or any
member of the Group:-
(i) fails to satisfy the requirements specified in the
Budget or the Business Plan; or
(ii) without prejudice to Clause 8.1(a) above, is
considered by the Offeror (acting reasonably) to be
necessary to effect an acquisition of business assets
or shares provided that the financial results of the
Business after such acquisition is completed are
separately identifiable for the purpose of
determining the Earn Out;
(l) it will not take steps designed to prevent the Company or any
member of the Group from carrying on its business in the
ordinary course, substantially as presently carried on, and
(without prejudice to the generality of the foregoing) it will
not in any way to the detriment of the Company or any member of
the Group compel the Company or any member of the Group to trade
or deal with any particular person, firm or company whether for
goods or services except in relation to the selection of a
financial institution for commercial lending or investing or in
respect of appointing auditors, barristers,
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solicitors, accountants, investment bankers, insurers, actuaries
and other professional advisors provided that the Company or any
member of the Group shall only be required to meet appropriate
fees, charges or costs to the extent reasonable in the
circumstances including where such costs are incurred on an
Offeror's Group wide basis the due proportion of such costs
where such circumstances shall include the standing and
reputation of the professional advisers appointed;
(m) it will use its reasonable endeavours to procure that no
member of the Offeror's Group knowingly and deliberately diverts
away from the Group any business opportunities that first become
available to the Company or any of the Subsidiaries;
(n) it will not change the Company's corporate name or cause it to
cease using any trade name or start using any new trade name
(other than to reflect the fact that it is a member of the
Offeror's Group or in the event the Company does not have the
exclusive right to the RICHARD ELLIS name and mark in relation
to the Business in the United Kingdom);
(o) in the event of a sale or other disposition of a majority of
the Shares or all or substantially all of the undertaking or
material assets of the Group the Offeror shall procure the
purchaser to assume the Offeror's obligations under this Deed
and the Offer Document in respect of the Earn Out; and
(p) in the event that the Offeror procures the Company or any
Subsidiary to merge with another company or to acquire the whole
or part of any undertaking or any shares in the capital of
another company and the Board of the Company has not unanimously
approved such merger or acquisition then the Covenantor's
Representative may in the period of one month after the merger
or acquisition determine not to include the new undertaking or
company as part of the Business or the Group for the purpose of
calculating the REGL Modified Pre-tax Profit provided that any
such decision shall be treated consistently over time for the
purpose of determining REGL Modified Pre-tax Profit. In such
event, the Offeror shall indemnify the Group for any guarantee
provided by any member of the Group in connection with such
merger or acquisition.
8.2 Nothing in Clause 8.1 save for sub-Clauses (a), (i), (k) or (l) above
shall prevent the Offeror's Group from carrying on any business
presently carried on by it nor from acquiring any other company or
business whether of a similar nature or otherwise.
8.3 Nothing in Clause 8.1 shall prevent the Offeror or any other member of
the Offeror's Group or the Company from performing its other
obligations or enjoying or enforcing its rights under this Deed
including the Taxation Indemnity or any other agreement entered into
pursuant hereto.
8.4 Nothing in Clause 8.1 shall prevent the Offeror from changing the
auditors appointed for the Company or any members of the Group at any
time in the future.
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<PAGE> 20
8.5 In recognition of the Offeror's interest in acquiring a business that
is operated on the basis of maximising the net present value of
profits over time each of the Covenantors hereby undertakes to the
Offeror that in his capacity as officer, manager or employee of any
member of the Group ( if he is such) he shall procure as far as
reasonably practicable that following Completion and until the earlier
of 31 December 2002 and the date on which no further Deferred Loan
Notes may be issued:-
(a) he will not deliberately and knowingly do any act or thing or
procure the Company or any member of the Group to do any act or
thing the object of which is to distort unfairly the financial
results of the Company so as to increase the amount of Deferred
Loan Notes that are to be issued;
(b) that transactions entered into by the Company are structured
to maximise the net present value of the Company even though the
structure used may result in a corresponding decrease in REGL
Modified Pre-tax Profit;
(c) that the Business is being managed prudently and in accordance
with the Business Plan and Budget;
(d) that investment capital will not be committed or guarantees
undertaken or other liabilities assumed outside the ordinary
course of business without the written approval of the
Offeror; and
(e) to the extent that any rights, interests or obligations are
assigned under this Deed the Covenantors agree to meet their
obligations under this Clause 8.5.
9. MANAGEMENT OF THE GROUP POST COMPLETION
9.1 The Offeror hereby undertakes with the Covenantors that for the period
from Completion until the earlier of 31 December 2002 and the date on
which no further Deferred Loan Notes may be issued it will regulate
the affairs of the Group in accordance with this Clause 9
notwithstanding anything to the contrary in the articles of
association of the Company or any Group Company.
9.2 Notwithstanding anything contained in the articles of association of
the Company the board of directors of the Company will comprise 9
directors provided that the Offeror shall be able to replace any
directors appointed to the board at any time and further provided that
those members of the board of the Company appointed pursuant to Clause
9.2(c) below shall have served on the board for a period of at least
12 months:-
(a) five of whom will be appointed by the Offeror;
(b) four of whom, each being employees of the Company or its
Subsidiaries, will be appointed by the five directors
appointed pursuant to Clause 9.2(a) above; and
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<PAGE> 21
(c) the initial directors shall be Messrs Huntley, Froggatt,
Ellingham, Hubbard, Strong, Webster, Siegel, Aston and the
Finance Director.
9.3 (a) The Offeror shall nominate Mr. A. Huntley as a member of the
board of the Offeror as part of the slate of nominees to be
presented to shareholders at the Offeror's next annual meeting
of shareholders.
(b) The Offeror shall appoint two members of the board of the
Company, who are also employees of the Company, to the Senior
Executive Management Committee of the Offeror.
(c) The Offeror shall procure that personnel from its Investment
Banking Division are made available to the Company at cost or
on other terms agreed in writing between the parties at the
time of each given assignment to assist in the implementation
of the objectives set out in the Business Plan prepared for
three consecutive years.
9.4 (a) As and when prescribed by the Offeror with respect to its
major business units, the Company shall prepare and submit a
budget dealing with operating performance, capital expenditure
and cash flow. The Offeror's chief financial officer and
other designees will review these budgets during the
prescribed time and submit the final form of budget to the
Offeror's Board of Directors.
(b) Upon the approval of the Offeror's Board, in its sole
discretion, the Budget shall constitute authority to take all
actions implicit in the Budget, except for those matters, such
as major capital expenditures, acquisitions, guarantees,
borrowings, investments and other similar obligations, which
require further specific approvals.
(c) The Company shall use all reasonable endeavours to operate its
business in accordance with the agreed Budgets and the
Business Plan prepared for three consecutive years in the form
approved in writing by the Offeror.
9.5 The board of the Company will appoint a remuneration committee to
advise on the allocation of discretionary bonuses and options under
any stock incentive plans.
9.6 The Offeror shall use its reasonable endeavours (and where practicable
shall procure) that any business of surveying for the time being
carried on by the Company or any member of the Group shall at all
times be conducted in accordance with the document entitled "Rules of
Conduct" for the time being of The Royal Institution of Chartered
Surveyors.
10. COVENANTORS' REPRESENTATIVE
10.1 Each of the Covenantors hereby appoints the Chief Executive for the
time being (the first such Covenantors' Representative being Alan
Froggatt) of the Company (provided that person is a Covenantor) as the
Covenantors' Representative and authorises and empowers such
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<PAGE> 22
Covenantors' Representative as such Covenantor's true and lawful agent
and attorney to act in the name, place and stead of such Covenantor
with respect to the Offers as such Offers may from time to time be
amended, extended, varied or revised and with respect to the transfer
of the Covenantors' Shares to the Offeror pursuant thereto and to do
or refrain from doing all such acts and things as such Covenantors'
Representative shall deem necessary or appropriate in order to accept
and to give effect to the terms of the Offers and this Deed and the
transactions contemplated thereby, including, without limitation, the
power:-
(a) to act for such Covenantor with regard to all warranty and
indemnification matters referred to in this Deed including,
without limitation, the power to acknowledge responsibility
for any claim and the power to compromise or settle any claim
on behalf of such Covenantor including meeting his appropriate
proportion of costs incurred in investigating, assessing,
contesting, litigating or settling such claims out of the
Escrow Fund;
(b) to receive all demands, notices and other communications
directed to Covenantors and to do or refrain from doing any
further acts or deeds on behalf of such Covenantors which such
Covenantors' Representative deems necessary or appropriate;
(c) to acknowledge, vary, waive or agree any changes to the terms
of the Earn-Out protections set out in Clause 8 hereof in
relation to the Deferred Loan Notes on behalf of the
Covenantors where the Covenantors' Representative deems it
necessary, appropriate or expedient; and
(d) to vary, waive or agree any changes to the method of
calculating and to agree on behalf of such Covenantors the
calculations of REGL Modified Pre-Tax Profit, Base Amount and
Principal amount of Deferred Loan Notes to be issued
including, without limitation, in order to address any issues
that may arise from the acquisition or merger of a company by
or with any member of the Group.
10.2 The appointment of the Covenantors' Representative shall be
irrevocable until the later of 20 February 2004 and the date when all
relevant claims made by the Offeror prior to 20 February 2004 shall
have been resolved, settled, withdrawn or deemed to have been
withdrawn, at which date such appointment shall automatically
terminate, and the Offeror and any other person may conclusively and
absolutely rely, without enquiry, upon any action of the Covenantors'
Representative in accordance with this provision as an act of all of
the Covenantors in all matters referred to in the Offer Document and
this Deed. Each Covenantor hereby ratifies and confirms all and any
acts which the Covenantors' Representative shall do or cause to be
done in his capacity as Covenantors' Representative. The Covenantors'
Representative shall act for all Covenantors on all of the matters set
out in the Offer Document and in this Deed in the manner such
Covenantors' Representative believes to be in the best interests of
such Covenantors and consistent with their obligations under the
Offers and this Deed but the Covenantors' Representative shall not be
responsible to any Covenantor for any loss or damage any Covenantor
may suffer by reason of the performance by the Covenantors'
Representative of his
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<PAGE> 23
duties in accordance with this provision except for loss or damage
arising from wilful violation of law or negligence in the performance
of his duties.
10.3 In the event of the death, incapacity or resignation of the
Covenantors' Representative, or the Covenantors' Representative
ceasing to be the Chief Executive of the Company and the new Chief
Executive not being a Covenantor, the Covenantors shall agree upon a
successor within the 30 day period immediately following the date of
notification of the death, incapacity or resignation of the
Covenantors' Representative or his ceasing to be the Chief Executive
of the Company and the new Chief Executive not being a Covenantor and
such successor shall either be a Covenantor or any other person
acceptable to the Offeror who shall agree in writing to accept such
appointment in accordance with this provision. The appointment of a
successor Covenantors' Representative pursuant to this provision shall
promptly be notified in writing to the Offeror.
10.4 For the avoidance of doubt, any Covenantors' Representative appointed
pursuant to this Clause 10 shall not be vested with any authority or
power which is in conflict with the authority or power granted to any
attorney appointed by the Covenantors under any irrevocable
undertakings given by them in connection with or as part of the Offers
and to the extent that any conflict exists the attorney appointed by
the Covenantors pursuant to such irrevocable undertakings shall take
precedence.
11. ANNOUNCEMENTS, ETC
The terms of this Deed shall not be disclosed by any party hereto
other than to their respective legal financial and other advisers
without the prior consent of the other parties (not to be unreasonably
withheld or delayed) unless disclosure is required by any US or UK law
or the rules of the New York or London Stock Exchanges.
12. COSTS
Save as expressly otherwise provided in this Deed or in the Offer
Document each of the parties hereto shall bear its own legal,
accountancy and other costs, charges and expenses connected with the
negotiation, preparation and implementation of this Deed and the
Offers and any other document or action incidental to or referred to
in this Deed.
13. EFFECT OF COMPLETION
The terms of this Deed shall insofar as not performed before the
acquisition of the Shares by the Offeror and subject as specifically
otherwise provided in this Deed continue in force after and
notwithstanding the acquisition of the Shares by the Offeror.
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14. WAIVER, AMENDMENT
14.1 No waiver of any term, provision or condition of this Deed shall be
effective unless such waiver is evidenced in writing and signed by the
waiving party.
14.2 No omission or delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or of any
other right, power or privilege. The rights and remedies herein
provided are cumulative with and not exclusive of any rights or
remedies provided by law.
14.3 No variation to this Deed shall be effective unless made in writing
and signed by the Covenantors' Representative on behalf of the
Covenantors and by the Offeror.
15. FURTHER ASSURANCES
At any time hereafter the Covenantors shall at their own expense
execute all such documents and do such acts and things as the Offeror
may reasonably require for the purpose of vesting in the Offeror the
full legal and beneficial title to the Covenantors' Shares and giving
to the Offeror the full benefit of this Deed.
16. NOTICES
16.1 Save as specifically otherwise provided in this Deed any notice,
demand or other communication to be served under this Deed may be
served upon any party hereto only by posting by first class post or
airmail if sent from outside the UK or delivering the same or sending
the same by facsimile transmission to the Offeror at the address of
the Offeror's Solicitors or to any of the Covenantors to the
Covenantors' Representative marked for the attention of the
Covenantors' Representative or facsimile number given below or at such
other name and address or number in England and/or Wales as the
Offeror or (as the case may be) all of the Covenantors may from time
to time notify in writing to the other parties hereto:-
The Covenantors' - fax number - 0171 493 1503
Representative marked for the attention of Alan
Froggatt
The Offeror - fax number 0171 972 7990 marked for
the attention of Philip Broke copy to
John K. Lines, General Counsel of
Insignia Financial Group, Inc. fax
number 001 864 239 1096
16.2 The Covenantors hereby irrevocably agree that service of any notice,
demand or other communication upon the person named above shall be
deemed due service upon each of them at the time of deemed service
upon him. The Covenantors hereby irrevocably agree that the
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Offeror may rely upon any notice, demand or other communication given
by the Covenantors' Representative or the Covenantors' Solicitors and
purporting to be given on behalf of all the Covenantors as having been
given with the express authorisation of each of the Covenantors and
that each of the Covenantors will be bound thereby.
16.3 A notice or demand served by first class post shall be deemed duly
served 72 hours after posting by airmail from outside the UK and a
notice or demand sent by facsimile transmission shall be deemed to
have been served at the time of transmission and in proving service of
the same it will be sufficient to prove, in the case of a letter, that
such letter was properly stamped or franked first class, addressed and
placed in the post and, in the case of a facsimile transmission, that
such facsimile was duly transmitted to a current facsimile number of
the addressee at the address referred to in this Clause 16 or in
Clause 18.
17. COUNTERPARTS
This Deed may be executed in any number of counterparts and by the
several parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
18. GOVERNING LAW AND JURISDICTION
18.1 This Deed and the Offer Document shall be governed by and construed in
accordance with English law.
18.2 The parties hereto agree that service of any writ, notice or other
document for the purpose of any proceedings shall be duly served upon
it if delivered or sent by registered post, in the case of the
Covenantors to the address specified in Clause 16 (marked for the
attention of the Covenantors' Representative) or such other name and
address in England and/or Wales as is notified pursuant to Clause 16
and in the case of the Offeror to the address specified in Clause 16
(marked for the attention of Philip V. Broke).
19. INVALIDITY
If at any time any one or more of the provisions hereof is or becomes
invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions
hereof shall not be in any way affected or impaired thereby.
20. ASSIGNMENT
20.1 It is hereby agreed and declared that the benefit of this Deed may be
assigned by the Offeror (i) to any company of which it is a subsidiary
(as defined by Section 736 Companies Act 1985) or to any other company
which is a subsidiary of it or its holding company as thus defined;
and (ii) to any person who acquires a majority of the Shares or all or
substantially all of the undertaking
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or material assets of the Group and who agrees to assume the Offeror's
obligations under this Deed and the Offer Document in respect of the
Earn Out.
20.2 Save as aforesaid this Deed and all rights and benefits hereunder are
personal to the parties hereto and may not be assigned at law or in
equity without the prior written consent of the other parties hereto.
SIGNED on behalf of each of the Covenantors by way of confirmation.
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SCHEDULE 1
WARRANTIES
A. Constitution
B. Accounts
C. Business
D. Directors and Employees
E. Properties
F. Pensions
G. The Group and its Bankers
H. Accuracy of Information
I. Tax
J. Environmental Matters
K. Title and Capacity
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A. CONSTITUTION
MEMORANDUM AND ARTICLES
A.1. The Memorandum and Articles of Association of the Company in the form
of the copies supplied to the Offeror are complete and accurate and
have embodied therein or annexed thereto copies of all resolutions and
agreements as are referred to in Section 380 of the Companies Act 1985,
and all amendments thereto (if any) were duly and properly made.
REGISTER OF MEMBERS
A.2. The Register of Members of the Company contains true and accurate
records of the members from time to time of the Company and the Company
has not been subject to any application under the Companies Act 1985
for rectification of such Register.
RETURNS
A.3. All such resolutions returns and other documents required by the
Companies Act 1985 to be delivered to the Registrar of Companies have
been duly delivered and are true and accurate.
POWERS OF ATTORNEY
A.4. To the best of the knowledge and belief of the Covenantors, the Company
has not executed any power of attorney or conferred on any person other
than its directors officers and employees any authority to enter into
any transaction on behalf of or to bind the Company in any way.
SUBSIDIARIES
A.5. The Company does not have any subsidiary undertakings other than those
listed in the Document of Company Details nor does the Company own any
shares or stock in the capital of nor have any beneficial interest in
any other company, corporate enterprise, partnership or business
organisation nor does the Company control or take part in the
management of any other company or business organisation. Each of the
Subsidiaries is a wholly owned subsidiary of the Company, save as
otherwise indicated in the document in agreed form headed "Details of
the Company and the Subsidiaries".
OPTIONS OVER SHARES
A.6. There is no agreement or commitment outstanding which calls for the
allotment, issue or transfer of, or accords to any person the right to
call for the allotment or issue of, any shares, debentures or
securities in or of the Company or any of the Subsidiaries other than
the Options and the Convertible Shares.
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INSOLVENCY
A.7. No Company or Subsidiary is insolvent or unable to pay its debts as
they fall due or subject to receivership, administration, litigation or
winding-up and no order has been made or resolution passed, petition
presented or meeting held for the winding-up of any of them and no
analogous proceedings in any other jurisdiction have been commenced.
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B. ACCOUNTS
ACCOUNTS WARRANTY
B.1. The Accounts which are not audited have been prepared by the Company
with due care and attention in accordance with generally accepted
accounting principles and practices in the United Kingdom and
accordingly adequately reflect in all material respects all the assets
and liabilities and the state of affairs, financial position and
results of the Company as at and up to the Accounts Date and without
prejudice to the generality of the foregoing, the Accounts:-
(a) make adequate provision or reserve for depreciation, bad or
doubtful debts and other actual liabilities in accordance with
the accounting policies of the relevant company;
(b) either make adequate provision or reserve for or make fair
disclosure of postponed or deferred liabilities in the
financial statements in accordance with the accounting policies
of the relevant company;
(c) do not overvalue assets or understate liabilities; and
(d) have not (save as disclosed in the Accounts) been affected by
any extraordinary, exceptional or non- recurring item or by any
other fact or circumstance rendering the profits or losses for
the relevant period unusually high or low.
PARTNERSHIP ACCOUNTS
B.2. The Partnership Accounts have been prepared in accordance with
generally accepted accounting principles and practices in the United
Kingdom and are true and accurate in all material respects so far as
they are stated to be facts and not estimates and accordingly give a
true and fair view of all the assets and liabilities (whether present
or future, actual or contingent) and of the state of affairs, financial
position and results of the Partnership as at and up to 30 April 1997.
NET ASSET WARRANTY
B.3. The Net Asset Value, calculated in accordance with Schedule 5, shall
not be less than L.3,938,000 as at the Completion Accounts Date.
UNDISCLOSED LIABILITIES
B.4. To the best of the knowledge and belief of the Covenantors there are no
liabilities or obligations of any nature (absolute, accrued,
contingent, otherwise or known) which were not fully disclosed or
reserved in the balance sheet prepared as at the Accounts Date, except
the liabilities specified in the Disclosure Letter and those
liabilities arising since the Accounts Date which were incurred in the
ordinary course of business.
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BOOK DEBTS
B.5. Except to the extent to which provision or reserve has been made in the
Accounts, 90% of book debts owed to the Company included in the
Accounts will be duly paid in full not later than 30 April 1998 and
none of the book debts owed to the Company has been the subject of any
factoring by the Company. For this purpose book debts shall not include
prepayments by the Company.
FIXED ASSETS
B.6. The value of all of the fixed assets of the Company as shown in the
Accounts is at cost thereof less depreciation deducted from time to
time in a consistent manner and there has been no revaluation of such
fixed assets since their acquisition.
OFF BALANCE SHEET FINANCING
B.7. Neither the Company nor any associated company has engaged in any
financing (including without prejudice to the generality of the
foregoing the incurring of any borrowing or any indebtedness in the
nature of borrowing including without limitation liabilities in the
nature of acceptances or acceptance credits) of a type which would not
be required to be shown or reflected in the Accounts.
ACCOUNTING REFERENCE DATE
B.8. The Company has notified to the Registrar of Companies 30 April as
being its accounting reference date pursuant to the Companies Act 1985
and has not at any time notified the Registrar of Companies of any
other date.
BOOKS OF ACCOUNT
B.9. The Company has properly kept and maintained all necessary books of
account (accurately reflecting in accordance with generally accepted
accounting principles and practices in the United Kingdom and, in the
case of certain Subsidiaries, in their respective countries in which or
in a state, province or part of which they were incorporated, all
transactions effected by the Company or to which it is or has been a
party), minute books, records, Register of Members and other statutory
books. All deeds and documents (properly stamped where stamping is
necessary for enforcement thereof) belonging to the Company or which
ought to be in the possession of the Company and the common seal of the
Company are in the possession of the Company.
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C. BUSINESS
BUSINESS SINCE THE ACCOUNTS DATE
C.1. Since the Accounts Date there has been no material adverse change in
the overall financial or trading position or performance of the Company
taking account of seasonal fluctuations in the financial performance of
the Business, and the Business has been conducted on a normal basis and
the Company has not disposed of any of its assets otherwise than in the
normal course of business or declared or paid any dividend on any of
its shares or effected any distribution of its assets or made any loan
or other payment other than in the normal course of business, and
without prejudice to the generality thereof, the Company has not since
the Accounts Date done or agreed or committed to do any of the
following:-
(a) accelerated collection of any sum payable to the Company to a
date prior to the date such collection would have occurred in
the ordinary course of business and consistent with past
practice;
(b) delayed payment of any sum payable by the Company beyond its
due date or to a date after the date such payment would have
been made in the ordinary course of business and consistent
with past practice; and
(c) created, incurred, guaranteed or assumed any indebtedness or
borrowed money or entered into any financial lease.
ACQUISITION AND DISPOSAL OF ASSETS
C.2. The Company has not since the Accounts Date acquired or agreed to
acquire any material asset for a consideration which is higher than the
market value at the time of acquisition and has not disposed of or
agreed to dispose of any material asset for a consideration which is
lower than the market value or the value thereof as shown in the books
of the Company at the time of disposal.
CHARGES AND TITLE TO ASSETS
C.3. (a) Save for Intellectual Property the Company has not created or
agreed to create or suffered to arise or exist any Encumbrance
(other than arising in the ordinary course of business) over any
part of its undertaking or assets and the Company has and will
at Completion own all the assets included in the Accounts and
all other assets (tangible or intangible) used for the purpose
of the Company's business at the date hereof and to all assets
acquired since the Accounts Date and prior to Completion.
(b) The Company owns or leases all vehicles, plant, machinery and
equipment required for the proper and efficient conduct of the
business of the Company.
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(c) Save for Intellectual Property no person other than the
Company has any right, title or interest (present or future) in
any material asset belonging to or used by the Company.
LEASING ETC. AGREEMENTS
C.4. Accurate details of any hiring or leasing agreement, hire purchase
agreement, credit or conditional sale agreement, agreement for payment
on deferred terms or any other similar agreement with an annual
commitment in excess of L.5,000 per agreement to which the Company is a
party and where the aggregate annual payments by the Company exceed
L.5,000 are scheduled in the Disclosure Letter.
ONEROUS OBLIGATIONS
C.5. The Company is not a party to any contract, transaction, arrangement
or liability which:-
(a) is of an unusual or abnormal nature, or outside the ordinary
and proper course of business and is for an amount during the
term of the contract of more than L.50,000;
(b) is for a fixed term of more than six months and is for an
amount during the term of the contract of more than L.50,000;
(c) is of a material long-term nature (that is unlikely to have
been fully performed, in accordance with its terms, more than
six months after the date on which it was entered into or
undertaken) and is for an amount during the term of the contract
of more than L.50,000;
(d) is incapable of termination in accordance with its terms, by
the Company, on 60 days' notice or less and is for an amount
during the term of the contract of more than L.50,000;
(e) is of a material loss-making nature (that is, known to be
likely to result in a loss to the Company) on completion of
performance and is for an amount during the term of the contract
of more than L.15,000;
(f) cannot readily be fulfilled or performed by the Company on
time without undue, or unusual, expenditure of money, effort or
personnel and is for an amount during the term of the contract
of more than L.50,000;
(g) involves payment by the Company by reference to fluctuations
in the index of retail prices, or any other index or in the rate
of exchange for any currency and is for an amount during the
term of the contract of more than L.50,000;
(h) involves an aggregate outstanding expenditure by the Company
of more than L.50,000; or
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(i) restricts its freedom to engage in any activity or business or
confines its activity or business to a particular place.
SUPPLY CONTRACTS
C.6. All agreements or arrangements for the supply of products or goods to
or by the Company which involve or are likely to involve the supply of
goods the aggregate sale value of which will represent in excess of 5%
of the turnover for the preceding financial year of the Company have
been disclosed to the Offeror in writing. The Company has not been
notified of nor are the Covenantors aware of any breach of any of its
obligations under any contract, transaction or arrangement to which it
is a party or by which it is bound.
CONTRACTS WITH CONNECTED PERSONS
C.7. Save in respect of employment contracts and contracts relating to
employee benefits subsequent to Completion the Company will not have
any contractual or other arrangements of any sort with any of the
Covenantors or any body corporate or person connected or associated
with any of the Covenantors or holders of Shares or options over or to
subscribe for shares in the Company.
EVENTS OF DEFAULT
C.8. (a) To the best of the knowledge and belief of the Covenantors no
event has occurred or is subsisting which constitutes or results
in or would with the giving of notice and/or lapse of time
constitute or result in a default or the acceleration of any
obligation under any agreement or arrangement to which the
Company is a party or by which it or any of its properties,
revenues or assets are bound.
(b) The Company is not a party to any material agreement or
material arrangement which is capable of termination by any
other person on a change in the management control or
shareholding of the Company or by reason of the acquisition of
the Shares under the Offers.
(c) The Covenantors have no actual knowledge that after Completion
(whether by reason of an existing agreement or arrangement or
otherwise or as a result of the proposed acquisition of the
Company by the Offeror):-
(i) a material customer of the Company will cease, or
be entitled to cease, to deal with the Company or
is likely substantially to reduce its existing
level of business with the Company;
(ii) the Company is likely to lose the benefit of any
material right or privilege which it enjoys;
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(iii) any officer or senior employee of the Company or
director of the Company will leave other than as
referred to in or contemplated by this Deed or by
the Offers.
GUARANTEES ETC.
C.9. The Company has not given any indemnity, warranty or bond or incurred
any other similar obligation or created any security for or in respect
of liabilities, actual or contingent, of any other person nor has the
Company given any guarantee for an amount in excess of L.10,000 or
entered into any confidentiality agreement.
SRO INDEMNITIES
C.10 So far as the Covenantors are aware, no claim has been made and no
circumstances have arisen which are likely to give rise to a claim for
indemnification under the rules of the self regulating organisations by
an employee or former employee of the Company or any member of the
Group.
OPTIONS OVER SHARES ETC.
C.11. Since the Accounts Date no share or loan capital has been created or
issued or agreed to be created or issued and there are not any options
or other agreements outstanding which call or give any person the right
to call (whether or not subject to conditions) for the issue of any
share or loan capital of the Company and none of the Covenantors is
under any obligation of any kind whatsoever whether actual or
contingent to sell, charge or otherwise dispose of any of the Shares or
any interest therein to any other person other than the Offeror.
LITIGATION
C.12. The Company is not engaged in any litigation, arbitration,
prosecution or other legal proceedings (whether as plaintiff, defendant
or third party) and to the best of the knowledge and belief of the
Covenantors there are no such proceedings pending or threatened or any
proceedings in respect of which the Company is or would if the
proceedings were adversely determined be liable to indemnify any other
person concerned therein.
CUSTOMER DISPUTES
C.13. The Company is not engaged in any dispute, claim or negotiation with
any Customer which is or could be material to the Business or the value
of any of its assets.
BUSINESS NAME
C.14. The Company does not carry on, and has not in the past three years
carried on, any business under any name other than its corporate name.
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INTRA VIRES
C.15. The Company has the power to carry on its business as now conducted
and the business of the Company has at all times been carried on intra
vires.
INTELLECTUAL PROPERTY
C.16.1. General
Save for Intellectual Property licensed to the Company, the
Intellectual Property which is material to the successful
operation of the Business as presently operated is
beneficially owned by the Company and so far as the
Covenantors are aware the Intellectual Property constitutes
all rights necessary to carry on the business of the Company
as presently operated and will not be adversely affected by
the acquisition herein contemplated.
C.16.2. Registered Rights
Details of all registered Intellectual Property and of all
applications for registration of Intellectual Property are set
out in the Disclosure Letter with the name in which the
registrations are registered, the country of registration, the
mark, the number, the class and any associations, as
appropriate. All renewal fees have been paid in respect of
the registered Intellectual Property.
C.16.3 Licences-out
Details of all licences-out granted or liable to be granted in
relation to the Intellectual Property and which are still in
force which are material to the successful operation of the
Business as presently operated are set out in the Disclosure
Letter with details of the date, parties, term, royalty,
relevant Intellectual Property, exclusivity, territory and any
unusual restrictions or provisions.
C.16.4 Licences-in
Details of all licences-in granted or liable to be granted in
relation to the third party Intellectual Property used by the
Group other than software used in its business and which are
still in force are set out in the Disclosure Letter with
details of the date, parties, term, royalty, relevant third
party intellectual property, exclusivity, territory and any
unusual restrictions or provisions.
C.16.5 Breaches
So far as the Covenantors are aware there is no breach nor do
the Covenantors know of any fact or matter which would or may
create a breach of any licence referred to in Warranties
C.16.3 or C.16.4.
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C.16.6 Infringement by the Company
So far as the Covenantors are aware, the Intellectual Property
owned by the Company does not infringe any intellectual
property rights of any nature of any third party.
C.16.7 Infringement by third parties
So far as the Covenantors are aware, no third party is
infringing the Intellectual Property owned by the Company.
C.16.8 Confidential Information
The Company has obtained confidentiality agreements wherever
necessary for the protection of know-how forming part of the
Intellectual Property.
C.16.9 Data Protection and Software
(a) The Company has complied with the Data Protection
Act 1984 in all material respects.
(b) In the 12 months prior to the date hereof, the
Company has not suffered and the Covenantors do not
know that any other person has suffered any
failures or bugs in or breakdowns of any computer
hardware or software used in connection with the
business of the Company which have caused any
substantial disruption or interruption in or to its
use and the Covenantors do not know nor are they
aware of any fact or matter which may so disrupt or
interrupt or affect the use of such equipment
following the acquisition by the Offeror of the
Shares pursuant to this Deed on the same basis as
it is presently used.
(c) The Company either solely owns or is validly
licensed to use the software used in its Business
and has all rights necessary to develop, modify and
maintain such software and no action will be
necessary to enable it to continue to use, develop,
modify and maintain such software to the same
extent and in the same manner as it had been used
prior to the date hereof.
(d) All computer systems, excluding software, used in
the business of the Company is owned and operated
by and are under control of the Company and are not
wholly or partly dependent on any facilities which
are not under the ownership, operation or control
of the Company. No action will be necessary to
enable such systems to be continued to be used in
the business of the Company to the same extent and
the same manner as they have been used prior to the
date hereof.
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(e) Steps which the Management believes to be adequate
have been taken to back-up electronically stored
information and software material to be used or
likely to be used in the Business and the
Management has made what it believes to be adequate
disaster recovery provisions and security
arrangements in relation to all computer systems
and software used in the business of the Company.
PROPERTY IN OTHER COMPANIES
C.17. The Company is not liable to offer for sale transfer or otherwise
dispose of or purchase or otherwise acquire any assets, including
shares with an aggregate value of more than L.50,000 held by it in
other bodies corporate under their Articles of Association or any
agreement or arrangement or to take or suffer any action by reason of a
change in the management control or shareholding of the Company or by
reason of the acquisition of the Shares under the Offer.
INSURANCE
C.18. (a) The Company has produced to the Offeror all insurance policies
in effect in relation to its business and assets and such
policies are in full force and effect and so far as the
Covenantors are aware are not voidable.
(b) The Management considers that the Company is now, and has at
all material times been, adequately covered against accident,
damage, injury, third party loss, loss of profits, claims and
other risks normally covered by insurance and has at all times
effected such insurances as are required by law.
(c) So far as the Covenantors are aware there are no circumstances
which could reasonably be expected to lead to any cover under
such insurance being avoided by the insurers or the premiums
being increased and there is no claim outstanding under any
such policy nor are the Covenantors aware of any circumstances
likely to give rise to a claim.
FAIR TRADING AND COMPLIANCE WITH OTHER LEGISLATION
C.19. (a) To the best of the knowledge and belief of the Covenantors
neither the Company, nor any of its officers, agents or
employees (during the course of their duties in relation to the
Company) have committed, or omitted to do, any act or thing the
commission or omission of which is in contravention of any Act,
order, regulation or the like in the United Kingdom or
elsewhere which is punishable by fine or other penalty or which
may impose any other liabilities on the Company or affect the
validity or enforceability of any agreement or arrangement to
which it is a party.
(b) Without prejudice to the generality of the foregoing, so far as
the Covenantors are aware the Company has not done or omitted
to do any act or thing in contravention of the provisions of
the Restrictive Trade Practices Acts 1976 and 1977, the Fair
Trading Act 1973, the Competition Act 1980, Articles 85 and 86
of the Treaty of Rome, the Resale
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<PAGE> 39
Prices Act 1976, the Trade Descriptions Act 1968, the Consumer
Credit Act 1974, the Consumer Protection Act 1989, the
Companies Acts, the Financial Services Act 1986, the Banking
Act 1987 and the Food Safety Act 1990 and so far as the
Covenantors are aware all statutory, municipal and other like
requirements (including orders and regulations affecting
businesses carried on in member states of the European Economic
Community) applicable to the business of the Company have been
complied with.
LICENCES
C.20. So far as the Covenantors are aware the Company has all licences,
permissions, permits, consents and authorisations required for the
carrying on of its Business and is not in breach of the terms or
conditions of such licences, permissions, permits, consents and
authorisations and the Covenantors have not received notice of any
pending or threatened proceedings which might affect such licences,
permissions, permits, consents and authorisations and the Covenantors
are not aware of any other reason why any of them should be suspended,
threatened or revoked or be invalid.
GRANTS
C.21. The Company has not applied for nor received any financial assistance
from any supranational, national or local agency, body or authority.
FINANCIAL ASSISTANCE
C.22 The Company has not been a party to any transactions which could
constitute unlawful financial assistance by the Company for the
acquisition of its own shares contrary to the law relating thereto as
prevailing at the time of any such transaction.
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D. DIRECTORS AND EMPLOYEES
D DIRECTORS AND EMPLOYEES
D.1 PARTICULARS OF OFFICERS
The particulars of all employees annexed to the Disclosure Letter show
the names, job title, date of commencement of employment, date of
birth and period of continuous employment (calculated in accordance
with chapter 1 of part XIV of the Employment Rights Act 1996 "ERA"))
of every employee of the Company.
D.2 REMUNERATION AND BENEFITS
The particulars of all employees annexed to the Disclosure Letter show
all remuneration and other benefits:-
(a) actually provided; and
(b) which the Company is bound to provide (whether now or in the
future)
to each officer and employee of the Company and are true and complete
and include particulars of and details of participation in all profit
sharing, incentive, bonus, commission, share option, medical,
permanent health insurance, directors' and officers' insurance,
travel, car, redundancy and other benefit schemes, arrangements and
understandings (the "SCHEMES") operated for all or any employees or
former employees of the Company or their dependants whether legally
binding on the Company or not.
D.3 TERMS AND CONDITIONS
(a) The Disclosure Letter contains copies of all the standard
terms and conditions, staff handbooks and policies which apply
to employees of the Company and identifies which terms and
conditions apply to which employees.
(b) There are no terms and conditions in any contract with any
director, officer or employee of the Company pursuant to which
such person will be entitled to receive any payment or benefit
or such person's rights will change as a direct consequence of
the transaction contemplated by this Deed.
(c) There are no service agreements or contracts of employment
between the Company and any of its directors, officers or
employees containing any provision in addition to the matters
required to be contained therein under section 1 of the ERA.
(d) All employees of the Company have received a written
statement of particulars of their employment as required by
section 1 of the ERA.
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D.4 OPERATION OF THE SCHEMES
(a) The Schemes have at all times been operated in all material
respects in accordance with their governing rules or terms and
all applicable laws and all documents which are required to be
filed with any regulatory authority have been so filed and all
tax clearances and approvals necessary to obtain favourable tax
treatment for the Company and/or the participants in the Schemes
have been obtained and not withdrawn and no act or omission has
occurred which has or could prejudice any such tax clearance
and/or approval.
(b) No director, officer, employee or any dependant thereof or
any other participant in any Scheme in the last two years has
made any claim against the Company in respect of any Scheme and
the Covenantors are not aware of any event having occurred which
could reasonably be expected to give rise to any such claim.
D.5 NOTICE PERIODS
The terms of employment or engagement of all employees, agents,
consultants and professional advisers of the Company are such that
their employment or engagement may be terminated by not more than four
weeks' notice given at any time without liability for any payment
including by way of compensation or damages (except for unfair
dismissal or a statutory redundancy payment).
D.6 CHANGES SINCE THE ACCOUNTS DATE
Since the Accounts Date the Company has not made, announced or
proposed any changes to the emoluments or benefits of or any bonus to
any of its directors, officers or employees and the Company is under
no obligation to make any such changes with or without retrospective
operation.
D.7 LOANS
There are no amounts owing or agreed to be loaned or advanced by the
Company to any directors, officers and employees of the Company (other
than amounts representing season ticket loans, remuneration accrued
due for the current pay period, accrued holiday pay for the current
holiday year or for reimbursement of expenses).
D.8 NOTICE OF TERMINATION AND LEAVE OF ABSENCE
(a) Save as contemplated by the Offers no director, officer or
employee of the Company has given or received notice to
terminate his employment.
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(b) There are no directors, officers or employees of the Company
who are on secondment or absent on grounds of disability or
other leave of absence (other than normal holidays or absence of
no more than one week due to illness).
D.9 PAYMENT UP TO COMPLETION
All salaries and wages and other benefits of all employees of the
Company have, to the extent due, been paid or discharged in full.
D.10 INDUSTRIAL RELATIONS
(a) No directors, officers or employees of the Company are members
of a trade union, staff association or any other body
representing workers and no such union, association or body is
recognised by the Company for the purposes of collective
bargaining.
(b) The Disclosure Letter contains copies of and full details of
all rights and liabilities relating or pursuant to any
collective agreements (whether with a trade union, staff
association or any other body representing workers and whether
legally binding or not) concerning the Company.
(c) Within the three years preceding the date hereof the Company
has not been engaged or involved in any trade dispute (as
defined in section 218 of the Trade Union and Labour Relations
(Consolidation) Act 1992) with any employee, trade union, staff
association or any other body representing workers and no event
has occurred which could or might give rise to any such dispute
and no industrial action involving employees of the Company,
official or unofficial, is now occurring or threatened nor has
any industrial relations or employment matter been referred
either by the Company or its employees or by any trade union
staff association or any other body representing workers to
Advisory, Conciliation and Arbitration Service for advice,
conciliation or arbitration.
D.11 CLAIMS BY EMPLOYEES
No past or present director, officer or employee of the Company or any
predecessor in business has any claim or right of action against the
Company including any claim:-
(a) in respect of any accident or injury which is not fully
covered by insurance; or
(b) for breach of any contract of services or for services; or
(c) for loss of office or arising out of or connected with the
termination of his office or employment
and no event or inaction has occurred which could or might give rise
to any such claim.
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D.12 ENQUIRIES AND DISCRIMINATION
(a) So far as the Covenantors are aware there are no enquiries or
investigations existing, pending or threatened affecting the
Company in relation to any directors, officers or employees by
the Equal Opportunities Commission, the Commission for Racial
Equality or the Health and Safety Executive or any other bodies
with similar functions or powers in relation to workers.
(b) So far as the Covenantors are aware there are no terms or
conditions under which any director, officer or employee of the
Company is employed, nor has anything occurred or not occurred
prior to Completion that may give rise to any claim for sex
discrimination, race discrimination, disability discrimination
or equal pay either under domestic United Kingdom or European
Law whether by such director, officer or employee or a
prospective director, officer or employee or otherwise.
D.13 COMPLIANCE WITH LAWS
(a) The Company has complied in all material respects with all
relevant provisions of the Treaty of Rome, EC Directives,
statutes, regulations, codes of conduct, collective agreements,
terms and conditions of employment, orders, declarations and
awards relevant to the Company's directors, officers and
employees or the relations between the Company and any trade
union, staff association or any other body representing workers.
(b) There are no training schemes, arrangements or proposals,
whether past or present, in respect of which a levy may
henceforth become payable by the Company under the Industrial
Training Act 1982.
D.14 TRANSFER REGULATIONS
The Company has not entered into any agreement and no event has
occurred which may involve the Company in the future acquiring any
undertaking or part of one such that the Transfer Regulations may
apply thereto.
D.15 DUTY TO INFORM AND CONSULT
The Company has complied in all material respects with its obligations
to inform and consult with trade unions and other representatives of
workers and to send notices to the Secretary of State pursuant to
sections 188 to 194 of the TULR(C)A and regulations 10 and 11 of the
Transfer of Undertakings (Protection of Employment) Regulations 1981.
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D.16 RECORDS
The Company has maintained adequate and suitable records regarding the
service of its directors, officers and employees and such records
comply with the requirements of the Data Protection Act 1984.
D.17. BUSINESS IS CONDUCTED BY EMPLOYEES
The Company has not entered into any agreement or arrangement for the
management or operation of its business or any part thereof other than
with its employees.
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E. PROPERTIES
E.1. ALL PROPERTY
The Properties comprise all the freehold and leasehold land and
premises owned used or occupied by the Company and there are no other
rights vested in or liabilities of the Company or any agreements
whereby the Company has entered into obligations and/or has any
financial entitlement relating to any land other than the Properties at
the date hereof.
E.2. DISCLOSURES AND REPLIES
All disclosures and replies to enquiries and requisitions relating to
the Properties made or given by or on behalf of the Covenantors or the
Company to the Offeror or its Solicitors are now and will at Completion
be complete and correct in all material respects.
E.3. NO OTHER LIABILITIES
The Company has no actual or contingent obligations or liabilities (in
any capacity including as principal contracting party or guarantor) in
relation to any lease, licence or other interest in, or agreement
relating to, land apart from the Properties.
E.4. GOOD AND MARKETABLE TITLE
The Company has a good title to the Properties which title is freehold
or leasehold as indicated in Schedule 4 and, unless disclosed in
Schedule 4, the Company is solely legally and beneficially entitled to
the Properties for an unencumbered estate in possession.
E.5. TITLE DEEDS AND DOCUMENTS
The Company has under its control all title deeds and documents
necessary to prove its title to the Properties and the same are
original documents or properly examined abstracts; where any of the
Properties is leasehold the title documents include all necessary
consents for the grant and assignment of the lease, satisfactory
details of all reversioners' titles, memoranda of rent increases where
appropriate and all reversioners' consents required under the lease;
where any of the Properties is subject to leases, underleases,
agreements or licences the title documents include all necessary
consents in connection therewith and evidence of registration of the
grant of the same where appropriate.
E.6. ADEQUACY OF EXISTING BENEFICIAL RIGHTS
To the best of the Covenantors' knowledge each of the Properties has
the benefit of all rights necessary for the continued present use and
enjoyment of the same such rights not being capable of withdrawal by
any person nor liable to be made subject to any charge therefor.
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E.7. OTHER MATTERS ADVERSELY AFFECTING THE PROPERTIES
So far as the Company is aware, there are no agreements, covenants,
restrictions, exceptions, reservations, conditions, rights, privileges
or stipulations affecting the Properties which are of an onerous or
unusual nature.
E.8. NO DEFAULT
The Company has not received any notice of any breach of any
covenants, restrictions, exceptions, reservations, conditions,
agreements, statutory and common law requirements, by-laws, orders,
building regulations and other stipulations and regulations affecting
the Properties and the uses of the Properties including the terms of
any lease, underlease or tenancy agreement under which any part of any
of the Properties is held and (without prejudice to the generality of
the foregoing) all outgoings have been paid to date and (in the case
of leasehold property) all rents and service charges have been paid to
date and no notice of any alleged breach of any of the terms of any
such lease or tenancy agreement as aforesaid has been served on the
Company.
E.9. LEASEHOLD PROPERTIES
(a) Each of the Properties which is leasehold is held under the
lease brief details of which are set out in Schedule 4 and no
licences or collateral arrangements or concessions have been
entered into or granted each such lease being a head lease and
containing no unusual or onerous covenants or provisions nor
any rights of determination on the part of the landlord and
there are no rent reviews which are or will at the date of
Completion be in the course of being determined;
(b) The proposed acquisition of the Company by the Offeror will
not result in the termination or cessation of any rights or
interests in the Properties pursuant to any lease, licence or
collateral arrangement in relation to the Properties.
E.10. USE
The existing use of each of the Properties is only that specified in
Schedule 4 and is the lawful permitted use whether under the current
Town and Country Planning legislation and in the case of leasehold
property under the terms of the lease or tenancy agreement under which
such property is held or otherwise and are not temporary uses and all
necessary consents to such existing uses have been obtained.
E.11. NO COMPULSORY ACQUISITION OR ENFORCEMENT PROCEEDINGS
There are no outstanding enforcement or other notices or proceedings
issued in respect of any of the Properties and so far as the Company
is aware there is no resolution or proposal for compulsory acquisition
by the local or any other authority nor any outstanding order, notice
or
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other requirement of any such authority that affects such existing use
as aforesaid or involves expenditure in complying with it nor any
other circumstances known which may result in any such order or notice
being made or served or which may otherwise affect the Properties.
E.12. FULL DISCLOSURE
Accurate details of all leases have been disclosed in writing to the
Offeror or the Offeror's Solicitors prior to the date hereof.
E.13. ACCURACY OF INFORMATION
All the information produced to or given in writing to the Offeror or
the Offeror's Solicitors in respect of or relating to the Properties
(including replies to enquiries and requisitions) in the course of
negotiations leading up to the execution of this Deed is true and
accurate and the Covenantors are not aware of any fact, matter or
thing which has not been disclosed to the Offeror or the Offeror's
Solicitors which makes any such information untrue or misleading at
the date of this Deed.
E.14. NO DISPUTES
The Company has not received notice that the Properties are affected
by any outstanding disputes, notices or complaints which affect the
use of the Properties for the purposes for which they are now used or
proposed to be used or that there are matters or Encumbrances
affecting the Properties and which would prevent or impede the Company
from operating and carrying on the businesses currently carried on at
the Properties.
E.15. FIRE PRECAUTIONS ACT 1971
The Company has not received notice that it has not complied with its
obligations under the Fire Precautions Act 1971 and that it has
applied for and obtained fire certificates thereunder in respect of
all premises owned or occupied by the Company to the extent required
by such Act.
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F. PENSIONS
F.1. PENSION ARRANGEMENTS DISCLOSED
Save in respect of the Richard Ellis Retirement Fund, the Richard
Ellis Executive Retirement Trust and the Richard Ellis Structured
Finance Limited Retirement Scheme (the "PENSION SCHEMES") the Company
is under no obligation or commitment, nor is it a party to any custom
or practice, to pay, provide or contribute towards any "RELEVANT
BENEFITS" within the meaning of Section 612 of the TA (ignoring the
exception therein) and has not at any time participated in or
contributed towards any scheme or arrangement which has as its purpose
or one of its purposes the provision of any such benefits (other than
schemes which have been fully wound up).
F.2. EX GRATIA PENSIONS ETC.
The Company has not made or proposed, and will not before Completion
make or propose, any voluntary or ex gratia payments to any person in
respect of any relevant benefit (as defined in paragraph F.1 above).
F.3 UNDERTAKINGS AND ASSURANCES
No undertaking or assurance (whether legally binding or not) has been
given by the Company to any person as to the continuance,
introduction, increase or improvement of any such benefit or scheme or
arrangement as is referred to in paragraph F.1 above since 1 May 1996.
F.4. DISCLOSURE OF DOCUMENTS
All material details of the Pension Schemes have been supplied to the
Offeror or its legal advisers including (without limitation to the
foregoing) in relation to the Richard Ellis Retirement Fund
(the "RETIREMENT FUND") complete up-to-date and accurate copies of the
following:-
(a) all trust deeds, rules and other documents which have at any
time governed the Retirement Fund (including any which have
now been superseded or consolidated);
(b) any announcements to members of the Retirement Fund which are
not yet the subject of formal amendment to the documentation;
(c) the current explanatory booklets and other explanatory
literature issued to persons who are (or are entitled to
become) members of the Retirement Fund;
(d) the name and address of the actuary to the Retirement Fund and
the actuary's reports on the last actuarial valuation of the
Retirement Fund, together with any subsequent actuarial advice
or recommendations given in relation to the Retirement Fund;
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(e) the audited accounts of the Retirement Fund (including the
auditors' report) for the last two scheme years and any draft
scheme accounts for the current scheme year;
(f) a statement of the basis on which the participating companies
and the members of the Retirement Fund contribute thereto, and
make payments in respect of the expenses of administration,
management and trusteeship thereof and the rate and amount of
such contributions and payments made in the three years prior
to the date of this Deed;
(g) details of any discretionary benefits provided under, and
discretionary arrangements relating to, the Retirement Fund,
including any discretionary increases of deferred pensions or
pensions in payment;
(h) the approval letter issued by the Pension Schemes Office of
the Inland Revenue in respect of the Retirement Fund and any
undertakings and indemnities given to the Inland Revenue in
relation to the Retirement Fund other than undertakings in the
normal form requested by the Inland Revenue from pension
schemes generally.
All written information which has been made available to the Offeror
on or before the date of this Deed in relation to the Pension Schemes
and which is annexured to the Disclosure Letter is true and accurate
in all material respects.
F.5 PAYMENT OF CONTRIBUTIONS
All contributions and premiums which are payable by the participating
companies under the Pension Schemes and all contributions due from
members of the Pension Schemes have been duly paid when due and the
participating companies have fulfilled all their obligations under the
Pension Schemes to pay all relevant contributions and premiums.
F.6 EXEMPT APPROVAL
The Retirement Fund and the Richard Ellis Structured Finance Limited
Retirement Scheme are, and have been with effect from the date of
their commencement, (within the meaning of Section 592(1) of the TA)
exempt approved schemes and so far as the Covenantors are aware there
is no reason why such approval might be withdrawn or cease to apply.
F.7 CONTRACTING OUT
No employee of the Company is in contracted-out employment as defined
in the Pension Schemes Act 1993.
F.8 INSURANCE OF DEATH BENEFITS
All lump sum death benefits which may be payable under the Pension
Schemes (other than a refund of members' contributions with interest
where appropriate) are fully insured with an
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insurance company of good repute authorised to carry on long-term
insurance business under the Insurance Companies Act 1982. All
policies and contracts under which such benefits are insured are
enforceable and there is no ground on which the insurance company
concerned might avoid liability under any such policy or contract.
Each member and beneficiary has been covered for such insurance by
such insurance company at its normal rates and on its normal terms for
persons in good health.
F.9. LEGAL COMPLIANCE
So far as the Covenantors are aware the Pension Schemes have at all
times been administered in all material respects in accordance with
the trusts' powers and provisions of their governing documentation and
have been administered in accordance with and comply with all
applicable legislation and the general requirements of trust law.
F.10 NO CLAIMS OR LITIGATION
No notice of any claim has been made or threatened against the
trustees or administrator of the Pension Schemes or any company
participating therein or against any person whom the Company is or may
be liable to indemnify or compensate (including any complaint to the
Pensions Ombudsman) in respect of any act, event, omission or other
matter arising out of or in connection with the Pension Schemes (other
than routine claims for benefits) and so far as the Covenantors are
aware there are no circumstances which may give rise to any such
claim.
F.11 DISCRETIONARY BENEFITS
No power or discretion has been exercised to augment or improve any
benefit under the Pension Schemes, nor any promise or announcement
made to do so.
F.12 ACCESS TO MEMBERSHIP
Every person who is entitled to membership of the Pension Schemes has
been invited to join as of the date on which he became so entitled.
F.13 PAYMENTS TO COMPANIES
No payment has been or is proposed to be made from the Pension Schemes
to any participating company.
F.14 CONTRIBUTIONS TO PERSONAL PENSIONS
The Company has no contractual liability to make any contributions to
any personal pension scheme or any retirement annuity contract of any
employee or director or to make any payment of remuneration
specifically referable to contributions payable by any employee or
director under such scheme or contract.
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F.15 FEES AND EXPENSES PAID
All actuarial, consultancy, legal and other fees, charges or expenses
which have fallen due in respect of the Pension Schemes, and whether
payable by participating companies or by the trustees thereof, have
been paid.
F.16 NO TAX LIABILITY
All taxation of any nature, whether of the United Kingdom or
elsewhere, for which the trustees or administrators of the Pension
Schemes are liable or liable to account and which has fallen due has
been duly paid.
F.17 RECORDS PROPERLY MAINTAINED
The records of the Pension Schemes, including without prejudice to the
generality of the foregoing all books of account and trustees'
minutes, have been adequately maintained and all such records are in
the possession of or under the control of the trustees of the Pension
Schemes.
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G. THE GROUP AND ITS BANKERS
BORROWINGS
G.1. The total amount borrowed by the Company from its bankers does not
exceed its facilities and the total amount borrowed by the Company from
whatsoever source does not exceed any limitation on its borrowing
contained in its Articles of Association, or in any debenture or loan
stock deed or other instrument.
CONTINUANCE OF FACILITIES
G.2. Accurate details of all bank or deposit accounts (whether in credit or
overdrawn), overdraft, loans or other financial facilities outstanding
or available to the Company including the signatures of each bank or
deposit account, overdraft, loan or facility have been supplied to the
Offeror and none of the Covenantors nor the Company has done anything
whereby the continuance of any such facilities in full force and effect
might be affected or prejudiced. In relation to the bank or deposit
accounts there have been no payments out of any such accounts except
for payments in the ordinary course of the Company's business.
EVENTS OF DEFAULT - INDEBTEDNESS
G.3. No circumstances have arisen or, to the best of the knowledge,
information and belief of the Covenantors, are about to arise in
consequence of the acquisition of the Company or by reason of any
default by the Company or any of its Subsidiaries such that any person
is, or would with the giving of notice and/or lapse of time and/or the
satisfaction of any other condition become entitled to require payment
before its stated maturity of, or security for, any indebtedness in
respect of borrowed money of the Company and, to the best of the
knowledge, information and belief of the Covenantors, no person to whom
any indebtedness for borrowed money of the Company which is payable on
demand is owed presently proposes to demand payment of, or security
for, the same, and there is no reason to suppose that any overdraft
facility of the Company will be, or is likely to be, withdrawn.
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H. ACCURACY OF INFORMATION
H.1 All information contained in the document in agreed form headed
"Details of the Company and the Subsidiaries", Schedule 4 to this Deed
and the information contained in the Offer Document in relation to the
Company, its officers and any person connected (within the meaning
given in Section 839 T.A.) with any of them is true and correct in all
material respects and does not omit any information which would be
necessary to make the information contained therein not misleading in
any material respect.
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I. TAXATION
INFORMATION AND RETURNS
RETURNS
I.1. The Company has made all returns and supplied all information and given
all notices to the Inland Revenue or other Taxation Authority as
reasonably requested or required by law and, so far as the Covenantors
are aware, these have been made within any requisite period. All such
returns and information and notices are correct and accurate in all
material respects and are not the subject of any dispute so far as the
Covenantors are aware and to the best of the knowledge, information and
belief of the Covenantors there are no facts or circumstances likely to
give rise to or be the subject of any such dispute and all tax returns
for the Company for all periods ending on or before the Accounts Date
have been agreed by the Inland Revenue or other Taxation Authority.
CLEARANCES
I.2. No action has been taken by the Company in respect of which any consent
or clearance from the Inland Revenue or other Taxation Authority was
legally required save in circumstances where such consent or clearance
was validly obtained, and where any conditions attaching thereto were
and are (so far as necessary), at the date of the Offer, met.
CLAIMS AND ELECTIONS
I.3. The Company has not made and is not subject to any claim or election
under any or all of the following:-
(a) Sections 279(1) to (6) T.C.G.A. (foreign assets: delayed
remittances);
(b) Section 35 T.C.G.A. (capital gains: rebasing to 31 March 1982);
(c) Section 24 T.C.G.A. (assets of negligible value or lost or
destroyed);
(d) Section 175 T.C.G.A. and Sections 152 and 153 T.C.G.A.
(roll-over relief);
(e) Section 242 T.A. (surplus franked investment income);
(f) Section 247 T.A. (group income);
(g) Sections 584 585 or 723 T.A. (foreign income etc.: delayed
remittances);
(h) Sections 75 to 77 F.A. 1986 (stamp duty on reconstructions
etc.).
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I.4. The Disclosure Letter contains details of all outstanding entitlements
to make claims, elections, appeals and postponement applications in
respect of each company other than REGL and in respect of Section 35
T.C.G.A., no period has expired being a period in which such an
election in respect of the Company could have been made without the
election being made.
PAYMENT OF TAX BY INSTALLMENTS
I.5. The Company has made no election or arrangement for the payment of Tax
by instalments under Sections 280 and 48 T.C.G.A.
PROVISION FOR AND PAYMENT OF TAX
GENERAL
I.6. The Accounts make proper provision or reserve in respect of any period
ended on or before the Accounts Date for all Tax assessed or liable to
be assessed on the Company or for which it is accountable at the
Accounts Date whether or not the Company has or may have any right of
reimbursement against any other person and proper provision has been
made and shown in the Accounts for deferred taxation in accordance with
generally accepted accounting principles.
PAYMENT OF TAX
I.7. The Company has duly paid all Tax to the extent that the same ought to
have been paid and is not liable nor has it within three years prior to
the date hereof been liable to pay any penalty or interest in
connection therewith.
PAY AS YOU EARN
I.8. The Company has properly operated the P.A.Y.E. system, or any
equivalent system outside the United Kingdom, deducting Tax as required
by law from all payments to or treated as made to or benefits provided
for employees, ex-employees or independent contractors of the Company
(including any such payments within Section 134 T.A.) and duly
accounted to the Inland Revenue for Tax so deducted and has complied
with all its reporting obligations to the Inland Revenue in connection
with any such payments made or benefits provided, and no P.A.Y.E. audit
in respect of the Company has been made by the Inland Revenue nor has
the Company been notified that any such audit will be made.
GIVE AS YOU EARN
I.9. Details of any payroll deduction scheme pursuant to Section 202 T.A.
operated by the Company are set out in the Disclosure Letter and any
such scheme has been operated in accordance with that section and
regulations made thereunder.
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SECONDARY LIABILITY
I.10. So far as the Covenantors are aware, no transaction or event has
occurred in consequence of which the Company is or may be held liable
for any Tax or deprived of relief or allowances otherwise available to
it or may otherwise be held liable for or to indemnify any person in
respect of any Tax for which some other company or person was primarily
liable (whether by reason of any such other company being or having
been a member of the same group of companies or otherwise).
CORPORATION TAX
TRADING ASSETS
I.11. In the event that any asset shown in the Accounts as a fixed asset is
disposed of immediately following the Offers the proceeds derived from
such asset will not be treated as a trading receipt for tax purposes.
I.12. INTENTIONALLY LEFT BLANK
TRANSFER PRICING
I.13. The Company has not entered into any transactions to which Section 770
T.A. would apply and no notice or enquiry pursuant to Section 770 T.A.
has been made in connection with any of such transactions.
APPROPRIATIONS
I.14. Since the Accounts Date the Company has not appropriated any of its
assets to or from trading stock.
I.15. INTEREST RATE CONTRACTS ETC.
The Company is not at the date hereof and has not since the Accounts
Date been a party to any contract which is a qualifying contract for
the purposes of Section 147 of the 1994 or a contract which may become
a qualifying contract.
I.16 EXCHANGE GAINS AND LOSSES
The Company is not at the date hereof and has not since the Accounts
Date been:-
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(a) the holder of a qualifying asset;
(b) subject to a qualifying liability; or
(c) party to a currency contract
for the purposes of chapter II of the FA 1993.
I.17 CREDITOR RELATIONSHIPS
The Company is and has since the Accounts Date been taxed on an
authorised accruals basis of accounting in relation to all loan
relationships which are creditor relationships as defined in Section
103 of the FA 1996 and in relation thereto:-
(a) the accruals on which the Company is taxable are computed only
by reference to interest;
(b) if any such debt were to be repaid at its face value the
Company would not suffer any charge to Tax in excess of Tax on
interest accrued; and
(c) there is no connection between the Company and the debtor as
mentioned in Section 87 of the FA 1996.
I.18 DEBTOR RELATIONSHIPS
(a) So far as the Covenantors are aware the Company will obtain Tax
relief (in respect of the period between the Accounts Date and
the date hereof) on an authorised accruals basis of accounting
in relation to all loan relationships which are debtor
relationships as mentioned in Section 103 of the FA 1996 which
are now or have at any time during the period between the
Accounts Date and the date hereof been outstanding and in
relation to each such relationship:-
(i) the deduction given in computing the taxable profits
of the Company in consequence of that relationship
will not be less than the interest accruing for the
period concerned;
(ii) the Company would suffer no adverse Tax consequences
were such debts to be repaid at face value save that
the Tax deduction for interest accrued would cease.
(b) The Company has not since the Accounts Date held or been the
debtor under any relevant discounted security as mentioned in
Schedule 13 of the FA 1996.
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PENSION FUND SURPLUS
I.19. Since the Accounts Date the Company has not received any payment to
which Schedule 22 T.A. applies.
CAPITAL ASSETS
CAPITAL ALLOWANCES
I.20. (a) No balancing charge in respect of any capital allowances (as
defined in Section 832(1) T.A.) claimed or given would be made
on any member of the Group on the disposal of any pool of assets
(that is to say all those assets expenditure relating to which
would be taken into account in computing whether a balancing
charge would arise on a disposal of any other of those assets)
if the disposals were to be made on the date hereof and for a
consideration equal to the amount of the book value thereof as
shown or included in the Accounts for each of the assets.
(b) So far as the Covenantors are aware, all necessary conditions
for all capital allowances claimed by the Company were at all
material times satisfied and remain satisfied and the Company
has not since the Accounts Date become liable for any balancing
charge.
FINANCE LEASES
I.21. (a) The Company is not the lessee under any leases of plant or
machinery save for the leases specified in the Disclosure Letter
(the "Leases").
(b) The machinery or plant subject to the Leases has in the period
which is the requisite period in respect of any expenditure
thereon by an owner or lessor for the purposes of Section 39(1)
CAA been used and only been used for a qualifying purpose as
defined by the section.
(c) The Covenantors, after making due and reasonable enquiry, are
not aware of any revenue investigation, revenue enquiry or
other circumstance which indicates that any person who is or
was a lessor or owner of equipment subject to any of the Leases
will or may be denied the first year allowances and writing
down allowances by reference to which the initial rental under
that Lease was calculated.
DISTRIBUTIONS
REPAYMENTS OF SHARE CAPITAL
I.22. (a) The Company has not at any time after 6 April 1965 repaid or
agreed to repay or redeemed or agreed to redeem or purchased or
agreed to purchase (or made any
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contingent purchase contract within the meaning of Section 165
of the Companies Act 1985) in respect of any of its issued
share capital or any class thereof. Further the Company has
not after 6 April 1965 capitalised or agreed to capitalise in
the form of shares debentures or other securities or in paying
up amounts unpaid on any shares debentures or other securities
any profits or reserves of any class or description or passed
or agreed to be passed any resolution to do so.
(b) The Company has not made (and will not be deemed to have made)
any distribution within the meaning of Sections 209 and 210
T.A. in the last six years except dividends properly authorised
and shown in its Accounts nor is the Company bound to make any
such distribution.
PAYMENTS TO BE TREATED AS DISTRIBUTIONS
I.23. The Company has not issued any securities (within the meaning of
Section 254(1) T.A.) which remain in issue where the interest payable
thereon falls to be treated as a distribution.
CHARGEABLE GAINS
SALES AT BOOK VALUE
I.24. No chargeable gain would arise if any assets of the Company (other than
trading stock) were to be realised for a consideration equal to the
amount of the book value thereof as shown or included in the Accounts.
VALUATION OF ASSETS
I.25. (a) The Company has not since the Accounts Date made any disposal
of part of an asset part of which is still owned by the Company
at the date hereof which has required or may or will require
any computation under Section 42 T.C.G.A. (part disposals of
assets).
(b) The Company has not since the Accounts Date disposed of or
acquired any asset so that Section 17 T.C.G.A. might apply to
restrict the consideration deemed to be given on such disposal
or acquisition.
DEPRECIATORY TRANSACTIONS
I.26. No loss which may hereafter arise on a disposal by the Company of
shares in or securities of any company will or is likely to be reduced
by virtue of the application of Section 176 T.C.G.A. (transactions in a
group) or Section 177 T.C.G.A. (dividend stripping).
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SHARES AND SECURITIES
I.27. The Company has not acquired or sold any shares or securities or
changed the rights attaching to any shares or securities since the
Accounts Date.
TRANSFERS BY WAY OF GIFT
I.28. The Company has not since the Accounts Date made any such transfer of
an asset at an undervalue as is mentioned in Section 125 T.C.G.A. or
received any assets by way of gift as mentioned in Section 282 T.C.G.A.
ANTI AVOIDANCE PROVISIONS
TAX SCHEMES
I.29. The Company has not entered into nor been a party to nor otherwise
involved in any scheme or arrangement containing one or more steps or
stages having no commercial purpose and designed wholly or partly for
the purpose of avoiding or deferring Tax.
TRANSACTIONS IN SECURITIES
I.30. The Company has not since the Accounts Date:-
(a) become liable for Tax; or
(b) received and will not receive or be the subject of or be
adversely affected by any Claim for Tax (arising as a result of
events occurring after the Accounts Date);
arising under or imposed by or resulting from the operation of Sections
703-709 T.A..
TRANSACTIONS IN LAND
I.31. The Company has not since the Accounts Date:-
(a) become liable for Tax; or
(b) received and will not receive or be the subject of or be
adversely affected by any Claim for Tax (arising as a result of
events occurring after the Accounts Date);
arising under or imposed by or resulting from the operation of Sections
776-778 T.A..
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SALE AND LEASE BACK OF LAND
I.32. In the last six years, the Company has not entered into any transaction
as is mentioned in Sections 34-37 or Section 780 T.A.
TRANSACTIONS BETWEEN DEALING AND ASSOCIATED COMPANY
I.33. The Company has not in the last six years entered into any transaction
mentioned in Section 774 T.A.
FOREIGN ELEMENT
TREASURY CONSENTS
I.34. The Company has not without the prior consent of the Treasury entered
into any of the transactions specified in Section 765(1)(c) or (d) T.A.
nor did the Company prior to 15 March 1988 without such consent enter
into any of the transactions specified in Section 765(1)(a) or (b) T.A.
JURISDICTION
I.35. The Company is not liable to tax in any jurisdiction other than the
country in which it was incorporated.
TRANSFERS TO NON-RESIDENT COMPANY
I.36. The Company has not since the Accounts Date made any such transfer as
is mentioned in Section 140 T.C.G.A.
AGENCY FOR NON RESIDENTS
I.37. The Company is not assessable and has not been assessed to Tax by
virtue of Section 78 T.M.A.
INHERITANCE TAX
INHERITANCE TAX CHARGE
I.38 There is no unsatisfied liability to inheritance tax attached or
attributable to the Shares or any asset of the Company and in
consequence no person has the power to raise the amount of such Tax by
sale or mortgage of or by a terminable charge on any of the Shares or
assets of the Company as mentioned in Section 212 of the I.T.A. and
none of the Shares or assets of the Company are subject to an Inland
Revenue charge within Section 237 of the I.T.A..
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GROUPS OF COMPANIES
GROUP RELIEF
I.39. The Disclosure Letter contains particulars of all arrangements relating
to group relief under Sections 402-413 T.A. to which the Company is or
has been a party and:-
(a) all claims by the Company for group relief were valid when made
and have been or will be allowed by way of relief from
corporation tax;
(b) the Company has not made nor is liable to make any payment for
group relief otherwise than in consideration for the surrender
of group relief allowable to the Company by way of relief from
corporation tax;
(c) the Company has received all payments due to it under any
arrangement or agreement for surrender of group relief by it;
(d) no such payment exceeds or could exceed the amount permitted by
Section 402(6) T.A..
ADVANCE CORPORATION TAX
I.40. The Disclosure Letter contains particulars of all arrangements for the
surrender under Section 240 T.A. of any amount of advance corporation
tax and in respect of receipts and surrenders disclosed:-
(a) the Company has not paid nor is liable to pay for the benefit
of any advance corporation tax which is or may become incapable
of set off against the Company's liability to corporation tax;
(b) the Company has received all payments due to it for all
surrenders of advance corporation tax made by it; and
(c) no such payment exceeds or could exceed the amount permitted by
Section 240(8) T.A..
COMPANIES FORM A GROUP
I.41. The Companies form a group for the purposes of Section 170 T.C.G.A. and
there are no other companies which are members of that group.
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VALUE ADDED TAX
VALUE ADDED TAX
I.42. (a) The Company is a registered taxable person for the purpose of
the VAT legislation and has not at any time been treated as a
member of a group of companies for such purpose and has not
made any application to be so treated and no circumstances
exist whereby the Company would or might become liable for
value added tax as an agent or otherwise by virtue of Section
47 V.A.T.A. or any equivalent section of the VAT legislation.
(b) The Company has (so far as the Covenantors are aware) complied
in all respects with all material requirements and provisions
of V.A.T.A. or any equivalent legislation outside the UK and
all regulations and orders made thereunder (the "VAT
LEGISLATION") and has made and maintained and will pending the
date of the Offers make and maintain accurate and up-to-date
records invoices accounts and other documents required by or
necessary for the purposes of the VAT legislation.
STAMP DUTY
STAMP DUTY AND CAPITAL DUTY
I.43. All documents necessary to prove the Company's title to its assets have
been duly stamped and since the Accounts Date the Company has not been
a party to any transaction whereby the Company was or is or could
become liable to stamp duty reserve tax.
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J. ENVIRONMENTAL MATTERS
For the purposes of this Section J:
"Disposal" means any disposal by any means, including dumping, incineration,
spraying, pumping, injecting, depositing or burying;
"Environmental Laws" means all EU, national, municipal or local statutes,
regulations, bye-laws, published guidelines, published policies or rules, and
Orders of any Governmental Authority and the common law (in force as at or
prior to the date of this Deed), relating in whole or in part to the
environment and includes those laws (all as in force as at or prior to the date
of this Deed) relating to the storage, generation, use, handling, manufacture,
processing, transportation, import, export, treatment, Release or Disposal of
any Hazardous Substance and any laws (in force as at or prior to the date of
this Deed) relating to asbestos or asbestos containing materials in the
environment, in the workplace or in any building located on any of the
Properties;
"Environmental Notice" shall mean any citation, directive, order, claim,
litigation, investigation, proceeding, judgment, letter or other communication,
written or oral, actual or threatened, from any person, including any
Governmental Authority;
"Environmental Permits" includes all permits, certificates, approvals,
consents, authorisations, registrations, and licences issued, granted,
conferred, created or required by any Governmental Authority pursuant to any
Environmental Laws;
"Governmental Authority" means any domestic or foreign government whether
federal, provincial, state or municipal and any governmental agency,
governmental or regulatory authority, governmental tribunal or governmental
commission of any kind whatever;
"Hazardous Substance" means any pollutant, contaminant, waste, hazardous
substance, hazardous material, toxic substance, dangerous substance or
dangerous good as defined, judicially interpreted or identified in any
Environmental Law, including any that may impair the quality of any waters;
"Order" means any order (draft or otherwise), judgment, injunction, decree,
award or writ of any court, tribunal, arbitrator, Governmental Authority or
other person;
"Process" means any industrial or other process or activity carried on at the
Properties;
"Release" includes releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, migrating, escaping, leaching, disposing,
dumping, depositing, spraying, burying, abandoning, incinerating, seeping or
placing, or any similar action defined in any Environmental Law; and
"Remedial Order" means any Order issued, filed or imposed pursuant to any
Environmental Law and includes, without limitation, any Order requiring any
remediation or clean-up of any Hazardous Substance, or requiring that any
Release, Disposal or other activity be reduced, modified or eliminated.
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<PAGE> 65
J.1 To the best of the Covenantors' knowledge, information and belief the
Company possesses all Environmental Permits necessary or desirable to
operate its businesses. All operations of the Company are now and
always have been in compliance in all respects with and without breach
of all applicable Environmental Laws and all Environmental Permits.
J.2 The Company is not the subject of any Remedial Order, nor to the
knowledge of the Covenantors, has any investigation, evaluation or
other proceeding been commenced to determine whether any such Remedial
Order is necessary.
J.3 To the best of the Covenantors' knowledge, information and belief,
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<PAGE> 66
(a) the Company has not been charged with or convicted of an
offence for non compliance with or breach of any Environmental
Law nor has the Company been fined or otherwise sentenced for
non-compliance with or breach of any Environmental Law nor has
the Company settled any prosecution short of conviction for
non-compliance with or breach of any Environmental Law;
(b) the Company has not received any notice of judgment or
commencement of proceedings of any nature, or experienced any
search and seizure, nor is the Company under investigation
related to, any breach or alleged breach of or non-compliance
with any Environmental Law;
(c) the Company has not caused or permitted the Release or
Disposal of any Hazardous Substance on, from, under or to the
Properties or of any Release or Disposal from a facility owned
or operated by any other person, including previous owners,
for which the Company may have liability;
(d) all Hazardous Substances generated, handled, stored, treated,
processed, transported or disposed of by or on behalf of the
Company have been generated, handled, stored, treated,
processed, transported or disposed of in compliance with all
applicable Environmental Laws and Environmental Permits; and
(e) the Company has not received any Environmental Notice or other
Order that the Company is, or is potentially, responsible for
any clean-up, remediation or corrective action under any
Environmental Laws and the Covenantors have no knowledge of
any facts which could give rise to any such Environmental
Notice or other Order.
J.4 In relation to the Company, its businesses, the Properties and the
Process, the Covenantors have provided to the Offeror complete,
accurate and up to date copies of all insurance appraisals,
applications for relevant licences, consents, permits and
authorisations, all filings and submissions made in relation thereto,
all environmental audit reports and associated documentation, and
health and safety reports and in each case correspondence relevant
thereto in all cases since 31 December 1992.
J.5 There are no actions, claims, or proceedings (whether actual or so far
as the Covenantors are aware potential) relating to liability in
respect of environmental matters nor, to the best of the knowledge,
information and belief of the Covenantors, is there any other, so far
as the Covenantors are aware, reason to believe that the Company has or
is likely to have liability in relation to environmental matters.
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K. TITLE AND CAPACITY
Each of the Covenantors has good title to and the necessary power and authority
to enter into, to deliver and to perform his or its obligations made in this
Deed and in the document containing his irrevocable undertaking to accept the
Offers and any other documents executed or to be executed in connection
herewith or with the Offers and to sell all his Shares and he or it will at
Completion be free to transfer those Shares free from all Encumbrances and
together with all rights now or hereafter attaching thereto on the terms of
this Deed and the other documents executed or to be executed in connection
herewith and the entry into, delivery and performance of each of such
obligations will not conflict with or be prevented by the terms of any other
document or obligation binding on a Covenantor.
SCHEDULE 2
WARRANTY AND INDEMNITY DEFENCES
1. GENERAL
In this Deed and in particular this Schedule, where the context so
admits:-
(a) references to the Warranties are references to the warranties,
undertakings and covenants on the part of the Covenantors given
or contained in Schedule 1 and Clause 2 of this Deed and, for
the purposes of the limitations provided herein, all other (if
any) warranties given by the Covenantors or any of them pursuant
to or in connection with this Deed;
(b) the expression "relevant claim" means a claim in respect of
any of the Warranties and/or any claim against the Covenantors
under the Indemnities and/or the Taxation Indemnity as the case
may be;
(c) references to a claimant are references to any person entitled
to claim under the Warranties and/or the Indemnities and/or the
Taxation Indemnity;
(d) the expression "appropriate proportion" in relation to any of
the Covenantors means, to the maximum extent possible, that
proportion of his shares shown on the register of members as at
the date of the Offer Document together with any shares allotted
on the exercise of options granted under the REGL Wider Share
Ownership Scheme (plus options in respect of which he has
accepted the Cancellation Alternative) bears to the total issued
share capital of the Company less the shareholding of B Ordinary
Shareholders (plus the total number of options granted under the
REGL Wider Share Ownership Scheme); and
(e) In the event of the Offeror successfully bringing a relevant
claim against the Covenantors:-
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(i) the Offeror shall not be entitled to have recourse to the
personal assets of a Covenantor (other than the Common Stock and
Deferred Loan Notes and proceeds thereof held or to be held in
the Escrow Fund) under this Deed; and
(ii) any limitations imposed on the Offeror in this Deed in
relation to the Warranties, Indemnities and the Taxation
Indemnity, including the limitations specified in Clause 1(e)(i)
above, shall cease to apply to the extent there has been a
fraudulent misrepresentation by a Covenantor.
2. TIME LIMITS FOR CLAIMS
No relevant claim may be made unless written notice of a claim under
the Warranties or Indemnities shall have been given by the Offeror to
the Covenantors before:-
(a) 31 August 1999 in the case of a claim under the Warranties and
the Pension Fund Indemnity other than those relating to
Taxation; or
(b) 20 February 2003 in the case of a claim under the Indemnities
other than the Pension Fund Indemnity;
(c) 20 February 2004 in the case of a claim under the Warranties
relating to Taxation,
and any relevant claim which is validly made under paragraphs
(a) and (b) above within the required period shall (unless
previously settled or withdrawn) be deemed to have been waived
or withdrawn in the event that legal proceedings in respect
thereof are not issued and served on the Covenantors'
Representative within nine months of written notice of the
relevant claim first being given. Time shall be of the essence
for the purposes of the foregoing. For the avoidance of doubt,
the written notice required pursuant to paragraph 12 below shall
not constitute written notice of a relevant claim unless such
notice is clearly expressed to be notice of a relevant claim as
opposed to notice of potential liability under the Warranties or
Indemnities. Claims under the Warranties relating to Taxation
shall mutatis mutandis be governed by Clause 5 of the Taxation
Indemnity.
3. MINIMUM AMOUNT
No relevant claim may be made and no Covenantor shall be liable in
respect of any of the Warranties or under the Indemnities or the
Taxation Indemnity unless:-
(a) the amount of the liability actually payable by the
Covenantors under any individual claim or series of related
claims exceeds L.5,000; and
(b) the amount of the liability actually payable under such claim
and under all relevant claims (each being in excess of
L.5,000) exceeds L.150,000 in aggregate.
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4. THRESHOLD FOR CLAIMS
In the event that the aggregate relevant claims (each in excess of
L.5,000):-
(a) exceed L.150,000 but are not more than L.300,000, the Offeror
shall not make a relevant claim against the Covenantors but the
REGL Modified Pre-tax Profit shall be decreased in the year the
aggregate relevant claims exceed L.150,000 by the amount that
such aggregate relevant claims exceed that threshold, and in
each year thereafter in which relevant claims are made, by the
amount of such claims in such years provided that REGL Modified
Pre-tax Profit is only affected once in respect of the actual
amount paid; and
(b) exceed L.300,000, the Offeror shall be entitled to recover
L.150,000 plus the total amount of the aggregate relevant
claims in excess of L.300,000 from and only from the Escrow
Fund.
5. ESCROW ARRANGEMENTS
5.1 Deposit to Escrow
As security for any and all relevant claims made, each Covenantor
agrees that:
(a) on Completion the Non-Alternative Stock issued as part of the
Consideration ("ESCROW SHARES") shall not be delivered to him
but shall be deposited with the Escrow Agent;
(b) on each occasion on which any Deferred Loan Notes that would
otherwise have been issued by the Offeror to the Covenantors
("ESCROW NOTES") such Escrow Notes shall not be delivered to
the Covenantors but shall be deposited with the Escrow Agent
directly by the Offeror; and
(c) any dividend or distribution paid on the Escrow Shares shall
be paid to and deposited with the Escrow Agent provided that
to the extent that any such dividend or distribution gives
rise to a tax liability on his Escrow Shares in the UK, 40 per
cent. of the taxable amount of such dividend shall be
distributed to the Covenantor.
5.2 Release from Escrow
Subject to the retention of the Escrow Shares and the Escrow Notes
("ESCROW SECURITY") by the Escrow Agent in accordance with paragraph
5.3 below, the Offeror and the Covenantors' Representative shall
instruct the Escrow Agent to release from the Escrow Fund:-
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================================================================================
(a) to each Covenantor who was not a C Ordinary Shareholder one
third of his Escrow Shares on 20 February 1999 and each
succeeding 20 February, each such date being a Release Date,
until all such shares have been released from the Escrow Fund;
(b) to each Covenantor who was a C Ordinary Shareholder all his
Escrow Shares on 20 February 1999, being a Release Date; and
(c) to each Covenantor on 20 February 2000 and each succeeding 20
February, each such date being a Release Date, Escrow Notes
deposited in the Escrow Fund in respect of the second
preceding year until all such Escrow Notes have been released
from the Escrow Fund.
5.3 Relevant Claims
If by the Release Date it shall not have been Finally Determined
whether or not the Covenantors are liable in whole or part in respect
of a relevant claim and the Covenantors' Representative shall not have
expressly agreed in writing that the Covenantors are so liable, the
Offeror and the Covenantors' Representative shall jointly instruct the
Escrow Agent to retain in the Escrow Fund (and withhold from the
Escrow Security which would otherwise be released on such Release
Date) such amount of each Covenantor's Escrow Security (firstly from
Escrow Shares and secondly from Escrow Notes) representing his
appropriate proportion of such amount as the Offeror and the
Covenantors' Representative reasonably believe to be the value of such
claim (the "RETAINED ESCROW SECURITY") and, in the absence of
agreement, as determined by an independent chartered accountant
selected by the parties, where such Retained Escrow Security shall be
retained until it shall be Finally Determined whether or not the
Covenantors are liable in whole or in part in respect thereof or the
Covenantors' Representative shall agree that the Covenantors are so
liable or until the provisions of paragraph 5.4 apply (as
appropriate).
5.4 Disbursement of Escrow Security
The Offeror and the Covenantors' Representative shall jointly instruct
the Escrow Agent to release the Retained Escrow Security as follows in
the respective circumstances:
(a) if it is Finally Determined or agreed by the Offeror and the
Covenantors' Representative that the Covenantors are liable in
whole or in part in respect of a relevant claim, such amount
of each Covenantor's Retained Escrow Security with an Agreed
Value on the date of such Final Determination or agreement
equal to such Covenantor's appropriate proportion of the value
of such relevant claim (including interest and VAT thereon) in
each case as Finally Determined or agreed by the Covenantors'
Representative and the Offeror ("VALUE OF CLAIM") shall be
transferred by the Escrow Agent as authorised agent for the
Covenantor to the Offeror and the remainder of such
Covenantor's Retained Escrow Security shall be transferred by
the Escrow Agent as authorised agent for the Covenantor to
such Covenantor;
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(b) if it is Finally Determined or agreed by the Offeror and the
Covenantors' Representative that the Covenantors are not
liable in whole or in part in respect of a relevant claim,
each Covenantor's Retained Escrow Security shall be
distributed to such Covenantor;
(c) in the event the Agreed Value of each Covenantor's Retained
Escrow Security on the date of Final Determination or
agreement referred to in paragraph 5.4(a) above is less than
his appropriate proportion of the Value of Claim, an amount of
such Covenantor's other Escrow Security representing the
difference between his appropriate proportion of the Value of
Claim and the Agreed Value of the Retained Escrow Security
shall be transferred by the Escrow Agent as authorised agent
for the Covenantor from the Escrow Fund to the Offeror;
(d) in the event each Covenantor's Escrow Security transferred
under paragraphs 5.4(a) and (b) above is insufficient to meet
such Covenantor's appropriate proportion of the value of the
relevant claim the shortfall shall be carried forward and any
further Escrow Security from time to time deposited to the
Escrow Fund in respect of such Covenantor shall be transferred
by the Escrow Agent as authorised agent for the Covenantors in
accordance with paragraph 5.4(c) above until the shortfall of
his appropriate proportion of the relevant claim has been met
in full; and
(e) as to each Covenantor's Retained Escrow Security or other
Escrow Security, any distribution or transfer shall firstly be
taken from the Escrow Shares and secondly from the Escrow
Notes.
5.5 Valuation of Escrow Security
Escrow Security shall be valued for the purposes of paragraph 5.4 (the
"AGREED VALUE") as at any date as follows:-
(a) Escrow Shares shall have an Agreed Value equal to their Market
Price on such date; and
(b) Escrow Notes shall have an Agreed Value equal to their face
value.
(c) any distribution of dividends held in the Escrow Security or
cash shall be valued at the cash amount together with accrued
interest.
5.6 Covenantors' Representative's Access to Escrow Fund
(a) The Covenantors' Representative shall be entitled to recover
from the Escrow Fund (as they are incurred) the amount or
amounts of any and all third party costs and expenses incurred
or payable on behalf of the Covenantors by the Covenantors'
Representative in connection with investigating, assessing,
contesting or in settlement of any disputes or relevant claims
in connection with all proceedings in relation thereto or
steps taken to avoid or mitigate the same whether in relation
to a relevant claim made by the Offeror
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against the Covenantors or in pursuing a claim in accordance
with paragraph 12 against third parties.
(b) The Covenantors' costs of indemnifying the Offeror, the
Company and/or any Subsidiaries under paragraph 13 shall be
met at the option of the Covenantors' Representative out of
the Escrow Fund.
(c) The Offeror shall be obliged to join with the Covenantors'
Representative to jointly instruct the Escrow Agent to release
such amount of Escrow Security as is necessary to meet the
third party costs and expenses referred to in paragraph 5.6(a)
and (b) above.
5.7 Lapse of Claims
Notwithstanding any other provision of this paragraph the Offeror
shall not be entitled to continue to withhold its consent to release
of Escrow Security in respect of a relevant claim unless legal
proceedings in respect of such relevant claim shall have been
commenced on or before the expiry of nine months from the date on
which the relevant claim is notified in accordance with paragraph 12.
In default of legal proceedings both issued and served having been
commenced by such date the Offeror's rights to have recourse to the
Escrow Security in respect of such relevant claim shall automatically
lapse.
5.8 Permitted Actions
Nothing in this schedule shall in respect of the Escrow Securities
prevent the Covenantors from:-
(a) accepting or agreeing to accept or disposing of Shares or any
interest therein pursuant to acceptance of a general offer
made for all the issued share capital of the Offeror (other
than any such issued share capital held by the Offeror and/or
any subsidiary thereof and/or persons acting in concert with
the Offeror); or
(b) disposing of any shares in the Offeror or any interest thereon
where the disposal is pursuant to a statutory merger; or
(c) receiving interest due under the Escrow Notes,
provided that the share certificates in respect of any shares and/or
cash receivable by the Covenantors in consideration of an offer or
statutory merger shall be deposited in the Escrow Fund to be held on
the same terms as the Escrow Securities and
For the purposes of this clause a person shall be deemed to dispose of
a share or any interest therein if in any circumstances whatever he
ceases to be the beneficial owner thereof free from all liens,
charges, encumbrances or third party rights of any description or
enters into an agreement or arrangement whereby he will or may cease
to be such an owner thereof.
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6. APPROPRIATE PROPORTION
The liability of each of the Covenantors in respect of any relevant
claim shall not exceed his appropriate proportion of such claim.
7. REDUCTION OF CONSIDERATION
The amount of any successful relevant claim shall be deemed to
constitute a reduction in the Consideration payable hereunder.
8. RESTRICTIONS ON CLAIMS
No relevant claim may be made and none of the Covenantors shall be
liable under or in respect of the Warranties and/or under the
Indemnities:-
(a) if it would not have arisen but for some act, omission,
transaction or arrangement carried out after Completion
(otherwise than in the ordinary course of business or pursuant
to a legally binding commitment binding on the Company or any
Subsidiary in force on Completion) and which the Offeror was
or should reasonably have been aware would give rise to the
claim in question by or on behalf of all or any of the
Offeror, the Company any Subsidiary or any holding company
from time to time of any of them or any Subsidiary from time
to time thereof and their respective successors in title;
(b) if the fact, event or circumstance giving rise to the breach
or claim or otherwise relevant thereto is disclosed in the
Offer Document and this Deed (including the Schedules and any
Appendices thereto) or in any document in agreed terms or, in
relation to any breach of Warranty only, the Disclosure
Letter;
(c) to the extent that provision or allowance is made in the
Completion Accounts and Schedule of Liabilities in respect of
the matter to which the liability relates or that payment or
discharge thereof is or has been taken into account therein;
and
(d) to the extent of any insurance recovered by the claimant in
respect of the claim being brought. The Offeror shall procure
that the Company and the Subsidiaries maintain Professional
Indemnity insurance cover with substantially similar coverage
as the insurance in place during the 1997 financial year
provided such insurance cover is commercially available with
equivalent scope and breadth (including coverage of prior acts
and omissions up until Completion) and amount as had been in
place at Completion, provided that the Offeror shall not be
obliged to procure such insurance at a cost of more than 125%
of the cost for the financial year commencing 1 May 1997.
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9. CONTINGENT LIABILITIES
If in respect of a relevant claim under the Warranties or Indemnities
the liability of the Offeror or the Company or any Subsidiary is
contingent then the Covenantors shall not be liable in respect thereof
unless and until such time as the contingent liability ceases to be
contingent and becomes actual and no liability under a successful
relevant claim in respect of the payment of monies shall become due to
be satisfied unless and until the relevant monies become legally due
and payable.
10. DUTY TO MITIGATE
Nothing herein or in this Deed or otherwise shall be deemed to relieve
the Offeror or the Company or any Subsidiary from any common law duty
to mitigate any loss or damage incurred by it or them in consequence
of any matter giving rise to a relevant claim under the Warranties or
Indemnities and in any event the Offeror undertakes that it will
procure that following Completion insofar as relevant to the
Warranties or the Indemnities or other obligations of the Covenantors
under the Warranties or Indemnities:-
(a) the Company and each Subsidiary shall take all commercially
reasonable steps to perform its obligations owing to and
enforce its rights against third parties including (without
limitation) promptly to collect all debts the payment of which
or any part of which is warranted hereunder; and
(b) the Company and each Subsidiary shall duly and properly
perform its obligations set out in or contemplated by this
paragraph 10.
11. RECOVER ONLY ONCE
No person shall be entitled to recover any sum in respect of any
relevant claim or otherwise obtain reimbursement or restitution more
than once in respect of any one breach of the Warranties or claim
under the Indemnities or under the Taxation Indemnity or the subject
matter thereof so that for this purpose recovery by one shall be
deemed to be recovery by all other persons so entitled.
12. CONDUCT OF CLAIMS
If any relevant claim is made or any matter comes to the notice of the
Offeror or the Company or any Subsidiary or other possible claimant
for which or as a result of which the Covenantors may be liable under
the Warranties or the Indemnities the Offeror or the Company or
Subsidiary or claimant shall, as appropriate, within 28 days after the
matter first comes to its notice give written notice thereof to the
Covenantors' Representative provided that any failure to give the
requisite notice during that period shall not prejudice the ability of
the Offeror or the Company or any Subsidiary or other possible
claimant to make a claim and:-
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(a) none of them shall make any admission of liability, agreement,
settlement or compromise or otherwise take any action in
relation thereto without the prior written consent of the
Covenantors' Representative and shall at all times promptly
give the Covenantors' Representative and their professional
advisers all information and documents in its or the Company's
or Subsidiary's control as reasonably requested from time to
time;
(b) save as provided in paragraph 12(c), each of them will at all
times permit the Covenantors' Representative, as appropriate,
to take such action on their/its behalf to avoid, resist,
appeal, compromise, defend, mitigate or otherwise deal with
the claim or the liability the subject thereof or pursue any
rights of the Company or any Subsidiary in respect thereof;
(c) paragraph 12(b) will not apply to any relevant claim which
exceeds the maximum liability of the Covenantors (as set out
in paragraph 5 of this Schedule 2) or to any relevant claim
(other than purely monetary disputes or claims) which could
reasonably be expected to have a material adverse effect on
the operation of the Business or the goodwill or reputation of
the Business. In respect of any such relevant claims to which
this paragraph 12(c) applies, the Offeror, the Company or any
Subsidiary will consult with the Covenantors' Representative
and take account of all reasonable representations and views
in order to avoid, dispute, resist, appeal, compromise or
defend any such relevant claim.
Provided that to the extent that there is a conflict between the
provisions of this paragraph and Clause 4, Clause 4 shall prevail.
13. APPROPRIATE STEPS TO ENFORCE RECOVERY
Where the Offeror or the Company or any Subsidiary is entitled
(whether by right of indemnity, reimbursement or any other means) to
recover from some other person (not being the Offeror or the Company
or any Subsidiary but including, without limitation, any Taxation
authority) any sum or benefit in respect of any matter the subject of
a relevant claim under the Warranties or Indemnities the Offeror or
the Company or Subsidiary so entitled shall (subject to being
indemnified by the Covenantors to its or their reasonable satisfaction
against all costs and expenses which it or they may reasonably incur
thereby) take all appropriate steps to enforce such recovery or at the
option of the Covenantors it shall assign (for no consideration) to
them or such of them as they may nominate in writing all of its and
their rights of recovery aforesaid and the full benefit thereof and
(to the extent they have previously made payments in respect of the
relevant claim) account to them (or those of them as shall have made
payments in respect of the relevant claim in the proportions in which
such payments were made) for any amounts they recover, in accordance
with paragraph 14 below.
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14. SUBSEQUENT RECOVERY
In the event that payment is made by the Covenantors or any of them in
respect of a relevant claim under the Warranties or Indemnities and
the Offeror or the Company or any Subsidiary or any agent on its or
their behalf or any of them subsequently recovers from the third party
a sum or benefit which is referable to the subject matter of such
claim, the Offeror and the Company and the relevant Subsidiary shall
be jointly and severally liable forthwith after the receipt of such
sum or benefit to reimburse to the Covenantors the net amount received
(after deducting any costs and expenses reasonably incurred by the
recipient(s) in recovering such sum or benefit from the third party)
but not in any event exceeding the amount originally paid in respect
of the relevant claim. For these purposes:-
(a) a sum or benefit shall also be deemed to have been received if
received by way of credit set-off or other deduction or if
received in kind;
(b) a reduction in liability to Taxation arising as a direct
result of any payment made in respect of the relevant claim
shall be deemed to be a sum or benefit received aforesaid;
(c) the recipient shall be deemed to receive a credit refund or
repayment for Taxation purposes when and if it would have
received the same but for a liability to any Taxation not
covered by the Taxation Deed;
(d) any repayment supplement for Taxation purposes or interest
(less tax) paid or received or attributable to the sum or
benefit recovered shall also be accounted for to the
Covenantors to the extent referable to the period after the
relevant claim was satisfied.
15. RELEVANT REPRESENTATIONS
Save in respect of fraudulent misrepresentation none of the
Covenantors shall be liable in respect of any representations,
warranties, covenants, agreements, undertakings or other obligations
express, implied, statutory or otherwise which are made or assumed or
deemed to have been made or assumed by them or any of them in relation
to or connection with the subject matter hereof which are not
contained and expressly given or assumed by them in this Deed or any
document in agreed form to be entered into pursuant hereto and the
Offeror hereby confirms that it has not entered into this Deed or
intends to make the Offers in reliance on any such representation,
warranty, covenant, agreement, undertaking or other obligation.
16. CONTINUING OBLIGATIONS
The provisions of this Schedule shall remain in force and be fully
applicable in all circumstances and in particular shall not be
discharged by any breach of the Warranties or claim under the
Indemnities or breach of the provisions of the Taxation Indemnity
whatever its nature or consequence.
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17. MATERIAL TO BUSINESS
When any Warranty or any provision of this Deed or the Taxation
Indemnity is qualified or phrased by reference to materiality, such
reference shall be construed as a reference to materiality in the
context of the Business or its value as a whole, and where any
Warranty contains a reference to a material adverse change or effect,
such reference shall be construed as being a reference to a change or
effect which is material in the context of the Business or its value
taken as a whole.
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SCHEDULE 3
TAXATION INDEMNITY
1. INTERPRETATION
1.1 The following words, expressions and abbreviations used in this
Schedule shall, unless the context otherwise requires, have the
following meanings:-
"COMPLETION ACCOUNTS" means the unaudited consolidated financial
statements of the Company comprising the consolidated balance sheet,
profit and loss account and cash flow statement of the Group, together
with the notes thereon as at and for the period ended on the
Completion Accounts Date;
"CLAIM FOR TAX" means any of the following:-
(a) any liability to make a payment of or in respect of Tax;
(b) any claim, assessment, demand, notice or other document issued
or action taken by or on behalf of any person authority or
body whatsoever and of whatever country which claims payment
of Tax or any submission, return or correspondence from which
it appears that there may be a liability to Tax or Claim for
Tax within (c) below; or
(c) any non-availability or loss of or reduction of any Relief
(including in particular a right to repayment) to the extent
that such Relief has been shown as an asset in the Completion
Accounts or the availability of which has been taken into
account in computing, and so reducing or extinguishing, any
provision for deferred tax which appears in the Completion
Accounts (or which, but for such Relief, would have appeared
in the Completion Accounts);
"THE COMPANY" means REGL and the Subsidiaries and each of them;
"INCOME PROFITS OR GAINS" includes any measure by reference to which
Tax is computed;
"OFFEROR'S RELIEF" means any Relief to the extent that the same has
been treated as an asset in the Completion Accounts or the
availability of which has been taken into account in computing, and so
reducing or extinguishing any provision for deferred taxation which
appears in the Completion Accounts (or which would, but for such
Relief, have appeared in the Completion Accounts) or such Relief
arises in respect of periods after the Completion Accounts Date;
"RELEVANT EVENT" means every event, act, omission, default,
occurrence, circumstance, transaction, dealing or arrangement of any
kind whatsoever done or omitted to be done by the Covenantors or the
Company or which in any way concerns or affects the Company whether or
not done or omitted to be done by the Company or the Covenantors;
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"RELIEF" means any allowance, credit, exemption, deduction or relief
(including without prejudice to the generality of the foregoing loss
relief) from, in computing, against or in respect of Tax or any right
to the repayment of Tax;
"TAXATION STATUTES" means all statutes, decrees, orders and
regulations, whether domestic or foreign providing for or imposing any
Tax;
"TAX" has the meaning ascribed to it in the Deed;
"TAXATION AUTHORITY" means any local, municipal, governmental, state,
federal or fiscal revenue, customs or excise authority, body or
official anywhere in the world having powers or authority in relation
to Tax;
"UTILISATION OF AN OFFEROR'S RELIEF" means the utilisation or set off
of an Offeror's Relief available to the Company.
2. INDEMNITY
2.1 Subject as specifically provided herein, each Covenantor hereby
covenants severally with the Offeror to pay from time to time to the
Offeror or, as the Offeror may direct, to the Company or the relevant
Subsidiary (as the case may be), his appropriate proportion of an
amount equal to:-
(a) any Claim for Tax where the Claim for Tax in question arises
in respect or as a result or consequence of or in connection
with or by reference to:-
(i) one or more Relevant Events occurring or entered into
on or before the Completion Accounts Date; or
(ii) any income profits or gains earned, accrued or
received on or before the Completion Accounts Date;
or
(iii) the combined effect of two or more Relevant Events of
which at least one shall have occurred on or before
the Completion Accounts Date but only in
circumstances where such Claim for Tax would not have
been suffered by the Company but for the failure of
any person (other than a company falling within the
definition of the Company for the purposes of this
Deed) to discharge or pay any liability for Tax.
(b) any reasonable third party costs and expenses properly
incurred or payable in connection with any Claim for Tax the
subject of a successful claim under Clause 2.1(a) or (c),
including all legal proceedings relating thereto and the
settlement of any Claim for Tax or rebuttal of any contention
or in connection with any legal proceedings and reasonable
steps taken to avoid any Claim for Tax or contention whether
actual, threatened or anticipated including, for the avoidance
of doubt, all reasonable third party costs or
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expenses properly incurred in any legal proceedings taken by
the Offeror against the Covenantors under this Schedule;
(c) the amount of each and every Utilisation of an Offeror's
Relief which avoids or reduces a Claim for Tax which would
otherwise have been the subject of clause 2.1(a) hereof in
which case the Covenantors' liability under this Clause shall
be equal to the amount which the Covenantors would have paid
under Clause 2.1(a) had the Offeror's Relief utilised not been
available.
2.2 The covenant contained in Clause 2.1(a) shall not apply:-
(a) to any Claim for Tax to the extent that any Tax giving rise to
the same has been paid prior to the Completion Accounts Date
or to the extent that provision or reserve for the liability
to which the same relates has been made in the Completion
Accounts and for the purposes of this Clause 2.2(a) no
provision or reserve shall be prevented from being full and
sufficient if the same proves to be inadequate by reason only
of an increase in rates of Tax announced after the Completion
Accounts Date;
(b) to any Claim for Tax to the extent that the same shall have
arisen in consequence of any act or transaction, and which was
carried out without the prior written agreement of the
Covenantors by the Offeror or the Company after Completion
otherwise than in the ordinary course of business of the
Company or pursuant to a legally binding obligation created
prior to the date of this Deed; or
(c) to any Claim for Tax to the extent that the same is increased
as a result of any failure by the Offeror or the Company to
comply with its obligations under Clause 5.
(d) to any Claim for Tax to the extent that such liability to
Taxation arises or is increased by virtue of any change after
Completion in the basis upon which the accounts of the Company
are prepared and/or in the policies or practice adopted in the
preparation of such accounts other than a change required by
law or to comply with generally accepted accounting principles
where the existing basis, policies or practice did not so
comply; or
(e) to the extent that the Claim for Tax would not have arisen but
for the failure or omission by the Company after Completion to
make any claim, election, surrender or disclaimer or give any
notice or consent under any taxation statutes, the making or
giving of which was taken into account in computing any
provision or reserve for Tax in the Completion Accounts; or
(f) to the extent that the Claim for Tax would not have arisen but
for any claim, election, surrender or disclaimer made or
notice or consent given after Completion by the Offeror or the
Company or any subsidiary of them under any taxation statutes
other than a claim, election, surrender disclaimer, notice or
consent the making or giving of which was
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taken into account in computing any provision or reserve for
tax in the Completion Accounts; or
(g) to the extent that notice of the Claim for Tax, in accordance
with Clause 5 hereof shall not have been given to the
Covenantors on or prior to 20 February 2004; or
(h) to the extent only that any amount otherwise subject to the
covenant contained in Clause 2.1 has been recovered under the
Warranties contained in this Deed; or
(i) to the extent that the Claim for Tax is excluded by paragraph
3 of Schedule 2 to this Deed;
(j) to the extent that the Claim for Tax would not have arisen but
for any change in law or published administrative practice of
any Taxation Authority, in either case after Completion with
retrospective effect to periods prior to Completion.
(k) if and to the extent that the Offeror or the Company have
recovered an amount in respect of such claim from a person or
persons other than the Covenantors or any other Company;
(l) to the extent that such claim would not have arisen but for
any winding-up or cessation after Completion of any trade or
business carried on by the Company or the Offeror or any major
change in the nature or conduct of any Company's trade after
Completion;
(m) to the extent that any Reliefs (including, for the avoidance
of doubt, any such saving, reduction or payment in respect of
Tax as is referred to in Clause 2.4(b) or 4.3(b) which has not
previously been so used or in respect of which a payment has
not already been made by the Offeror to the Covenantors) other
than an Offeror's Relief, are available for offset against the
liability giving rise to the claim;
(n) to the extent the damage, liability or loss suffered or
incurred by the Company has been made good or otherwise
compensated for without cost to the Offeror or any Company.
2.3 The provisions of Clauses 1(b), (c), (d) and (e) (3 (Minimum Amount),
4 (Threshold for Claims), 5 (Escrow Arrangements), 6 (Appropriate
Proportion), 9 (Contingent Liabilities) 11 (Recover Only Once), 16
(Continuing Obligations) and 17 (Material to Business) of Schedule 2
shall mutatis mutandis apply to this Schedule as if set out herein in
full.
2.4 Subject to Clause 2.5 below, all sums payable by the Covenantors under
this Schedule shall be paid free and clear of all deductions or
withholdings (including Tax), unless the deduction or withholding is
required by law, in which event or in the event that the Offeror shall
incur any liability for Tax chargeable or assessable in respect of any
payment pursuant to this Schedule, the Covenantors shall pay such
additional amounts as shall be required to ensure that the net amount
received and retained by the recipient of such sums (after Tax) will
equal the full
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amount which would have been received and retained by it had no such
deduction or withholding been made and/or no such liability to tax
been incurred and:-
(a) in applying this Clause 2.4 no account shall be taken of the
extent to which any liability for Tax may be mitigated or
offset by any Relief available to the Offeror so that where
such Relief is available the additional amount payable
hereunder shall be the amount which would have been payable in
the absence of such availability; and
(b) if following the payment of an additional amount under this
Clause 2.4 the Offeror or the Company subsequently obtains a
saving, reduction or payment in respect of the Tax giving rise
to such additional amount (other than a reduction in Tax which
would have given rise to a claim under this Schedule or been
taken into account in a claim for damages under the
Warranties) the Offeror shall pay to the Covenantors a sum
equal to the amount of such repayment or saving (in both cases
to the extent only of the said additional amount) such payment
to be made within 14 days of the receipt of the repayment or
the reduction of Tax due and payable as the case may be.
2.5 Clause 2.4 shall not apply if the Offeror assigns the benefit of this
Deed to any other person.
3. TIMING
3.1 For the purposes of paragraph 9 of Schedule 2, a liability giving rise
to a claim under this Schedule shall be treated as being an actual tax
liability on the date falling five business days after the Offeror
makes written demand therefor or, if later:-
(a) insofar as the claim arises pursuant to Clause 2.1(a) two days
before the day on which a payment of Tax becomes due under or
in consequence of the Claim for Tax in question or two days
before the day on which any repayment (or increased repayment)
of Tax which but for such Claim for Tax would have been
available, would have been due;
(b) insofar as the claim arises pursuant to Clause 2.1(b), two
days before the day on which the costs and expenses fall due
for payment (subject to the Offeror giving the Covenantors
such evidence as they reasonably require for the purposes of
ascertaining that such costs and expenses have fallen due);
(c) insofar as the Claim for Tax arises pursuant to Clause 2.1(c),
two days before the day on which an actual payment of Tax
becomes due in consequence of the non-availability of the
Offeror's Relief which would have been available but for the
Utilisation of the Offeror's Relief.
3.2 For the purposes hereof where Tax is due or a repayment due is lost or
reduced or where, but for a Utilisation of an Offeror's Relief, Tax
would be due or costs and expenses fall due for payment, on more than
one occasion then paragraphs (a) to (c) of Clause 3.1 shall apply
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separately on each such occasion (but, for the avoidance of doubt,
shall not operate to extend or increase the liability of the
Covenantors under this Schedule for the Claim for Tax in question).
3.3 Where, but for the non-availability of an Offeror's Relief, the
Company could have surrendered the same to another company by way of
Group Relief, this Schedule and in particular Clause 3.1(a) shall
apply as if the Company could have saved such amount of Tax as the
recipient of the Group Relief could have saved as a consequence of
such Group Relief and at the same time.
3.4 If any sum due under Clause 2 is not paid by the Covenantors or due
under Clause 4.3 is not paid by the Offeror by the due date the same
shall carry interest (from such later date until the date of payment)
at the rate of two per cent over base rate for the time being of
National Westminster Bank PLC (or in the absence of such rate at such
rate quoted by a bank of similar standing as the Offeror shall select)
save that interest shall not start to run in respect of any payments
of Tax falling within sub-Clause 3.1(a) above until two days before
the day on which the Company makes the payment of Tax due.
3.5 For the avoidance of doubt, references to any payment being made by
the Covenantors for the purpose of this Schedule 3 shall be references
to the transfer of an Appropriate Amount of the Escrow Security in
accordance with paragraph 5 of Schedule 2.
4. RIGHT TO REIMBURSEMENTS AND CREDITS
4.1 Subject to Clause 4.3, in calculating amounts due from the Covenantors
under this Schedule no account shall be taken of any entitlement of
the Offeror or the Company to make any recovery in respect of that
amount or the circumstances giving rise to the same from some other
person or of any Relief or other benefit or saving which may become
available to the Offeror or the Company in consequence of the Claim
for Tax in question or the circumstances giving rise to the same.
4.2 If the Offeror or the Company is or becomes entitled to recover from
some other person (not being the Company but including, inter alios,
any Tax authority) any amount in respect of the Claim for Tax
resulting in a payment being or becoming due by the Covenantors to the
Offeror under this Schedule, then the Offeror shall promptly notify
the Covenantors of the said entitlement and, if so required by the
Covenantors and if the Covenantors shall undertake to pay all
reasonable costs and expenses properly incurred by the Offeror and the
Company, shall take all reasonable steps to enforce or procure that
the Company shall enforce that recovery (keeping the Covenantors fully
informed of progress) and shall apply the same in accordance with
Clause 4.3.
4.3 If the Offeror or the Company receives:-
(a) a recovery as mentioned in Clause 4.2; or
(b) a benefit or saving being either a reduction in Tax due and
payable or any increased repayment of Tax in either case as a
result of:-
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(i) credit being obtained for Tax giving rise to a claim
by the Offeror under the terms of this schedule
(other than a reduction in a liability to Tax which
would otherwise have itself given rise to a payment
hereunder or been taken into account in a claim for
damages under the Warranties); and
(ii) the utilisation of any Relief which has arisen in
connection with Tax paid by the Company which has
given rise to a payment by the Covenantors pursuant
to Clause 2 hereof (other than where such Relief is
utilised to offset or reduce a liability to Tax which
would itself have given rise to a payment hereunder
or been taken into account in a claim for damages
under the Warranties);
then the Offeror shall within 14 days pay to the Covenantors an
amount equal to so much of the benefit received or sum recovered
(less any Tax paid by the recipient in respect thereof and less
any costs and expenses incurred by the Offeror and the Company)
as does not exceed the amount which the Covenantors paid in
respect of the Claim for Tax in question (together with so much
of any interest or repayment supplement paid to the recipient of
the recovery or benefit in respect thereof as corresponds to the
proportion of the recovery or benefit accounted for under this
Clause 4.3, less any Tax thereon).
4.4 Where any recovery or benefit is accounted for under Clause 4.3:-
(a) the amount of the payment originally made by the Covenantors
under Clause 2 shall be treated as reduced for all purposes of
this Schedule (including any further application of this
Clause 4) and of this Deed; and
(b) the same shall not of itself prejudice the right of the
Offeror to make further recoveries under this Schedule whether
in respect of matters to which the original claim related or
otherwise.
5. RESISTANCE OF CLAIMS
5.1 If the Offeror or the Company becomes aware of any Claim for Tax
(which expression shall for the avoidance of doubt include any claim
which would give rise to a Claim for Tax but for a Utilisation of an
Offeror's Relief) which may result in the Offeror having a claim
against the Covenantors under this Schedule, the Offeror shall give
notice to the Covenantors in the manner provided by this Deed as soon
as is reasonably practicable and in any event, in the case of an
assessment, at least 14 days before the expiry of the time limit for
appealing the assessment provided that any failure to give such notice
shall not prejudice the ability of the Offeror to make a claim under
this Deed and:
(a) neither the Offeror nor the Company shall make any admission
of liability, agreement, settlement or compromise or otherwise
take any action in relation thereto without the
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prior written consent of the Covenantors' Representative and
shall at all times promptly give the Covenantors' Representative
and their professional advisers all information and documents in
the Offeror's or the Company's control as reasonably requested
from time to time;
(b) save as provided in paragraph 5.1(c), each of them will at all
times permit the Covenantors' Representative, as appropriate,
to take such action on their/its behalf to avoid, resist,
appeal, compromise, defend, mitigate or otherwise deal with
the claim or the liability the subject thereof or pursue any
rights of the Company in respect thereof;
(c) paragraph 5.1(c) will not apply to any Claim for Tax which
(when aggregated with any other relevant claims) exceeds the
maximum liability of the Covenantors (as set out in paragraph
5 of Schedule 2 of this Deed) or to any Claim for Tax which
could reasonably be expected to have a material adverse effect
on the operation of the Business or the goodwill or reputation
of the Business. In respect of any such Claim for Tax to
which this paragraph 5.1 applies, the Offeror or the Company
will consult with the Covenantors' Representative and take
account of all reasonable representations and views in order
to avoid, dispute, resist, appeal, compromise or defend any
such Claim for Tax.
5.2 If the Covenantors do not request the Offeror or the Company to take
any action or do not respond indicating that they are actively
considering the matter within 21 days of the notice referred to in
Clause 5.1 above, the Offeror on the Company shall be free to admit,
settle, pay or discharge the Claim for Tax on such terms and
conditions as it shall in its absolute discretion consider
appropriate.
5.3 Any claim under this Schedule shall (unless previously settled or
withdrawn) be deemed to have been waived or withdrawn in the event
that legal proceedings in respect thereof are not issued and served on
the Covenantors' Representative within nine months of the date of
notice given pursuant to Clause 5.1 above.
6. MISCELLANEOUS
6.1 Any payment by the Covenantors to the Offeror pursuant to Clause 2
hereof shall, so far as possible constitute a repayment of the
Consideration.
6.2 The provisions of Clause 10 (Notices) of this Deed shall apply to this
Schedule as if the same were incorporated herein.
6.3 The provisions of Clause 9 (Covenantor's Representative) and of Clause
13 (waiver, amendment), 16 (counterparts), 17 (governing law) and 19
(assignment) of this Deed shall apply to this Schedule as if the same
were incorporated herein.
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7. COVENANTORS TO PREPARE TAX RETURNS/MITIGATION
7.1 The Covenantors or their duly authorised agents shall be responsible
for, and have the conduct of preparing, submitting to and agreeing
with the relevant Taxation Authorities all taxation computations of
the Company relating to all accounting periods ending on or before
Completion subject to all such computations, documents and
correspondence relating thereto being submitted in draft form to the
Offeror or its duly authorised agents for comment and approval such
approval not to be unreasonably withheld or delayed. The Offeror or
its duly authorised agent shall comment within 21 business days of
such submission. If the Covenantors have not received any comments
within 21 business days, the Offeror and its duly authorised agents
shall be deemed to have approved such draft documents. If the Offeror
or its duly authorised agents have any comments or suggestions, the
Covenantors shall not unreasonably refuse to adopt such comment or
suggestion. The Covenantors and the Offeror shall each respectively
afford (or procure the affordance) to the other or their duly
authorised agents of information and assistance which may reasonably
be required to prepare, submit and agree all such outstanding taxation
computations PROVIDED THAT nothing herein shall oblige the Offeror or
the Company to submit any return unless it is satisfied that it is
true and accurate in all material respects.
7.2 The Offeror shall procure that the Company makes (or joins in making)
such claims and elections as shall have been taken into account in the
1997 Accounts and sign such documents as the Covenantors shall
reasonably require in relation to accounting periods for which the
Covenantors have responsibility pursuant to paragraph 7.1 above.
7.3 The Offeror shall procure that the Company takes such reasonable steps
as are necessary for the Company to use in the manner hereinafter
mentioned all Reliefs arising by reason of events occurring on or
before the date of Completion (other than Offeror's Reliefs) as are
available to the Company to reduce or eliminate any liability of the
Company to make an actual payment of Tax in respect of which the
Offeror would have been able to make a claim against the Covenantors
under this Schedule, the said use being to effect the reduction or
elimination of any such liability to make an actual payment of Tax to
the extent permitted by law PROVIDED THAT nothing in this Clause shall
oblige the Offeror the Company or any Subsidiary to take any action
which it reasonably believes would materially increase the Tax
liability of the Company for any accounting period ended after
Completion (and, for these purposes, the use of a Relief, other than
an Offeror's Relief, to reduce or eliminate any liability of the
Company to make an actual payment of Tax in respect of which the
Offeror would have been able to make a claim under this Schedule shall
not constitute a material increase of any Tax liability of the Company
for any accounting period ended after Completion).
- 84 -
<PAGE> 87
SCHEDULE 4
THE PROPERTIES
1. The following parts of the premises known as Berkeley Square House
Berkeley Square London W1:-
(a) parts of the basement
(b) part of the First Floor
(c) part of Wing no. 1 on the third floor
(d) part of Wing no. 3 on the first floor
(e) part of Wing no. 3 on the third floor
(f) part of Wing no. 4 on the third floor
(g) part of Wing no. 5 on the third floor
(h) part of Wing no. 6 on the third floor
(i) part of Wing no. 7 on the third floor
(j) part of Wing no. 2 on the third floor
(k) part of Wing no. 7 on the third floor
(l) part of Wing no. 6 on the fourth floor
(m) sixteen car parking spaces
all as more particularly described in various leases (and in the case
of (m) a licence) between National Westminster Bank plc (1) (or in the
case of (c) where the first party is Instance Contracts Limited) and
Wildman and others trading as Richard Ellis (2)
2. Premises on the fourth and fifth floors of 73 Mosley Street Manchester
as more particularly described in the Lease dated 17 November 1989 made
between MIM Trustee Corporation Ltd (1) and Michael Strong and David
Sizer trading as Richard Ellis (2)
3. Premises at 15, 16 and 17 Warwick Road Coventry as more particularly
described in a Lease dated 28 May 1992 made between Messrs Holt (1) and
Halifax Estate Agencies Limited (2)
- 85 -
<PAGE> 88
4. Premises on the ground floor of The Corn Exchange Fenwick Street
Liverpool as more particularly described in a Lease dated 25 August
1994 between AXA Equity & Law Life Assurance Society plc (1) and
Richard Ellis Regional Ltd (2) and the Supplemental Lease dated 4 March
1996 between AXA Equity & Law Life Assurance Society plc (1) and
Richard Ellis Regional Ltd (2)
5. Premises on the first floor of the Corn Exchange Fenwick Street
Liverpool as more particularly described in a Lease dated 22 April 1997
between AXA Equity & Law Life Assurance Society plc (1) and Richard
Ellis Regional Ltd (2)
6. Storerooms B1 and B2 in the Corn Exchange Fenwick Street Liverpool as
more particularly described in a tenancy agreement dated 30 June 1995
between AXA Equity & Law Life Assurance Society plc (1) and Richard
Ellis Regional Limited (2)
7. Third Floor Acquis House Greek Street Leeds as more particularly
described in a Lease dated 10 October 1988 between the Acquis Property
Company Ltd (1) and Henry Spencer & Sons Ltd (2)
8. Fourth floor offices at 85/89 Colmore Row Birmingham as more
particularly described in a Lease dated 22 May 1989 between Piper Land
Development Ltd (1) and Cartwright Holt Ltd (2)
9. Seventh and eighth Floors office premises at Broad Street House, 55 Old
Broad Street, London EC2 as more particularly described in a
sub-underlease dated 21st March 1997 between A.J.M. Huntley and Others
(practising in partnership as Richard Ellis) (1) and Derby Investment
Holdings Limited (2)
Ninth and tenth Floors and Basement Store Room at Broad Street House,
55 Old Broad Street, London EC2 as more particularly described in a
Reversionary Underlease dated 21st March, 1997 between Derby Investment
Holdings Limited (1) and A.J.M. Huntley and Others (2).
10. First floor offices at Apsley House Glasgow as more particularly
described in a Lease dated 27 January and 8 February 1994 between
County Properties Group Ltd (1) and Messrs Richard Ellis (2)
11. First floor offices at Pacific House 70 Wellington Street Glasgow as
more particularly described in a Lease dated 30 September and 1
November 1985 between Beta Properties Ltd (1) and Anthony Edgar
Goodends and others as partners of and trustees for Richard Ellis (2)
12. Premises on the first floor of 12/14 Albert Road, Middlesborough as
more particularly described in a Lease dated 22 October 1990 between
West End & Metropolitan Estates Limited (1) and Halifax (NW) Limited
(2)
- 86 -
<PAGE> 89
13. Premises on the second and third floors of Eagle Buildings, 64 Cross
Street, Manchester as more particularly described in a Lease dated 23
March 1992 between The Norwich Union Life Insurance Society (1) and
Halifax Estate Agencies Limited (2)
14. Premises on the third floor of the Gladstone Buildings, 1-5 St James'
Row, Sheffield as more particularly described in a Lease dated 3 May
1989 between Sun Life Assurance Company of Canada (UK) Limited (1) and
Halifax (NW) Limited (2).
15. Basement Storeroom in Broad Street House, 55 Old Broad Street, London
EC2 as more particularly described in a supplemental underlease dated
28 February 1980 between City and West End Properties Limited (1) and
Midland Bank Finance Corporation (2).
- 87 -
<PAGE> 90
SCHEDULE 5
PART A: COMPLETION ACCOUNTS
1. NET ASSET VALUE
1.1 For the purpose of determining the Net Asset Value the Offeror shall
cause the Company to prepare and deliver to each party, as soon as
practicable following Completion but in any event within 90 days after
the Completion Accounts Date, draft Completion Accounts. The
Completion Accounts shall be prepared in accordance with the Companies
Acts and in accordance with generally accepted accounting principles
and practices in the United Kingdom which are extant at the time of
preparation, including in particular (but without limitation) the
Statements of Standard Accounting Practice issued by the member bodies
of the Consultative Committee of Accounting Bodies (or any successor
or replacement organisation) which are extant at that time and,
subject thereto, adopting the same accounting policies and practices
consistently applied as those used in the preparation of the
Partnership Accounts and the Accounts.
1.2 Immediately following preparation of the draft Completion Accounts,
the Offeror shall review the draft Completion Accounts and determine
the Net Asset Value as soon as possible and in any event not later
than 30 days after the Offeror's receipt of the draft Completion
Accounts.
1.3 Immediately following the Offeror's determination of the Net Asset
Value, there shall be supplied to the Covenantors' Representative a
statement of the Net Asset Value determination. The Covenantors'
Representative shall have a period of 28 days (the "NAV AGREEMENT
PERIOD") in which to review and agree or dispute the Offeror's
determination of the Net Asset Value.
1.4 The Offeror's determination of the Net Asset Value shall in the
absence of the service of a notice within the NAV Agreement Period by
either party on the other disputing the amount so determined be deemed
to constitute the final and binding agreement between the Covenantors
and the Offeror as to the amount thereof.
1.5 In the event that the Net Asset Value has not been agreed by the
earlier of the termination of the NAV Agreement Period or by 30
September 1998, the determination of the Net Asset Value shall be
referred to an independent firm of chartered accountants agreed
between the Offeror and the Covenantors' Representative or, failing
agreement within 30 days of the expiry of the NAV Agreement Period,
determined by the President for the time being of the Institute of
Chartered Accountants in England and Wales. In appointing any such
independent firm of chartered accountants, the Offeror and the
Covenantors' Representative shall have the right to make
representations to such independent firm of chartered accountants as
to the determination of the Net Asset Value. Any independent firm of
chartered accountants appointed pursuant to this paragraph 1.5 shall
act as experts and not as arbitrators and their certificate shall (in
the absence of manifest error) be final and binding on the Offeror and
the Covenantors and the
- 88 -
<PAGE> 91
costs of any independent firm of chartered accountants appointed
pursuant to this paragraph 1.5 shall be borne between the parties as
it shall determine, or, in the absence of any such determination
equally between the parties.
1.6 The Covenantors' Representative shall procure that each Covenantor
shall, and the Offeror shall procure that the Company shall, promptly
provide each other, and their respective advisers with all information
(in their respective possession or control) relating to the operations
of the Group or the Company as the case may be, including access at
all reasonable times to all books and records, and all co-operation
and assistance as may be reasonably required to:-
(a) enable the production of the Completion Accounts; and
(b) enable the Offeror (or any independent firm of chartered
accountants appointed pursuant to this clause) to determine
the Net Asset Value.
1.7 The parties agree that from the date on which the Offers are made to
the Shareholders until the later of the Completion Accounts Date or
the date the Offers are declared unconditional the parties will use
all reasonable endeavours to operate the business in the ordinary and
usual course and will not deliberately and knowingly do any act or
thing or procure the Company or any member of the Group to do any act
or thing not properly done for the purpose of the Business the effect
of which distorts unfairly the Calculation of the Net Asset Value.
- 89 -
<PAGE> 92
PART B: SCHEDULE OF LIABILITIES AS AT 31/12/97 - NON NORMAL TRADING ITEMS
<TABLE>
<CAPTION>
FY97 6m to 31/10 2m to Projected Total
L.000 L.000 31/12 from 1/1/98 L.000
L.000 to completion
L.000
<S> <C> <C> <C> <C> <C>
Interest on late paid tax 28 28
Incorporation costs 4 4
Donaldsons deal costs 16 16
Insignia deal costs 0 562 562
Associated Insignia deal costs:
Actuarial fees (estimated) 20 20
Wragges' fees (estimated) 20 20
PI provision (Central House) 20 20
(Amresco) 16 16
(Britannia Hotels) 70 70
General PI provision 100 100
Surmia 208 17 225
Redundancies 0 30 30
Additional bad debt provision 256 256
(Schipol)
244 118 609 396 1,367
Deal costs:
Transaction bonuses/NIC 1,781 1,781
Legal costs 270 270
1,781 270 2,051
</TABLE>
- 90 -
<PAGE> 1
EXHIBIT 10.6
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement"), made as of July 31, 1998, is by and among INSIGNIA/ESG HOLDINGS,
INC., a Delaware corporation with an office at 200 Park Avenue, New York, New
York 10166 (the "Parent Company"), INSIGNIA/ESG, INC., a Delaware corporation
with an office at 200 Park Avenue, New York, New York 10166 (the "Company") and
STEPHEN B. SIEGEL, an individual residing at 130 East 67th Street, NY, NY 10021
(the "Executive").
W I T N E S S E T H :
WHEREAS, Insignia Financial Group, Inc., Insignia/ESG (and its
predecessor entities) and the Executive entered into an Amended and Restated
Employment Agreement dated as of January 1, 1997, which was further amended (the
"Employment Agreement"); and
WHEREAS, the undersigned desire to amend and restate the Employment
Agreement as set forth in this Agreement; and
WHEREAS, the Parent Company and the Company desire to continue to
assure themselves of the services of the Executive for the period provided in
this Agreement, and the Executive is willing to serve in the employ of the
Parent Company and the Company for such period upon the terms and conditions
hereinafter provided;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Parent Company and the Company hereby agree to
employ the Executive, and the Executive hereby accepts such employment, in
each case upon the terms and conditions set forth herein, for a period
commencing prior to the date of this Agreement and ending on December 31,
2002 (the "Expiration Date"), subject to earlier termination as set forth
herein (such period, as it may be so terminated, being referred to herein as
the "Employment Period").
2. DUTIES AND SERVICES.
(a) OFFICES. During the Employment Period, the Executive shall
serve as President of the Parent Company and Chairman, President and Chief
Executive Officer of the Company. In the performance of his duties hereunder,
the Executive shall report to and shall be responsible to the Chairman of
the Board of Directors of the Parent Company. The Executive agrees to his
employment as described in this Section 2, and agrees to devote
substantially all of his time and efforts to the performance of his duties
hereunder. The Executive shall be available to travel as the needs of the
business of the Parent Company and the Company require.
2
<PAGE> 3
(b) LOCATION OF OFFICE. During the Employment Period, the Executive's
office shall be located in the principal executive offices of the Company, which
shall be in New York City, New York. The Company will provide the Executive with
a suitable office, an executive secretary reasonably acceptable to him, and
other support appropriate to his duties hereunder.
(c) PRIMARY RESPONSIBILITIES. During the Employment Period, the
Executive shall have principal responsibility for the financial and operational
affairs of the Parent Company and its subsidiaries, including the Company, in
each case as directed by the Chairman of the Parent Company.
(d) PERMITTED ACTIVITIES. Notwithstanding anything to the contrary
herein provided, the Executive (i) may make certain real estate and other
investments and hold positions as officers, directors and/or partners thereof in
so far as such positions and investments do not conflict with the Executive's
duties and loyalties to the Parent Company, the Company and any controlled
affiliates, and (ii) may continue to hold all positions and operate businesses
and/or receive compensation in accordance with Exhibit A annexed hereto and
incorporated herein and (iii) may hold such other positions, in charitable and
other organizations, as may be appropriate to his duties hereunder,
(collectively, the "Permitted Activities").
(e) LICENSING. The Executive shall comply with the requirements of the
New York State Real Property Law (Broker's License Law) and New York State's
Rules for the
3
<PAGE> 4
Guidance of Real Estate Brokers and Salespersons and shall maintain his real
estate broker's license in effect at all times during the Employment Period. If
the Executive is not duly licensed as a real estate broker or salesperson in New
York at any time during the term of this Agreement, the Executive will
immediately notify the General Counsel of the Parent Company of that fact, in
writing. During such period the Executive will not engage in any activities in
violation of the applicable licensing laws, or any other applicable law; and the
Executive will diligently take all actions necessary to obtain such license as
soon as practicable thereafter. The failure of the Executive to maintain his
real estate broker's license during the Employment Period shall constitute a
material breach of this Agreement which shall entitle the Parent Company and the
Company to terminate the Executive's employment for cause.
(f) MEMBERSHIP. The Executive shall, at the Parent Company's and the
Company's request and expense, maintain a membership in the Real Estate Board of
New York, Inc. The Executive will at all times adhere to the Code of Ethics and
Professional Practices of said Board and to the requirements of all applicable
laws and governmental regulations.
(g) OTHER DUTIES. The Executive shall serve as a director and/or
officer of any of the Parent Company's subsidiaries or affiliates if the Parent
Company so requests. Executive shall not be entitled to receive any compensation
for the performance of the duties provided for in this Section 2(g) in addition
to the compensation expressly provided in this Agreement consistent with his
principal responsibilities as President of the Parent Company and Chairman,
President and Chief Executive Officer of the Company. Executive shall endeavor
to participate in all
4
<PAGE> 5
Executive Management Committee Meetings of the Parent Company and at all
monthly Operations Review Meetings of the Parent Company. It is acknowledged by
Executive that recurring failure of Executive to attend such meetings in person
or by telephone shall be a material breach of this Agreement; provided however,
that any failure to attend due to illness or other comparable circumstance
beyond the Executive's control shall be excused.
3. COMPENSATION. As full compensation for his services hereunder, the
Company shall pay, grant, issue, or give, as the case may be, to the Executive
the following, subject to the provisions of Section 6:
(a) BASE SALARY. A base salary at the rate of $1,000,000 per annum (the
"Base Salary"), payable in equal bi-weekly installments or in such other
installments consistent with the policy of the Parent Company or the Company as
they may be amended from time to time.
(b) OVERRIDE. An override ("Override") up to a maximum of $400,000 for
the year ended December 31, 1998 and subsequent years, equal to 0.6% of the
gross leasing commissions received (as "received" is defined in Section 3(d)
below) by the Company in each calendar year or part thereof during the
Employment Period, but only to the extent that the Company meets or exceeds the
Company's annual EBITDA budget as established by the Compensation Committee of
the Parent Company's Board of Directors (the "Compensation Committee"), after
deduction of the Override payable to the Executive, all bonus compensation paid
to employees of the Company (including the imputed bonus of the Executive as
determined under this Agreement), all Company overhead allocations and all
compensation paid to the
5
<PAGE> 6
Executive pursuant to this Agreement, which annual EBITDA budget shall be
increased by the Compensation Committee for each subsequent year by an amount of
no less than 10% of the annual EBITDA budget for the immediately preceding year.
For purposes of this Section 3(b), EBITDA shall mean the earnings before
interest, taxes, depreciation, and amortization of the Company computed in
accordance with generally accepted accounting principles, consistently applied.
(c) ADVANCES. The Company shall advance to the Executive an amount
equal to $50,000 less withholding permitted by Section 12 on the first day of
each month (such amounts including the related withholding are referred to as
the "Advances"). Not later than March 31 following the end of each fiscal year
(or 90 days following the termination of the Employment Period, if earlier), the
Compensation Committee shall deliver to the Executive a calculation of the
amount of Override payable to him pursuant to Section 3(b) of this Agreement and
the amount of Annual Bonus payable to him pursuant to Section 3(e) of this
Agreement for the preceding year (or portion thereof if the Employment Period
has terminated during such year). In the event the Advances for any such period
exceed the Override and Annual Bonus earned for such period, the Executive shall
repay such excess to the Company within 15 days of receipt of such calculation.
In the event the Override and Annual Bonus earned for such period exceeds the
Advances for such period, the Company shall pay such excess less withholding to
the Executive within 15 days of delivery of such calculation.
6
<PAGE> 7
(d) COMMISSIONS. A commission equal to a percentage (as determined
below) of the commissions earned, received and retained (collectively,
"received") by Insignia/ESG upon transactions as to which the Executive has
rendered services recognized by Insignia/ESG. The Executive's share of all
promotional commission revenues described above shall be thirty (30%) percent,
and Insignia/ESG's share shall be seventy (70%) percent; and the Executive's
share of all net commission (e.g. arising from a transaction where Insignia/ESG
is agent for the owner of the leased premises) revenues described above shall be
fifty (50%) percent and Insignia/ESG's share shall be fifty (50%) percent. Such
compensation shall be earned by the Executive only when such commissions have
been received by Insignia/ESG and shall be payable to the Executive at the time
and in the manner that commissions are paid to other real estate
salespersons/brokers of Insignia/ESG in accordance with the then current
Insignia/ESG policy.
(e) ANNUAL BONUS. An annual bonus for the year ending December 31, 1998
and subsequent years in an amount determined by the Compensation Committee of
the Parent Company, in its sole and absolute discretion, of 10%, or such lesser
percentage as such Compensation Committee shall determine, of the increase in
annual EBITDA reduced by all bonus compensation paid to employees of the Company
(including the imputed bonus of the Executive as determined under this
Agreement), all Company overhead allocations and all compensation paid to the
Executive pursuant to this Agreement, over the annual EBITDA for the immediately
preceding year. Such bonus shall be paid to the Executive within
one-hundred-twenty (120) days after the end of the Company's fiscal year. For
purposes of this Section 3(e),
7
<PAGE> 8
EBITDA shall mean the earnings before interest, taxes, depreciation, and
amortization of the Company computed in accordance with generally accepted
accounting principles, consistently applied.
(f) OPTIONS AND LOANS. Options (the "Options") pursuant to the Parent
Company's 1998 Stock Incentive Plan to be approved by stockholders (the "Plan"),
to purchase one hundred thousand (100,000) shares of the Class A Common Stock,
par value $0.01 per share, of the Parent Company (the "Parent Company Stock") at
a price to be determined by the Trustees of the Plan based upon the initial
trading prices of the Parent Company, which Options shall vest in five equal
installments commencing on the date six months after the date of grant and each
of the next four anniversaries of such date. In addition, Executive shall be
eligible to receive a loan in the amount of up to one million dollars
($1,000,000) to acquire Parent Company stock pursuant to the Plan.
(g) FRINGE BENEFIT PROGRAMS. In addition to the other benefits provided
to the Executive hereunder, the right to participate in the fringe benefit
programs now or hereafter maintained by the Parent Company or the Company during
the Employment Period and offered by the Parent Company or the Company to its
executive officers. Such fringe benefit program may include, but shall not be
limited to, pension, profit sharing, stock purchase, stock option, savings,
bonus, disability, life insurance, health insurance, hospitalization, dental,
and other plans and policies authorized on the date hereof (collectively, the
"Benefit Plans").
8
<PAGE> 9
(h) EXPENSE REIMBURSEMENT. Reimbursement of the Executive for all
reasonable out-of-pocket expenses incurred by him in connection with the
performance of duties hereunder, including professional activities and
membership fees and dues relating to professional organizations of which the
Executive currently is a member or is directed to be a member by the Chairman of
the Parent Company, upon the presentation of appropriate documentation therefor
in accordance with the then regular policies and procedures of the Company. The
Executive's current professional activities and memberships are set forth on
Exhibit B, attached hereto and made a part hereof. The Executive shall not
engage in or apply for any other professional activity or membership without the
prior written consent of the Chairman of the Parent Company.
(i) VACATIONS. Paid vacation consisting of twenty (20) days during each
calendar year during the Employment Period, to be taken at such time as is
consistent with the needs of the Parent Company and the Company, as reasonably
determined by the Executive.
(j) APPROVAL OF STOCKHOLDERS. Executive understands that the
compensation provided for in Section 3(f) of this Agreement is subject to the
approval of the Plan by the directors and stockholders of the Parent Company. In
the event such approval is not obtained on or before December 31, 1998, the
provisions of Section 3(f) shall be void ab initio, but the other provisions of
this Agreement shall remain in full force and effect provided this Agreement has
not been earlier terminated in accordance with its terms.
9
<PAGE> 10
4. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE.
The Executive represents and warrants to the Parent Company and the
Company as follows:
(a) Other than the Permitted Activities, he is under no contractual or
other restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Parent Company, or the Company hereunder; and
(b) To the best of his knowledge, he is under no physical or mental
disability that would hinder his performance of his duties under this Agreement.
5. NON-COMPETITION; CONFIDENTIALITY.
(a) NON-COMPETITION. In view of the unique and valuable services it is
expected the Executive will render to the Parent Company and the Company, the
Executive's knowledge of the customers, trade secrets, and other proprietary
information relating to the
10
<PAGE> 11
business of the Parent Company and the Company and their customers and
suppliers, and similar knowledge regarding the Parent Company and the Company it
is expected the Executive will obtain, the Executive agrees that (i) so long as
he is employed by the Parent Company and the Company pursuant to this Agreement
or otherwise and (ii) for a period of two (2) years after the Termination for
Cause (as hereinafter defined) of such employment or the Executive's termination
of such employment during the Employment Period, he will not compete with or be
engaged in the same business as, or "Participate In" (as hereinafter defined)
any other business or organization which, at the time of the cessation of the
Employment Period, competes with or is engaged in the same business as or
business similar to that of the Company or the Parent Company, with respect to
any product or service sold or activity engaged in by the Company or the Parent
Company in any geographical area which at the time of such cessation such
product or service is sold or activity is engaged in by the Company or the
Parent Company; provided, however, that the provisions of this Section 5 shall
not be interpreted to preclude the Executive, at any time and from time to time,
from (i) Participating In any other organization if approved by a majority of
the Directors of the Parent Company, or (ii) owning not more than five percent
(5%) of the outstanding capital stock of any publicly-traded entity or (iii) as
set forth on Exhibit A. In the event of a Termination Without Cause (as
hereinafter defined) of Executive's employment the Executive shall, at his
election, either (i) observe the non-competition agreement set forth in the
first sentence of this Section 5(a) for the remainder of the Employment Period
and continue to receive the compensation provided for herein, or (ii) accept
other employment (the "Competing Employment") in the real estate industry which
violates the non-competition agreement set forth in the first sentence of this
Section 5(a) and receive compensation at the
11
<PAGE> 12
annual rate of $1,000,000 less the aggregate amount of compensation payable to
him from the Competing Employment for the remainder of the Employment Period. In
the event this Agreement is not extended beyond the Employment Period, the
Executive shall not be bound by the non-competition agreement set forth in the
first sentence of this Section 5(a). The terms "Participate In" and
"Participating In" shall mean: "directly or indirectly, for his own benefit or
for, with, or through any other person, own or owning, manage or managing,
operate or operating, control or controlling, loan money to or lending money to,
or participate in or participating in, as the case may be, the ownership,
management, operation, or control of, or be connected or being connected, as the
case may be, as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce or acquiescing, as the
case may be, in the use of his name in." Notwithstanding the termination or
failure to extend the term of this Agreement for any reason, the Executive will
not directly or indirectly employ any person who, at any time up to such
cessation of Executive's employment, was an employee of the Company or the
Parent Company, within a period of two years after such person leaves the employ
of the Company or the Parent Company or any of its affiliates other than his
personal secretary. In addition, notwithstanding the termination or failure to
extend the term of this Agreement for any reason, the Executive agrees that
following the Employment Period, he will not solicit anyone for the purpose of
providing management, leasing, brokerage or related real estate services with
respect to the properties then managed and the clients then served by the
Company or the Parent Company.
12
<PAGE> 13
(b) CONFIDENTIALITY. All confidential information which the Executive
may now possess, may obtain during or after the Employment Period, or may create
prior to the end of the Employment Period or otherwise relating to the business
of the Company or the Parent Company or any of their subsidiaries or affiliates
or of any customer or supplier of any of them shall not be published, disclosed,
or made accessible by him to any other person, either during or after the
termination of his employment, or used by him except during the Employment
Period in the business and for the benefit of the Company, the Parent Company
and their subsidiaries and affiliates. In the event that the Executive becomes
legally compelled to disclose any of the confidential information, the Executive
will provide the Parent Company and the Company with prompt notice so that the
Parent Company and the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 5(b) and in
the event that such protective order or other remedy is not obtained, or should
the Parent Company and the Company waive compliance with the provisions of this
Section 5(b), the Executive will furnish only that portion of the confidential
information which is so legally required. The Executive shall return all
tangible evidence of such confidential information to the Company and the Parent
Company prior to or at the termination of his employment hereunder.
(c) NON-COMPETITION COMPENSATION. In consideration of Executive's
performance of the agreements set forth in Sections 5(a) above, Executive
acknowledges that he was paid $300,000, to be allocated to the non-competition
agreement in Section 5(a). Such $300,000 is acknowledged by Executive to be full
and adequate compensation for the restrictions on the conduct of the Executive
to which he has voluntarily consented in Section 5(a).
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(d) INTERPRETATION. Since a breach of the provisions of this Section 5
could not adequately be compensated by money damages, the Company or the Parent
Company shall be entitled, in addition to any other right and remedy available
to it, to seek an injunction restraining such breach and the Parent Company and
the Company shall not be required to post a bond in any proceeding brought for
such purpose. The Executive agrees that the provisions of this Section 5 are
necessary and reasonable to protect the Company and the Parent Company in the
conduct of their respective businesses. If any restriction contained in this
Section 5 shall be deemed to be invalid, illegal, or unenforceable by reason of
the extent, duration, or geographical scope thereof, or otherwise, then the
court making such determination shall have the right to reduce such extent,
duration, geographical scope, or other provisions hereof, and in its reduced
form such restriction shall then be enforceable in the manner contemplated
hereby. Nothing herein shall be construed as prohibiting the Company or the
Parent Company from pursuing any other remedies, at law or in equity, for such
breach or threatened breach.
6. TERMINATION.
(a) DEFINITIONS.
(i) Death Termination Event. As used herein, "Death Termination
Event" shall mean the death of the Executive.
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(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is physically
or mentally incapacitated or disabled or otherwise unable to fully discharge his
duties hereunder for a period of 100 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the event
that the last will and testament of the Executive has not been probated at the
time of determination, the estate of the Executive, and (B) in the event that
the last will and testament of the Executive has been probated at the time of
determination, the legatees or the Executor who are entitled under such will to
the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term "Termination
For Cause" shall mean the termination by the Company or the Parent Company of
the Executive's employment hereunder upon a good faith determination by a
majority vote of the members of the Board of Directors of the Parent Company
that termination of this Agreement is necessary by reason of (A) the conviction
of the Executive of a felony under state or federal law, unless in any such case
the Executive performed such act in good faith and in a manner the Executive
reasonably believed to be in or not opposed to the best interests of the Company
or the Parent Company, (B) the continued material breach by the Executive of any
of the material provisions of this Agreement for a period of thirty days after
written notice of such breach is given to the Executive by the Company or the
Parent Company, (C) failure by the Executive to comply with any material
directive of the Board of Directors of the Company or the Parent Company which
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shall continue for ten days after written notice thereof is given to the
Executive, (D) a violation of the confidentiality provisions of Sections 5 or 9
of this Agreement by the Executive, (E) the taking by the Executive of any
action on behalf of the Company or the Parent Company knowingly without the
possession by the Executive of the appropriate authority to take such action,
provided that Executive shall have five (5) days after written notice thereof
from the General Counsel of the Parent Company to cure such breach, (F) the
taking by the Executive of actions (other than Permitted Activities) in conflict
of interest with the Company or the Parent Company or their subsidiaries or
affiliates, given the Executive's positions with the Company or the Parent
Company and their subsidiaries and affiliates, provided that Executive shall
have five (5) days after written notice thereof from the General Counsel of the
Parent Company to cure such breach, (G) the usurpation of a corporate
opportunity of the Company or the Parent Company or their subsidiaries or
affiliates by the Executive; provided, however, the parties acknowledge and
agree that no Permitted Activity shall constitute a corporate opportunity, and
further provided that the Executive shall have five (5) days after written
notice thereof from the General Counsel of the Parent Company to cure such
breach, (H) the recurring failure to attend and participate in (x) Executive
Management Committee Meetings, and (y) Monthly Operations Review Meetings,
provided that the Executive shall have five (5) days after written notice
thereof from the General Counsel of the Parent Company to cure such breach, (I)
a failure as provided in the last sentence of Section 2(e), provided that the
Executive shall have five (5) days after written notice thereof to cure such
breach. Notwithstanding the foregoing, if any breach by the Executive as
described in subparts (E), (F), (G), (H) and (I) above is not capable of being
cured within the five (5) day period following written notice thereof from the
General Counsel of the
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Parent Company, such breach shall not be deemed to constitute a basis for
Termination For Cause of the Executive's employment hereunder if the Executive
has taken all actions reasonably necessary during such five (5) day period to
commence the cure of such breach and has diligently pursued such cure to
completion within thirty (30) days following such written notice to the
satisfaction of the General Counsel of the Parent Company.
(v) Termination Without Cause. As used herein, "Termination
Without Cause" shall mean any termination of the Executive's employment
hereunder by the Company or the Parent Company that is not a Termination For
Cause, a Death Termination Event, a Disability Termination Event or a
resignation of employment by the Executive.
(b) DEATH TERMINATION EVENT. Upon the occurrence of a Death Termination
Event, this Agreement shall terminate automatically upon the date that such
Death Termination Event occurred (subject to the last sentence of this Section
6), whereupon the Company shall pay to the Estate compensation at the annual
rate of One Million ($1,000,000) Dollars for a period equal to the remaining
term of the Employment Period (determined upon the assumption that the
Employment Period will not be terminated prior to the Expiration Date), but in
no event longer than one (1) year.
(c) DISABILITY TERMINATION EVENT. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 6).
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(d) TERMINATION FOR CAUSE. The Executive and the Company and the Parent
Company agree that the Company and the Parent Company shall have the right to
effectuate a Termination For Cause prior to the Expiration Date. Upon the
occurrence of a Termination For Cause, this Agreement shall terminate upon the
date that such Termination For Cause occurs (subject to the last sentence of
this Section 6), whereupon the Executive shall be entitled to receive the Base
Salary, as then in effect, to and including the date that such Termination For
Cause occurs. The same shall apply to any resignation of employment by the
Executive
(e) TERMINATION WITHOUT CAUSE. Upon the occurrence of a Termination
Without Cause, this Agreement shall terminate upon the date that such
Termination Without Cause occurs (subject to the last sentence of this
Section 6), whereupon the Executive shall make the election provided for in the
second sentence of Section 5(a) and shall be compensated in accordance with such
election.
Notwithstanding anything in this Agreement to the contrary, Sections 3
(as to base salary, overrides, commissions, bonuses, options and loans, fringe
benefits and expense reimbursements to which Executive became entitled prior to
or as a result of the termination of this Agreement), 4, 5, 6, 7, 8, 9, 10, 11
and 12 of this Agreement shall survive any termination of this Agreement or of
the Executive's employment hereunder until the expiration of the statute of
limitations applicable hereto.
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7. CHANGE IN CONTROL PAYMENT.
(a) CHANGE IN CONTROL DEFINED. A Change in Control shall be deemed to
occur upon the occurrence of both of: (i) the actual closing of any transaction
which results in a majority of the equity interest in the Parent Company being
beneficially owned by any "person" including any "group" (as such terms are used
in Section 13(d) and 14(d) of the Securities and Exchange Act of 1934, as
amended), other than the Parent Company's present affiliates; and (ii) after
such closing, a majority of the Board of Directors of the Parent Company are not
persons who (a) had been Directors at any time in the 12 months preceding such
closing or (b) when they were elected to the Board (x) were nominated (if they
were elected by the stockholders) or elected (if they were elected by the
directors) with the affirmative vote of a majority of the directors who were
Continuing Directors at the time of nomination or election by the Board and (y)
were not elected as a result of an actual or threatened solicitation of proxies
or consents by a person other than the Board of Directors of the Parent Company
or an agreement intended to avoid or settle such a proxy solicitation (the
directors described in (a) and (b) being "Continuing Directors").
(b) EFFECT OF CHANGE IN CONTROL. In the event of a Change In Control,
upon the later to occur of: (i) an involuntary termination of Executive's
employment hereunder other than a Termination for Cause; or ii) the expiration
of the term of this Employment Agreement without a voluntary resignation by
Executive of his employment with the Parent Company or uncured material default
hereunder by Executive, Executive shall be entitled to receive a cash
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bonus equal to .5% of the Consideration received by the Parent Company or the
shareholders of the Parent Company as a direct result of the transaction
constituting a Change in Control.
(c) "CONSIDERATION" IN CHANGE IN CONTROL. "Consideration" shall not
include the assumption, directly or indirectly, or repayment of indebtedness or
other liabilities of the Parent Company. If all or a portion of the
consideration paid in connection with the Change in Control is other than cash
or securities, then the value of such non-cash consideration shall be the fair
market value thereof on the date the Change in Control is actually consummated
as mutually agreed upon in good faith by the Parent Company's Board of Directors
and the Executive. If the Board of Directors and the Executive are unable to
come to agreement on the fair market value of such non-cash consideration, then
the parties shall jointly retain an independent expert to value the same, and
the determination of such independent expert shall be binding on both the
Executive and the Company. If such non-cash consideration consists of common
stock, options, warrants or rights for which a public trading market existed
prior to the consummation of the Change in Control, then the value of such
securities shall be determined by the closing or last sales price thereof on the
date of the consummation of the Change in Control; provided, however, that if
such non-cash consideration consists of newly-issued, publicly-traded common
stock, then the value thereof shall be the average of the closing prices for the
20 trading days subsequent to the fifth trading day after the consummation of
the Change in Control. In such event, the portion of the bonus payable to the
Executive pursuant to this Section 7 attributable to such securities shall be
paid on the 30th trading day subsequent to consummation of the Change in
Control. If no public market exists for the common stock, options, warrants or
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other rights issued as a result of the Change in Control, then the value of
thereof shall be as mutually agreed upon in good faith by the Company's Board of
Directors and the Executive. If the non-cash consideration paid consists of
preferred stock or debt securities (regardless of whether a public trading
market existed for such preferred stock or debt securities prior to consummation
of the Change in Control or exists thereafter), the value hereof shall be the
face or principal amount, as the case may be. Any amounts payable by a purchaser
to the Parent Company, any shareholder of the Parent Company or any affiliate of
either the Parent Company or any shareholder of the Parent Company in connection
with a non-competition, employment, consulting, licensing, supply or other
agreement shall be deemed to be part of the consideration paid in the Change in
Control. If all or a portion of the consideration payable in connection with the
Change in Control includes contingent future payments, then the Company shall
pay to the Executive, upon consummation of such Change in Control, an additional
cash amount, determined in accordance with this Section 7 as, when and if such
contingency payments are received. However, in the event of an installment
purchase at a fixed price and a fixed time schedule, the Company agrees to pay
the Executive, upon consummation of the Change in Control, a cash amount
determined in accordance with this Section 7 based on the present value of such
installment payments using a discount rate of 6.5%.
8. LOAN. The Parent Company has assumed an unsecured loan to the
Executive in the principal amount of $1,000,000 (the "Loan"), which Loan shall
continue upon the terms and conditions set forth in, and shall be evidenced by,
a new promissory note attached as Exhibit C hereto and hereby made a part hereof
(the "Note").
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9. TERM LIFE INSURANCE. The Parent Company or the Company shall
purchase term life insurance, providing a death benefit of $5,000,000, upon the
life of the Executive, the beneficiaries of which shall be designated by the
Executive and which term life insurance shall be upon terms and conditions, and
in form and substance, available at the time, and otherwise reasonably
satisfactory to the Executive and which term life insurance shall be maintained
by the Parent Company or the Company during the Employment Period at its sole
cost and expense; provided however that such life insurance shall be purchased
only to the extent that it is commercially reasonably available.
10. KEY MAN LIFE INSURANCE. The Parent Company or the Company shall
provide "Key Man" life insurance, providing a death benefit of $15,000,00 upon
the death of the Executive, for which either the Parent Company or the Company
is the beneficiary (the "Key Man Insurance Policy"). In connection therewith,
the Executive hereby authorizes the Parent Company or the Company, at its sole
cost and expense, to purchase and maintain upon the life of the Executive such
insurance policy, and agrees to submit to such medical examinations, and to
provide and/or consent to the release of such medical information, as may be
necessary or desirable in order to secure the issuance thereof.
11. INDEMNIFICATION. The Company and the Parent Company hereby agree,
jointly and severally, to indemnify the Executive (and his successors, legatees,
estate, administrators, executors, and legal representatives) and to advance
monies to such persons to
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pay expenses relating to indemnifiable events to the fullest extent permitted by
the laws of the State of Delaware, and the Executive shall be entitled to the
protection of any insurance policies the Company or the Parent Company may elect
to maintain generally for the benefit of their directors and officers, against
all costs, charges, and expenses whatsoever incurred or sustained by him or his
successors, legatees, estate, administrators, executors, and legal
representatives in connection with any action, suit, or proceeding to which any
of such persons may be a party by reason of the Executive being or having been a
director or officer of the Company or the Parent Company or any of their
subsidiaries or affiliates.
12. TAX WITHHOLDING. The Company and the Parent Company shall be
entitled to withhold from amounts payable to the Executive hereunder such
amounts as may be required by applicable tax law to be so withheld.
13. MODIFICATION. This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter, and may be
modified or terminated only by a written instrument duly executed by each party.
Executive acknowledges and agrees that upon execution, that certain First
Amendment and Restated Employment Agreement dated January 1, 1997, as amended,
by and among Executive, Insignia Financial Group, Inc., and the Company, as
successors to Insignia Commercial Group, Inc. and Insignia/Edward S. Gordon,
Incorporated shall be cancelled, including the promissory note issued in
connection therewith.
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14. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given, at the address of such party set forth in the preamble to this
Agreement (or to such other address as such party shall have furnished in
writing in accordance with the provisions of this Section 14.) Notice to the
Estate shall be sufficient if addressed to the Executive as provided in this
Section 14. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address which shall be deemed given at the time of receipt thereof.
15. WAIVER. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
16. BINDING EFFECT. The Executive's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance, or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and
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<PAGE> 25
inure to the benefit of the Executive and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company, the Parent Company and their successors.
17. THIRD PARTY BENEFICIARIES. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
18. CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company, the Parent
Company and their respective representatives have participated in the
preparation hereof.
19. HEADINGS. The headings in this Agreement are solely for convenience
of reference, and shall be given no effect in the construction or interpretation
of this Agreement.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to the
conflict of law provisions thereof.
22. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
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IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
INSIGNIA/ESG HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
INSIGNIA/ESG, INC.
By:
--------------------------------------
Name:
Title:
-----------------------------------------
STEPHEN B. SIEGEL
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EXHIBIT A
PERMITTED ACTIVITIES
1. Liquidating certain assets of Edward S. Gordon Company Incorporated and
Edward S. Gordon Company of New Jersey, Inc. and operating the Aircraft.
2. Officer and part owner of the Pittsfield Mets baseball team.
3. Board member of Liberty Property Trust.
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EXHIBIT B
International Real Estate Institute
N.A.C.O.R.E.
N.A.I.O.P.
Realty Foundation of New York
Urban Land Foundation
IDRC
ONCOR
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EXHIBIT C
PROMISSORY NOTE
$1,000,000 New York, New York
July 1, 1998
FOR VALUE RECEIVED, the undersigned, Stephen B. Siegel, residing at 130
East 67th Street, NY, NY 10021 ("Maker"), promises to pay to the order of
Insignia/ESG Holdings, Inc. ("Holder"), at the offices of Holder located at 200
Park Avenue, New York, New York 10166 (or at such other place as Holder may
designate in writing to Maker), in lawful money of the United States of America,
the principal amount of ONE MILLION DOLLARS ($1,000,000).
The outstanding principal balance of this Promissory Note and all
accrued interest thereon shall become due and payable in full upon the earlier
to occur of (i) the Maker's voluntary termination of his employment with Holder,
(ii) the Maker is Terminated For Cause (as defined in his Second Amended and
Restated Employment Agreement) and (iii) December 31, 2002. Notwithstanding
anything to the contrary contained in this Note, the repayment of the
outstanding principal amount of this Note, and all then accrued interest
thereon, shall be forgiven ratably over the three year period commencing on the
date hereof and ending on June 30, 2001 if, on such third anniversary, the
Maker's employment with the Holder has not been terminated for any valid reason.
In the event the Maker dies or becomes permanently disabled the repayment of the
outstanding principal amount of this Promissory Note, and all then accrued
interest thereon, shall be forgiven as of the effective date of such death or
permanent disability.
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The outstanding principal balance of this Promissory Note shall accrue
interest at the Applicable Rate (as hereinafter defined), compounded annually;
provided, however, that in no event shall the amount of interest due or payable
under this Promissory Note exceed the maximum rate of interest allowed by
applicable law.
The "Applicable Rate" for any period shall be a rate of interest
(expressed on an annual basis) equal to Holdings' Cost of Funds (as defined
below). For purposes of this Promissory Note, "Holdings' Cost of Funds" as of
any date shall mean a rate of interest equal to the applicable rate of interest
as of such date provided under that certain Credit Agreement dated as of
September 1998, by and among Holder, First Union National Bank of South
Carolina, Lehman Commercial Paper, Inc. and the Lenders referred to therein (the
"Credit Agreement"). In the absence of an Applicable Rate, interest shall accrue
at the prime rate as published by The New York Times.
Maker may from time to time make a prepayment of all or any part of the
outstanding balance of this Promissory Note (a "Prepayment"), without penalty or
premium.
If Maker shall commit an act of bankruptcy, make an assignment for the
benefit of creditors, or if a meeting of creditors is convened or a committee of
creditors is appointed for, or any petition or proceeding for any relief under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
receivership, liquidation or dissolution law or statute now or hereafter in
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effect (whether at law or in equity) is filed or commenced by or against, Maker
or any of his property, or if any custodian, trustee or receiver is appointed
for Maker or any such property, then, and in any such event, in addition to all
other rights and remedies of Holder under applicable law and otherwise, Holder
may, at its option, declare any or all of the then outstanding balance of this
Promissory Note to be due and payable, whereupon the maturity of said amount
shall be accelerated and the same shall become immediately due and payable.
Maker will pay all reasonable costs and expenses of collection and
enforcement, including but not limited to reasonable attorneys' fees, court
costs and disbursements, in connection with the enforcement of Holder's rights
under this Promissory Note.
Maker hereby waives demand for payment, notice of nonpayment, or
presentment, notice of dishonor, protest or any other notice. No delay on the
part of Holder in exercising any rights under this Promissory Note shall operate
as a waiver of such rights, and no single or partial exercise by Holder of any
right or remedy shall preclude other or further exercise thereof or the exercise
of any other right or remedy.
BY MAKING THIS PROMISSORY NOTE, MAKER ACKNOWLEDGES THAT ANY DISPUTE OR
CONTROVERSY BETWEEN MAKER AND HOLDER WOULD BE BASED ON DIFFICULT AND COMPLEX
ISSUES OF LAW AND FACT. ACCORDINGLY, MAKER HEREBY WAIVES HIS RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL
IN WHICH
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AN ACTION MAY BE COMMENCED BY OR AGAINST MAKER ARISING OUT OF THIS PROMISSORY
NOTE OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN MAKER AND
HOLDER OF ANY KIND OR NATURE.
MAKER AGREES THAT THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, OR, AT THE OPTION OF HOLDER, ANY STATE COURT LOCATED IN
NEW YORK, NEW YORK, SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN MAKER AND HOLDER PERTAINING DIRECTLY OR INDIRECTLY TO THIS
PROMISSORY NOTE. MAKER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY
WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR
PAPERS ISSUED THEREIN, AND AGREEING THAT SERVICE OF SUCH SUMMONS AND COMPLAINT,
OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED ADDRESSED TO MAKER AT THE ADDRESS OF MAKE SET FORTH ABOVE.
SHOULD MAKER FAIL TO APPEAR OR ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS
SO SERVED WITHIN THIRTY (30) DAYS AFTER THE MAILING THEREOF, HE SHALL BE DEEMED
IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED AGAINST HIM AS PRAYED FOR
IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
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THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
This Promissory Note shall be binding upon the estate and heirs of
Maker. Holder may assign this Promissory Note to any controlled affiliate of
Holder without the consent of Maker, whereupon all references herein to "Holder"
shall be deemed to be to such assignee; provided, however, that Maker shall have
no obligations to make any payments due hereunder to any person other than
Holder unless and until Holder notifies Maker of such assignment in writing.
IN WITNESS WHEREOF, Maker has executed and delivered this Promissory
Note as of the date first written above.
-----------------------------------------
STEPHEN B. SIEGEL
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is entered into as of August 3,
1998, by and between Insignia/ESG Holdings, Inc., a Delaware corporation with an
office at 200 Park Avenue, New York, New York, 10166 (the "Company"), and Ronald
Uretta, an individual with an office at One Insignia Financial Plaza,
Greenville, SC 29062 (the "Executive"). This Agreement is effective as of the
date of the consummation of the spin-off of the Company from Insignia Financial
Group, Inc. ("IFG") to its shareholders, and as of such date the obligations of
IFG under the Amended and Restated Employment Agreement between IFG and the
Executive dated as of January 1, 1998 shall be assumed by the Company, and the
Company hereby assumes and agrees to pay (without duplication under this
Agreement) the rights thereunder regarding amounts owed by IFG thereunder if IFG
does not timely pay such amounts (in which case the Company will be subrogated
to the right of the Executive to collect such amounts from IFG).
BACKGROUND
The Company desires to assure itself of the services of the Executive for
the period provided in this Agreement, and the Executive is willing to serve in
the employ of the Company for such period upon the terms and conditions provided
in this Agreement.
STATEMENT OF AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on the effective date
hereof (the "Commencement Date") and ending three years from the Commencement
Date, or on such earlier date as provided herein (the "Expiration Date") (such
period, as it may be so terminated, being referred to herein as the "Employment
Period").
SECTION 2. DUTIES AND SERVICES.
(a) OFFICES. Subject to Section 2(d), during the Employment Period the
Executive shall serve as Chief Operating Officer of the Company and, at the
Company's request, as an officer or director of one or more of its subsidiaries.
In the performance of his duties hereunder, the Executive shall report to and
shall be responsible only to the Chief Executive Officer and the Board of
Directors of the Company. The Executive agrees to his employment as described in
<PAGE> 2
this Section 2. The parties hereto understand and agree that the Executive has
substantial business interests outside of the scope of this Agreement,
including, without limitation, at Metropolitan Asset Enhancement, L.P. and
Insignia Properties Trust, and under an employment or consulting agreement with
IFG, and both parties hereby consent to such arrangements. The Executive shall
be available to travel as the needs of the business of the Company reasonably
require.
(b) OFFICE. During the Employment Period, the Company shall provide the
Executive with an office located in Greenville, SC or at 200 Park Avenue, New
York, NY, whichever the Executive chooses, or at such other location as the
Company and the Executive shall mutually agree. The Company will provide the
Executive with an office and executive secretary reasonably acceptable to him,
and other reasonable support appropriate to his duties hereunder.
(c) PRIMARY RESPONSIBILITIES. Subject to Section 2(a) and 2(d), during the
Employment Period, the Executive shall have such responsibilities as are
assigned to him by the Chief Executive Officer and the Board of Directors of the
Company. The Executive shall comply with all written policies and procedures of
the Company.
(d) CONSULTING. If (i) without the prior written consent of the Executive,
the Executive's title, powers or duties within the Company have been
substantially diminished, other than as a result of a Termination For Cause, (as
defined in Section 7(a)(iv)), (ii) an Extraordinary Transaction (as defined in
Section 4(c)) or a Material Asset Disposition (as defined in Section 4(d)) has
taken place, or (iii) Andrew L. Farkas has elected to convert that certain
Employment Agreement, dated as of August 3, 1998, by and between the Company and
Mr. Farkas (the "Farkas Employment Agreement") into a consulting agreement, then
the Executive may elect in writing to convert this Agreement into a consulting
agreement. Under the terms of the consulting agreement, the Executive shall
consult with respect to the assets and liabilities of the Company as they
existed immediately before the Extraordinary Transaction or the Material Asset
Disposition. Such consultation shall be at the reasonable times convenient to
the Executive on no less than five business days' notice, the parties
recognizing that the Executive during the consulting period likely will have
substantial other business interests, including under an employment or
consulting agreement with IFG. The terms and conditions of this Agreement
(including all rights hereunder of the Executive as to compensation, bonus,
payments and benefits) shall continue unabridged during the period of
consulting. The other provisions of this Agreement also shall remain in effect
except that (i) Section 2(a) shall be deleted and the remainder of Section 2
shall be modified by this Section 2(d), (ii) Section 7(a)(iv)(B) and Section
7(a)(iv)(C) shall be deleted, and (iii) references to salary (and Base Salary)
in Section 4(a) and elsewhere in this Agreement shall be deemed to refer to a
consulting fee (and Base Consulting Fee), and such Base Consulting Fee shall be
paid to the executive in twelve monthly installments, payable on the first day
of each calendar month. The "Employment Period" shall be deemed to include the
period during which the Executive is obligated to provide consulting services
hereunder and therefore, to the extent permitted by law, the conversion shall
not be deemed a termination or resignation for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits
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equivalent to those he would have received had there been no termination. The
Executive shall not be obligated to consult for more than five days or portions
of a day in any calendar month.
SECTION 3. KEY MAN LIFE INSURANCE. The Company shall have the right to
place a "key man" life insurance policy, providing a death benefit of up to
$15,000,000 upon the life of the Executive, for which the Company is the
beneficiary. In connection therewith, the Executive hereby authorizes the
Company, at its sole cost and expense, to purchase and maintain upon the life of
the Executive such insurance policy, and agrees to submit to such reasonable
medical examinations, and to provide and/or consent to the release of such
medical information, as may be necessary or desirable in order to secure the
issuance thereof. Except as may be required in order to obtain insurance
coverage as described in this Section 3, any and all information about
Executive's health or medical records shall be kept confidential by the Company
and shall not be disclosed by the Company to any party without the Executive's
prior written consent.
SECTION 4. COMPENSATION. As full compensation for his services hereunder,
the Company shall pay, grant, issue or give, as the case may be, to the
Executive the compensation and benefits specified below:
(a) BASE SALARY. Subject to the provisions of Section 7, a base salary at
the rate of $500,000 per annum ("Base Salary"), which Base Salary shall be paid
to the Executive in accordance with the customary executive payroll policy of
the Company as in effect from time to time; provided, however, that the Base
Salary, as in effect at any time and from time to time, may be further increased
by action of the Board of Directors; and further provided, however, that in no
event shall the Base Salary be decreased at any time or from time to time
without the prior consent of the Executive, which consent may be granted or
withheld in the Executive's sole discretion.
(b) ANNUAL DISCRETIONARY BONUS. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined by the
Board of Directors of the Company in its sole and absolute discretion, which
shall be paid to the Executive, with respect to any fiscal year of the Company,
before the expiration of 74 days after the end of such fiscal year. In making
bonus determinations, the Company shall evaluate the Executive's performance in
accordance with the standard bonus guidelines used by the Company for executives
of the Company in the same or a similar position as the Executive. In the event
of the consummation of the sale of the present residential business of IFG to
Apartment Investment and Management Company pursuant to an amended and restated
merger agreement dated May 26, 1998 (the "AIMCO Merger") in any year, the
Company shall, immediately after the consummation of the AIMCO Merger, pay to
the Executive an amount equal to X times Y, where X equals: (a) if the
consummation of the AIMCO Merger occurs in 1998, the amount of the discretionary
bonus the Executive received from IFG with respect to 1997, (b) if the
consummation of the AIMCO Merger occurs in 1999, the amount of the discretionary
bonus the Executive received from the Company with respect to 1998, divided by
the number of days between the effective date of this Agreement and the end of
1998, and multiplied by 365, or (c) if the consummation of the AIMCO Merger
occurs after 1999, the amount of the discretionary bonus the Executive received
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with respect to the year prior to the year in which the consummation of the
AIMCO Merger occurred, and Y equals a fraction the numerator of which is the
number of days between the beginning of the year and the occurrence of the
consummation of the AIMCO Merger and the denominator of which is 365.
(c) EXTRAORDINARY TRANSACTION.
An "Extraordinary Transaction" as used herein means the occurrence of any
one or more of the following:
(i) the Company ceases to be required to file reports under Section
13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor to that Section;
(ii) (a majority of the members of the Board of Directors of the
Company are not persons who (a) had been directors of the Company for at least
the preceding 12 consecutive months or (b) when they initially were elected to
the Board (x) were nominated (if they were elected by the stockholders) or
elected (if they were elected by the directors) with the affirmative vote of
two-thirds of the directors who were Continuing Directors at the time of the
nomination or election by the Board and (y) were not elected as a result of an
actual or threatened solicitation of proxies or consents by a person other than
the Board of Directors of the Company or an agreement intended to avoid or
settle such a proxy solicitation (the directors described in clauses (a) and (b)
being "Continuing Directors");
(iii) (any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company, any of
its present affiliates (as such term is defined in Rule 405 promulgated under
the Securities Act of 1933, as amended) ("Affiliates"), or any employee benefit
plan of the Company or any of its present Affiliates) is or becomes the
"beneficial owner" (as defined in Rule 13(d) (3) under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities;
(iv) (the purchase of Common Stock of the Company ("Common Stock")
pursuant to any tender or exchange offer or otherwise made by any "person,"
including a "group" (as such terms are used in Sections 13 (d) and 14 (d) of the
Exchange Act), other than the Company, any of its present Affiliates, or any
employee benefit plan of the Company or any of its present Affiliates, which
results in "beneficial ownership" (as so defined) of 30% or more of the
outstanding Common Stock;
(v) (the execution and delivery of a definitive agreement by the
Company that provides for a merger or consolidation, or a transaction having a
similar effect (unless such merger, consolidation or similar action is with a
subsidiary of the Company or with another company, a majority of whose
outstanding capital stock is owned by the same persons or entities who own a
majority of the Company's outstanding Common Stock at such time), where (A) the
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majority of the Common Stock of the Company is no longer held by the persons who
were the stockholders of the Company immediately prior to the transaction, (B)
the sale, lease, exchange or other disposition of all or substantially all of
the assets of the Company but excluding the trading of marketable securities
held as portfolio securities or (C) the Company's Common Stock is converted into
cash, securities or other property (other than the common stock of a company
into which the Company is merged), provided, however, that, in the event that
the contemplated merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this paragraph (v) by virtue
of such Change of Control shall not apply; and
(vi) upon the consummation of any transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary through purchase of assets, or by merger, or otherwise.
(d) MATERIAL ASSET DISPOSITION BONUS. In the event of a Material Asset
Disposition, as defined below, in consideration of the services performed by the
Executive and consistent with the prior terms of the Executive's employment, the
Company (or, in the case of clause (iii) below, the spin-off entity or, in
default thereof, the Company) shall pay to the Executive immediately before the
consummation of such Material Asset Disposition, a cash bonus equal to the Bonus
Percentage of the consideration (valued as set forth below) received by the
Company or its shareholders as a result of such Material Asset Disposition;
provided, however, that if the Material Asset Disposition giving rise to the
cash bonus contemplated by this Section 4(d) is the consummation of the AIMCO
Merger, the Company shall pay such cash bonus immediately after the consummation
of the AIMCO Merger, and the amount of such cash bonus shall be equal to .25% of
the consideration (valued as set forth below) received by IFG or its
shareholders as a result of the consummation of the AIMCO Merger (not including
the value of the distribution of shares of the Company to shareholders of IFG).
The Bonus Percentage shall be .25% if the Executive is a consultant to the
Company, or makes himself reasonably available to consult for the Company with
respect to the assets and liabilities of the Company as they existed immediately
after the spin-off of Insignia/ESG Holdings, Inc. to the Company's shareholders,
at the time the definitive agreement regarding such Material Asset Disposition
is executed. The Bonus Percentage shall be .5% if the Executive is an employee
of the Company (for this purpose only, the word "employee" not including a
consultant under this Agreement), whether under this Agreement or otherwise, at
the time the definitive agreement regarding such Material Asset Disposition is
executed. If the Executive has been Terminated For Cause, or is otherwise not
employed by the Company and not available to consult for the Company, at the
time the definitive agreement regarding such Material Asset Disposition is
executed, then the Bonus Percentage shall be 0%.
A "Material Asset Disposition" as used herein means, without duplication
for the same matter: (i) a transaction which results in a majority of the equity
interest in the Company being beneficially owned by any "person" or "persons,"
including any "group" (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act), other than any of the Company's present Affiliates; (ii) a sale
or series of sales by the Company of subsidiaries, divisions, assets (other than
marketable securities), or operating businesses representing in the aggregate
20% or more of
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the Company's 1998 budgeted EBITDA (which shall include for purposes of this
Agreement EBITDA for all contemplated subsidiaries of the Company) and each such
sale after such threshold has been reached or, if the AIMCO Merger is
consummated, a sale or series of sales by the Company of subsidiaries,
divisions, or assets (other than marketable securities), or operating businesses
regardless of size; (iii) a spin off, or series of spin offs, of any of the
Company's divisions, operating businesses or subsidiaries that meet the 1998
budgeted EBITDA threshold set forth in (ii) above (or, if the AIMCO Merger is
consummated, any such spin off, regardless of size) which is followed by a
subsequent Extraordinary Transaction (as defined above, but with reference to
the spun off entity rather than the Company) of the subsidiary, division or
business spun off within five years following such spin off; (iv) any
transaction which results in any one or more of the Company's divisions,
subsidiaries or operating businesses, representing in the aggregate 20% or more
of the Company's EBITDA, being owned by a third party or, if the AIMCO Merger is
consummated, any transaction, regardless of size, which results in any one or
more of the Company's divisions, subsidiaries, or operating businesses being
owned by a third party; or (v) the consummation of the AIMCO Merger. In the
event a Material Asset Disposition is consummated in one or more steps,
including, without limitation, by way of second-step merger, any additional
consideration paid or to be paid in any subsequent step in the Material Asset
Disposition in respect of (x) subsidiaries, divisions, assets (other than
marketable securities), or operating businesses of the Company and (y) capital
stock of the Company (and any securities convertible into, or options, warrants
or other rights to acquire, such capital stock) shall be included for purposes
of calculating the bonus payable pursuant to this Section 4(d). "Consideration"
shall not include the assumption, directly or indirectly, or repayment of
indebtedness or other liabilities of the Company but shall include the
assumption, directly or indirectly, or repayment of securities similar to the
IFG Trust Convertible Preferred Securities now outstanding. If all or a portion
of the consideration paid in the Material Asset Disposition is other than cash
or securities, then the value of such non-cash consideration shall be the fair
market value thereof on the date the Material Asset Disposition is consummated
as mutually agreed upon in good faith by the Company's Board of Directors and
the Executive. If the Board of Directors and the Executive are unable to come to
agreement on the fair market value of such non-cash consideration following the
provisions of this Section 4(d), then, at the request of either, an independent
valuation expert agreeable to both shall be appointed to determine the fair
market value of such non-cash consideration, and the determination of such
independent expert shall be binding on both the Executive and the Company. If
such non-cash consideration consists of common stock, options, warrants or
rights for which a public trading market existed prior to the consummation of
the Material Asset Disposition, then the value of such securities shall be
determined by the closing or last sales price thereof on the date of the
consummation of the Material Asset Disposition; provided, however, that if such
non-cash consideration consists of newly-issued, publicly-traded common stock,
options, warrants or rights for which no public trading market existed prior to
the consummation of the Material Asset Disposition, then the value thereof shall
be the average of the closing prices for the 20 trading days subsequent to the
fifth trading day after the consummation of the Material Asset Disposition. In
such event, the portion of the bonus payable to the Executive pursuant to this
Section 4(d) attributable to such securities shall be paid on the 30th trading
day subsequent to consummation of the Material Asset Disposition. If no public
market exists for the common stock, options, warrants or other
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rights issued in the Material Asset Disposition, then the value of thereof shall
be as mutually agreed upon in good faith by the Company's Board of Directors and
the Executive. If the non-cash consideration paid in the Material Asset
Disposition consists of preferred stock or debt securities (regardless of
whether a public trading market existed for such preferred stock or debt
securities prior to consummation of the Material Asset Disposition or exists
thereafter), the value hereof shall be the face or principal amount, as the case
may be. Any amounts payable by a purchaser to the Company, any shareholder of
the Company or any Affiliate of either the Company or any shareholder of the
Company in connection with a non-competition, employment, consulting, licensing,
supply or other agreement shall be deemed to be part of the consideration paid
in the Material Asset Disposition. If all or a portion of the consideration
payable in connection with the Material Asset Disposition includes contingent
future payments, then the Company shall pay to the Executive, upon consummation
of such Material Asset Disposition, an additional cash fee, determined in
accordance with this Section 4(d) as, when and if such contingency payments are
received. However, in the event of an installment purchase at a fixed price and
a fixed time schedule, the Company agrees to pay the Executive, upon
consummation of the Material Asset Disposition, a cash fee determined in
accordance with this Section 4(d) based on the present value of such installment
payments using a discount rate of 6.5%. For purposes of this Section 4(d), in no
case shall the "consideration" received by the Company be greater than the total
market capitalization of the Company at the time of the Material Asset
Disposition.
(e) FRINGE BENEFIT PROGRAMS. In addition to the other benefits provided to
the Executive hereunder and to the extent he satisfies the eligibility
requirements thereof and to the extent permitted by law, participation in fringe
benefit programs made available generally to employees or independent
contractors of the Company, including, without limitation, pension, profit
sharing, stock purchase, savings, bonus, disability, life insurance, health
insurance, hospitalization, dental, deferred compensation and other plans and
policies authorized on the date hereof or in the future.
(f) EXPENSE REIMBURSEMENT. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, including professional activities and membership fees and dues
relating to professional organizations of which the Executive currently is a
member or is directed in writing to be a member by the Chief Executive Officer
of the Company and including, without limitation, expenses required for
professional licensing of the Executive, and business related cell phone expense
in accordance with the Company's written policies and procedures, all upon the
presentation of appropriate documentation therefore in accordance with the then
regular procedures of the Company.
(g) PERQUISITES. In addition to the other benefits provided to the
Executive hereunder, and at the sole cost and expense of the Company, except as
otherwise provided herein:
(i) the Executive shall be entitled to reasonable business usage of
aircraft owned or leased by the Company as determined by the Chief Executive
Officer of the Company.
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With prior consent from the Chief Executive Officer of the Company, the
Executive may utilize such aircraft for personal use and in such event the cost
of such use shall be added to and included in the Executive's compensation for
federal, state and local income tax purposes;
(ii) subject to the provisions of Section 7 hereof, the Company will
provide to the Executive disability insurance coverage identical to the
disability insurance coverage provided to senior executives of the Company from
time to time;
(iii) the Executive shall be entitled to use of a full-time car and
driver in New York City, New York, which car and driver shall also be available
for use by all other executives of the Company as the need shall arise;
(iv) the Executive shall be entitled to full reimbursement for
expenses incurred in respect of professional continuing education; and
(v) the Executive shall be entitled to reasonable consultations with
financial and tax advisors or counselors, including annual income tax
preparation and audits relating to the period during which the Executive was
employed by the Company (whether or not under this Agreement) and whether such
audit expense is incurred during or after the Employment Period.
(h) VACATIONS, ETC. Leaves-of-absence in accordance with the then regular
procedures of the Company governing senior executives, and four weeks of paid
vacation per year on a noncumulative basis.
(i) PARACHUTE LIMIT. Notwithstanding anything else herein, to the extent
the Executive would be subject to the excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments"), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit"); provided, however, that this Section 4(i)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable federal, state and
local income, social security and other taxes) would be greater than the
unreduced Parachute Payments to be received by the Executive minus (i) the
excise tax payable under Section 4999 of the Code with respect to such Parachute
Payments and (ii) all applicable federal, state and local income, social
security and other taxes on such Parachute Payments. The foregoing reduction
shall be applied to the Parachute Payments as follows: (i) first by reducing the
amounts payable under Section 4(c) (if such amounts are included in such
computation) until such amounts have been exhausted up to the Parachute Limit,
(ii) then by reducing any such other amounts and benefits (other than awards
described in (iii) below) as determined by the Company, and (iii)
notwithstanding anything contained herein or in an option, warrant or restricted
stock agreement, award or plan relating to the Executive then, on a pro-rata
basis up to the Parachute Limit, by failing to accelerate the vesting (without
affecting the right to vest) upon
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a change in ownership or effective control or change in ownership of a
substantial portion of assets (as described in Code Section 280G(b)(2)(A)(i)) of
any unvested awards of shares of restricted stock of the Company previously
granted to Executive and options or warrants to purchase shares of the Company
previously granted to Executive. Notwithstanding the foregoing, the Company
shall treat any of the amounts described in (i) through (iii) above as a
Parachute Payment solely to the extent required under applicable law.
(j) PURCHASE OF INSURANCE. Following the Executive's cessation of
employment with the Company for any reason, (i) the Executive shall have the
right to continue, at the Executive's sole cost, any or all life insurance
policies on the life of the Executive maintained by the Company during the
Employment Period and to designate the beneficiaries and owners thereof, and
(ii) the Executive and his dependents shall have the right to purchase from or
through the Company or its successor, at the Executive's or his dependents' sole
cost, individual and dependent care health insurance coverage. Notwithstanding
anything in this Agreement to the contrary, the provisions of this Section 4(j)
shall continue regardless of the cessation of the Executive's employment by the
Company. In the case of the death of the Executive, whether during or after the
Employment Period, the rights under Section 4(j)(ii) of the persons who were the
Executive's dependents at the time of his death shall continue in full force and
effect for the duration of each of their lives.
(k) VESTING. In the event of (a) a termination of Executive's employment
for any reason other than a Termination for Cause or voluntary termination by
the Executive, including, but not limited to a Death Termination Event,
Disability Termination Event, Termination Without Cause or in the event of (b)
the occurrence of an Extraordinary Transaction, an Influence Change Event (as
such term is defined in the Farkas Employment Agreement), or an Extraordinary
Stock Event (as such term is defined in the Farkas Employment Agreement)
(whether or not resulting in a termination of Executive's employment), all
options and warrants then granted to the Executive will immediately vest and be
exercisable by the Executive.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EXECUTIVE. The
Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his duties
hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties hereunder
with or without reasonable accommodations.
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SECTION 6. NON-SOLICITATION; CONFIDENTIALITY.
(a) NON-SOLICITATION.
(1) In recognition of the close personal contact the Executive
has or will have with the Company's and its affiliates' trade secrets,
confidential information, records and business relationships, and the position
of trust in which the Company holds the Executive, the Executive further
covenants and agrees that while the Executive is employed by the Company and for
a period lasting for one (1) year following the cessation of the Executive's
employment with the Company, the Executive will not, if such action would have a
material adverse effect on the Company, in direct competition with the Company
(where competition is measured as of the date the Executive ceases to be
employed by the Company), either for himself or as an officer, director,
employee, agent, representative, independent contractor or in any relationship
to any person, partnership, corporation, or other entity (except the Company or
its Affiliates or subsidiaries), solicit, directly or by assisting others,
business from any of the Company's customers or clients who were customers or
clients of the Company as of the date of the cessation of the Executive's
employment and with whom the Executive has had material contact (as defined
below) during the twelve (12) month period preceding the date of cessation of
the Executive's employment with the Company in the event of a cessation of
employment with the Company or, absent such cessation, during the twelve (12)
months preceding the solicitation, for the purpose of providing goods or
services to said customers and clients. For purposes of this Agreement,
"material contact" exists between the Executive and any of the Company's
customers or clients (i) with whom the Executive actually dealt; or (ii) whose
dealings with the Company were handled, coordinated or supervised by the
Executive; or (iii) about whom the Executive obtained confidential information
in the ordinary course of business through the Executive's association with the
Company.
(2) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's employment with
the Company ceases, the Executive will not solicit any employee, broker or sales
person of the Company, or any of its respective subsidiaries or affiliates to
leave their employ for the employ of a person or entity which directly competes
with the Company, or any of its respective subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's employment with
the Company ceases, the Executive will not purchase for his own account any
limited partnership units of partnerships that, on the date of purchase, are
controlled directly or indirectly by the Company, except that the provisions of
this sentence shall not be deemed breached merely because the Executive owns,
immediately after a purchase, not more than one percent of the outstanding
units. Should the Executive breach the foregoing sentence, all his options
issued by the Company or any of its subsidiaries shall be canceled and all of
his restricted stock issued by the Company or any of its subsidiaries (whether
or not then vested) which he then owns shall be forfeited. For purposes of this
Section 6(a)(3), "purchase" shall mean the payment of cash only
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for such limited partnership units and shall not include payment of cash for
interests in an entity whose assets consist in whole or in part of such limited
partnership units.
(4) The Executives covenants and agrees that he will not, either
for himself or as an officer, director, employee, agent, representative, or
independent contractor of any person, partnership, corporation, or other entity
(except the Company or its Affiliates or subsidiaries), interfere with any
contract that exists between the Company and any customers or clients of the
Company as of the effective date of this Agreement.
The Executive acknowledges that the foregoing provisions are intended to
protect the Company's and its subsidiaries' and Affiliates' business and
customer contacts, not to prevent the Executive from pursuing a livelihood in
the general area of his previous training, and they should be interpreted
accordingly.
(b) CONFIDENTIALITY. All confidential information which the Executive may
now possess, may obtain during or after his employment with Company, or may
create prior to the end of his employment with the Company or otherwise relating
to the business of the Company or any of its subsidiaries or affiliates or of
any customer or supplier of any of them shall not be published, disclosed, or
made accessible by him to any other person, either during or after the cessation
of his employment, or used by him except during his employment with the Company
in the business and for the benefit of the Company and its subsidiaries and
Affiliates. In addition, the Executive agrees not to disclose, publish or make
accessible to any other person, from and after the date of this Agreement,
during the Employment Period or at any time thereafter, any of the terms or
provisions of this Agreement, except the Executive's accountants who need such
information to advise him, prepare his tax returns, make required filings and
the like; provided, however, that the Executive will be responsible for causing
any such accountants to be aware of and to abide by the obligations contained in
this Section 6(b) and will be responsible for any breach of such obligations by
any of them. In the event that the Executive becomes legally compelled to
disclose any of the confidential information, the Executive will provide the
Company with prompt written notice so that the Company may seek a protective
order or other appropriate remedy and/or waive in writing compliance with the
provisions of this Section 6(b) and in the event that such protective order or
other remedy is not obtained, or should the Company waive in writing compliance
with the provisions of this Section 6(b), the Executive will furnish only that
portion of the confidential information which is so legally required. The
Executive shall return all tangible evidence of such confidential information to
the General Counsel of the Company prior to or at the cessation of his
employment.
(c) INTERPRETATION. Since a breach of the provisions of this Section 6
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach and the Company shall not be required to post
a bond in any proceeding brought for such purpose. The Executive agrees that the
provisions of this Section 6 are necessary and reasonable to protect the Company
in the conduct of its businesses. If any restriction contained in this Section 6
shall be deemed to be invalid, illegal, or unenforceable by reason of the
extent, duration, or geographical scope
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thereof, or otherwise, then the court making such determination shall have the
right to reduce such extent, duration, geographical scope, or other provisions
hereof, and in its reduced form such restriction shall then be enforceable in
the manner contemplated hereby. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies, at law or in equity, for such
breach or threatened breach.
(d) INVESTORS. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall restrict the right of the Executive to solicit or receive,
on his own behalf or on behalf of others, any investment or any funds in any
form from any person, regardless of whether such person is an investor in the
Company or in any current or former affiliate of the Company.
SECTION 7. TERMINATION.
(a) DEFINITIONS.
(i) Death Termination Event. As used herein, "Death Termination
Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is physically
or mentally incapacitated or disabled or otherwise unable to fully discharge his
duties hereunder for a period of 185 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the event
that the last will and testament of the Executive has not been probated at the
time of determination, the estate of the Executive and (B) in the event that the
last will and testament of the Executive has been probated at the time of
determination, the legatees of the Executive who are entitled under such will to
the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term "Termination For
Cause" shall mean the termination by the Company of the Executive's employment
hereunder upon a good faith determination by a majority vote of the members of
the Board of Directors of the Company that termination of this Agreement is
necessary by reason of (A) the Executive shall be convicted of a felony, (B) the
Executive shall commit any act or omit to take any action in bad faith and to
the material detriment of the Company and Executive shall not have cured the
same within 30 days after the Company sends written notice thereof, or (C)
Executive shall breach in a material way any material term of this Agreement and
fail to correct such breach within 30 days after the Company sends written
notice thereof.
(v) Termination Without Cause. As used herein, "Termination Without
Cause" shall mean any termination of the Executive's employment by the Company
hereunder that is not a Termination For Cause, a Death Termination Event, or a
Disability Termination Event but shall not include a conversion of this
Agreement to a consulting agreement.
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<PAGE> 13
(b) DEATH TERMINATION EVENT. Upon the occurrence of a Death Termination
Event, this Agreement will terminate automatically upon the date that such Death
Termination Event occurred (subject to the last sentence of this Section 7 and
to the last two sentences of Section 4(j)), whereupon the Executive's Estate
shall receive the consideration set forth in Sections 4(a) through (d) through
the date three years from the Commencement Date. In addition, the Executive's
Estate shall be entitled to receive the payments contemplated by Section 4(c)
and Section 4(d) if the event giving rise to such payment occurs, or a
definitive agreement regarding such event is executed, before or within 180 days
after the Death Termination Event.
(c) DISABILITY TERMINATION EVENT. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 7 and to the last two sentences of Section 4(j)), whereupon the
Executive shall continue to receive the consideration set forth in Sections 4(a)
through (d) and Section 4(g)(iii) through the date three years from the
Commencement Date. In addition, the Executive shall be entitled to receive the
payments contemplated by Section 4(c) and Section 4(d) if the event giving rise
to such payment occurs, or a definitive agreement regarding such event is
executed, before or within 180 days after the Disability Termination Event.
(d) TERMINATION FOR CAUSE. The Executive and the Company agree that the
Company shall have the right to effectuate a Termination For Cause in accordance
with the terms of this Agreement at any time. Upon the occurrence of a
Termination For Cause, this Agreement will terminate upon the date that such
Termination For Cause occurs (subject to the provisions of Section 9), whereupon
(i) the Executive shall not be entitled to receive any additional payments
hereunder other than the Base Salary, as then in effect, to and including the
date that such Termination For Cause occurs and (ii) the Company shall be
entitled to any and all remedies and damages available to it.
(e) TERMINATION WITHOUT CAUSE. Upon the occurrence of a Termination
Without Cause, this Agreement shall terminate upon the date that such
Termination Without Cause occurs (subject to the provisions of Section 9 and to
the last two sentences of Section 4(j)), whereupon the Executive shall continue
to receive the consideration set forth in Sections 4(a) through (d) and Section
4(g)(iii) through the date three years from the Commencement Date. In addition,
the Executive shall be entitled to receive the payments contemplated by Section
4(c) and Section 4(d) if the event giving rise to such payment occurs, or a
definitive agreement regarding such event is executed, on or before the date
three years from the Commencement Date.
In the event of a termination of Executive's employment for any reason
other than a Termination for Cause or voluntary termination by the Executive,
including, but not limited to a Death Termination Event, Disability Termination
Event, or Termination Without Cause, all options, warrants and restricted stock
then held by and/or granted to the Executive will immediately vest and be
exercisable by the Executive but in the event of the occurrence of an
Extraordinary Transaction, no options, warrants or restricted stock then held by
and/or granted to the Executive will immediately vest as a result thereof.
13
<PAGE> 14
SECTION 8. WITHHOLDING. The Company shall be entitled to withhold from
amounts payable to the Executive hereunder such amounts as may be required by
applicable law to be so withheld.
SECTION 9. SURVIVAL. Notwithstanding anything in this Agreement to the
contrary, Section 6 of this Agreement shall survive any termination of this
Agreement or cessation of the Executive's employment hereunder for the periods
stated therein.
SECTION 10. MODIFICATION. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
SECTION 11. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11).
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 12. WAIVER. Any waiver by either party of a breach of any
provision of Agreement shall not operate as a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
SECTION 13. BINDING EFFECT. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors.
SECTION 14. HEADINGS. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 15. ENFORCEMENT. Should the Executive sue to enforce any of his
rights under this Agreement and should the Executive prevail on any issue in
such suit, then the Company shall pay all the Executive's costs of such suit
(including attorneys fees and disbursements). If any taxes are imposed on such
payment, the Company shall make such additional payments to
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<PAGE> 15
the Executive as may be necessary, so that after deducting the taxes imposed on
all payments made to the Executive pursuant to this paragraph, the Executive is
left on an after tax basis with an amount equal to his claim for indemnification
prior to the payments described in this sentence.
SECTION 16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina, without
reference to the conflict of law provisions thereof.
SECTION 18. CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company and their
respective attorneys and representatives have participated in the preparation
hereof.
SECTION 19. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO THE TRIAL BY THE
COURT.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
INSIGNIA/ESG HOLDINGS, INC.
By:
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
EXECUTIVE
----------------------------------------
Name: Ronald Uretta
16
<PAGE> 1
EXHIBIT 10.10
ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE AGREEMENT
THIS ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE AGREEMENT (this
"Agreement") is made and entered into as of July 1, 1998, by and among Insignia
Financial Group, Inc., a Delaware corporation ("Assignor"), Insignia/ESG
Holdings, Inc., a Delaware corporation ("Assignee") and Edward S. Gordon
("Employee").
W I T N E S S E T H :
WHEREAS Assignor and Employee are currently parties to that certain
Employment Agreement dated as of June 17, 1996, as amended by Amendment No. 1
thereto dated April 1, 1997 (as amended, the "Employment Agreement"), a copy of
which is attached hereto as Exhibit A;
WHEREAS, it is contemplated that Assignor will distribute 100% of the
outstanding common stock of Assignee to Assignor's stockholders (the
"Distribution");
WHEREAS, Assignee desires to assure itself of the services of Employee
from and after the Distribution through the period contemplated by the
Employment Agreement, and Employee desires and is willing to serve in the
employ of Assignee for such period; and
WHEREAS, each of Assignor, Assignee and Employee desires to enter into
this Agreement for their mutual benefit and in order to facilitate the
Distribution;
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Assignor hereby irrevocably assigns and delegates to Assignee
all of Assignor's existing and future rights and obligations under the
Employment Agreement, and Assignee hereby irrevocably accepts and assumes all
of such rights and obligations, in each case effective simultaneously with the
consummation of the Distribution and without any further action on the part or
any party hereto (the "Assignment").
2. Subject to the provisions of Section 4 hereof, Employee hereby
irrevocably and unconditionally consents to the Assignment and, on behalf of
himself and his heirs, executors, administrators and estate, releases Assignor
and its subsidiaries and affiliates (other than Assignee) from any and all
actions, causes of action, obligations, liabilities, judgments, suits, debts,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
extents, executions, claims and demands whatsoever, in law, admiralty or
equity, whether liquidated or unliquidated, contingent or otherwise, whether
specifically mentioned or not, which Employee ever had, now has or hereafter
can, shall or may have under, arising out of or relating to the Employment
Agreement, it being understood and agreed that any liability for any such
claim, etc. shall instead be the sole responsibility of Assignee.
<PAGE> 2
3. By signing this Agreement, Employee acknowledges and agrees
that:
(a) He has been afforded a reasonable and sufficient
period of time of at least twenty-one (21) days to review this
Agreement, for deliberation hereon and for negotiation of the terms
hereof, and that, at Employee's initiative, Employee has waived said
period and any possible renewals or extensions thereof;
(b) He has been specifically urged by Assignor to consult
with legal counsel or the representative of his choice before signing
this Agreement, and that he did, in fact, consult an attorney of his
own choosing before signing this Agreement and said attorney reviewed
this Agreement before Employee signed it;
(c) He has carefully read and understands the terms of
this Agreement, all of which have been fully explained to him;
(d) He has signed this Agreement freely and voluntarily
and without duress or coercion and with full knowledge and
understanding of its significance and consequences and of the rights
relinquished, surrendered, released and discharged hereunder; and
(e) The only consideration for signing this Agreement are
the terms stated herein and no other promise, agreement or
representation of any kind has been made to him by any person or
entity whatsoever to cause him to sign this Agreement.
4. This Agreement may be revoked in writing by Employee at any
time during the period of seven (7) calendar days following the date of
execution by Employee as indicated on the Signature Page hereto. If such
seven-day revocation period expires without Employee exercising his revocation
right, the obligations of this Agreement will then become fully effective.
5. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
conflicts of law principles thereof.
6. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which, when taken
together, shall constitute one and the same instrument.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment, Assumption, Consent and Release Agreement on the respective dates
indicated below.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ FRANK M. GARRISON
---------------------------
Frank M. Garrison
Executive Managing Director
Date: July 1, 1998
INSIGNIA/ESG HOLDINGS, INC.
By: /s/ JEFFREY P. COHEN
---------------------------
Jeffrey P. Cohen
Executive Vice President
Date: July 1, 1998
EMPLOYEE
/s/ EDWARD S. GORDON
------------------------------
Edward S. Gordon
Date: 7-6 , 1998
----------------
-3-
<PAGE> 1
EXHIBIT 10.11
FARKAS-Insignia/ESG Holdings
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is entered into as of August
3, 1998, by and between Insignia/ESG Holdings, Inc., a Delaware corporation
with an office at 200 Park Avenue, New York, NY 10166 (the "Company"), and
Andrew Lawrence Farkas, an individual with an office at 375 Park Avenue, New
York, N.Y. (the "Executive "). This Agreement is effective as of the date of
the consummation of the spin-off of the Company from Insignia Financial Group,
Inc. ("IFG") to its shareholders, and as of such date the obligations of IFG
under the Amended and Restated Employment Agreement between IFG and the
Executive dated as of January 1, 1998 shall be assumed by the Company, and the
Company hereby assumes and agrees to pay (without duplication under this
Agreement) the rights thereunder regarding amounts owed by IFG thereunder if
IFG does not timely pay such amounts (in which case the Company will be
subrogated to the right of the Executive to collect such amounts from IFG).
BACKGROUND
The Company desires to assure itself of the services of the Executive
for the period provided in this Agreement, and the Executive is willing to
serve in the employ of the Company for such period upon the terms and
conditions provided in this Agreement.
STATEMENT OF AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, in each case upon
the terms and conditions set forth herein, for a period commencing on the
effective date hereof (the "Commencement Date") and ending three years from the
Commencement Date, or on such earlier date as provided herein (the "Expiration
Date") (such period, as it may be so terminated, being referred to herein as
the "Employment Period").
SECTION 2. DUTIES AND SERVICES.
(a) OFFICES. Subject to Section 2(e), during the Employment
Period the Executive shall serve as Chief Executive Officer of the Company and,
at the Company's request, as an officer or director of one or more of its
subsidiaries. In the performance of his duties hereunder, the Executive shall
report to and shall be responsible only to the Board of Directors of the
Company. The Executive agrees to his employment as described in this Section
2. The parties hereto understand and agree that the Executive has substantial
business interests outside of the scope of this Agreement, including, without
limitation, at Metropolitan Asset Enhancement, L.P.
<PAGE> 2
("MAE"), Insignia Properties Trust, as a strategic partner at Charterhouse, and
under an employment or consulting agreement with IFG, and both parties hereby
consent to such arrangements. The Executive shall be available to travel as
the needs of the business of the Company reasonably require.
(b) NOMINATION TO THE BOARD OF DIRECTORS AND COMMITTEES THEREOF.
The Company agrees that the Executive shall be nominated by its Board of
Directors to be elected to such Board of Directors as a Director of the Company
at each meeting of its stockholders at which Directors of the Company are to be
elected for so long as the Executive shall be employed by the Company. The
Company further agrees that, for so long as the Executive shall be employed by
the Company and shall be a Director of the Company, he shall be elected or
appointed, as the case may be, to serve (i) as Chairman of the Board of
Directors of the Company, (ii) on the Executive Committee of the Board of
Directors of the Company as the Chairman thereto, and (iii) on the Compensation
Committee of the Board of Directors as an ex officio member thereof
(collectively, the "Board Positions"). This Section 2(b) shall terminate upon
the conversion of this Agreement into a consulting agreement pursuant to
Section 2(e) of this Agreement.
(c) LOCATION OF OFFICE. Subject to Section 2(e), during the
Employment Period the Company shall provide the Executive with an office in
both the principal executive offices of the Company in New York, New York. The
Company will provide the Executive with two executive secretaries acceptable to
him, and other support appropriate to his duties hereunder, in the sole
discretion of the Executive.
(d) PRIMARY RESPONSIBILITIES. Subject to Section 2(e), during the
Employment Period, the Executive shall have primary responsibility for the
business of the Company and its subsidiaries, including, without limitation,
the following areas:
(i) Underwriting decisions;
(ii) Securitization decisions;
(iii) Acquisition and disposition decisions;
(iv) Hiring and termination of employees;
(v) Setting executive and other employee compensation;
(vi) Setting the location of the Company's principal executive offices at any
time and from time to time; and
(vii) Other similar general management decisions affecting the operations of
the Company,
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<PAGE> 3
in each case subject to the approval of the Board of Directors of the Company
or the appropriate committee thereof to the extent required by the laws of the
State of Delaware or the By-Laws of the Company.
(e) CONSULTING. If (i) without the prior written consent of the
Executive the Executive's title, powers or duties within the Company have been
substantially diminished, other than as a result of a Termination For Cause, or
(ii) if an Influence Change Event (as defined in Section 8(a)(iv)) after or in
connection with an Extraordinary Transaction (as defined in Section 8(a)(i), an
Extraordinary Stock Event (as defined in Section (8(a)(v)), or a Material Asset
Disposition (as defined in Section 4(e)), has taken place, then Executive may
elect in writing to convert this Agreement into a consulting agreement. Under
the terms of the consulting agreement, the Executive shall consult with respect
to the assets and liabilities of the Company as they existed immediately before
the Extraordinary Transaction, Extraordinary Stock Event, or Material Asset
Disposition. Such consultation shall be at the reasonable times convenient to
the Executive on no less than five business days' notice, the parties
recognizing that the Executive during the consulting period likely will have
substantial other business interests, including under including, without
limitation, at Metropolitan Asset Enhancement, L.P. ("MAE"), as a strategic
partner at Charterhouse, and under an employment or consulting agreement with
IFG. The terms and conditions of this Agreement (including all rights
hereunder of the Executive as to compensation, bonus, payments and benefits)
shall continue unabridged during the period of consulting. The other
provisions of this Agreement also shall remain in effect except that (i)
Section 2(a) shall be deleted and the remainder of Section 2 shall be modified
by this Section 2(d), (ii) Section 7(a)(iv)(B) and Section 7(a)(iv)(C) shall be
deleted, and (iii) references to salary (and Base Salary) in Section 4(a) and
elsewhere in this Agreement shall be deemed to refer to a consulting fee (and
Base Consulting Fee), and such Base Consulting Fee shall be paid to the
executive in twelve monthly installments, payable on the first day of each
calendar month. The "Employment Period" shall be deemed to include the period
during which the Executive is obligated to provide consulting services
hereunder and therefore, to the extent permitted by law, the conversion shall
not be deemed a termination or resignation for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits equivalent to those he would have received
had there been no termination. The Executive shall not be obligated to consult
for more than five days or portions of a day in any calendar month.
SECTION 3. KEY MAN LIFE INSURANCE. The Company shall have the
right to place a "key man" life insurance policy, providing a death benefit of
up to $15,000,000 upon the life of the Executive, for which the Company is the
beneficiary (the "Key Man Insurance Policy"). In connection therewith, the
Executive hereby authorizes the Company, at its sole cost and expense, to
purchase and maintain upon the life of the Executive such insurance policy, and
agrees to submit to such reasonable medical examinations, and to provide and/or
consent to the release of such medical information, as may be necessary or
desirable in order to secure the issuance thereof. Except as may be required
in order to obtain insurance coverage as described in this
3
<PAGE> 4
Section 3, any and all information about Executive's health or medical records
shall be kept confidential by the Company and shall not be disclosed by the
Company to any party without the Executive's prior written consent.
SECTION 4. COMPENSATION. As full compensation for his services
hereunder, the Company shall pay, grant, issue or give, as the case may be, to
the Executive the compensation and benefits specified below:
(a) BASE SALARY. Subject to the provisions of Sections 7 and 8, a
base salary at the rate of $750,000 per annum ("Base Salary"), which Base
Salary shall be paid to the Executive in accordance with the customary
executive payroll policy of the Company as in effect from time to time;
provided, however, that the Base Salary, as in effect at any time and from time
to time, may be further increased by action of the Board of Directors; and
further provided, however, that in no event shall the Base Salary be decreased
at any time or from time to time without the prior consent of the Executive,
which consent may be granted or withheld in the Executive's sole discretion.
(b) ANNUAL DISCRETIONARY BONUS. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined by
the Board of Directors of the Company in its sole and absolute discretion,
which shall be paid to the Executive, with respect to any fiscal year of the
Company, before the expiration of 74 days after the end of such fiscal year.
In making bonus determinations, the Company shall evaluate the Executive's
performance in accordance with the bonus guidelines used by the Company for
executives of the Company in the same or a similar position as the Executive.
In the event of the consummation of the sale of the present residential
business of IFG to Apartment Investment and Management Company pursuant to an
amended and restated merger agreement dated May 26, 1998 (the "AIMCO Merger")
in any year, the Company shall, immediately after the consummation of the AIMCO
Merger, pay to the Executive an amount equal to X times Y, where X equals: (a)
if the consummation of the AIMCO Merger occurs in 1998, the amount of the
discretionary bonus the Executive received from IFG with respect to 1997, (b)
if the consummation of the AIMCO Merger occurs in 1999, the amount of the
discretionary bonus the Executive received from the Company with respect to
1998, divided by the number of days between the effective date of this
Agreement and the end of 1998, and multiplied by 365, or (c) if the
consummation of the AIMCO Merger occurs after 1999, the amount of the
discretionary bonus the Executive received with respect to the year prior to
the year in which the consummation of the AIMCO Merger occurred, and Y equals a
fraction the numerator of which is the number of days between the beginning of
the year and the occurrence of the consummation of the AIMCO Merger and the
denominator of which is 365.
(c) EXTRAORDINARY TRANSACTION, INFLUENCE CHANGE EVENT, OR
EXTRAORDINARY STOCK EVENT. Upon the occurrence of an Extraordinary
Transaction, an Influence Change Event, or an Extraordinary Stock Event, the
Company shall, in addition to remaining obligated under the terms of this
Agreement, immediately before the Extraordinary Transaction, Influence Change
Event, or Extraordinary Stock Event, pay the Executive a payment (the
"Extraordinary
4
<PAGE> 5
Transaction Payment") equal to one percent (1%) of the total equity market
capitalization of the Company on the date the Extraordinary Transaction, the
Influence Change Event, or the Extraordinary Stock Event occurred. In
addition, the Company shall pay the Executive the amounts and benefits
contemplated in Section 7(e). Notwithstanding the foregoing, (A) the Company
shall not be obligated to make any payment under this Section 4(c) (or under
Section 8(b)(iii)) with respect to a matter if it must also make a payment with
respect to such matter under Section 4(d) and (B) no more than one payment
shall be made under this Section 4(c)(or under Section 8(b)(iii)) with respect
to any single matter, regardless of whether that matter qualifies as more than
one of an Extraordinary Transaction, an Influence Change Event, or an
Extraordinary Stock Event.
(d) MATERIAL ASSET DISPOSITION BONUS. In the event of a Material
Asset Disposition, as defined below, in consideration of the services performed
by the Executive and consistent with the prior terms of the Executive's
employment, the Company (or, in the case of clause (iii) below, the spin-off
entity or, in default thereof, the Company) shall pay to the Executive
immediately before the consummation of such Material Asset Disposition, a cash
bonus equal to 1.00% of the consideration (valued as set forth below) received
by the Company or its shareholders as a result of such Material Asset
Disposition, provided, however, that if the Material Asset Disposition giving
rise to the cash bonus contemplated by this Section 4(d) is the consummation of
the AIMCO Merger, the Company shall pay such cash bonus immediately after the
consummation of the AIMCO Merger, and the amount of such cash bonus shall be
equal to 1.00% of the consideration (valued as set forth below) received by IFG
or its shareholders as a result of the consummation of the AIMCO Merger (not
including the value of the distribution of the shares of the Company to
shareholders of IFG). A "Material Asset Disposition" as used herein means,
without duplication for the same matter: (i) a transaction which results in a
majority of the equity interest in the Company being beneficially owned by any
"person" or "persons," including any "group" (as such terms are used in Section
13(d) and 14(d) of the Exchange Act), other than any of the Company's present
Affiliates; (ii) a sale or series of sales by the Company of subsidiaries,
divisions, assets (other than marketable securities), or operating businesses
representing in the aggregate 20% or more of the Company's 1998 budgeted EBITDA
(which shall include for purposes of this Agreement EBITDA for all contemplated
subsidiaries of the Company) and each such sale after such threshold has been
reached or, if the AIMCO Merger is consummated, a sale or series of sales by
the Company of subsidiaries, divisions or assets (other than marketable
securities), or operating businesses, regardless of size; (iii) a spin off, or
series of spin offs, of any of the Company's divisions, operating businesses or
subsidiaries that meet the 1998 budgeted EBITDA threshold set forth in (ii)
above (or, if the AIMCO Merger is consummated, any such spin off regardless of
size) which is followed by a subsequent Extraordinary Transaction (as defined
above, but with reference to the spun off entity rather than the Company) of
the subsidiary, division or business spun off within five years following such
spin off; (iv) any transaction which results in any one or more of the
Company's divisions, subsidiaries or operating businesses, representing in the
aggregate 20% or more of the Company's EBITDA, being owned by a third party or,
if the AIMCO Merger is consummated, any transaction, regardless of size, which
results in any one or more of the Company's divisions, subsidiaries, or
operating businesses being owned by a third party; or (v) the consummation of
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the AIMCO Merger. In the event a Material Asset Disposition is consummated in
one or more steps, including, without limitation, by way of second-step merger,
any additional consideration paid or to be paid in any subsequent step in the
Material Asset Disposition in respect of (x) subsidiaries, divisions, assets
(other than marketable securities), or operating businesses of the Company and
(y) capital stock of the Company (and any securities convertible into, or
options, warrants or other rights to acquire, such capital stock) shall be
included for purposes of calculating the bonus payable pursuant to this Section
4(d). "Consideration" shall not include the assumption, directly or
indirectly, or repayment of indebtedness or other liabilities of the Company
but shall include the assumption, directly or indirectly, or repayment
securities similar to the IFG Trust Convertible Preferred Securities now
outstanding. If all or a portion of the consideration paid in the Material
Asset Disposition is other than cash or securities, then the value of such
non-cash consideration shall be the fair market value thereof on the date the
Material Asset Disposition is consummated as mutually agreed upon in good faith
by the Company's Board of Directors and the Executive. If the Board of
Directors and the Executive are unable to come to agreement on the fair market
value of such non-cash consideration following the provisions of this Section
4(d), then, at the request of either, an independent valuation expert agreeable
to both shall be appointed to determine the fair market value of such non-cash
consideration, and the determination of such independent expert shall be
binding on both the Executive and the Company. If such non-cash consideration
consists of common stock, options, warrants or rights for which a public
trading market existed prior to the consummation of the Material Asset
Disposition, then the value of such securities shall be determined by the
closing or last sales price thereof on the date of the consummation of the
Material Asset Disposition; provided, however, that if such non-cash
consideration consists of newly-issued, publicly-traded common stock, options,
warrants or rights for which no public trading market existed prior to the
consummation of the Material Asset Disposition, then the value thereof shall be
the average of the closing prices for the 20 trading days subsequent to the
fifth trading day after the consummation of the Material Asset Disposition. In
such event, the portion of the bonus payable to the Executive pursuant to this
Section 4(d) attributable to such securities shall be paid on the 30th trading
day subsequent to consummation of the Material Asset Disposition. If no public
market exists for the common stock, options, warrants or other rights issued in
the Material Asset Disposition, then the value of thereof shall be as mutually
agreed upon in good faith by the Company's Board of Directors and the
Executive. If the non-cash consideration paid in the Material Asset
Disposition consists of preferred stock or debt securities (regardless of
whether a public trading market existed for such preferred stock or debt
securities prior to consummation of the Material Asset Disposition or exists
thereafter), the value hereof shall be the face or principal amount, as the
case may be. Any amounts payable by a purchaser to the Company, any
shareholder of the Company or any Affiliate of either the Company or any
shareholder of the Company in connection with a non-competition, employment,
consulting, licensing, supply or other agreement shall be deemed to be part of
the consideration paid in the Material Asset Disposition. If all or a portion
of the consideration payable in connection with the Material Asset Disposition
includes contingent future payments, then the Company shall pay to the
Executive, upon consummation of such Material Asset Disposition, an additional
cash fee, determined in accordance with this Section 4(d) as, when and if such
contingency payments are received. However, in the event of an installment
purchase at a fixed price and a fixed time
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schedule, the Company agrees to pay the Executive, upon consummation of the
Material Asset Disposition, a cash fee determined in accordance with this
Section 4(d) based on the present value of such installment payments using a
discount rate of 6.5%. For purposes of this Section 4(d), in no case shall the
"consideration" received by the Company be greater than the total market
capitalization of the Company at the time of the Material Asset Disposition.
(e) FRINGE BENEFIT PROGRAMS. In addition to the other benefits
provided to the Executive hereunder and to the extent he satisfies the
eligibility requirements thereof and to the extent permitted by law,
participation in fringe benefit programs made available generally to employees
or independent contractors of the Company, including, without limitation,
pension, profit sharing, stock purchase, savings, bonus, disability, life
insurance, health insurance, hospitalization, dental, deferred compensation and
other plans and policies authorized on the date hereof or in the future.
(f) EXPENSE REIMBURSEMENT. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of
his duties hereunder, and business related mobile or cellular phone expense in
accordance with the Company's written policies and procedures, all upon the
presentation of appropriate documentation therefore in accordance with the then
regular procedures of the Company.
(g) PERQUISITES. In addition to the other benefits provided to
the Executive hereunder, and at the sole cost and expense of the Company,
except as otherwise provided in Section 7(d), the Company shall provide:
(i) $3,750 to the Executive on the first day of each month,
for car and driver expenses; and
(ii) full reimbursement for expenses incurred in respect of
professional continuing education.
(h) DISABILITY PROTECTION. Subject to the provisions of Sections
7 and 8 hereof, the Company will provide to the Executive disability insurance
coverage identical to the disability insurance coverage provided to senior
executives of the Company from time to time at the Company's sole cost and
expense.
(i) PARACHUTE LIMIT. Notwithstanding anything else herein, to the
extent the Executive would be subject to the excise tax under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation
of parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments "), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit "); provided, however, that this Section 4(i)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable
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federal, state and local income, social security and other taxes) would be
greater than the unreduced Parachute Payments to be received by the Executive
minus (i) the excise tax payable under Section 4999 of the Code with respect to
such Parachute Payments and (ii) all applicable federal, state and local
income, social security and other taxes on such Parachute Payments. The
foregoing reduction shall be applied to the Parachute Payments as follows: (i)
first by reducing the amounts payable under Section 4(c) (if such amounts are
included in such computation) until such amounts have been exhausted up to the
Parachute Limit, (ii) then by reducing any such other amounts and benefits
(other than awards described in (iii) below) as determined by the Company, and
(iii) notwithstanding anything contained herein or in an option, warrant or
restricted stock agreement, award or plan relating to the Executive then, on a
pro-rata basis up to the Parachute Limit, by failing to accelerate the vesting
(without affecting the right to vest) upon a change in ownership or effective
control or change in ownership of a substantial portion of assets (as described
in Code Section 280G(b)(2)(A)(i)) of any unvested awards of shares of
restricted stock of the Company previously granted to Executive and options or
warrants to purchase shares of the Company previously granted to Executive.
Notwithstanding the foregoing, the Company shall treat any of the amounts
described in (i) through (iii) above as a Parachute Payment solely to the
extent required under applicable law.
(j) REGISTRATION RIGHTS. The Company hereby ratifies the
Executive's registration rights with respect to all of the securities of the
Company beneficially owned by the Executive as set forth in the Registration
Rights Agreement heretofore executed by the Executive and the Company.
(k) VESTING. In the event of (a) a termination of Executive's
employment for any reason other than a Termination for Cause or voluntary
termination by the Executive, including, but not limited to a Death Termination
Event, Disability Termination Event, Termination Without Cause or in the event
of (b) the occurrence of an Extraordinary Transaction, an Influence Change
Event, or an Extraordinary Stock Event (whether or not resulting in a
termination of Executive's employment), all options and warrants then granted
to the Executive will immediately vest and be exercisable by the Executive.
(l) PURCHASE OF INSURANCE. Provided Executive does not
voluntarily terminate his employment during the Employment Period or is not
subject to a Termination For Cause by the Company, the Company will continue,
at the Company's sole cost, individual and dependent care health insurance
coverage on the Executive through the Employment Period, or through the date
three years from the Commencement Date, whichever is later, and, following
Executive's cessation of employment with the Company for any reason, (i)
thereafter, the Executive shall have the right to continue, at the Executive's
sole cost, any or all life insurance policies on the life of the Executive
maintained by the Company during the Employment Period and to determine the
beneficiaries and owners thereof, and (ii) the Executive and his dependents
shall have the right to purchase from or through the Company or its successor,
at the Executive's or his dependents' sole cost, individual and dependent care
health insurance coverage upon terms and conditions identical to the terms and
conditions upon which health insurance coverage is provided to employees of the
Company and their dependents. Notwithstanding anything in this
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Agreement to the contrary, the provisions of this Section 4(l) shall continue
regardless of the cessation of the Executive's employment with the Company. In
the case of the death of the Executive, whether during or after the Employment
Period, the rights under Section 4(l)(ii) of the persons who were the
Executive's dependents at the time of his death shall continue in full force
and effect for the duration of each of their lives.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
EXECUTIVE. The Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation
which is inconsistent with the execution of this Agreement, the performance of
his duties hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties
hereunder with or without reasonable accommodations.
SECTION 6. NON-SOLICITATION; CONFIDENTIALITY.
(a) NON-SOLICITATION.
(1) In recognition of the close personal contact
the Executive has or will have with the Company's and its affiliates' trade
secrets, confidential information, records and business relationships, and the
position of trust in which the Company holds the Executive, the Executive
further covenants and agrees that while the Executive is employed by the
Company and for a period lasting for one (1) year following the date of
cessation of the Executive's employment with the Company, the Executive will
not, if such action would have a material adverse effect on the Company, in
direct competition with the Company (where competition is measured as of the
date the Executive ceases to be employed by the Company), either for himself or
as an officer, director, employee, agent, representative, independent
contractor or in any relationship to any person, partnership, corporation, or
other entity (except the Company or its Affiliates or subsidiaries), solicit,
directly or by assisting others, business from any of the Company's customers
or clients who were customers or clients of the Company as of the date of the
cessation of the Executive's employment and with whom the Executive has had
material contact (as defined below) during the twelve (12) month period
preceding the date of cessation of the Executive's employment with the Company
in the event of a cessation of employment with the Company or, absent such
cessation, during the twelve (12) month period preceding the solicitation, for
the purpose of providing goods or services to said customers and clients. For
purposes of this Agreement, "material contact" exists between the Executive and
any of the Company's customers or clients (i) with whom the Executive actually
dealt; or (ii) whose dealings with the Company were handled, coordinated or
supervised by the Executive; or (iii) about whom the Executive obtained
confidential information in the ordinary course of business through the
Executive's association with the Company.
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(2) The Executive covenants and agrees that, for
a period ending on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not solicit any
employee, broker or sales person of the Company, or any of its respective
subsidiaries or affiliates to leave their employ for the employ of a person or
entity which directly competes with the Company, or any of its respective
subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for
a period ending on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not purchase for his own
account any limited partnership units of partnerships that, on the date of
purchase, are controlled directly or indirectly by the Company, except that the
provisions of this sentence shall not be deemed breached merely because the
Executive owns, immediately after a purchase, not more than one percent of the
outstanding units. Should the Executive breach the foregoing sentence, all his
options issued by the Company or any of its subsidiaries shall be canceled and
all of his restricted stock issued by the Company or any of its subsidiaries
(whether or not then vested) which he then owns shall be forfeited. For
purposes of this Section 6(a)(3), "purchase" shall mean the payment of cash
only for such limited partnership units and shall not include payment of cash
for interests in an entity whose assets consist in whole or in part of such
limited partnership units.
(4) The Executives covenants and agrees that he
will not, either for himself or as an officer, director, employee, agent,
representative, or independent contractor of any person, partnership,
corporation, or other entity (except the Company or its Affiliates or
subsidiaries), interfere with any contract that exists between the Company and
any customers or clients of the Company as of the effective date of this
Agreement.
The Executive acknowledges that the foregoing provisions are intended
to protect the Company's and its subsidiaries' and Affiliates' business and
customer contacts, not to prevent the Executive from pursuing a livelihood in
the general area of his previous training, and they should be interpreted
accordingly.
(b) CONFIDENTIALITY. All confidential information which the
Executive may now possess, may obtain during or after his employment with
Company, or may create prior to the end of his employment with the Company or
otherwise relating to the business of the Company or any of its subsidiaries or
affiliates or of any customer or supplier of any of them shall not be
published, disclosed, or made accessible by him to any other person, either
during or after the cessation of his employment, or used by him except during
his employment with the Company in the business and for the benefit of the
Company and its subsidiaries and Affiliates. In addition, the Executive agrees
not to disclose, publish or make accessible to any other person, from and after
the date of this Agreement, during the Employment Period or at any time
thereafter, any of the terms or provisions of this Agreement, except the
Executive's accountants or legal counsel who need such information to advise
him, prepare his tax returns, make required filings, represent him and the
like; provided, however, that the Executive will be responsible for causing
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any such accountants and legal counsel to be aware of and to abide by the
obligations contained in this Section 6(b) and will be responsible for any
breach of such obligations by any of them. In the event that the Executive
becomes legally compelled to disclose any of the confidential information, the
Executive will provide the Company with prompt written notice so that the
Company may seek a protective order or other appropriate remedy and/or waive in
writing compliance with the provisions of this Section 6(b) and in the event
that such protective order or other remedy is not obtained, or should the
Company waive in writing compliance with the provisions of this Section 6(b),
the Executive will furnish only that portion of the confidential information
which is so legally required. The Executive shall return all tangible evidence
of such confidential information to the General Counsel of the Company prior to
or at the cessation of his employment.
(c) INTERPRETATION. Since a breach of the provisions of this
Section 6 could not adequately be compensated by money damages, the Company
shall be entitled, in addition to any other right and remedy available to it,
to an injunction restraining such breach and the Company shall not be required
to post a bond in any proceeding brought for such purpose. The Executive
agrees that the provisions of this Section 6 are necessary and reasonable to
protect the Company in the conduct of its businesses. If any restriction
contained in this Section 6 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope thereof,
or otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope, or other provisions hereof,
and in its reduced form such restriction shall then be enforceable in the
manner contemplated hereby. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies, at law or in equity, for such
breach or threatened breach.
(d) INVESTORS. Notwithstanding anything herein to the contrary,
nothing in this Agreement shall restrict the right of the Executive to solicit
or receive, on his own behalf or on behalf of others, any investment or any
funds in any form from any person, regardless of whether such person is an
investor in the Company or in any current or former affiliate of the Company.
SECTION 7. TERMINATION.
(a) DEFINITIONS.
(i) Death Termination Event. As used herein, "Death
Termination Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein,
"Disability Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable to fully
discharge his duties hereunder for a period of 185 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in
the event that the last will and testament of the Executive has not been
probated at the time of determination, the estate
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of the Executive and (B) in the event that the last will and testament of the
Executive has been probated at the time of determination, the legatees of the
Executive who are entitled under such will to the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term
"Termination For Cause" shall mean the termination by the Company of the
Executive's employment hereunder upon a good faith determination by a majority
vote of the members of the Board of Directors of the Company that termination
of this Agreement is necessary by reason of (A) the Executive shall be
convicted of a felony, (B) the Executive shall commit any act or omit to take
any action in bad faith and to the material detriment of the Company and
Executive shall not have cured the same within 30 days after the Company sends
written notice thereof, or (C) Executive shall breach in a material way any
material term of this Agreement and fail to correct such breach within 30 days
after the Company sends written notice thereof.
(v) Termination Without Cause. As used herein,
"Termination Without Cause" shall mean any termination of the Executive's
employment hereunder that is not a Termination For Cause, a Death Termination
Event, or a Disability Termination Event, and shall include, without
limitation, a termination of the Executive's employment hereunder due to the
scheduled expiration of the Employment Period on the date three years from the
Commencement Date or (as contemplated by Section 8(b)(i)), an Extraordinary
Transaction, an Influence Change Event, or an Extraordinary Stock Event.
(b) DEATH TERMINATION EVENT. Upon the occurrence of a Death
Termination Event, this Agreement shall terminate automatically upon the date
that such Death Termination Event occurred (subject to the last sentence of
this Section 7), whereupon the Executive's estate shall receive the
consideration set forth in Sections 4(a) and 4(g)(i) and (ii), through the date
three years from the Commencement Date. In addition, the Executive's Estate
shall be entitled to receive the payments contemplated by Section 4(c) and
Section 4(d) if the event giving rise to such payment occurs, or a definitive
agreement regarding such event is executed, before or within 180 days after the
Death Termination Event.
(c) DISABILITY TERMINATION EVENT. Upon the occurrence of a
Disability Termination Event, this Agreement shall terminate automatically upon
the date that such Disability Termination Event occurred (subject to the last
sentence of this Section 7), whereupon (i) the Company shall continue to pay
seventy-five percent (75%) of the then- current Base Salary to the Executive
for twice the period equal to the remaining term of the Employment Period (such
calculation will be determined upon the assumptions: (A) that the Employment
Period will not be terminated prior to the date three years from the
Commencement Date, and (B) that the remaining term of the Employment Period
will not in any event be less than two years), (ii) the Company shall continue
to provide to the Executive the disability protection contemplated by Section
4(h) of this Agreement until such time as the Executive elects to discontinue
such coverage, (iii) the Company will arrange for the Executive (x) to have the
ability to maintain the Key Man Insurance Policy thereafter at the sole expense
of the Executive, and (y) to designate the beneficiaries thereof, in each case
to the exclusion of the Company and as promptly as
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practicable after such termination, and (iv) the Executive shall receive the
consideration set forth in Sections 4(b) and 4(g)(i) and (ii) through the date
three years from the Commencement Date. In addition, the Executive shall be
entitled to receive the payments contemplated by Section 4(c) and Section 4(d)
if the event giving rise to such payment occurs, or a definitive agreement
regarding such event is executed, before or within 180 days after the
Disability Termination Event.
(d) TERMINATION FOR CAUSE. The Executive and the Company agree
that the Company shall have the right to effectuate a Termination for Cause
prior to the date three years from the Commencement Date. Upon the occurrence
of a Termination For Cause, this Agreement will terminate upon the date of that
such Termination For Cause occurs (subject to the last sentence of this Section
7), whereupon (i) the Executive shall be entitled to receive the Base Salary,
as then in effect, to and including the date that such Termination for Cause
occurs, and (ii) the Company will arrange for the Executive (x) to have the
ability to maintain the Key Man Insurance Policy thereafter at the sole expense
of the Executive, and (y) to designate the beneficiaries thereof, in each case
to the exclusion of the Company and as promptly as practicable after such
termination.
(e) TERMINATION WITHOUT CAUSE. Upon the occurrence of a
Termination Without Cause, this Agreement shall terminate upon the date that
such Termination Without Cause occurs (subject to the last sentence of this
Section 7), whereupon (i) the Company shall (A) in the event that such
Termination Without Cause is not an Extraordinary Transaction, an Influence
Change Event, or an Extraordinary Stock Event, continue to pay the then-current
Base Salary to the Executive until the date three years from the Commencement
Date, and (B) in the event that such Termination Without Cause is an
Extraordinary Transaction, an Influence Change Event, or an Extraordinary Stock
Event, the Company shall pay to the Executive the Extraordinary Transaction
Payment (as defined in Section 4(c)) in accordance with the provisions of
Section 8, and (ii) the Company shall continue to provide to the Executive the
disability protection contemplated by Section 4(h) of this Agreement until such
time as the Executive elects to discontinue such coverage, and (iii) the
Company will arrange for the Executive (x) to have the ability to maintain the
Key Man Insurance Policy thereafter at the sole expense of the Executive, and
(y) to designate the beneficiaries thereof, in each case to the exclusion of
the Company and as promptly as practicable after such termination. In
addition, the Company shall pay the Executive the amounts and benefits
contemplated by Sections 4(b) and 4(g)(i) and (ii). Also, the Executive shall
be entitled to receive the payments contemplated by Section 4(c) and Section
4(d) if the event giving rise to such payment occurs, or a definitive agreement
regarding such event is executed, on or before the date three years from the
Commencement Date.
Notwithstanding anything in this Agreement to the contrary, (i)
Sections 3, 4(k), 4(l), 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 and 19
of this Agreement shall survive any termination of this Agreement or of the
Executive's employment hereunder until the expiration of the statute of
limitations applicable hereto; and (ii) the Company will pay to the Executive
(or the Estate), regardless of the termination of this Agreement for any reason
other than a Termination For Cause, any amounts pursuant to Sections 4(c), 4(d)
and 8(b) with regard to Material Asset
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Disposition, Extraordinary Transaction, Extraordinary Stock Event, or Influence
Change Event (A) where definitive agreements regarding such transaction have
been executed before the termination of this Agreement, (B) where definitive
agreements regarding such transaction have been executed before the date three
years from the Commencement Date and the Executive has not as of such date
voluntarily resigned as Chairman of the Board of the Company, or (C) in the
event of a Termination Without Cause, where the event giving rise to such
payment occurs, or a definitive agreement regarding such event is executed, on
or before the date three years from the Commencement Date.
SECTION 8. EXTRAORDINARY TRANSACTION.
(a) DEFINITIONS.
(i) Extraordinary Transaction. As used herein,
"Extraordinary Transaction" shall mean the occurrence of any one or more of the
following:
(1) the Company ceases to be required to file
reports under Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor to that Section;
(2) a majority of the members of the Board of
Directors of the Company are not persons who (a) had been directors of the
Company for at least the preceding 12 consecutive months or (b) when they
initially were elected to the Board (x) were nominated (if they were elected by
the stockholders) or elected (if they were elected by the directors) with the
affirmative vote of two-thirds of the directors who were Continuing Directors
at the time of the nomination or election by the Board and (y) were not elected
as a result of an actual or threatened solicitation of proxies or consents by a
person other than the Board of Directors of the Company or an agreement
intended to avoid or settle such a proxy solicitation (the directors described
in clauses (a) and (b) being "Continuing Directors");
(3) any "person," including a "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding
the Company, any of its present affiliates (as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as amended) ("Affiliates"), or
any employee benefit plan of the Company or any of its present Affiliates) is
or becomes the "beneficial owner" (as defined in Rule 13(d) (3) under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities;
(4) the purchase of Common Stock of the Company
("Common Stock") pursuant to any tender or exchange offer or otherwise made by
any "person," including a "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than the Company, any of its present
Affiliates, or any employee benefit plan of the Company or any of its present
Affiliates, which results in "beneficial ownership" (as so defined) of 30% or
more of the outstanding Common Stock;
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(5) the execution and delivery of a definitive
agreement by the Company that provides for a merger or consolidation, or a
transaction having a similar effect (unless such merger, consolidation or
similar action is with a subsidiary of the Company or with another company, a
majority of whose outstanding capital stock is owned by the same persons or
entities who own a majority of the Company's outstanding Common Stock at such
time), where (A) the majority of the Common Stock of the Company is no longer
held by the persons who were the stockholders of the Company immediately prior
to the transaction, (B) the sale, lease, exchange or other disposition of all
or substantially all of the assets of the Company, but excluding the trading of
marketable securities held as portfolio securities or (C) the Company's Common
Stock is converted into cash, securities or other property (other than the
common stock of a company into which the Company is merged), provided, however,
that, in the event that the contemplated merger, consolidation or similar
transaction is not consummated, then any rights that may arise under this
paragraph (5) by virtue of such Change of Control shall not apply;
(6) upon the consummation of any transaction
requiring stockholder approval for the acquisition of the Company by an entity
other than the Company or a subsidiary through purchase of assets, or by
merger, or otherwise;
(7) the election to the Board of Directors of the
Company, by vote of the stockholders of the Company, of one individual under
circumstances where (A) the Board of Directors of the Company, after such
election, is comprised of one individual, and (B) all of the Farkas Shares (as
defined in Section 8(a)(iii)) at the time of such election were not voted for
such election to the Board of Directors of the Company of such individual;
(8) the appointment to the Board of Directors of
the Company, by vote of the Board of Directors of the Company, of one
individual under circumstances where (A) the Board of Directors of the Company,
after such appointment, is comprised of one individual, and (B) the Executive
did not so vote for such appointment to the Board of Directors of the Company
of such individual, either because the Executive was not a Director of the
Company at such time or because the Executive did not vote affirmatively for
the appointment to the Board of Directors of the Company of such individual;
(9) the election to the Board of Directors of the
Company, by the stockholders of the Company, of one or more individuals under
circumstances where (A) the Board of Directors of the Company, after such
election, is comprised of more than one individual under the By-Laws of the
Company, as then in effect, and (B) a majority of the Directors of the Company
in office after such election did not receive Executive Approval (as defined in
Section 8(a)(ii)); or
(10) the appointment to the Board of Directors of
the Company, by vote of the Board of Directors of the Company, of one or more
individuals under circumstances where (A) the Board of Directors of the
Company, after such appointment, is comprised of more than one individual under
the By-Laws of the Company, as then in effect, and (B) a majority of the
Directors of the Company in office after such appointment did not receive
Executive Approval.
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(ii) Executive Approval. As used herein, the term
"Executive Approval" shall mean, with respect to any member of the Board of
Directors of the Company in office at the time of determination, (A) if such
individual is not then a member of the Board of Directors of the Company by
virtue of election to the Board of Directors of the Company by vote of the
stockholders of the Company, the Executive, as a Director of the Company, voted
for the appointment of such individual to the Board of Directors of the Company
pursuant to which such individual is then a member of the Board of Directors of
the Company, and (B) if such individual is then a member of the Board of
Directors of the Company by virtue of election to the Board of Directors of the
Company by vote of the stockholders of the Company, all of the Farkas Shares at
the time of such election were voted in favor of the election of such
individual to the Board of Directors of the Company pursuant to which such
individual is then a member of the Board of Directors of the Company.
(iii) Farkas Shares. As used herein, the term "Farkas
Shares," as of any time, shall mean the securities of the Company entitled to
vote generally in the election of Directors of the Company as to which, at such
time, the Executive had the sole power to vote or to direct the voting of.
(iv) Influence Change Event. As used herein "Influence
Change Event" shall mean the occurrence of the loss by the Executive of any of
the Board Positions or if the Executive's title, powers and duties within the
Company or the Board of Directors of the Company have been diminished, in each
case other than as a result of a Termination For Cause, without the prior
written consent of the Executive.
(v) Extraordinary Stock Event. As used herein
"Extraordinary Stock Event" shall mean either (i) the occurrence of more than
fifteen (15%) percent of the outstanding securities of the Company entitled to
vote in the election of directors of the Company being owned (by beneficial
ownership, as such term is used in Section 13(d) of the Exchange Act, and the
rules and regulations thereunder or otherwise) or acquired by any person (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
the Executive, a person over whom the Executive has the power to exercise a
controlling influence exclusive of any other person, or a person whose
beneficial ownership has been approved by the Executive in writing (such person
being referred to herein as the "Acquiror") and the Acquiror either describes,
is required to describe, or would be required to describe in the event that the
Acquiror was subject to Section 13(d) of the Exchange Act, as in effect on the
date hereof, any plans or proposals which it may have which relate to or would
result in any of the events described in paragraphs (a) through (j) of Item 4
of Schedule 13D, as in effect on the date hereof, in a Schedule 13D, or
amendments thereto, filed with the Securities and Exchange Commission with
respect to such ownership or acquisition or (ii) the occurrence of more than
forty (40%) percent of the outstanding securities of the Company entitled to
vote in the election of directors of the Company being owned (by beneficial
ownership, as such term is used in Section 13(d) of the Exchange Act and the
rules and regulations thereunder, or otherwise) or acquired by any person (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), whether or
not such ownership has been consented to by the Executive.
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(b) EXTRAORDINARY TRANSACTION; INFLUENCE CHANGE EVENT;
EXTRAORDINARY STOCK EVENT. Upon the occurrence of either an Extraordinary
Transaction, an Influence Change Event, or an Extraordinary Stock Event, (i)
this Agreement may, at Executive's option exercised in writing, be terminated
as of the date of such Extraordinary Transaction, Influence Change Event, or
Extraordinary Stock Event, as the case may be (an "Extraordinary Transaction
Termination"), (ii) in the event of such termination contemplated by Section
8(b)(i), the provisions of Section 7(e) of this Agreement shall be in effect as
of the date of such Extraordinary Transaction, Influence Change Event, or
Extraordinary Stock Event, as the case may be, and (iii) whether or not there
is such termination, the Company shall pay to the Executive, in immediately
available funds, the Extraordinary Transaction Payment, as described in Section
4(c), immediately before the occurrence of such Extraordinary Transaction,
Influence Change Event, or Extraordinary Stock Event, as the case may be.
SECTION 9. INDEMNIFICATION. The Company hereby ratifies the
indemnification of the Executive pursuant to the terms of an Indemnification
Agreement to be executed by the Executive and the Company.
SECTION 10. WITHHOLDING. The Company shall be entitled to
withhold from amounts payable to the Executive hereunder such amounts as may be
required by applicable law to be so withheld.
SECTION 11. MODIFICATION. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
SECTION 12. NOTICES. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 12).
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 12. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 13. WAIVER. Any waiver by either party of a breach of
any provision of Agreement shall not operate as a waiver of any other breach of
such provision or of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing.
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SECTION 14. BINDING EFFECT. The Executive's rights and
obligations under this Agreement shall not be transferable by assignment or
otherwise, such rights shall not be subject to commutation, encumbrance or the
claims of the Executive's creditors, and any attempt to do any of the foregoing
shall be void. The provisions of this Agreement shall be binding upon and
inure to the benefit of the Executive and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors.
SECTION 15. THIRD PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement; provided, however, that notwithstanding
any provision of this Agreement to the contrary, each of the successors,
spouse, issue, legatees, estate, administrators, executors, and legal
representatives of the Executive shall be entitled to rely upon and to enforce
this Agreement as a third party beneficiary hereof.
SECTION 16. HEADINGS. The headings in this Agreement are solely
for convenience of reference, and shall be given no effect in the construction
or interpretation of this Agreement.
SECTION 17. ENFORCEMENT. Should the Executive sue to enforce any
of his rights under this Agreement and should the Executive prevail on any
issue in such suit, then the Company shall pay all the Executive's costs of
such suit (including attorneys fees and disbursements). If any taxes are
imposed on such payment, the Company shall make such additional payments to the
Executive as may be necessary, so that after deducting the taxes imposed on all
payments made to the Executive pursuant to this paragraph, the Executive is
left on an after tax basis with an amount equal to his claim for
indemnification prior to the payments described in this sentence.
SECTION 18. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 19. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of South Carolina,
without reference to the conflict of law provisions thereof.
SECTION 20. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING
ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER
OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
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STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO THE TRIAL BY
THE COURT.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INSIGNIA/ESG HOLDINGS, INC.
By:
------------------------------------
Name:
------------------------------------
Its:
------------------------------------
EXECUTIVE
---------------------------------------
Name: Andrew L. Farkas
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<PAGE> 1
EXHIBIT 10.12
GARRISON - INSIGNIA/ESG HOLDINGS
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is entered into as of August
3, 1998, by and between Insignia/ESG Holdings, Inc., a Delaware corporation with
an office at 200 Park Avenue, New York, New York, 10166 (the "Company"), and
Frank M. Garrison, an individual with an office at 102 Woodmont Boulevard, Suite
400, Nashville TN, 37205 (the "Executive"). This Agreement is effective as of
the date of the consummation of the spin-off of the Company from Insignia
Financial Group, Inc. ("IFG") to its shareholders, and as of such date the
obligations of IFG under the Amended and Restated Employment Agreement between
IFG and the Executive dated as of January 1, 1998 shall be assumed by the
Company, and the Company hereby assumes and agrees to pay (without duplication
under this Agreement) the rights thereunder regarding amounts owed by IFG
thereunder if IFG does not timely pay such amounts (in which case the Company
will be subrogated to the right of the Executive to collect such amounts from
IFG).
BACKGROUND
The Company desires to assure itself of the services of the Executive
for the period provided in this Agreement, and the Executive is willing to serve
in the employ of the Company for such period upon the terms and conditions
provided in this Agreement.
STATEMENT OF AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, in each case upon
the terms and conditions set forth herein, for a period commencing on the
effective date hereof (the "Commencement Date") and ending three years from the
Commencement Date, or on such earlier date as provided herein (the "Expiration
Date") (such period, as it may be so terminated, being referred to herein as the
"Employment Period").
SECTION 2. DUTIES AND SERVICES.
(a) DUTIES. Subject to Section 2(d), during the Employment Period the
Executive shall serve as Executive Managing Director (Mergers & Acquisitions and
Investment Banking) of the Company and, at the Company's request, as an officer
or director of one or more of its subsidiaries. In the performance of his duties
hereunder, the Executive shall report to and shall be responsible only to the
Chief Executive Officer and the Board of Directors of the Company.
<PAGE> 2
The Executive agrees to his employment as described in this Section 2. The
parties hereto understand and agree that the Executive has substantial business
interests outside of the scope of this Agreement, including, without limitation,
at Metropolitan Asset Enhancement, L.P. and Insignia Properties Trust, and under
an employment or consulting agreement with IFG, and both parties hereby consent
to such arrangements. The Executive shall be available to travel as the needs of
the business of the Company reasonably require.
(b) OFFICE. During the Employment Period, the Company shall provide the
Executive with an office located in Nashville, TN or at 200 Park Avenue, New
York, NY, whichever the Executive chooses, or at such other location as the
Company and the Executive shall mutually agree. The Company will provide the
Executive with an office and executive secretary reasonably acceptable to him,
and other reasonable support appropriate to his duties hereunder.
(c) PRIMARY RESPONSIBILITIES. Subject to Section 2(a) and 2(d), during
the Employment Period, the Executive shall have such responsibilities as are
assigned to him by the Chief Executive Officer and the Board of Directors of the
Company. The Executive shall comply with all written policies and procedures of
the Company.
(d) CONSULTING. If (i) without the prior written consent of the
Executive the Executive's title, powers or duties within the Company have been
substantially diminished, other than as a result of a Termination For Cause (as
defined in Section 7(a)(iv)), (ii) a Extraordinary Transaction (as defined in
Section 4(c)) or a Material Asset Disposition (as defined in Section 4(d)) has
taken place, or (iii) Andrew L. Farkas has elected to convert that certain
Employment Agreement, dated as of August 3, 1998, by and between the Company and
Mr. Farkas (the "Farkas Employment Agreement") into a consulting agreement, then
the Executive may elect in writing to convert this Agreement into a consulting
agreement. Under the terms of the consulting agreement, the Executive shall
consult with respect to the assets and liabilities of the Company as they
existed immediately before the Extraordinary Transaction or the Material Asset
Disposition. Such consultation shall be at the reasonable times convenient to
the Executive on no less than five business days' notice, the parties
recognizing that the Executive during the consulting period likely will have
substantial other business interests, including under an employment or
consulting agreement with IFG. The terms and conditions of this Agreement
(including all rights hereunder of the Executive as to compensation, bonus,
payments and benefits) shall continue unabridged during the period of
consulting. The other provisions of this Agreement also shall remain in effect
except that (i) Section 2(a) shall be deleted and the remainder of Section 2
shall be modified by this Section 2(d), (ii) Section 7(a)(iv)(B) and Section
7(a)(iv)(C) shall be deleted, and (iii) references to salary (and Base Salary)
in Section 4(a) and elsewhere in this Agreement shall be deemed to refer to a
consulting fee (and Base Consulting Fee), and such Base Consulting Fee shall be
paid to the executive in twelve monthly installments, payable on the first day
of each calendar month. The "Employment Period" shall be deemed to include the
period during which the Executive is obligated to provide consulting services
hereunder and therefore, to the extent permitted by law, the conversion shall
not be deemed a termination or resignation for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits
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equivalent to those he would have received had there been no termination. The
Executive shall not be obligated to consult for more than five days or portions
of a day in any calendar month.
SECTION 3. KEY MAN LIFE INSURANCE. The Company shall have the right to
place a "key man" life insurance policy, providing a death benefit of up to
$15,000,000 upon the life of the Executive, for which the Company is the
beneficiary. In connection therewith, the Executive hereby authorizes the
Company, at its sole cost and expense, to purchase and maintain upon the life of
the Executive such insurance policy, and agrees to submit to such reasonable
medical examinations, and to provide and/or consent to the release of such
medical information, as may be necessary or desirable in order to secure the
issuance thereof. Except as may be required in order to obtain insurance
coverage as described in this Section 3, any and all information about
Executive's health or medical records shall be kept confidential by the Company
and shall not be disclosed by the Company to any party without the Executive's
prior written consent.
SECTION 4. COMPENSATION. As full compensation for his services
hereunder, the Company shall pay, grant, issue or give, as the case may be, to
the Executive the compensation and benefits specified below:
(a) BASE SALARY. Subject to the provisions of Section 7, a base salary
at the rate of $400,000 per annum ("Base Salary"), which Base Salary shall be
paid to the Executive in accordance with the customary executive payroll policy
of the Company as in effect from time to time; provided, however, that the Base
Salary, as in effect at any time and from time to time, may be further increased
by action of the Board of Directors; and further provided, however, that in no
event shall the Base Salary be decreased at any time or from time to time
without the prior consent of the Executive, which consent may be granted or
withheld in the Executive's sole discretion.
(b) ANNUAL DISCRETIONARY BONUS. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined by the
Board of Directors of the Company in its sole and absolute discretion, which
shall be paid to the Executive, with respect to any fiscal year of the Company,
before the expiration of 74 days after the end of such fiscal year. In making
bonus determinations, the Company shall evaluate the Executive's performance in
accordance with the standard bonus guidelines used by the Company for executives
of the Company in the same or a similar position as the Executive. In the event
of the consummation of the sale of the present residential business of IFG to
Apartment Investment and Management Company pursuant to an amended and restated
merger agreement dated May 26, 1998 (the "AIMCO Merger") in any year, the
Company shall, immediately after the consummation of the AIMCO Merger, pay to
the Executive an amount equal to X times Y, where X equals: (a) if the
consummation of the AIMCO Merger occurs in 1998, the amount of the discretionary
bonus the Executive received from IFG with respect to 1997, (b) if the
consummation of the AIMCO Merger occurs in 1999, the amount of the discretionary
bonus the Executive received from the Company with respect to 1998, divided by
the number of days between the effective date of this Agreement and the end of
1998, and multiplied by 365, or (c) if the consummation of the AIMCO Merger
occurs after 1999, the amount of the discretionary bonus the Executive received
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with respect to the year prior to the year in which the consummation of the
AIMCO Merger occurred, and Y equals a fraction the numerator of which is the
number of days between the beginning of the year and the occurrence of the
consummation of the AIMCO Merger and the denominator of which is 365.
(c) EXTRAORDINARY TRANSACTION.
An "Extraordinary Transaction" as used herein means the occurrence of
any one or more of the following:
(i) the Company ceases to be required to file reports under
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor to that Section;
(ii) a majority of the members of the Board of Directors of
the Company are not persons who (a) had been directors of the Company for at
least the preceding 12 consecutive months or (b) when they initially were
elected to the Board (x) were nominated (if they were elected by the
stockholders) or elected (if they were elected by the directors) with the
affirmative vote of two-thirds of the directors who were Continuing Directors at
the time of the nomination or election by the Board and (y) were not elected as
a result of an actual or threatened solicitation of proxies or consents by a
person other than the Board of Directors of the Company or an agreement intended
to avoid or settle such a proxy solicitation (the directors described in clauses
(a) and (b) being "Continuing Directors");
(iii) any "person," including a "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company,
any of its present affiliates (as such term is defined in Rule 405 promulgated
under the Securities Act of 1933, as amended) ("Affiliates"), or any employee
benefit plan of the Company or any of its present Affiliates) is or becomes the
"beneficial owner" (as defined in Rule 13(d) (3) under the Exchange Act),
directly or indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities;
(iv) the purchase of Common Stock of the Company ("Common
Stock") pursuant to any tender or exchange offer or otherwise made by any
"person," including a "group" (as such terms are used in Sections 13 (d) and 14
(d) of the Exchange Act), other than the Company, any of its present Affiliates,
or any employee benefit plan of the Company or any of its present Affiliates,
which results in "beneficial ownership" (as so defined) of 30% or more of the
outstanding Common Stock;
(v) the execution and delivery of a definitive agreement by
the Company that provides for a merger or consolidation, or a transaction having
a similar effect (unless such merger, consolidation or similar action is with a
subsidiary of the Company or with another company, a majority of whose
outstanding capital stock is owned by the same persons or entities who own a
majority of the Company's outstanding Common Stock at such time), where (A) the
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majority of the Common Stock of the Company is no longer held by the persons who
were the stockholders of the Company immediately prior to the transaction, (B)
the sale, lease, exchange or other disposition of all or substantially all of
the assets of the Company but excluding the trading of marketable securities
held as portfolio securities or (C) the Company's Common Stock is converted into
cash, securities or other property (other than the common stock of a company
into which the Company is merged), provided, however, that, in the event that
the contemplated merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this paragraph (v) by virtue
of such Change of Control shall not apply; and
(vi) upon the consummation of any transaction requiring
stockholder approval for the acquisition of the Company by an entity other than
the Company or a subsidiary through purchase of assets, or by merger, or
otherwise.
(d) MATERIAL ASSET DISPOSITION BONUS. In the event of a Material
Asset Disposition, as defined below, in consideration of the services performed
by the Executive and consistent with the prior terms of the Executive's
employment, the Company (or, in the case of clause (iii) below, the spin-off
entity or, in default thereof, the Company) shall pay to the Executive
immediately before the consummation of such Material Asset Disposition, a cash
bonus equal to the Bonus Percentage of the consideration (valued as set forth
below) received by the Company or its shareholders as a result of such Material
Asset Disposition; provided, however, that if the Material Asset Disposition
giving rise to the cash bonus contemplated by this Section 4(d) is the
consummation of the AIMCO Merger, the Company shall pay such cash bonus
immediately after the consummation of the AIMCO Merger, and the amount of such
cash bonus shall be equal to .25% of the consideration (valued as set forth
below) received by IFG or its shareholders as a result of the consummation of
the AIMCO Merger (not including the value of the distribution of shares of the
Company to shareholders of IFG). The Bonus Percentage shall be .25% if the
Executive is a consultant to the Company, or makes himself reasonably available
to consult for the Company, with respect to the assets and liabilities of the
Company as they existed immediately after the spin-off of Insignia/ESG Holdings,
Inc. to the Company's shareholders, at the time the definitive agreement
regarding such Material Asset Disposition is executed. The Bonus Percentage
shall be .5% if the Executive is an employee of the Company (for this purpose
only, the word "employee" not including a consultant under this Agreement),
whether under this Agreement or otherwise, at the time the definitive agreement
regarding such Material Asset Disposition is executed. If the Executive has been
Terminated For Cause, or is otherwise not employed by the Company and not
available to consult for the Company, at the time the definitive agreement
regarding such Material Asset Disposition is executed, then the Bonus Percentage
shall be 0%.
A "Material Asset Disposition" as used herein means, without
duplication for the same matter: (i) a transaction which results in a majority
of the equity interest in the Company being beneficially owned by any "person"
or "persons," including any "group" (as such terms are used in Section 13(d) and
14(d) of the Exchange Act), other than any of the Company's present Affiliates;
(ii) a sale or series of sales by the Company of subsidiaries, divisions, assets
(other than marketable securities), or operating businesses representing in the
aggregate 20% or more of
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the Company's 1998 budgeted EBITDA (which shall include for purposes of this
Agreement EBITDA for all contemplated subsidiaries of the Company) and each such
sale after such threshold has been reached or, if the AIMCO Merger is
consummated, a sale or series of sales by the Company of subsidiaries,
divisions, or assets (other than marketable securities), or operating businesses
regardless of size; (iii) a spin off, or series of spin offs, of any of the
Company's divisions, operating businesses or subsidiaries that meet the 1998
budgeted EBITDA threshold set forth in (ii) above (or, if the AIMCO Merger is
consummated, any such spin off, regardless of size) which is followed by a
subsequent Extraordinary Transaction (as defined above, but with reference to
the spun off entity rather than the Company) of the subsidiary, division or
business spun off within five years following such spin off; (iv) any
transaction which results in any one or more of the Company's divisions,
subsidiaries or operating businesses, representing in the aggregate 20% or more
of the Company's EBITDA, being owned by a third party or, if the AIMCO Merger is
consummated, any transaction, regardless of size, which results in any one or
more of the Company's divisions, subsidiaries, or operating businesses being
owned by a third party; or (v) the consummation of the AIMCO Merger. In the
event a Material Asset Disposition is consummated in one or more steps,
including, without limitation, by way of second-step merger, any additional
consideration paid or to be paid in any subsequent step in the Material Asset
Disposition in respect of (x) subsidiaries, divisions, assets (other than
marketable securities), or operating businesses of the Company and (y) capital
stock of the Company (and any securities convertible into, or options, warrants
or other rights to acquire, such capital stock) shall be included for purposes
of calculating the bonus payable pursuant to this Section 4(d). "Consideration"
shall not include the assumption, directly or indirectly, or repayment of
indebtedness or other liabilities of the Company but shall include the
assumption, directly or indirectly, or repayment of securities similar to the
IFG Trust Convertible Preferred Securities now outstanding. If all or a portion
of the consideration paid in the Material Asset Disposition is other than cash
or securities, then the value of such non-cash consideration shall be the fair
market value thereof on the date the Material Asset Disposition is consummated
as mutually agreed upon in good faith by the Company's Board of Directors and
the Executive. If the Board of Directors and the Executive are unable to come to
agreement on the fair market value of such non-cash consideration following the
provisions of this Section 4(d), then, at the request of either, an independent
valuation expert agreeable to both shall be appointed to determine the fair
market value of such non-cash consideration, and the determination of such
independent expert shall be binding on both the Executive and the Company. If
such non-cash consideration consists of common stock, options, warrants or
rights for which a public trading market existed prior to the consummation of
the Material Asset Disposition, then the value of such securities shall be
determined by the closing or last sales price thereof on the date of the
consummation of the Material Asset Disposition; provided, however, that if such
non-cash consideration consists of newly-issued, publicly-traded common stock,
options, warrants or rights for which no public trading market existed prior to
the consummation of the Material Asset Disposition, then the value thereof shall
be the average of the closing prices for the 20 trading days subsequent to the
fifth trading day after the consummation of the Material Asset Disposition. In
such event, the portion of the bonus payable to the Executive pursuant to this
Section 4(d) attributable to such securities shall be paid on the 30th trading
day subsequent to consummation of the Material Asset Disposition. If no public
market exists for the common stock, options, warrants or other
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rights issued in the Material Asset Disposition, then the value of thereof shall
be as mutually agreed upon in good faith by the Company's Board of Directors and
the Executive. If the non-cash consideration paid in the Material Asset
Disposition consists of preferred stock or debt securities (regardless of
whether a public trading market existed for such preferred stock or debt
securities prior to consummation of the Material Asset Disposition or exists
thereafter), the value hereof shall be the face or principal amount, as the case
may be. Any amounts payable by a purchaser to the Company, any shareholder of
the Company or any Affiliate of either the Company or any shareholder of the
Company in connection with a non-competition, employment, consulting, licensing,
supply or other agreement shall be deemed to be part of the consideration paid
in the Material Asset Disposition. If all or a portion of the consideration
payable in connection with the Material Asset Disposition includes contingent
future payments, then the Company shall pay to the Executive, upon consummation
of such Material Asset Disposition, an additional cash fee, determined in
accordance with this Section 4(d) as, when and if such contingency payments are
received. However, in the event of an installment purchase at a fixed price and
a fixed time schedule, the Company agrees to pay the Executive, upon
consummation of the Material Asset Disposition, a cash fee determined in
accordance with this Section 4(d) based on the present value of such installment
payments using a discount rate of 6.5%. For purposes of this Section 4(d), in no
case shall the "consideration" received by the Company be greater than the total
market capitalization of the Company at the time of the Material Asset
Disposition.
(e) FRINGE BENEFIT PROGRAMS. In addition to the other benefits
provided to the Executive hereunder and to the extent he satisfies the
eligibility requirements thereof and to the extent permitted by law,
participation in fringe benefit programs made available generally to employees
or independent contractors of the Company, including, without limitation,
pension, profit sharing, stock purchase, savings, bonus, disability, life
insurance, health insurance, hospitalization, dental, deferred compensation and
other plans and policies authorized on the date hereof or in the future.
(f) EXPENSE REIMBURSEMENT. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, including professional activities and membership fees and dues
relating to professional organizations of which the Executive currently is a
member or is directed in writing to be a member by the Chief Executive Officer
of the Company and including, without limitation, expenses required for
professional licensing of the Executive, and business related cell phone expense
in accordance with the Company's written policies and procedures, all upon the
presentation of appropriate documentation therefore in accordance with the then
regular procedures of the Company.
(g) PERQUISITES. In addition to the other benefits provided to the
Executive hereunder, and at the sole cost and expense of the Company, except as
otherwise provided herein:
(i) the Executive shall be entitled to reasonable business
usage of aircraft owned or leased by the Company as determined by the Chief
Executive Officer of the Company.
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With prior consent from the Chief Executive Officer of the Company, the
Executive may utilize such aircraft for personal use and in such event the cost
of such use shall be added to and included in the Executive's compensation for
federal, state and local income tax purposes;
(ii) subject to the provisions of Section 7 hereof, the
Company will provide to the Executive disability insurance coverage identical to
the disability insurance coverage provided to senior executives of the Company
from time to time; and
(iii) the Executive shall be fully reimbursed for expenses
incurred in respect of professional continuing education.
(h) VACATIONS, ETC. Leaves-of-absence in accordance with the then
regular procedures of the Company governing senior executives, and four weeks of
paid vacation per year on a noncumulative basis.
(i) PARACHUTE LIMIT. Notwithstanding anything else herein, to the
extent the Executive would be subject to the excise tax under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments"), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit"); provided, however, that this Section 4(i)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable federal, state and
local income, social security and other taxes) would be greater than the
unreduced Parachute Payments to be received by the Executive minus (i) the
excise tax payable under Section 4999 of the Code with respect to such Parachute
Payments and (ii) all applicable federal, state and local income, social
security and other taxes on such Parachute Payments. The foregoing reduction
shall be applied to the Parachute Payments as follows: (i) first by reducing the
amounts payable under Section 4(c) (if such amounts are included in such
computation) until such amounts have been exhausted up to the Parachute Limit,
(ii) then by reducing any such other amounts and benefits (other than awards
described in (iii) below) as determined by the Company, and (iii)
notwithstanding anything contained herein or in an option, warrant or restricted
stock agreement, award or plan relating to the Executive then, on a pro-rata
basis up to the Parachute Limit, by failing to accelerate the vesting (without
affecting the right to vest) upon a change in ownership or effective control or
change in ownership of a substantial portion of assets (as described in Code
Section 280G(b)(2)(A)(i)) of any unvested awards of shares of restricted stock
of the Company previously granted to Executive and options or warrants to
purchase shares of the Company previously granted to Executive. Notwithstanding
the foregoing, the Company shall treat any of the amounts described in (i)
through (iii) above as a Parachute Payment solely to the extent required under
applicable law.
(j) PURCHASE OF INSURANCE. Following the Executive's cessation of
employment with the Company for any reason, (i) the Executive shall have the
right to continue, at the
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<PAGE> 9
Executive's sole cost, any or all life insurance policies on the life of the
Executive maintained by the Company during the Employment Period and to
designate the beneficiaries and owners thereof, and (ii) the Executive and his
dependents shall have the right to purchase from or through the Company or its
successor, at the Executive's or his dependents' sole cost, individual and
dependent care health insurance coverage. Notwithstanding anything in this
Agreement to the contrary, the provisions of this Section 4(j) shall continue
regardless of the cessation of the Executive's employment by the Company. In the
case of the death of the Executive, whether during or after the Employment
Period, the rights under Section 4(j)(ii) of the persons who were the
Executive's dependents at the time of his death shall continue in full force and
effect for the duration of each of their lives.
(k) VESTING. In the event of (a) a termination of Executive's
employment for any reason other than a Termination for Cause or voluntary
termination by the Executive, including, but not limited to a Death Termination
Event, Disability Termination Event, Termination Without Cause or in the event
of (b) the occurrence of an Extraordinary Transaction, an Influence Change Event
(as such term is defined in the Farkas Employment Agreement), or an
Extraordinary Stock Event (as such term is defined in the Farkas Employment
Agreement) (whether or not resulting in a termination of Executive's
employment), all options and warrants then granted to the Executive will
immediately vest and be exercisable by the Executive.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EXECUTIVE.
The Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation which
is inconsistent with the execution of this Agreement, the performance of his
duties hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties
hereunder with or without reasonable accommodations.
SECTION 6. NON-SOLICITATION; CONFIDENTIALITY.
(a) NON-SOLICITATION.
(1) In recognition of the close personal contact the
Executive has or will have with the Company's and its affiliates' trade secrets,
confidential information, records and business relationships, and the position
of trust in which the Company holds the Executive, the Executive further
covenants and agrees that while the Executive is employed by the Company and for
a period lasting for one (1) year following the cessation of the Executive's
employment with the Company, the Executive will not, if such action would have a
material adverse effect on the Company, in direct competition with the Company
(where competition is measured as of the date the Executive ceases to be
employed by the Company), either for himself or as an officer, director,
employee, agent, representative, independent contractor or in any relationship
to any person, partnership, corporation, or other entity (except the Company or
its
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<PAGE> 10
Affiliates or subsidiaries), solicit, directly or by assisting others, business
from any of the Company's customers or clients who were customers or clients of
the Company as of the date of the cessation of the Executive's employment and
with whom the Executive has had material contact (as defined below) during the
twelve (12) month period preceding the date of cessation of the Executive's
employment with the Company in the event of a cessation of employment with the
Company or, absent such cessation, during the twelve (12) months preceding the
solicitation, for the purpose of providing goods or services to said customers
and clients. For purposes of this Agreement, "material contact" exists between
the Executive and any of the Company's customers or clients (i) with whom the
Executive actually dealt; or (ii) whose dealings with the Company were handled,
coordinated or supervised by the Executive; or (iii) about whom the Executive
obtained confidential information in the ordinary course of business through the
Executive's association with the Company.
(2) The Executive covenants and agrees that, for a
period ending on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not solicit any employee,
broker or sales person of the Company, or any of its respective subsidiaries or
affiliates to leave their employ for the employ of a person or entity which
directly competes with the Company, or any of its respective subsidiaries or
affiliates.
(3) The Executive covenants and agrees that, for a
period ending on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not purchase for his own
account any limited partnership units of partnerships that, on the date of
purchase, are controlled directly or indirectly by the Company, except that the
provisions of this sentence shall not be deemed breached merely because the
Executive owns, immediately after a purchase, not more than one percent of the
outstanding units. Should the Executive breach the foregoing sentence, all his
options issued by the Company or any of its subsidiaries shall be canceled and
all of his restricted stock issued by the Company or any of its subsidiaries
(whether or not then vested) which he then owns shall be forfeited. For purposes
of this Section 6(a)(3), "purchase" shall mean the payment of cash only for such
limited partnership units and shall not include payment of cash for interests in
an entity whose assets consist in whole or in part of such limited partnership
units.
(4) The Executives covenants and agrees that he will
not, either for himself or as an officer, director, employee, agent,
representative, or independent contractor of any person, partnership,
corporation, or other entity (except the Company or its Affiliates or
subsidiaries), interfere with any contract that exists between the Company and
any customers or clients of the Company as of the effective date of this
Agreement.
The Executive acknowledges that the foregoing provisions are intended
to protect the Company's and its subsidiaries' and Affiliates' business and
customer contacts, not to prevent the Executive from pursuing a livelihood in
the general area of his previous training, and they should be interpreted
accordingly.
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(b) CONFIDENTIALITY. All confidential information which the Executive
may now possess, may obtain during or after his employment with Company, or may
create prior to the end of his employment with the Company or otherwise relating
to the business of the Company or any of its subsidiaries or affiliates or of
any customer or supplier of any of them shall not be published, disclosed, or
made accessible by him to any other person, either during or after the cessation
of his employment, or used by him except during his employment with the Company
in the business and for the benefit of the Company and its subsidiaries and
Affiliates. In addition, the Executive agrees not to disclose, publish or make
accessible to any other person, from and after the date of this Agreement,
during the Employment Period or at any time thereafter, any of the terms or
provisions of this Agreement, except the Executive's accountants who need such
information to advise him, prepare his tax returns, make required filings and
the like; provided, however, that the Executive will be responsible for causing
any such accountants to be aware of and to abide by the obligations contained in
this Section 6(b) and will be responsible for any breach of such obligations by
any of them. In the event that the Executive becomes legally compelled to
disclose any of the confidential information, the Executive will provide the
Company with prompt written notice so that the Company may seek a protective
order or other appropriate remedy and/or waive in writing compliance with the
provisions of this Section 6(b) and in the event that such protective order or
other remedy is not obtained, or should the Company waive in writing compliance
with the provisions of this Section 6(b), the Executive will furnish only that
portion of the confidential information which is so legally required. The
Executive shall return all tangible evidence of such confidential information to
the General Counsel of the Company prior to or at the cessation of his
employment.
(c) INTERPRETATION. Since a breach of the provisions of this Section 6
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach and the Company shall not be required to post
a bond in any proceeding brought for such purpose. The Executive agrees that the
provisions of this Section 6 are necessary and reasonable to protect the Company
in the conduct of its businesses. If any restriction contained in this Section 6
shall be deemed to be invalid, illegal, or unenforceable by reason of the
extent, duration, or geographical scope thereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form such
restriction shall then be enforceable in the manner contemplated hereby. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies, at law or in equity, for such breach or threatened breach.
(d) INVESTORS. Notwithstanding anything herein to the contrary, nothing
in this Agreement shall restrict the right of the Executive to solicit or
receive, on his own behalf or on behalf of others, any investment or any funds
in any form from any person, regardless of whether such person is an investor in
the Company or in any current or former affiliate of the Company.
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SECTION 7. TERMINATION.
(a) DEFINITIONS.
(i) Death Termination Event. As used herein, "Death
Termination Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein,
"Disability Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable to fully
discharge his duties hereunder for a period of 185 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the
event that the last will and testament of the Executive has not been probated at
the time of determination, the estate of the Executive and (B) in the event that
the last will and testament of the Executive has been probated at the time of
determination, the legatees of the Executive who are entitled under such will to
the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term
"Termination For Cause" shall mean the termination by the Company of the
Executive's employment hereunder upon a good faith determination by a majority
vote of the members of the Board of Directors of the Company that termination of
this Agreement is necessary by reason of (A) the Executive shall be convicted of
a felony, (B) the Executive shall commit any act or omit to take any action in
bad faith and to the material detriment of the Company and Executive shall not
have cured the same within 30 days after the Company sends written notice
thereof, or (C) Executive shall breach in a material way any material term of
this Agreement and fail to correct such breach within 30 days after the Company
sends written notice thereof.
(v) Termination Without Cause. As used herein, "Termination
Without Cause" shall mean any termination of the Executive's employment by the
Company hereunder that is not a Termination For Cause, a Death Termination
Event, or a Disability Termination Event but shall not include a conversion of
this Agreement to a consulting agreement.
(b) DEATH TERMINATION EVENT. Upon the occurrence of a Death
Termination Event, this Agreement will terminate automatically upon the date
that such Death Termination Event occurred (subject to the last sentence of this
Section 7 and to the last two sentences of Section 4(j)), whereupon the
Executive's Estate shall receive the consideration set forth in Sections 4(a)
through (d) through the date three years from the Commencement Date. In
addition, the Executive's Estate shall be entitled to receive the payments
contemplated by Section 4(c) and Section 4(d) if the event giving rise to such
payment occurs, or a definitive agreement regarding such event is executed,
before or within 180 days after the Death Termination Event.
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(c) DISABILITY TERMINATION EVENT. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 7 and to the last two sentences of Section 4(j)), whereupon the
Executive shall continue to receive the consideration set forth in Sections 4(a)
through (d) and Section 4(g)(iii) through the date three years from the
Commencement Date. In addition, the Executive shall be entitled to receive the
payments contemplated by Section 4(c) and Section 4(d) if the event giving rise
to such payment occurs, or a definitive agreement regarding such event is
executed, before or within 180 days after the Disability Termination Event.
(d) TERMINATION FOR CAUSE. The Executive and the Company agree that the
Company shall have the right to effectuate a Termination For Cause in accordance
with the terms of this Agreement at any time. Upon the occurrence of a
Termination For Cause, this Agreement will terminate upon the date that such
Termination For Cause occurs (subject to the provisions of Section 9), whereupon
(i) the Executive shall not be entitled to receive any additional payments
hereunder other than the Base Salary, as then in effect, to and including the
date that such Termination For Cause occurs and (ii) the Company shall be
entitled to any and all remedies and damages available to it.
(e) TERMINATION WITHOUT CAUSE. Upon the occurrence of a Termination
Without Cause, this Agreement shall terminate upon the date that such
Termination Without Cause occurs (subject to the provisions of Section 9 and to
the last two sentences of Section 4(j)), whereupon the Executive shall continue
to receive the consideration set forth in Sections 4(a) through (d) and Section
4(g)(iii) through the date three years from the Commencement Date. In addition,
the Executive shall be entitled to receive the payments contemplated by Section
4(c) and Section 4(d) if the event giving rise to such payment occurs, or a
definitive agreement regarding such event is executed, on or before the date
three years from the Commencement Date.
In the event of a termination of Executive's employment for any reason
other than a Termination for Cause or voluntary termination by the Executive,
including, but not limited to a Death Termination Event, Disability Termination
Event, or Termination Without Cause, all options, warrants and restricted stock
then held by and/or granted to the Executive will immediately vest and be
exercisable by the Executive but in the event of the occurrence of an
Extraordinary Transaction, no options, warrants or restricted stock then held by
and/or granted to the Executive will immediately vest as a result thereof.
SECTION 8. WITHHOLDING. The Company shall be entitled to withhold from
amounts payable to the Executive hereunder such amounts as may be required by
applicable law to be so withheld.
SECTION 9. SURVIVAL. Notwithstanding anything in this Agreement to the
contrary, Section 6 of this Agreement shall survive any termination of this
Agreement or cessation of the Executive's employment hereunder for the periods
stated therein.
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SECTION 10. MODIFICATION. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
SECTION 11. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11).
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 12. WAIVER. Any waiver by either party of a breach of any
provision of Agreement shall not operate as a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
SECTION 13. BINDING EFFECT. The Executive's rights and obligations
under this Agreement shall not be transferable by assignment or otherwise, such
rights shall not be subject to commutation, encumbrance or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors.
SECTION 14. HEADINGS. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 15. ENFORCEMENT. Should the Executive sue to enforce any of his
rights under this Agreement and should the Executive prevail on any issue in
such suit, then the Company shall pay all the Executive's costs of such suit
(including attorneys fees and disbursements). If any taxes are imposed on such
payment, the Company shall make such additional payments to the Executive as may
be necessary, so that after deducting the taxes imposed on all payments made to
the Executive pursuant to this paragraph, the Executive is left on an after tax
basis with an amount equal to his claim for indemnification prior to the
payments described in this sentence.
SECTION 16. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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SECTION 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina, without
reference to the conflict of law provisions thereof.
SECTION 18. CONSTRUCTION AND INTERPRETATION. Should any provision of
this Agreement require judicial interpretation, the parties hereto agree that
the court interpreting or construing the same shall not apply a presumption that
the terms hereof shall be more strictly construed against one party by reason of
the rule of construction that a document is to be more strictly construed
against the party that itself, or through its agent, prepared the same, and it
is expressly agreed and acknowledged that the Executive, the Company and their
respective attorneys and representatives have participated in the preparation
hereof.
SECTION 19. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING ESTABLISHED.
THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS
AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO THE TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INSIGNIA/ESG HOLDINGS, INC.
By:
--------------------------------
Name:
------------------------------
Its:
------------------------------
EXECUTIVE
-----------------------------------
Name: Frank M. Garrison
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EXHIBIT 10.13
ASTON - INSIGNIA/ESG HOLDINGS
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is entered into as of August
3, 1998, by and between Insignia/ESG Holdings, Inc., a Delaware corporation
with an office at 200 Park Avenue, New York, New York, 10166 (the "Company"),
and James A. Aston, an individual with an office at One Insignia Financial
Plaza, Greenville, SC 29062 (the "Executive"). This Agreement is effective as
of the date of the consummation of the spin-off of the Company from Insignia
Financial Group, Inc. ("IFG") to its shareholders, and as of such date the
obligations of IFG under the Amended and Restated Employment Agreement between
IFG and the Executive dated as of January 1, 1998 shall be assumed by the
Company, and the Company hereby assumes and agrees to pay (without duplication
under this Agreement) the rights thereunder regarding amounts owed by IFG
thereunder if IFG does not timely pay such amounts (in which case the Company
will be subrogated to the right of the Executive to collect such amounts from
IFG).
BACKGROUND
The Company desires to assure itself of the services of the Executive
for the period provided in this Agreement, and the Executive is willing to
serve in the employ of the Company for such period upon the terms and
conditions provided in this Agreement.
STATEMENT OF AGREEMENT
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, in each case upon
the terms and conditions set forth herein, for a period commencing on the
effective date hereof (the "Commencement Date") and ending three years from the
Commencement Date, or on such earlier date as provided herein (the "Expiration
Date") (such period, as it may be so terminated, being referred to herein as
the "Employment Period").
SECTION 2. DUTIES AND SERVICES.
(a) DUTIES. Subject to Section 2(d), during the Employment Period
the Executive shall serve as Chief Financial Officer of the Company and, at the
Company's request, as an officer or director of one or more of its subsidiaries.
In the performance of his duties hereunder, the Executive shall report to and
shall be responsible only to the Chief Executive Officer and the Board of
Directors of the Company. The Executive agrees to his employment as described
in
<PAGE> 2
this Section 2. The parties hereto understand and agree that the Executive has
substantial business interests outside of the scope of this Agreement,
including, without limitation, at Metropolitan Asset Enhancement, L.P. and
Insignia Properties Trust, and under an employment or consulting agreement with
IFG, and both parties hereby consent to such arrangements. The Executive shall
be available to travel as the needs of the business of the Company reasonably
require.
(b) OFFICE. During the Employment Period, the Company shall
provide the Executive with an office located in Greenville, SC or at 200 Park
Avenue, New York, NY, whichever the Executive chooses, or at such other
location as the Company and the Executive shall mutually agree. The Company
will provide the Executive with an office and executive secretary reasonably
acceptable to him, and other reasonable support appropriate to his duties
hereunder.
(c) PRIMARY RESPONSIBILITIES. Subject to Section 2(a) and 2(d),
during the Employment Period, the Executive shall have such responsibilities as
are assigned to him by the Chief Executive Officer and the Board of Directors
of the Company. The Executive shall comply with all written policies and
procedures of the Company.
(d) CONSULTING. If (i) without the prior written consent of the
Executive the Executive's title, powers or duties within the Company have been
substantially diminished, other than as a result of a Termination For Cause (as
defined in Section 7(a)(iv)), (ii) a Extraordinary Transaction (as defined in
Section 4(c)) or a Material Asset Disposition (as defined in Section 4(d)) has
taken place, or (iii) Andrew L. Farkas has elected to convert that certain
Employment Agreement, dated as of August 3, 1998, by and between the Company
and Mr. Farkas (the "Farkas Employment Agreement") into a consulting agreement,
then the Executive may elect in writing to convert this Agreement into a
consulting agreement. Under the terms of the consulting agreement, the
Executive shall consult with respect to the assets and liabilities of the
Company as they existed immediately before the Extraordinary Transaction or the
Material Asset Disposition. Such consultation shall be at the reasonable times
convenient to the Executive on no less than five business days' notice, the
parties recognizing that the Executive during the consulting period likely will
have substantial other business interests, including under an employment or
consulting agreement with IFG. The terms and conditions of this Agreement
(including all rights hereunder of the Executive as to compensation, bonus,
payments and benefits) shall continue unabridged during the period of
consulting. The other provisions of this Agreement also shall remain in effect
except that (i) Section 2(a) shall be deleted and the remainder of Section 2
shall be modified by this Section 2(d), (ii) Section 7(a)(iv)(B) and Section
7(a)(iv)(C) shall be deleted, and (iii) references to salary (and Base Salary)
in Section 4(a) and elsewhere in this Agreement shall be deemed to refer to a
consulting fee (and Base Consulting Fee), and such Base Consulting Fee shall be
paid to the executive in twelve monthly installments, payable on the first day
of each calendar month. The "Employment Period" shall be deemed to include the
period during which the Executive is obligated to provide consulting services
hereunder and therefore, to the extent permitted by law, the conversion shall
not be deemed a termination or resignation for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits
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equivalent to those he would have received had there been no termination. The
Executive shall not be obligated to consult for more than five days or portions
of a day in any calendar month.
SECTION 3. KEY MAN LIFE INSURANCE. The Company shall have the
right to place a "key man" life insurance policy, providing a death benefit of
up to $15,000,000 upon the life of the Executive, for which the Company is the
beneficiary. In connection therewith, the Executive hereby authorizes the
Company, at its sole cost and expense, to purchase and maintain upon the life
of the Executive such insurance policy, and agrees to submit to such reasonable
medical examinations, and to provide and/or consent to the release of such
medical information, as may be necessary or desirable in order to secure the
issuance thereof. Except as may be required in order to obtain insurance
coverage as described in this Section 3, any and all information about
Executive's health or medical records shall be kept confidential by the Company
and shall not be disclosed by the Company to any party without the Executive's
prior written consent.
SECTION 4. COMPENSATION. As full compensation for his services
hereunder, the Company shall pay, grant, issue or give, as the case may be, to
the Executive the compensation and benefits specified below:
(a) BASE SALARY. Subject to the provisions of Section 7, a base
salary at the rate of $400,000 per annum ("Base Salary"), which Base Salary
shall be paid to the Executive in accordance with the customary executive
payroll policy of the Company as in effect from time to time; provided,
however, that the Base Salary, as in effect at any time and from time to time,
may be further increased by action of the Board of Directors; and further
provided, however, that in no event shall the Base Salary be decreased at any
time or from time to time without the prior consent of the Executive, which
consent may be granted or withheld in the Executive's sole discretion.
(b) ANNUAL DISCRETIONARY BONUS. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined by
the Board of Directors of the Company in its sole and absolute discretion, which
shall be paid to the Executive, with respect to any fiscal year of the Company,
before the expiration of 74 days after the end of such fiscal year. In making
bonus determinations, the Company shall evaluate the Executive's performance in
accordance with the standard bonus guidelines used by the Company for executives
of the Company in the same or a similar position as the Executive. In the event
of the consummation of the sale of the present residential business of IFG to
Apartment Investment and Management Company pursuant to an amended and restated
merger agreement dated May 26, 1998 (the "AIMCO Merger") in any year, the
Company shall, immediately after the consummation of the AIMCO Merger, pay to
the Executive an amount equal to X times Y, where X equals: (a) if the
consummation of the AIMCO Merger occurs in 1998, the amount of the discretionary
bonus the Executive received from IFG with respect to 1997, (b) if the
consummation of the AIMCO Merger occurs in 1999, the amount of the discretionary
bonus the Executive received from the Company with respect to 1998, divided by
the number of days between the effective date of this Agreement and the end of
1998, and multiplied by 365, or (c) if the consummation of the AIMCO Merger
occurs after 1999, the amount of the discretionary bonus the Executive received
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with respect to the year prior to the year in which the consummation of the
AIMCO Merger occurred, and Y equals a fraction the numerator of which is the
number of days between the beginning of the year and the occurrence of the
consummation of the AIMCO Merger and the denominator of which is 365.
(c) EXTRAORDINARY TRANSACTION.
An "Extraordinary Transaction" as used herein means the occurrence of
any one or more of the following:
(i) the Company ceases to be required to file reports
under Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor to that Section;
(ii) a majority of the members of the Board of Directors
of the Company are not persons who (a) had been directors of the Company for at
least the preceding 12 consecutive months or (b) when they initially were
elected to the Board (x) were nominated (if they were elected by the
stockholders) or elected (if they were elected by the directors) with the
affirmative vote of two-thirds of the directors who were Continuing Directors
at the time of the nomination or election by the Board and (y) were not elected
as a result of an actual or threatened solicitation of proxies or consents by a
person other than the Board of Directors of the Company or an agreement
intended to avoid or settle such a proxy solicitation (the directors described
in clauses (a) and (b) being "Continuing Directors");
(iii) any "person," including a "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the
Company, any of its present affiliates (as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as amended) ("Affiliates"), or
any employee benefit plan of the Company or any of its present Affiliates) is
or becomes the "beneficial owner" (as defined in Rule 13(d) (3) under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities;
(iv) the purchase of Common Stock of the Company ("Common
Stock") pursuant to any tender or exchange offer or otherwise made by any
"person," including a "group" (as such terms are used in Sections 13 (d) and 14
(d) of the Exchange Act), other than the Company, any of its present
Affiliates, or any employee benefit plan of the Company or any of its present
Affiliates, which results in "beneficial ownership" (as so defined) of 30% or
more of the outstanding Common Stock;
(v) the execution and delivery of a definitive agreement
by the Company that provides for a merger or consolidation, or a transaction
having a similar effect (unless such merger, consolidation or similar action is
with a subsidiary of the Company or with another company, a majority of whose
outstanding capital stock is owned by the same persons or entities who own a
majority of the Company's outstanding Common Stock at such time), where (A) the
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majority of the Common Stock of the Company is no longer held by the persons
who were the stockholders of the Company immediately prior to the transaction,
(B) the sale, lease, exchange or other disposition of all or substantially all
of the assets of the Company but excluding the trading of marketable securities
held as portfolio securities or (C) the Company's Common Stock is converted
into cash, securities or other property (other than the common stock of a
company into which the Company is merged), provided, however, that, in the
event that the contemplated merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this paragraph (v) by virtue
of such Change of Control shall not apply; and
(vi) upon the consummation of any transaction requiring
stockholder approval for the acquisition of the Company by an entity other than
the Company or a subsidiary through purchase of assets, or by merger, or
otherwise.
(d) MATERIAL ASSET DISPOSITION BONUS. In the event of a Material
Asset Disposition, as defined below, in consideration of the services performed
by the Executive and consistent with the prior terms of the Executive's
employment, the Company (or, in the case of clause (iii) below, the spin-off
entity or, in default thereof, the Company) shall pay to the Executive
immediately before the consummation of such Material Asset Disposition, a cash
bonus equal to the Bonus Percentage of the consideration (valued as set forth
below) received by the Company or its shareholders as a result of such Material
Asset Disposition; provided, however, that if the Material Asset Disposition
giving rise to the cash bonus contemplated by this Section 4(d) is the
consummation of the AIMCO Merger, the Company shall pay such cash bonus
immediately after the consummation of the AIMCO Merger, and the amount of such
cash bonus shall be equal to .25% of the consideration (valued as set forth
below) received by IFG or its shareholders as a result of the consummation of
the AIMCO Merger (not including the value of the distribution of shares of the
Company to shareholders of IFG). The Bonus Percentage shall be .25% if the
Executive is a consultant to the Company, or makes himself reasonably available
to consult for the Company with respect to the assets and liabilities of the
Company as they existed immediately after the spin-off of Insignia/ESG
Holdings, Inc. to the Company's shareholders, at the time the definitive
agreement regarding such Material Asset Disposition is executed. The Bonus
Percentage shall be .5% if the Executive is an employee of the Company (for
this purpose only, the word "employee" not including a consultant under this
Agreement), whether under this Agreement or otherwise, at the time the
definitive agreement regarding such Material Asset Disposition is executed. If
the Executive has been Terminated For Cause, or is otherwise not employed by
the Company and not available to consult for the Company, at the time the
definitive agreement regarding such Material Asset Disposition is executed,
then the Bonus Percentage shall be 0%.
A "Material Asset Disposition" as used herein means, without
duplication for the same matter: (i) a transaction which results in a majority
of the equity interest in the Company being beneficially owned by any "person"
or "persons," including any "group" (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act), other than any of the Company's present
Affiliates; (ii) a sale or series of sales by the Company of subsidiaries,
divisions, assets (other than marketable securities), or operating businesses
representing in the aggregate 20% or more of
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the Company's 1998 budgeted EBITDA (which shall include for purposes of this
Agreement EBITDA for all contemplated subsidiaries of the Company) and each
such sale after such threshold has been reached or, if the AIMCO Merger is
consummated, a sale or series of sales by the Company of subsidiaries,
divisions, or assets (other than marketable securities), or operating
businesses regardless of size; (iii) a spin off, or series of spin offs, of any
of the Company's divisions, operating businesses or subsidiaries that meet the
1998 budgeted EBITDA threshold set forth in (ii) above (or, if the AIMCO Merger
is consummated, any such spin off, regardless of size) which is followed by a
subsequent Extraordinary Transaction (as defined above, but with reference to
the spun off entity rather than the Company) of the subsidiary, division or
business spun off within five years following such spin off; (iv) any
transaction which results in any one or more of the Company's divisions,
subsidiaries or operating businesses, representing in the aggregate 20% or more
of the Company's EBITDA, being owned by a third party or, if the AIMCO Merger
is consummated, any transaction, regardless of size, which results in any one
or more of the Company's divisions, subsidiaries, or operating businesses being
owned by a third party; or (v) the consummation of the AIMCO Merger. In the
event a Material Asset Disposition is consummated in one or more steps,
including, without limitation, by way of second-step merger, any additional
consideration paid or to be paid in any subsequent step in the Material Asset
Disposition in respect of (x) subsidiaries, divisions, assets (other than
marketable securities), or operating businesses of the Company and (y) capital
stock of the Company (and any securities convertible into, or options, warrants
or other rights to acquire, such capital stock) shall be included for purposes
of calculating the bonus payable pursuant to this Section 4(d).
"Consideration" shall not include the assumption, directly or indirectly, or
repayment of indebtedness or other liabilities of the Company but shall include
the assumption, directly or indirectly, or repayment of securities similar to
the IFG Trust Convertible Preferred Securities now outstanding. If all or a
portion of the consideration paid in the Material Asset Disposition is other
than cash or securities, then the value of such non-cash consideration shall be
the fair market value thereof on the date the Material Asset Disposition is
consummated as mutually agreed upon in good faith by the Company's Board of
Directors and the Executive. If the Board of Directors and the Executive are
unable to come to agreement on the fair market value of such non-cash
consideration following the provisions of this Section 4(d), then, at the
request of either, an independent valuation expert agreeable to both shall be
appointed to determine the fair market value of such non-cash consideration,
and the determination of such independent expert shall be binding on both the
Executive and the Company. If such non-cash consideration consists of common
stock, options, warrants or rights for which a public trading market existed
prior to the consummation of the Material Asset Disposition, then the value of
such securities shall be determined by the closing or last sales price thereof
on the date of the consummation of the Material Asset Disposition; provided,
however, that if such non-cash consideration consists of newly-issued,
publicly-traded common stock, options, warrants or rights for which no public
trading market existed prior to the consummation of the Material Asset
Disposition, then the value thereof shall be the average of the closing prices
for the 20 trading days subsequent to the fifth trading day after the
consummation of the Material Asset Disposition. In such event, the portion of
the bonus payable to the Executive pursuant to this Section 4(d) attributable
to such securities shall be paid on the 30th trading day subsequent to
consummation of the Material Asset Disposition. If no public market exists for
the common stock, options, warrants or other
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rights issued in the Material Asset Disposition, then the value of thereof
shall be as mutually agreed upon in good faith by the Company's Board of
Directors and the Executive. If the non-cash consideration paid in the
Material Asset Disposition consists of preferred stock or debt securities
(regardless of whether a public trading market existed for such preferred stock
or debt securities prior to consummation of the Material Asset Disposition or
exists thereafter), the value hereof shall be the face or principal amount, as
the case may be. Any amounts payable by a purchaser to the Company, any
shareholder of the Company or any Affiliate of either the Company or any
shareholder of the Company in connection with a non-competition, employment,
consulting, licensing, supply or other agreement shall be deemed to be part of
the consideration paid in the Material Asset Disposition. If all or a portion
of the consideration payable in connection with the Material Asset Disposition
includes contingent future payments, then the Company shall pay to the
Executive, upon consummation of such Material Asset Disposition, an additional
cash fee, determined in accordance with this Section 4(d) as, when and if such
contingency payments are received. However, in the event of an installment
purchase at a fixed price and a fixed time schedule, the Company agrees to pay
the Executive, upon consummation of the Material Asset Disposition, a cash fee
determined in accordance with this Section 4(d) based on the present value of
such installment payments using a discount rate of 6.5%. For purposes of
this Section 4(d), in no case shall the "consideration" received by the Company
be greater than the total market capitalization of the Company at the time of
the Material Asset Disposition.
(e) FRINGE BENEFIT PROGRAMS. In addition to the other benefits
provided to the Executive hereunder and to the extent he satisfies the
eligibility requirements thereof and to the extent permitted by law,
participation in fringe benefit programs made available generally to employees
or independent contractors of the Company, including, without limitation,
pension, profit sharing, stock purchase, savings, bonus, disability, life
insurance, health insurance, hospitalization, dental, deferred compensation and
other plans and policies authorized on the date hereof or in the future.
(f) EXPENSE REIMBURSEMENT. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of
his duties hereunder, including professional activities and membership fees and
dues relating to professional organizations of which the Executive currently is
a member or is directed in writing to be a member by the Chief Executive
Officer of the Company and including, without limitation, expenses required for
professional licensing of the Executive, and business related cell phone
expense in accordance with the Company's written policies and procedures, all
upon the presentation of appropriate documentation therefore in accordance with
the then regular procedures of the Company.
(g) PERQUISITES. In addition to the other benefits provided to
the Executive hereunder, and at the sole cost and expense of the Company,
except as otherwise provided herein:
(i) the Executive shall be entitled to reasonable
business usage of aircraft owned or leased by the Company as determined by the
Chief Executive Officer of the Company.
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With prior consent from the Chief Executive Officer of the Company, the
Executive may utilize such aircraft for personal use and in such event the cost
of such use shall be added to and included in the Executive's compensation for
federal, state and local income tax purposes;
(ii) subject to the provisions of Section 7 hereof, the
Company will provide to the Executive disability insurance coverage identical
to the disability insurance coverage provided to senior executives of the
Company from time to time; and
(iii) the Executive shall be fully reimbursed for expenses
incurred in respect of professional continuing education.
(h) VACATIONS, ETC. Leaves-of-absence in accordance with the then
regular procedures of the Company governing senior executives, and four weeks
of paid vacation per year on a noncumulative basis.
(i) PARACHUTE LIMIT. Notwithstanding anything else herein, to the
extent the Executive would be subject to the excise tax under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation
of parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments"), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit"); provided, however, that this Section 4(i)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable federal, state and
local income, social security and other taxes) would be greater than the
unreduced Parachute Payments to be received by the Executive minus (i) the
excise tax payable under Section 4999 of the Code with respect to such
Parachute Payments and (ii) all applicable federal, state and local income,
social security and other taxes on such Parachute Payments. The foregoing
reduction shall be applied to the Parachute Payments as follows: (i) first by
reducing the amounts payable under Section 4(c) (if such amounts are included
in such computation) until such amounts have been exhausted up to the Parachute
Limit, (ii) then by reducing any such other amounts and benefits (other than
awards described in (iii) below) as determined by the Company, and (iii)
notwithstanding anything contained herein or in an option, warrant or
restricted stock agreement, award or plan relating to the Executive then, on a
pro-rata basis up to the Parachute Limit, by failing to accelerate the vesting
(without affecting the right to vest) upon a change in ownership or effective
control or change in ownership of a substantial portion of assets (as described
in Code Section 280G(b)(2)(A)(i)) of any unvested awards of shares of
restricted stock of the Company previously granted to Executive and options or
warrants to purchase shares of the Company previously granted to Executive.
Notwithstanding the foregoing, the Company shall treat any of the amounts
described in (i) through (iii) above as a Parachute Payment solely to the
extent required under applicable law.
(j) PURCHASE OF INSURANCE. Following the Executive's cessation
of employment with the Company for any reason, (i) the Executive shall have the
right to continue, at the
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Executive's sole cost, any or all life insurance policies on the life of the
Executive maintained by the Company during the Employment Period and to
designate the beneficiaries and owners thereof, and (ii) the Executive and his
dependents shall have the right to purchase from or through the Company or its
successor, at the Executive's or his dependents' sole cost, individual and
dependent care health insurance coverage. Notwithstanding anything in this
Agreement to the contrary, the provisions of this Section 4(j) shall continue
regardless of the cessation of the Executive's employment by the Company. In
the case of the death of the Executive, whether during or after the Employment
Period, the rights under Section 4(j)(ii) of the persons who were the
Executive's dependents at the time of his death shall continue in full force
and effect for the duration of each of their lives.
(k) VESTING. In the event of (a) a termination of Executive's
employment for any reason other than a Termination for Cause or voluntary
termination by the Executive, including, but not limited to a Death Termination
Event, Disability Termination Event, Termination Without Cause or in the event
of (b) the occurrence of an Extraordinary Transaction, an Influence Change
Event (as such term is defined in the Farkas Employment Agreement)), or an
Extraordinary Stock Event (as such term is defined in the Farkas Employment
Agreement) (whether or not resulting in a termination of Executive's
employment), all options and warrants then granted to the Executive will
immediately vest and be exercisable by the Executive.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
EXECUTIVE. The Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation
which is inconsistent with the execution of this Agreement, the performance of
his duties hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties
hereunder with or without reasonable accommodations.
SECTION 6. NON-SOLICITATION; CONFIDENTIALITY.
(a) NON-SOLICITATION.
(1) In recognition of the close personal contact
the Executive has or will have with the Company's and its affiliates' trade
secrets, confidential information, records and business relationships, and the
position of trust in which the Company holds the Executive, the Executive
further covenants and agrees that while the Executive is employed by the
Company and for a period lasting for one (1) year following the cessation of
the Executive's employment with the Company, the Executive will not, if such
action would have a material adverse effect on the Company, in direct
competition with the Company (where competition is measured as of the date the
Executive ceases to be employed by the Company), either for himself or as an
officer, director, employee, agent, representative, independent contractor or
in any relationship to any person, partnership, corporation, or other entity
(except the Company or its
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Affiliates or subsidiaries), solicit, directly or by assisting others, business
from any of the Company's customers or clients who were customers or clients of
the Company as of the date of the cessation of the Executive's employment and
with whom the Executive has had material contact (as defined below) during the
twelve (12) month period preceding the date of cessation of the Executive's
employment with the Company in the event of a cessation of employment with the
Company or, absent such cessation, during the twelve (12) months preceding the
solicitation, for the purpose of providing goods or services to said customers
and clients. For purposes of this Agreement, "material contact" exists between
the Executive and any of the Company's customers or clients (i) with whom the
Executive actually dealt; or (ii) whose dealings with the Company were handled,
coordinated or supervised by the Executive; or (iii) about whom the Executive
obtained confidential information in the ordinary course of business through
the Executive's association with the Company.
(2) The Executive covenants and agrees that, for
a period ending on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not solicit any
employee, broker or sales person of the Company, or any of its respective
subsidiaries or affiliates to leave their employ for the employ of a person or
entity which directly competes with the Company, or any of its respective
subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for
a period ending on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not purchase for his own
account any limited partnership units of partnerships that, on the date of
purchase, are controlled directly or indirectly by the Company, except that the
provisions of this sentence shall not be deemed breached merely because the
Executive owns, immediately after a purchase, not more than one percent of the
outstanding units. Should the Executive breach the foregoing sentence, all his
options issued by the Company or any of its subsidiaries shall be canceled and
all of his restricted stock issued by the Company or any of its subsidiaries
(whether or not then vested) which he then owns shall be forfeited. For
purposes of this Section 6(a)(3), "purchase" shall mean the payment of cash
only for such limited partnership units and shall not include payment of cash
for interests in an entity whose assets consist in whole or in part of such
limited partnership units.
(4) The Executives covenants and agrees that he
will not, either for himself or as an officer, director, employee, agent,
representative, or independent contractor of any person, partnership,
corporation, or other entity (except the Company or its Affiliates or
subsidiaries), interfere with any contract that exists between the Company and
any customers or clients of the Company as of the effective date of this
Agreement.
The Executive acknowledges that the foregoing provisions are intended
to protect the Company's and its subsidiaries' and Affiliates' business and
customer contacts, not to prevent the Executive from pursuing a livelihood in
the general area of his previous training, and they should be interpreted
accordingly.
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(b) CONFIDENTIALITY. All confidential information which the
Executive may now possess, may obtain during or after his employment with
Company, or may create prior to the end of his employment with the Company or
otherwise relating to the business of the Company or any of its subsidiaries or
affiliates or of any customer or supplier of any of them shall not be
published, disclosed, or made accessible by him to any other person, either
during or after the cessation of his employment, or used by him except during
his employment with the Company in the business and for the benefit of the
Company and its subsidiaries and Affiliates. In addition, the Executive agrees
not to disclose, publish or make accessible to any other person, from and after
the date of this Agreement, during the Employment Period or at any time
thereafter, any of the terms or provisions of this Agreement, except the
Executive's accountants who need such information to advise him, prepare his
tax returns, make required filings and the like; provided, however, that the
Executive will be responsible for causing any such accountants to be aware of
and to abide by the obligations contained in this Section 6(b) and will be
responsible for any breach of such obligations by any of them. In the event
that the Executive becomes legally compelled to disclose any of the
confidential information, the Executive will provide the Company with prompt
written notice so that the Company may seek a protective order or other
appropriate remedy and/or waive in writing compliance with the provisions of
this Section 6(b) and in the event that such protective order or other remedy
is not obtained, or should the Company waive in writing compliance with the
provisions of this Section 6(b), the Executive will furnish only that portion
of the confidential information which is so legally required. The Executive
shall return all tangible evidence of such confidential information to the
General Counsel of the Company prior to or at the cessation of his employment.
(c) INTERPRETATION. Since a breach of the provisions of this
Section 6 could not adequately be compensated by money damages, the Company
shall be entitled, in addition to any other right and remedy available to it,
to an injunction restraining such breach and the Company shall not be required
to post a bond in any proceeding brought for such purpose. The Executive
agrees that the provisions of this Section 6 are necessary and reasonable to
protect the Company in the conduct of its businesses. If any restriction
contained in this Section 6 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope thereof,
or otherwise, then the court making such determination shall have the right to
reduce such extent, duration, geographical scope, or other provisions hereof,
and in its reduced form such restriction shall then be enforceable in the
manner contemplated hereby. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies, at law or in equity, for such
breach or threatened breach.
(d) INVESTORS. Notwithstanding anything herein to the contrary,
nothing in this Agreement shall restrict the right of the Executive to solicit
or receive, on his own behalf or on behalf of others, any investment or any
funds in any form from any person, regardless of whether such person is an
investor in the Company or in any current or former affiliate of the Company.
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SECTION 7. TERMINATION.
(a) DEFINITIONS.
(i) Death Termination Event. As used herein, "Death
Termination Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein,
"Disability Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable to fully
discharge his duties hereunder for a period of 185 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in
the event that the last will and testament of the Executive has not been
probated at the time of determination, the estate of the Executive and (B) in
the event that the last will and testament of the Executive has been probated
at the time of determination, the legatees of the Executive who are entitled
under such will to the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term
"Termination For Cause" shall mean the termination by the Company of the
Executive's employment hereunder upon a good faith determination by a majority
vote of the members of the Board of Directors of the Company that termination
of this Agreement is necessary by reason of (A) the Executive shall be
convicted of a felony, (B) the Executive shall commit any act or omit to take
any action in bad faith and to the material detriment of the Company and
Executive shall not have cured the same within 30 days after the Company sends
written notice thereof, or (C) Executive shall breach in a material way any
material term of this Agreement and fail to correct such breach within 30 days
after the Company sends written notice thereof.
(v) Termination Without Cause. As used herein,
"Termination Without Cause" shall mean any termination of the Executive's
employment by the Company hereunder that is not a Termination For Cause, a
Death Termination Event, or a Disability Termination Event but shall not
include a conversion of this Agreement to a consulting agreement.
(b) DEATH TERMINATION EVENT. Upon the occurrence of a Death
Termination Event, this Agreement will terminate automatically upon the date
that such Death Termination Event occurred (subject to the last sentence of
this Section 7 and to the last two sentences of Section 4(j)), whereupon the
Executive's Estate shall receive the consideration set forth in Sections 4(a)
through (d) through the date three years from the Commencement Date. In
addition, the Executive's Estate shall be entitled to receive the payments
contemplated by Section 4(c) and Section 4(d) if the event giving rise to such
payment occurs, or a definitive agreement regarding such event is executed,
before or within 180 days after the Death Termination Event.
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(c) DISABILITY TERMINATION EVENT. Upon the occurrence of a
Disability Termination Event, this Agreement shall terminate automatically upon
the date that such Disability Termination Event occurred (subject to the last
sentence of this Section 7 and to the last two sentences of Section 4(j)),
whereupon the Executive shall continue to receive the consideration set forth
in Sections 4(a) through (d) and Section 4(g)(iii) through the date three years
from the Commencement Date. In addition, the Executive shall be entitled to
receive the payments contemplated by Section 4(c) and Section 4(d) if the event
giving rise to such payment occurs, or a definitive agreement regarding such
event is executed, before or within 180 days after the Disability Termination
Event.
(d) TERMINATION FOR CAUSE. The Executive and the Company agree
that the Company shall have the right to effectuate a Termination For Cause in
accordance with the terms of this Agreement at any time. Upon the occurrence
of a Termination For Cause, this Agreement will terminate upon the date that
such Termination For Cause occurs (subject to the provisions of Section 9),
whereupon (i) the Executive shall not be entitled to receive any additional
payments hereunder other than the Base Salary, as then in effect, to and
including the date that such Termination For Cause occurs and (ii) the Company
shall be entitled to any and all remedies and damages available to it.
(e) TERMINATION WITHOUT CAUSE. Upon the occurrence of a
Termination Without Cause, this Agreement shall terminate upon the date that
such Termination Without Cause occurs (subject to the provisions of Section 9
and to the last two sentences of Section 4(j)), whereupon the Executive shall
continue to receive the consideration set forth in Sections 4(a) through (d)
and Section 4(g)(iii) through the date three years from the Commencement Date.
In addition, the Executive shall be entitled to receive the payments
contemplated by Section 4(c) and Section 4(d) if the event giving rise to such
payment occurs, or a definitive agreement regarding such event is executed, on
or before the date three years from the Commencement Date.
In the event of a termination of Executive's employment for any reason
other than a Termination for Cause or voluntary termination by the Executive,
including, but not limited to a Death Termination Event, Disability Termination
Event, or Termination Without Cause, all options, warrants and restricted stock
then held by and/or granted to the Executive will immediately vest and be
exercisable by the Executive but in the event of the occurrence of an
Extraordinary Transaction, no options, warrants or restricted stock then held
by and/or granted to the Executive will immediately vest as a result thereof.
SECTION 8. WITHHOLDING. The Company shall be entitled to
withhold from amounts payable to the Executive hereunder such amounts as may be
required by applicable law to be so withheld.
SECTION 9. SURVIVAL. Notwithstanding anything in this Agreement
to the contrary, Section 6 of this Agreement shall survive any termination of
this Agreement or cessation of the Executive's employment hereunder for the
periods stated therein.
13
<PAGE> 14
SECTION 10. MODIFICATION. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
SECTION 11. NOTICES. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11).
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 12. WAIVER. Any waiver by either party of a breach of
any provision of Agreement shall not operate as a waiver of any other breach of
such provision or of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement. Any waiver must be in writing.
SECTION 13. BINDING EFFECT. The Executive's rights and
obligations under this Agreement shall not be transferable by assignment or
otherwise, such rights shall not be subject to commutation, encumbrance or the
claims of the Executive's creditors, and any attempt to do any of the foregoing
shall be void. The provisions of this Agreement shall be binding upon and
inure to the benefit of the Executive and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors.
SECTION 14. HEADINGS. The headings in this Agreement are solely
for convenience of reference, and shall be given no effect in the construction
or interpretation of this Agreement.
SECTION 15. ENFORCEMENT. Should the Executive sue to enforce any
of his rights under this Agreement and should the Executive prevail on any
issue in such suit, then the Company shall pay all the Executive's costs of
such suit (including attorneys fees and disbursements). If any taxes are
imposed on such payment, the Company shall make such additional payments to the
Executive as may be necessary, so that after deducting the taxes imposed on all
payments made to the Executive pursuant to this paragraph, the Executive is
left on an after tax basis with an amount equal to his claim for
indemnification prior to the payments described in this sentence.
SECTION 16. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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<PAGE> 15
SECTION 17. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of South Carolina,
without reference to the conflict of law provisions thereof.
SECTION 18. CONSTRUCTION AND INTERPRETATION. Should any
provision of this Agreement require judicial interpretation, the parties hereto
agree that the court interpreting or construing the same shall not apply a
presumption that the terms hereof shall be more strictly construed against one
party by reason of the rule of construction that a document is to be more
strictly construed against the party that itself, or through its agent,
prepared the same, and it is expressly agreed and acknowledged that the
Executive, the Company and their respective attorneys and representatives have
participated in the preparation hereof.
SECTION 19. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING
ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER
OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH
PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS
THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO THE TRIAL BY THE COURT.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INSIGNIA/ESG HOLDINGS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
EXECUTIVE
---------------------------------------------
Name: James A. Aston
16
<PAGE> 1
EXHIBIT 10.14
INSIGNIA/ESG HOLDINGS, INC.
1998 STOCK INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I PURPOSE ............................................... 1
ARTICLE II DEFINITIONS ........................................... 1
ARTICLE III ADMINISTRATION ........................................ 7
ARTICLE IV SHARE AND OTHER LIMITATIONS ........................... 10
ARTICLE V ELIGIBILITY ........................................... 14
ARTICLE VI STOCK OPTIONS ......................................... 14
ARTICLE VII STOCK APPRECIATION RIGHTS ............................. 17
ARTICLE VIII RESTRICTED STOCK ...................................... 19
ARTICLE IX PERFORMANCE SHARES .................................... 22
ARTICLE X PERFORMANCE UNITS ..................................... 23
ARTICLE XI OTHER STOCK-BASED AWARDS .............................. 25
ARTICLE XII NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY ................................ 27
ARTICLE XIII NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS ............. 29
ARTICLE XIV CHANGE IN CONTROL PROVISIONS .......................... 33
ARTICLE XV TERMINATION OR AMENDMENT OF PLAN ...................... 34
ARTICLE XVI UNFUNDED PLAN ......................................... 35
ARTICLE XVII GENERAL PROVISIONS .................................... 36
ARTICLE XVIII EFFECTIVE DATE OF PLAN ................................ 38
ARTICLE XIX TERM OF PLAN .......................................... 39
EXHIBIT A PERFORMANCE CRITERIA .................................. A-1
</TABLE>
i
<PAGE> 3
INSIGNIA/ESG HOLDINGS, INC.
--------------------------
1998 STOCK INCENTIVE PLAN
--------------------------
ARTICLE I
PURPOSE
The purpose of this Insignia/ESG Holdings, Inc. 1998 Stock Incentive
Plan is to enhance the profitability and value of the Company for the benefit of
its stockholders by enabling the Company (i) to offer employees of and
Consultants to the Company and its Affiliates stock-based incentives and other
equity interests in the Company, thereby creating a means to raise the level of
stock ownership by employees and Consultants in order to attract, retain and
reward such individuals and strengthen the mutuality of interests between such
individuals and the Company's stockholders, and (ii) to make equity based awards
to Non-Employee Directors, thereby creating a means to attract, retain and
reward such Non-Employee Directors and strengthen the mutuality of interests
between Non-Employee Directors and the Company's stockholders.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Acquisition Event" has the meaning set forth in Section
4.2(d).
2.2 "Affiliate" means each of the following: (i) any
Subsidiary; (ii) any Parent; (iii) any corporation, trade or business
(including, without limitation, a partnership or limited liability
company) which is directly or indirectly controlled 50% or more
(whether by ownership of stock, assets or an equivalent ownership
interest or voting interest) by the Company or one of its Affiliates;
and (iv) any other entity in which the Company or any of its Affiliates
has a material equity interest and which is designated as an
"Affiliate" by resolution of the Committee.
2.3 "Award" means any award under this Plan of any: (i) Stock
Option; (ii) Stock Appreciation Right; (iii) Restricted Stock; (iv)
Performance Share; (v) Performance Unit;
<PAGE> 4
(vi) Other Stock-Based Award; or (vii) other award providing benefits
similar to (i) through (vi) designed to meet the requirements of a
Foreign Jurisdiction.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means, with respect to a Participant's Termination
of Employment or Termination of Consultancy: (i) in the case where
there is no employment agreement, consulting agreement, change in
control agreement or similar agreement in effect between the Company or
an Affiliate and the Participant at the time of the grant of the Award
(or where there is such an agreement but it does not define "cause" (or
words of like import)), termination due to a Participant's
insubordination, dishonesty, incompetence, moral turpitude, other
misconduct of any kind or the refusal to perform his or her duties or
responsibilities for any reason other than illness or incapacity; or
(ii) in the case where there is an employment agreement, consulting
agreement, change in control agreement or similar agreement in effect
between the Company or an Affiliate and the Participant at the time of
the grant of the Award that defines "cause" (or words of like import),
as defined under such agreement; provided, however, that with regard to
any agreement that conditions "cause" on occurrence of a change in
control, such definition of "cause" shall not apply until a change in
control actually takes place and then only with regard to a termination
thereafter. With respect to a Participant's Termination of
Directorship, "cause" shall mean an act or failure to act that
constitutes cause for removal of a director under applicable Delaware
law.
2.6 "Change in Control" has the meaning set forth in Article
XIII or Article XIV, as applicable.
2.7 "Code" means the Internal Revenue Code of 1986, as
amended. Any reference to any section of the Code shall also be a
reference to any successor provision.
2.8 "Committee" means: (a) with respect to the application of
this Plan to Eligible Employees and Consultants, a committee or
subcommittee of the Board appointed from time to time by the Board,
which committee or subcommittee shall consist of two or more
non-employee directors, each of whom is intended to be, to the extent
required by Rule 16b-3, a "non-employee director" as defined in Rule
16b-3 and, to the extent required by Section 162(m) of the Code and any
regulations thereunder, an "outside director" as defined under Section
162(m) of the Code; provided, however, that if and to the extent that
no Committee exists which has the authority to administer this Plan,
the functions of the Committee shall be exercised by the Board and all
references herein to the Committee shall be deemed to be references to
the Board; and (b) with respect to the application of this Plan to
Non-Employee Directors, the Board.
2.9 "Common Stock" means the common stock, $.01 par value per
share, of the Company.
2
<PAGE> 5
2.10 "Company" means Insignia/ESG Holdings, Inc., a Delaware
corporation, and its successors by operation of law.
2.11 "Consultant" means any advisor or consultant to the
Company or its Affiliates.
2.12 "Disability" means, with respect to an Eligible Employee,
Consultant or Non-Employee Director, a permanent and total disability
as defined in Section 22(e)(3) of the Code. A Disability shall only be
deemed to occur at the time of the determination by the Committee of
the Disability.
2.13 "Distribution Date" means the date of distribution of
Common Stock by Insignia Financial Group, Inc. to holders of Class A
Common Stock, par value $.01 per share, of Insignia Financial Group,
Inc.
2.14 "Effective Date" means the effective date of this Plan as
defined in Article XVIII.
2.15 "Eligible Employee" means each employee of the Company or
an Affiliate.
2.16 "Exchange Act" means the Securities Exchange Act of 1934,
as amended. Any references to any section of the Exchange Act shall
also be a reference to any successor provision.
2.17 "Fair Market Value" means, unless otherwise required by
any applicable provision of the Code or any regulations issued
thereunder, as of any date, the last sales price for the Common Stock
on the applicable date: (i) as reported on the principal national
securities exchange on which it is then traded or the Nasdaq Stock
Market, Inc. or (ii) if not traded on any such national securities
exchange or the Nasdaq Stock Market, Inc. as quoted on an automated
quotation system sponsored by the National Association of Securities
Dealers, Inc. If the Common Stock is not readily tradable on a national
securities exchange, the Nasdaq Stock Market, Inc. or any automated
quotation system sponsored by the National Association of Securities
Dealers, Inc., its Fair Market Value shall be set in good faith by the
Committee. Notwithstanding anything herein to the contrary, "Fair
Market Value" means the price for Common Stock set by the Committee in
good faith based on reasonable methods set forth under Section 422 of
the Code and the regulations thereunder including, without limitation,
a method utilizing the average of prices of the Common Stock reported
on the principal national securities exchange on which it is then
traded during a reasonable period designated by the Committee. For
purposes of the grant of any Stock Option, the applicable date shall be
the date for which the last sales price is available at the time of
grant. For purposes of the conversion of a Performance Unit to shares
of Common Stock for reference purposes, the applicable date shall be
the date determined by the Committee in accordance with Section 10.1.
For purposes of the exercise of any Stock Appreciation Right, the
applicable date shall be the
3
<PAGE> 6
date a notice of exercise is received by the Committee or, if not a day
on which the applicable market is open, the next day that it is open.
2.18 "Foreign Jurisdiction" means any jurisdiction outside of
the United States including, without limitation, countries, states,
provinces and localities.
2.19 "Incentive Stock Option" means any Stock Option awarded
to an Eligible Employee under this Plan intended to be and designated
as an "Incentive Stock Option" within the meaning of Section 422 of the
Code.
2.20 "Limited Stock Appreciation Right" means an Award of a
limited Tandem Stock Appreciation Right or a Non-Tandem Stock
Appreciation Right made pursuant to Section 7.5 of this Plan.
2.21 "Non-Employee Director" means a director of the Company
who is not an active employee of the Company or an Affiliate and who is
not an officer, director or employee of (i) any entity which, directly
or indirectly, beneficially owns or controls 5% or more of the combined
voting power of the then outstanding voting securities of the Company
(or any Subsidiary) entitled to vote generally in the election of
directors of the Company (or, if applicable, the Subsidiary) or (ii)
any entity controlling, controlled by or under common control (within
the meaning of Rule 405 of the Securities Act) with any such entity.
2.22 "Non-Qualified Stock Option" means any Stock Option
awarded under this Plan that is not an Incentive Stock Option.
2.23 "Non-Tandem Stock Appreciation Right" means a Stock
Appreciation Right entitling a Participant to receive an amount in cash
or Common Stock (as determined by the Committee in its sole discretion)
equal to the excess of: (i) the Fair Market Value of a share of Common
Stock as of the date such right is exercised, over (ii) the aggregate
exercise price of such right.
2.24 "Other Stock-Based Award" means an Award of Common Stock
and other Awards made pursuant to Article XI that are valued in whole
or in part by reference to, or are payable in or otherwise based on,
Common Stock, including, without limitation, an Award valued by
reference to performance of an Affiliate.
2.25 "Parent" means any parent corporation of the Company
within the meaning of Section 424(e) of the Code.
2.26 "Participant" means any Eligible Employee or Consultant
to whom an Award has been made under this Plan and each Non-Employee
Director of the Company; provided, however, that a Non-Employee
Director shall be a Participant for purposes of the Plan solely with
respect to awards of Stock Options pursuant to Article XIII.
4
<PAGE> 7
2.27 "Performance Criteria" has the meaning set forth in
Exhibit A.
2.28 "Performance Cycle" has the meaning set forth in Section
10.1.
2.29 "Performance Goal" means the objective performance goals
established by the Committee in accordance with Section 162(m) of the
Code and based on one or more Performance Criteria.
2.30 "Performance Period" has the meaning set forth in Section
9.1.
2.31 "Performance Share" means an Award made pursuant to
Article IX of this Plan of the right to receive Common Stock or, as
determined by the Committee in its sole discretion, cash of an
equivalent value at the end of the Performance Period or thereafter.
2.32 "Performance Unit" means an Award made pursuant to
Article X of this Plan of the right to receive a fixed dollar amount,
payable in cash or Common Stock (or a combination of both) as
determined by the Committee in its sole discretion, at the end of a
specified Performance Cycle or thereafter.
2.33 "Plan" means this Insignia/ESG Holdings, Inc. 1998 Stock
Incentive Plan, as amended from time to time.
2.34 "Reference Stock Option" has the meaning set forth in
Section 7.1.
2.35 "Restricted Stock" means an Award of shares of Common
Stock under this Plan that is subject to restrictions under Article
VIII.
2.36 "Restriction Period" has the meaning set forth in Section
8.3(a) with respect to Restricted Stock.
2.37 "Retirement" means a Termination of Employment or
Termination of Consultancy without Cause by a Participant at or after
age 65 or such earlier date after age 50 as may be approved by the
Committee with regard to such Participant. With respect to a
Participant's Termination of Directorship, Retirement shall mean the
failure to stand for reelection or the failure to be reelected at or
after a Participant has attained age 65 or, with the consent of the
Board, before age 65 but after age 50.
2.38 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.39 "Section 162(m) of the Code" means Section 162(m) of the
Code and any Treasury regulations thereunder.
5
<PAGE> 8
2.40 "Securities Act" means the Securities Act of 1933, as
amended. Any reference to any section of the Securities Act shall also
be a reference to any successor provision.
2.41 "Stock Appreciation Right" or "SAR" means the right
pursuant to an Award granted under Article VII.
2.42 "Stock Option" or "Option" means any option to purchase
shares of Common Stock granted to Eligible Employees or Consultants
under Article VI or to Non-Employee Directors under Article XIII.
2.43 "Subsidiary" means any subsidiary corporation of the
Company within the meaning of Section 424(f) of the Code.
2.44 "Tandem Stock Appreciation Right" means a Stock
Appreciation Right entitling the holder to surrender to the Company all
(or a portion) of a Stock Option in exchange for an amount in cash or
Common Stock (as determined by the Committee in its sole discretion)
equal to the excess of: (i) the Fair Market Value, on the date such
Stock Option (or such portion thereof) is surrendered, of the Common
Stock covered by such Stock Option (or such portion thereof), over (ii)
the aggregate exercise price of such Stock Option (or such portion
thereof).
2.45 "Ten Percent Stockholder" means a person owning stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company, its Subsidiaries or its Parent.
2.46 "Termination of Consultancy" means, with respect to a
Consultant, that the Consultant is no longer acting as a consultant to
the Company or an Affiliate. In the event an entity shall cease to be
an Affiliate, there shall be deemed a Termination of Consultancy of any
individual who is not otherwise a Consultant to the Company or another
Affiliate at the time the entity ceases to be an Affiliate.
2.47 "Termination of Directorship" means, with respect to a
Non-Employee Director, that the Non-Employee Director has ceased to be
a director of the Company.
2.48 "Termination of Employment" means: (i) a termination of
employment (for reasons other than a military or personal leave of
absence granted by the Company) of a Participant from the Company and
its Affiliates; or (ii) when an entity which is employing a Participant
ceases to be an Affiliate, unless the Participant otherwise is, or
thereupon becomes, employed by the Company or another Affiliate.
2.49 "Transfer" means anticipate, alienate, attach, sell,
assign, pledge, encumber, charge, hypothecate or otherwise transfer and
"Transferred" has a correlative meaning.
6
<PAGE> 9
ARTICLE III
ADMINISTRATION
3.1 The Committee. The Plan shall be administered and
interpreted by the Committee. If for any reason the appointed Committee
does not meet the requirements of Rule 16b-3 or Section 162(m) of the
Code, such noncompliance with the requirements of Rule 16b-3 and
Section 162(m) of the Code shall not affect the validity of Awards,
grants, interpretations or other actions of the Committee.
3.2 Grants of Awards. The Committee shall have full authority
to grant to Eligible Employees and Consultants, pursuant to the terms
of this Plan: (i) Stock Options; (ii) Tandem Stock Appreciation Rights
and Non-Tandem Stock Appreciation Rights; (iii) Restricted Stock; (iv)
Performance Shares; (v) Performance Units; (vi) Other Stock-Based
Awards; and (vii) other awards providing benefits similar to (i)
through (vi) designed to meet the requirements of Foreign
Jurisdictions. All Awards shall be granted by, confirmed by, and
subject to the terms of, a written agreement executed by the Company
and the Participant. In particular, the Committee shall have the
authority:
(a) to select the Eligible Employees and Consultants
to whom Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Awards,
including any combination of two or more Awards, are to be
granted hereunder to one or more Eligible Employees or
Consultants;
(c) to determine, in accordance with the terms of
this Plan, the number of shares of Common Stock to be covered
by each Award granted hereunder;
(d) to determine the terms and conditions, not
inconsistent with the terms of this Plan, of any Award granted
hereunder (including, but not limited to, the exercise or
purchase price (if any), any restriction or limitation, any
vesting schedule or acceleration thereof and any forfeiture
restrictions or waiver thereof, regarding any Award and the
shares of Common Stock relating thereto, based on such
factors, if any, as the Committee shall determine, in its sole
discretion);
(e) to determine whether and under what circumstances
a Stock Option may be settled in cash, Common Stock and/or
Restricted Stock under Section 6.3(d) or, with respect to
Stock Options granted to Non-Employee Directors, Section
13.4(d);
(f) to determine whether, to what extent and under
what circumstances to provide loans (which shall bear interest
at the rate the Committee shall provide) to Eligible Employees
and Consultants in order to exercise Stock Options under this
Plan or to purchase Awards under this Plan (including shares
of Common Stock);
7
<PAGE> 10
(g) to determine whether a Stock Option is an
Incentive Stock Option or Non-Qualified Stock Option, whether
a Stock Appreciation Right is a Tandem Stock Appreciation
Right or Non-Tandem Stock Appreciation Right or whether an
Award is intended to satisfy Section 162(m) of the Code;
(h) to determine whether to require an Eligible
Employee or Consultant, as a condition of the granting of any
Award, not to sell or otherwise dispose of shares of Common
Stock acquired pursuant to the exercise of an Option or an
Award for a period of time as determined by the Committee, in
its sole discretion, following the date of the acquisition of
such Option or Award;
(i) to modify, extend or renew an Award, subject to
Article XV herein, provided, however, that if an Award is
modified, extended or renewed and thereby deemed to be the
issuance of a new Award under the Code or the applicable
accounting rules, the exercise price of an Award may continue
to be the original exercise price even if less than the Fair
Market Value of the Common Stock at the time of such
modification, extension or renewal; and
(j) to offer to buy out an Option previously granted,
based on such terms and conditions as the Committee shall
establish and communicate to the Participant at the time such
offer is made.
3.3 Guidelines. Subject to Article XV hereof, the Committee
shall have the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing this Plan and perform all
acts, including the delegation of its administrative responsibilities,
as it shall, from time to time, deem advisable; to construe and
interpret the terms and provisions of this Plan and any Award issued
under this Plan (and any agreements relating thereto); and to otherwise
supervise the administration of this Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in this
Plan or in any agreement relating thereto in the manner and to the
extent it shall deem necessary to effectuate the purpose and intent of
this Plan. The Committee may adopt special guidelines and provisions
for persons who are residing in, or subject to, the taxes of, Foreign
Jurisdictions to comply with applicable tax and securities laws and may
impose any limitations and restrictions that it deems necessary to
comply with the applicable tax and securities laws of such Foreign
Jurisdictions. To the extent applicable, this Plan is intended to
comply with Section 162(m) of the Code and the applicable requirements
of Rule 16b-3 and shall be limited, construed and interpreted in a
manner so as to comply therewith.
3.4 Decisions Final. Any decision, interpretation or other
action made or taken in good faith by or at the direction of the
Company, the Board or the Committee (or any of its members) arising out
of or in connection with this Plan shall be within the absolute
discretion of all and each of them, as the case may be, and shall be
final, binding and
8
<PAGE> 11
conclusive on the Company and all employees and Participants and their
respective heirs, executors, administrators, successors and assigns.
3.5 Reliance on Counsel. The Company, the Board or the
Committee may consult with legal counsel, who may be counsel for the
Company or other counsel, with respect to its obligations or duties
hereunder, or with respect to any action or proceeding or any question
of law, and shall not be liable with respect to any action taken or
omitted by it in good faith pursuant to the advice of such counsel.
3.6 Procedures. If the Committee is appointed, the Board shall
designate one of the members of the Committee as chairman and the
Committee shall hold meetings, subject to the By-Laws of the Company,
at such times and places as it shall deem advisable. A majority of the
Committee members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by all the Committee
members in accordance with the By-Laws of the Company, shall be fully
as effective as if it had been made by a vote at a meeting duly called
and held. The Committee shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it
shall deem advisable.
3.7 Designation of Consultants/Liability.
(a) The Committee may designate employees of the
Company and professional advisors to assist the Committee in
the administration of this Plan and may grant authority to
officers to execute agreements or other documents on behalf of
the Committee.
(b) The Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the
administration of this Plan and may rely upon any opinion
received from any such counsel or consultant and any
computation received from any such consultant or agent.
Expenses incurred by the Committee in the engagement of any
such counsel, consultant or agent shall be paid by the
Company. The Committee, its members and any employee of the
Company designated pursuant to paragraph (a) above shall not
be liable for any action or determination made in good faith
with respect to this Plan. To the maximum extent permitted by
applicable law, no officer of the Company or member or former
member of the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or
any Award granted under it. To the maximum extent permitted by
applicable law or the Certificate of Incorporation or By-Laws
of the Company and to the extent not covered by insurance,
each officer and member or former member of the Committee
shall be indemnified and held harmless by the Company against
any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Company) or liability (including
any sum paid in settlement of a claim with the approval of the
Company), and advanced amounts necessary to pay the foregoing
at the earliest time and to the fullest extent
9
<PAGE> 12
permitted, arising out of any act or omission to act in
connection with this Plan, except to the extent arising out of
such officer's, member's or former member's own fraud or bad
faith. Such indemnification shall be in addition to any rights
of indemnification the officers, directors or members or
former officers, directors or members may have under
applicable law or under the Certificate of Incorporation or
By-Laws of the Company or any Affiliate. Notwithstanding
anything else herein, this indemnification will not apply to
the actions or determinations made by an individual with
regard to Awards granted to him or her under this Plan.
ARTICLE IV
SHARE AND OTHER LIMITATIONS
4.1 Shares.
(a) General Limitation. The aggregate number of
shares of Common Stock which may be issued or used for
reference purposes under this Plan or with respect to which
Awards may be granted shall not exceed the greater of (i)
3,500,000 shares of Common Stock (subject to any increase or
decrease pursuant to Section 4.2) with respect to all types of
Awards or (ii) 12% of the number of shares of Common Stock
issued and outstanding (assuming full dilution of all
outstanding Awards and equity convertible into Common Stock),
determined as of the Company's most recent fiscal quarter
immediately preceding the grant of any Award (subject to any
increase or decrease pursuant to Section 4.2) with respect to
all types of Awards other than Incentive Stock Options. The
shares of Common Stock available under this Plan may be either
authorized and unissued Common Stock or Common Stock held in
or acquired for the treasury of the Company. To the extent
that an Incentive Stock Option is disqualified and no longer
an Incentive Stock Option, the number of shares of Common
Stock underlying the Stock Option shall continue to count
against the aggregate limit of 3,500,000 shares of Common
Stock set forth herein. If any Stock Option or Stock
Appreciation Right granted under this Plan expires, terminates
or is canceled for any reason without having been exercised in
full or, with respect to Stock Options, the Company
repurchases any Stock Option, the number of shares of Common
Stock underlying such unexercised or repurchased Stock Option
or any unexercised Stock Appreciation Right shall again be
available for the purposes of Awards under this Plan. If any
shares of Restricted Stock, Performance Shares or Performance
Units awarded under this Plan to a Participant are forfeited
or repurchased by the Company for any reason, the number of
forfeited or repurchased shares of Restricted Stock,
Performance Shares or Performance Units shall again be
available for the purposes of Awards under this Plan. If a
Tandem Stock Appreciation Right is granted or a Limited Stock
Appreciation Right is granted in tandem with a Stock Option,
such grant shall only apply once against the maximum number of
shares of Common
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Stock which may be issued under this Plan. In determining the
number of shares of Common Stock available for Awards other
than Awards of Incentive Stock Options, if Common Stock has
been exchanged by a Participant as full or partial payment to
the Company, or for withholding, in connection with the
exercise of a Stock Option or the number shares of Common
Stock otherwise deliverable has been reduced for withholding,
the number of shares of Common Stock exchanged as payment in
connection with the exercise or for withholding or reduced
shall again be available for purposes of Awards under this
Plan.
(b) Individual Participant Limitations. (i) The
maximum number of shares of Common Stock subject to any Award
of Stock Options, Stock Appreciation Rights, Performance
Shares or shares of Restricted Stock for which the grant of
such Award or the lapse of the relevant Restriction Period is
subject to the attainment of Performance Goals in accordance
with Section 8.3(a)(ii) herein which may be granted under this
Plan during any fiscal year of the Company to each Eligible
Employee or Consultant shall be 500,000 shares per type of
Award (subject to any increase or decrease pursuant to Section
4.2), provided that the maximum number of shares of Common
Stock for all types of Awards does not exceed 500,000 during
any fiscal year of the Company. If a Tandem Stock Appreciation
Right is granted or a Limited Stock Appreciation Right is
granted in tandem with a Stock Option, it shall apply against
the Eligible Employee's or Consultant's individual share
limitations for both Stock Appreciation Rights and Stock
Options.
(ii) There are no annual individual Eligible
Employee or Consultant share limitations on Restricted Stock
for which the grant of such Award or the lapse of the relevant
Restriction Period is not subject to attainment of Performance
Goals in accordance with Section 8.3(a)(ii) hereof.
(iii) The maximum value at grant of
Performance Units which may be granted under this Plan during
any fiscal year of the Company to each Eligible Employee or
Consultant shall be $250,000. Each Performance Unit shall be
referenced to one share of Common Stock and shall be charged
against the available shares under this Plan at the time the
unit value measurement is converted to a referenced number of
shares of Common Stock in accordance with Section 10.1.
(iv) The individual Participant limitations
set forth in this Section 4.1(b) shall be cumulative; that is,
to the extent that shares of Common Stock for which Awards are
permitted to be granted to an Eligible Employee or a
Consultant during a fiscal year are not covered by an Award to
such Eligible Employee or Consultant in a fiscal year, the
number of shares of Common Stock available for Awards to such
Eligible Employee or Consultant shall automatically increase
in the subsequent fiscal years during the term of the Plan
until used.
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4.2 Changes.
(a) The existence of this Plan and the Awards granted
hereunder shall not affect in any way the right or power of
the Board or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its
business, any merger or consolidation of the Company or any
Affiliate, any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting Common Stock, the
dissolution or liquidation of the Company or any Affiliate,
any sale or transfer of all or part of the assets or business
of the Company or any Affiliate or any other corporate act or
proceeding.
(b) Subject to the provisions of Section 4.2(d), in
the event of any such change in the capital structure or
business of the Company by reason of any stock split, reverse
stock split, stock dividend, combination or reclassification
of shares, recapitalization, or other change in the capital
structure of the Company, merger, consolidation, spin-off,
reorganization, partial or complete liquidation, issuance of
rights or warrants to purchase any Common Stock or securities
convertible into Common Stock, or any other corporate
transaction or event having an effect similar to any of the
foregoing and effected without receipt of consideration by the
Company, then the aggregate number and kind of shares which
thereafter may be issued under this Plan, the number and kind
of shares or other property (including cash) to be issued upon
exercise of an outstanding Stock Option or other Awards
granted under this Plan and the purchase price thereof shall
be appropriately adjusted consistent with such change in such
manner as the Committee may deem equitable to prevent
substantial dilution or enlargement of the rights granted to,
or available for, Participants under this Plan, and any such
adjustment determined by the Committee in good faith shall be
final, binding and conclusive on the Company and all
Participants and employees and their respective heirs,
executors, administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from
any adjustment in Options or Awards pursuant to Section 4.2(a)
or (b) shall be aggregated until, and eliminated at, the time
of exercise by rounding-down for fractions less than one-half
and rounding-up for fractions equal to or greater than
one-half. No cash settlements shall be made with respect to
fractional shares eliminated by rounding. Notice of any
adjustment shall be given by the Committee to each Participant
whose Award has been adjusted and such adjustment (whether or
not such notice is given) shall be effective and binding for
all purposes of this Plan.
(d) In the event of a merger or consolidation in
which the Company is not the surviving entity or in the event
of any transaction that results in the acquisition of
substantially all of the Company's outstanding Common Stock by
a single person or entity or by a group of persons and/or
entities acting in concert, or in the event
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of the sale or transfer of all or substantially all of the
Company's assets (all of the foregoing being referred to as
"Acquisition Events"), then the Committee may, in its sole
discretion, terminate all outstanding Stock Options and Stock
Appreciation Rights, effective as of the date of the
Acquisition Event, by delivering notice of termination to each
Participant at least 30 days prior to the date of consummation
of the Acquisition Event, in which case during the period from
the date on which such notice of termination is delivered to
the consummation of the Acquisition Event, each such
Participant shall have the right to exercise in full all of
his or her Stock Options and Stock Appreciation Rights that
are then outstanding (without regard to any limitations on
exercisability otherwise contained in the Stock Option or
Award Agreements), but any such exercise shall be contingent
upon and subject to the occurrence of the Acquisition Event,
and, provided that, if the Acquisition Event does not take
place within a specified period after giving such notice for
any reason whatsoever, the notice and exercise pursuant
thereto shall be null and void.
If an Acquisition Event occurs but the Committee does not
terminate the outstanding Stock Options and Stock Appreciation Rights
pursuant to this Section 4.2(d), then the provisions of Section 4.2(b)
shall apply.
4.3 Minimum Purchase Price. Notwithstanding any provision of
this Plan to the contrary, if authorized but previously unissued shares
of Common Stock are issued under this Plan, such shares shall not be
issued for a consideration which is less than as permitted under
applicable law.
4.4 Assumption of Awards. Except with regard to awards that
are subject to termination agreements with Insignia Financial Group
Inc. providing for the cash-out and cancellation of the award, awards
that were granted prior to the Effective Date under the Insignia
Financial Group Inc.'s 1992 Stock Incentive Plan, as amended, to
individuals who became Eligible Employees of or Consultants to the
Company or an Affiliate as of the Distribution Date and that were
outstanding immediately prior to the Distribution Date will be assumed
by the Company as of the Distribution Date and converted into Awards
hereunder based on the Company's Common Stock in a manner determined by
the Committee. The terms of such Awards shall be governed by the terms
of this Plan as of the Effective Date. Notwithstanding the foregoing,
such Awards shall continue to be governed by the terms of the
applicable agreement in effect prior to the Effective Date, except as
adjusted to reflect the appropriate number of shares of Common Stock
and, with respect to Stock Options, the appropriate exercise price.
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ARTICLE V
ELIGIBILITY
5.1 General Eligibility. All Eligible Employees and
Consultants and prospective employees of and Consultants to the Company
and its Affiliates are eligible to be granted Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock, Performance
Shares, Performance Units, Other Stock-Based Awards and awards
providing benefits similar to each of the foregoing designed to meet
the requirements of Foreign Jurisdictions under this Plan. Eligibility
for the grant of an Award and actual participation in this Plan shall
be determined by the Committee in its sole discretion. The vesting and
exercise of Awards granted to a prospective employee or Consultant are
conditioned upon such individual actually becoming an Eligible Employee
or Consultant.
5.2 Incentive Stock Options. All Eligible Employees of the
Company, its Subsidiaries and its Parent (if any) are eligible to be
granted Incentive Stock Options under this Plan. Notwithstanding the
foregoing, unless otherwise permitted pursuant to the Code, "qualified
real estate agents" (as defined in Section 3508 of the Code) shall not
be eligible to be granted Incentive Stock Options under this Plan.
Eligibility for the grant of an Award and actual participation in this
Plan shall be determined by the Committee in its sole discretion.
5.3 Non-Employee Directors. Non-Employee Directors are only
eligible to receive an Award of Stock Options in accordance with
Article XIII of the Plan.
ARTICLE VI
STOCK OPTIONS
6.1 Stock Options. Each Stock Option granted hereunder shall
be one of two types: (i) an Incentive Stock Option intended to satisfy
the requirements of Section 422 of the Code; or (ii) a Non-Qualified
Stock Option.
6.2 Grants. The Committee shall have the authority to grant to
any Eligible Employee one or more Incentive Stock Options,
Non-Qualified Stock Options or both types of Stock Options (in each
case with or without Stock Appreciation Rights). To the extent that any
Stock Option does not qualify as an Incentive Stock Option (whether
because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not
qualify, shall constitute a separate NonQualified Stock Option. The
Committee shall have the authority to grant any Consultant one or more
Non-Qualified Stock Options (with or without Stock Appreciation
Rights). Notwithstanding any other provision of this Plan to the
contrary or any provision in an agreement evidencing the grant of a
Stock Option to the contrary, any Stock Option
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granted to an Eligible Employee of an Affiliate (other than an
Affiliate which is a Parent or a Subsidiary) shall be a Non-Qualified
Stock Option.
6.3 Terms of Stock Options. Stock Options granted under this
Plan shall be subject to the following terms and conditions, and shall
be in such form and contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem
desirable:
(a) Exercise Price. The exercise price per share of
Common Stock purchasable under an Incentive Stock Option or a
Stock Option intended to be "performance-based" for purposes
of Section 162(m) of the Code shall be determined by the
Committee at the time of grant, but shall not be less than
100% of the Fair Market Value of the share of Common Stock at
the time of grant; provided, however, that if an Incentive
Stock Option is granted to a Ten Percent Stockholder, the
exercise price shall be no less than 110% of the Fair Market
Value of the Common Stock. The exercise price per share of
Common Stock purchasable under a Non-Qualified Stock Option
shall be determined by the Committee.
(b) Stock Option Term. The term of each Stock Option
shall be fixed by the Committee; provided, however, that no
Stock Option shall be exercisable more than 10 years after the
date such Stock Option is granted; and further provided that
the term of an Incentive Stock Option granted to a Ten Percent
Stockholder shall not exceed 5 years.
(c) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee at
grant. If the Committee provides, in its discretion, that any
Stock Option is exercisable subject to certain limitations
(including, without limitation, that such Stock Option is
exercisable only in installments or within certain time
periods), the Committee may waive such limitations on the
exercisability at any time at or after grant in whole or in
part (including, without limitation, waiver of the installment
exercise provisions or acceleration of the time at which such
Stock Option may be exercised), based on such factors, if any,
as the Committee shall determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever
installment exercise and waiting period provisions apply under
subsection (c) above, Stock Options may be exercised in whole
or in part at any time and from time to time during the Stock
Option term by giving written notice of exercise to the
Committee specifying the number of shares to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price as follows: (i) in cash or by check, bank draft
or money order payable to the order of the Company; (ii) if
the Common Stock is traded on a national securities exchange,
the Nasdaq Stock Market, Inc. or quoted on a national
quotation system sponsored by the National Association of
Securities
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Dealers, through a "cashless exercise" procedure whereby the
Participant delivers irrevocable instructions to a broker to
deliver promptly to the Company an amount equal to the
purchase price; or (iii) on such other terms and conditions as
may be acceptable to the Committee (including, without
limitation, the relinquishment of Stock Options or by payment
in full or in part in the form of Common Stock owned by the
Participant for a period of at least 6 months (and for which
the Participant has good title free and clear of any liens and
encumbrances) based on the Fair Market Value of the Common
Stock on the payment date as determined by the Committee). No
shares of Common Stock shall be issued until payment therefor,
as provided herein, has been made or provided for.
(e) Incentive Stock Option Limitations. To the extent
that the aggregate Fair Market Value (determined as of the
time of grant) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by
an Eligible Employee during any calendar year under this Plan
and/or any other stock option plan of the Company, any
Subsidiary or any Parent exceeds $100,000, such Options shall
be treated as Non-Qualified Stock Options. In addition, if an
Eligible Employee does not remain employed by the Company, any
Subsidiary or any Parent at all times from the time an
Incentive Stock Option is granted until 3 months prior to the
date of exercise thereof (or such other period as required by
applicable law), such Stock Option shall be treated as a
Non-Qualified Stock Option. Should any provision of this Plan
not be necessary in order for the Stock Options to qualify as
Incentive Stock Options, or should any additional provisions
be required, the Committee may amend this Plan accordingly,
without the necessity of obtaining the approval of the
stockholders of the Company.
(f) Form, Modification, Extension and Renewal of
Stock Options. Subject to the terms and conditions and within
the limitations of this Plan, Stock Options shall be evidenced
by such form of agreement or grant as is approved by the
Committee, and the Committee may (i) modify, extend or renew
outstanding Stock Options granted under this Plan (provided
that the rights of a Participant are not reduced without his
consent), and (ii) accept the surrender of outstanding Stock
Options (up to the extent not theretofore exercised) and
authorize the granting of new Stock Options in substitution
therefor (to the extent not theretofore exercised).
(g) Other Terms and Conditions. Stock Options may
contain such other provisions, which shall not be inconsistent
with any of the terms of this Plan, as the Committee shall
deem appropriate including, without limitation, permitting
"reloads" such that the same number of Stock Options are
granted as the number of Stock Options exercised, shares used
to pay for the exercise price of Stock Options or shares used
to pay withholding taxes ("Reloads"). With respect to Reloads,
the exercise price of the new Stock Option shall be the Fair
Market Value on the date of the "reload" and the term of the
Stock Option shall be the same as
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the remaining term of the Stock Options that are exercised, if
applicable, or such other exercise price and term as
determined by the Committee.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 Tandem Stock Appreciation Rights. Stock Appreciation
Rights may be granted in conjunction with all or part of any Stock
Option (a "Reference Stock Option") granted under this Plan ("Tandem
Stock Appreciation Rights"). In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the
grant of such Reference Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of
such Reference Stock Option. Consultants shall not be eligible for a
grant of Tandem Stock Appreciation Rights granted in conjunction with
all or part of an Incentive Stock Option.
7.2 Terms and Conditions of Tandem Stock Appreciation Rights.
Tandem Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of this Plan, as shall
be determined from time to time by the Committee, including Article XII
and the following:
(a) Term. A Tandem Stock Appreciation Right or
applicable portion thereof granted with respect to a Reference
Stock Option shall terminate and no longer be exercisable upon
the termination or exercise of the Reference Stock Option,
except that, unless otherwise determined by the Committee, in
its sole discretion, at the time of grant, a Tandem Stock
Appreciation Right granted with respect to less than the full
number of shares covered by the Reference Stock Option shall
not be reduced until and then only to the extent the exercise
or termination of the Reference Stock Option causes the number
of shares covered by the Tandem Stock Appreciation Right to
exceed the number of shares remaining available and
unexercised under the Reference Stock Option.
(b) Exercisability. Tandem Stock Appreciation Rights
shall be exercisable only at such time or times and to the
extent that the Reference Stock Options to which they relate
shall be exercisable in accordance with the provisions of
Article VI and this Article VII.
(c) Method of Exercise. A Tandem Stock Appreciation
Right may be exercised by a Participant by surrendering the
applicable portion of the Reference Stock Option. Upon such
exercise and surrender, the Participant shall be entitled to
receive an amount determined in the manner prescribed in this
Section 7.2. Stock Options which have been so surrendered, in
whole or in part, shall no longer
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be exercisable to the extent the related Tandem Stock
Appreciation Rights have been exercised.
(d) Payment. Upon the exercise of a Tandem Stock
Appreciation Right, a Participant shall be entitled to receive
up to, but no more than, an amount in cash and/or Common Stock
(as chosen by the Committee in its sole discretion at grant,
or thereafter if no rights of a Participant are reduced) equal
in value to the excess of the Fair Market Value of one share
of Common Stock over the option price per share specified in
the Reference Stock Option, multiplied by the number of shares
in respect of which the Tandem Stock Appreciation Right shall
have been exercised.
(e) Deemed Exercise of Reference Stock Option. Upon
the exercise of a Tandem Stock Appreciation Right, the
Reference Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in
Article IV of this Plan on the number of shares of Common
Stock to be issued under this Plan.
7.3 Non-Tandem Stock Appreciation Rights. Non-Tandem Stock
Appreciation Rights may also be granted without reference to any Stock
Option granted under this Plan.
7.4 Terms and Conditions of Non-Tandem Stock Appreciation
Rights. Non-Tandem Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of this
Plan, as shall be determined from time to time by the Committee,
including Article XII and the following:
(a) Term. The term of each Non-Tandem Stock
Appreciation Right shall be fixed by the Committee, but shall
not be greater than ten (10) years after the date the right is
granted.
(b) Exercisability. Non-Tandem Stock Appreciation
Rights shall be exercisable at such time or times and subject
to such terms and conditions as shall be determined by the
Committee at grant. If the Committee provides, in its
discretion, that any such right is exercisable subject to
certain limitations (including, without limitation, that it is
exercisable only in installments or within certain time
periods), the Committee may waive such limitation on the
exercisability at any time at or after grant in whole or in
part (including, without limitation, waiver of the installment
exercise provisions or acceleration of the time at which
rights may be exercised), based on such factors, if any, as
the Committee shall determine, in its sole discretion.
(c) Method of Exercise. Subject to whatever
installment exercise and waiting period provisions apply under
subsection (b) above, Non-Tandem Stock Appreciation Rights may
be exercised in whole or in part at any time and from time
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to time during the option term, by giving written notice of
exercise to the Company specifying the number of Non-Tandem
Stock Appreciation Rights to be exercised.
(d) Payment. Upon the exercise of a Non-Tandem Stock
Appreciation Right a Participant shall be entitled to receive,
for each right exercised, up to, but no more than, an amount
in cash and/or Common Stock (as chosen by the Committee in its
sole discretion at grant, or thereafter if no rights of a
Participant are reduced) equal in value to the excess of the
Fair Market Value of one share of Common Stock on the date the
right is exercised over the Fair Market Value of one share of
Common Stock on the date the right was awarded to the
Participant.
7.5 Limited Stock Appreciation Rights. The Committee may, in
its sole discretion, grant a Tandem Stock Appreciation Right or a
Non-Tandem Stock Appreciation Right as a Limited Stock Appreciation
Right. Limited Stock Appreciation Rights may be exercised only upon the
occurrence of a Change in Control or such other event as the Committee
may, in its sole discretion, designate at the time of grant or
thereafter. Upon the exercise of limited Stock Appreciation Rights,
except as otherwise provided in an Award agreement, the Participant
shall receive in cash or Common Stock, as determined by the Committee,
an amount equal to the amount (i) set forth in Section 7.2(d) with
respect to Tandem Stock Appreciation Rights, or (ii) set forth in
Section 7.4(d) with respect to Non-Tandem Stock Appreciation Rights, as
applicable.
ARTICLE VIII
RESTRICTED STOCK
8.1 Awards of Restricted Stock. Shares of Restricted Stock may
be issued to Eligible Employees or Consultants either alone or in
addition to other Awards granted under this Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which,
grants of Restricted Stock will be made, the number of shares to be
awarded, the price (if any) to be paid by the recipient (subject to
Section 8.2), the time or times within which such Awards may be subject
to forfeiture, the vesting schedule and rights to acceleration thereof,
and all other terms and conditions of the Awards. The Committee may
condition the grant or vesting of Restricted Stock upon the attainment
of specified performance goals, including established Performance Goals
in accordance with Section 162(m) of the Code, or such other factors as
the Committee may determine, in its sole discretion.
8.2 Awards and Certificates. An Eligible Employee or
Consultant selected to receive Restricted Stock shall not have any
rights with respect to such Award, unless and until such Participant
has delivered to the Company a fully executed copy of the applicable
Award agreement relating thereto and has otherwise complied with the
applicable terms
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and conditions of such Award. Further, such Award shall be subject to
the following conditions:
(a) Purchase Price. The purchase price of Restricted
Stock shall be fixed by the Committee. Subject to Section 4.3,
the purchase price for shares of Restricted Stock may be zero
to the extent permitted by applicable law, and, to the extent
not so permitted, such purchase price may not be less than par
value.
(b) Acceptance. Awards of Restricted Stock must be
accepted within a period of 90 days (or such shorter period as
the Committee may specify at grant) after the Award date by
executing a Restricted Stock Award agreement and by paying
whatever price (if any) the Committee has designated
thereunder.
(c) Legend. Each Participant receiving shares of
Restricted Stock shall be issued a stock certificate in
respect of such shares of Restricted Stock, unless the
Committee elects to use another system, such as book entries
by the transfer agent, as evidencing ownership of shares of
Restricted Stock. Such certificate shall be registered in the
name of such Participant, and shall bear an appropriate legend
referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:
"The anticipation, alienation, attachment, sale,
transfer, assignment, pledge, encumbrance or charge of the
shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) of the Insignia/ESG
Holdings, Inc. (the "Company") 1998 Stock Incentive Plan (the
"Plan") and an Agreement entered into between the registered
owner and the Company dated. Copies of such Plan and
Agreement are on file at the principal office of the Company."
(d) Custody. The Committee may require that any stock
certificates evidencing such shares be held in custody by the
Company until the restrictions thereon shall have lapsed and
that, as a condition to the grant of such Award of Restricted
Stock, the Participant shall have delivered a duly signed
stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
8.3 Restrictions and Conditions on Restricted Stock Awards.
Shares of Restricted Stock awarded pursuant to this Plan shall be
subject to Article XII and the following restrictions and conditions:
(a) Restriction Period; Vesting and Acceleration of
Vesting. (i) The Participant shall not be permitted to
Transfer shares of Restricted Stock awarded under this Plan
during the period or periods set by the Committee (the
"Restriction Period") commencing on the date of such Award, as
set forth in the Restricted Stock Award agreement and such
agreement shall set forth a vesting schedule and any events
which would accelerate vesting of the shares of Restricted
Stock.
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Within these limits, based on service, attainment of
Performance Goals pursuant to Section 8.3(a)(ii) below and/or
such other factors or criteria as the Committee may determine
in its sole discretion, the Committee may provide for the
lapse of such restrictions in installments in whole or in
part, or may accelerate the vesting of all or any part of any
Restricted Stock Award and/or waive the deferral limitations
for all or any part of any Restricted Stock Award.
(ii) Objective Performance Goals, Formulae
or Standards. If the grant of shares of Restricted Stock or
the lapse of restrictions is based on the attainment of
Performance Goals, the Committee shall establish the
Performance Goals and the applicable vesting percentage of the
Restricted Stock Award applicable to each Participant or class
of Participants in writing prior to the beginning of the
applicable fiscal year or at such later date as otherwise
determined by the Committee and while the outcome of the
Performance Goals are substantially uncertain. Such
Performance Goals may incorporate provisions for disregarding
(or adjusting for) changes in accounting methods, corporate
transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances.
With regard to a Restricted Stock Award that is intended to
comply with Section 162(m) of the Code, to the extent any such
provision would create impermissible discretion under Section
162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect. The
applicable Performance Goals shall be based on one or more of
the Performance Criteria set forth in Exhibit A hereto.
(b) Rights as Stockholder. Except as provided in this
subsection (b) and subsection (a) above and as otherwise
determined by the Committee, the Participant shall have, with
respect to the shares of Restricted Stock, all of the rights
of a holder of shares of Common Stock of the Company
including, without limitation, the right to receive any
dividends, the right to vote such shares and, subject to and
conditioned upon the full vesting of shares of Restricted
Stock, the right to tender such shares. The Committee may, in
its sole discretion, determine at the time of grant that the
payment of dividends shall be deferred until, and conditioned
upon, the expiration of the applicable Restriction Period.
(c) Lapse of Restrictions. If and when the
Restriction Period expires without a prior forfeiture of the
Restricted Stock subject to such Restriction Period, the
certificates for such shares shall be delivered to the
Participant. All legends shall be removed from said
certificates at the time of delivery to the Participant except
as otherwise required by applicable law.
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ARTICLE IX
PERFORMANCE SHARES
9.1 Award of Performance Shares. Performance Shares may be
awarded either alone or in addition to other Awards granted under this
Plan. The Committee shall, in its sole discretion, determine the
Eligible Employees and Consultants to whom and the time or times at
which such Performance Shares shall be awarded, the duration of the
period (the "Performance Period") during which, and the conditions
under which, a Participant's right to Performance Shares will be vested
and the other terms and conditions of the Award in addition to those
set forth in Section 9.2.
Each Performance Share awarded shall be referenced to one
share of Common Stock. Except as otherwise provided herein, the
Committee shall condition the right to payment of any Performance Share
Award upon the attainment of objective Performance Goals established
pursuant to Section 9.2(c) below and such other non-performance based
factors or criteria as the Committee may determine in its sole
discretion.
9.2 Terms and Conditions. A Participant selected to receive
Performance Shares shall not have any rights with respect to such
Awards, unless and until such Participant has delivered a fully
executed copy of a Performance Share Award agreement evidencing the
Award to the Company and has otherwise complied with the following
terms and conditions:
(a) Earning of Performance Share Award. At the
expiration of the applicable Performance Period, the Committee
shall determine the extent to which the Performance Goals
established pursuant to Section 9.2(c) are achieved and the
percentage of each Performance Share Award that has been
earned.
(b) Payment. Following the Committee's determination
in accordance with subsection (a) above, shares of Common
Stock or, as determined by the Committee in its sole
discretion, the cash equivalent of such shares shall be
delivered to the Participant, in an amount equal to such
Participant's earned Performance Share Award. Notwithstanding
the foregoing, except as may be set forth in the agreement
covering the Award, the Committee may, in its sole discretion
and in accordance with Section 162(m) of the Code, award an
amount less than the earned Performance Share Award and/or
subject the payment of all or part of any Performance Share
Award to additional vesting and forfeiture conditions as it
deems appropriate.
(c) Objective Performance Goals, Formulae or
Standards. The Committee shall establish the objective
Performance Goals for the earning of Performance Shares based
on a Performance Period applicable to each Participant or
class of Participants in writing prior to the beginning of the
applicable Performance Period
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or at such later date as permitted under Section 162(m) of the
Code and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section
162(m) of the Code, provisions for disregarding (or adjusting
for) changes in accounting methods, corporate transactions
(including, without limitation, dispositions and acquisitions)
and other similar type events or circumstances. To the extent
any such provision would create impermissible discretion under
Section 162(m) of the Code or otherwise violate Section 162(m)
of the Code, such provision shall be of no force or effect.
The applicable Performance Goals shall be based on one or more
of the Performance Criteria set forth in Exhibit A hereto.
(d) Dividends and Other Distributions. At the time of
any Award of Performance Shares, the Committee may, in its
sole discretion, award an Eligible Employee or Consultant the
right to receive the cash value of any dividends and other
distributions that would have been received as though the
Eligible Employee or Consultant had held each share of Common
Stock referenced by the earned Performance Share Award from
the last day of the first year of the Performance Period until
the actual distribution to such Participant of the related
share of Common Stock or cash value thereof. Such amounts, if
awarded, shall be paid to the Participant as and when the
shares of Common Stock or cash value thereof are distributed
to such Participant and, at the discretion of the Committee,
may be paid with interest from the first day of the second
year of the Performance Period until such amounts and any
earnings thereon are distributed. The applicable rate of
interest shall be determined by the Committee in its sole
discretion; provided, however, that for each fiscal year or
part thereof, the applicable interest rate shall not be
greater than a rate equal to the four-year U.S. Government
Treasury rate on the first day of each applicable fiscal year.
ARTICLE X
PERFORMANCE UNITS
10.1 Awards of Performance Units. Performance Units may be
awarded either alone or in addition to other Awards granted under this
Plan. The Committee shall, in its sole discretion, determine the
Eligible Employees to whom and the time or times at which such
Performance Units shall be awarded, the duration of the period (the
"Performance Cycle") during which, and the conditions under which, a
Participant's right to Performance Units will be vested and the other
terms and conditions of the Award in addition to those set forth in
Section 10.2.
Performance Units shall be awarded in a dollar amount
determined by the Committee and shall be converted for purposes of
calculating growth in value to a referenced number of shares of Common
Stock based on the Fair Market Value of shares
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of Common Stock at the close of trading on the first business day
following the announcement of the annual financial results of the
Company for the fiscal year of the Company immediately preceding the
fiscal year of the commencement of the relevant Performance Cycle,
provided that the Committee may provide that the minimum price for such
conversion shall be the Fair Market Value on the date of grant.
Each Performance Unit shall be referenced to one share of
Common Stock. Except as otherwise provided herein, the Committee shall
condition the right to payment of any Performance Unit Award upon the
attainment of objective Performance Goals established pursuant to
Section 10.2(a) and such other non-performance based factors or
criteria as the Committee may determine in its sole discretion. The
cash value of any fractional Performance Unit Award subsequent to
conversion to shares of Common Stock shall be treated as a dividend or
other distribution under Section 10.2(e) to the extent any portion of
the Performance Unit Award is earned.
10.2 Terms and Conditions. The Performance Units awarded
pursuant to this Article 10 shall be subject to the following terms and
conditions:
(a) Performance Goals. The Committee shall establish
the objective Performance Goals for the earnings of
Performance Units based on a Performance Cycle applicable to
each Participant or class of Participants in writing prior to
the beginning of the applicable Performance Cycle or at such
later date as permitted under Section 162(m) of the Code and
while the outcome of the Performance Goals are substantially
uncertain. Such Performance Goals may incorporate, if and only
to the extent permitted under Section 162(m) of the Code,
provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without
limitation, dispositions and acquisitions) and other similar
type events or circumstances. To the extent any such provision
would create impermissible discretion under Section 162(m) of
the Code or otherwise violate Section 162(m) of the Code, such
provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the
Performance Criteria set forth in Exhibit A hereto.
(b) Vesting. At the expiration of the Performance
Cycle, the Committee shall determine and certify in writing
the extent to which the Performance Goals have been achieved,
and the percentage of the Performance Units of each
Participant that have vested.
(c) Payment. Subject to the applicable provisions of
the Award agreement and this Plan, at the expiration of the
Performance Cycle, cash and/or shares of Common Stock (as the
Committee may determine in its sole discretion at grant, or
thereafter if no rights of a Participant are reduced) shall be
delivered to the Participant in payment of the vested
Performance Units covered by the Performance Unit Award.
Notwithstanding the foregoing, except as may be set
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forth in the agreement covering the Award, the Committee may,
in its sole discretion, and to the extent applicable and
permitted under Section 162(m) of the Code, award an amount
less than the earned Performance Unit Award and/or subject the
payment of all or part of any Performance Unit Award to
additional vesting and forfeiture conditions as it deems
appropriate.
(d) Accelerated Vesting. Based on service,
performance and/or such other factors or criteria, if any, as
the Committee may determine, the Committee may, at or after
grant, accelerate the vesting of all or any part of any
Performance Unit Award and/or waive the deferral limitations
for all or any part of such Award.
(e) Dividends and Other Distributions. At the time of
any Award of Performance Units, the Committee may, in its sole
discretion, award an Eligible Employee or Consultant the right
to receive the cash value of any dividends and other
distributions that would have been received as though the
Eligible Employee or Consultant had held each share of Common
Stock referenced by the earned Performance Unit Award from the
last day of the first year of the Performance Cycle until the
actual distribution to such Participant of the related share
of Common Stock or cash value thereof. Such amounts, if
awarded, shall be paid to the Participant as and when the
shares of Common Stock or cash value thereof are distributed
to such Participant and, at the discretion of the Committee,
may be paid with interest from the first day of the second
year of the Performance Cycle until such amounts and any
earnings thereon are distributed. The applicable rate of
interest shall be determined by the Committee in its sole
discretion; provided, however, that for each fiscal year or
part thereof, the applicable interest rate shall not be
greater than a rate equal to the four-year U.S. Government
Treasury rate on the first day of each applicable fiscal year.
ARTICLE XI
OTHER STOCK-BASED AWARDS
11.1 Other Awards. Other Stock-Based Awards may be granted
either alone or in addition to or in tandem with Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares or
Performance Units.
Subject to the provisions of this Plan, the Committee shall
have authority to determine the persons to whom and the time or times
at which such Awards shall be made, the number of shares of Common
Stock to be awarded pursuant to such Awards, and all other conditions
of the Awards. The Committee may also provide for the grant of Common
Stock under such Awards upon the completion of a specified performance
period.
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11.2 Terms and Conditions. Other Stock-Based Awards made
pursuant to this Article XI shall be subject to the following terms and
conditions:
(a) Non-Transferability. Subject to the applicable
provisions of the Award agreement and this Plan, shares of
Common Stock subject to Awards made under this Article XI may
not be Transferred prior to the date on which the shares are
issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses.
(b) Dividends. Unless otherwise determined by the
Committee at the time of Award, subject to the provisions of
the Award agreement and this Plan, the recipient of an Award
under this Article XI shall be entitled to receive, currently
or on a deferred basis, dividends or dividend equivalents with
respect to the number of shares of Common Stock covered by the
Award, as determined at the time of the Award by the
Committee, in its sole discretion.
(c) Vesting. Any Award under this Article XI and any
Common Stock covered by any such Award shall vest or be
forfeited to the extent so provided in the Award agreement, as
determined by the Committee, in its sole discretion.
(d) Waiver of Limitation. The Committee may, in its
sole discretion, waive in whole or in part any or all of the
limitations imposed hereunder (if any) with respect to any or
all of an Award under this Article XI.
(e) Price. Common Stock or Other Stock-Based Awards
issued on a bonus basis under this Article XI may be issued
for no cash consideration; Common Stock or Other Stock-Based
Awards purchased pursuant to a purchase right awarded under
this Article XI shall be priced as determined by the
Committee. Subject to Section 4.3, the purchase price of
shares of Common Stock or Other Stock-Based Awards may be zero
to the extent permitted by applicable law, and, to the extent
not so permitted, such purchase price may not be less than par
value. The purchase of shares of Common Stock or Other
Stock-Based Awards may be made on either an after-tax or
pre-tax basis, as determined by the Committee; provided,
however, that if the purchase is made on a pre-tax basis, such
purchase shall be made pursuant to a deferred compensation
program established by the Committee, which will be deemed a
part of this Plan.
11.3 Purchase and Loan Program. The Company's 1998
Supplemental Stock Purchase and Loan Program shall be an Other
Stock-Based Award under this Article XI and shall be deemed
incorporated herein.
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ARTICLE XII
NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY
12.1 Non-Transferability. No Stock Option, Stock Appreciation Right,
Performance Unit, Performance Share or Other Stock-Based Award shall be
Transferable by the Participant otherwise than by will or by the laws of descent
and distribution. All Stock Options and all Stock Appreciation Rights shall be
exercisable, during the Participant's lifetime, only by the Participant. Tandem
Stock Appreciation Rights shall be Transferable, to the extent permitted above,
only with the underlying Stock Option. Shares of Restricted Stock under Article
VIII may not be Transferred prior to the date on which shares are issued, or, if
later, the date on which any applicable restriction, performance or deferral
period lapses. No Award shall, except as otherwise specifically provided by law
or herein, be Transferable in any manner, and any attempt to Transfer any such
Award shall be void, and no such Award shall in any manner be liable for or
subject to the debts, contracts, liabilities, engagements or torts of any person
who shall be entitled to such Award, nor shall it be subject to attachment or
legal process for or against such person. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter, that a Non-Qualified
Stock Option granted pursuant to Article VI (other than a Non-Qualified Stock
Option granted to a Non-Employee Director) that is otherwise not transferable
pursuant to this Article XII is transferable in whole or part and in such
circumstances, and under such conditions, as specified by the Committee.
12.2 Termination of Employment or Termination of Consultancy.
The following rules apply with regard to the Termination of Employment
or Termination of Consultancy of a Participant:
(a) Rules Applicable to Stock Options and Stock
Appreciation Rights. Unless otherwise determined by the
Committee at grant or, if no rights of the Participant are
reduced, thereafter:
(i) Termination by Reason of Death,
Disability or Retirement. If a Participant's Termination of
Employment or Termination of Consultancy is by reason of
death, Disability or Retirement, all Stock Options and Stock
Appreciation Rights held by such Participant may be exercised,
to the extent exercisable at the Participant's Termination of
Employment or Termination of Consultancy, by the Participant
(or, in the case of death, by the legal representative of the
Participant's estate) at any time within a period of one year
from the date of such Termination of Employment or Termination
of Consultancy, but in no event beyond the expiration of the
stated terms of such Stock Options and Stock Appreciation
Rights; provided, however, that, in the case of Retirement, if
the Participant dies within such exercise period, all
unexercised Stock Options and Non-Tandem Stock Appreciation
Rights held by such Participant shall thereafter be
exercisable, to the
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extent to which they were exercisable at the time of death,
for a period of one year from the date of such death, but in
no event beyond the expiration of the stated term of such
Stock Options and Non-Tandem Stock Appreciation Rights.
(ii) Involuntary Termination Without Cause.
If a Participant's Termination of Employment or Termination of
Consultancy is by involuntary termination without Cause, all
Stock Options and Stock Appreciation Rights held by such
Participant may be exercised, to the extent exercisable at
Termination of Employment or Termination of Consultancy, by
the Participant at any time within a period of 90 days from
the date of such Termination of Employment or Termination of
Consultancy, but in no event beyond the expiration of the
stated term of such Stock Options and Stock Appreciation
Rights.
(iii) Voluntary Termination. If a
Participant's Termination of Employment or Termination of
Consultancy is voluntary (other than a voluntary termination
described in Section 12.2(a)(iv)(B) below), all Stock Options
and Stock Appreciation Rights held by such Participant may be
exercised, to the extent exercisable at Termination of
Employment or Termination of Consultancy, by the Participant
at any time within a period of 30 days from the date of such
Termination of Employment or Termination of Consultancy, but
in no event beyond the expiration of the stated terms of such
Stock Options and Stock Appreciation Rights.
(iv) Termination for Cause. If a
Participant's Termination of Employment or Termination of
Consultancy (A) is for Cause or (B) is a voluntary termination
(as provided in subsection (iii) above) within 90 days after
an event which would be grounds for a Termination of
Employment or Termination of Consultancy for Cause, all Stock
Options and Stock Appreciation Rights held by such Participant
shall thereupon terminate and expire as of the date of such
Termination of Employment or Termination of Consultancy.
(b) Rules Applicable to Restricted Stock. Subject to
the applicable provisions of the Restricted Stock Award
agreement and this Plan, upon a Participant's Termination of
Employment or Termination of Consultancy for any reason during
the relevant Restriction Period, all Restricted Stock still
subject to restriction will vest or be forfeited in accordance
with the terms and conditions established by the Committee at
grant or thereafter.
(c) Rules Applicable to Performance Shares and
Performance Units. Subject to the applicable provisions of the
Award agreement and this Plan, upon a Participant's
Termination of Employment or Termination of Consultancy for
any reason during the Performance Period, the Performance
Cycle or other period or restriction as may be applicable for
a given Award, the Performance Shares or Performance Units in
question will vest (to the extent applicable and to the extent
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permissible under Section 162(m) of the Code) or be forfeited
in accordance with the terms and conditions established by the
Committee at grant or thereafter.
(d) Rules Applicable to Other Stock-Based Awards.
Subject to the applicable provisions of the Award agreement
and this Plan, upon a Participant's Termination of Employment
or Termination of Consultancy for any reason during any period
or restriction as may be applicable for a given Award, the
Other Stock-Based Awards in question will vest or be forfeited
in accordance with the terms and conditions established by the
Committee at grant or thereafter.
ARTICLE XIII
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
13.1 Stock Options. The terms of this Article XIII shall apply
only to Stock Options granted to Non-Employee Directors.
13.2 Grants. Without further action by the Board or the
stockholders of the Company, each Non-Employee Director shall, subject
to the terms of the Plan, be granted:
(a) Stock Options to purchase 20,000 shares of Common
Stock as of the date the Non-Employee Director begins service
as a Non-Employee Director on the Board; and
(b) In addition to Stock Options granted pursuant to
(a) above, Stock Options to purchase 2,000 shares of Common
Stock as of the first day of the month following the annual
meeting of stockholders of the Company, provided he or she has
not, as of such day, experienced a Termination of
Directorship.
13.3 Non-Qualified Stock Options. Stock Options granted under
this Article XIII shall be Non-Qualified Stock Options.
13.4 Terms of Stock Options. Stock Options granted under this
Article XIII shall be subject to the following terms and conditions,
and shall be in such form and contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Board
shall deem desirable:
(a) Stock Option Price. The Stock Option price per
share of Common Stock purchasable under a Stock Option shall
be determined by the Board at the time of grant but shall not
be less than 100% of the Fair Market Value of the share of
Common Stock at the time of grant.
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(b) Stock Option Term. The term of each Stock Option
shall be 5 years.
(c) Exercisability. (i) Stock Options granted to
Non-Employee Directors pursuant to Section 13.2(a) shall vest
and become exercisable as follows:
Stock Options to purchase 4,000 shares of
Common Stock shall be exercisable on or
after the later of (A) 6 months and one day
after the date of grant or (B) the
Effective Date;
Stock Options to purchase 4,000 shares of
Common Stock shall be exercisable on or
after the first anniversary of the date
that is 6 months and one day after the date
of grant.
Stock Options to purchase 4,000 shares of
Common Stock shall be exercisable on or
after the second anniversary of the date
that is 6 months and one day after the date
of grant.
Stock Options to purchase 4,000 shares of
Common Stock shall be exercisable on or
after the third anniversary of the date
that is 6 months and one day after the date
of grant.
Stock Options to purchase 4,000 shares of
Common Stock shall be exercisable on or
after the fourth anniversary of the date
that is 6 months and one day after the date
of grant.
(ii) Stock Options granted to Non-Employee
Directors pursuant to Section 13.2(b) shall be
exercisable on or after the later of (A) 6 months and
one day after the date of grant or (B) the Effective
Date.
(d) Method of Exercise. Subject to whatever waiting
period provisions apply under subsection (c) above, Stock
Options may be exercised in whole or in part at any time and
from time to time during the Stock Option term, by giving
written notice of exercise to the Company specifying the
number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price as
follows: (i) in cash or by check, bank draft or money order
payable to the Company; (ii) if the Common Stock is traded on
a national securities exchange, through a "cashless exercise"
procedure whereby the Participant delivers irrevocable
instructions to a broker to deliver promptly to the Company an
amount equal to the purchase price; or (iii) such other
arrangement for the satisfaction of the purchase price, as the
Board may accept. If and to the extent determined by the Board
in its sole discretion at or after grant, payment in full or
in part may also be made in the form of Common Stock owned by
the Participant for at least 6 months (and for which the
Participant has good title free and clear of any liens and
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encumbrances) based on the Fair Market Value of the Common
Stock on the payment date. No shares of Common Stock shall be
issued until payment, as provided herein, therefor has been
made or provided for.
(e) Form, Modification, Extension and Renewal of
Stock Options. Subject to the terms and conditions and within
the limitations of the Plan, a Stock Option shall be evidenced
by such form of agreement or grant as is approved by the
Board, and the Board may modify, extend or renew outstanding
Stock Options granted under the Plan (provided that the rights
of a Participant are not reduced without his consent).
13.5 Termination of Directorship. The following rules apply
with regard to Stock Options upon the Termination of Directorship:
(a) Termination of Directorship by Reason of Death,
Disability or Otherwise Ceasing to be a Director. Except as
otherwise provided herein, upon the Termination of
Directorship by reason of death, Disability, resignation,
failure to stand for reelection or failure to be reelected or
otherwise, all outstanding Stock Options exercisable and not
exercised shall remain exercisable by the Participant or, in
the case of death, by the Participant's estate or by the
person given authority to exercise such Stock Options by his
or her will or by operation of law, at any time within a
period of one year from the date of such Termination of
Directorship, but in no event beyond the expiration of the
stated term of such Stock Option.
(b) Cancellation of Options. Except as provided in
(a) above, no Stock Options that were not exercisable as of
the date of Termination of Directorship shall thereafter
become exercisable upon a Termination of Directorship for any
reason or no reason whatsoever, and such Stock Options shall
terminate and become null and void upon a Termination of
Directorship. If a Non-Employee Director's Termination of
Directorship is for Cause, all Stock Options held by the
Non-Employee Director shall thereupon terminate and expire as
of the date of termination.
13.6 Acceleration of Exercisability. All Stock Options granted
to Non-Employee Directors and not previously exercisable shall become fully
exercisable immediately upon a Change in Control (as defined herein). For this
purpose, a "Change in Control" shall be deemed to have occurred upon:
(a) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(1) of the
Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than
80% of the combined voting power of the then outstanding
voting securities of Company entitled to vote generally in the
election of directors,
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including, but not limited to, by merger, consolidation or
similar corporate transaction or by purchase; excluding,
however, the following: (x) any acquisition by the Company,
any Subsidiary or any Parent, or (y) any acquisition by an
employee benefit plan (or related trust) sponsored or
maintained by the Company, any Subsidiary or any Parent; or
(b) the approval of the stockholders of the Company
of (i) a complete liquidation or dissolution of the Company or
(ii) the sale or other disposition of more than 80% of the
gross assets of the Company and its Subsidiaries and Parent
(if any) on a consolidated basis (determined under generally
accepted accounting principles in accordance with prior
practice); excluding, however, such a sale or other
disposition to a corporation with respect to which, following
such sale or other disposition, (x) more than 20% of the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors will be then beneficially owned,
directly or indirectly, by the individuals and entities who
were beneficial owners of the outstanding shares of Common
Stock immediately prior to such sale or other disposition, (y)
no person (other than the Company, its Subsidiaries and Parent
(if any), and any employee benefit plan (or related trust) of
the Company, any Subsidiary or any Parent or such corporation
or any person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly, 20% or more
of the outstanding shares of Common Stock) will beneficially
own, directly or indirectly 20% or more of the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election or
directors, and (z) individuals who were members of the
incumbent board immediately prior to the sale or other
disposition will constitute at least a majority of the members
of the board of directors of such corporation.
13.7 Changes.
(a) The Awards to a Non-Employee Director shall be
subject to Sections 4.2(a), (b) and (c) of the Plan and this
Section 13.7, but shall not be subject to Section 4.2(d).
(b) If the Company shall not be the surviving
corporation in any merger or consolidation, or if the Company
is to be dissolved or liquidated, then, unless the surviving
corporation assumes the Stock Options or substitutes new Stock
Options which are determined by the Board in its sole
discretion to be substantially similar in nature and
equivalent in terms and value for Stock Options then
outstanding, upon the effective date of such merger,
consolidation, liquidation or dissolution, any unexercised
Stock Options shall expire without additional compensation to
the holder thereof; provided, that, the Board shall deliver
notice to each Non-Employee Director at least 30 days prior to
the date of consummation of such merger, consolidation,
dissolution or liquidation which would result in the
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expiration of the Stock Options and during the period from the
date on which such notice of termination is delivered to the
consummation of the merger, consolidation, dissolution or
liquidation, such Participant shall have the right to exercise
in full, effective as of such consummation, all Stock Options
that are then outstanding (without regard to limitations on
exercise otherwise contained in the Stock Options) but
contingent on occurrence of the merger, consolidation,
dissolution or liquidation, and, provided that, if the
contemplated transaction does not take place within a 90 day
period after giving such notice for any reason whatsoever, the
notice, accelerated vesting and exercise shall be null and
void and, if and when appropriate, new notice shall be given
as aforesaid.
ARTICLE XIV
CHANGE IN CONTROL PROVISIONS
14.1 Benefits. In the event of a Change in Control of the
Company, except as otherwise provided by the Committee upon the grant
of an Award and except as provided in Section 13.6 of this Plan with
regard to Non-Employee Directors, the Participant shall be entitled to
the following benefits:
(a) Except to the extent provided in the applicable
Award agreement, the Participant's employment agreement with
the Company or an Affiliate, as approved by the Committee, or
other written agreement approved by the Committee (as such
agreement may be amended from time to time), (i) Awards
granted and not previously exercisable shall not become
exercisable upon a Change in Control, (ii) restrictions to
which any shares of Restricted Stock granted prior to the
Change in Control are subject shall not lapse upon a Change in
Control, and (iii) the conditions required for vesting of any
unvested Performance Units and/or Performance Shares shall not
be deemed to be satisfied upon a Change in Control.
(b) The Committee, in its sole discretion, may
provide for the purchase of any Stock Option by the Company or
an Affiliate for an amount of cash equal to the excess of the
Change in Control Price (as defined below) of the shares of
Common Stock covered by such Stock Options, over the aggregate
exercise price of such Stock Options. For purposes of this
Section 14.1, Change in Control Price shall mean the higher of
(i) the highest price per share of Common Stock paid in any
transaction related to a Change in Control of the Company, or
(ii) the highest Fair Market Value per share of Common Stock
at any time during the sixty (60) day period preceding a
Change in Control.
(c) Notwithstanding anything to the contrary herein,
unless the Committee provides otherwise at the time a Stock
Option is granted hereunder or thereafter, no acceleration of
exercisability shall occur with respect to such Stock
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Options if the Committee reasonably determines in good faith,
prior to the occurrence of the Change in Control, that the
Stock Options shall be honored or assumed, or new rights
substituted therefor (each such honored, assumed or
substituted stock option hereinafter called an "Alternative
Option"), by a Participant's employer (or the parent or a
subsidiary of such employer) immediately following the Change
in Control, provided that any such Alternative Option must
meet the following criteria:
(i) the Alternative Option must be based on
stock which is traded on an established securities
market, or which will be so traded within 30 days of
the Change in Control;
(ii) the Alternative Option must provide
such Participant with rights and entitlements
substantially equivalent to or better than the
rights, terms and conditions applicable under such
Stock Option, including, but not limited to, an
identical or better exercise schedule; and
(iii) the Alternative Option must have
economic value substantially equivalent to the value
of such Stock Option (determined at the time of the
Change in Control).
For purposes of Incentive Stock Options, any assumed
or substituted Stock Option shall comply with the requirements
of Treasury Regulation Section 1.425-1 (and any amendments
thereto).
(d) Notwithstanding anything else herein, the
Committee may, in its sole discretion, provide for accelerated
vesting of an Award or accelerated lapsing of restrictions on
shares of Restricted Stock at any time.
14.2 Change in Control. A "Change in Control" shall have the
meaning specified in the applicable Award Agreement, the Participant's
employment agreement with the Company or an Affiliate, as approved by
the Committee, or other written agreement approved by the Committee (as
such agreement may be amended from time to time).
ARTICLE XV
TERMINATION OR AMENDMENT OF PLAN
Notwithstanding any other provision of this Plan, the Board or
the Committee may at any time, and from time to time, amend, in whole
or in part, any or all of the provisions of this Plan (including any
amendment deemed necessary to ensure that the Company may comply with
any regulatory requirement referred to in Article XVII), or suspend or
terminate it entirely, retroactively or otherwise; provided, however,
that, unless otherwise
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<PAGE> 37
required by law or specifically provided herein, the rights of a
Participant with respect to Awards granted prior to such amendment,
suspension or termination, may not be impaired without the consent of
such Participant and, provided further, without the approval of the
shareholders of the Company in accordance with the laws of the State of
Delaware, to the extent required by the applicable provisions of Rule
16b-3 or Section 162(m) of the Code, or, to the extent applicable to
Incentive Stock Options, Section 422 of the Code, no amendment may be
made which would (i) increase the aggregate number of shares of Common
Stock that may be issued under this Plan; (ii) increase the maximum
individual Participant limitations for a fiscal year under Section
4.1(b); (iii) change the classification of employees or Consultants
eligible to receive Awards under this Plan; (iv) decrease the minimum
option price of any Stock Option or Stock Appreciation Right; (v)
extend the maximum option period under Section 6.3; (vi) materially
alter the Performance Criteria for the Award of Restricted Stock,
Performance Units or Performance Shares as set forth in Exhibit A; or
(vii) require stockholder approval in order for this Plan to continue
to comply with the applicable provisions of Section 162(m) of the Code
or, to the extent applicable to Incentive Stock Options, Section 422 of
the Code. In no event may this Plan be amended without the approval of
the stockholders of the Company in accordance with the applicable laws
of the State of Delaware to increase the aggregate number of shares of
Common Stock that may be issued under this Plan, decrease the minimum
exercise price of any Stock Option or Stock Appreciation Right, or to
make any other amendment that would require stockholder approval under
the rules of any exchange or system on which the Company's securities
are listed or traded at the request of the Company.
The Committee may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to Article IV
above or as otherwise specifically provided herein, no such amendment
or other action by the Committee shall impair the rights of any holder
without the holder's consent.
ARTICLE XVI
UNFUNDED PLAN
16.1 Unfunded Status of Plan. This Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments as to which a Participant has a fixed and
vested interest but which are not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any
rights that are greater than those of a general creditor of the
Company.
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ARTICLE XVII
GENERAL PROVISIONS
17.1 Legend. The Committee may require each person receiving
shares pursuant to an Award under this Plan to represent to and agree
with the Company in writing that the Participant is acquiring the
shares without a view to distribution thereof. In addition to any
legend required by this Plan, the certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on Transfer.
All certificates for shares of Common Stock delivered under
this Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed or
any national securities association system upon whose system the Stock
is then quoted, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate
reference to such restrictions.
17.2 Other Plans. Nothing contained in this Plan shall prevent
the Board from adopting other or additional compensation arrangements,
subject to shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in
specific cases.
17.3 No Right to Employment/Consultancy. Neither this Plan nor
the grant of any Award hereunder shall give any Participant or other
employee or Consultant any right with respect to continuance of
employment or Consultancy by the Company or any Affiliate, nor shall
they be a limitation in any way on the right of the Company or any
Affiliate by which an employee is employed or a Consultant is retained
to terminate his employment or Consultancy at any time.
17.4 Withholding of Taxes. The Company shall have the right to
deduct from any payment to be made to a Participant, or to otherwise
require, prior to the issuance or delivery of any shares of Common
Stock or the payment of any cash hereunder, payment by the Participant
of, any Federal, state or local taxes required by law to be withheld.
Upon the vesting of Restricted Stock, or upon making an election under
Code Section 83(b), a Participant shall pay all required withholding to
the Company.
Any such withholding obligation with regard to any Participant
may be satisfied, subject to the consent of the Committee, by reducing
the number of shares of Common Stock otherwise deliverable or by
delivering shares of Common Stock already owned. Any fraction of a
share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the
Participant.
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17.5 Listing and Other Conditions.
(a) As long as the Common Stock is listed on a
national securities exchange or system sponsored by a national
securities association, the issue of any shares of Common
Stock pursuant to an Award shall be conditioned upon such
shares being listed on such exchange or system. The Company
shall have no obligation to issue such shares unless and until
such shares are so listed, and the right to exercise any Stock
Option with respect to such shares shall be suspended until
such listing has been effected.
(b) If at any time counsel to the Company shall be of
the opinion that any sale or delivery of shares of Common
Stock pursuant to an Award is or may in the circumstances be
unlawful or result in the imposition of excise taxes on the
Company under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation
to make such sale or delivery, or to make any application or
to effect or to maintain any qualification or registration
under the Securities Act or otherwise with respect to shares
of Common Stock or Awards, and the right to exercise any Stock
Option shall be suspended until, in the opinion of said
counsel, such sale or delivery shall be lawful or will not
result in the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension
under this Section 17.5, any Award affected by such suspension
which shall not then have expired or terminated shall be
reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available
during the period of such suspension, but no such suspension
shall extend the term of any Stock Option.
17.6 Governing Law. This Plan shall be governed and construed
in accordance with the laws of the State of Delaware (regardless of the
law that might otherwise govern under applicable Delaware principles of
conflict of laws).
17.7 Construction. Wherever any words are used in this Plan in
the masculine gender they shall be construed as though they were also
used in the feminine gender in all cases where they would so apply, and
wherever any words are used herein in the singular form they shall be
construed as though they were also used in the plural form in all cases
where they would so apply.
17.8 Other Benefits. No Award payment under this Plan shall be
deemed compensation for purposes of computing benefits under any
retirement plan of the Company or its subsidiaries nor affect any
benefits under any other benefit plan now or subsequently in effect
under which the availability or amount of benefits is related to the
level of compensation.
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<PAGE> 40
17.9 Costs. The Company shall bear all expenses included in
administering this Plan, including expenses of issuing Common Stock
pursuant to any Awards hereunder.
17.10 No Right to Same Benefits. The provisions of Awards need
not be the same with respect to each Participant, and such Awards to
individual Participants need not be the same in subsequent years.
17.11 Death/Disability. The Committee may in its discretion
require the transferee of a Participant to supply it with written
notice of the Participant's death or Disability and to supply it with a
copy of the will (in the case of the Participant's death) or such other
evidence as the Committee deems necessary to establish the validity of
the transfer of an Award. The Committee may also require that the
agreement of the transferee to be bound by all of the terms and
conditions of this Plan.
17.12 Section 16(b) of the Exchange Act. All elections and
transactions under this Plan by persons subject to Section 16 of the
Exchange Act involving shares of Common Stock are intended to comply
with any applicable exemptive condition under Rule 16b-3. The Committee
may establish and adopt written administrative guidelines, designed to
facilitate compliance with Section 16(b) of the Exchange Act, as it may
deem necessary or proper for the administration and operation of this
Plan and the transaction of business thereunder.
17.13 Severability of Provisions. If any provision of this
Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof, and this
Plan shall be construed and enforced as if such provisions had not been
included.
17.14 Headings and Captions. The headings and captions herein
are provided for reference and convenience only, shall not be
considered part of this Plan, and shall not be employed in the
construction of this Plan.
ARTICLE XVIII
EFFECTIVE DATE OF PLAN
The Plan shall become effective upon adoption by the Board, subject to
the approval of this Plan by the stockholders of the Company in accordance with
the requirements of the laws of the State of Delaware or such later date as
provided in the adopting resolution. Because the stockholders of Insignia
Financial Group, Inc. will be the stockholders of the Company as of the
Distribution Date, the approval of the stockholders of Insignia Financial Group,
Inc. shall be deemed to satisfy the stockholder approval requirement set forth
in the foregoing sentence.
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<PAGE> 41
ARTICLE XIX
TERM OF PLAN
No Award shall be granted pursuant to this Plan on or after the tenth
anniversary of the earlier of the date this Plan is adopted or the date of
stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date.
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<PAGE> 42
EXHIBIT A
PERFORMANCE CRITERIA
Performance Goals established for purposes of conditioning the grant of
an Award of Restricted Stock based on performance or the vesting of
performance-based Awards of Restricted Stock, Performance Units and/or
Performance Shares shall be based on one or more of the following performance
criteria ("Performance Criteria"): (i) the attainment of certain target levels
of, or a specified percentage increase in, revenues, income before income taxes
and extraordinary items, net income, earnings before income tax, earnings before
interest, taxes, depreciation and amortization, funds from operation of real
estate investments or a combination of any or all of the foregoing; (ii) the
attainment of certain target levels of, or a percentage increase in, after-tax
or pre-tax profits including, without limitation, that attributable to
continuing and/or other operations; (iii) the attainment of certain target
levels of, or a specified increase in, operational cash flow; (iv) the
achievement of a certain level of, reduction of, or other specified objectives
with regard to limiting the level of increase in, all or a portion of, the
Company's bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of such cash balances and/or other offsets and adjustments as may be established
by the Committee; (v) the attainment of a specified percentage increase in
earnings per share or earnings per share from continuing operations; (vi) the
attainment of certain target levels of, or a specified increase in return on
capital employed or return on invested capital; (vii) the attainment of certain
target levels of, or a percentage increase in, after-tax or pre-tax return on
stockholders' equity; (viii) the attainment of certain target levels of, or a
specified increase in, economic value added targets based on a cash flow return
on investment formula; (ix) the attainment of certain target levels in the fair
market value of the shares of the Company's common stock; and (x) the growth in
the value of an investment in the Company's common stock assuming the
reinvestment of dividends. For purposes of item (i) above, "extraordinary items"
shall mean all items of gain, loss or expense for the fiscal year determined to
be extraordinary or unusual in nature or infrequent in occurrence or related to
a corporate transaction (including, without limitation, a disposition or
acquisition) or related to a change in accounting principle, all as determined
in accordance with standards established by Opinion No. 30 of the Accounting
Principles Board.
In addition, such Performance Criteria may be based upon the attainment
of specified levels of Company (or subsidiary, division or other operational
unit of the Company) performance under one or more of the measures described
above relative to the performance of other corporations. To the extent permitted
under Code Section 162(m), but only to the extent permitted under Code Section
162(m) (including, without limitation, compliance with any requirements for
stockholder approval), the Committee may: (i) designate additional business
criteria on which the Performance Criteria may be based or (ii) adjust, modify
or amend the aforementioned business criteria.
A-1
<PAGE> 1
EXHIBIT 10.15
INSIGNIA/ESG HOLDINGS, INC.
1998 SUPPLEMENTAL STOCK PURCHASE AND LOAN PROGRAM
UNDER THE
INSIGNIA/ESG HOLDINGS, INC. 1998 STOCK INCENTIVE PLAN
1. PURPOSE.
The Insignia/ESG Holdings, Inc. (the "Company") 1998 Supplemental Stock Purchase
and Loan Program (the "Program") is designated by the Committee established
under the Insignia/ESG Holdings, Inc. 1998 Stock Incentive Plan (the "Incentive
Plan") to provide the right to purchase shares of the common stock, par value
$.01 per share of the Company (the "Common Stock") to certain employees of the
Company, its Subsidiaries and Affiliates designated by the Committee (a
"Designated Affiliate") at a purchase price determined by the Committee as
described below, and to provide a source of financing to such employees to
facilitate the purchase of Common Stock. The right to purchase shares of Common
Stock under the Program shall be deemed to be an "Other Stock-Based Award" under
Article XI of the Incentive Plan and the terms of the Program shall be governed
by the provisions herein as well as the provisions of the Incentive Plan.
Capitalized terms that are not defined hereunder shall have the meaning set
forth in the Incentive Plan. The Program is not intended to be an employee stock
purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. ELIGIBILITY.
(a) PARTICIPATION.
All employees of the Company, its Subsidiaries and Designated Affiliates whose
annual Base Compensation equals or exceeds $100,000 (the "Covered Employees")
are eligible to participate in the Program.
"Base Compensation" means the total base compensation paid to a Covered Employee
in any calendar year including salary reduction contributions under Sections
401(k) and 125 of the Code but excluding overtime, bonus, commissions, or
contributions to or benefits paid under any pension, profit-sharing, fringe
benefit, group insurance or other welfare plan or deferred compensation
arrangement.
(b) CESSATION OF PARTICIPATION.
Participation in the Program shall cease automatically once the Covered Employee
is no longer a Covered Employee including, without limitation: (i) death; (ii)
incurring a Disability; (iii) going on a leave of absence; (iv) termination of
employment with the Company, any Subsidiary and any Designated Affiliate; and
(v) a reduction in Base Compensation below $100,000.
<PAGE> 2
3. PURCHASE OF COMMON STOCK.
(a) PURCHASE PRICE.
Each Covered Employee may purchase shares of Common Stock at the end of each
calendar quarter at a price per share of Common Stock equal to one hundred
percent (100%) of the Fair Market Value of a share of Common Stock on the last
business day of each calendar quarter.
(b) METHOD OF PAYMENT.
Payment of the purchase price for the shares of Common Stock may be made by
Covered Employees by means of a check payable to the Company, payroll deductions
or pursuant to a loan granted to the Covered Employee by the Company, the
applicable Subsidiary or applicable Designated Affiliate. No Covered Employee
will be permitted to authorize payroll deductions for the payment of shares of
Common Stock in an amount which exceeds fifty percent (50%) of his or her annual
Base Compensation less any amounts to be repaid pursuant to a loan granted under
Section 5 hereof.
(c) TIMING OF PURCHASE ELECTION.
If payment of the purchase price for shares of Common Stock is to be made by
check or pursuant to a loan, the election to purchase must be made no less than
thirty (30) days prior to the end of the applicable calendar quarter or, within
such shorter period as the Committee may provide, in its sole discretion. If
payment of the purchase price for shares of Common Stock is to be made by means
of payroll deductions, authorization of payroll deductions must be made at least
fourteen (14) days prior to the commencement of the applicable calendar quarter.
(d) ACCOUNTS
All payroll deductions made by a Covered Employee shall be accumulated and
credited to such Participant's account (without interest) under the Program and
used to purchase shares of Common Stock.
(e) COORDINATION WITH 401(k) HARDSHIP RULES.
In the event a Covered Employee makes a hardship withdrawal of employee deferral
(401(k)) contributions under a 401(k) profit sharing plan of the Company or a
Subsidiary or an Affiliate or any other plan qualified under Section 401(a) of
the Code that contains a Code Section 401(k) feature, such Covered Employee's
payroll deductions and the purchase of shares of Common Stock under the Program
shall be suspended for the twelve (12) month period following such hardship
withdrawal.
4. ADMINISTRATION.
The Program shall be administered and interpreted by the Committee. The Program
shall be considered a part of the Incentive Plan. The Committee shall have the
exclusive authority and responsibility to make all determinations necessary in
connection with the administration of the Program, to adopt forms of loan
documents and agreements, to adopt forms authorizing payroll deductions, and to
take all other actions which the Committee deems are appropriate or necessary to
the proper administration of the Program. All decisions of the Committee with
respect to the Program shall be final, conclusive, and binding upon all parties.
2
<PAGE> 3
5. LOAN CONDITIONS.
(a) PURPOSE.
Loans shall be used solely for the purpose of (i) purchasing shares of Common
Stock under the Program and (ii) satisfying any tax liability relating to the
purchase of shares of Common Stock.
No other uses are permitted.
(b) LOAN AMOUNT.
The maximum aggregate amount of any loan or loans outstanding to any one Covered
Employee at any time under the Program shall be equal to fifty percent (50%) of
the Covered Employee's Base Compensation. In no event will a Covered Employee be
allowed to have more than five (5) loans outstanding at any time under the
Program.
(c) LOAN TERMS.
The term of each loan shall expire on the earlier of (a) the Covered Employee's
termination of employment with the Company, any Subsidiary and any Designated
Affiliate for any reason, including, but not limited to, voluntary termination,
retirement, Disability or death and (b) the date set forth in the applicable
promissory note, as determined by the Committee, which shall not exceed five (5)
years from the date of issuance of the loan. The loan will be payable upon
demand by the Committee no later than thirty (30) days following the expiration
of the term thereof. The Committee may delay the expiration of a loan for any
reason as it decides in its sole discretion including, without limitation, if
the Covered Employee terminates employment with the Company and each Subsidiary
but continues employment with an Affiliate. If the expiration of the loan is
extended, the Committee may, in its sole discretion, request that new loan
documentation be executed by the Covered Employee. If new loan documentation is
not requested by the Committee, the then existing loan documents shall continue
to govern any loan which is extended.
(d) INTEREST RATE.
The interest rate on each loan shall be determined by the Committee and set
forth in the applicable promissory note but in no event shall such interest rate
be less than the rate at which the Company may borrow from its principal
lenders.
(e) FORM OF REPAYMENT.
Repayment of all outstanding loans shall occur in substantially level amortized
payments over the term of each loan by means of payroll deduction, or through by
such other means as are authorized by the Committee at the time of the granting
of the loan, or thereafter, provided that no rights of a Covered Employee are
reduced. The unpaid principal balance of a loan, together with accrued interest
thereon, may be prepaid in full or in part at any time without premium or
penalty.
(f) SECURITY.
In order to obtain a loan under the Program, a Covered Employee must execute all
of the loan documents required by the Company and pledge collateral adequate to
secure the loan. The adequacy of the collateral pledged by a Covered Employee as
security for a loan will be
3
<PAGE> 4
determined by the Committee in its sole discretion, but in all events, a pledge
of the shares of Common Stock owned by the Covered Employee or the shares of
Common Stock to be acquired by the Covered Employee with the loan proceeds will
constitute adequate security. If the Committee determines in its sole discretion
that additional collateral is required and not provided, the loan shall become
immediately due and payable.
6. DELIVERY OF COMMON STOCK.
(a) ISSUANCE OF CERTIFICATES.
Certificates for whole shares of Common Stock shall not be issued to Covered
Employees unless and until requested. If a Covered Employee requests
certificates for shares of Common Stock, fractional shares of Common Stock shall
not be issued and cash shall be paid in lieu of such fractional shares if so
requested by the Covered Employee.
(b) AGENT.
The Company may designate an agent to administer the Program, purchase and sell
shares of Common Stock in accordance with the Program, keep records, and send
statements of account to Covered Employees, as the Committee may request from
time to time. The agent shall serve as a custodian for purposes of the Program
and, unless otherwise requested by the Covered Employee, Common Stock purchased
under the Program shall be held by and in the name of or in the name of a
nominee of, the custodian for the benefit of each Covered Employee, who shall
thereafter be a beneficial stockholder of the Common Stock.
7. MISCELLANEOUS PROVISIONS.
(a) AMENDMENT / TERMINATION.
The Company or the Committee may, at any time, subject to Article XV of the
Incentive Plan, amend, modify, terminate or freeze the Program, discontinue the
making of new loans or cancel any outstanding loan by forgiveness of the
outstanding debt or otherwise, and discontinue the right of Covered Employees'
to purchase Common Stock under the Program, provided, however, that neither the
Company nor the Committee may change the terms of any outstanding loan except to
require additional collateral as deemed necessary by the Committee nor take any
action which would affect the rights of a Covered Employee with respect to
Common Stock previously acquired by such Covered Employee under the Program.
(b) NO RIGHT TO CONTINUE AS A COVERED EMPLOYEE.
The Program is a voluntary undertaking on the part of the Company and shall not
constitute a contract between the Company (or any Affiliate thereof) and any
Covered Employee, or consideration for, or any inducement or condition of, the
employment of a Covered Employee. Nothing contained in the Program shall give
any individual the right to continue in the service of the Company as a Covered
Employee or restrict the right of the Company to terminate the service of a
Covered Employee at any time.
(c) RIGHTS AS A STOCKHOLDER.
The Covered Employee shall have all rights of ownership as a stockholder with
regard to all shares of Common Stock purchased under the Program including,
without limitation, the right to
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<PAGE> 5
receive any dividend, and the right to vote or, subject to Section 7(e) hereof,
tender such shares. All shares of Common Stock purchased under the Program shall
be fully vested at all times.
(d) NO THIRD PARTY BENEFICIARIES.
Nothing in this Program or the Incentive Plan shall create rights by any third
party to rely upon the terms hereof without the Committee's express written
consent, including rights of a spouse.
(e) SECTION 16(b) OF THE EXCHANGE ACT.
In order to comply with Section 16 of the Exchange Act and Rule 16b-3
thereunder, notwithstanding anything herein to the contrary, any shares of
Common Stock purchased under the Program must be held by the Covered Employee
for a period of at least six (6) months following the date of such purchase.
5
<PAGE> 1
EXHIBIT 10.16
INSIGNIA/ESG HOLDINGS, INC.
EXECUTIVE PERFORMANCE INCENTIVE PLAN
<PAGE> 2
INSIGNIA/ESG HOLDINGS, INC.
EXECUTIVE PERFORMANCE INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to attract, retain and motivate key
employees by providing cash performance awards to designated key employees of
the Company, its Parent and its Subsidiaries. This Plan is effective for the
initial short fiscal year of the Company commencing on the date of distribution
of the common stock, par value $.01 per share, of the Company by Insignia
Financial Group, Inc. to holders of Class A Common Stock, par value $.01 per
share, of Insignia Financial Group, Inc. and for fiscal years thereafter,
subject to approval by the stockholders of the Company in accordance with the
laws of the State of Delaware.
2. DEFINITIONS
Unless the context otherwise requires, the words which follow shall
have the following meaning:
(a) "Award" - shall mean the total annual Performance
Award as determined under the Plan.
(b) "Board" - shall mean the Board of Directors of the
Company.
(c) "Change in Control of the Company" - shall have the
meaning set forth in the Participant's employment
agreement (if any) or other written agreement
approved by the Committee (if any).
(d) "Code" - shall mean the Internal Revenue Code of
1986, as amended and any successor thereto.
(e) "Code Section 162(m)" - shall mean the exception for
performance-based compensation under Section 162(m)
of the Code or any successor section and the Treasury
regulations promulgated thereunder.
(f) "Company" - shall mean Insignia/ESG Holdings, Inc.
and any successor by merger, consolidation or
otherwise.
(g) "Committee" - shall mean the Compensation Committee
of the Board or such other Committee of the Board
that is appointed
<PAGE> 3
by the Board all of whose members shall satisfy the
requirements to be "outside directors," as defined
under Code Section 162(m).
(h) "Individual Target Award" - shall mean the targeted
performance award for a Plan Year specified by the
Committee as provided in Section 5 hereof.
(i) "Parent" - shall mean, other than the Company, (i)
any corporation in an unbroken chain of corporations
ending with the Company which owns stock possessing
fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the
other corporations in such chain or (ii) any
corporation or trade or business (including, without
limitation, a partnership or limited liability
company) which controls fifty percent (50%) or more
(whether by ownership of stock, assets or an
equivalent ownership interest) of the Company.
(j) "Participant" - shall mean an employee of the
Company, the Parent or a Subsidiary selected, in
accordance with Section 4 hereof, to be eligible to
receive an Award in accordance with this Plan.
(k) "Performance Award" - shall mean the amount paid or
payable under Section 6 hereof.
(l) "Plan" - shall mean this Insignia/ESG Holdings, Inc.
Executive Performance Incentive Plan.
(m) "Plan Year" - shall mean the fiscal year of the
Company.
(n) "Subsidiary" - shall mean, other than the Company,
(i) any corporation in an unbroken chain of
corporations beginning with the Company which owns
stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock
in one of the other corporations in such chain; (ii)
any corporation or trade or business (including,
without limitation, a partnership or limited
liability company) which is controlled fifty percent
(50%) or more (whether by ownership of stock, assets
or an equivalent ownership interest or voting
interest) by the Company or one of its Subsidiaries;
or (iii) any other entity in which the Company or any
of its Subsidiaries has a material equity interest
and which is designated as a "Subsidiary" by
resolution of the Committee.
2
<PAGE> 4
3. ADMINISTRATION AND INTERPRETATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall
have the exclusive authority and responsibility to: (i) interpret the Plan; (ii)
approve the designa tion of eligible Participants; (iii) set the performance
criteria for Awards within the Plan guidelines; (iv) certify attainment of
performance goals and other material terms; (v) reduce Awards as provided
herein; (vi) authorize the payment of all benefits and expenses of the Plan as
they become payable under the Plan; (vii) adopt, amend and rescind rules and
regulations relating to the Plan; and (viii) make all other determinations and
take all other actions necessary or desirable for the Plan's administration
including, without limitation, correcting any defect, supplying any omission or
reconciling any inconsistency in this Plan in the manner and to the extent it
shall deem necessary to carry this Plan into effect, but only to the extent any
such action would be permitted under Code Section 162(m).
Decisions of the Committee shall be made by a majority of its members.
All decisions of the Committee on any question concerning the selection of
Participants and the interpretation and administration of the Plan shall be
final, conclusive and binding upon all parties. The Committee may rely on
information, and consider recommendations, provided by the Board or the
executive officers of the Company. The Plan is intended to comply with Code
Section 162(m), and all provisions contained herein shall be limited, construed
and interpreted in a manner to so comply.
4. ELIGIBILITY AND PARTICIPATION
(a) For each Plan Year, the Committee shall select the employees
of the Company, its Parent and Subsidiaries who are to
participate in the Plan from among the executive key employees
of the Company, its Parent and Subsidiaries.
(b) No person shall be entitled to any Award under this Plan for
any Plan Year unless he or she is so designated as a
Participant for that Plan Year. The Committee may add to or
delete individuals from the list of designated Participants at
any time and from time to time, in its sole discretion,
subject to any limitations required to comply with Code
Section 162(m).
5. INDIVIDUAL TARGET AWARD
For each Participant for each Plan Year, the Committee may specify a
targeted performance award. The Individual Target Award may be expressed, at the
Committee's discretion, as a fixed dollar amount, a percentage of base pay or
total pay (excluding payments made under this Plan), or an amount determined
pursuant to an objective formula or standard. Establishment of an Individual
Target Award for an employee for a Plan Year shall not imply or require that the
same level Individual Target Award (if any such award is established by the
Committee for the relevant employee) be set for any subsequent Plan Year. At the
time the Performance Goals are
3
<PAGE> 5
established (as provided in subsection 6.2 below), the Committee shall prescribe
a formula to determine the percentages (which may be greater than one-hundred
percent (100%)) of the Individual Target Award which may be payable based upon
the degree of attainment of the Performance Goals during the Plan Year.
Notwithstanding anything else herein, the Committee may, in its sole discretion,
elect to pay a Participant an amount that is less than the Participant's
Individual Target Award (or attained percentage thereof) regardless of the
degree of attainment of the Performance Goals; provided that no such discretion
to reduce an Award earned based on achievement of the applicable Performance
Goals shall be permitted for the Plan Year in which a Change in Control of the
Company occurs, or during such Plan Year with regard to the prior Plan Year if
the Awards for the prior Plan Year have not been made by the time of the Change
in Control of the Company, with regard to individuals who were Participants at
the time of the Change in Control of the Company. If a Participant does not have
an employment agreement or other written agreement approved by the Committee
which defines Change in Control, the foregoing provision and any other provision
of this Plan relating to Change in Control shall not apply to such Participant.
6. PERFORMANCE AWARD PROGRAM
6.1 Performance Awards. Subject to Section 7 herein, each Participant
is eligible to receive up to the achieved percentage of their Individual Target
Award for such Plan Year (or, subject to the last sentence of Section 5, such
lesser amount as determined by the Committee in its sole discretion) based upon
the attainment of the objective Performance Goals established pursuant to
subsection 6.2 and the formula established pursuant to Section 5. Except as
specifically provided in Section 7, no Performance Award shall be made to a
Participant for a Plan Year unless the minimum Performance Goals for such Plan
Year are attained.
6.2 Objective Performance Goals, Formulae or Standards (the
"Performance Goals"). The Committee shall establish the objective performance
goals, formulae or standards and the Individual Target Award (if any) applicable
to each Participant or class of Participants for a Plan Year in writing prior to
the beginning of such Plan Year or at such later date as permitted under Code
Section 162(m) and while the outcome of the Performance Goals are substantially
uncertain. Such Performance Goals may incorporate, if and only to the extent
permitted under Code Section 162(m), provisions for disregarding (or adjusting
for) changes in accounting methods, corporate transactions (including, without
limitation, dispositions and acquisitions) and other similar type events or
circumstances. To the extent any such provision would create impermissible
discretion under Code Section 162(m) or otherwise violate Code Section 162(m),
such provision shall be of no force or effect. These Performance Goals shall be
based on one or more of the following criteria with regard to the Company (or a
subsidiary, division, or other operational unit of the Company): (i) the
attainment of certain target levels of, or a specified percentage increase in,
revenues, income before income taxes and extraordinary items, net income,
earnings before income tax, earnings before interest, taxes, depreciation and
amortization, funds from operation of real estate investments or a combination
of any or all of the foregoing; (ii) the attainment of certain target levels of,
or a percentage increase in, after-tax or pre-tax
4
<PAGE> 6
profits including, without limitation, that attributable to continuing and/or
other operations; (iii) the attainment of certain target levels of, or a
specified increase in, operational cash flow; (iv) the achievement of a certain
level of, reduction of, or other specified objectives with regard to limiting
the level of increase in, all or a portion of, the Company's bank debt or other
long-term or short-term public or private debt or other similar financial
obligations of the Company, which may be calculated net of such cash balances
and/or other offsets and adjustments as may be established by the Committee; (v)
the attainment of a specified percentage increase in earnings per share or
earnings per share from continuing operations; (vi) the attainment of certain
target levels of, or a specified increase in return on capital employed or
return on invested capital; (vii) the attainment of certain target levels of, or
a percentage increase in, after-tax or pre-tax return on stockholders' equity;
(viii) the attainment of certain target levels of, or a specified increase in,
economic value added targets based on a cash flow return on investment formula;
(ix) the attainment of certain target levels in the fair market value of the
shares of the Company's common stock; and (x) the growth in the value of an
investment in the Company's common stock assuming the reinvestment of dividends.
For purposes of item (i) above, "extraordinary items" shall mean all items of
gain, loss or expense for the Plan Year determined to be extraordinary or
unusual in nature or infrequent in occurrence or related to a corporate
transaction (including, without limitation, a disposition or acquisition) or
related to a change in accounting principle, all as determined in accordance
with standards established by opinion No. 30 of the Accounting Principles Board.
In addition, such Performance Goals may be based upon the attainment of
specified levels of Company (or subsidiary, division or other operational unit
of the Company) performance under one or more of the measures described above
relative to the performance of other corporations. To the extent permitted under
Code Section 162(m), but only to the extent permitted under Code Section 162(m)
(including, without limitation, compliance with any requirements for stockholder
approval), the Committee may: (i) designate additional business criteria on
which the Performance Goals may be based or (ii) adjust, modify or amend the
aforementioned business criteria.
6.3 Maximum Nondiscretionary Award. The maximum Performance Award
payable to a Participant for any Plan Year is $3,000,000.
6.4 Payment Date; Committee Certification. The Performance Awards will
be paid as soon as administratively feasible after the Plan Year in which they
are earned, but not before the Committee certifies in writing that the
Performance Goals specified (except to the extent permitted under Code Section
162(m) and provided in Section 7 with regard to death, disability or Change in
Control of the Company or certain other termination situations) pursuant to
subsection 6.2 were, in fact, satisfied, except as may otherwise be agreed by a
Participant and the Company in a written agreement executed prior to the
beginning of the Plan Year to which the Performance Award relates in accordance
with any deferred compensation program in effect applicable to such Participant.
The Committee shall use its best efforts to make a determination with regard to
satisfaction of the Performance Goals within two and one-half (2 1/2) months
after the end of each Plan Year. Any Performance Award deferred by a Participant
5
<PAGE> 7
shall not increase (between the date on which the Performance Award is credited
to any deferred compensation program applicable to such Participant and the
payment date) by a measuring factor for each Plan Year greater than the interest
rate on thirty (30) year Treasury Bonds on the first business day of such Plan
Year compounded annually, as elected by the Participant in the deferral
agreement. The Participant shall have no right to receive payment of any
deferred amount until he or she has a right to receive such amount under the
terms of the applicable deferred compensation program.
7. EMPLOYMENT AT YEAR END GENERALLY REQUIRED FOR AWARD
No Award shall be made to any Participant who is not an active employee
of the Company, its Parent or one of its Subsidiaries or affiliates at the end
of the Plan Year; provided, however, that the Committee, in its sole and
absolute discretion, may make Awards to Participants for a Plan Year in
circumstances that the Committee deems appropriate including, but not limited
to, a Participant's death, disability, retirement or other termination of
employment during such Plan Year and the Committee shall be required to make at
least a pro-rata Award through the date of a Change in Control of the Company to
each Participant who is a Participant at the time of such Change in Control of
the Company. All such Awards shall be based on achievement of the Performance
Goals for the Plan Year, except that, to the extent permitted under Code Section
162(m), in the case of death, disability or Change in Control of the Company
during the Plan Year (or such other termination situations as permitted under
Code Section 162(m)) an amount equal to or less than the Individual Target
Awards may be made by the Committee either during or after the Plan Year without
regard to actual achievement of the Performance Goals. Furthermore, upon a
Change in Control of the Company the Committee may, in its sole discretion but
only to the extent permitted under Code Section 162(m), make an award (payable
immediately) equal to a pro-rata portion (through the date of the Change in
Control of the Company) of the Individual Target Award payable upon achieving,
but not surpassing, the Performance Goals for the relevant Plan Year. Any such
immediate pro-rata payment shall reduce any other Award made for such Plan Year
under this Plan by the amount of the pro-rata payment.
8. NON-ASSIGNABILITY
No Award under this Plan nor any right or benefit under this Plan shall
be subject to anticipation, alienation, sale, assignment, pledge, encumbrance,
garnishment, execution or levy of any kind or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber and to the extent permitted
by applicable law, charge, garnish, execute upon or levy upon the same shall be
void and shall not be recognized or given effect by the Company.
9. NO RIGHT TO EMPLOYMENT
Nothing in the Plan or in any notice of award pursuant to the Plan
shall confer upon any person the right to continue in the employment of the
Company, its Parent, or
6
<PAGE> 8
one of its Subsidiaries or affiliates nor affect the right of the Company, its
Parent or any of its Subsidiaries or affiliates to terminate the employment of
any Participant.
10. AMENDMENT OR TERMINATION
The Board (or a duly authorized committee thereof) may, in its sole and
absolute discretion, amend, suspend or terminate the Plan or to adopt a new plan
in place of this Plan at any time; provided, that no such amendment shall,
without the prior approval of the stockholders of the Company in accordance with
the laws of the State of Delaware to the extent required under Code Section
162(m): (i) materially alter the Performance Goals as set forth in subsection
6.2; (ii) increase the maximum amount set forth in subsection 6.3 and the
interest factor under subsection 6.4, except to the extent permitted under Code
Section 162(m) to substitute an approximately equivalent rate in the event that
the thirty (30) year Treasury Bond rate ceases to exist; (iii) change the class
of eligible employees set forth in Section 4(a); or (iv) implement any change to
a provision of the Plan requiring stockholder approval in order for the Plan to
continue to comply with the requirements of Code Section 162(m). Furthermore, no
amendment, suspension or termination shall, without the consent of the
Participant, alter or impair a Participant's right to receive payment of an
Award for a Plan Year otherwise payable hereunder.
11. SEVERABILITY
In the event that any one or more of the provisions contained in the
Plan shall, for any reason, be held to be invalid, illegal or unenforceable, in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Plan and the Plan shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained therein.
12. WITHHOLDING
The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it may have to withhold
federal, state or local income or other taxes incurred by reason of payments
pursuant to the Plan.
13. GOVERNING LAW
This Plan and any amendments thereto shall be construed, administered,
and governed in all respects in accordance with the laws of the State of
Delaware (regardless of the law that might otherwise govern under applicable
principles of conflict of laws).
7
<PAGE> 1
EXHIBIT 10.17
- ------------------------------------------------------------------------------
INSIGNIA/ESG HOLDINGS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
- ------------------------------------------------------------------------------
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Purpose.......................................................................................1
2. Definitions...................................................................................1
3. Eligibility...................................................................................4
4. Grant of Option; Participation................................................................4
5. Payroll Deductions............................................................................5
6. Exercise of Option............................................................................6
7. Delivery of Common Stock......................................................................6
8. Withdrawals; Termination of Employment; Disability or Leave of Absence Prior to
Termination of Employment.....................................................................7
9. Dividends and Interest........................................................................8
10. Stock.........................................................................................8
11. Administration................................................................................9
12. Designation of Beneficiary...................................................................10
13. Transferability..............................................................................10
14. Use of Funds.................................................................................11
15. Reports......................................................................................11
16. Effect of Certain Changes....................................................................11
17. Amendment or Termination.....................................................................12
18. Notices......................................................................................12
19. Regulations and Other Approvals; Governing Law...............................................12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
20. Withholding of Taxes.........................................................................13
21. No Employment Rights.........................................................................13
22. Severability of Provisions...................................................................13
23. Construction.................................................................................14
</TABLE>
ii
<PAGE> 4
INSIGNIA/ESG HOLDINGS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries and Designated Parent with an opportunity to
purchase Common Stock of the Company through accumulated payroll deductions. It
is the intention of the Company that the Plan qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code and the provisions
of the Plan shall be construed in a manner consistent with the requirements of
such section of the Code. The Plan is effective as of the Distribution Date.
2. DEFINITIONS.
(a) "Agent" shall mean the agent appointed by the
Committee pursuant to Section 11(b) hereof.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(d) "Committee" shall mean the Compensation Committee
of the Board or such other committee or subcommittee appointed from time to time
by the Board. To the extent that no Committee exists which has the authority to
administer the Plan, the functions of the Committee shall be exercised by the
Board.
(e) "Common Stock" shall mean shares of the Company's
common stock, par value $.01 per share.
(f) "Company" shall mean Insignia/ESG Holdings, Inc.,
a Delaware corporation.
(g) "Compensation" shall mean the total cash
compensation paid during an Offering Period by the Company, any Designated
Subsidiary or Designated Parent or any affiliate of the Company to an Employee,
including overtime and bonuses, as reported by the Company, any Designated
Subsidiary or Designated Parent or any affiliate of the Company for federal
income tax purposes, and including an Employee's portion of salary deferral
contributions pursuant to Section 401(k) of the Code and any amount excludable
pursuant to Section 125 of the Code. Compensation shall not include any
contributions by the
<PAGE> 5
Company or any of its affiliates to, or benefits paid under, this Plan or under
any other pension, profit-sharing, fringe benefit, group insurance or other
employee welfare plan heretofore or hereafter adopted or any deferred
compensation arrangement. For purposes of this Section, affiliate shall mean any
entity required to be aggregated with the Company under Section 414 (b), (c),
(m) or (o) of the Code.
(h) "Designated Parent" shall mean the Parent
Corporation of the Company if so specifically designated as eligible to
participate in the Plan by the Board in its sole discretion.
(i) "Designated Subsidiaries" shall mean each
Subsidiary Corporation of the Company on the effective date of the Plan and
future Subsidiary Corporations which are not specifically excluded from
participation by the Board from time to time in its sole discretion.
Notwithstanding the foregoing, the term "Designated Subsidiaries" shall not
include Subsidiary Corporations located in Foreign Jurisdictions, unless the
Board specifically designates such Subsidiary Corporation as a Designated
Subsidiary.
(j) "Disability" or "Disabled" shall mean a permanent
and total disability as defined under Section 22(e)(3) of the Code.
(k) "Distribution Date" shall mean the date of
distribution of Common Stock by Insignia Financial Group, Inc. to holders of
Class A Common Stock, par value $.01 per share, of Insignia Financial Group,
Inc.
(l) "Employee" shall mean any person, including an
officer, who is regularly and continuously employed by the Company or a
Designated Subsidiary or a Designated Parent.
(m) "Employer" shall mean, with respect to any
Employee, the Company or Designated Subsidiary or Designated Parent by which the
Employee is employed.
(n) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(o) "Exercise Date" shall mean the last business day
of each Offering Period in which payroll deductions are made under the Plan.
(p) "Fair Market Value" for purposes of this Plan,
unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, shall mean, as of any date, the last sales price
reported for the Common Stock on the applicable date (i) as reported by the
principal national securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities exchange, as
quoted on an automated quotation system sponsored by the National Association of
Securities Dealers. If the Common Stock is not readily tradable on a national
securities exchange or any system
2
<PAGE> 6
sponsored by the National Association of Securities Dealers, its Fair Market
Value shall be set in good faith by the Committee on the advice of a registered
investment adviser (as defined under the Investment Advisers Act of 1940).
(q) "Foreign Jurisdiction" shall mean any
jurisdiction outside of the United States including, without limitation,
countries, states, provinces and localities.
(r) "Leave of Absence" shall mean a leave of absence
determined in accordance with the personnel policies of a Participant's
Employer.
(s) "Offering Date" shall mean the first day of each
calendar quarter or such other dates designated by the Committee in its sole
discretion.
(t) "Offering Period" shall mean each calendar
quarter during the effectiveness of the Plan, commencing on each Offering Date,
provided that the Committee shall have the power to change the duration of
Offering Periods.
(u) "Option" shall mean an option to purchase shares
of Common Stock of the Company.
(v) "Parent Corporation" shall mean any corporation
(other than the Company) in an unbroken chain of corporations ending with the
Company if, at the time of granting an Option, each of the corporations other
than the employer corporation owns stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
(w) "Participant" shall mean an Employee who
participates in the Plan.
(x) "Plan" shall mean this Insignia/ESG Holdings,
Inc. 1998 Employee Stock Purchase Plan, as amended from time to time.
(y) "Rule 16b-3" shall mean Rule 16b-3 under Section
16(b) of the Exchange Act as then in effect or any successor provisions.
(z) "Subsidiary Corporation" shall mean any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company at the time of granting an Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
3
<PAGE> 7
3. ELIGIBILITY.
(a) Subject to the requirements of Section 4(b)
hereof, any person who is (i) an Employee as of an Offering Date and (ii) who
customarily works more than twenty (20) hours per week for an Employer and more
than five (5) months per year for an Employer shall be eligible to participate
in the Plan and be granted an Option for the Offering Period commencing on such
Offering Date.
(b) Notwithstanding any provisions of the Plan to the
contrary, no Employee shall be granted an Option under the Plan:
(i) if, immediately after the grant, such Employee
(or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own
stock and/or hold outstanding Options to purchase stock
possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company
or of any Subsidiary Corporation or Parent Corporation; or
(ii) which permits such Employee's right to purchase
stock under all employee stock purchase plans (as described in
Section 423 of the Code) of the Company and any Subsidiary
Corporation or Parent Corporation to accrue at a rate which
exceeds twenty-five thousand dollars ($25,000) of fair market
value of such stock (determined at the time such option is
granted) for any calendar year in which such option is
outstanding at any time.
(c) Notwithstanding anything herein to the contrary,
unless otherwise permitted pursuant to the Code, "qualified real estate agents"
(as defined in Section 3508 of the Code) shall not be eligible to participate in
the Plan.
4. GRANT OF OPTION; PARTICIPATION.
(a) On each Offering Date, the Company shall commence
an offer by granting each eligible Employee an Option to purchase shares of
Common Stock, subject to the limitations set forth in Sections 3(b) and 10
hereof. The Committee shall specify the terms and conditions for each such
offer, including the number of shares of Common Stock that may be purchased
thereunder.
(b) Each eligible Employee may elect to become a
Participant in the Plan with respect to an Offering Period, only by filing an
agreement with the Employer authorizing payroll deductions (as set forth in
Section 5 hereof).
(c) The Option price per share of the Common Stock
subject to an offering shall be determined by the Board, in its sole discretion,
and shall remain in effect
4
<PAGE> 8
unless modified at least thirty (30) days prior to the applicable Offering
Date, but in no event shall be less than the lesser of: (i) eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock on the first business
day of the Offering Period or (ii) eighty-five (85%) of the Fair Market Value of
a share of Common Stock on the Exercise Date. Effective as of the Distribution
Date until modified by the Board, the price per share of the Common Stock
subject to an offering shall be the lesser of: (i) eighty-five percent (85%) of
the Fair Market Value of a share of Common Stock on the first business day of
the Offering Period or (ii) eighty-five (85%) of the Fair Market Value of a
share of Common Stock on the Exercise Date.
5. PAYROLL DEDUCTIONS.
(a) At least fourteen (14) days (or such shorter
period designated by the Committee) prior to each Offering Date, a Participant
may, in the manner prescribed by forms approved by the Committee, and subject to
the restriction set forth in Section 3(b)(ii) above, authorize payroll
deductions in any whole percentage up to ten percent (10%) of his or her
Compensation during the Offering Period. A Participant may increase or decrease
such payroll deductions prior to the beginning of any subsequent Offering
Period, upon fourteen (14) days' (or such shorter period designated by the
Committee) prior written notice to the Committee. A Participant may terminate a
payroll deduction authorization at any time, upon fourteen (14) days' (or such
shorter period designated by the Committee) prior written notice to the
Committee. An authorization shall remain in effect until modified or terminated
by the Participant or until the percentage used to determine the Option price
(as set forth in Section 4(c) above) is effectively increased.
(b) All payroll deductions made by a Participant
shall be credited to such Participant's account under the Plan. A Participant
may not make any additional payments into such account.
(c) In the event a Participant makes a hardship
withdrawal of employee deferral (401(k)) contributions under a 401(k) profit
sharing plan of the Company, a Designated Subsidiary, or a Designated Parent or
an affiliate or any other plan qualified under Section 401(a) of the Code that
contains a Code Section 401(k) feature, such Participant's payroll deductions
and the purchase of shares of Common Stock under the Plan shall be suspended
until the first payroll period following the Offering Date commencing after the
twelve (12) month period after such hardship withdrawal. If a Participant who
elects a hardship withdrawal under such a 401(k) profit sharing plan or such
other plan has a cash balance accumulated in his or her account at the time of
withdrawal that has not already been applied to purchase shares of Common Stock,
such cash balance shall be returned to the Participant as soon as
administratively practicable.
5
<PAGE> 9
6. EXERCISE OF OPTION.
(a) Unless a Participant withdraws from the Plan as
provided in Section 8 hereof, such Participant's election to purchase shares of
Common Stock shall be exercised automatically on the Exercise Date, and the
maximum number of whole and/or fractional shares of Common Stock subject to such
Option shall be purchased for such Participant at the applicable Option price
with the accumulated payroll deductions in such Participant's account. If all or
any portion of the shares cannot reasonably be purchased on the Exercise Date in
the sole discretion of the Committee because of unavailability or any other
reason, such purchase shall be made as soon thereafter as feasible. In no event
shall certificates for any fractional shares be issued under the Plan.
(b) The shares of Common Stock purchased upon
exercise of an Option hereunder shall be credited to the Participant's account
under the Plan and shall be deemed to be transferred to the Participant on the
Exercise Date and, except as otherwise provided herein, the Participant shall
have all rights of a stockholder with respect to such shares, including, without
limitation, the right to receive dividends on the shares and the right to vote
or tender such shares.
7. DELIVERY OF COMMON STOCK.
(a) Certificates for whole shares of Common Stock
shall not be issued to Participants unless and until requested or as otherwise
provided pursuant to Section 8. Such certificates shall be issued as soon as
administratively feasible following the Participant's request for issuance. If a
Participant requests certificates for whole shares of Common Stock, any
fractional shares of Common Stock shall remain in the Participant's account
during his or her employment, unless he or she requests cash in lieu of the
fractional shares. A fee fixed by the Plan's Agent or transfer agent, as the
case may be, may be charged to the Participant for the issuance of certificates
of shares of Common Stock and for the replacement of lost certificates.
Certificates for a fractional share of Common Stock shall not be issued under
any circumstance.
(b) A Participant may request the Agent to sell all
or a portion of shares of Common Stock for which certificates have not been
issued and receive cash for such shares, subject to any brokerage fees or
commissions.
6
<PAGE> 10
8. WITHDRAWALS; TERMINATION OF EMPLOYMENT; DISABILITY OR LEAVE OF ABSENCE
PRIOR TO TERMINATION OF EMPLOYMENT.
(a) A Participant may withdraw all, but not less than
all, the payroll deductions credited to such Participant's account (that have
not been used to purchase shares of Common Stock) under the Plan at any time
prior to the Exercise Date by giving fourteen (14) days' (or such shorter period
designated by the Committee) prior written notice to the Committee. All such
payroll deductions credited to such Participant's account shall be paid to such
Participant (without interest) promptly after receipt of such Participant's
written notice of withdrawal and such Participant's Option for the Offering
Period in which the withdrawal occurs shall be automatically terminated. No
further payroll deductions for the purchase of shares of Common Stock shall be
made for such Participant during such Offering Period. A Participant's
withdrawal from an offering shall not have any effect upon such Participant's
eligibility to participate in a subsequent offering or in any similar plan which
may hereafter be adopted by the Company.
(b) If a Participant retires or terminates his or her
employment with the Company, any Subsidiary Corporation and any Parent
Corporation for any reason other than death, the payroll deductions credited to
such Participant's account (that have not been used to purchase shares of Common
Stock) shall be returned or distributed to the Participant (without interest) as
soon as practicable following the Participant's retirement or other termination
of employment. The Participant shall elect, within the sixty (60) day period
following the Participant's retirement or other termination of employment with
the Company, any Subsidiary Corporation and any Parent Corporation (i) to
receive certificates for all of the whole shares of Common Stock and cash in
lieu of any fractional shares of Common Stock credited to the Participant's
account under the Plan, (ii) to have certificates for all shares of Common Stock
(including fractional shares) credited to the Participant's account under the
Plan transferred to an individual brokerage account established by the Agent for
the benefit of the Participant or for the benefit of the Participant and his or
her spouse as joint tenants with rights of survivorship, or (iii) a combination
of (i) and (ii). A fee fixed by the Plan's Agent may be charged to the
Participant for the issuance of certificates of shares of Common Stock.
(c) In the event of the Participant's death, the
Participant's Option shall be exercised in accordance with the terms of the Plan
such that the payroll deductions credited to such Participant's account after
the Offering Date (whether before or immediately following the Participant's
death) shall be used to purchase shares of Common Stock in accordance with the
terms of the Plan. The Participant's beneficiary shall elect, within the sixty
(60) day period following the Exercise Date following the Participant's death,
(i) to receive certificates for all of the whole shares of Common Stock and cash
in lieu of any fractional shares of Common Stock credited to the Participant's
account under the Plan, (ii) to have certificates for all shares of Common Stock
(including fractional shares) credited to the Participant's account under the
Plan transferred to an individual brokerage account established by the Agent for
the benefit of the Participant's beneficiary, or (iii) a combination of (i) and
7
<PAGE> 11
(ii). A fee fixed by the Plan's Agent may be charged to the Participant's
beneficiary for the issuance of certificates of shares of Common Stock.
(d) In the event of a Participant's Disability or
Leave of Absence, payroll deductions shall only be taken from Compensation that
is due and owing to the Participant. To the extent that any cash balance has
accumulated in the Participant's account, such balance shall be used to purchase
shares of Common Stock on the Exercise Date. With respect to a Participant who
becomes ineligible to participate due to a Disability or Leave of Absence,
shares of Common Stock held in such Participant's account shall continue to be
held in the Participant's account unless he or she elects otherwise under
Section 7(a). In the event that such individual's Disability or Leave of Absence
ends and such individual returns to work as an Employee and satisfies the
eligibility conditions under Section 3, payroll deductions shall resume
automatically in accordance with his or her most recent payroll deduction
authorization form in effect prior to the Disability or Leave of Absence, unless
he or she elects otherwise. Section 8(b) shall apply to any termination of
employment with the Company, any Subsidiary Corporation and any Parent
Corporation following a Participant's Disability or Leave of Absence.
9. DIVIDENDS AND INTEREST.
(a) Cash dividends, if any, on shares of Common Stock
acquired through the Plan will be automatically paid by check directly to the
Participant by the Company, or if applicable, the transfer agent. Dividends paid
in property other than cash or Common Stock shall be distributed to Participants
as soon as practicable.
(b) No interest shall accrue on or be payable with
respect to the payroll deductions of a Participant in the Plan.
10. STOCK.
(a) The maximum number of shares of Common Stock
which shall be reserved for sale under the Plan shall be 1,500,000 subject to
adjustment as provided in Section 16 hereof. If the total number of shares which
would otherwise be subject to Options granted pursuant to Section 4(a) hereof on
an Offering Date exceeds the number of shares then available under the Plan
(after deduction of all shares for which Options have been exercised or are then
outstanding), the Committee shall make a pro rata allocation of the shares
remaining available for Option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Committee shall give written notice to each Participant of such reduction of the
number of Option shares affected thereby and shall similarly reduce the rate of
payroll deductions, if necessary. Purchases of Common Stock under the Plan shall
be made by the Agent on the open market, or in the sole discretion of the
8
<PAGE> 12
Committee, may be made by the Company's delivery of treasury shares or
newly-issued and authorized shares to the Plan, upon such terms as the Committee
may approve.
(b) Shares of Common Stock to be delivered to a
Participant under the Plan shall be registered solely in the name of the
Participant or, at the election of the Participant, in the name of the
Participant and his or her spouse as joint tenants with rights of survivorship.
11. ADMINISTRATION.
(a) The Plan shall be administered by the Committee,
and the Committee may select an administrator to whom its duties and
responsibilities hereunder may be delegated. The Committee shall have full power
and authority, subject to the provisions of the Plan, to promulgate such rules
and regulations as it deems necessary for the proper administration of the Plan,
to interpret the provisions and supervise the administration of the Plan, and to
take all action in connection therewith or in relation thereto as it deems
necessary or advisable. The Committee may adopt special guidelines and
provisions for persons who are residing in, or subject to the laws of, Foreign
Jurisdictions to comply with applicable tax and securities laws. All
interpretations and determinations of the Committee shall be made in its sole
and absolute discretion based on the Plan document and shall be final,
conclusive and binding on all parties.
(b) The Committee may employ such legal counsel,
consultants, brokers and agents as it may deem desirable for the administration
of the Plan and may rely upon any opinion received from any such counsel or
consultant and any computation received from any such consultant, broker or
agent. The Committee may, in its sole discretion, designate an Agent to
administer the Plan, purchase and sell shares of Common Stock in accordance with
the Plan, keep records, send statements of account to employees and to perform
other duties relating to the Plan, as the Committee may request from time to
time. The Agent shall serve as custodian for purposes of the Plan and, unless
otherwise requested by the Participant, Common Stock purchased under the Plan
shall be held by and in the name of, or in the name of a nominee of, the
custodian for the benefit of each Participant, who shall thereafter be a
beneficial stockholder of the Company. The Committee may adopt, amend or repeal
any guidelines or requirements necessary for the custody and delivery of the
Common Stock, including, without limitation, guidelines regarding the imposition
of reasonable fees in certain circumstances.
(c) The Company shall, to the fullest extent
permitted by law and the Certificate of Incorporation and By-laws of the Company
and, to the extent not covered by insurance, indemnify each director, officer or
employee of the Employer (including the heirs, executors, administrators and
other personal representatives of such person) and each member of the Committee
against all expenses, costs, liabilities and losses (including attorneys' fees,
judgments, fines, excise taxes or penalties, and amounts paid or to be paid in
settlement)
9
<PAGE> 13
actually and reasonably incurred by such person in connection with any
threatened, pending or actual suit, action or proceeding (whether civil,
criminal, administrative or investigative in nature or otherwise) in which such
person may be involved by reason of the fact that he or she is or was serving
this Plan in any capacity at the request of the Employer, except in instances
where any such person engages in willful neglect or fraud. Such right of
indemnification shall include the right to be paid by the Company for expenses
incurred or reasonably anticipated to be incurred in defending any such suit,
action or proceeding in advance of its disposition; provided, however, that the
payment of expenses in advance of the settlement or final disposition of a suit,
action or proceeding, shall be made only upon delivery to the Company of an
undertaking by or on behalf of such person to repay all amounts so advanced if
it is ultimately determined that such person is not entitled to be indemnified
hereunder. Such indemnification shall be in addition to any rights of
indemnification the person may have as a director, officer or employee or under
the Certificate of Incorporation of the Company or the By-Laws of the Company.
Expenses incurred by the Committee or the Board in the engagement of any such
counsel, consultant or agent shall be paid by the Company.
(d) Employees shall be fully responsible for (i) any
brokerage fees and commissions charged for the sale of Common Stock, (ii) any
fees for certificates of shares of Common Stock and (iii) any taxes owed by them
as a result of participation in the Plan.
12. DESIGNATION OF BENEFICIARY.
A Participant may file, on forms supplied by and delivered to
the Company, a written designation of a beneficiary who is to receive any shares
of Common Stock and cash remaining in such Participant's account under the Plan
in the event of the Participant's death. Such designation of beneficiary may be
changed by the Participant at any time by written notice. If a Participant is
married on the date of his death and no beneficiary had been designated by the
Participant prior to his death, the Participant's spouse will be presumed to be
his beneficiary. If a Participant is not married on the date of his death and no
beneficiary had been designated by the Participant prior to his death, the
Participant's beneficiary shall be his estate.
13. TRANSFERABILITY.
(a) Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an Option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in an way (other than by will, the laws of descent and
distribution or as provided in Section 10(b) or 12 hereof) by the Participant.
Any such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with Section 8 hereof.
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<PAGE> 14
(b) All rights of a Participant granted under this
Plan, including but not limited to, the grant of an Option, the right to
exercise an Option and the ability to authorize payroll deductions shall relate
solely to a Participant, except as otherwise provided in Section 8(c) hereof.
14. USE OF FUNDS.
All payroll deductions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such payroll deductions.
15. REPORTS.
Individual accounts shall be maintained for each Participant
in the Plan. Statements of account shall be given to participating Employees at
such times prescribed by the Committee; such statements shall set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares of Common Stock purchased, the aggregate shares in the Participant's
account and the remaining cash balance, if any.
16. EFFECT OF CERTAIN CHANGES.
(a) In the event of any increase, reduction, or
change or exchange of shares of Common Stock for a different number or kind of
shares or other securities of the Company by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, stock dividend, stock
split or reverse stock split, combination or exchange of shares, repurchase of
shares, change in corporate structure or otherwise, or the distribution of an
extraordinary dividend, the Committee shall conclusively determine the
appropriate equitable adjustments, if any, to be made under the Plan, including
without limitation adjustments to the number of shares of Common Stock which
have been authorized for issuance under the Plan but have not yet been placed
under Option, as well as the price per share of Common Stock covered by each
Option under the Plan which has not yet been exercised.
(b) In the event of the complete liquidation of the
Company or of a reorganization, consolidation or merger in which the Company is
not the surviving Corporation, any Option granted under the Plan shall continue
in full force and effect unless either (i) the Board modifies such Option so
that it is fully exercisable with respect to all of the Common Stock subject
thereto prior to the effective date of such transaction or (ii) the surviving
corporation issues or assumes a stock option as contemplated under Section
424(a) of the Code.
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<PAGE> 15
17. AMENDMENT OR TERMINATION.
The Company, by action of the Board (or a duly authorized
committee thereof), may at any time terminate, amend or freeze the Plan. No such
termination shall adversely affect Options previously granted and no amendment
may make any change in any Option theretofore granted which adversely affects
the rights of any Participant. No amendment shall be effective unless approved
by the stockholders of the Company if stockholder approval of such amendment is
required to comply with Section 423 of the Code or to comply with any other
applicable law, regulation or stock exchange rule. Upon termination of the Plan,
the Company shall return or distribute the payroll deductions credited to a
Participant's account (that have not been used to purchase shares of Common
Stock) and shall distribute or credit shares of Common Stock credited to a
Participant's account in accordance with Section 8(b) hereof. Upon the freezing
of the Plan, any payroll deductions credited to a Participant's account (that
have not been used to purchase shares of Common Stock) shall be used to purchase
shares of Common Stock in accordance with Section 6, substituting the term
Exercise Date with the effective date of the freezing of the Plan.
18. NOTICES.
All notices or other communications by a Participant to the
Company or the Committee under or in connection with the Plan shall be deemed to
have been duly given when received in the form specified by the Company or
Committee at the location, or by the person, designated for the receipt thereof.
Each Participant shall be responsible for furnishing the Committee with the
current and proper address for the mailing of notices and the delivery of other
information. Any notices or communications by the Company to a Participant shall
be deemed given if directed to such address and mailed by regular United States
mail, first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing shall be suspended until the Participant
furnishes the proper address.
19. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
(a) This Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of Delaware without giving effect to the choice of law principles thereof,
except to the extent that such law is preempted by federal law.
(b) The obligation of the Company to sell or deliver
shares of Common Stock with respect to Options granted under the Plan shall be
subject to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
12
<PAGE> 16
(c) To the extent required, the Plan is intended to
comply with Rule 16b-3 and the Committee shall interpret and administer the
provisions of the Plan in a manner consistent therewith. Any provisions
inconsistent with Rule 16b-3 shall be inoperative and shall not affect the
validity of the Plan. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act and Rule 16b-3, as it may deem necessary or proper for the
administration and operation of the Plan and the transaction of business
thereunder.
20. WITHHOLDING OF TAXES.
(a) If the Participant makes a disposition, within
the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any share or shares issued to such Participant pursuant to such
Participant's exercise of an Option, and such disposition occurs within the
two-year period commencing on the day after the Offering Date or within the
one-year period commencing on the day after the Exercise Date, such Participant
shall immediately, or as soon as practicable thereafter, notify the Company
thereof and thereafter immediately deliver to the Company any amount of federal,
state or local income taxes and other amounts which the Company informs the
Participant the Company is required to withhold.
(b) Notwithstanding anything herein to the contrary,
the Employer shall have the right to make such provisions as it deems necessary
to satisfy any obligations to withhold federal, state, or local income taxes or
other taxes incurred by reason of the issuance of Common Stock pursuant to the
Plan. Notwithstanding anything herein to the contrary, the Employer may require
a Participant to remit an amount equal to the required withholding amount and
may invalidate any election if the Participant does not remit applicable
withholding taxes.
21. NO EMPLOYMENT RIGHTS.
The establishment and operation of this Plan shall not confer
any legal rights upon any Participant or other person for a continuation of
employment, nor shall it interfere with the rights of an Employer to discharge
any Employee and to treat him without regard to the effect which that treatment
might have upon him as a Participant or potential Participant under the Plan.
22. SEVERABILITY OF PROVISIONS.
If any provision of the Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and the Plan shall be construed and enforced as if such
provisions had not been included.
13
<PAGE> 17
23. CONSTRUCTION.
The use of a masculine pronoun shall include the feminine, and
the singular form shall include the plural form, unless the context clearly
indicates otherwise. The headings and captions herein are provided for reference
and convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
14
<PAGE> 1
EXHIBIT 10.18
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") made and entered into
this ___ day of _________, 1998 by and between INSIGNIA/ESG HOLDINGS, INC., a
Delaware corporation (the "Company"), and _________ (the "Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as executive officers, directors or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of such corporations;
and
WHEREAS, the current difficulties or virtual impossibility of
obtaining adequate insurance and uncertainties relating to indemnification have
increased the difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, the Indemnitee is willing to serve, continue to serve and to
take on additional service for or on behalf of the Company on the condition that
he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and the Indemnitee do hereby covenant and agree as
follows:
Section 1. Services by Indemnitee. The Indemnitee agrees to serve as a
director and/or executive of the Company. Subject to other agreements,
arrangements and understandings between the Indemnitee and the Company, the
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or other obligation imposed by operation of
law). Notwithstanding the foregoing, this Agreement shall not impose any
employment obligation upon the Company, provide Indemnitee with any right to
continuance of employment, or amend, modify or alter any agreement, arrangement
or understanding concerning the employment of Indemnitee. If the Indemnitee is
an executive of the Company, the Indemnitee's employment is and shall continue
to be at will (subject to any other agreements, arrangements or understandings
between the Company and the Indemnitee).
Section 2. Indemnification. The Company shall indemnify the Indemnitee
to the fullest extent permitted by applicable law in effect on the date hereof
or as such laws may from time to time be amended. Without diminishing the scope
of the indemnification provided by this Section 2, the rights of indemnification
of the Indemnitee provided hereunder shall
<PAGE> 2
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include but shall not be limited to those rights set forth hereunder, except to
the extent expressly prohibited by applicable law.
Section 3. Action or Proceeding Other Than an Action By or in the
Right of the Company. The Indemnitee shall be entitled to the indemnification
rights provided in this Section 3 if he is or was a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative in nature, other than
an action by or in the right of the Company, by reason of the fact that he is or
was, either prior to or after the execution of this Agreement, a director,
officer, employee, agent or fiduciary of the Company or any of its subsidiaries
or is or was, either prior to or after the execution of this Agreement, serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of any other entity or by reason of anything done or not done by him,
either prior to or after the execution of this Agreement, in any such capacity.
Pursuant to this Section 3, the Indemnitee shall be indemnified against all
expenses (including attorneys' fees), costs, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding (including, but not limited to, the
investigation, defense or appeal thereof), if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful.
Section 4. Actions By or in the Right of the Company. The Indemnitee
shall be entitled to the indemnification rights provided in this Section 4 if he
is or was a party or is threatened to be made a party to any threatened, pending
or completed action or suit brought by or in the right of the Company to procure
a judgment in its favor by reason of the fact that he is or was, either prior to
or after the execution of this Agreement, a director, officer, employee, agent
or fiduciary of the Company or any of its subsidiaries or is or was, either
prior to or after the execution of this Agreement, serving at the request of the
Company as a director, officer, employee, agent or fiduciary of any other entity
by reason of anything done or not done by him, either prior to or after the
execution of this Agreement, in any such capacity. Pursuant to this Section 4,
the Indemnitee shall be indemnified against all expenses (including attorneys'
fees) and costs actually and reasonably incurred by him in connection with such
action or suit (including, but not limited to, the investigation, defense,
settlement or appeal thereof) if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that no such indemnification shall be made in
respect of any claim, issue or matter as to which applicable law expressly
prohibits such indemnification by reason of an adjudication of liability of the
Indemnitee to the Company, unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite such adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnification for such expenses and costs as
such court shall deem proper.
Section 5. Indemnification for Costs, Charges and Expenses of
Successful Party. Notwithstanding the other provisions of this Agreement and in
addition to the rights to
<PAGE> 3
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indemnification set forth in Sections 3 and 4 hereof, to the extent that the
Indemnitee has served as a witness on behalf of the Company or has been
successful on the merits or otherwise, including without limitation the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections 3 and 4 hereof, or in defense of any claim,
issue or matter therein, he shall be indemnified against all costs, charges and
expenses (including attorneys' fees) actually and reasonably incurred by him or
on his behalf in connection therewith.
Section 6. Partial Indemnification. In addition to the rights to
indemnification set forth in Sections 3 and 4 hereof, if the Indemnitee is only
partially successful in the defense, investigation, settlement or appeal of any
action, suit, investigation or proceeding described in Section 3 or 4 hereof,
and as a result is not entitled under Section 3, 4 or 5 hereof to
indemnification by the Company for the total amount of the expenses (including
attorneys' fees), costs, judgments, penalties, fees and amounts paid in
settlement actually and reasonably incurred by him, the Company shall
nevertheless indemnify the Indemnitee, as a matter of right pursuant to Section
5 hereof, to the extent that the Indemnitee has been partially successful.
Section 7. Determination of Entitlement to Indemnification. (a) Upon
written request by the Indemnitee for indemnification pursuant to Section 3 or 4
hereof, the entitlement of the Indemnitee to indemnification pursuant to the
terms of this Agreement shall be determined by the following person or persons
who shall be empowered to make such determination: (i) the Board of Directors of
the Company by a majority vote of a quorum consisting of Disinterested Directors
(as hereinafter defined); or (ii) by a committee of Disinterested Directors
designated by majority vote of such Disinterested Directors, even though less
than a quorum; or (iii) if such a quorum referred to in clause (i) is not
obtainable or, even if obtainable, if the Board of Directors by the majority
vote of Disinterested Directors so directs, by Independent Counsel (as
hereinafter defined) in a written opinion to the Board of Directors, a copy of
which shall be delivered to the Indemnitee; or (iv) by the stockholders.
Independent Counsel shall be selected by the Disinterested Directors and
approved by the Indemnitee. Upon failure of the Board so to select Independent
Counsel or upon failure of the Indemnitee so to approve Independent Counsel,
Independent Counsel shall be selected by a Chancellor of the State of Delaware
or such other person as such Chancellor shall designate to make such selection.
Such determination of entitlement to indemnification shall be made not later
than 60 days after receipt by the Company of a written request for
indemnification. Such request shall include documentation or information which
is necessary for such determination and which is reasonably available to the
Indemnitee. Any costs or expenses (including attorneys' fees) incurred by the
Indemnitee in connection with his request for indemnification hereunder shall be
borne by the Company. The Company hereby indemnifies and agrees to hold the
Indemnitee harmless from such costs and expenses irrespective of the outcome of
the determination of the Indemnitee's entitlement to indemnification.
(b) Notwithstanding any other provision of this Agreement to the
contrary, if there is a Change in Control of the Company (as defined below),
other than a Change in Control which has been approved by a majority of the
Company's Board of Directors who were directors immediately prior to such Change
in Control, then with respect to all matters thereafter arising
<PAGE> 4
-4-
concerning the rights of Indemnitee to indemnity payments and advances of
expenses under this Agreement or any other agreement, the Company's Certificate
of Incorporation or the Company's by-laws relating to claims for
indemnification, the Company shall seek legal advice only from Independent
Counsel selected by Indemnitee and approved by the Company (which approval shall
not be unreasonably withheld). Such Independent Counsel, among other things,
shall render its written opinion to the Company and Indemnitee as to whether and
to what extent the Indemnitee would be permitted to be indemnified under
applicable law. The Company agrees to pay the reasonable fees of the Independent
Counsel referred to above and, to the extent permitted by applicable law, may
fully indemnify such Independent Counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement.
Section 8. Presumptions and Effect of Certain Proceedings. The
Secretary of the Company shall, promptly upon receipt of the Indemnitee's
request for indemnification, advise in writing the Board of Directors or such
other person or persons empowered to make the determination as provided in
Section 7 that the Indemnitee has made such request for indemnification. Upon
making such request for indemnification, the Indemnitee shall be presumed to be
entitled to indemnification hereunder and the Company shall have the burden of
proof in the making of any determination contrary to such presumption. If the
person or persons so empowered to make such determination shall have failed to
make the requested indemnification within 60 days after receipt by the Company
of such request, except as otherwise expressly prohibited by applicable law, the
requisite determination of entitlement to indemnification shall be deemed to
have been made and the Indemnitee shall be absolutely entitled to such
indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Section 3 or 4 hereof by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself: (a) create a presumption that the Indemnitee did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, that the Indemnitee had reasonable cause to believe that his conduct
was unlawful; or (b) otherwise adversely affect the rights of the Indemnitee to
indemnification except as may be provided herein.
Section 9. Advancement of Expenses and Costs. All reasonable expenses
and costs incurred by the Indemnitee (including attorneys' fees, retainers and
advances of disbursements required of the Indemnitee) shall be paid by the
Company upon incurrence, in advance of the final disposition of such action,
suit or proceeding, at the request of the Indemnitee within 20 days after the
receipt by the Company of a statement or statements from the Indemnitee
requesting such advance or advances from time to time. The Indemnitee's
entitlement to such expenses shall include those incurred in connection with any
proceeding by the Indemnitee seeking an adjudication or award in arbitration
pursuant to this Agreement. Such statement or statements shall reasonably
evidence the expenses and costs incurred by him in connection therewith. The
Indemnitee hereby undertakes to repay such amount if it is ultimately determined
that the Indemnitee is not entitled to be indemnified against such expenses and
costs
<PAGE> 5
-5-
by the Company as provided by this Agreement or otherwise.
Section 10. Remedies of Indemnitee in Cases of Determination not to
Indemnify or to Advance Expenses. In the event that a determination is made that
the Indemnitee is not entitled to indemnification hereunder or if payment has
not been timely made following a determination of entitlement to indemnification
pursuant to Sections 7 and 8, or if expenses are not advanced pursuant to
Section 9, the Indemnitee shall be entitled to a final adjudication in an
appropriate court of the State of Delaware or any other court of competent
jurisdiction of his entitlement to such indemnification or advance.
Alternatively, the Indemnitee at his option may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association, such award, if determined by the arbitrator to be
merited, to be made within 60 days following the filing of the demand for
arbitration. The Company shall not oppose the Indemnitee's right to seek any
such adjudication or award in arbitration or any other claim. Such judicial
proceeding or arbitration shall be made de novo and the Indemnitee shall not be
prejudiced by reason of a determination (if so made) that he is not entitled to
indemnification. If a determination is made or deemed to have been made pursuant
to the terms of Section 7 or Section 8 hereof that the Indemnitee is entitled to
indemnification, the Company shall be bound by such determination and is
precluded from asserting that such determination has not been made or that the
procedure by which such determination was made is not valid, binding and
enforceable. The Company further agrees to stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement and is precluded from making any assertion to the contrary. If the
court or arbitrator shall determine that the Indemnitee is entitled to any
indemnification hereunder, the Company shall pay all reasonable expenses
(including attorneys' fees) and costs actually incurred by the Indemnitee in
connection with such adjudication or award in arbitration (including, but not
limited to, any appellate proceedings).
Section 11. Other Rights to Indemnification. The indemnification and
advancement of expenses (including attorney's fees) and costs provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may now or in the future be entitled under any provision of the
by-laws, Certificate of Incorporation, vote of stockholders or disinterested
directors, provision of law, other agreement or otherwise.
Section 12. Attorneys' Fees and Other Expenses to Enforce Agreement
and Other Matters. (a) In the event that the Indemnitee is subject to or
intervenes in any proceeding in which the validity or enforceability of this
Agreement is at issue or seeks an adjudication or award in arbitration to
enforce his rights under, or to recover damages for breach of, this Agreement,
the Indemnitee, if he prevails in whole or in part in such action, shall be
entitled to recover from the Company and shall be indemnified by the Company
against, any actual expenses for attorneys' fees and disbursements reasonably
incurred by him.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, partners,
venturers, employees, agents or fiduciaries of the Company or of any other
corporation, partnership, joint venture, trust,
<PAGE> 6
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employee benefit plan or other enterprise which person serves at the request of
the Company, Indemnitee shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, partner, venturer, employee or agent
under the policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of the payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure the rights, including execution of documentation
necessary to enable the Company to bring suit to enforce these rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable if and to the extent that Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement, arrangement, understanding or otherwise.
Section 13. Duration of Agreement. This Agreement shall continue until
and terminate upon the later of: (a) 10 years after the Indemnitee has ceased to
occupy any of the positions or have any of the relationships described in
Sections 3 and 4 of this Agreement; or (b) the final termination of all pending
or threatened actions, suits proceedings or investigations commenced prior to or
during such 10-year period with respect to the Indemnitee. Notwithstanding the
foregoing, this Agreement shall terminate and the Indemnitee shall have no
further rights under this Agreement, including but not limited to any rights to
indemnification or advancement of expenses, upon the commencement, directly or
indirectly, by or on behalf of the Indemnitee, of any suit or proceeding against
the Company other than (i) a suit or proceeding seeking a final adjudication of
the Indemnitee's right to indemnification under Section 10 of this Agreement or
(ii) a suit or proceeding seeking indemnification or contribution from the
Company where the Company is or may be liable for all or part of a claim against
the Indemnitee or (iii) a class action where the Indemnitee is not a class
representative. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of the Indemnitee's
spouse, assigns, heirs, devises, estate, executors, administrators or other
legal representatives, and the Company's successors and assigns.
Section 14. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality, and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal, or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (b) to
the fullest extent possible, the provisions of this Agreement (including without
limitation all portions of any paragraph of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
Section 15. Identical Counterparts. This Agreement may be executed in
one or
<PAGE> 7
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more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
Section 16. Headings. The headings of the sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
<PAGE> 8
-8-
Section 17. Definitions. For purposes of this Agreement:
(a) Change in Control." A Change in Control shall be deemed
to have occurred if (i) any "person" (as such term is used in Section 13 (d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than (x) unless otherwise determined by the Board of Directors of the
Company or a duly authorized committee thereof, Andrew L. Farkas, his associates
or affiliates, or any group of which he is a member (within the meaning of such
terms under the Exchange Act and rules thereunder), or (y), a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20% or more of the total voting power represented by the Company's then
outstanding Voting Securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) 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 of Directors; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior to such a merger
or consolidation continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company or an agreement for the sale
or disposition by the Company (in one transaction or a series of related
transactions) of all or substantially all the Company's assets.
(b) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the action, suit, investigation or
proceeding in respect of which indemnification is being sought by the
Indemnitee.
(c) "Independent Counsel" shall mean a law firm or a member
of a law firm that neither is presently nor in the past five years has been
retained to represent: (i) the Company or the Indemnitee in any matter material
to either such party, or (ii) any other party to the action, suit, investigation
or proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or the Indemnitee in an action to determine the Indemnitee's right to
indemnification under this Agreement.
(d) "Voting Securities" shall mean any securities of the
Company which vote generally in the election of directors.
<PAGE> 9
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Section 18. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 19. Notice by the Indemnitee. The Indemnitee agrees promptly
to notify the Company in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
matter which may be subject to indemnification covered hereunder, either civil,
criminal or investigative.
Section 20. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) if delivered by hand, on the date of delivery, (ii) if sent by a
nationally recognized overnight courier, on the second business day after the
date on which it was sent, or (ii) if mailed by certified or registered mail
with postage prepaid, on the third business day after the date on which it is so
mailed. Such notices, requests, demands and other communications will be sent to
the address indicated below:
(a) If to the Indemnitee, to:
(b) If to the Company to:
Secretary
Insignia/ESG Holdings, Inc.
200 Park Avenue
New York, New York 10166
or to such other address as may have been furnished to the Indemnitee by the
Company or to the Company the Indemnitee, as the case may be.
Section 21. Governing Law. The parties agree that this Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, in that giving effect to the conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
INSIGNIA/ESG HOLDINGS, INC.
By:
--------------------------
<PAGE> 10
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Adam B. Gilbert
Secretary
--------------------------
Indemnitee
<PAGE> 11
SCHEDULE TO FORM OF INDEMNIFICATION AGREEMENT
Directors and Officers of Insignia/ESG, Holdings, Inc.
Andrew L. Farkas
Robert J. Denison
Robin L. Farkas
Andrew J.M. Huntley
Robert G. Koen
Stephen B. Siegel
H. Strauss Zelnick
James A. Aston
Frank M. Garrison
Adam B. Gilbert
Edward S. Gordon
Ronald Uretta
<PAGE> 1
EXHIBIT 10.19
TECHNICAL SERVICES AGREEMENT
THIS AGREEMENT is made and entered into as of June 29, 1998, by and
between Insignia Financial Group, Inc., a Delaware corporation ("IFG"),
Insignia/ESG Holdings, Inc., a Delaware corporation ("I/ESG") and Apartment
Investment and Management Company, a Maryland real estate investment trust
("AIMCO").
BACKGROUND
IFG (which is the parent company of I/ESG) and AIMCO have entered into
a definitive agreement and plan of merger pursuant to which IFG will be merged
with and into AIMCO upon satisfaction of certain conditions (the "Merger").
Prior to consummation of the Merger, IFG intends to spin off I/ESG as
an independent, public company.
I/ESG currently utilizes certain information systems of IFG which will
be acquired by AIMCO upon consummation of the Merger. I/ESG is in the process of
establishing its own information systems in anticipation of its spin-off from
IFG; however, these new independent systems will not be fully operational until
after consummation of the Merger, but prior to March 31, 1999. Therefore, IFG,
AIMCO and I/ESG desire to enter into this Agreement whereby AIMCO will provide
I/ESG with the technical and information services described on Exhibit "A"
hereto upon the terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual covenants and agreements contained
herein, and upon the terms and subject to the conditions hereinafter set forth,
the parties do hereby agree as follows:
1. SCOPE OF SERVICES. Subject to the terms and conditions of this
Agreement, AIMCO agrees to use its best efforts to provide I/ESG with the
services described in "Exhibit A" (collectively, the "Services"). AIMCO agrees
to use its best efforts to insure that such Services are delivered and performed
in a timely and careful manner consistent with past practices of Insignia
Financial Group, Inc. I/ESG may in its discretion, at its sole expense, retain
outside consultants to assist AIMCO in providing the Services. AIMCO agrees that
it will cooperate with any outside consultants retained by I/ESG to assist AIMCO
in providing the Services and in the transition of the Services to I/ESG's
internal information systems personnel.
2. TERM OF AGREEMENT.
A. The term of this Agreement shall be for the period commencing on
the Effective Date of the Merger ("Effective Date") and ending on December 31,
1998; provided, however, that I/ESG may extend the term of this Agreement on a
month-to-month basis thereafter until such time as I/ESG determines in its sole
and absolute discretion that the Services are no longer
<PAGE> 2
required, but in no event beyond March 31, 1999. Notwithstanding the foregoing,
I/ESG may terminate this Agreement at any time in its absolute and full
discretion, upon 15 days prior written notice to AIMCO. Upon termination of this
Agreement, all rights and obligations of each party hereunder, other than with
respect to any payments due hereunder, shall cease, as of the effective date of
such termination, and any amounts owed by either party hereunder shall be paid
in full. Upon any termination of any service hereunder, AIMCO will cooperate
with I/ESG in transferring such service function to such other technical service
providers as I/ESG shall designate. In addition, upon termination of this
Agreement, AIMCO shall return to I/ESG any property of I/ESG in its possession
used in connection with the Services.
B. I/ESG acknowledges that in the event I/ESG acquires additional
assets or merges with or acquires additional entities after the date hereof,
AIMCO's cost structure to provide the Services may increase. I/ESG shall,
therefore, notify, AIMCO in writing within five business days after the
execution of any binding definitive agreement pursuant to which additional
Services by AIMCO will be needed so that AIMCO may assess the effect such
agreement will have on AIMCO's cost of providing Services. AIMCO will notify
I/ESG in writing within 15 business days of any change in its cost structure,
and the Fee will be adjusted accordingly. Notwithstanding anything to the
contrary in this Agreement, AIMCO may terminate this Agreement upon 15 days
prior written notice in the event the parties cannot agree on the new cost
structure.
3. PLACE OF PERFORMANCE. AIMCO will perform the Services from the
locations where such Services were performed internally by IFG prior to
consummation of the Merger; provided, however, that such Services may be
performed from another location, if in AIMCO's reasonable business judgment it
preferable to do so and the performance of the Services from such other
location(s) will not have an adverse effect on the quality and timeliness of the
Services.
4. COMMUNICATIONS LINES. It is understood and agreed that I/ESG shall be
exclusively responsible for and shall pay all installation, monthly and other
charges relating to the installation and use of data communication lines in
connection with the Services. AIMCO shall not be responsible for loss of
availability of the communications lines used by I/ESG in accessing the
Services, except for any communication lines connecting I/ESG with AIMCO which
are the responsibility of AIMCO and except to the extent that AIMCO causes the
loss of any such communication lines.
5. FEES AND PAYMENTS.
A. I/ESG agrees to pay AIMCO a monthly fee (the "Fee") during the
term hereof in accordance with the fee schedule set forth on Exhibit C attached
hereto, subject to adjustment as provided in Section 2.B. The parties agree that
such Fee is intended to represent an approximation of the actual costs incurred
by AIMCO in performing and delivering the Services hereunder.
B. I/ESG shall pay the Fee each month in arrears within five
business days following receipt by I/ESG of an invoice from AIMCO specifying the
Fee amount owed for the
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<PAGE> 3
immediately preceding calendar month. Any invoice for a partial calendar month
shall be prorated. Such payments are to be made by wire transfer to the
following account of AIMCO (or another account designated in writing by AIMCO):
Bank:
City:
ABA Routing No.
Account No.
All invoices shall include any additional charges or credits
required to correct for any prior billing error, together with supporting
documentation explaining such error.
I/ESG shall be permitted to request from time to time copies
of supporting documentation relating to invoices it receives from AIMCO. I/ESG
shall also have the right, at its expense, to have fees and expenses which have
been invoiced by AIMCO to I/ESG audited by I/ESG's outside auditors for the
purpose of determining whether such fees and expenses have been correctly
computed in accordance with the provisions hereof. Such audits shall be
conducted during normal business hours and under reasonable terms and
conditions. AIMCO will cooperate with I/ESG's outside auditors by promptly
providing them with such documentation as they shall reasonably request in
connection with the audit.
D. All amounts not paid by I/ESG when due pursuant to this
Agreement shall bear interest at an annual rate equal to the Prime Rate, as
announced from time to time by First Union National Bank of South Carolina (or,
if not announced thereby, by another bank of national standing selected by
AIMCO), plus 1.5%, from the due date until such amounts are paid in full.
6. CONFIDENTIALITY OF I/ESG FILES; FILE SECURITY AND RETENTION.
A. Any I/ESG computer files or other information provided by
I/ESG to AIMCO for use in connection with provision of the Services shall remain
the exclusive and confidential property of I/ESG. AIMCO shall treat as
confidential and will not otherwise make available any I/ESG computer files or
other confidential information to any person other than employees of AIMCO on a
need-to-know basis. AIMCO will instruct its employees who have access to the
I/ESG computer files and other information to keep the same confidential by
using the same care and discretion that AIMCO uses with respect to its own
confidential property.
B. AIMCO and I/ESG will provide adequate security measures to
insure that third parties do not have access to the I/ESG computer files and
other information. AIMCO reserves the right to issue and change regulations and
procedures from time to time to improve file security upon notice and consent of
I/ESG.
C. AIMCO will take commercially reasonable precautions to prevent
the loss of or alteration to the I/ESG computer files. As a precaution, I/ESG
will, to the extent it deems necessary, keep copies of all source documents of
the information delivered to AIMCO or inputted by I/ESG into the AIMCO system
and will maintain a procedure external to the AIMCO system for the
reconstruction of lost or altered I/ESG computer files.
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<PAGE> 4
D. AIMCO will, to the extent applicable, retain the I/ESG
computer files held by AIMCO at AIMCO's facility in accordance with, and to the
extent provided by, AIMCO's then prevailing records retention policies. AIMCO
will not dispose of any I/ESG computer files without providing adequate written
notice to I/ESG. At I/ESG's request, AIMCO will provide I/ESG, in a standard
AIMCO format, with any and all of the I/ESG computer files requested by I/ESG
which are then in AIMCO's possession. Upon termination of this Agreement and
prior written notice by AIMCO, AIMCO may transfer any or all of the I/ESG
computer files to I/ESG.
7. OWNERSHIP, LICENSES AND SUBLICENSES, CONFIDENTIALITY AND
NON-DISCLOSURE.
A. I/ESG acknowledges that all computer programs (other than
pre-packaged third party software, but not including modifications,
enhancements, or improvements to such pre-packaged software made for the benefit
of AIMCO) and related documentation made available, directly or indirectly, by
AIMCO to I/ESG as part of the Services (the "AIMCO Products") will, after the
Effective Date, be the exclusive and confidential property of AIMCO or the third
parties from whom AIMCO has secured the right to use such computer programs and
documentation. AIMCO and the third parties referred to in the immediately
preceding sentence shall retain all rights and title, to the extent of their
respective interests, to all copyrights, trademarks, service marks, trade
secrets, and other proprietary rights in the applicable logos, product names,
AIMCO Products and Services.
B. I/ESG shall receive all improvements, enhancements,
modifications and updates to any AIMCO Products which are delivered to I/ESG as
part of the Services if and as they are made generally available by AIMCO, at no
cost, to I/ESG; provided, however, that in no event will AIMCO be required to
take any action that would constitute a violation of its obligations under any
software license agreement that it assumes in connection with the Merger or
otherwise.
C. I/ESG WILL NOT MAKE ANY ALTERATION, CHANGE OR MODIFICATION TO
ANY OF THE AIMCO PRODUCTS OR TO ANY OF THE AIMCO SUPPORTED FILES USED BY AIMCO
IN CONNECTION WITH PROVIDING THE SERVICES TO I/ESG. I/ESG MAY NOT RECOMPILE,
DECOMPILE, DISASSEMBLE, REVERSE ENGINEER, OR MAKE OR DISTRIBUTE ANY OTHER FORM
OF, OR ANY DERIVATIVE WORK FROM THE AIMCO PRODUCTS AND/OR THE SERVICES.
D. I/ESG shall treat as confidential and will not disclose or
otherwise make available any of the AIMCO Products or any trade secrets,
processes, proprietary data, information or documentation related thereto, or
any pricing or product information furnished to I/ESG by AIMCO (collectively,
the "Confidential Information"), in any form, to any person other than
employees, agents, consultants and representatives of I/ESG. I/ESG will instruct
its employees who have access to the Confidential Information to keep the same
confidential by using the same care and discretion that is used with respect to
its own confidential property and trade secrets.
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<PAGE> 5
E. I/ESG's use of any pre-packaged third party software during
the term of this Agreement will be governed by the terms and conditions of the
applicable third party license agreements contained in the package delivered to
I/ESG hereunder with such pre-packaged third party software.
8. REPRESENTATIONS AND WARRANTIES OF AIMCO. AIMCO hereby represents and
warrants to I/ESG that:
A. AIMCO will, immediately upon consummation of the Merger, have
the know-how and personnel necessary in order to comply with AIMCO's obligations
under this Agreement.
B. AIMCO will instruct its personnel who are or will be in charge
of overseeing the performance and delivery of the Services to I/ESG that AIMCO
has entered into this binding and enforceable Agreement obligating AIMCO to
perform and deliver the Services, and AIMCO will appoint Al Gossett as I/ESG's
contact person at AIMCO.
9. INDEMNIFICATION
A. Subject to Section 9.E, AIMCO shall indemnify, defend (using
counsel acceptable to I/ESG) and hold harmless I/ESG and its affiliates and each
of their respective officers, directors, employees, stockholders, partners,
agents and representatives, and each of their respective successors and assigns,
from and against any and all liabilities, obligations, claims, losses, causes of
action, suits, proceedings, awards, judgments, settlements, demands, damages
(but including only direct damages, costs, expenses, fines, penalties,
deficiencies, taxes and fees, (including without limitation the fees, expenses,
disbursements and investigation costs of attorneys and consultants) arising
directly out of or resulting in any way from or in connection with (i) any
breach by AIMCO of its obligations and duties hereunder, and (ii) any
negligence, fraud, or willful or intentional misconduct by AIMCO or its
employees in connection with the performance of its obligations hereunder. For
purposes of this Section 9.A, Skadden, Arps and Bryan Cave, LLP are deemed to be
acceptable by I/ESG.
B. Subject to Section 9.E, Insignia/ESG agrees to indemnify,
defend (using counsel acceptable to AIMCO) and hold harmless AIMCO and its
affiliates and each of their respective officers, directors, employees,
stockholders, partners, agents and representatives, and each of their respective
successors and assigns, from and against any and all liabilities, obligations,
claims, losses, causes of action, suits, proceedings, awards, judgments,
settlements, demands, damages, costs, expenses, fines, penalties, deficiencies,
taxes and fees, (including without limitation the fees, expenses, disbursements
and investigation costs of attorneys and consultants) arising directly or
indirectly out of or resulting in any way from or in connection with (i) any
breach by I/ESG of its obligations and duties hereunder and (ii) any negligence,
fraud, or willful or intentional misconduct of I/ESG in connection with the
performance of its obligations hereunder.
C. If any action or proceeding is brought against a party with
respect to which indemnity may be sought under this Section 8, the indemnifying
party, upon written notice from
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<PAGE> 6
the indemnified party, shall assume the investigation and defense thereof,
including the employment of counsel and payment of all reasonable expenses. The
indemnified party shall have the right to employ separate counsel in any such
action or proceeding and to participate in the defense thereof, but the
indemnifying party shall not be required to pay the fees and expenses of such
separate counsel, unless such separate counsel is employed with the written
approval and consent of the indemnifying party, which consent may be withheld in
the indemnifying party's reasonable discretion.
D. The indemnities in this Section 9 shall survive the expiration
or termination of this Agreement.
E. Anything in this Agreement to the contrary notwithstanding,
AIMCO and I/ESG hereby waive and release each other of, and from, any and all
right of recovery, claim, action, or cause of action against each other, their
agents, officers, and employees, for any loss or damage that may occur to
property, by reason of fire or the elements, or other casualty, regardless of
cause or origin, including negligence of AIMCO or I/ESG and their officers,
employees or agents, to the extent the same is insured against under insurance
policies carried by AIMCO or I/ESG; however, neither party's waiver shall
include any deductible amounts on insurance policies carried by such party, nor
extend to acts of the type described in clauses (i) and (ii) of Section 8.A and
8.B. AIMCO and I/ESG agree to obtain a waiver of subrogation from the respective
insurance companies which have issued policies of insurance covering all risk of
direct physical loss and to have the insurance policies endorsed, if necessary,
to prevent the invalidation of the insurance coverages by reason of the mutual
waivers.
10. LAWS AND GOVERNMENTAL REGULATIONS. I/ESG shall be responsible (i) for
compliance with all laws and governmental regulations affecting its business and
(ii) for any use it may make of the Services to assist it in complying with such
laws and governmental regulations, and AIMCO shall not have any responsibility
relating thereto (including, without limitation, advising I/ESG of I/ESG's
responsibilities in complying with any laws or governmental regulations
affecting I/ESG's business). AIMCO agrees to use its best efforts to cause the
applicable Services to be designed and delivered in such a manner that they will
be able to assist I/ESG in complying with its applicable legal and regulatory
responsibilities; in no event shall I/ESG rely solely on its use of the Services
in complying with any laws and governmental regulations.
11. DEFAULT; REMEDIES UPON DEFAULT.
A. Should I/ESG (a) default in the payment of any sum of money
hereunder, (b) default in the performances of any of its other obligations under
this Agreement or (c) commit an act of bankruptcy or become the subject of any
proceeding under the Bankruptcy Act or become insolvent, or if any substantial
part of I/ESG's property becomes subject to any levy, seizure, assignment,
application, or sale for or by any creditor or governmental agency, then, in any
such event, AIMCO, at its option may, upon written notice thereof, immediately
terminate this Agreement. Nothing in this Section 11 shall in any way limit
AIMCO's rights and remedies under Section 9 hereof.
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<PAGE> 7
B. Should AIMCO (a) default in the payment of any sum of money
hereunder, (b) default in the performance of any of its obligations under this
Agreement of (c) commit an act of bankruptcy or become the subject of any
proceeding under the Bankruptcy Act or become insolvent, or if any substantial
part of AIMCO's property becomes subject to any levy, seizure, assignment,
application, or sale for or by any creditor or governmental agency, then, in any
such event, I/ESG, at its option may, upon written notice thereof, immediately
terminate this Agreement. Nothing in this Section 11 shall in any way limit
I/ESG's rights and remedies under Section 9 hereof.
12. GENERAL.
A. This Agreement shall not be assigned by I/ESG or AIMCO without
the prior written consent of the other party, and any attempt by I/ESG or AIMCO
to assign any of its rights, duties or obligations which arise under this
Agreement without such consent will be void.
B. Both parties acknowledge that it has not been induced to enter
into this Agreement by any representation or warranty not set forth in this
Agreement. This Agreement contains the entire agreement of AIMCO and I/ESG with
respect to its subject matter and supersedes all existing agreements and all
other oral, written or other communications between them concerning its subject
matter. This Agreement shall not be modified in any way except by a writing
signed by both AIMCO and I/ESG.
C. If any provision of this Agreement (or any portion thereof)
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this Agreement shall not in any way be
affected or impaired thereby.
D. The failure by either AIMCO or I/ESG to insist upon strict
performance of any of the provisions contained herein shall in no way constitute
a waiver of any of its rights as set forth herein, at law or in equity, or a
waiver by either AIMCO or I/ESG of any other provision or subsequent default by
the other in the performance of or compliance with any of the terms and
conditions set forth herein.
E. The headings in this Agreement are intended for convenience of
reference and shall not affect its interpretation.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ ADAM B. GILBERT
--------------------------------------
Name: Adam B. Gilbert
Title: Executive Vice President
INSIGNIA FINANCIAL GROUP, INC.
By:/s/ ADAM B. GILBERT
--------------------------------------
Name: Adam B. Gilbert
Title: Secretary
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By:/s/ THOMAS W. TOOMEY
--------------------------------------
Name: Thomas W. Toomey
Title: Executive Vice President
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<PAGE> 8
EXHIBIT "A"
At I/ESG's sole expense:
1. AIMCO will provide access to either of AIMCO's mainframe Corporate
Financials or the PeopleSoft Corporate Financials for processing
I/ESG's Corporate Financials. Corporate Financials consists of the
following applications: Accounts Receivable / Billing, Accounts
Payable, General Ledger, and Fixed Assets.
2. AIMCO will provide access to the central hardware for processing
Corporate Financials. (Mainframe or HP Server).
3. AIMCO will provide Operations personnel to run central computer
Operations.
4. AIMCO will provide on-line availability to Accounts Payable, Accounts
Receivable, and General Ledger between the hours of 08:00 and 21:00
(EST), provided on-line availability shall not be for total hours
greater than provided I/ESG today.
5. AIMCO will provide inquiry and input capability to the I/ESG Accounting
staff located in Greenville, SC. Inquiry and limited input will be
provided to regional accounting offices located in Irvine, CA; Dallas,
TX; and Tampa, FL.
6. AIMCO will provide I/ESG reports as listed in EXHIBIT "B", Report
Schedule.
7. AIMCO will provide Corporate Financials software maintenance for the
term of this Agreement.
8. AIMCO will be responsible for data backups and delivering to I/ESG upon
request.
9. AIMCO will provide Customer Response Center for I/ESG to contact with
issues and questions. Hours of Operation for Response Center is 08:30 -
17:30 (EST), Monday through Friday.
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<PAGE> 9
EXHIBIT "B"
<TABLE>
<CAPTION>
===================================================================================================================================
APPLICATION JOB NAME REPORTS FILES JOB COMPLETION TIME
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
G/L PeopleSoft Financial Statements Day after each cutoff
(Overall, Supp A, Supp B),
08:30
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Cash Receipts Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Distribution of APs Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft AutoBank Transfer Report Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Corporate ACH Report Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Download Management Fee file Day after Supp A cutoff, 08:00
to network server
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Control File Update Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Transaction File List Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Unposted JE Register Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft General Ledger Account Summary Monday - Friday, 08:00
IV
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft General Ledger Out of Balance Monday - Friday, 08:00
Report
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft GL Update Error-Audit Report Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft JE Exception - ES Gordon Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft JE Numeric Register Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Transaction Analysis Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Postage 16th of every month, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft GL Consolidation Errors File Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft GL Inactive Report Monday - Friday, 08:00
- -----------------------------------------------------------------------------------------------------------------------------------
A/R PeopleSoft Daily Transaction Listing Monday - Friday, 08:30
===================================================================================================================================
</TABLE>
-9-
<PAGE> 10
EXHIBIT "B"
(CONTINUED)
** TIMES ARE EASTERN TIMES
<TABLE>
<CAPTION>
===================================================================================================================================
APPLICATION JOB NAME REPORTS FILES JOB COMPLETION TIME
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A/P PeopleSoft Check Register Check Stock Monday - Friday, 08:30
- -----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Unpaid Invoice Register Monday - Friday, 08:30
- -----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Unpaid Invoice Register Due Monday - Friday, 08:30
- -----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Check Recaps Monday - Friday, 08:30
- -----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Daily A/P Distribution Monday - Friday, 08:30
- -----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Check Register Check Stock Monday after cutoff, 08:30
- -----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Unpaid Invoice Register Monday after cutoff, 08:30
- -----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Paid Invoices for Y/E Day after A run in March,
June, September, December,
08:30
===================================================================================================================================
</TABLE>
-10-
<PAGE> 11
EXHIBIT "C"
FEE SCHEDULE
A. Monthly charge for processing and support of the Services: $54,000
B. Other services outside the Services:
o Applications and Technical Services Personnel time: $60/hour plus
expenses
o CIO and Management Personnel time: $145/hour plus
expenses
-11-
<PAGE> 1
EXHIBIT 10.20
AMENDMENT NO. 1 TO TECHNICAL SERVICES AGREEMENT
This Amendment No. 1 to Technical Services Agreement ("Amendment") is
made and entered into as of July 28, 1998, by and among Insignia Financial
Group, Inc., a Delaware corporation ("IFG"), Insignia/ESG Holdings, Inc., a
Delaware corporation ("I/ESG") and Apartment Investment and Management Company,
a Maryland real estate investment trust ("AIMCO").
BACKGROUND
The parties entered into that certain Technical Services Agreement on
June 29, 1998 (the "Agreement") pursuant to which AIMCO has agreed to provide
certain technical services to I/ESG commencing on the effective date of the
merger of IFG with and into AIMCO; and
WHEREAS, the parties desire to amend the Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and in the Agreement, the parties hereto do hereby covenant and
agree as follows:
1. Defined Terms. Terms defined in the Agreement and delineated herein
by initial capital letters shall have the same meaning ascribed thereto in the
Agreement, except to the extent that the meaning of any such term is
specifically modified by the provisions hereof. In addition, other terms not
defined in the Agreement but defined herein will, when delineated with initial
capital letters, have the meanings ascribed thereto in this Amendment. Terms and
phrases which are not delineated by initial capital letters shall have the
meanings commonly ascribed thereto.
2. Amendment. From and after the date hereof, the Agreement shall be
amended as follows:
The first sentence in Section 2.A. of the Agreement is hereby
deleted in its entirety and is hereby replaced by the following sentence:
"The term of this Agreement shall be for a period commencing on the
Effective Date of the Merger ("Effective Date") and ending on June
30, 1999."
3. Effect of Amendment. Except as expressly amended by the provisions
hereof, the terms and provisions contained in the Agreement shall continue to
govern the rights and obligations of the parties; and all provisions and
covenants in the Agreement shall remain in full
<PAGE> 2
force and effect as stated therein, except to the extent specifically modified
by the provisions of this Amendment. This Amendment and the Agreement shall be
construed as one instrument.
IN WITNESS WHEREOF, IFG, I/ESG and AIMCO have executed this Amendment
in multiple counterparts as of the date first written above, but it is intended
that this Amendment shall become effective simultaneously with the effectiveness
of the Agreement.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ ADAM B. GILBERT
---------------------------------
Name: Adam B. Gilbert
Title: Executive Vice President
INSIGNIA FINANCIAL GROUP, INC.
By:/s/ ADAM B. GILBERT
---------------------------------
Name: Adam B. Gilbert
Title: Secretary
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By:/s/ THOMAS W. TOOMEY
---------------------------------
Name: Thomas W. Toomey
Title: Chief Financial Officer
-2-
<PAGE> 1
EXHIBIT 21.1
<TABLE>
<CAPTION>
ENTITY STATE OF FORMATION
- ------ ------------------
<S> <C>
Insignia/ESG, Inc. Delaware
Barnes Morris Pardoe Delaware Limited Liability Company
& Foster Management Services, L.L.C.
Compagnie di Amministazgione Italy
c Gastioni Immobiliare S.p.A.
Construction Interiors, Inc. Delaware
Corporate Relocation Management, Inc. Ohio
E.S.G. Operating Co., Inc. New York
Edward S. Gordon Co., Inc. of Long Island, L.L.C. New York Limited Liability Company
Edward S. Gordon Management Corporation New York
FC&S Management Company Illinois
First Ohio Escrow Corporation, Inc. Ohio
First Ohio Mortgage Corporation, Inc. Ohio
Forum Properties, Inc. Oregon
Goldie B. Wolfe & Company Illinois
ICIG Directives, L.L.C. Delaware
IFC Acquisition Corp. I Delaware
IFC Acquisition Corp. II Delaware
IFSE Holding Co. LLC Delaware Limited Liability Company
IPCG, Inc. Delaware
Insignia Acquisition Corporation Delaware
Insignia Capital Advisors, Inc. South Carolina
Insignia/ESG Capital Corporation Delaware
Insignia/ESG of Alabama, Inc. Delaware
Insignia/ESG, of California, Inc. Delaware
Insignia/ESG of Colorado, Inc. Delaware
Insignia/ESG of Texas, Inc. Delaware
Insignia/ESG Hotel Partners, Inc. Delaware
Insignia Commercial Group West, Inc. Delaware
Insignia Commercial Investments Group, Inc. Delaware
Insignia Commercial Management, Inc. Delaware
Insignia Construction Management Services - Delaware
New York, Inc.
Insignia EC Corporation Delaware
Insignia RO, Inc. Delaware
Insignia Residential Group, Inc. Delaware
Insignia Retail Group, Inc. Delaware
Insignia Rooney Management, Inc. Delaware
Insignia (UK) Holdings Limited United Kingdom
Kreisel Company, Inc. New York
MAP VII Acquisition Corporation Delaware
Metropolitan Acquisition VII, L.L.C. Delaware Limited Liability Company
O'Donnell Property Services, Inc. California
Property Consulting Services, Inc. Delaware
RJN Corporation Delaware
Realty One, Inc. Ohio
Richard D. Ellis Group, Ltd. United Kingdom
Rostenberg-Doern Management Corp. New York
S.I.A., Inc. South Carolina
Soren Management Inc. New York
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 9,250 15,051
<SECURITIES> 0 0
<RECEIVABLES> 101,653 129,115
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 11,235 13,473
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 334,494 450,907
<CURRENT-LIABILITIES> 0 0
<BONDS> 20,891 31,208
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 208,444 288,720
<TOTAL-LIABILITY-AND-EQUITY> 334,494 450,907
<SALES> 0 0
<TOTAL-REVENUES> 295,753 102,801
<CGS> 0 0
<TOTAL-COSTS> 251,268 89,212
<OTHER-EXPENSES> 22,601 7,748
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 318 382
<INCOME-PRETAX> 21,758 5,016
<INCOME-TAX> 8,703 2,257
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,055 2,759
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
