UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
Commission File Number 1-14373
INSIGNIA FINANCIAL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 56-2084290
(State of Incorporation) (I.R.S. Employer Identification No.)
375 Park Avenue, New York, New York 10152
(Address of Principal Executive Offices) (Zip Code)
(212) 750-6070
(Registrant's Telephone Number, Including Area Code)
Insignia/ESG Holdings, Inc.
200 Park Avenue, New York, New York
(Former Name and Former Address, If Changed Since Last Report)
----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X No_____
At October 31, 1998, the Registrant had 21,408,106 shares of Common Stock
outstanding.
<PAGE>
INSIGNIA FINANCIAL GROUP, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
----------
INDEX
-----
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)............
Condensed Consolidated Statements of Income for the
Three and Nine Months Ended September, 30, 1998 and 1997 . 2
Condensed Consolidated Balance Sheets
as of September 30, 1998 and December 31, 1997........... 3
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1998 and 1997.... 4
Notes to Condensed Consolidated Financial Statements......... 5-10
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations......... 11-15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 16
Item 6. Exhibits and Reports on Form 8-K........................... 16
SIGNATURES 17
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- - ------- --------------------
a) Income Statements
INSIGNIA FINANCIAL GROUP, INC.
(F.K.A. INSIGNIA/ESG HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
Real estate services $131,721 $73,864 $358,360 $177,838
Interest 874 54 1,939 184
Other 69 12 164 12
-- -- --- --
132,664 73,930 360,463 178,034
------- ------ ------- -------
Costs and expenses
Real estate services 118,091 63,256 318,401 152,294
Administrative 2,033 2,269 5,561 5,212
Interest 382 -- 1,088 --
Depreciation and amortization 6,340 3,348 17,263 10,471
----- ----- ------ ------
126,846 68,873 342,313 167,977
------- ------ ------- -------
5,818 5,057 18,150 10,057
Equity earnings (loss) in real
estate ventures (465) 84 (1,323) 241
Minority interests 113 -- 259 --
--- ---
Income before income taxes 5,466 5,141 17,086 10,298
Provision for income taxes 2,460 2,057 7,689 4,119
----- ----- ----- -----
Net income $ 3,006 $ 3,084 $ 9,397 $ 6,179
======== ======= ======== ========
Per share amounts - Basic: $ .14 $ .16 $ .45 $ .32
======== ======= ======== ========
Per share amounts - diluted: $ .13 $ .14 $ .43 $ .29
======== ======= ======== ========
Weighted average common shares
and assumed conversions 22,377,358 21,507,809 21,998,319 21,615,033
========== ========== ========== ==========
<FN>
- - ----------
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
b) Balance Sheets
INSIGNIA FINACIAL GROUP, INC.
(F.K.A. INSIGNIA/ESG HOLDINGS, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
(Unaudited) (Note)
Assets
<S> <C> <C>
Cash and cash equivalents $ 34,124 $ 9,250
Restricted cash 4,299 --
Receivable from Old Insignia 23,500 --
Receivables 128,543 89,662
Mortgage loans held for sale 15,738 11,991
Real estate interests 49,087 19,454
Property and equipment 22,028 11,235
Property management contracts 41,297 48,614
Costs in excess of net assets of
acquired businesses 224,212 138,019
Other assets 8,975 6,269
----- -----
Total assets $551,803 $334,494
======== ========
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 11,354 $ 9,673
Commissions payable 53,038 51,285
Accrued and sundry liabilities 43,607 28,105
Accrued incentives 20,530 15,706
Accrued obligations arising from Merger 15,451 --
Mortgage warehouse line of credit 15,756 12,495
Notes payable 17,495 8,396
------ -----
177,231 125,660
------- -------
Minority interests 106 390
Stockholders' Equity
Common stock, par value $.01 per share
- authorized 80,000,000 shares,
21,408,106 issued and outstanding shares (1998) 214 --
Additional paid-in capital 374,252 --
Retained earnings -- --
Investment and net advances from Old Insignia -- 208,444
-------
Total stockholders' equity 374,466 208,444
------- -------
Total liabilities and stockholders' equity $551,803 $334,494
======== ========
<FN>
NOTE: The Balance Sheets at December 31, 1997 has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
- - ----------
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
c) Statements of Cash Flows
INSIGNIA FINANCIAL GROUP, INC.
(F.K.A. INSIGNIA/ESG HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1998 1997
---- ----
Operating Activities
<S> <C> <C>
Net income $ 9,397 $ 6,179
Adjustments to reconcile net income to net cash
Provided by operations:
Depreciation and amortization 17,263 10,471
Equity loss (earnings) in real estate ventures 1,323 (241)
Minority interests (259) --
Changes in operating assets and liabilities:
Receivables (17,835) (17,770)
Other assets 366 (1,158)
Accounts payable and accrued expenses (1,503) 6,335
Commissions payable 1,753 11,384
----- ------
Net cash provided by operating activities 10,505 15,200
------ ------
Investing activities
Net additions to property and equipment (11,586) (2,876)
Net increase in restricted cash (4,299) --
Payments made for acquisition of businesses,
net of acquired cash (61,690) (5,859)
Net increase in mortgage loans held for sale (3,747) --
Proceeds from Balcor property dispositions 196 2,387
Investments in real estate (30,926) (3,264)
Distributions from real estate investments 3,054 2,556
Advances made under note agreements (4,925) (5,013)
Collections on notes receivable 2,638 1,965
----- -----
Net cash used in investing activities (111,285) (10,104)
-------- -------
Financing activities
Payments on notes payable (6,113) --
Proceeds from notes payable 8,766 --
Net contribution of capital from Old Insignia 122,579 (33)
------- ---
Net cash provided by (used in) financing
activities 125,232 (33)
------- ---
Effect of exchange rate changes in cash 422 --
---
Increase in cash and cash equivalents 24,874 5,063
Cash and cash equivalents at beginning of period 9,250 44
----- --
Cash and cash equivalents at end of period $ 34,124 $ 5,107
======== =======
<FN>
- - ----------
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------
1. Business
On March 17, 1998, Insignia Financial Group, Inc. ("Old Insignia") entered
into an Agreement and Plan of Merger (as subsequently amended and restated
as of May 26, 1998, the "Merger Agreement") with Apartment Investment and
Management Company, a Maryland corporation ("AIMCO"), and AIMCO Properties,
L.P., a Delaware limited partnership, pursuant to which Old Insignia was
merged into AIMCO, with AIMCO as the survivor (the "Merger"). The Merger
was consummated on October 1, 1998.
On September 21, 1998, Old Insignia completed the spin off of certain of
its businesses through a pro rata distribution (the "Distribution") to its
stockholders of all of the outstanding Common Stock, par value $.01 per
share ("New Insignia Common Stock"), of Insignia/ESG Holdings, Inc., a
Delaware corporation and a wholly owned subsidiary of Old Insignia ("New
Insignia" or "Insignia"). New Insignia comprises a fully integrated real
estate services company with operations throughout the United States, the
United Kingdom, Italy and Germany. New Insignia provides property
management, leasing, tenant representation, investment sales, asset
management, investor services, consulting, brokerage, development and
investment banking services to owners and users of real estate. In
addition, New Insignia has ownership of real estate, primarily investments
in partnerships, through co-investments with institutional partners, and
property held for development. New Insignia consists of Insignia/ESG, Inc.
("Insignia/ESG"), New Insignia's commercial real estate services unit,
which includes Richard Ellis Group Limited ("Richard Ellis") in the United
Kingdom, Insignia RE GmbH in Germany, and the 60% owned Insignia/CAGISA in
Italy; Insignia Residential Group, Inc., a New York based cooperative and
condominium management company; and Realty One, Inc., a full service
residential real estate brokerage and mortgage banking firm headquartered
in Cleveland, Ohio (collectively, the "New Insignia Businesses").
Old Insignia effected the Distribution of the New Insignia Businesses by
distributing to each record holder of Old Insignia Common Stock as of
September 15, 1998 (the "Distribution Record Date") certificates
representing that number of whole shares of New Insignia Common Stock equal
to two-thirds of the number of shares of Old Insignia Common Stock held by
such holder.
Most of Old Insignia's existing liabilities, other than those directly
relating to the New Insignia Businesses, remained with Old Insignia
post-Distribution and were assumed by AIMCO upon consummation of the
Merger.
In connection with the Merger, Old Insignia was obligated to contribute
approximately $23.5 million to New Insignia. This contribution, which
represented funding for liabilities of New Insignia arising from the Merger
and the payment for warrants as discussed in Note 2 below, was collected on
the date of the Merger. Liabilities totaling approximately $15.5 million in
aggregate were assumed from Old Insignia at the time of the Distribution.
New Insignia paid these liabilities, which relate primarily to executive
compensation arising from the Merger, in early October although New
Insignia reflects no expense relating to these payments.
New Insignia reassumed the original corporate name, Insignia Financial
Group, Inc., on November 2, 1998. New Insignia had conducted business under
the corporate name Insignia/ESG Holdings, Inc. since approval of the
Distribution by the shareholders of Old Insignia on September 14, 1998. In
addition, New Insignia reclaimed Old Insignia's original New York Stock
Exchange trading symbol, IFS, and trading of its common shares under this
symbol commenced on November 2, 1998.
2. Options, Warrants and Restricted Stock
On September 30, 1998, Old Insignia distributed to record holders of the
6.5% Convertible Preferred Securities ("Preferred Securities") of Insignia
Financing I, a subsidiary of Old Insignia, on September 15, 1998 warrants
to purchase approximately 1.2 million shares of New Insignia Common Stock
(four warrants for each $500 liquidation amount of Preferred Securities
held by them). Each warrant represents the right to purchase one share of
New Insignia Common Stock at an exercise price of $14.50 per share. The
term of each warrant is five years, although these warrants do not become
exercisable until September 30, 2000. Old Insignia purchased these warrants
from New Insignia on September 14, 1998 for approximately $8.5 million. As
a result of the Merger, the Preferred Securities are the obligation of
AIMCO and are convertible into AIMCO securities, as Insignia Financing I is
now a subsidiary of AIMCO.
In connection with the Merger, New Insignia assumed certain existing
options and warrants to purchase shares of Old Insignia Common Stock and
awards of unvested restricted shares (as adjusted to give effect to the
Distribution ratio). Such options and warrants represent the right to
purchase approximately 4.4 million shares of New Insignia Common Stock and
are in addition to approximately 1.2 million options to purchase New
Insignia Common Stock granted under the New Insignia 1998 Stock Incentive
Plan at the time of the Distribution.
The following table summarizes the outstanding options, warrants and
unvested restricted shares of New Insignia at September 30, 1998:
<TABLE>
<CAPTION>
Total Exercise
Outstanding Price
----------- -----
<S> <C> <C> <C>
Old Insignia employee options assumed 3,384,000 $ 3.74 - $15.49
Old Insignia warrants assumed 971,000 $8.25
Old Insignia restricted shares assumed 259,000 N/A
Employee options granted 1,205,000 $12.63 - $13.88
Warrants sold to Old Insignia for
distribution to holders of
Old Insignia Preferred Securities 1,196,000 $14.50
---------
7,015,000
---------
</TABLE>
3. Basis of Presentation
These financial statements present the consolidated financial position,
results of operations and cash flows of the New Insignia Businesses
spun-off into New Insignia as if New Insignia were a separate entity for
all periods presented. Old Insignia's historical cost bases in the assets
and liabilities of the New Insignia Businesses have been reflected in these
financial statements. The financial information in these financial
statements is not necessarily indicative of results that would have
occurred had the New Insignia Businesses been a separate stand-alone entity
during the periods presented or of future results of New Insignia.
The New Insignia Businesses have utilized Old Insignia's centralized
systems for cash management, payroll, employee benefit plans, insurance and
various administrative services. As a result, substantially all cash
received by these entities was deposited in and commingled with Old
Insignia's general corporate funds. Similarly, real estate services and
administrative expenses, capital expenditures and other cash requirements
of the New Insignia Businesses were paid by Old Insignia and charged
directly or allocated to these entities. Administrative expenses, which
included, among other things, investment banking, information technology,
legal, finance, accounting and facilities expenses, were allocated to New
Insignia. These allocations were approximately $5.6 million and $5.2
million for the nine months of 1998 and 1997, respectively. The allocations
were based upon detailed analysis of the operations of Old Insignia using
various methods, including acquisition activities, employee headcount and
estimated management time devoted to the operations of the New Insignia
Businesses. Certain assets and liabilities related to the operations of the
New Insignia Businesses were managed and controlled by Old Insignia on a
centralized basis. Such assets and liabilities have been allocated to New
Insignia based on the use of, or interest in, those assets and liabilities.
In the opinion of management, the methods for allocating expenses, assets
and liabilities are believed to be reasonable.
4. Interim Financial Information
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and nine month periods ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the combined
financial statements and footnotes thereto included in the Registration
Statement on Form 10 of Insignia/ESG Holdings, Inc. filed with the
Securities and Exchange Commission on August 5, 1998.
5. Reclassifications
Certain amounts have been reclassified to conform with the current
presentation. These reclassifications have no effect on net income for any
period presented.
6. Credit Agreement
On October 22, 1998, New Insignia closed on a three year revolving credit
facility in the amount of $185 million. The credit agreement was arranged
by First Union National Bank and Lehman Brothers and involves a syndicate
of nine national and international financial institutions. This credit
facility will be used for future working capital and acquisition needs. No
borrowings have been made on this facility through November 10, 1998.
7. Stock Repurchase
On October 27, 1998, New Insignia announced that its Board of Directors had
approved a program to repurchase up to $10 million of its outstanding
common stock. At November 10, 1998, 19,100 shares of common stock have been
repurchased at an aggregate cost of approximately $250,000.
8. Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share ("Statement 128"). Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic
earnings per share exclude any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. Earnings per share
amounts for all periods have been presented in conformity with the
Statement 128 requirements.
Earnings per share data is presented for the three and nine months ended
September 30, 1998 and 1997 based on the weighted average common shares of
Old Insignia Common Stock, as adjusted for the two-thirds Distribution.
which commenced trading on September 22, 1998. Assumed conversions have
been determined based on the options and warrants of New Insignia using the
treasury stock method and average prices of New Insignia Common Stock. The
per share data for the nine month period ended September 30, 1997 is
presented on a pro forma basis, as New Insignia did not exist during this
entire period. The results may not be indicative of the actual results that
may have occurred if New Insignia had been operating on a stand-alone basis
for the periods presented.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(Thousands, except share data)
Basic
<S> <C> <C> <C> <C>
Average common shares outstanding 21,305 19,425 20,926 19,380
Assumed conversions -- -- -- --
Total 21,305 19,425 20,926 19,380
Net income $ 3,006 $ 3,084 $ 9,397 $ 6,179
Per share amounts - basic $ .14 $ .16 $ .45 $ .32
Diluted
Average common shares outstanding 21,305 19,425 20,926 19,380
Assumed conversions 1,072 2,083 1,072 2,235
Total 22,377 21,508 21,998 21,615
Net income $ 3,006 $ 3,084 $ 9,397 $ 6,179
Per share amounts - diluted $ .13 $ .14 $ .43 $ .29
</TABLE>
9. Financial Accounting Standards
In 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income ("Statement 130"). Statement 130 establishes
new rules for the reporting and display of comprehensive income and its
components. Statement 130 requires unrealized gains or losses on
available-for-sale securities and foreign currency translation adjustments,
reported separately in shareholders' equity, to be included in other
comprehensive income. New Insignia adopted Statement 130 as of January 1,
1998. Total comprehensive income for the nine month period ended September
30, 1998 was approximately $11.2 million. The difference between net income
and comprehensive income is due in its entirety to foreign currency
translation adjustments. No differences existed between net income and
comprehensive income for the nine month period ended September 30, 1997.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("Statement 131"), which is effective
for years beginning after December 15, 1997. Statement 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. Statement 131 is effective for financial statements for fiscal
years beginning after December 15, 1997, and therefore New Insignia will
adopt the new requirements retroactively in 1998. Management does not
anticipate that the adoption of Statement 131 will have a significant
effect on how New Insignia reports segment disclosures. New Insignia
currently operates in principally two business segments, commercial and
residential services.
In 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"),
which is effective for financial statements for fiscal years beginning
after December 15, 1998. SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred. Initial application should
be reported as the cumulative effect of a change in accounting principle
and expensed in the first quarter in the year of adoption. At September 30,
1998, New Insignia had no amounts capitalized as organizational costs that
would be affected by the requirements of SOP 98-5.
10. The following is a summary of New Insignia's material contingencies as of
September 30, 1998:
In connection with the Merger Agreement, New Insignia and AIMCO entered
into an Indemnification Agreement. The Indemnification Agreement provides
generally that following consummation of the Merger, New Insignia will
indemnify and hold harmless AIMCO from and against all losses in excess of
$9.1 million resulting from (i) breaches of representations, warranties or
covenants of Old Insignia or New Insignia in the Merger Agreement, (ii)
actions taken by or on behalf of Old Insignia prior to consummation of the
Merger and (iii) the Distribution. New Insignia is also required to
indemnify AIMCO against all losses (without regard to any dollar value
limitation) resulting from (a) amounts paid or payable to employees of Old
Insignia actually paid by AIMCO, other than those employees AIMCO has
agreed to retain following the consummation of the Merger, (b) obligations
to third parties for goods, services, taxes or indebtedness incurred prior
to the consummation of the Merger, other than as agreed to by AIMCO or
included in the approximately $458 million of indebtedness and liabilities
of Old Insignia and its subsidiaries which were assumed by AIMCO in the
Merger, and (c) Insignia's ownership and operation of New Insignia and the
New Insignia Businesses.
The Indemnification Agreement requires AIMCO to indemnify and hold harmless
New Insignia from all losses that arise out of the operation of the
business of Old Insignia acquired by AIMCO after the Merger and for all
losses in excess of $9.1 million arising from breach of any representation,
warranty or covenant of AIMCO in the Merger Agreement.
Pursuant to the Merger Agreement, New Insignia and AIMCO are required to
settle in cash any differences between the actual adjusted net liabilities
of Old Insignia on the date of the Merger and the $458 million of such
adjusted net liabilities stipulated in the Merger Agreement.
Settlements may be made based upon information available through March 31,
1999, except as to income taxes, as to which settlement is to be made with
respect to any amounts attributable to periods ending on or before the
October 1, 1998 Merger date. Although there will almost certainly be
adjustments to the amounts estimated on the Merger date, which would be
recorded as an adjustment to shareholders' equity at the Distribution date,
New Insignia does not believe any such adjustments will be material.
New Insignia and certain subsidiaries are defendants in lawsuits arising in
the ordinary course of business. Such lawsuits are primarily insured claims
arising from accidents at managed properties. Claims may demand substantial
compensatory and punitive damages.
Management believes that the aforementioned contingencies will be resolved
without material loss to New Insignia or its subsidiaries.
11. Acquisitions
Richard Ellis Group Limited
In February 1998, the shareholders of Richard Ellis accepted Old Insignia's
offer to acquire 100% of the stock of Richard Ellis. Richard Ellis is a
real estate services and investment firm located in the United Kingdom. The
total purchase price was approximately $82.9 million, of which $14.7
million is contingent on the future performance of Richard Ellis. The
transaction was completed on February 26, 1998. Old Insignia funded the
Cash component of the acquisition from borrowings on its revolving credit
facility, and issued 617,371 shares of Old Insignia Common Stock and
options enabling Richard Ellis employees to purchase 853,741 shares of Old
Insignia Common Stock. The acquisition was accounted for as a purchase.
Hotel Partners
On May 11, 1998, Old Insignia acquired Hotel Partners ("Hotel Partners"), a
Chicago-based international brokerage firm focused exclusively on the
hospitality segment of the real estate industry. The total purchase
consideration paid by Old Insignia for Hotel Partners was approximately
$7.0 million which was paid in cash at closing. Additional payments of up
to $29.1 million, over a five year period, are contingent on the future
performance of Hotel Partners. The acquisition was accounted for as a
purchase.
Jackson Cross Company
On June 15, 1998, Old Insignia acquired Jackson Cross Company ("Jackson
Cross"), a prominent commercial real estate service firm with operations
primarily in the greater Philadelphia area. The total purchase
consideration paid by Old Insignia for Jackson Cross was approximately $9.1
million, consisting of $8.6 million paid in cash at closing and $500,000 in
guaranteed deferred payments. Additional payments of up to $5.4 million are
contingent on the future performance of Jackson Cross. The acquisition was
accounted for as a purchase.
Other Information
Pro Forma results of operations for the nine month periods ended September
30, 1998 and 1997, assuming consummation of the Distribution and the
acquisition of Richard Ellis (1998), Realty One (1997) and Barnes, Morris,
Pardoe & Foster (1997) as of January 1, 1997, are as follows (in thousands,
except per share data):
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
Revenues $370,695 $321,029
Net Income 9,495 9,855
===== =====
Per share amounts - diluted $ .43 $ .46
======== ========
</TABLE>
12. Equity
During the nine month period ended September 30, 1998, New Insignia had the
following changes in the equity accounts:
a) Issuance of 21,408,106 shares of New Insignia Common Stock in the
Distribution.
b) Contribution of capital from Old Insignia at the time of the
Distribution totaling $374,466,000.
c) Net income of $9,397,000 for the nine months ended September 30, 1998,
which is included in total contributed capital.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- - -------------------- ----------------------------------------------------------
of Operations
-------------
New Insignia (referred to hereafter as "Insignia") has three principal
business units- commercial real estate services, residential real estate
services and real estate ownership. The commercial real estate services business
is comprised of Insignia/ESG's United States operations, Richard Ellis in the
United Kingdom, Insignia RE GmbH in Germany and Insignia/CAGISA in Italy. The
residential services business is comprised of Realty One, a single-family home
brokerage and mortgage banking business, and Insignia Residential Group, a
cooperative and condominium apartment services business.
Insignia/ESG is one of the largest commercial real estate services firms in
the United States according to January 1998 issue of Commercial Property News.
With the acquisition of Richard Ellis in the United Kingdom, the opening of
Insignia RE GmbH in Germany, and the purchase of a 60% interest in
Insignia/CAGISA in Italy, Insignia/ESG is becoming a global leader in real
estate services. The financial statements of Richard Ellis have been translated
using the following exchange rates: $1.6981 for the balance sheet as of
September 30, 1998 and $1.6629 for the statement of income for the nine months
ended September 30, 1998. Exchange rates have been determined based on the end
of the period rate, in the case of the balance sheet, and the average rate for
the period, in the case of the statement of income.
Revenues from tenant representation, investment sales, debt/equity
placements and property leasing, which collectively generate a substantial
majority of Insignia's revenue, are transactional in nature and therefore
subject to changes in business activity. Insignia believes that its large,
diversified client base, geographical reach, overall size and number of annual
transactions help to offset the impact of changes in business activity on
revenues and profitability. Such changes in business activity, as well as
seasonal factors in Realty One's business, significantly impact quarterly
results. A significant portion of the expenses associated with the above
mentioned activities are directly correlated to revenue.
Insignia's primary objective is to increase earnings and stockholder value
through internal growth and the acquisition of select businesses. The following
results are based on the historical financial statements of the New Insignia
Businesses and include certain assumptions concerning the allocation of overhead
costs from Old Insignia. These results may not be indicative of the actual
results that may have occurred if the New Insignia Businesses had been operating
on a stand-alone basis for the periods presented or in the future.
Financial Condition
- - -------------------
Total assets increased by approximately $217.3 million from December 31,
1997 to $551.8 million at September 30, 1998. The majority of the increase
relates to acquisitions, including Richard Ellis, Hotel Partners and Jackson
Cross. Assets include a $23.5 million receivable from Old Insignia, which was
collected on the date of the Merger. Real estate interests increased by $29.6
million, reflecting the continued co-investment and development activity. The
remainder of the asset growth was financed primarily by investments and net
advances from Old Insignia prior to spin off, including common equity and cash
payments with respect to acquisitions.
Liabilities increased by approximately $51.6 million from December 31, 1997
to $177.2 million at September 30, 1998. The increase primarily represents
normal liabilities of the businesses acquired, together with $15 million in
liabilities paid in October arising from the Merger of Old Insignia into AIMCO.
All retained earnings of Insignia are considered contributed capital from Old
Insignia at the time of the Distribution and, therefore, included in paid-in
capital at September 30, 1998.
Results of Operations
- - ---------------------
Insignia posted increases in real estate service revenues of 78% to $131.7
million and 102% to $358.4 million for the three and nine months of 1998,
compared to the corresponding periods in 1997. These significant growth rates
are attributable primarily to acquisition contributions, the largest of which
were Realty One and Barnes, Morris, Pardoe & Foster ("Barnes Morris") in October
1997 and Richard Ellis in February 1998. Additionally, favorable real estate
markets in the United States and United Kingdom contributed to the growth.
Insignia posted a decrease in net income of 3% to $3 million for the three
months and an increase of 52% to $9.4 million for the nine months of 1998,
compared to 1997. The quarterly decline in net income is primarily attributable
to increased real estate investments, which are expected to show losses after
depreciation for financial reporting purposes, and an increase in the effective
tax rate.
Net EBITDA is defined as income before depreciation, amortization and
income taxes. Results for the three and nine months of 1998 reflect increases in
Net EBITDA of 47% to $12.6 million and 76% to $37.0 million, in comparison to
1997. Increases were achieved by each of Insignia's three business units -
commercial services, residential services and real estate ownership. After Tax
Cash Flow, defined as net income plus depreciation and amortization deducted in
determining net income, increased 55% to $10.2 million for the quarter and 73%
to $29.3 million for the nine months of 1998.
EBITDA from Real Estate Services
- - --------------------------------
Insignia's businesses produced increases in EBITDA, defined as real estate
revenues less direct expenses and administrative costs, of 39% to $11.6 million
for the third quarter and 69% to $34.4 million for the nine months of 1998
compared to 1997. The acquisitions of Richard Ellis and Realty One, together
with selective acquisitions of domestic commercial real estate services firms
and favorable real estate markets, constituted a majority of the increase in
EBITDA.
Commercial Services
Commercial real estate services are conducted in the United States through
Insignia/ESG and in the United Kingdom through Richard Ellis. These businesses
produced revenue increases of 40% to $95.1 million for the third quarter and 64%
to $261.2 million for the nine months of 1998, compared to 1997. Richard Ellis
accounted for approximately 57% of the revenue increase for the third quarter
and approximately 37% of the revenue increase for the nine months period. The
remainder of the increase is attributable to domestic acquisitions, including
Barnes Morris, Hotel Partners, and Jackson Cross, and internal growth.
Residential Services
Residential services consist of Realty One, which provides single family
home brokerage and related mortgage banking services in northern Ohio, and
Insignia Residential Group, which manages cooperatives, condominiums and
apartments in the greater New York City area. These businesses produced revenue
increases of 508% to $36.6 million for the third quarter and 431% to $97.2
million for nine months of 1998, compared to 1997. This growth is substantially
the result of the October 1997 acquisition of Realty One. Realty One's
operations are seasonal, with the spring and summer quarters reflecting the
greatest volume and the winter quarter reflecting significantly reduced
activity. Realty One's operations for the three and nine months reflect revenues
of $30.2 million and $77.7 million on increases of approximately 5% and 6% in
unit volume. Average sales prices of homes sold by Realty One reflect an
increase of approximately 8% in 1998. Insignia Residential Group produced
revenue increases of 7% to $6.4 million for the third quarter and 7% to $19.5
million for the nine months of 1998, compared to 1997.
Real Estate Ownership
Insignia's FFO from real estate ownership, which is defined as income or
loss from real estate operations before depreciation, increased 66% for the
third quarter to $378,000 and 150% to $1.35 million for the nine months of 1998,
compared to 1997. These increases were achieved primarily as a result of the
continued strategy of purchasing minority equity interests in selected real
estate assets in partnership with institutional clients as well as operating
income growth from existing co-investment properties. The co-investment program,
which currently holds equity interests ranging from 10% to 35% in approximately
5.5 million square feet of commercial property and approximately 3,300 units of
multi-family property, was commenced in late 1996 and continues to contribute
substantially to the real estate ownership positions of Insignia.
Equity earnings from real estate ownership reflected losses of $465,000 and
$1.3 million for the third quarter and nine months of 1998. The difference
between real estate FFO and equity earnings represents depreciation of real
estate and, in the third quarter, a write-down of 100% of Insignia's equity in
one investment of approximately $510,000 because of the inability to achieve
expected lease rates.
Financing Costs
Interest expense, attributable entirely to the existing debt of Richard
Ellis and Realty One at their respective acquisition dates, was $382,000 for the
third quarter and $1.1 million for the nine months of 1998.
Other Expenses Affecting Net Income
The discussion of Net EBITDA above excludes depreciation, amortization and
income taxes. Depreciation and amortization increased 89% to $6.3 million for
the third quarter and 65% to $17.3 million for the nine months of 1998, compared
to 1997. Most of the increase relates to amortization of cost in excess of net
assets of acquired businesses, most notably Richard Ellis and Realty One. Income
taxes increased both as a result of higher income and effective tax rates in
1998.
Earnings Per Share
Insignia posted a decrease in earnings per share of 8% or $.01 for the
third quarter and an increase of 48% or $.14 for the nine months of 1998,
compared to 1997. The weighted average shares have been determined based on the
Old Insignia Common Stock, effected for the two-thirds Distribution. The
increase in weighted average shares is a result of increases in the Old Insignia
Common Stock, primarily attributable to shares issued and options assumed in the
Richard Ellis and Realty One acquisitions.
Liquidity and Capital Resources
Insignia's liquidity and capital resources consist of cash on hand
(including the amount due from Old Insignia collected at the AIMCO Merger date),
cash provided by operations and available credit under the newly closed $185
million revolving credit facility. Insignia uses After Tax Cash Flow as a
measure of working capital provided from operations. Operations by this measure
produced $10.2 million and $29.3 million for the three and nine months of 1998,
reflecting strong gains of 55% and 73% over 1997. Insignia believes that its
cash from operating activities is more than adequate to meet its working capital
and capital replacement needs. However, it is important to note that periods of
revenue growth in the leasing sector of commercial property services result in
some portion of working capital from operations being used to carry greater
amounts of receivables.
Capital expenditure requirements are not normally extensive, consisting of
periodic computer, furniture and fixture replacements. Most capital expenditures
are typically incurred in connection with acquisitions or other personnel
additions. Capital expenditures for the nine months of 1998 of $11.6 million
consist primarily of costs incurred to purchase and implement a new generation
of computer systems for the property management business, equipment purchases by
the single family home brokerage business and costs associated with the
relocation of the cooperative and condominium management business within the
Midtown area of Manhattan.
Over the second half of 1998 and into 1999, Insignia anticipates incurring
capital expenditures significantly in excess of the normal needs of the
business. Insignia is implementing a new generation of computer systems for the
cooperative and condominium management business and has already completed the
relocation of that business as previously mentioned. Additionally, Insignia is
proceeding to develop and implement completely new financial systems for the
international commercial services businesses, both for the United States and the
United Kingdom, using similar systems to those recently developed for the
businesses which merged into AIMCO. Realty One also expects to commence a
program to substantially upgrade its broker productivity and target marketing
systems. The aggregate cost of these planned new systems and upgrades is
estimated at $16 million, of which approximately $8 million had been
incurred at September 30, 1998. Insignia expects to pay for all remaining costs
from operating cash flows and cash on hand.
The following chart provides a overview of the financial results for the
three and nine month periods ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Real Estate Revenues
<S> <C> <C> <C> <C>
Insignia/ESG $ 77,890 $ 67,837 $220,794 $159,530
European 17,193 -- 40,403 --
Realty One 30,191 -- 77,663 --
Insignia Residential Group 6,447 6,027 19,500 18,308
----- ----- ------ ------
Total real estate revenues 131,721 73,864 358,360 177,838
------- ------ ------- -------
Costs and Expenses
Real estate services 118,091 63,256 318,401 152,294
Administrative 2,033 2,269 5,561 5,212
----- ----- ----- -----
EBITDA - Real Estate Services 11,597 8,339 34,398 20,332
Interest and other 943 66 2,103 196
Real estate FFO 378 228 1,350 540
Interest expense (382) -- (1,088) --
Minority interests 113 -- 259 --
--- ---
Net EBITDA 12,649 8,633 37,022 21,068
Income taxes (2,460) (2,057) (7,689) (4,119)
------ ------ ------ ------
After Tax Cash Flow 10,189 6,576 29,333 16,949
Depreciation (908) (480) (2,559) (1,119)
Amortization of intangibles (5,432) (2,868) (14,704) (9,352)
Depreciation - real estate (843) (144) (2,673) (299)
Net Income $ 3,006 $ 3,084 $ 9,397 $ 6,179
========= ======== ========= ========
</TABLE>
In addition to net income, Insignia believes that Net EBITDA and After Tax
Cash Flow are primary indicators of financial performance. These supplemental
indicators are used by management to evaluate operations and in making financial
decisions. Net EBITDA is defined as Net Income plus depreciation, amortization
and income taxes. After Tax Cash Flow is defined as Net Income plus depreciation
and amortization. After Tax Cash Flow, as used for this purpose, should not be
construed to represent cash provided by operations pursuant to generally
accepted accounting principles, which takes into consideration such items as
changes in elements of working capital and deferred taxes. Neither Net EBITDA
nor After Tax Cash Flow are terms defined by generally accepted accounting
principles, and Insignia's usage of these terms may differ from other companies'
usage of the same of similar terms.
Year 2000
In earlier years, certain computer programs were written using two digits
rather than four to define the applicable years. These programs were written
without consideration of the impact of the approaching change in the century and
may experience problems handling dates beyond 1999 ("Year 2000"). The Year 2000
issue presents potential concerns for business computing, the consequences of
which may include system failures and business process interruption. Aside from
the well-known calculation problems with the use of two digit date formats as
the year changes from 1999 to 2000, the Year 2000 is a special case for leap
year.
Insignia is assessing the readiness of its internal systems, including
information technology (IT) and non-IT systems. Although the assessment is still
underway, management currently believes that all material systems will be
compliant prior to Year 2000 and that the cost to address the issue is expected
to range from $1.5 million to $2.5 million, inclusive of the previously
mentioned $16 million in planned upgrades. To date, an expense of approximately
$340,000 has been incurred towards the Year 2000 issue. All organizations
dealing with the Year 2000 issue must address the effect this issue will have on
their third party vendors. Insignia is undertaking steps to identify its vendors
and understand their ability to continue providing services and products beyond
1999. For the significant vendors, contingency plans will be developed. Should
Insignia or its significant third-party vendors be unable to complete the
required Year 2000 remediation steps in a timely fashion, the Year 2000 issue
could have a material adverse impact on the operations and financial condition
of Insignia in the future.
Other
Certain information contained in this quarterly report, and documents
incorporated by reference herein, may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Insignia to
be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such information
includes, without limitation, statements regarding the results of litigation,
the results of the Distribution and Merger, the effects of Year 2000 issues,
Insignia's future financial performance and estimated capital expenditures.
Actual results will be effected by a variety of risks and factors, including,
without limitation, national and local economic conditions, real estate risks
and financing risks. Such forward-looking statements speak only as of the date
of this quarterly report. Insignia expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in Insignia's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- - ------- -----------------
See Note 10 in Notes to Condensed Consolidated Financial Statements, Part
I, Item 1, of this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
a) Exhibits
3.1 Certificate of Amendment to the Certificate of Incorporation of
Insignia/ESG Holdings, Inc., dated October 16, 1998, changing the
name of the Corporation to Insignia Financial Group, Inc.
4.1 Warrant Agreement dated as of September 15, 1998 between Insignia/ESG
Holdings and APTS Partners, L.P.
4.2 Warrant Agreement dated as of September 15, 1998 between Insignia/ESG
Holdings and APTS Partners, L.P.
4.3 Warrant Agreement dated as of September 15, 1998 between Insignia/ESG
Holdings and APTS Partners, L.P.
4.4 Warrant Agreement dated as of September 15, 1998 between Insignia/ESG
Holdings and APTS V, L.L.C.
4.5 Warrant Agreement dated as of September 15, 1998 between Insignia/ESG
Holdings and Gotham Partners, L.P.
4.6 Warrant Agreement dated as of September 30, 1998, between Insignia/ESG
Holdings, Inc. and First Union National Bank of Delaware. 10.1
Employment Agreement dated September 18, 1998 between Insignia
Financial Group, Inc. and Adam B. Gilbert. 27.1 Financial Data
Schedule for September 30, 1998
b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
by: /s/Andrew L. Farkas
-------------------
Andrew L. Farkas
Chairman and Chief Executive Officer
by: /s/James A. Aston
-----------------
James A. Aston
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Insignia Financial Group, Inc. September 30, 1998 Form 10-Q and is qualified in
its entirety by reference to such 10-Q filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 34,124
<SECURITIES> 0
<RECEIVABLES> 128,543
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 22,028
<DEPRECIATION> 0
<TOTAL-ASSETS> 551,803
<CURRENT-LIABILITIES> 0
<BONDS> 33,251
0
0
<COMMON> 214
<OTHER-SE> 374,252
<TOTAL-LIABILITY-AND-EQUITY> 551,803
<SALES> 0
<TOTAL-REVENUES> 360,463
<CGS> 0
<TOTAL-COSTS> 318,401
<OTHER-EXPENSES> 22,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,088
<INCOME-PRETAX> 17,086
<INCOME-TAX> 7,689
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,397
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.43
</TABLE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
INSIGNIA/ESG HOLDINGS, INC.
Pursuant to Section 242 of the General Corporation Law
The undersigned, being the Secretary of Insignia/ESG Holdings, Inc., hereby
certify as follows:
FIRST: The name of the Corporation is Insignia/ESG Holdings, Inc.
SECOND: The Certificate of Incorporation of Insignia/ESG Holdings, Inc. was
filed with the Secretary of State of Delaware on the 6th day of May, 1998.
THIRD: The Certificate of Incorporation is hereby amended to change the
name of the Corporation to Insignia Financial Group, Inc. To reflect such
amendment, Article FIRST of the Certificate of Incorporation is hereby amended
to read as follows:
"FIRST: The name of the Corporation is Insignia Financial Group, Inc."
FOURTH: The foregoing amendment to the Certificate of Incorporation will be
effective as of October 30, 1998.
FIFTH: The foregoing amendment to the Certificate of Incorporation has been
duly adopted in accordance with Section 242 of the General Corporation Law.
<PAGE>
2
4440/39038-088 NYLIB2/554890 v1 09/03/98 09:30 AM (10559)
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment and affirmed that the statements made herein are true under
penalties of perjury this 16th day of October, 1998.
/s/Adam B. Gilbert
------------------
Adam B. Gilbert
Secretary
LOANS/APTS
0839/39038-028 NYLIB2/549862 v5 10/07/98 10:39 AM (10559)
WARRANT AGREEMENT dated as of September 15, 1998 between Insignia/ESG
Holdings, Inc., a Delaware corporation (the "Corporation"), and APTS Partners,
L.P., a Delaware limited partnership ("APTS").
Preliminary Statement
This Warrant Agreement sets forth the terms and conditions of Warrants
transferred to APTS in connection with the exchange of the warrants held by APTS
to purchase shares of Class A Common Stock, par value $.01 per share, of
Insignia Financial Group, Inc. ("IFG") under Warrant Nos. 13 and 14 dated May
10, 1995 of IFG registered in the name of APTS, such exchange resulting from the
distribution by IFG to its stockholders of all of the then outstanding shares of
Common Stock of the Corporation in a transaction intending to qualify as a
tax-free distribution and reorganization under Sections 355 and 368 of the
Internal Revenue Code.
Accordingly, the parties hereto agree as follows.
1. DefinitionsDefinitions. As used in this Warrant Agreement, the following
terms shall have the following meanings, unless the context otherwise requires.
a. "Aggregate Consideration Receivable" by the Corporation in connection
with the issuance of any shares of Common Stock (or any rights, warrants,
options or convertible or exercisable securities entitling the holders thereof
to subscribe for or purchase any shares of Common Stock or any stock
appreciation rights entitling the holders thereof to any interest in an increase
in value, however measured, of shares of Common Stock) shall mean the sum of:
i. the aggregate consideration paid to the Corporation for such shares,
rights, warrants, options or convertible or exercisable securities, and
ii. the aggregate consideration or premiums stated in such rights,
warrants, options or convertible or exercisable securities to be payable for the
shares of Common Stock covered thereby.
In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of Directors or a
duly authorized committee thereof (irrespective of the accounting treatment
thereof), and described in a resolution of the Board of Directors or such
committee.
LOAN/APTS
b. "APTS" shall mean APTS Partners, L.P., a Delaware limited partnership.
c. "Board of Directors" shall mean the board of directors of the
Corporation.
d. "Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are required by law to
close.
e. "Capital Stock" shall mean any and all shares, rights to purchase,
warrants, options, convertible securities, participations in or other
equivalents of or interests (other than security interests) in (however
designated and whether voting or nonvoting) corporate stock.
f. "Change in Control" shall mean the occurrence of any of the following
events:
i. Andrew Farkas has ceased to serve on a full-time basis as the Chief
Executive Officer of the Corporation for any reason;
ii. Andrew Farkas has ceased to own beneficially (within the meaning of
rule 13d-3 promulgated under the Exchange Act) at least 700,000 shares of Common
Stock (as adjusted to reflect stock dividends or distributions, subdivisions or
reclassifications, splits and combinations);
iii. any Person or group (within the meaning of section 13(d)(3) or
14(d)(2) of the Exchange Act) other than a group controlled by Andrew Farkas or
by APTS or any affiliate of Andrew Farkas or APTS acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 45% or
more of the number of shares of Common Stock or the combined voting power of
Voting Stock of the Corporation outstanding immediately prior to such
acquisition;
iv. individuals who, as of the Distribution Date, constitute the Board of
Directors and individuals nominated or elected to serve on the Board of
Directors by individuals described in this section 2(f)(iv) cease for any reason
to constitute at least a majority of the Board of Directors; and
v. the Corporation consummates any merger or consolidation (other than a
Permitted Merger or Consolidation) of the Corporation with or into any other
entity, the sale of all or substantially all of the assets of the Corporation,
the reorganization, liquidation or dissolution of the Corporation, or any
similar transaction or event.
g. "Common Stock" shall mean the Common Stock, par value $.01 per share, of
the Corporation and, in the case of a reclassification, recapitalization or
other similar change in such Common Stock or in the case of a consolidation or
merger of the Corporation with or into another Person, such consideration to
which a holder of a share of Common Stock would have been entitled upon the
occurrence of such event.
h. "Common Stock Equivalents" shall mean, without double counting:
i. shares of Common Stock, where one share of Common Stock shall constitute
one Common Stock Equivalent;
ii. shares of Capital Stock convertible into Common Stock, where any one
share of Capital Stock shall constitute a number of Common Stock Equivalents
equal to the number of shares of Common Stock issuable in respect of such share
of Capital Stock;
iii. any rights, warrants, options and convertible or exercisable
securities entitling the holder thereof to subscribe for or purchase any shares
of Common Stock, where any such rights, warrants, options and convertible or
exercisable securities shall constitute a number of Common Stock Equivalents
equal to the number of shares of Common Stock issuable in respect of such
rights, warrants, options or convertible or exercisable securities; and
iv. any stock appreciation rights entitling the holders thereof to any
interest in an increase in value, however measured, of shares of Common Stock,
where any such stock appreciation rights shall constitute a number of Common
Stock Equivalents equal to the Common Stock equivalent, as nearly as it may be
calculated, of such stock appreciation rights.
i. "Corporation" shall mean Insignia /ESG Holdings, Inc., a Delaware
corporation.
j. "Distribution" shall mean the distribution by Insignia Financial Group,
Inc. to its stockholders of all of the then outstanding shares of Common Stock
of the Corporation.
k. "Distribution Date" shall mean the record date for the Distribution.
l. "Effective Purchase Price per Share" at which the Corporation issues any
shares of Common Stock (or any rights, warrants, options or convertible or
exercisable securities entitling the holders thereof to subscribe for or
purchase any shares of Common Stock or any stock appreciation rights entitling
the holders thereof to any interest in an increase in value, however measured,
of shares of Common Stock) shall mean an amount equal to the ratio of:
i. the Aggregate Consideration Receivable by the Corporation in connection
with the issuance of such shares of Common Stock (or any such rights, warrants,
options, convertible or exercisable securities or stock appreciation rights) to
ii. the number of shares of Common Stock so issued (or issuable upon the
exercise or conversion of such rights, warrants, options or convertible or
exercisable securities or the Common Stock Equivalents, as nearly as it may be
calculated, of such stock appreciation rights).
m. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
n. "Excluded Transaction" shall mean any of the following transactions:
i. the issuance of any shares of Capital Stock of the Corporation to
employees or directors of the Corporation under an employee benefit plan or
arrangement adopted by the Corporation, whether or not referred to or described
in the Form 10;
ii. the issuance of Common Stock Equivalents in an amount not to exceed
200,000 (as adjusted, as appropriate, to reflect any stock dividends,
distributions, subdivisions, reclassifications or combinations of the Common
Stock), provided that, within 10 Business Days following such issuance, the
Corporation has furnished to each Warrant Holder written notice of the fact that
the Corporation intends to treat such issuance as an Excluded Transaction within
the meaning of this clause (ii); and
iii0 any issuance of securities referred to or described in the Form 10.
o "Exercise Price per Share" of any Warrant shall mean:
i0 until adjusted in accordance with section 12 hereof, an amount equal to
$8.25 per share, and
ii0 thereafter, such other amount as may from time to time be determined in
accordance with the provisions of section 12 hereof.
p "Expiration Date" shall mean September 1, 1999.
<PAGE>
q "Fair Market Value" of a share of Common Stock as of any date shall mean,
as of any date, the average of the closing prices of Common Stock for the 20
consecutive Trading Days next preceding the date five days prior to the date in
question. The closing price for each day shall be:
i0 the average of the closing sale price or, in the absence of a closing
sale price, the highest bid and lowest asked prices of one share of Common Stock
quoted in the NYSE Composite Tape or, if not then listed on the NYSE, the NASDAQ
National Market System or any similar system of automated dissemination of
quotations of securities prices then in common use, if so quoted; or
ii0 if not quoted as described in clause (i), the average of the highest
bid and lowest offered quotations for Common Stock as reported by the National
Quotation Bureau Incorporated if at least two securities dealers have inserted
both bid and offered quotations for Common Stock on at least five of the 20
consecutive Trading Days next preceding the date five days prior to the date in
question; or
iii0 if the Common Stock is listed or admitted for trading on any national
securities exchange, the last sale price, or the closing bid price if no sale
occurred, of Common Stock on the principal securities exchange on which the
Common Stock is listed or admitted for trading.
If none of the conditions set forth above is met, the closing price of
Common Stock on any day or the average of such closing prices for any period
shall be the Fair Market Value of Common Stock for such day or period as
determined by a member firm of the NYSE selected by the Corporation and approved
by the Holders of a majority of the outstanding Warrants. If the Corporation and
such Holders are unable to agree on the selection of a member firm, then the
issue of selection of a member firm shall be submitted to the American
Arbitration Association.
r "Form 10" shall mean the Registration Statement on Form 10 of the
Corporation with respect to the Common Stock in the form in which it is declared
effective by the Securities and Exchange Commission.
s "GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereof so as to properly reflect the financial condition, results of
operations and changes in financial position of any Person, except that any
accounting principle or practice required to be changed by such Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
<PAGE>
t "Merger Transaction" shall mean any business combination transaction or
series of transactions involving the Corporation, regardless of whether such
transactions take the form of a merger, purchase and sale of securities,
purchase or sale of assets or otherwise, immediately prior to which, following
which or in connection with which a Change in Control occurs.
u "NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
v "NYSE" shall mean the New York Stock Exchange.
w "Permitted Merger or Consolidation" shall mean any merger or
consolidation of the Corporation:
i0 with or into any wholly owned Subsidiary; or
ii0 immediately after which Persons who were stockholders of the
Corporation prior to such merger or consolidation hold at least 80% of the
outstanding shares of Capital Stock of the Corporation measured by voting power.
x "Person" shall mean an individual, corporation, joint venture, general or
limited partnership, trust, unincorporated organization, limited liability
company, limited liability partnership, government or any agency or political
subdivision thereof, association, sole proprietorship or any other form of
entity not specifically listed herein.
y "Qualifying Transaction" shall mean:
i0 any acquisition by the Corporation of stock or other assets of any kind
in exchange, in whole or in part, for shares of any class of Capital Stock of
the Corporation; and
ii0 any transaction in which shares of Capital Stock of the Corporation are
issued for cash proceeds;
provided, however, that the term "Qualifying Transaction" shall not include
a Merger Transaction.
z "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute.
aa "Subsidiary" shall mean:
i0 any corporation 50% or more of the Voting Stock of which is owned,
directly or indirectly, by the Corporation; or
<PAGE>
ii0 any other Person whose accounts are required under GAAP to be included
in the Corporation's consolidated financial statements,
but shall exclude limited partnerships.
bb "Trading Day" shall mean, with respect to the Common Stock: (i) if the
Common Stock is quoted on the NYSE, the NASDAQ National Market System, any
similar system of automated dissemination of quotations of securities prices, or
the National Quotation Bureau Incorporated, each day on which quotations may be
made on such system; or (ii) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business; or (iii)~if shares of the
Corporation's Common Stock are not quoted on any system or listed or admitted
for trading on any securities exchange, a Business Day.
cc "Voting Stock" shall mean, with respect to any Person, all classes of
Capital Stock of such Person then outstanding and normally entitled to vote for
the election of directors of such Person. Any reference to a percentage of
Voting Stock shall refer to the percentage of votes eligible to be cast for the
election of directors which are attributable to the applicable shares of Voting
Stock.
dd "Warrant Agreement" shall mean this warrant agreement.
ee "Warrant Certificate" shall mean a certificate evidencing one or more
Warrants, substantially in the form of Exhibit~A hereto.
ff "Warrant Holder" shall mean APTS, as the original registered holder of
the Warrants, and any registered transferee of a Warrant Holder.
gg "Warrant Office" shall mean the office or agency of the Corporation at
which the Warrant Register shall be maintained and where the Warrants may be
presented for exercise, exchange, substitution and transfer, which office or
agency will be the office of the Corporation at 200 Park Avenue, New York, New
York 10166, which office or agency may be changed by the Corporation pursuant to
notice in writing to the Persons named in the Warrant Register as the holders of
the Warrants.
hh "Warrant Register" shall mean the register, substantially maintained by
the Corporation at the Warrant Office.
ii "Warrant Shares" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants, as the same may be adjusted from time to
time pursuant to section 12 hereof, and any other shares of Capital Stock issued
or issuable upon the exercise of the Warrants pursuant to section 12 hereof.
<PAGE>
jj "Warrants" shall mean the warrants to purchase Common Stock issued by
the Corporation pursuant to this Warrant Agreement; individually, a "Warrant."
2 Representations and WarrantiesRepresentations and Warranties. The
Corporation hereby represents and warrants as follows:
a The Corporation is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, has the corporate
power and authority to conduct its business as presently conducted, has the
corporate power and authority to execute and deliver this Warrant Agreement and
the Warrant Certificates, to issue the Warrants and to perform its obligations
under this Warrant Agreement and the Warrant Certificates.
b The execution, delivery and performance by the Corporation of this
Warrant Agreement and the Warrant Certificates, the issuance of the Warrants,
and the issuance of the Warrant Shares upon exercise of the Warrants have been
duly authorized by all necessary corporate action.
c This Warrant Agreement has been duly executed and delivered by the
Corporation and constitutes a legal, valid, binding and enforceable obligation
of the Corporation. When the Warrants and Warrant Certificates have been issued
as contemplated hereby the Warrants and the Warrant Certificates will constitute
legal, valid, binding and enforceable obligations of the Corporation. The
Warrant Shares, when issued upon exercise of the Warrants in accordance with the
terms hereof, will be duly authorized, validly issued, fully paid and
nonassessable shares of the Common Stock or, in the event of an adjustment
pursuant to section 12, other shares of Capital Stock. Statements in this
section 2(c) as to validity, binding effect and enforceability are subject to
(i) limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, including, without
limitation, limitations as to enforceability that may be imposed under Section
548 of the United States Bankruptcy Code, Article 10 of the New York Debtor
Creditor Law or other provisions of law relating to fraudulent transfers and
obligations and (ii) equitable principles limiting the availability of equitable
remedies.
3 Number of WarrantsNumber of Warrants. The Corporation hereby agrees to
issue and deliver to APTS on the Distribution Date Warrant Certificates
evidencing 316,667 Warrants.
4 Registration, Transfer and Exchange of Certificates.
<PAGE>
a The Corporation shall maintain at the Warrant Office the Warrant Register
for registration of the Warrants and Warrant Certificates and transfers thereof.
On the Distribution Date the Corporation shall register the Warrants and Warrant
Certificates in the Warrant Register in the name of the Warrant Holder. The
Corporation may deem and treat the registered holders of the Warrant
Certificates as the absolute owners thereof and the Warrants represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant
Certificates made by any person) for the purpose of any exercise thereof or any
distribution to the Warrant Holders thereof, and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary.
b Subject to section 14 hereof, the Corporation shall register the transfer
of any outstanding Warrants in the Warrant Register upon surrender of the
Warrant Certificates evidencing such Warrants to the Corporation at the Warrant
Office, accompanied (if so required by it) by a written instrument or
instruments of transfer in form satisfactory to it, duly executed by the
registered holder or holders thereof or by the duly appointed legal
representative thereof. Upon any such registration of transfer, new Warrant
Certificates evidencing such transferred Warrants shall be issued to the
transferee and the surrendered Warrant Certificates shall be cancelled. If less
than all the Warrants evidenced by Warrant Certificates surrendered for transfer
are to be transferred, new Warrant Certificates shall be issued to the holder
surrendering such Warrant Certificates evidencing such remaining number of
Warrants.
c Warrant Certificates may be exchanged at the option of the holders
thereof when surrendered to the Corporation at the Warrant Office, for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be cancelled.
d No charge shall be made for any such transfer or exchange except for any
tax or other governmental charge imposed in connection therewith. Except as
provided in section 14(b) hereof, each Warrant Certificate issued upon transfer
or exchange shall bear the legend set forth in section 14(b) hereof if the
Warrant Certificate presented for transfer or exchange bore such legend.
<PAGE>
5 Mutilated or Missing Warrant CertificatesMutilated or Missing Warrant
Certificates. If any Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Corporation shall issue, in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence satisfactory to the Corporation of
such loss, theft or destruction of such Warrant Certificate and, if requested,
indemnity satisfactory to it. The Corporation acknowledges that a written
indemnity by the Warrant Holder shall be satisfactory to the Corporation for
such purpose. No service charge shall be made for any such substitution, but all
expenses and reasonable charges associated with procuring such indemnity and all
stamp, tax and other governmental duties that may be imposed in relation thereto
shall be borne by the holder of such Warrant Certificate. Each Warrant
Certificate issued in any such substitution shall bear the legend set forth in
section 14(b) hereof if the Warrant Certificate for which such substitution was
made bore such legend.
6 Duration and Exercise of WarrantsDuration and Exercise of Warrants.
a The Warrants evidenced by a Warrant Certificate shall be exercisable in
whole or in part by the registered holder thereof on any Business Day after the
Distribution Date and on or before 5:00 PM, New York City time, on the
Expiration Date.
b Upon presentation to the Corporation at the Warrant Office of the Warrant
Certificate evidencing the Warrants to be exercised, with the form of election
to purchase attached thereto duly completed, signed by the Warrant Holder, and
upon payment of an amount equal to the product of:
i0 the Exercise Price per Share; and
ii0 the number of Warrant Shares being purchased,
in lawful money of the United States of America, the Corporation shall
issue and cause to be delivered to or upon the written order of the registered
holders of such Warrants and in such name or names as such registered holder may
designate, a certificate for the Warrant Share or Warrant Shares issued upon
such exercise of the Warrants being exercised. Any Persons so designated to be
named therein shall be deemed to have become Warrant Holders of record of such
Warrant Share or Warrant Shares as of the date of exercise of such Warrants.
Any Persons so designated to be named therein shall be deemed to have
become holders of record of such Warrant Share or Warrant Shares as of the date
of exercise of such Warrants.
c If less than all of the Warrants evidenced by a Warrant Certificate are
exercised at any time, a new Warrant Certificate or Certificates shall be issued
for the remaining number of Warrants evidenced by such Warrant Certificate. Each
new Warrant Certificate so issued shall bear the legend set forth in section
14(b) hereof if the Warrant Certificate presented in connection with partial
exercise thereof bore such legend. All Warrant Certificates surrendered upon
exercise of Warrants shall be cancelled.
7 No Fractional SharesNo Fractional Shares. The Corporation shall not be
required to issue fractional Warrant Shares upon exercise of the Warrants but
shall pay for any such fraction of a share an amount in cash equal to such
fraction of the Fair Market Value of a share of Common Stock.
<PAGE>
8 Payment of TaxesPayment of Taxes. The Corporation will pay all taxes
attributable to the initial issuance of Warrant Shares to a Warrant Holder upon
the exercise of his Warrants, provided that the Corporation shall not be
required to pay any income tax incurred by the Warrant Holder or the holder of
the Warrant Shares upon exercise of the Warrants or issuance of the Warrant
Shares.
9 Stockholder RightsStockholder Rights.
a Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as a stockholder in respect of the
meetings of stockholders or the election of directors of the Corporation or any
other matter, or any rights whatsoever as a stockholder of the Corporation.
b Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the registered
holders thereof to purchase any securities or as imposing any liabilities on
such Warrant Holders as stockholders of the Corporation, whether such obligation
or liabilities are asserted by the Corporation or by creditors of the
Corporation.
10 Reservation and Issuance of Warrant SharesReservation and Issuance of
Warrant Shares.
a The Corporation will at all times have authorized, and reserve and keep
available, for the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon the exercise of the Warrants, the number of shares of Common
Stock deliverable upon exercise of all outstanding Warrants.
b The Corporation will take any corporate action which may be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price per Share.
c The Corporation covenants that all Warrant Shares will, upon issuance to
the Warrant Holder in accordance with the terms of this Warrant Agreement and
the Corporation's certificate of incorporation, be fully paid and nonassessable
and free from all taxes with respect to the issuance thereof and from all liens,
charges and security interests (other than any created by or on behalf of any
Warrant Holder).
<PAGE>
11 Obtaining of Governmental Approvals and Stock Exchange ListingsObtaining
of Governmental Approvals and Stock Exchange Listings. The Corporation will, at
its own expense, from time to time take all action which may be necessary to
obtain and keep effective any and all permits, consents, orders and approvals of
governmental agencies and authorities which are or become requisite in
connection with the issuance, sale, transfer and delivery of the Warrant
Certificates and the exercise of the Warrants and the issuance, sale, transfer
and delivery of the Warrant Shares, and all action which may be necessary so
that any Common Stock, immediately upon its issuance upon the exercise of
Warrants, will be listed on each securities exchange or listing or quotation
service, if any, on which the Common Stock is then listed.
12 Adjustment of Exercise Price per Share and number of Warrant Shares
issuable on exercise of WarrantsAdjustment of Exercise Price per Share and
number of Warrant Shares issuable on exercise of Warrants.
a Prior to the Expiration Date, the Exercise Price per Share, and in some
cases the number of Warrant Shares issuable upon exercise of each Warrant, are
subject to adjustment from time to time in the manner provided in this section
12 upon the occurrence of any of the events enumerated in this section~12.
b In the event that the Corporation shall at any time after the
Distribution Date:
i0 declare a dividend or make a distribution on any series of its Common
Stock in shares of any series of its Common Stock;
ii0 subdivide or reclassify shares of any series of its outstanding Common
Stock into a greater number of shares;
iii0 combine shares of any series of its outstanding Common Stock into a
smaller number of shares;
iv0 pay a dividend or make a distribution on any series of its Common Stock
in shares of any series of its Capital Stock other than Common Stock; or
v0 issue by reclassification of any series of its Common Stock shares of
any series of its Capital Stock;
then each Warrant outstanding on the record date for such dividend or
distribution or on the effective date of such subdivision, reclassification or
combination shall thereafter entitle the holder thereof to receive the aggregate
number and kind of shares, other securities and property which, if such Warrant
had been exercised immediately prior to such time, such holder would have owned
or have become entitled to receive by virtue of such dividend, distribution,
subdivision, reclassification or combination and, if after such dividend,
distribution, subdivision, reclassification or combination the Warrants continue
to represent the right to purchase only shares of Common Stock (and not other
securities or property), the Exercise Price per Share shall be adjusted to be an
amount equal to the product of:
(x) the Exercise Price per Share in effect immediately prior to such
dividend, distribution, subdivision, reclassification or combination and
(y) the ratio of:
(1) the number of shares of Common Stock issuable on exercise of a single
Warrant immediately before giving effect to the dividend, distribution,
subdivision, reclassification or combination and
(2) the number of shares of Common Stock issuable on exercise of a single
Warrant immediately after giving effect to such dividend, distribution,
subdivision, reclassification or combination.
If after such dividend, distribution, subdivision, reclassification or
combination the Warrants represent the right to purchase securities other than
shares of Common Stock or other property, the Exercise Price per Share shall be
adjusted equitably. An adjustment made pursuant to this section 12(b) shall
become effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of subdivision, combination or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
c i0 "Full-ratchet" Anti-dilution Adjustment. In the event that the
Corporation shall at any time after the Distribution Date issue any shares of
Common Stock (or any rights, warrants, options or convertible or exercisable
securities entitling the holders thereof to subscribe for or purchase any shares
of Common Stock, or any stock appreciation rights entitling the holders thereof
to any interest in an increase in value, however measured, of shares of Common
Stock) other than in a Qualifying Transaction and other than in an Excluded
Transaction, at an Effective Purchase Price per Share less than the Exercise
Price per Share in effect immediately prior to such issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an amount equal to
such Effective Price per Share and
(2) no adjustment shall be made as a result of such issuance in the number
of Warrant Shares issuable on exercise of the Warrants.
<PAGE>
For example, if on any given date the Corporation issues (other than in a
Qualifying Transaction and other than in an Excluded Transaction) warrants
exercisable at $3.00 per share to purchase shares of Common Stock for a purchase
price of $5.00 per warrant and the Exercise Price per Share in effect
immediately prior to such issuance is $8.25 per share, then the Exercise Price
per Share will be adjusted to $8.00 per share and no adjustment will be made in
the number of Warrant Shares issuable upon exercise of a Warrant.
ii0 "Proportional" Anti-dilution Adjustment. In the event that the
Corporation shall at any time after the Distribution Date issue any shares of
Common Stock (or any rights, warrants, options or convertible or exercisable
securities entitling the holders thereof to subscribe for or purchase any shares
of Common Stock, or any stock appreciation rights entitling the holders thereof
to any interest in an increase in value, however measured, of shares of Common
Stock) in a Qualifying Transaction or in an Excluded Transaction described in
clause (i) or (ii) of the definition of that term, at an Effective Purchase
Price per Share less than the Exercise Price per Share in effect immediately
prior to such issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an amount equal to
the ratio of:
(a) the sum of:
(i) the product of:
1 the number of shares of Common Stock outstanding immediately prior to
such issuance and
2 the Exercise Price per Share in effect immediately prior to such issuance
and
(ii) the Aggregate Consideration Receivable by the Corporation in
connection with such issuance, to
(b) the sum of:
(i) the number of shares of Common Stock outstanding immediately prior to
such issuance and
(ii) the number of additional shares of Common Stock to be so issued
(including the number of shares underlying such rights, warrants, options or
convertible or exercisable securities); and
(2) no adjustment shall be made as a result of such issuance in the number
of Warrant Shares issuable on exercise of the Warrants.
<PAGE>
For example, if on any given date the Corporation has 10,000,000 shares of
Common Stock outstanding, the Corporation issues (in a Qualifying Transaction or
in an Excluded Transaction described in clause (i) or (ii) of the definition of
that term) warrants exercisable at $3.00 per share to purchase an additional
1,000,000 shares of Common Stock for a purchase price of $5.00 per warrant and
the Exercise Price per Share in effect immediately prior to such issuance is
$8.25 per share, then the Exercise Price per Share shall be adjusted to $8.227
per share (calculated as follows: $8.227 per share = [(10,000,000 shares x $8.25
per share) + $8,000,000] / (10,000,000 shares + 1,000,000 shares), and no
adjustment will be made in the number of Warrant Shares issuable upon exercise
of a Warrant.
d No change in either the Exercise Price per Share or the number of Warrant
Shares issuable upon exercise of the Warrants shall occur solely as the result
of the issuance by the Corporation at any time after the Distribution Date of
any shares of Common Stock (or any rights, warrants, options or convertible or
exercisable securities entitling the holders thereof to subscribe for or
purchase any shares of Common Stock or any stock appreciation rights entitling
the holders thereof to any interest in an increase in value, however measured,
of shares of Common Stock) in an Excluded Transaction described in clause (iii)
of the definition of that term.
e In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of Directors or a
duly authorized committee thereof (irrespective of the accounting treatment
thereof), and described in a resolution of the Board of Directors or such
committee. An adjustment made pursuant to section 12(c) hereof shall become
effective immediately upon the effective date of the issuance resulting in such
adjustment. Such adjustment shall be made successively whenever any shares,
rights, warrants, options or convertible or exercisable securities are so issued
at an Effective Purchase Price per Share that is less than the Exercise Price
per Share in effect on the date of such issuance. To the extent that any such
rights, warrants, options or convertible or exercisable securities or stock
appreciation rights expire without having been converted or exercised, each
Warrant outstanding shall, as of the date of such expiration, have the same
Exercise Price per Share as would have been the case had such expired rights,
warrants, options, convertible or exercisable securities or stock appreciation
rights not been issued, but such readjustment shall not affect the Exercise
Price per Share paid for any shares of Common Stock or other shares of Capital
Stock delivered upon any exercise prior to the date such readjustment is made.
<PAGE>
f In the event that the Corporation shall distribute to all holders of its
Common Stock any of its assets or debt securities, or rights, options, warrants
or convertible or exercisable securities of the Corporation (including
securities for cash, but excluding:
i0 distributions of Capital Stock referred to in section 12(b) hereof,
ii0 distributions of rights, warrants, options, convertible or exercisable
securities or stock appreciation rights referred to in section 12(c) hereof, if
the decrease in the Exercise Price per Share under section 12(c) hereof would be
greater than the decrease in the Exercise Price per Share under this section
12(f) (with section 12(c) applying rather than this section 12(f)), and
iii0 cash dividends or other cash distributions that are paid out of
Consolidated Net Income for any dividend period, earned surplus or retained
earnings,
then in each such case:
(1) the Exercise Price per Share shall be adjusted to be an amount equal to
the difference between:
(a) the Exercise Price per Share in effect immediately prior to such
issuance and
(b) an amount equal to the then fair market value (as reasonably determined
by the Board of Directors, in good faith and as described in a resolution of the
Board of Directors) of the portion of the assets or debt securities of the
Corporation so distributed or of such rights, options, warrants or convertible
or exercisable securities applicable to one share of Common Stock, and
(2) no adjustment shall be made in any such case in the number of Warrant
Shares issuable on exercise of the Warrants.
Such adjustment shall become effective immediately after the record date
for the determination of shares entitled to receive such distribution.
Notwithstanding the foregoing, no such adjustment shall be made upon any such
distribution if the plan or arrangement under which such distribution is made
provides for a distribution to holders of Warrant Shares in the same pro rata
amounts upon exercise of the Warrants. Such adjustment shall be made
successively whenever any event listed above shall occur.
g If at any time, as a result of an adjustment made pursuant to this
section 12, the holder of any Warrant thereafter exercised shall become entitled
to receive any shares of the Corporation other than shares of Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this section 12, and the provisions of this Warrant
Agreement with respect to the Warrant Shares shall apply on like terms to such
other shares.
h If any of the following events occur, namely:
i0 any reclassification or change of Warrant Shares (other than a change in
par value, or from par value to no par value, or from no par value to par value,
or as a result of subdivision or combination);
ii0 any consolidation or merger of the Corporation with another Person
shall be effected as a result of which holders of Warrant Shares shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for Warrant Shares; or
iii0 any sale or conveyance of the properties and assets of the Corporation
as, or substantially as, an entirety to any other Person;
then the Corporation or such successor or purchasing Person, as the case
may be, shall make provisions to establish that each Warrant then outstanding
shall be exercisable for the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon the occurrence
of such event by a holder of Warrant Shares immediately prior to such event. The
Corporation shall not consummate any such event unless, prior to or
simultaneously with such consummation, the successor Person (if other than the
Corporation) resulting from such consolidation or merger or the Person
purchasing such properties and assets shall assume by written instrument, the
obligation to deliver to each Warrant Holder the shares of stock, securities or
assets to which, in accordance with the foregoing provisions, such holder may be
entitled and all other obligations of the Corporation under this Warrant
Agreement. The provisions of this section 12(h) shall similarly apply to
successive reclassifications, consolidations, mergers, sales and conveyances.
i Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrant, Warrant Certificates theretofore
or thereafter issued may continue to express the same number and kind of shares
as are stated on the Warrant Certificates initially issuable pursuant to this
Warrant Agreement.
<PAGE>
j Anything in this section 12 to the contrary notwithstanding, the
Corporation shall be entitled to make such decreases in the Exercise Price per
Share and such increases in the number of Warrant Shares issuable upon the
exercise of each Warrant, in addition to those adjustments required by this
section 12, as it in its sole discretion shall determine to be advisable in
order that any dividends, distributions or, issuances of securities, rights,
options, warrants or convertible or exchangeable securities made by the
Corporation to its stockholders shall not be taxable to them.
13 Notices to HoldersNotices to Holders.
a Upon any adjustment pursuant to section 12 hereof in the Exercise Price
per Share or in the number of Warrant Shares issuable upon exercise of a
Warrant, the Corporation shall promptly but in any event within 30 days
thereafter, cause to be given to each of the Warrant Holders, at its address
appearing on the Warrant Register by registered mail, postage prepaid, return
receipt requested, a certificate signed by its chairman, president or chief
financial officer setting forth the Exercise Price per Share and the number of
Warrant Shares purchasable upon exercise of a Warrant as so adjusted and
describing in reasonable detail the facts accounting for such adjustment and the
method of calculation used. When appropriate, such certificate may be given in
advance and included as a part of the notice required to be mailed under the
other provisions of this section 13.
b In the event:
i0 that the Corporation shall authorize the issuance to all holders of
Common Stock of rights or warrants to subscribe for or purchase Capital Stock of
the Corporation or of any other subscription rights or warrants;
ii0 that the Corporation shall authorize the distribution to all holders of
Common Stock of evidences of its indebtedness or assets (including, without
limitation, cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in Common Stock);
iii0 of any consolidation or merger to which the Corporation is a party and
for which approval of any stockholders of the Corporation is required, or of the
conveyance or transfer of the properties and assets of the Corporation
substantially as an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination);
iv0 of the voluntary or involuntary dissolution, liquidation or winding up
of the Corporation; or
<PAGE>
v0 that the Corporation proposes to take any other action which would
require an adjustment in the Exercise Price per Share or in the number of
Warrant Shares or other securities or assets to which each holder is entitled
pursuant to section 12 hereof;
then the Corporation shall cause to be given to each of the Warrant Holders
at its address appearing on the Warrant Register, at least 30 calendar days
prior to the applicable record date, if any, hereinafter specified, or, if no
such record date is specified, 30 calendar days prior to the taking of any
action referred to in clauses (i) through (v) above (except that, if the action
taken by the Corporation is an issuance described in section 12(c)(i) or (ii)
hereof, then as promptly as possible but in no event later than the date that
the Corporation provides public notice of such issuance), by registered mail,
postage prepaid, return receipt requested, a written notice stating (i) the date
as of which the holders of record of Common Stock to be entitled to receive any
such rights, warrants or distribution are to be determined, or (ii) the date on
which any such consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective, or (iii) the date as
of which any such other action is to be effected, and, if applicable and known
to the Corporation, the date as of which it is expected that holders of record
of Common Stock shall be entitled to exchange their shares for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up; provided,
however, that in the event that the Corporation provides public notice of such
proposed action or event specifying the information set forth above at least 10
days prior to the proposed record date or effective date, then the Corporation
shall be deemed to have satisfied its obligation to provide notice pursuant to
this section 13(b). The failure to give the notice required by this section 13
or any defect therein shall not affect the legality or validity of any
distribution, right, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up or other action referred to above, or the
vote upon any such action.
c The Corporation shall promptly, but in any event no less than 30 days
prior to the effective date of any Change in Control, cause to be given to each
of the registered holders of the Warrants, at its address appearing on the
Warrant Register by registered mail, postage prepaid, return receipt requested,
written notice of the pendency of such Change in Control.
14 Restrictions on TransferRestrictions on Transfer; Subsequent Transferees
as Third Party Beneficiaries.
<PAGE>
a The Warrant Holder (i)~represents that it is acquiring the Warrants for
its own account for investment and not with a view to any distribution or public
offering within the meaning of the Securities Act, (ii)~acknowledges that the
Warrants and the Warrant Shares issuable upon exercise thereof have not been
registered under the Securities Act or any state securities laws and
(iii)agrees that it will not sell or otherwise transfer any of its Warrants or
Warrant Shares except upon the terms and conditions specified herein, provided
that the Warrant Holders may sell the Warrants or the Warrant Shares purchased
upon exercise of the Warrants in one or more private transactions not requiring
registration under the Securities Act.
b Except as otherwise provided in section~14(d) hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to a Warrant
Holder shall include a legend in substantially the following form (with such
changes therein as may be appropriate to reflect whether such legend refers to
Warrants or Warrant Shares), provided that such legend shall not be required if
such transfer is being made in connection with a sale which is exempt from
registration pursuant to Rule~144 under the Securities Act or if the opinion of
counsel referred to in section~14(c) hereof is to the further effect that
neither such legend nor the restrictions on transfer in this section~14 are
required in order to ensure compliance with the Securities Act:
THE [WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS,]
[SHARES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT OR LAWS.
c Each Warrant Holder wishing to effect such a transfer of any Warrant or
Warrant Shares shall furnish to the Corporation an agreement by the transferee
thereof that it is taking and holding the same subject to the terms and
conditions specified herein and a written opinion of such Warrant Holder's
counsel, in form reasonably satisfactory to the Corporation, to the effect that
the proposed transfer may be effected without registration under the Securities
Act and any applicable state securities laws.
d The restrictions set forth in this section~14 shall terminate and cease
to be effective with respect to any Warrants or Warrant Shares registered under
the Securities Act or receipt by the Corporation of an opinion of counsel, in
form reasonably satisfactory to the Corporation, to the effect that compliance
with such restrictions is not necessary in order to comply with the Securities
Act and any applicable state securities laws with respect to the transfer of the
Warrants and/or the Warrant Shares. Whenever such restrictions shall so
terminate the holder of such Warrants and/or Warrant Shares shall be entitled to
receive from the Corporation, without expense (other than transfer taxes, if
any), Warrant Certificates or certificates for such Warrant Shares not bearing
the legend set forth in section~14(b) hereof and the Corporation will rescind
any transfer restrictions relating thereto.
e It is the intention of the parties hereto that each Warrant Holder who
acquires Warrants by transfer be a third party beneficiary, to the extent of
Warrants acquired and held by such Warrant Holder, of the provisions of this
Warrant Agreement that bestow rights on Warrant Holders.
<PAGE>
15 Covenants. Holdings covenants to include in any filings made with any
taxing authority the issuance of these warrants as being pursuant to the plan of
reorganization (with respect to the distribution of the Corporation by IFG).
16 Amendments and Waivers. Amendments and Waivers. Any provision of this
Warrant Agreement may be amended, supplemented, waived, discharged or terminated
by a written instrument signed by the Corporation and the holders of not less
than a majority of the outstanding Warrants, provided that the Exercise Price
per Share may not be increased by amendment, the number of Warrant Shares
issuable upon exercise of the Warrants may not be reduced by amendment and this
section~15 may not be changed by amendment except with the unanimous consent of
the holders of outstanding Warrants.
17 Specific Performance. Specific Performance. The holders of the Warrants
shall have the right to specific performance by the Corporation of the
provisions of this Warrant Agreement. The Corporation hereby irrevocably waives,
to the extent that it may do so under applicable law, any defense based on the
adequacy of a remedy at law which may be asserted as a bar to the remedy of
specific performance in any action brought against the Corporation for specific
performance of this Warrant Agreement by the holders of the Warrants.
18 Notices.Notices.
a Any notice or demand to be given or made by the Warrant Holders or the
holders of Warrant Shares to or on the Corporation pursuant to this Warrant
Agreement shall be sufficiently given or made if sent by registered mail, return
receipt requested, postage prepaid, addressed to the Corporation at the Warrant
Office.
b Any notice to be given by the Corporation to the Warrant Holders or the
holders of Warrant Shares shall be sufficiently given or made if sent by
registered mail, return receipt requested, postage prepaid, addressed to such
holder as such holder's name and address shall appear on the Warrant Register or
the Common Stock registry of the Corporation, as the case may be.
19 Binding Effect. Binding Effect. This Warrant Agreement shall be binding
upon and inure to the sole and exclusive benefit of the Corporation and the
Warrant Holder, and their respective successors and assigns.
20 Continued Validity.Continued Validity. A holder of Warrant Shares shall
continue to be entitled with respect to such Warrant Shares to all rights and
subject to all obligations to which it would have been entitled or subject as a
holder under sections~14 through 22 hereof.
<PAGE>
21 Counterparts. Counterparts. This Warrant Agreement may be executed in
one or more separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
22 New York Law. New York Law. THIS WARRANT AGREEMENT AND EACH WARRANT
CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
23 Benefits of This Agreement. Benefits of This Agreement. Nothing in this
Warrant Agreement shall be construed to give any Person other than the
Corporation and the Warrant Holder any legal or equitable right, remedy or claim
under this Warrant Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Warrant Agreement to
be duly executed and delivered by their proper and duly authorized officers, as
of the date and year first above written.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ Andrew L. Farkas
-----------------------
Name: Andrew L. Farkas
Title: Chairman and Chief Executive Officer
APTS PARTNERS, L.P.
By: APTS GP Partners, L.P.,
its general partner
By: APTS Acquisition Corporation,
its general partner
By:/s/ John R. S. Jacobsson
---------------------------
Name: John R. S. Jacobsson
Title: Vice President
<PAGE>
A-1
0839/39038-028 NYLIB2/549862 v5 10/07/98 10:39 AM (10559)
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS,
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT OR LAWS.
EXERCISABLE ONLY ON OR BEFORE
SEPTEMBER 1, 1999
[Date] Warrant Certificate Warrant No. [ ]
This Warrant Certificate is one of the Warrant Certificates referred to in
the Warrant Agreement dated as of September 15, 1998 (the "Warrant Agreement")
between the Corporation and APTS Partners, L.P., a Delaware limited partnership.
The Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitations, obligations, duties and immunities thereunder of the Corporation
and the holders of Warrants. Terms defined in the Warrant Agreement and used
herein have the same meanings herein as therein.
This Warrant Certificate certifes that___________________ , or registered
assigns, is the registered holder of _____ Warrants to purchase shares of Common
Stock of INSIGNIA/ESG HOLDINGS, INC., a Delaware corporation (the
"Corporation"). Each Warrant entitles the holder, but only subject to the
conditions set forth herein and in the Warrant Agreement, to purchase from the
Corporation before 5:00~PM, New York City time, on the Expiration Date, one
fully paid and nonassessable share of Common Stock (subject to adjustment as
described below) at a price equal to the Exercise Price per Share.
The Exercise Price per Share shall be payable in lawful money of the United
States of America. The Warrants represented by this certificate may be exercised
by surrender of this Warrant Certificate, along with an executed copy of the
annexed Form of Election to Purchase and payment of the applicable Exercise
Price at the office of the Corporation at 200 Park Avenue, New York, New York
10166, or such other address as the Corporation may specify in writing to the
registered holder of the Warrants evidenced hereby. The Exercise Price per Share
and the number of shares of Common Stock purchasable upon exercise of the
Warrants is subject to adjustment prior to the Expiration Date as set forth in
the Warrant Agreement.
No Warrant may be exercised after 5:00~PM, New York City time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00~PM, New
York City time, on the Expiration Date.
<PAGE>
A-3
0839/39038-028 NYLIB2/549862 v5 10/07/98 10:39 AM (10559)
The Corporation may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary.
This Warrant Certificate, when surrendered at the Warrant Office by the
registered holder hereof in person or by a legal representative duly authorized
in writing, may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor registered
in the name of the holder and representing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to
be signed by its duly authorized officers and has caused its corporate seal to
be affixed hereunto.
INSIGNIA/ ESG HOLDINGS, INC.
By:__________________________
Name:
Title:
(CORPORATE SEAL)
ATTEST
____________________________
Secretary
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise, in accordance with
section 6(b) of the Warrant Agreement, _________Warrants, representing the right
to purchase________ shares of Common Stock, and herewith tenders payment for
such shares of Common Stock to the order of the Corporation in the amount of
$________ as payment of the exercise price in accordance with the terms hereof.
The undersigned requests that a certificate for such shares of Common Stock
be registered in the name _______________ of whose address __________________ is
and that such certificate be delivered to_______________ whose address
is_________________ . If said number of shares of Common Stock is less than all
of the shares of Common Stock purchasable hereunder, the undersigned hereby
requests that a new Warrant Certificate representing the remaining balance of
the Warrants be registered in the name of_______________ whose address
is_______________ and that such Warrant Certificate be delivered
to_________________ whose address is_____________________ .
Signature:
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:
LOANS/APTSLP
0839/39038-028 NYLIB2/563070 v1 10/06/98 01:06 PM (10559)
WARRANT AGREEMENT dated as of September 15, 1998 between Insignia/ESG
Holdings, Inc., a Delaware corporation (the "Corporation"), and APTS Partners,
L.P., a Delaware limited partnership ("APTS").
Preliminary Statement
This Warrant Agreement sets forth the terms and conditions of Warrants
transferred to APTS in connection with the exchange of the warrants held by APTS
to purchase shares of Class A Common Stock, par value $.01 per share, of
Insignia Financial Group, Inc. ("IFG") under the Warrant Agreement dated as of
January 17, 1995 between IFG and APTS, such exchange resulting from the
distribution by IFG to its stockholders of all of the then outstanding shares of
Common Stock of the Corporation in a transaction intending to qualify as a
tax-free distribution and reorganization under Sections 355 and 368 of the
Internal Revenue Code.
Accordingly, the parties hereto agree as follows.
1. Definitions. As used in this Warrant Agreement, the following terms shall
have the following meanings, unless the context otherwise requires.
a. "Aggregate Consideration Receivable" by the Corporation in connection
with the issuance of any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities entitling
the holders thereof to subscribe for or purchase any shares of Common
Stock or any stock appreciation rights entitling the holders thereof
to any interest in an increase in value, however measured, of shares
of Common Stock) shall mean the sum of:
i. the aggregate consideration paid to the Corporation for such
shares, rights, warrants, options or convertible or exercisable
securities, and
ii. the aggregate consideration or premiums stated in such rights,
warrants, options or convertible or exercisable securities to be
payable for the shares of Common Stock covered thereby.
In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of
Directors or a duly authorized committee thereof (irrespective of the
accounting treatment thereof), and described in a resolution of the
Board of Directors or such committee.
b. "APTS" shall mean APTS Partners, L.P., a Delaware limited partnership.
c. "Board of Directors" shall mean the board of directors of the
Corporation.
d. "Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are required by
law to close.
e. "Capital Stock" shall mean any and all shares, rights to purchase,
warrants, options, convertible securities, participations in or other
equivalents of or interests (other than security interests) in
(however designated and whether voting or nonvoting) corporate stock.
f. "Change in Control" shall mean the occurrence of any of the following
events:
i. Andrew Farkas has ceased to serve on a full-time basis as the
Chief Executive Officer of the Corporation for any reason;
ii. Andrew Farkas has ceased to own beneficially (within the meaning
of rule 13d-3 promulgated under the Exchange Act) at least
700,000 shares of Common Stock (as adjusted to reflect stock
dividends or distributions, subdivisions or reclassifications,
splits and combinations);
iii. any Person or group (within the meaning of section 13(d)(3) or
14(d)(2) of the Exchange Act) other than a group controlled by
Andrew Farkas or by APTS or any affiliate of Andrew Farkas or
APTS acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 45% or more of the
number of shares of Common Stock or the combined voting power of
Voting Stock of the Corporation outstanding immediately prior to
such acquisition;
iv. individuals who, as of the Distribution Date, constitute the
Board of Directors and individuals nominated or elected to serve
on the Board of Directors by individuals described in this
section 2(f)(iv) cease for any reason to constitute at least a
majority of the Board of Directors; and
v. the Corporation consummates any merger or consolidation (other
than a Permitted Merger or Consolidation) of the Corporation with
or into any other entity, the sale of all or substantially all of
the assets of the Corporation, the reorganization, liquidation or
dissolution of the Corporation, or any similar transaction or
event.
g. "Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Corporation and, in the case of a reclassification,
recapitalization or other similar change in such Common Stock or in
the case of a consolidation or merger of the Corporation with or into
another Person, such consideration to which a holder of a share of
Common Stock would have been entitled upon the occurrence of such
event.
h. "Common Stock Equivalents" shall mean, without double counting:
i. shares of Common Stock, where one share of Common Stock shall
constitute one Common Stock Equivalent;
ii. shares of Capital Stock convertible into Common Stock, where any
one share of Capital Stock shall constitute a number of Common
Stock Equivalents equal to the number of shares of Common Stock
issuable in respect of such share of Capital Stock;
iii. any rights, warrants, options and convertible or exercisable
securities entitling the holder thereof to subscribe for or
purchase any shares of Common Stock, where any such rights,
warrants, options and convertible or exercisable securities shall
constitute a number of Common Stock Equivalents equal to the
number of shares of Common Stock issuable in respect of such
rights, warrants, options or convertible or exercisable
securities; and
iv. any stock appreciation rights entitling the holders thereof to
any interest in an increase in value, however measured, of shares
of Common Stock, where any such stock appreciation rights shall
constitute a number of Common Stock Equivalents equal to the
Common Stock equivalent, as nearly as it may be calculated, of
such stock appreciation rights.
i. "Corporation" shall mean Insignia /ESG Holdings, Inc., a Delaware
corporation.
j. "Distribution" shall mean the distribution by Insignia Financial
Group, Inc. to its stockholders of all of the then outstanding shares
of Common Stock of the Corporation.
k. "Distribution Date" shall mean the record date for the Distribution.
l. "Effective Purchase Price per Share" at which the Corporation issues
any shares of Common Stock (or any rights, warrants, options or
convertible or exercisable securities entitling the holders thereof to
subscribe for or purchase any shares of Common Stock or any stock
appreciation rights entitling the holders thereof to any interest in
an increase in value, however measured, of shares of Common Stock)
shall mean an amount equal to the ratio of:
i. the Aggregate Consideration Receivable by the Corporation in
connection with the issuance of such shares of Common Stock (or
any such rights, warrants, options, convertible or exercisable
securities or stock appreciation rights) to
ii. the number of shares of Common Stock so issued (or issuable upon
the exercise or conversion of such rights, warrants, options or
convertible or exercisable securities or the Common Stock
Equivalents, as nearly as it may be calculated, of such stock
appreciation rights).
m. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
n. "Excluded Transaction" shall mean any of the following transactions:
i. the issuance of any shares of Capital Stock of the Corporation to
employees or directors of the Corporation under an employee
benefit plan or arrangement adopted by the Corporation, whether
or not referred to or described in the Form 10;
ii. the issuance of Common Stock Equivalents in an amount not to
exceed 200,000 (as adjusted, as appropriate, to reflect any stock
dividends, distributions, subdivisions, reclassifications or
combinations of the Common Stock), provided that, within 10
Business Days following such issuance, the Corporation has
furnished to each Warrant Holder written notice of the fact that
the Corporation intends to treat such issuance as an Excluded
Transaction within the meaning of this clause (ii); and
iii. any issuance of securities referred to or described in the Form
10.
o. "Exercise Price per Share" of any Warrant shall mean:
i. until adjusted in accordance with section 12 hereof, an amount
equal to $8.25 per share, and
ii. thereafter, such other amount as may from time to time be
determined in accordance with the provisions of section 12
hereof.
p "Expiration Date" shall mean January 17, 2002.
q "Fair Market Value" of a share of Common Stock as of any date shall
mean, as of any date, the average of the closing prices of Common
Stock for the 20 consecutive Trading Days next preceding the date five
days prior to the date in question. The closing price for each day
shall be:
i0 the average of the closing sale price or, in the absence of a
closing sale price, the highest bid and lowest asked prices of
one share of Common Stock quoted in the NYSE Composite Tape or,
if not then listed on the NYSE, the NASDAQ National Market System
or any similar system of automated dissemination of quotations of
securities prices then in common use, if so quoted; or
ii0 if not quoted as described in clause (i), the average of the
highest bid and lowest offered quotations for Common Stock as
reported by the National Quotation Bureau Incorporated if at
least two securities dealers have inserted both bid and offered
quotations for Common Stock on at least five of the 20
consecutive Trading Days next preceding the date five days prior
to the date in question; or
iii0 if the Common Stock is listed or admitted for trading on any
national securities exchange, the last sale price, or the closing
bid price if no sale occurred, of Common Stock on the principal
securities exchange on which the Common Stock is listed or
admitted for trading.
If none of the conditions set forth above is met, the closing price of
Common Stock on any day or the average of such closing prices for any
period shall be the Fair Market Value of Common Stock for such day or
period as determined by a member firm of the NYSE selected by the
Corporation and approved by the Holders of a majority of the
outstanding Warrants. If the Corporation and such Holders are unable
to agree on the selection of a member firm, then the issue of
selection of a member firm shall be submitted to the American
Arbitration Association.
r "Form 10" shall mean the Registration Statement on Form 10 of the
Corporation with respect to the Common Stock in the form in which it
is declared effective by the Securities and Exchange Commission.
s "GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles
Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently
applied for all periods after the date hereof so as to properly
reflect the financial condition, results of operations and changes in
financial position of any Person, except that any accounting principle
or practice required to be changed by such Accounting Principles Board
or Financial Accounting Standards Board (or other appropriate board or
committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
t "Merger Transaction" shall mean any business combination transaction
or series of transactions involving the Corporation, regardless of
whether such transactions take the form of a merger, purchase and sale
of securities, purchase or sale of assets or otherwise, immediately
prior to which, following which or in connection with which a Change
in Control occurs.
u "NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
v "NYSE" shall mean the New York Stock Exchange.
w "Permitted Merger or Consolidation" shall mean any merger or
consolidation of the Corporation:
i0 with or into any wholly owned Subsidiary; or
ii0 immediately after which Persons who were stockholders of the
Corporation prior to such merger or consolidation hold at least
80% of the outstanding shares of Capital Stock of the Corporation
measured by voting power.
x "Person" shall mean an individual, corporation, joint venture, general
or limited partnership, trust, unincorporated organization, limited
liability company, limited liability partnership, government or any
agency or political subdivision thereof, association, sole
proprietorship or any other form of entity not specifically listed
herein.
y "Qualifying Transaction" shall mean:
i0 any acquisition by the Corporation of stock or other assets of
any kind in exchange, in whole or in part, for shares of any
class of Capital Stock of the Corporation; and
ii0 any transaction in which shares of Capital Stock of the
Corporation are issued for cash proceeds;
provided, however, that the term "Qualifying Transaction" shall not
include a Merger Transaction.
z "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute.
aa "Subsidiary" shall mean:
i0 any corporation 50% or more of the Voting Stock of which is
owned, directly or indirectly, by the Corporation; or
ii0 any other Person whose accounts are required under GAAP to be
included in the Corporation's consolidated financial statements,
but shall exclude limited partnerships.
bb "Trading Day" shall mean, with respect to the Common Stock: (i) if the
Common Stock is quoted on the NYSE, the NASDAQ National Market System,
any similar system of automated dissemination of quotations of
securities prices, or the National Quotation Bureau Incorporated, each
day on which quotations may be made on such system; or (ii) if the
Common Stock is listed or admitted for trading on any national
securities exchange, days on which such national securities exchange
is open for business; or (iii)~if shares of the Corporation's Common
Stock are not quoted on any system or listed or admitted for trading
on any securities exchange, a Business Day.
cc "Voting Stock" shall mean, with respect to any Person, all classes of
Capital Stock of such Person then outstanding and normally entitled to
vote for the election of directors of such Person. Any reference to a
percentage of Voting Stock shall refer to the percentage of votes
eligible to be cast for the election of directors which are
attributable to the applicable shares of Voting Stock.
dd "Warrant Agreement" shall mean this warrant agreement.
ee "Warrant Certificate" shall mean a certificate evidencing one or more
Warrants, substantially in the form of Exhibit~A hereto.
ff "Warrant Holder" shall mean APTS, as the original registered holder of
the Warrants, and any registered transferee of a Warrant Holder.
gg "Warrant Office" shall mean the office or agency of the Corporation at
which the Warrant Register shall be maintained and where the Warrants
may be presented for exercise, exchange, substitution and transfer,
which office or agency will be the office of the Corporation at 200
Park Avenue, New York, New York 10166, which office or agency may be
changed by the Corporation pursuant to notice in writing to the
Persons named in the Warrant Register as the holders of the Warrants.
hh "Warrant Register" shall mean the register, substantially maintained
by the Corporation at the Warrant Office.
ii "Warrant Shares" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants, as the same may be adjusted
from time to time pursuant to section 12 hereof, and any other shares
of Capital Stock issued or issuable upon the exercise of the Warrants
pursuant to section 12 hereof.
jj "Warrants" shall mean the warrants to purchase Common Stock issued by
the Corporation pursuant to this Warrant Agreement; individually, a
"Warrant."
2 Representations and Warranties. The Corporation hereby represents and
warrants as follows:
a The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has the
corporate power and authority to conduct its business as presently
conducted, has the corporate power and authority to execute and
deliver this Warrant Agreement and the Warrant Certificates, to issue
the Warrants and to perform its obligations under this Warrant
Agreement and the Warrant Certificates.
b The execution, delivery and performance by the Corporation of this
Warrant Agreement and the Warrant Certificates, the issuance of the
Warrants, and the issuance of the Warrant Shares upon exercise of the
Warrants have been duly authorized by all necessary corporate action.
c This Warrant Agreement has been duly executed and delivered by the
Corporation and constitutes a legal, valid, binding and enforceable
obligation of the Corporation. When the Warrants and Warrant
Certificates have been issued as contemplated hereby the Warrants and
the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Corporation. The Warrant Shares, when
issued upon exercise of the Warrants in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and
nonassessable shares of the Common Stock or, in the event of an
adjustment pursuant to section 12, other shares of Capital Stock.
Statements in this section 2(c) as to validity, binding effect and
enforceability are subject to (i) limitations as to enforceability
imposed by bankruptcy, reorganization, moratorium, insolvency and
other laws of general application relating to or affecting the
enforceability of creditors' rights, including, without limitation,
limitations as to enforceability that may be imposed under Section 548
of the United States Bankruptcy Code, Article 10 of the New York
Debtor Creditor Law or other provisions of law relating to fraudulent
transfers and obligations and (ii) equitable principles limiting the
availability of equitable remedies.
3 Number of Warrants. The Corporation hereby agrees to issue and deliver to
APTS on the Distribution Date Warrant Certificates evidencing 293,333
Warrants.
4 Registration, Transfer and Exchange of Certificates.
a The Corporation shall maintain at the Warrant Office the Warrant
Register for registration of the Warrants and Warrant Certificates and
transfers thereof. On the Distribution Date the Corporation shall
register the Warrants and Warrant Certificates in the Warrant Register
in the name of the Warrant Holder. The Corporation may deem and treat
the registered holders of the Warrant Certificates as the absolute
owners thereof and the Warrants represented thereby (notwithstanding
any notation of ownership or other writing on the Warrant Certificates
made by any person) for the purpose of any exercise thereof or any
distribution to the Warrant Holders thereof, and for all other
purposes, and the Corporation shall not be affected by any notice to
the contrary.
b Subject to section 14 hereof, the Corporation shall register the
transfer of any outstanding Warrants in the Warrant Register upon
surrender of the Warrant Certificates evidencing such Warrants to the
Corporation at the Warrant Office, accompanied (if so required by it)
by a written instrument or instruments of transfer in form
satisfactory to it, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof. Upon
any such registration of transfer, new Warrant Certificates evidencing
such transferred Warrants shall be issued to the transferee and the
surrendered Warrant Certificates shall be cancelled. If less than all
the Warrants evidenced by Warrant Certificates surrendered for
transfer are to be transferred, new Warrant Certificates shall be
issued to the holder surrendering such Warrant Certificates evidencing
such remaining number of Warrants.
c Warrant Certificates may be exchanged at the option of the holders
thereof when surrendered to the Corporation at the Warrant Office, for
another Warrant Certificate or other Warrant Certificates of like
tenor and representing in the aggregate a like number of Warrants.
Warrant Certificates surrendered for exchange shall be cancelled.
d No charge shall be made for any such transfer or exchange except for
any tax or other governmental charge imposed in connection therewith.
Except as provided in section 14(b) hereof, each Warrant Certificate
issued upon transfer or exchange shall bear the legend set forth in
section 14(b) hereof if the Warrant Certificate presented for transfer
or exchange bore such legend.
5 Mutilated or Missing Warrant Certificates. If any Warrant Certificate shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue, in
exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon
receipt of evidence satisfactory to the Corporation of such loss, theft or
destruction of such Warrant Certificate and, if requested, indemnity
satisfactory to it. The Corporation acknowledges that a written indemnity
by the Warrant Holder shall be satisfactory to the Corporation for such
purpose. No service charge shall be made for any such substitution, but all
expenses and reasonable charges associated with procuring such indemnity
and all stamp, tax and other governmental duties that may be imposed in
relation thereto shall be borne by the holder of such Warrant Certificate.
Each Warrant Certificate issued in any such substitution shall bear the
legend set forth in section 14(b) hereof if the Warrant Certificate for
which such substitution was made bore such legend.
6 Duration and Exercise of Warrants.
a The Warrants evidenced by a Warrant Certificate shall be exercisable
in whole or in part by the registered holder thereof on any Business
Day after the Distribution Date and on or before 5:00 PM, New York
City time, on the Expiration Date.
b Upon presentation to the Corporation at the Warrant Office of the
Warrant Certificate evidencing the Warrants to be exercised, with the
form of election to purchase attached thereto duly completed, signed
by the Warrant Holder, and upon payment of an amount equal to the
product of:
i0 the Exercise Price per Share; and
ii0 the number of Warrant Shares being purchased,
in lawful money of the United States of America, the Corporation shall
issue and cause to be delivered to or upon the written order of the
registered holders of such Warrants and in such name or names as such
registered holder may designate, a certificate for the Warrant Share
or Warrant Shares issued upon such exercise of the Warrants being
exercised. Any Persons so designated to be named therein shall be
deemed to have become Warrant Holders of record of such Warrant Share
or Warrant Shares as of the date of exercise of such Warrants.
Any Persons so designated to be named therein shall be deemed to have
become holders of record of such Warrant Share or Warrant Shares as of
the date of exercise of such Warrants.
c If less than all of the Warrants evidenced by a Warrant Certificate
are exercised at any time, a new Warrant Certificate or Certificates
shall be issued for the remaining number of Warrants evidenced by such
Warrant Certificate. Each new Warrant Certificate so issued shall bear
the legend set forth in section 14(b) hereof if the Warrant
Certificate presented in connection with partial exercise thereof bore
such legend. All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled.
7 No Fractional Shares. The Corporation shall not be required to issue
fractional Warrant Shares upon exercise of the Warrants but shall pay for
any such fraction of a share an amount in cash equal to such fraction of
the Fair Market Value of a share of Common Stock.
8 Payment of Taxes. The Corporation will pay all taxes attributable to the
initial issuance of Warrant Shares to a Warrant Holder upon the exercise of
his Warrants, provided that the Corporation shall not be required to pay
any income tax incurred by the Warrant Holder or the holder of the Warrant
Shares upon exercise of the Warrants or issuance of the Warrant Shares.
9 Stockholder Rights.
a Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof
the right to vote or to consent or to receive notice as a stockholder
in respect of the meetings of stockholders or the election of
directors of the Corporation or any other matter, or any rights
whatsoever as a stockholder of the Corporation.
b Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the
registered holders thereof to purchase any securities or as imposing
any liabilities on such Warrant Holders as stockholders of the
Corporation, whether such obligation or liabilities are asserted by
the Corporation or by creditors of the Corporation.
10 Reservation and Issuance of Warrant Shares.
a The Corporation will at all times have authorized, and reserve and
keep available, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants,
the number of shares of Common Stock deliverable upon exercise of all
outstanding Warrants.
b The Corporation will take any corporate action which may be necessary
in order that the Corporation may validly and legally issue fully paid
and nonassessable Warrant Shares at the Exercise Price per Share.
c The Corporation covenants that all Warrant Shares will, upon issuance
to the Warrant Holder in accordance with the terms of this Warrant
Agreement and the Corporation's certificate of incorporation, be fully
paid and nonassessable and free from all taxes with respect to the
issuance thereof and from all liens, charges and security interests
(other than any created by or on behalf of any Warrant Holder).
11 Obtaining of Governmental Approvals and Stock Exchange Listings. The
Corporation will, at its own expense, from time to time take all action
which may be necessary to obtain and keep effective any and all permits,
consents, orders and approvals of governmental agencies and authorities
which are or become requisite in connection with the issuance, sale,
transfer and delivery of the Warrant Certificates and the exercise of the
Warrants and the issuance, sale, transfer and delivery of the Warrant
Shares, and all action which may be necessary so that any Common Stock,
immediately upon its issuance upon the exercise of Warrants, will be listed
on each securities exchange or listing or quotation service, if any, on
which the Common Stock is then listed.
12 Adjustment of Exercise Price per Share and number of Warrant Shares
issuable on exercise of Warrants.
a Prior to the Expiration Date, the Exercise Price per Share, and in
some cases the number of Warrant Shares issuable upon exercise of each
Warrant, are subject to adjustment from time to time in the manner
provided in this section 12 upon the occurrence of any of the events
enumerated in this section~12.
b In the event that the Corporation shall at any time after the
Distribution Date:
i0 declare a dividend or make a distribution on any series of its
Common Stock in shares of any series of its Common Stock;
ii0 subdivide or reclassify shares of any series of its outstanding
Common Stock into a greater number of shares;
iii0 combine shares of any series of its outstanding Common Stock into
a smaller number of shares;
iv0 pay a dividend or make a distribution on any series of its Common
Stock in shares of any series of its Capital Stock other than
Common Stock; or
v0 issue by reclassification of any series of its Common Stock
shares of any series of its Capital Stock;
then each Warrant outstanding on the record date for such dividend or
distribution or on the effective date of such subdivision,
reclassification or combination shall thereafter entitle the holder
thereof to receive the aggregate number and kind of shares, other
securities and property which, if such Warrant had been exercised
immediately prior to such time, such holder would have owned or have
become entitled to receive by virtue of such dividend, distribution,
subdivision, reclassification or combination and, if after such
dividend, distribution, subdivision, reclassification or combination
the Warrants continue to represent the right to purchase only shares
of Common Stock (and not other securities or property), the Exercise
Price per Share shall be adjusted to be an amount equal to the product
of:
(x) the Exercise Price per Share in effect immediately prior to such
dividend, distribution, subdivision, reclassification or
combination and
(y) the ratio of:
(1) the number of shares of Common Stock issuable on exercise of
a single Warrant immediately before giving effect to the
dividend, distribution, subdivision, reclassification or
combination and
(2) the number of shares of Common Stock issuable on exercise of
a single Warrant immediately after giving effect to such
dividend, distribution, subdivision, reclassification or
combination.
If after such dividend, distribution, subdivision, reclassification or
combination the Warrants represent the right to purchase securities
other than shares of Common Stock or other property, the Exercise
Price per Share shall be adjusted equitably. An adjustment made
pursuant to this section 12(b) shall become effective immediately
after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the
case of subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall
occur.
c
i0 "Full-ratchet" Anti-dilution Adjustment. In the event that
the Corporation shall at any time after the Distribution
Date issue any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase
any shares of Common Stock, or any stock appreciation rights
entitling the holders thereof to any interest in an increase
in value, however measured, of shares of Common Stock) other
than in a Qualifying Transaction and other than in an
Excluded Transaction, at an Effective Purchase Price per
Share less than the Exercise Price per Share in effect
immediately prior to such issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to such Effective Price per Share and
(2) no adjustment shall be made as a result of such
issuance in the number of Warrant Shares issuable on
exercise of the Warrants.
For example, if on any given date the Corporation issues
(other than in a Qualifying Transaction and other than in an
Excluded Transaction) warrants exercisable at $3.00 per
share to purchase shares of Common Stock for a purchase
price of $5.00 per warrant and the Exercise Price per Share
in effect immediately prior to such issuance is $8.25 per
share, then the Exercise Price per Share will be adjusted to
$8.00 per share and no adjustment will be made in the number
of Warrant Shares issuable upon exercise of a Warrant.
ii0 "Proportional" Anti-dilution Adjustment. In the event that
the Corporation shall at any time after the Distribution
Date issue any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase
any shares of Common Stock, or any stock appreciation rights
entitling the holders thereof to any interest in an increase
in value, however measured, of shares of Common Stock) in a
Qualifying Transaction or in an Excluded Transaction
described in clause (i) or (ii) of the definition of that
term, at an Effective Purchase Price per Share less than the
Exercise Price per Share in effect immediately prior to such
issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to the ratio of:
(a) the sum of:
(i) the product of:
1 the number of shares of
Common Stock outstanding
immediately prior to such issuance and
2 the Exercise Price per Share in effect
immediately prior to such issuance and
(ii) the Aggregate Consideration Receivable
by the Corporation in connection with such
issuance, to
(b) the sum of:
(i) the number of shares of Common Stock
outstanding immediately prior to such
issuance and
(ii) the number of additional shares of Common
Stock to be so issued (including the number
of shares underlying such rights, warrants,
options or convertible or exercisable
securities); and
(2) no adjustment shall be made as a result of such
issuance in the number of Warrant Shares issuable on
exercise of the Warrants.
For example, if on any given date the Corporation has
10,000,000 shares of Common Stock outstanding, the
Corporation issues (in a Qualifying Transaction or in an
Excluded Transaction described in clause (i) or (ii) of the
definition of that term) warrants exercisable at $3.00 per
share to purchase an additional 1,000,000 shares of Common
Stock for a purchase price of $5.00 per warrant and the
Exercise Price per Share in effect immediately prior to such
issuance is $8.25 per share, then the Exercise Price per
Share shall be adjusted to $8.227 per share (calculated as
follows: $8.227 per share = [(10,000,000 shares x $8.25 per
share) + $8,000,000] / (10,000,000 shares + 1,000,000
shares), and no adjustment will be made in the number of
Warrant Shares issuable upon exercise of a Warrant.
d No change in either the Exercise Price per Share or the number of
Warrant Shares issuable upon exercise of the Warrants shall occur
solely as the result of the issuance by the Corporation at any time
after the Distribution Date of any shares of Common Stock (or any
rights, warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase any shares
of Common Stock or any stock appreciation rights entitling the holders
thereof to any interest in an increase in value, however measured, of
shares of Common Stock) in an Excluded Transaction described in clause
(iii) of the definition of that term.
e In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of
Directors or a duly authorized committee thereof (irrespective of the
accounting treatment thereof), and described in a resolution of the
Board of Directors or such committee. An adjustment made pursuant to
section 12(c) hereof shall become effective immediately upon the
effective date of the issuance resulting in such adjustment. Such
adjustment shall be made successively whenever any shares, rights,
warrants, options or convertible or exercisable securities are so
issued at an Effective Purchase Price per Share that is less than the
Exercise Price per Share in effect on the date of such issuance. To
the extent that any such rights, warrants, options or convertible or
exercisable securities or stock appreciation rights expire without
having been converted or exercised, each Warrant outstanding shall, as
of the date of such expiration, have the same Exercise Price per Share
as would have been the case had such expired rights, warrants,
options, convertible or exercisable securities or stock appreciation
rights not been issued, but such readjustment shall not affect the
Exercise Price per Share paid for any shares of Common Stock or other
shares of Capital Stock delivered upon any exercise prior to the date
such readjustment is made.
f In the event that the Corporation shall distribute to all holders of
its Common Stock any of its assets or debt securities, or rights,
options, warrants or convertible or exercisable securities of the
Corporation (including securities for cash, but excluding:
i0 distributions of Capital Stock referred to in section 12(b)
hereof,
ii0 distributions of rights, warrants, options, convertible or
exercisable securities or stock appreciation rights referred to
in section 12(c) hereof, if the decrease in the Exercise Price
per Share under section 12(c) hereof would be greater than the
decrease in the Exercise Price per Share under this section 12(f)
(with section 12(c) applying rather than this section 12(f)), and
iii0 cash dividends or other cash distributions that are paid out of
Consolidated Net Income for any dividend period, earned surplus
or retained earnings,
then in each such case:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to the difference between:
(a) the Exercise Price per Share in effect immediately
prior to such issuance and
(b) an amount equal to the then fair market value (as
reasonably determined by the Board of Directors, in
good faith and as described in a resolution of the
Board of Directors) of the portion of the assets or
debt securities of the Corporation so distributed or of
such rights, options, warrants or convertible or
exercisable securities applicable to one share of
Common Stock, and
(2) no adjustment shall be made in any such case in the number
of Warrant Shares issuable on exercise of the Warrants.
Such adjustment shall become effective immediately after the record
date for the determination of shares entitled to receive such
distribution. Notwithstanding the foregoing, no such adjustment shall
be made upon any such distribution if the plan or arrangement under
which such distribution is made provides for a distribution to holders
of Warrant Shares in the same pro rata amounts upon exercise of the
Warrants. Such adjustment shall be made successively whenever any
event listed above shall occur.
g If at any time, as a result of an adjustment made pursuant to this
section 12, the holder of any Warrant thereafter exercised shall
become entitled to receive any shares of the Corporation other than
shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares
contained in this section 12, and the provisions of this Warrant
Agreement with respect to the Warrant Shares shall apply on like terms
to such other shares.
h If any of the following events occur, namely:
i0 any reclassification or change of Warrant Shares (other than a
change in par value, or from par value to no par value, or from
no par value to par value, or as a result of subdivision or
combination);
ii0 any consolidation or merger of the Corporation with another
Person shall be effected as a result of which holders of Warrant
Shares shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in
exchange for Warrant Shares; or
iii0 any sale or conveyance of the properties and assets of the
Corporation as, or substantially as, an entirety to any other
Person;
then the Corporation or such successor or purchasing Person, as the
case may be, shall make provisions to establish that each Warrant then
outstanding shall be exercisable for the kind and amount of shares of
stock and other securities or property or assets (including cash)
receivable upon the occurrence of such event by a holder of Warrant
Shares immediately prior to such event. The Corporation shall not
consummate any such event unless, prior to or simultaneously with such
consummation, the successor Person (if other than the Corporation)
resulting from such consolidation or merger or the Person purchasing
such properties and assets shall assume by written instrument, the
obligation to deliver to each Warrant Holder the shares of stock,
securities or assets to which, in accordance with the foregoing
provisions, such holder may be entitled and all other obligations of
the Corporation under this Warrant Agreement. The provisions of this
section 12(h) shall similarly apply to successive reclassifications,
consolidations, mergers, sales and conveyances.
i Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrant, Warrant Certificates
theretofore or thereafter issued may continue to express the same
number and kind of shares as are stated on the Warrant Certificates
initially issuable pursuant to this Warrant Agreement.
j Anything in this section 12 to the contrary notwithstanding, the
Corporation shall be entitled to make such decreases in the Exercise
Price per Share and such increases in the number of Warrant Shares
issuable upon the exercise of each Warrant, in addition to those
adjustments required by this section 12, as it in its sole discretion
shall determine to be advisable in order that any dividends,
distributions or, issuances of securities, rights, options, warrants
or convertible or exchangeable securities made by the Corporation to
its stockholders shall not be taxable to them.
13 Notices to Holders.
a Upon any adjustment pursuant to section 12 hereof in the Exercise
Price per Share or in the number of Warrant Shares issuable upon
exercise of a Warrant, the Corporation shall promptly but in any event
within 30 days thereafter, cause to be given to each of the Warrant
Holders, at its address appearing on the Warrant Register by
registered mail, postage prepaid, return receipt requested, a
certificate signed by its chairman, president or chief financial
officer setting forth the Exercise Price per Share and the number of
Warrant Shares purchasable upon exercise of a Warrant as so adjusted
and describing in reasonable detail the facts accounting for such
adjustment and the method of calculation used. When appropriate, such
certificate may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this
section 13.
b In the event:
i0 that the Corporation shall authorize the issuance to all holders
of Common Stock of rights or warrants to subscribe for or
purchase Capital Stock of the Corporation or of any other
subscription rights or warrants;
ii0 that the Corporation shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or
assets (including, without limitation, cash dividends or cash
distributions payable out of consolidated earnings or earned
surplus or dividends payable in Common Stock);
iii0 of any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the
Corporation is required, or of the conveyance or transfer of the
properties and assets of the Corporation substantially as an
entirety, or of any capital reorganization or reclassification or
change of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination);
iv0 of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; or
v0 that the Corporation proposes to take any other action which
would require an adjustment in the Exercise Price per Share or in
the number of Warrant Shares or other securities or assets to
which each holder is entitled pursuant to section 12 hereof;
then the Corporation shall cause to be given to each of the Warrant
Holders at its address appearing on the Warrant Register, at least 30
calendar days prior to the applicable record date, if any, hereinafter
specified, or, if no such record date is specified, 30 calendar days
prior to the taking of any action referred to in clauses (i) through
(v) above (except that, if the action taken by the Corporation is an
issuance described in section 12(c)(i) or (ii) hereof, then as
promptly as possible but in no event later than the date that the
Corporation provides public notice of such issuance), by registered
mail, postage prepaid, return receipt requested, a written notice
stating (i) the date as of which the holders of record of Common Stock
to be entitled to receive any such rights, warrants or distribution
are to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective, or (iii) the date as of
which any such other action is to be effected, and, if applicable and
known to the Corporation, the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up; provided, however, that in the
event that the Corporation provides public notice of such proposed
action or event specifying the information set forth above at least 10
days prior to the proposed record date or effective date, then the
Corporation shall be deemed to have satisfied its obligation to
provide notice pursuant to this section 13(b). The failure to give the
notice required by this section 13 or any defect therein shall not
affect the legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up or other action referred to above, or the vote upon any
such action.
c The Corporation shall promptly, but in any event no less than 30 days
prior to the effective date of any Change in Control, cause to be
given to each of the registered holders of the Warrants, at its
address appearing on the Warrant Register by registered mail, postage
prepaid, return receipt requested, written notice of the pendency of
such Change in Control.
14 Restrictions on Transfer; Subsequent Transferees as Third Party
Beneficiaries.
a The Warrant Holder (i)~represents that it is acquiring the Warrants
for its own account for investment and not with a view to any
distribution or public offering within the meaning of the Securities
Act, (ii)~acknowledges that the Warrants and the Warrant Shares
issuable upon exercise thereof have not been registered under the
Securities Act or any state securities laws and (iii)~agrees that it
will not sell or otherwise transfer any of its Warrants or Warrant
Shares except upon the terms and conditions specified herein, provided
that the Warrant Holders may sell the Warrants or the Warrant Shares
purchased upon exercise of the Warrants in one or more private
transactions not requiring registration under the Securities Act.
b Except as otherwise provided in section~14(d) hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to a
Warrant Holder shall include a legend in substantially the following
form (with such changes therein as may be appropriate to reflect
whether such legend refers to Warrants or Warrant Shares), provided
that such legend shall not be required if such transfer is being made
in connection with a sale which is exempt from registration pursuant
to Rule~144 under the Securities Act or if the opinion of counsel
referred to in section~14(c) hereof is to the further effect that
neither such legend nor the restrictions on transfer in this
section~14 are required in order to ensure compliance with the
Securities Act:
THE [WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS,]
[SHARES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
c Each Warrant Holder wishing to effect such a transfer of any Warrant
or Warrant Shares shall furnish to the Corporation an agreement by the
transferee thereof that it is taking and holding the same subject to
the terms and conditions specified herein and a written opinion of
such Warrant Holder's counsel, in form reasonably satisfactory to the
Corporation, to the effect that the proposed transfer may be effected
without registration under the Securities Act and any applicable state
securities laws.
d The restrictions set forth in this section~14 shall terminate and
cease to be effective with respect to any Warrants or Warrant Shares
registered under the Securities Act or receipt by the Corporation of
an opinion of counsel, in form reasonably satisfactory to the
Corporation, to the effect that compliance with such restrictions is
not necessary in order to comply with the Securities Act and any
applicable state securities laws with respect to the transfer of the
Warrants and/or the Warrant Shares. Whenever such restrictions shall
so terminate the holder of such Warrants and/or Warrant Shares shall
be entitled to receive from the Corporation, without expense (other
than transfer taxes, if any), Warrant Certificates or certificates for
such Warrant Shares not bearing the legend set forth in section~14(b)
hereof and the Corporation will rescind any transfer restrictions
relating thereto.
e It is the intention of the parties hereto that each Warrant Holder who
acquires Warrants by transfer be a third party beneficiary, to the
extent of Warrants acquired and held by such Warrant Holder, of the
provisions of this Warrant Agreement that bestow rights on Warrant
Holders.
15 Covenants. Holdings covenants to include in any filings made with any
taxing authority the issuance of these warrants as being pursuant to the
plan of reorganization (with respect to the distribution of the Corporation
by IFG).
16 Amendments and Waivers. Any provision of this Warrant Agreement may be
amended, supplemented, waived, discharged or terminated by a written
instrument signed by the Corporation and the holders of not less than a
majority of the outstanding Warrants, provided that the Exercise Price per
Share may not be increased by amendment, the number of Warrant Shares
issuable upon exercise of the Warrants may not be reduced by amendment and
this section~15 may not be changed by amendment except with the unanimous
consent of the holders of outstanding Warrants.
17 Specific Performance. The holders of the Warrants shall have the right to
specific performance by the Corporation of the provisions of this Warrant
Agreement. The Corporation hereby irrevocably waives, to the extent that it
may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Corporation for specific
performance of this Warrant Agreement by the holders of the Warrants.
18 Notices.
a Any notice or demand to be given or made by the Warrant Holders or the
holders of Warrant Shares to or on the Corporation pursuant to this
Warrant Agreement shall be sufficiently given or made if sent by
registered mail, return receipt requested, postage prepaid, addressed
to the Corporation at the Warrant Office.
b Any notice to be given by the Corporation to the Warrant Holders or
the holders of Warrant Shares shall be sufficiently given or made if
sent by registered mail, return receipt requested, postage prepaid,
addressed to such holder as such holder's name and address shall
appear on the Warrant Register or the Common Stock registry of the
Corporation, as the case may be.
19 Binding Effect. This Warrant Agreement shall be binding upon and inure to
the sole and exclusive benefit of the Corporation and the Warrant Holder,
and their respective successors and assigns.
20 Continued Validity. A holder of Warrant Shares shall continue to be
entitled with respect to such Warrant Shares to all rights and subject to
all obligations to which it would have been entitled or subject as a holder
under sections~14 through 22 hereof.
21 Counterparts. This Warrant Agreement may be executed in one or more
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
22 New York Law. THIS WARRANT AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
23 Benefits of This Agreement. Nothing in this Warrant Agreement shall be
construed to give any Person other than the Corporation and the Warrant
Holder any legal or equitable right, remedy or claim under this Warrant
Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Warrant Agreement to
be duly executed and delivered by their proper and duly authorized officers, as
of the date and year first above written.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ Andrew L. Farkas
-----------------------
Name: Andrew L. Farkas
Title: Chairman and Chief Executive Officer
APTS PARTNERS, L.P.
By: APTS GP Partners, L.P.,
its general partner
By: APTS Acquisition Corporation,
its general partner
By:/s/ John R. S. Jacobsson
---------------------------
Name: John R. S. Jacobsson
Title: Vice President
<PAGE>
FORM OF WARRANT CERTIFICATE
THE WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS, REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
EXERCISABLE ONLY ON OR BEFORE
JANUARY 17, 2002
[Date] Warrant Certificate Warrant No. [ ]
This Warrant Certificate is one of the Warrant Certificates referred to in
the Warrant Agreement dated as of September 15, 1998 (the "Warrant Agreement")
between the Corporation and APTS Partners, L.P., a Delaware limited partnership.
The Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitations, obligations, duties and immunities thereunder of the Corporation
and the holders of Warrants. Terms defined in the Warrant Agreement and used
herein have the same meanings herein as therein.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of _____ Warrants to purchase shares of Common Stock of
INSIGNIA/ESG HOLDINGS, INC., a Delaware corporation (the "Corporation"). Each
Warrant entitles the holder, but only subject to the conditions set forth herein
and in the Warrant Agreement, to purchase from the Corporation before 5:00~PM,
New York City time, on the Expiration Date, one fully paid and nonassessable
share of Common Stock (subject to adjustment as described below) at a price
equal to the Exercise Price per Share.
The Exercise Price per Share shall be payable in lawful money of the United
States of America. The Warrants represented by this certificate may be exercised
by surrender of this Warrant Certificate, along with an executed copy of the
annexed Form of Election to Purchase and payment of the applicable Exercise
Price at the office of the Corporation at 200 Park Avenue, New York, New York
10166, or such other address as the Corporation may specify in writing to the
registered holder of the Warrants evidenced hereby. The Exercise Price per Share
and the number of shares of Common Stock purchasable upon exercise of the
Warrants is subject to adjustment prior to the Expiration Date as set forth in
the Warrant Agreement.
No Warrant may be exercised after 5:00~PM, New York City time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00~PM, New
York City time, on the Expiration Date.
The Corporation may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary.
This Warrant Certificate, when surrendered at the Warrant Office by the
registered holder hereof in person or by a legal representative duly authorized
in writing, may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor registered
in the name of the holder and representing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to
be signed by its duly authorized officers and has caused its corporate seal to
be affixed hereunto.
INSIGNIA/ ESG HOLDINGS, INC.
By:__________________________
Name:
Title:
(CORPORATE SEAL)
ATTEST
____________________________
Secretary
<PAGE>
ANNEX TO FORM OF WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise, in accordance with
section 6(b) of the Warrant Agreement, Warrants, representing the right to
purchase shares of Common Stock, and herewith tenders payment for such shares of
Common Stock to the order of the Corporation in the amount of $ as payment of
the exercise price in accordance with the terms hereof.
The undersigned requests that a certificate for such shares of Common Stock
be registered in the name of whose address is and that such certificate be
delivered to whose address is . If said number of shares of Common Stock is less
than all of the shares of Common Stock purchasable hereunder, the undersigned
hereby requests that a new Warrant Certificate representing the remaining
balance of the Warrants be registered in the name of whose address is and that
such Warrant Certificate be delivered to whose address is .
Signature:
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:
WARRANT AGREEMENT dated as of September 15, 1998 between Insignia/ESG
Holdings, Inc., a Delaware corporation (the "Corporation"), and APTS Partners,
L.P., a Delaware limited partnership ("APTS").
Preliminary Statement
This Warrant Agreement sets forth the terms and conditions of Warrants
transferred to APTS in connection with the exchange of the warrants held by APTS
to purchase shares of Class A Common Stock, par value $.01 per share, of
Insignia Financial Group, Inc. ("IFG") under Warrant No. 13 dated May 10, 1995
of IFG registered in the name of APTS, such exchange resulting from the
distribution by IFG to its stockholders of all of the then outstanding shares of
Common Stock of the Corporation in a transaction intending to qualify as a
tax-free distribution and reorganization under Sections 355 and 368 of the
Internal Revenue Code.
Accordingly, the parties hereto agree as follows.
1. Definitions. As used in this Warrant Agreement, the following terms shall
have the following meanings, unless the context otherwise requires.
a. "Aggregate Consideration Receivable" by the Corporation in connection
with the issuance of any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities entitling
the holders thereof to subscribe for or purchase any shares of Common
Stock or any stock appreciation rights entitling the holders thereof
to any interest in an increase in value, however measured, of shares
of Common Stock) shall mean the sum of:
i. the aggregate consideration paid to the Corporation for such
shares, rights, warrants, options or convertible or exercisable
securities, and
ii. the aggregate consideration or premiums stated in such rights,
warrants, options or convertible or exercisable securities to be
payable for the shares of Common Stock covered thereby.
In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of Directors
or a duly authorized committee thereof (irrespective of the accounting
treatment thereof), and described in a resolution of the Board of Directors
or such committee.
2
b. "APTS" shall mean APTS Partners, L.P., a Delaware limited partnership.
c. "Board of Directors" shall mean the board of directors of the
Corporation.
d. "Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are required by
law to close.
e. "Capital Stock" shall mean any and all shares, rights to purchase,
warrants, options, convertible securities, participations in or other
equivalents of or interests (other than security interests) in
(however designated and whether voting or nonvoting) corporate stock.
f. "Change in Control" shall mean the occurrence of any of the following
events:
i. Andrew Farkas has ceased to serve on a full-time basis as the
Chief Executive Officer of the Corporation for any reason;
ii. Andrew Farkas has ceased to own beneficially (within the meaning
of rule 13d-3 promulgated under the Exchange Act) at least
700,000 shares of Common Stock (as adjusted to reflect stock
dividends or distributions, subdivisions or reclassifications,
splits and combinations);
iii. any Person or group (within the meaning of section 13(d)(3) or
14(d)(2) of the Exchange Act) other than a group controlled by
Andrew Farkas or by APTS or any affiliate of Andrew Farkas or
APTS acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 45% or more of the
number of shares of Common Stock or the combined voting power of
Voting Stock of the Corporation outstanding immediately prior to
such acquisition;
iv. individuals who, as of the Distribution Date, constitute the
Board of Directors and individuals nominated or elected to serve
on the Board of Directors by individuals described in this
section 2(f)(iv) cease for any reason to constitute at least a
majority of the Board of Directors; and
v. the Corporation consummates any merger or consolidation (other
than a Permitted Merger or Consolidation) of the Corporation with
or into any other entity, the sale of all or substantially all of
the assets of the Corporation, the reorganization, liquidation or
dissolution of the Corporation, or any similar transaction or
event.
g. "Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Corporation and, in the case of a reclassification,
recapitalization or other similar change in such Common Stock or in
the case of a consolidation or merger of the Corporation with or into
another Person, such consideration to which a holder of a share of
Common Stock would have been entitled upon the occurrence of such
event.
h. "Common Stock Equivalents" shall mean, without double counting:
i. shares of Common Stock, where one share of Common Stock shall
constitute one Common Stock Equivalent;
ii. shares of Capital Stock convertible into Common Stock, where any
one share of Capital Stock shall constitute a number of Common
Stock Equivalents equal to the number of shares of Common Stock
issuable in respect of such share of Capital Stock;
iii. any rights, warrants, options and convertible or exercisable
securities entitling the holder thereof to subscribe for or
purchase any shares of Common Stock, where any such rights,
warrants, options and convertible or exercisable securities shall
constitute a number of Common Stock Equivalents equal to the
number of shares of Common Stock issuable in respect of such
rights, warrants, options or convertible or exercisable
securities; and
iv. any stock appreciation rights entitling the holders thereof to
any interest in an increase in value, however measured, of shares
of Common Stock, where any such stock appreciation rights shall
constitute a number of Common Stock Equivalents equal to the
Common Stock equivalent, as nearly as it may be calculated, of
such stock appreciation rights.
i. "Corporation" shall mean Insignia /ESG Holdings, Inc., a Delaware
corporation.
j. "Distribution" shall mean the distribution by Insignia Financial
Group, Inc. to its stockholders of all of the then outstanding shares
of Common Stock of the Corporation.
k. "Distribution Date" shall mean the record date for the Distribution.
l. "Effective Purchase Price per Share" at which the Corporation issues
any shares of Common Stock (or any rights, warrants, options or
convertible or exercisable securities entitling the holders thereof to
subscribe for or purchase any shares of Common Stock or any stock
appreciation rights entitling the holders thereof to any interest in
an increase in value, however measured, of shares of Common Stock)
shall mean an amount equal to the ratio of:
i. the Aggregate Consideration Receivable by the Corporation in
connection with the issuance of such shares of Common Stock (or
any such rights, warrants, options, convertible or exercisable
securities or stock appreciation rights) to
ii. the number of shares of Common Stock so issued (or issuable upon
the exercise or conversion of such rights, warrants, options or
convertible or exercisable securities or the Common Stock
Equivalents, as nearly as it may be calculated, of such stock
appreciation rights).
m. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
n. "Excluded Transaction" shall mean any of the following transactions:
i. the issuance of any shares of Capital Stock of the Corporation to
employees or directors of the Corporation under an employee
benefit plan or arrangement adopted by the Corporation, whether
or not referred to or described in the Form 10;
ii. the issuance of Common Stock Equivalents in an amount not to
exceed 200,000 (as adjusted, as appropriate, to reflect any stock
dividends, distributions, subdivisions, reclassifications or
combinations of the Common Stock), provided that, within 10
Business Days following such issuance, the Corporation has
furnished to each Warrant Holder written notice of the fact that
the Corporation intends to treat such issuance as an Excluded
Transaction within the meaning of this clause (ii); and
iii. any issuance of securities referred to or described in the Form
10.
o. "Exercise Price per Share" of any Warrant shall mean:
i. until adjusted in accordance with section 12 hereof, an amount
equal to $8.25 per share, and
ii. thereafter, such other amount as may from time to time be
determined in accordance with the provisions of section 12
hereof.
p. "Expiration Date" shall mean May 1, 2000.
q. "Fair Market Value" of a share of Common Stock as of any date shall
mean, as of any date, the average of the closing prices of Common
Stock for the 20 consecutive Trading Days next preceding the date five
days prior to the date in question. The closing price for each day
shall be:
i0 the average of the closing sale price or, in the absence of a
closing sale price, the highest bid and lowest asked prices of
one share of Common Stock quoted in the NYSE Composite Tape or,
if not then listed on the NYSE, the NASDAQ National Market System
or any similar system of automated dissemination of quotations of
securities prices then in common use, if so quoted; or
ii0 if not quoted as described in clause (i), the average of the
highest bid and lowest offered quotations for Common Stock as
reported by the National Quotation Bureau Incorporated if at
least two securities dealers have inserted both bid and offered
quotations for Common Stock on at least five of the 20
consecutive Trading Days next preceding the date five days prior
to the date in question; or
iii0 if the Common Stock is listed or admitted for trading on any
national securities exchange, the last sale price, or the closing
bid price if no sale occurred, of Common Stock on the principal
securities exchange on which the Common Stock is listed or
admitted for trading.
If none of the conditions set forth above is met, the closing price of
Common Stock on any day or the average of such closing prices for any
period shall be the Fair Market Value of Common Stock for such day or
period as determined by a member firm of the NYSE selected by the
Corporation and approved by the Holders of a majority of the
outstanding Warrants. If the Corporation and such Holders are unable
to agree on the selection of a member firm, then the issue of
selection of a member firm shall be submitted to the American
Arbitration Association.
r "Form 10" shall mean the Registration Statement on Form 10 of the
Corporation with respect to the Common Stock in the form in which it
is declared effective by the Securities and Exchange Commission.
s "GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles
Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently
applied for all periods after the date hereof so as to properly
reflect the financial condition, results of operations and changes in
financial position of any Person, except that any accounting principle
or practice required to be changed by such Accounting Principles Board
or Financial Accounting Standards Board (or other appropriate board or
committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
t "Merger Transaction" shall mean any business combination transaction
or series of transactions involving the Corporation, regardless of
whether such transactions take the form of a merger, purchase and sale
of securities, purchase or sale of assets or otherwise, immediately
prior to which, following which or in connection with which a Change
in Control occurs.
u "NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
v "NYSE" shall mean the New York Stock Exchange.
w "Permitted Merger or Consolidation" shall mean any merger or
consolidation of the Corporation:
i0 with or into any wholly owned Subsidiary; or
ii0 immediately after which Persons who were stockholders of the
Corporation prior to such merger or consolidation hold at least
80% of the outstanding shares of Capital Stock of the Corporation
measured by voting power.
x "Person" shall mean an individual, corporation, joint venture, general
or limited partnership, trust, unincorporated organization, limited
liability company, limited liability partnership, government or any
agency or political subdivision thereof, association, sole
proprietorship or any other form of entity not specifically listed
herein.
y "Qualifying Transaction" shall mean:
i0 any acquisition by the Corporation of stock or other assets of
any kind in exchange, in whole or in part, for shares of any
class of Capital Stock of the Corporation; and
ii0 any transaction in which shares of Capital Stock of the
Corporation are issued for cash proceeds;
provided, however, that the term "Qualifying Transaction" shall not include a
Merger Transaction.
z "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute.
aa "Subsidiary" shall mean:
i0 any corporation 50% or more of the Voting Stock of which is
owned, directly or indirectly, by the Corporation; or
ii0 any other Person whose accounts are required under GAAP to be
included in the Corporation's consolidated financial statements,
but shall exclude limited partnerships.
bb "Trading Day" shall mean, with respect to the Common Stock: (i) if the
Common Stock is quoted on the NYSE, the NASDAQ National Market System,
any similar system of automated dissemination of quotations of
securities prices, or the National Quotation Bureau Incorporated, each
day on which quotations may be made on such system; or (ii) if the
Common Stock is listed or admitted for trading on any national
securities exchange, days on which such national securities exchange
is open for business; or (iii)~if shares of the Corporation's Common
Stock are not quoted on any system or listed or admitted for trading
on any securities exchange, a Business Day.
cc "Voting Stock" shall mean, with respect to any Person, all classes of
Capital Stock of such Person then outstanding and normally entitled to
vote for the election of directors of such Person. Any reference to a
percentage of Voting Stock shall refer to the percentage of votes
eligible to be cast for the election of directors which are
attributable to the applicable shares of Voting Stock.
dd "Warrant Agreement" shall mean this warrant agreement.
ee "Warrant Certificate" shall mean a certificate evidencing one or more
Warrants, substantially in the form of Exhibit~A hereto.
ff "Warrant Holder" shall mean APTS, as the original registered holder of
the Warrants, and any registered transferee of a Warrant Holder.
gg "Warrant Office" shall mean the office or agency of the Corporation at
which the Warrant Register shall be maintained and where the Warrants
may be presented for exercise, exchange, substitution and transfer,
which office or agency will be the office of the Corporation at 200
Park Avenue, New York, New York 10166, which office or agency may be
changed by the Corporation pursuant to notice in writing to the
Persons named in the Warrant Register as the holders of the Warrants.
hh "Warrant Register" shall mean the register, substantially maintained
by the Corporation at the Warrant Office.
ii "Warrant Shares" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants, as the same may be adjusted
from time to time pursuant to section 12 hereof, and any other shares
of Capital Stock issued or issuable upon the exercise of the Warrants
pursuant to section 12 hereof.
jj "Warrants" shall mean the warrants to purchase Common Stock issued by
the Corporation pursuant to this Warrant Agreement; individually, a
"Warrant."
2 Representations and Warranties. The Corporation hereby represents and
warrants as follows:
a The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has the
corporate power and authority to conduct its business as presently
conducted, has the corporate power and authority to execute and
deliver this Warrant Agreement and the Warrant Certificates, to issue
the Warrants and to perform its obligations under this Warrant
Agreement and the Warrant Certificates.
b The execution, delivery and performance by the Corporation of this
Warrant Agreement and the Warrant Certificates, the issuance of the
Warrants, and the issuance of the Warrant Shares upon exercise of the
Warrants have been duly authorized by all necessary corporate action.
c This Warrant Agreement has been duly executed and delivered by the
Corporation and constitutes a legal, valid, binding and enforceable
obligation of the Corporation. When the Warrants and Warrant
Certificates have been issued as contemplated hereby the Warrants and
the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Corporation. The Warrant Shares, when
issued upon exercise of the Warrants in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and
nonassessable shares of the Common Stock or, in the event of an
adjustment pursuant to section 12, other shares of Capital Stock.
Statements in this section 2(c) as to validity, binding effect and
enforceability are subject to (i) limitations as to enforceability
imposed by bankruptcy, reorganization, moratorium, insolvency and
other laws of general application relating to or affecting the
enforceability of creditors' rights, including, without limitation,
limitations as to enforceability that may be imposed under Section 548
of the United States Bankruptcy Code, Article 10 of the New York
Debtor Creditor Law or other provisions of law relating to fraudulent
transfers and obligations and (ii) equitable principles limiting the
availability of equitable remedies.
3 Number of Warrants. The Corporation hereby agrees to issue and deliver to
APTS on the Distribution Date Warrant Certificates evidencing 293,333
Warrants.
4 Registration, Transfer and Exchange of Certificates.
a The Corporation shall maintain at the Warrant Office the Warrant
Register for registration of the Warrants and Warrant Certificates and
transfers thereof. On the Distribution Date the Corporation shall
register the Warrants and Warrant Certificates in the Warrant Register
in the name of the Warrant Holder. The Corporation may deem and treat
the registered holders of the Warrant Certificates as the absolute
owners thereof and the Warrants represented thereby (notwithstanding
any notation of ownership or other writing on the Warrant Certificates
made by any person) for the purpose of any exercise thereof or any
distribution to the Warrant Holders thereof, and for all other
purposes, and the Corporation shall not be affected by any notice to
the contrary.
b Subject to section 14 hereof, the Corporation shall register the
transfer of any outstanding Warrants in the Warrant Register upon
surrender of the Warrant Certificates evidencing such Warrants to the
Corporation at the Warrant Office, accompanied (if so required by it)
by a written instrument or instruments of transfer in form
satisfactory to it, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof. Upon
any such registration of transfer, new Warrant Certificates evidencing
such transferred Warrants shall be issued to the transferee and the
surrendered Warrant Certificates shall be cancelled. If less than all
the Warrants evidenced by Warrant Certificates surrendered for
transfer are to be transferred, new Warrant Certificates shall be
issued to the holder surrendering such Warrant Certificates evidencing
such remaining number of Warrants.
c Warrant Certificates may be exchanged at the option of the holders
thereof when surrendered to the Corporation at the Warrant Office, for
another Warrant Certificate or other Warrant Certificates of like
tenor and representing in the aggregate a like number of Warrants.
Warrant Certificates surrendered for exchange shall be cancelled.
d No charge shall be made for any such transfer or exchange except for
any tax or other governmental charge imposed in connection therewith.
Except as provided in section 14(b) hereof, each Warrant Certificate
issued upon transfer or exchange shall bear the legend set forth in
section 14(b) hereof if the Warrant Certificate presented for transfer
or exchange bore such legend.
5 Mutilated or Missing Warrant Certificates. If any Warrant Certificate shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue, in
exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon
receipt of evidence satisfactory to the Corporation of such loss, theft or
destruction of such Warrant Certificate and, if requested, indemnity
satisfactory to it. The Corporation acknowledges that a written indemnity
by the Warrant Holder shall be satisfactory to the Corporation for such
purpose. No service charge shall be made for any such substitution, but all
expenses and reasonable charges associated with procuring such indemnity
and all stamp, tax and other governmental duties that may be imposed in
relation thereto shall be borne by the holder of such Warrant Certificate.
Each Warrant Certificate issued in any such substitution shall bear the
legend set forth in section 14(b) hereof if the Warrant Certificate for
which such substitution was made bore such legend.
6 Duration and Exercise of Warrants.
a The Warrants evidenced by a Warrant Certificate shall be exercisable
in whole or in part by the registered holder thereof on any Business
Day after the Distribution Date and on or before 5:00 PM, New York
City time, on the Expiration Date.
b Upon presentation to the Corporation at the Warrant Office of the
Warrant Certificate evidencing the Warrants to be exercised, with the
form of election to purchase attached thereto duly completed, signed
by the Warrant Holder, and upon payment of an amount equal to the
product of:
i0 the Exercise Price per Share; and
ii0 the number of Warrant Shares being purchased,
in lawful money of the United States of America, the Corporation shall
issue and cause to be delivered to or upon the written order of the
registered holders of such Warrants and in such name or names as such
registered holder may designate, a certificate for the Warrant Share
or Warrant Shares issued upon such exercise of the Warrants being
exercised. Any Persons so designated to be named therein shall be
deemed to have become Warrant Holders of record of such Warrant Share
or Warrant Shares as of the date of exercise of such Warrants.
Any Persons so designated to be named therein shall be deemed to have
become holders of record of such Warrant Share or Warrant Shares as of
the date of exercise of such Warrants.
c If less than all of the Warrants evidenced by a Warrant Certificate
are exercised at any time, a new Warrant Certificate or Certificates
shall be issued for the remaining number of Warrants evidenced by such
Warrant Certificate. Each new Warrant Certificate so issued shall bear
the legend set forth in section 14(b) hereof if the Warrant
Certificate presented in connection with partial exercise thereof bore
such legend. All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled.
7 No Fractional Shares. The Corporation shall not be required to issue
fractional Warrant Shares upon exercise of the Warrants but shall pay for
any such fraction of a share an amount in cash equal to such fraction of
the Fair Market Value of a share of Common Stock.
8 Payment of Taxes. The Corporation will pay all taxes attributable to the
initial issuance of Warrant Shares to a Warrant Holder upon the exercise of
his Warrants, provided that the Corporation shall not be required to pay
any income tax incurred by the Warrant Holder or the holder of the Warrant
Shares upon exercise of the Warrants or issuance of the Warrant Shares.
9 Stockholder Rights.
a Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof
the right to vote or to consent or to receive notice as a stockholder
in respect of the meetings of stockholders or the election of
directors of the Corporation or any other matter, or any rights
whatsoever as a stockholder of the Corporation.
b Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the
registered holders thereof to purchase any securities or as imposing
any liabilities on such Warrant Holders as stockholders of the
Corporation, whether such obligation or liabilities are asserted by
the Corporation or by creditors of the Corporation.
10 Reservation and Issuance of Warrant Shares.
a The Corporation will at all times have authorized, and reserve and
keep available, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants,
the number of shares of Common Stock deliverable upon exercise of all
outstanding Warrants.
b The Corporation will take any corporate action which may be necessary
in order that the Corporation may validly and legally issue fully paid
and nonassessable Warrant Shares at the Exercise Price per Share.
c The Corporation covenants that all Warrant Shares will, upon issuance
to the Warrant Holder in accordance with the terms of this Warrant
Agreement and the Corporation's certificate of incorporation, be fully
paid and nonassessable and free from all taxes with respect to the
issuance thereof and from all liens, charges and security interests
(other than any created by or on behalf of any Warrant Holder).
11 Obtaining of Governmental Approvals and Stock Exchange Listings. The
Corporation will, at its own expense, from time to time take all action
which may be necessary to obtain and keep effective any and all permits,
consents, orders and approvals of governmental agencies and authorities
which are or become requisite in connection with the issuance, sale,
transfer and delivery of the Warrant Certificates and the exercise of the
Warrants and the issuance, sale, transfer and delivery of the Warrant
Shares, and all action which may be necessary so that any Common Stock,
immediately upon its issuance upon the exercise of Warrants, will be listed
on each securities exchange or listing or quotation service, if any, on
which the Common Stock is then listed.
12 Adjustment of Exercise Price per Share and number of Warrant Shares
issuable on exercise of Warrants.
a Prior to the Expiration Date, the Exercise Price per Share, and in
some cases the number of Warrant Shares issuable upon exercise of each
Warrant, are subject to adjustment from time to time in the manner
provided in this section 12 upon the occurrence of any of the events
enumerated in this section~12.
b In the event that the Corporation shall at any time after the
Distribution Date:
i0 declare a dividend or make a distribution on any series of its
Common Stock in shares of any series of its Common Stock;
ii0 subdivide or reclassify shares of any series of its outstanding
Common Stock into a greater number of shares;
iii0 combine shares of any series of its outstanding Common Stock into
a smaller number of shares;
iv0 pay a dividend or make a distribution on any series of its Common
Stock in shares of any series of its Capital Stock other than
Common Stock; or
v0 issue by reclassification of any series of its Common Stock
shares of any series of its Capital Stock;
then each Warrant outstanding on the record date for such dividend or
distribution or on the effective date of such subdivision,
reclassification or combination shall thereafter entitle the holder
thereof to receive the aggregate number and kind of shares, other
securities and property which, if such Warrant had been exercised
immediately prior to such time, such holder would have owned or have
become entitled to receive by virtue of such dividend, distribution,
subdivision, reclassification or combination and, if after such
dividend, distribution, subdivision, reclassification or combination
the Warrants continue to represent the right to purchase only shares
of Common Stock (and not other securities or property), the Exercise
Price per Share shall be adjusted to be an amount equal to the product
of:
(x) the Exercise Price per Share in effect immediately prior to such
dividend, distribution, subdivision, reclassification or combination
and
(y) the ratio of:
(1) the number of shares of Common Stock issuable on exercise of a
single Warrant immediately before giving effect to the dividend,
distribution, subdivision, reclassification or combination and
(2) the number of shares of Common Stock issuable on exercise of a
single Warrant immediately after giving effect to such dividend,
distribution, subdivision, reclassification or combination.
If after such dividend, distribution, subdivision, reclassification or
combination the Warrants represent the right to purchase securities other
than shares of Common Stock or other property, the Exercise Price per Share
shall be adjusted equitably. An adjustment made pursuant to this section
12(b) shall become effective immediately after the record date in the case
of a dividend or distribution and shall become effective immediately after
the effective date in the case of subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur.
c
i0 "Full-ratchet" Anti-dilution Adjustment. In the event that the
Corporation shall at any time after the Distribution Date issue
any shares of Common Stock (or any rights, warrants, options or
convertible or exercisable securities entitling the holders
thereof to subscribe for or purchase any shares of Common Stock,
or any stock appreciation rights entitling the holders thereof to
any interest in an increase in value, however measured, of shares
of Common Stock) other than in a Qualifying Transaction and other
than in an Excluded Transaction, at an Effective Purchase Price
per Share less than the Exercise Price per Share in effect
immediately prior to such issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to such Effective Price per Share and
(2) no adjustment shall be made as a result of such issuance in
the number of Warrant Shares issuable on exercise of the
Warrants.
For example, if on any given date the Corporation issues (other
than in a Qualifying Transaction and other than in an Excluded
Transaction) warrants exercisable at $3.00 per share to purchase
shares of Common Stock for a purchase price of $5.00 per warrant
and the Exercise Price per Share in effect immediately prior to
such issuance is $8.25 per share, then the Exercise Price per
Share will be adjusted to $8.00 per share and no adjustment will
be made in the number of Warrant Shares issuable upon exercise of
a Warrant.
ii0 "Proportional" Anti-dilution Adjustment. In the event that
the Corporation shall at any time after the Distribution
Date issue any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase
any shares of Common Stock, or any stock appreciation rights
entitling the holders thereof to any interest in an increase
in value, however measured, of shares of Common Stock) in a
Qualifying Transaction or in an Excluded Transaction
described in clause (i) or (ii) of the definition of that
term, at an Effective Purchase Price per Share less than the
Exercise Price per Share in effect immediately prior to such
issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to the ratio of:
(a) the sum of:
(i) the product of:
1 the number of shares of Common
Stock outstanding immediately prior
to such issuance and
2 the Exercise Price per Share in
effect immediately prior to such
issuance and
(ii) the Aggregate Consideration Receivable
by the Corporation in connection with such
issuance, to
(b) the sum of:
(i) the number of shares of Common Stock
outstanding immediately prior to such
issuance and
(ii) the number of additional shares of Common
Stock to be so issued (including the number
of shares underlying such rights, warrants,
options or convertible or exercisable
securities); and
(2) no adjustment shall be made as a result of such
issuance in the number of Warrant Shares issuable on
exercise of the Warrants.
For example, if on any given date the Corporation has
10,000,000 shares of Common Stock outstanding, the
Corporation issues (in a Qualifying Transaction or in an
Excluded Transaction described in clause (i) or (ii) of the
definition of that term) warrants exercisable at $3.00 per
share to purchase an additional 1,000,000 shares of Common
Stock for a purchase price of $5.00 per warrant and the
Exercise Price per Share in effect immediately prior to such
issuance is $8.25 per share, then the Exercise Price per
Share shall be adjusted to $8.227 per share (calculated as
follows: $8.227 per share = [(10,000,000 shares x $8.25 per
share) + $8,000,000] / (10,000,000 shares + 1,000,000
shares), and no adjustment will be made in the number of
Warrant Shares issuable upon exercise of a Warrant.
d No change in either the Exercise Price per Share or the number of
Warrant Shares issuable upon exercise of the Warrants shall occur
solely as the result of the issuance by the Corporation at any time
after the Distribution Date of any shares of Common Stock (or any
rights, warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase any shares
of Common Stock or any stock appreciation rights entitling the holders
thereof to any interest in an increase in value, however measured, of
shares of Common Stock) in an Excluded Transaction described in clause
(iii) of the definition of that term.
e In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of
Directors or a duly authorized committee thereof (irrespective of the
accounting treatment thereof), and described in a resolution of the
Board of Directors or such committee. An adjustment made pursuant to
section 12(c) hereof shall become effective immediately upon the
effective date of the issuance resulting in such adjustment. Such
adjustment shall be made successively whenever any shares, rights,
warrants, options or convertible or exercisable securities are so
issued at an Effective Purchase Price per Share that is less than the
Exercise Price per Share in effect on the date of such issuance. To
the extent that any such rights, warrants, options or convertible or
exercisable securities or stock appreciation rights expire without
having been converted or exercised, each Warrant outstanding shall, as
of the date of such expiration, have the same Exercise Price per Share
as would have been the case had such expired rights, warrants,
options, convertible or exercisable securities or stock appreciation
rights not been issued, but such readjustment shall not affect the
Exercise Price per Share paid for any shares of Common Stock or other
shares of Capital Stock delivered upon any exercise prior to the date
such readjustment is made.
f In the event that the Corporation shall distribute to all holders of
its Common Stock any of its assets or debt securities, or rights,
options, warrants or convertible or exercisable securities of the
Corporation (including securities for cash, but excluding:
i0 distributions of Capital Stock referred to in section 12(b)
hereof,
ii0 distributions of rights, warrants, options, convertible or
exercisable securities or stock appreciation rights referred to
in section 12(c) hereof, if the decrease in the Exercise Price
per Share under section 12(c) hereof would be greater than the
decrease in the Exercise Price per Share under this section 12(f)
(with section 12(c) applying rather than this section 12(f)), and
iii0 cash dividends or other cash distributions that are paid out of
Consolidated Net Income for any dividend period, earned surplus
or retained earnings,
then in each such case:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to the difference between:
(a) the Exercise Price per Share in effect immediately
prior to such issuance and
(b) an amount equal to the then fair market value (as
reasonably determined by the Board of Directors, in
good faith and as described in a resolution of the
Board of Directors) of the portion of the assets or
debt securities of the Corporation so distributed or of
such rights, options, warrants or convertible or
exercisable securities applicable to one share of
Common Stock, and
(2) no adjustment shall be made in any such case in the number
of Warrant Shares issuable on exercise of the Warrants.
Such adjustment shall become effective immediately after the
record date for the determination of shares entitled to receive
such distribution. Notwithstanding the foregoing, no such
adjustment shall be made upon any such distribution if the plan
or arrangement under which such distribution is made provides for
a distribution to holders of Warrant Shares in the same pro rata
amounts upon exercise of the Warrants. Such adjustment shall be
made successively whenever any event listed above shall occur.
g If at any time, as a result of an adjustment made pursuant to
this section 12, the holder of any Warrant thereafter exercised
shall become entitled to receive any shares of the Corporation
other than shares of Common Stock, thereafter the number of such
other shares so receivable upon exercise of any Warrant shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in this section 12, and
the provisions of this Warrant Agreement with respect to the
Warrant Shares shall apply on like terms to such other shares.
h If any of the following events occur, namely:
i0 any reclassification or change of Warrant Shares (other than
a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of
subdivision or combination);
ii0 any consolidation or merger of the Corporation with another
Person shall be effected as a result of which holders of
Warrant Shares shall be entitled to receive stock,
securities or other property or assets (including cash) with
respect to or in exchange for Warrant Shares; or
iii0 any sale or conveyance of the properties and assets of the
Corporation as, or substantially as, an entirety to any
other Person;
then the Corporation or such successor or purchasing Person, as
the case may be, shall make provisions to establish that each
Warrant then outstanding shall be exercisable for the kind and
amount of shares of stock and other securities or property or
assets (including cash) receivable upon the occurrence of such
event by a holder of Warrant Shares immediately prior to such
event. The Corporation shall not consummate any such event
unless, prior to or simultaneously with such consummation, the
successor Person (if other than the Corporation) resulting from
such consolidation or merger or the Person purchasing such
properties and assets shall assume by written instrument, the
obligation to deliver to each Warrant Holder the shares of stock,
securities or assets to which, in accordance with the foregoing
provisions, such holder may be entitled and all other obligations
of the Corporation under this Warrant Agreement. The provisions
of this section 12(h) shall similarly apply to successive
reclassifications, consolidations, mergers, sales and
conveyances.
i Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrant, Warrant Certificates
theretofore or thereafter issued may continue to express the same
number and kind of shares as are stated on the Warrant Certificates
initially issuable pursuant to this Warrant Agreement.
j Anything in this section 12 to the contrary notwithstanding, the
Corporation shall be entitled to make such decreases in the Exercise
Price per Share and such increases in the number of Warrant Shares
issuable upon the exercise of each Warrant, in addition to those
adjustments required by this section 12, as it in its sole discretion
shall determine to be advisable in order that any dividends,
distributions or, issuances of securities, rights, options, warrants
or convertible or exchangeable securities made by the Corporation to
its stockholders shall not be taxable to them.
13 Notices to Holders.
a Upon any adjustment pursuant to section 12 hereof in the Exercise
Price per Share or in the number of Warrant Shares issuable upon
exercise of a Warrant, the Corporation shall promptly but in any event
within 30 days thereafter, cause to be given to each of the Warrant
Holders, at its address appearing on the Warrant Register by
registered mail, postage prepaid, return receipt requested, a
certificate signed by its chairman, president or chief financial
officer setting forth the Exercise Price per Share and the number of
Warrant Shares purchasable upon exercise of a Warrant as so adjusted
and describing in reasonable detail the facts accounting for such
adjustment and the method of calculation used. When appropriate, such
certificate may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this
section 13.
b In the event:
i0 that the Corporation shall authorize the issuance to all holders
of Common Stock of rights or warrants to subscribe for or
purchase Capital Stock of the Corporation or of any other
subscription rights or warrants;
ii0 that the Corporation shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or
assets (including, without limitation, cash dividends or cash
distributions payable out of consolidated earnings or earned
surplus or dividends payable in Common Stock);
iii0 of any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the
Corporation is required, or of the conveyance or transfer of the
properties and assets of the Corporation substantially as an
entirety, or of any capital reorganization or reclassification or
change of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination);
iv0 of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; or
v0 that the Corporation proposes to take any other action which
would require an adjustment in the Exercise Price per Share or in
the number of Warrant Shares or other securities or assets to
which each holder is entitled pursuant to section 12 hereof;
then the Corporation shall cause to be given to each of the Warrant
Holders at its address appearing on the Warrant Register, at least 30
calendar days prior to the applicable record date, if any, hereinafter
specified, or, if no such record date is specified, 30 calendar days
prior to the taking of any action referred to in clauses (i) through
(v) above (except that, if the action taken by the Corporation is an
issuance described in section 12(c)(i) or (ii) hereof, then as
promptly as possible but in no event later than the date that the
Corporation provides public notice of such issuance), by registered
mail, postage prepaid, return receipt requested, a written notice
stating (i) the date as of which the holders of record of Common Stock
to be entitled to receive any such rights, warrants or distribution
are to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective, or (iii) the date as of
which any such other action is to be effected, and, if applicable and
known to the Corporation, the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up; provided, however, that in the
event that the Corporation provides public notice of such proposed
action or event specifying the information set forth above at least 10
days prior to the proposed record date or effective date, then the
Corporation shall be deemed to have satisfied its obligation to
provide notice pursuant to this section 13(b). The failure to give the
notice required by this section 13 or any defect therein shall not
affect the legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up or other action referred to above, or the vote upon any
such action.
c The Corporation shall promptly, but in any event no less than 30 days
prior to the effective date of any Change in Control, cause to be
given to each of the registered holders of the Warrants, at its
address appearing on the Warrant Register by registered mail, postage
prepaid, return receipt requested, written notice of the pendency of
such Change in Control.
14 Restrictions on Transfer; Subsequent Transferees as Third Party
Beneficiaries.
a The Warrant Holder (i)~represents that it is acquiring the Warrants
for its own account for investment and not with a view to any
distribution or public offering within the meaning of the Securities
Act, (ii)~acknowledges that the Warrants and the Warrant Shares
issuable upon exercise thereof have not been registered under the
Securities Act or any state securities laws and (iii)~agrees that it
will not sell or otherwise transfer any of its Warrants or Warrant
Shares except upon the terms and conditions specified herein, provided
that the Warrant Holders may sell the Warrants or the Warrant Shares
purchased upon exercise of the Warrants in one or more private
transactions not requiring registration under the Securities Act.
b Except as otherwise provided in section~14(d) hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to a
Warrant Holder shall include a legend in substantially the following
form (with such changes therein as may be appropriate to reflect
whether such legend refers to Warrants or Warrant Shares), provided
that such legend shall not be required if such transfer is being made
in connection with a sale which is exempt from registration pursuant
to Rule~144 under the Securities Act or if the opinion of counsel
referred to in section~14(c) hereof is to the further effect that
neither such legend nor the restrictions on transfer in this
section~14 are required in order to ensure compliance with the
Securities Act:
THE [WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS,]
[SHARES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
c Each Warrant Holder wishing to effect such a transfer of any Warrant
or Warrant Shares shall furnish to the Corporation an agreement by the
transferee thereof that it is taking and holding the same subject to
the terms and conditions specified herein and a written opinion of
such Warrant Holder's counsel, in form reasonably satisfactory to the
Corporation, to the effect that the proposed transfer may be effected
without registration under the Securities Act and any applicable state
securities laws.
d The restrictions set forth in this section~14 shall terminate and
cease to be effective with respect to any Warrants or Warrant Shares
registered under the Securities Act or receipt by the Corporation of
an opinion of counsel, in form reasonably satisfactory to the
Corporation, to the effect that compliance with such restrictions is
not necessary in order to comply with the Securities Act and any
applicable state securities laws with respect to the transfer of the
Warrants and/or the Warrant Shares. Whenever such restrictions shall
so terminate the holder of such Warrants and/or Warrant Shares shall
be entitled to receive from the Corporation, without expense (other
than transfer taxes, if any), Warrant Certificates or certificates for
such Warrant Shares not bearing the legend set forth in section~14(b)
hereof and the Corporation will rescind any transfer restrictions
relating thereto.
e It is the intention of the parties hereto that each Warrant Holder who
acquires Warrants by transfer be a third party beneficiary, to the
extent of Warrants acquired and held by such Warrant Holder, of the
provisions of this Warrant Agreement that bestow rights on Warrant
Holders.
15 Covenants. Holdings covenants to include in any filings made with any
taxing authority the issuance of these warrants as being pursuant to the
plan of reorganization (with respect to the distribution of the Corporation
by IFG).
16 Amendments and Waivers. Any provision of this Warrant Agreement may be
amended, supplemented, waived, discharged or terminated by a written
instrument signed by the Corporation and the holders of not less than a
majority of the outstanding Warrants, provided that the Exercise Price per
Share may not be increased by amendment, the number of Warrant Shares
issuable upon exercise of the Warrants may not be reduced by amendment and
this section~15 may not be changed by amendment except with the unanimous
consent of the holders of outstanding Warrants.
17 Specific Performance. The holders of the Warrants shall have the right to
specific performance by the Corporation of the provisions of this Warrant
Agreement. The Corporation hereby irrevocably waives, to the extent that it
may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Corporation for specific
performance of this Warrant Agreement by the holders of the Warrants.
18 Notices.
a Any notice or demand to be given or made by the Warrant Holders or the
holders of Warrant Shares to or on the Corporation pursuant to this
Warrant Agreement shall be sufficiently given or made if sent by
registered mail, return receipt requested, postage prepaid, addressed
to the Corporation at the Warrant Office.
b Any notice to be given by the Corporation to the Warrant Holders or
the holders of Warrant Shares shall be sufficiently given or made if
sent by registered mail, return receipt requested, postage prepaid,
addressed to such holder as such holder's name and address shall
appear on the Warrant Register or the Common Stock registry of the
Corporation, as the case may be.
19 Binding Effect. This Warrant Agreement shall be binding upon and inure to
the sole and exclusive benefit of the Corporation and the Warrant Holder,
and their respective successors and assigns.
20 Continued Validity. A holder of Warrant Shares shall continue to be
entitled with respect to such Warrant Shares to all rights and subject to
all obligations to which it would have been entitled or subject as a holder
under sections~14 through 22 hereof.
21 Counterparts. This Warrant Agreement may be executed in one or more
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
22 New York Law. THIS WARRANT AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
23 Benefits of This Agreement. Nothing in this Warrant Agreement shall be
construed to give any Person other than the Corporation and the Warrant
Holder any legal or equitable right, remedy or claim under this Warrant
Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Warrant
Agreement to be duly executed and delivered by their proper and duly
authorized officers, as of the date and year first above written.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ Andrew L. Farkas
-----------------------
Name: Andrew L. Farkas
Title: Chairman and Chief Executive Officer
APTS PARTNERS, L.P.
By: APTS GP Partners, L.P.,
its general partner
By: APTS Acquisition Corporation,
its general partner
By:/s/ John R. W. Jacobsson
---------------------------
Name: John R. S. Jacobsson
Title: Vice President
A-1
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS, REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
EXERCISABLE ONLY ON OR BEFORE
JANUARY 17, 2002
[Date] Warrant Certificate Warrant No. [ ]
This Warrant Certificate is one of the Warrant Certificates referred to in
the Warrant Agreement dated as of September 15, 1998 (the "Warrant Agreement")
between the Corporation and APTS Partners, L.P., a Delaware limited partnership.
The Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitations, obligations, duties and immunities thereunder of the Corporation
and the holders of Warrants. Terms defined in the Warrant Agreement and used
herein have the same meanings herein as therein.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of _____ Warrants to purchase shares of Common Stock of
INSIGNIA/ESG HOLDINGS, INC., a Delaware corporation (the "Corporation"). Each
Warrant entitles the holder, but only subject to the conditions set forth herein
and in the Warrant Agreement, to purchase from the Corporation before 5:00~PM,
New York City time, on the Expiration Date, one fully paid and nonassessable
share of Common Stock (subject to adjustment as described below) at a price
equal to the Exercise Price per Share.
The Exercise Price per Share shall be payable in lawful money of the United
States of America. The Warrants represented by this certificate may be exercised
by surrender of this Warrant Certificate, along with an executed copy of the
annexed Form of Election to Purchase and payment of the applicable Exercise
Price at the office of the Corporation at 200 Park Avenue, New York, New York
10166, or such other address as the Corporation may specify in writing to the
registered holder of the Warrants evidenced hereby. The Exercise Price per Share
and the number of shares of Common Stock purchasable upon exercise of the
Warrants is subject to adjustment prior to the Expiration Date as set forth in
the Warrant Agreement.
No Warrant may be exercised after 5:00~PM, New York City time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00~PM, New
York City time, on the Expiration Date.
A-4
The Corporation may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary.
This Warrant Certificate, when surrendered at the Warrant Office by the
registered holder hereof in person or by a legal representative duly authorized
in writing, may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor registered
in the name of the holder and representing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to
be signed by its duly authorized officers and has caused its corporate seal to
be affixed hereunto.
INSIGNIA/ ESG HOLDINGS, INC.
By:__________________________
Name:
Title:
(CORPORATE SEAL)
ATTEST
____________________________
Secretary
ANNEX TO FORM OF WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise, in accordance with
section 6(b) of the Warrant Agreement, Warrants, representing the right to
purchase shares of Common Stock, and herewith tenders payment for such shares of
Common Stock to the order of the Corporation in the amount of $ as payment of
the exercise price in accordance with the terms hereof.
The undersigned requests that a certificate for such shares of Common Stock
be registered in the name of whose address is and that such certificate be
delivered to whose address is . If said number of shares of Common Stock is less
than all of the shares of Common Stock purchasable hereunder, the undersigned
hereby requests that a new Warrant Certificate representing the remaining
balance of the Warrants be registered in the name of whose address is and that
such Warrant Certificate be delivered to whose address is .
Signature:
(Signature must conform in all respects to name of holder as specified on
the face of the Warrant Certificate.)
Date:
LOANS/APTSVLLC
0839/39038-028 NYLIB2/549871 v4 10/05/98 11:03 AM (10559)
WARRANT AGREEMENT dated as of September 15, 1998 between Insignia/ESG
Holdings, Inc., a Delaware corporation (the "Corporation"), and APTS V, L.L.C.,
a Delaware limited liability company ("APTS").
Preliminary Statement
This Warrant Agreement sets forth the terms and conditions of Warrants
transferred to APTS in connection with the exchange of the warrants held by APTS
to purchase shares of Class A Common Stock, par value $.01 per share, of
Insignia Financial Group, Inc. ("IFG") under the Amended and Restated Warrant
Agreement dated as of December 5, 1995 between IFG and APTS, such exchange
resulting from the distribution by IFG to its stockholders of all of the then
outstanding shares of Common Stock of the Corporation in a transaction intending
to qualify as a tax-free distribution and reorganization under Sections 355 and
368 of the Internal Revenue Code.
Accordingly, the parties hereto agree as follows.
1. Definitions. As used in this Warrant Agreement, the following terms shall
have the following meanings, unless the context otherwise requires.
a. "Aggregate Consideration Receivable" by the Corporation in connection
with the issuance of any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities entitling
the holders thereof to subscribe for or purchase any shares of Common
Stock or any stock appreciation rights entitling the holders thereof
to any interest in an increase in value, however measured, of shares
of Common Stock) shall mean the sum of:
i. the aggregate consideration paid to the Corporation for such shares,
rights, warrants, options or convertible or exercisable securities,
and
ii. the aggregate consideration or premiums stated in such rights,
warrants, options or convertible or exercisable securities to be
payable for the shares of Common Stock covered thereby.
In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of
Directors or a duly authorized committee thereof (irrespective of the
accounting treatment thereof), and described in a resolution of the
Board of Directors or such committee.
b. "APTS" shall mean APTS V, L.L.C., a Delaware limited liability
company.
c. "Board of Directors" shall mean the board of directors of the
Corporation.
d. "Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are required by
law to close.
e. "Capital Stock" shall mean any and all shares, rights to purchase,
warrants, options, convertible securities, participations in or other
equivalents of or interests (other than security interests) in
(however designated and whether voting or nonvoting) corporate stock.
f. "Change in Control" shall mean the occurrence of any of the following
events:
i. Andrew Farkas has ceased to serve on a full-time basis as the
Chief Executive Officer of the Corporation for any reason;
ii. Andrew Farkas has ceased to own beneficially (within the meaning
of rule 13d-3 promulgated under the Exchange Act) at least
700,000 shares of Common Stock (as adjusted to reflect stock
dividends or distributions, subdivisions or reclassifications,
splits and combinations);
iii. any Person or group (within the meaning of section 13(d)(3) or
14(d)(2) of the Exchange Act) other than a group controlled by
Andrew Farkas or by APTS or any affiliate of Andrew Farkas or
APTS acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 45% or more of the
number of shares of Common Stock or the combined voting power of
Voting Stock of the Corporation outstanding immediately prior to
such acquisition;
iv. individuals who, as of the Distribution Date, constitute the
Board of Directors and individuals nominated or elected to serve
on the Board of Directors by individuals described in this
section 2(f)(iv) cease for any reason to constitute at least a
majority of the Board of Directors; and
v. the Corporation consummates any merger or consolidation (other
than a Permitted Merger or Consolidation) of the Corporation with
or into any other entity, the sale of all or substantially all of
the assets of the Corporation, the reorganization, liquidation or
dissolution of the Corporation, or any similar transaction or
event.
g. "Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Corporation and, in the case of a reclassification,
recapitalization or other similar change in such Common Stock or
in the case of a consolidation or merger of the Corporation with
or into another Person, such consideration to which a holder of a
share of Common Stock would have been entitled upon the
occurrence of such event.
h. "Common Stock Equivalents" shall mean, without double counting:
i. shares of Common Stock, where one share of Common Stock
shall constitute one Common Stock Equivalent;
ii. shares of Capital Stock convertible into Common Stock, where
any one share of Capital Stock shall constitute a number of
Common Stock Equivalents equal to the number of shares of
Common Stock issuable in respect of such share of Capital
Stock;
iii. any rights, warrants, options and convertible or exercisable
securities entitling the holder thereof to subscribe for or
purchase any shares of Common Stock, where any such rights,
warrants, options and convertible or exercisable securities
shall constitute a number of Common Stock Equivalents equal
to the number of shares of Common Stock issuable in respect
of such rights, warrants, options or convertible or
exercisable securities; and
iv. any stock appreciation rights entitling the holders thereof
to any interest in an increase in value, however measured,
of shares of Common Stock, where any such stock appreciation
rights shall constitute a number of Common Stock Equivalents
equal to the Common Stock equivalent, as nearly as it may be
calculated, of such stock appreciation rights.
i. "Corporation" shall mean Insignia /ESG Holdings, Inc., a Delaware
corporation.
j. "Distribution" shall mean the distribution by Insignia Financial
Group, Inc. to its stockholders of all of the then outstanding
shares of Common Stock of the Corporation.
k. "Distribution Date" shall mean the record date for the
Distribution.
l. "Effective Purchase Price per Share" at which the Corporation
issues any shares of Common Stock (or any rights, warrants,
options or convertible or exercisable securities entitling the
holders thereof to subscribe for or purchase any shares of Common
Stock or any stock appreciation rights entitling the holders
thereof to any interest in an increase in value, however
measured, of shares of Common Stock) shall mean an amount equal
to the ratio of:
i. the Aggregate Consideration Receivable by the Corporation in
connection with the issuance of such shares of Common Stock
(or any such rights, warrants, options, convertible or
exercisable securities or stock appreciation rights) to
ii. the number of shares of Common Stock so issued (or issuable
upon the exercise or conversion of such rights, warrants,
options or convertible or exercisable securities or the
Common Stock Equivalents, as nearly as it may be calculated,
of such stock appreciation rights).
m. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
n. "Excluded Transaction" shall mean any of the following
transactions:
i. the issuance of any shares of Capital Stock of the Corporation to
employees or directors of the Corporation under an employee
benefit plan or arrangement adopted by the Corporation, whether
or not referred to or described in the Form 10;
ii0 the issuance of Common Stock Equivalents in an amount not to
exceed 200,000 (as adjusted, as appropriate, to reflect any stock
dividends, distributions, subdivisions, reclassifications or
combinations of the Common Stock), provided that, within 10
Business Days following such issuance, the Corporation has
furnished to each Warrant Holder written notice of the fact that
the Corporation intends to treat such issuance as an Excluded
Transaction within the meaning of this clause (ii); and
iii0 any issuance of securities referred to or described in the Form
10.
o "Exercise Price per Share" of any Warrant shall mean:
i0 until adjusted in accordance with section 12 hereof, an amount
equal to $8.25 per share, and
ii0 thereafter, such other amount as may from time to time be
determined in accordance with the provisions of section 12
hereof.
p "Expiration Date" shall mean January 1, 1999.
q "Fair Market Value" of a share of Common Stock as of any date shall
mean, as of any date, the average of the closing prices of Common
Stock for the 20 consecutive Trading Days next preceding the date five
days prior to the date in question. The closing price for each day
shall be:
i0 the average of the closing sale price or, in the absence of a
closing sale price, the highest bid and lowest asked prices of
one share of Common Stock quoted in the NYSE Composite Tape or,
if not then listed on the NYSE, the NASDAQ National Market System
or any similar system of automated dissemination of quotations of
securities prices then in common use, if so quoted; or
ii0 if not quoted as described in clause (i), the average of the
highest bid and lowest offered quotations for Common Stock as
reported by the National Quotation Bureau Incorporated if at
least two securities dealers have inserted both bid and offered
quotations for Common Stock on at least five of the 20
consecutive Trading Days next preceding the date five days prior
to the date in question; or
iii0 if the Common Stock is listed or admitted for trading on any
national securities exchange, the last sale price, or the closing
bid price if no sale occurred, of Common Stock on the principal
securities exchange on which the Common Stock is listed or
admitted for trading.
If none of the conditions set forth above is met, the closing price of
Common Stock on any day or the average of such closing prices for any
period shall be the Fair Market Value of Common Stock for such day or
period as determined by a member firm of the NYSE selected by the
Corporation and approved by the Holders of a majority of the
outstanding Warrants. If the Corporation and such Holders are unable
to agree on the selection of a member firm, then the issue of
selection of a member firm shall be submitted to the American
Arbitration Association.
r "Form 10" shall mean the Registration Statement on Form 10 of the
Corporation with respect to the Common Stock in the form in which it
is declared effective by the Securities and Exchange Commission.
s "GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles
Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently
applied for all periods after the date hereof so as to properly
reflect the financial condition, results of operations and changes in
financial position of any Person, except that any accounting principle
or practice required to be changed by such Accounting Principles Board
or Financial Accounting Standards Board (or other appropriate board or
committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
t "Merger Transaction" shall mean any business combination transaction
or series of transactions involving the Corporation, regardless of
whether such transactions take the form of a merger, purchase and sale
of securities, purchase or sale of assets or otherwise, immediately
prior to which, following which or in connection with which a Change
in Control occurs.
u "NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
v "NYSE" shall mean the New York Stock Exchange.
w "Permitted Merger or Consolidation" shall mean any merger or
consolidation of the Corporation:
i0 with or into any wholly owned Subsidiary; or
ii0 immediately after which Persons who were stockholders of the
Corporation prior to such merger or consolidation hold at least
80% of the outstanding shares of Capital Stock of the Corporation
measured by voting power.
x "Person" shall mean an individual, corporation, joint venture, general
or limited partnership, trust, unincorporated organization, limited
liability company, limited liability partnership, government or any
agency or political subdivision thereof, association, sole
proprietorship or any other form of entity not specifically listed
herein.
y "Qualifying Transaction" shall mean:
i0 any acquisition by the Corporation of stock or other assets of
any kind in exchange, in whole or in part, for shares of any
class of Capital Stock of the Corporation; and
ii0 any transaction in which shares of Capital Stock of the
Corporation are issued for cash proceeds;
provided, however, that the term "Qualifying Transaction" shall not
include a Merger Transaction.
z "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute.
aa "Subsidiary" shall mean:
i0 any corporation 50% or more of the Voting Stock of which is
owned, directly or indirectly, by the Corporation; or
ii0 any other Person whose accounts are required under GAAP to be
included in the Corporation's consolidated financial statements,
but shall exclude limited partnerships.
bb "Trading Day" shall mean, with respect to the Common Stock: (i) if the
Common Stock is quoted on the NYSE, the NASDAQ National Market System,
any similar system of automated dissemination of quotations of
securities prices, or the National Quotation Bureau Incorporated, each
day on which quotations may be made on such system; or (ii) if the
Common Stock is listed or admitted for trading on any national
securities exchange, days on which such national securities exchange
is open for business; or (iii)~if shares of the Corporation's Common
Stock are not quoted on any system or listed or admitted for trading
on any securities exchange, a Business Day.
cc "Voting Stock" shall mean, with respect to any Person, all classes of
Capital Stock of such Person then outstanding and normally entitled to
vote for the election of directors of such Person. Any reference to a
percentage of Voting Stock shall refer to the percentage of votes
eligible to be cast for the election of directors which are
attributable to the applicable shares of Voting Stock.
dd "Warrant Agreement" shall mean this warrant agreement.
ee "Warrant Certificate" shall mean a certificate evidencing one or more
Warrants, substantially in the form of Exhibit~A hereto.
ff "Warrant Holder" shall mean APTS, as the original registered holder of
the Warrants, and any registered transferee of a Warrant Holder.
gg "Warrant Office" shall mean the office or agency of the Corporation at
which the Warrant Register shall be maintained and where the Warrants
may be presented for exercise, exchange, substitution and transfer,
which office or agency will be the office of the Corporation at 200
Park Avenue, New York, New York 10166, which office or agency may be
changed by the Corporation pursuant to notice in writing to the
Persons named in the Warrant Register as the holders of the Warrants.
hh "Warrant Register" shall mean the register, substantially maintained
by the Corporation at the Warrant Office.
ii "Warrant Shares" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants, as the same may be adjusted
from time to time pursuant to section 12 hereof, and any other shares
of Capital Stock issued or issuable upon the exercise of the Warrants
pursuant to section 12 hereof.
jj "Warrants" shall mean the warrants to purchase Common Stock issued by
the Corporation pursuant to this Warrant Agreement; individually, a
"Warrant."
2 Representations and Warranties. The Corporation hereby represents and
warrants as follows:
a The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has the
corporate power and authority to conduct its business as presently
conducted, has the corporate power and authority to execute and
deliver this Warrant Agreement and the Warrant Certificates, to issue
the Warrants and to perform its obligations under this Warrant
Agreement and the Warrant Certificates.
b The execution, delivery and performance by the Corporation of this
Warrant Agreement and the Warrant Certificates, the issuance of the
Warrants, and the issuance of the Warrant Shares upon exercise of the
Warrants have been duly authorized by all necessary corporate action.
c This Warrant Agreement has been duly executed and delivered by the
Corporation and constitutes a legal, valid, binding and enforceable
obligation of the Corporation. When the Warrants and Warrant
Certificates have been issued as contemplated hereby the Warrants and
the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Corporation. The Warrant Shares, when
issued upon exercise of the Warrants in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and
nonassessable shares of the Common Stock or, in the event of an
adjustment pursuant to section 12, other shares of Capital Stock.
Statements in this section 2(c) as to validity, binding effect and
enforceability are subject to (i) limitations as to enforceability
imposed by bankruptcy, reorganization, moratorium, insolvency and
other laws of general application relating to or affecting the
enforceability of creditors' rights, including, without limitation,
limitations as to enforceability that may be imposed under Section 548
of the United States Bankruptcy Code, Article 10 of the New York
Debtor Creditor Law or other provisions of law relating to fraudulent
transfers and obligations and (ii) equitable principles limiting the
availability of equitable remedies.
3 Number of Warrants. The Corporation hereby agrees to issue and deliver to
APTS on the Distribution Date Warrant Certificates evidencing 51,944
Warrants.
4 Registration, Transfer and Exchange of Certificates.
a The Corporation shall maintain at the Warrant Office the Warrant
Register for registration of the Warrants and Warrant Certificates and
transfers thereof. On the Distribution Date the Corporation shall
register the Warrants and Warrant Certificates in the Warrant Register
in the name of the Warrant Holder. The Corporation may deem and treat
the registered holders of the Warrant Certificates as the absolute
owners thereof and the Warrants represented thereby (notwithstanding
any notation of ownership or other writing on the Warrant Certificates
made by any person) for the purpose of any exercise thereof or any
distribution to the Warrant Holders thereof, and for all other
purposes, and the Corporation shall not be affected by any notice to
the contrary.
b Subject to section 14 hereof, the Corporation shall register the
transfer of any outstanding Warrants in the Warrant Register upon
surrender of the Warrant Certificates evidencing such Warrants to the
Corporation at the Warrant Office, accompanied (if so required by it)
by a written instrument or instruments of transfer in form
satisfactory to it, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof. Upon
any such registration of transfer, new Warrant Certificates evidencing
such transferred Warrants shall be issued to the transferee and the
surrendered Warrant Certificates shall be cancelled. If less than all
the Warrants evidenced by Warrant Certificates surrendered for
transfer are to be transferred, new Warrant Certificates shall be
issued to the holder surrendering such Warrant Certificates evidencing
such remaining number of Warrants.
c Warrant Certificates may be exchanged at the option of the holders
thereof when surrendered to the Corporation at the Warrant Office, for
another Warrant Certificate or other Warrant Certificates of like
tenor and representing in the aggregate a like number of Warrants.
Warrant Certificates surrendered for exchange shall be cancelled.
d No charge shall be made for any such transfer or exchange except for
any tax or other governmental charge imposed in connection therewith.
Except as provided in section 14(b) hereof, each Warrant Certificate
issued upon transfer or exchange shall bear the legend set forth in
section 14(b) hereof if the Warrant Certificate presented for transfer
or exchange bore such legend.
5 Mutilated or Missing Warrant Certificates. If any Warrant Certificate shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue, in
exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon
receipt of evidence satisfactory to the Corporation of such loss, theft or
destruction of such Warrant Certificate and, if requested, indemnity
satisfactory to it. The Corporation acknowledges that a written indemnity
by the Warrant Holder shall be satisfactory to the Corporation for such
purpose. No service charge shall be made for any such substitution, but all
expenses and reasonable charges associated with procuring such indemnity
and all stamp, tax and other governmental duties that may be imposed in
relation thereto shall be borne by the holder of such Warrant Certificate.
Each Warrant Certificate issued in any such substitution shall bear the
legend set forth in section 14(b) hereof if the Warrant Certificate for
which such substitution was made bore such legend.
6 Duration and Exercise of Warrants.
a The Warrants evidenced by a Warrant Certificate shall be exercisable
in whole or in part by the registered holder thereof on any Business
Day after the Distribution Date and on or before 5:00 PM, New York
City time, on the Expiration Date.
b Upon presentation to the Corporation at the Warrant Office of the
Warrant Certificate evidencing the Warrants to be exercised, with the
form of election to purchase attached thereto duly completed, signed
by the Warrant Holder, and upon payment of an amount equal to the
product of:
i0 the Exercise Price per Share; and
ii0 the number of Warrant Shares being purchased,
in lawful money of the United States of America, the Corporation shall
issue and cause to be delivered to or upon the written order of the
registered holders of such Warrants and in such name or names as such
registered holder may designate, a certificate for the Warrant Share
or Warrant Shares issued upon such exercise of the Warrants being
exercised. Any Persons so designated to be named therein shall be
deemed to have become Warrant Holders of record of such Warrant Share
or Warrant Shares as of the date of exercise of such Warrants.
Any Persons so designated to be named therein shall be deemed to have
become holders of record of such Warrant Share or Warrant Shares as of
the date of exercise of such Warrants.
c If less than all of the Warrants evidenced by a Warrant Certificate
are exercised at any time, a new Warrant Certificate or Certificates
shall be issued for the remaining number of Warrants evidenced by such
Warrant Certificate. Each new Warrant Certificate so issued shall bear
the legend set forth in section 14(b) hereof if the Warrant
Certificate presented in connection with partial exercise thereof bore
such legend. All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled.
7 No Fractional Shares. The Corporation shall not be required to issue
fractional Warrant Shares upon exercise of the Warrants but shall pay for
any such fraction of a share an amount in cash equal to such fraction of
the Fair Market Value of a share of Common Stock.
8 Payment of Taxes. The Corporation will pay all taxes attributable to the
initial issuance of Warrant Shares to a Warrant Holder upon the exercise of
his Warrants, provided that the Corporation shall not be required to pay
any income tax incurred by the Warrant Holder or the holder of the Warrant
Shares upon exercise of the Warrants or issuance of the Warrant Shares.
9 Stockholder Rights.
a Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof
the right to vote or to consent or to receive notice as a stockholder
in respect of the meetings of stockholders or the election of
directors of the Corporation or any other matter, or any rights
whatsoever as a stockholder of the Corporation.
b Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the
registered holders thereof to purchase any securities or as imposing
any liabilities on such Warrant Holders as stockholders of the
Corporation, whether such obligation or liabilities are asserted by
the Corporation or by creditors of the Corporation.
10 Reservation and Issuance of Warrant Shares.
a The Corporation will at all times have authorized, and reserve and
keep available, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants,
the number of shares of Common Stock deliverable upon exercise of all
outstanding Warrants.
b The Corporation will take any corporate action which may be necessary
in order that the Corporation may validly and legally issue fully paid
and nonassessable Warrant Shares at the Exercise Price per Share.
c The Corporation covenants that all Warrant Shares will, upon issuance
to the Warrant Holder in accordance with the terms of this Warrant
Agreement and the Corporation's certificate of incorporation, be fully
paid and nonassessable and free from all taxes with respect to the
issuance thereof and from all liens, charges and security interests
(other than any created by or on behalf of any Warrant Holder).
11 Obtaining of Governmental Approvals and Stock Exchange Listings. The
Corporation will, at its own expense, from time to time take all action
which may be necessary to obtain and keep effective any and all permits,
consents, orders and approvals of governmental agencies and authorities
which are or become requisite in connection with the issuance, sale,
transfer and delivery of the Warrant Certificates and the exercise of the
Warrants and the issuance, sale, transfer and delivery of the Warrant
Shares, and all action which may be necessary so that any Common Stock,
immediately upon its issuance upon the exercise of Warrants, will be listed
on each securities exchange or listing or quotation service, if any, on
which the Common Stock is then listed.
12 Adjustment of Exercise Price per Share and number of Warrant Shares
issuable on exercise of Warrants.
a Prior to the Expiration Date, the Exercise Price per Share, and in
some cases the number of Warrant Shares issuable upon exercise of each
Warrant, are subject to adjustment from time to time in the manner
provided in this section 12 upon the occurrence of any of the events
enumerated in this section~12.
b In the event that the Corporation shall at any time after the
Distribution Date:
i0 declare a dividend or make a distribution on any series of its
Common Stock in shares of any series of its Common Stock;
ii0 subdivide or reclassify shares of any series of its outstanding
Common Stock into a greater number of shares;
iii0 combine shares of any series of its outstanding Common Stock into
a smaller number of shares;
iv0 pay a dividend or make a distribution on any series of its Common
Stock in shares of any series of its Capital Stock other than
Common Stock; or
v0 issue by reclassification of any series of its Common Stock
shares of any series of its Capital Stock;
then each Warrant outstanding on the record date for such dividend or
distribution or on the effective date of such subdivision,
reclassification or combination shall thereafter entitle the holder
thereof to receive the aggregate number and kind of shares, other
securities and property which, if such Warrant had been exercised
immediately prior to such time, such holder would have owned or have
become entitled to receive by virtue of such dividend, distribution,
subdivision, reclassification or combination and, if after such
dividend, distribution, subdivision, reclassification or combination
the Warrants continue to represent the right to purchase only shares
of Common Stock (and not other securities or property), the Exercise
Price per Share shall be adjusted to be an amount equal to the product
of:
(x) the Exercise Price per Share in effect immediately prior to such
dividend, distribution, subdivision, reclassification or combination
and
(y) the ratio of:
(1) the number of shares of Common Stock issuable on exercise of a
single Warrant immediately before giving effect to the dividend,
distribution, subdivision, reclassification or combination and
(2) the number of shares of Common Stock issuable on exercise of a
single Warrant immediately after giving effect to such dividend,
distribution, subdivision, reclassification or combination.
If after such dividend, distribution, subdivision, reclassification or
combination the Warrants represent the right to purchase securities
other than shares of Common Stock or other property, the Exercise
Price per Share shall be adjusted equitably. An adjustment made
pursuant to this section 12(b) shall become effective immediately
after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the
case of subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall
occur.
c
i0 "Full-ratchet" Anti-dilution Adjustment. In the event that the
Corporation shall at any time after the Distribution Date issue
any shares of Common Stock (or any rights, warrants, options or
convertible or exercisable securities entitling the holders
thereof to subscribe for or purchase any shares of Common Stock,
or any stock appreciation rights entitling the holders thereof to
any interest in an increase in value, however measured, of shares
of Common Stock) other than in a Qualifying Transaction and other
than in an Excluded Transaction, at an Effective Purchase Price
per Share less than the Exercise Price per Share in effect
immediately prior to such issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an amount
equal to such Effective Price per Share and
(2) no adjustment shall be made as a result of such issuance in the
number of Warrant Shares issuable on exercise of the Warrants.
For example, if on any given date the Corporation issues (other than
in a Qualifying Transaction and other than in an Excluded Transaction)
warrants exercisable at $3.00 per share to purchase shares of Common
Stock for a purchase price of $5.00 per warrant and the Exercise Price
per Share in effect immediately prior to such issuance is $8.25 per
share, then the Exercise Price per Share will be adjusted to $8.00 per
share and no adjustment will be made in the number of Warrant Shares
issuable upon exercise of a Warrant.
ii0 "Proportional" Anti-dilution Adjustment. In the event that the
Corporation shall at any time after the Distribution Date issue any
shares of Common Stock (or any rights, warrants, options or
convertible or exercisable securities entitling the holders thereof to
subscribe for or purchase any shares of Common Stock, or any stock
appreciation rights entitling the holders thereof to any interest in
an increase in value, however measured, of shares of Common Stock) in
a Qualifying Transaction or in an Excluded Transaction described in
clause (i) or (ii) of the definition of that term, at an Effective
Purchase Price per Share less than the Exercise Price per Share in
effect immediately prior to such issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an amount
equal to the ratio of:
(a) the sum of:
(i) the product of:
1 the number of shares of Common Stock
outstanding immediately prior to such issuance and
2 the Exercise Price per Share in effect
immediately prior to such issuance and
(ii) the Aggregate Consideration Receivable by the
Corporation in connection with such issuance, to
(b) the sum of:
(i) the number of shares of Common Stock outstanding
immediately prior to such issuance and
(ii) the number of additional shares of Common Stock to be
so issued (including the number of shares underlying
such rights, warrants, options or convertible or
exercisable securities); and
(2) no adjustment shall be made as a result of such issuance in the
number of Warrant Shares issuable on exercise of the Warrants.
For example, if on any given date the Corporation has 10,000,000
shares of Common Stock outstanding, the Corporation issues (in a
Qualifying Transaction or in an Excluded Transaction described in
clause (i) or (ii) of the definition of that term) warrants
exercisable at $3.00 per share to purchase an additional
1,000,000 shares of Common Stock for a purchase price of $5.00
per warrant and the Exercise Price per Share in effect
immediately prior to such issuance is $8.25 per share, then the
Exercise Price per Share shall be adjusted to $8.227 per share
(calculated as follows: $8.227 per share = [(10,000,000 shares x
$8.25 per share) + $8,000,000] / (10,000,000 shares + 1,000,000
shares), and no adjustment will be made in the number of Warrant
Shares issuable upon exercise of a Warrant.
d No change in either the Exercise Price per Share or the number of
Warrant Shares issuable upon exercise of the Warrants shall occur
solely as the result of the issuance by the Corporation at any time
after the Distribution Date of any shares of Common Stock (or any
rights, warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase any shares
of Common Stock or any stock appreciation rights entitling the holders
thereof to any interest in an increase in value, however measured, of
shares of Common Stock) in an Excluded Transaction described in clause
(iii) of the definition of that term.
e In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of
Directors or a duly authorized committee thereof (irrespective of the
accounting treatment thereof), and described in a resolution of the
Board of Directors or such committee. An adjustment made pursuant to
section 12(c) hereof shall become effective immediately upon the
effective date of the issuance resulting in such adjustment. Such
adjustment shall be made successively whenever any shares, rights,
warrants, options or convertible or exercisable securities are so
issued at an Effective Purchase Price per Share that is less than the
Exercise Price per Share in effect on the date of such issuance. To
the extent that any such rights, warrants, options or convertible or
exercisable securities or stock appreciation rights expire without
having been converted or exercised, each Warrant outstanding shall, as
of the date of such expiration, have the same Exercise Price per Share
as would have been the case had such expired rights, warrants,
options, convertible or exercisable securities or stock appreciation
rights not been issued, but such readjustment shall not affect the
Exercise Price per Share paid for any shares of Common Stock or other
shares of Capital Stock delivered upon any exercise prior to the date
such readjustment is made.
f In the event that the Corporation shall distribute to all holders of
its Common Stock any of its assets or debt securities, or rights,
options, warrants or convertible or exercisable securities of the
Corporation (including securities for cash, but excluding:
i0 distributions of Capital Stock referred to in section 12(b)
hereof,
ii0 distributions of rights, warrants, options, convertible or
exercisable securities or stock appreciation rights referred to
in section 12(c) hereof, if the decrease in the Exercise Price
per Share under section 12(c) hereof would be greater than the
decrease in the Exercise Price per Share under this section 12(f)
(with section 12(c) applying rather than this section 12(f)), and
iii0 cash dividends or other cash distributions that are paid out of
Consolidated Net Income for any dividend period, earned surplus
or retained earnings,
then in each such case:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to the difference between:
(a) the Exercise Price per Share in effect immediately
prior to such issuance and
(b) an amount equal to the then fair market value (as
reasonably determined by the Board of Directors, in
good faith and as described in a resolution of the
Board of Directors) of the portion of the assets or
debt securities of the Corporation so distributed or of
such rights, options, warrants or convertible or
exercisable securities applicable to one share of
Common Stock, and
(2) no adjustment shall be made in any such case in the number
of Warrant Shares issuable on exercise of the Warrants.
Such adjustment shall become effective immediately after the record
date for the determination of shares entitled to receive such
distribution. Notwithstanding the foregoing, no such adjustment shall
be made upon any such distribution if the plan or arrangement under
which such distribution is made provides for a distribution to holders
of Warrant Shares in the same pro rata amounts upon exercise of the
Warrants. Such adjustment shall be made successively whenever any
event listed above shall occur.
g If at any time, as a result of an adjustment made pursuant to this
section 12, the holder of any Warrant thereafter exercised shall
become entitled to receive any shares of the Corporation other than
shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares
contained in this section 12, and the provisions of this Warrant
Agreement with respect to the Warrant Shares shall apply on like terms
to such other shares.
h If any of the following events occur, namely:
i0 any reclassification or change of Warrant Shares (other than a
change in par value, or from par value to no par value, or from
no par value to par value, or as a result of subdivision or
combination);
ii0 any consolidation or merger of the Corporation with another
Person shall be effected as a result of which holders of Warrant
Shares shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in
exchange for Warrant Shares; or
iii0 any sale or conveyance of the properties and assets of the
Corporation as, or substantially as, an entirety to any other
Person;
then the Corporation or such successor or purchasing Person, as the
case may be, shall make provisions to establish that each Warrant then
outstanding shall be exercisable for the kind and amount of shares of
stock and other securities or property or assets (including cash)
receivable upon the occurrence of such event by a holder of Warrant
Shares immediately prior to such event. The Corporation shall not
consummate any such event unless, prior to or simultaneously with such
consummation, the successor Person (if other than the Corporation)
resulting from such consolidation or merger or the Person purchasing
such properties and assets shall assume by written instrument, the
obligation to deliver to each Warrant Holder the shares of stock,
securities or assets to which, in accordance with the foregoing
provisions, such holder may be entitled and all other obligations of
the Corporation under this Warrant Agreement. The provisions of this
section 12(h) shall similarly apply to successive reclassifications,
consolidations, mergers, sales and conveyances.
i Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrant, Warrant Certificates
theretofore or thereafter issued may continue to express the same
number and kind of shares as are stated on the Warrant Certificates
initially issuable pursuant to this Warrant Agreement.
j Anything in this section 12 to the contrary notwithstanding, the
Corporation shall be entitled to make such decreases in the Exercise
Price per Share and such increases in the number of Warrant Shares
issuable upon the exercise of each Warrant, in addition to those
adjustments required by this section 12, as it in its sole discretion
shall determine to be advisable in order that any dividends,
distributions or, issuances of securities, rights, options, warrants
or convertible or exchangeable securities made by the Corporation to
its stockholders shall not be taxable to them.
13 Notices to Holders.
a Upon any adjustment pursuant to section 12 hereof in the Exercise
Price per Share or in the number of Warrant Shares issuable upon
exercise of a Warrant, the Corporation shall promptly but in any event
within 30 days thereafter, cause to be given to each of the Warrant
Holders, at its address appearing on the Warrant Register by
registered mail, postage prepaid, return receipt requested, a
certificate signed by its chairman, president or chief financial
officer setting forth the Exercise Price per Share and the number of
Warrant Shares purchasable upon exercise of a Warrant as so adjusted
and describing in reasonable detail the facts accounting for such
adjustment and the method of calculation used. When appropriate, such
certificate may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this
section 13.
b In the event:
i0 that the Corporation shall authorize the issuance to all holders
of Common Stock of rights or warrants to subscribe for or
purchase Capital Stock of the Corporation or of any other
subscription rights or warrants;
ii0 that the Corporation shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or
assets (including, without limitation, cash dividends or cash
distributions payable out of consolidated earnings or earned
surplus or dividends payable in Common Stock);
iii0 of any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the
Corporation is required, or of the conveyance or transfer of the
properties and assets of the Corporation substantially as an
entirety, or of any capital reorganization or reclassification or
change of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination);
iv0 of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; or
iv0 that the Corporation proposes to take any other action which
would require an adjustment in the Exercise Price per Share or in
the number of Warrant Shares or other securities or assets to
which each holder is entitled pursuant to section 12 hereof;
then the Corporation shall cause to be given to each of the Warrant
Holders at its address appearing on the Warrant Register, at least 30
calendar days prior to the applicable record date, if any, hereinafter
specified, or, if no such record date is specified, 30 calendar days
prior to the taking of any action referred to in clauses (i) through
(v) above (except that, if the action taken by the Corporation is an
issuance described in section 12(c)(i) or (ii) hereof, then as
promptly as possible but in no event later than the date that the
Corporation provides public notice of such issuance), by registered
mail, postage prepaid, return receipt requested, a written notice
stating (i) the date as of which the holders of record of Common Stock
to be entitled to receive any such rights, warrants or distribution
are to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective, or (iii) the date as of
which any such other action is to be effected, and, if applicable and
known to the Corporation, the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up; provided, however, that in the
event that the Corporation provides public notice of such proposed
action or event specifying the information set forth above at least 10
days prior to the proposed record date or effective date, then the
Corporation shall be deemed to have satisfied its obligation to
provide notice pursuant to this section 13(b). The failure to give the
notice required by this section 13 or any defect therein shall not
affect the legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up or other action referred to above, or the vote upon any
such action.
c The Corporation shall promptly, but in any event no less than 30 days
prior to the effective date of any Change in Control, cause to be
given to each of the registered holders of the Warrants, at its
address appearing on the Warrant Register by registered mail, postage
prepaid, return receipt requested, written notice of the pendency of
such Change in Control.
14 Restrictions on Transfer; Subsequent Transferees as Third Party
Beneficiaries.
a The Warrant Holder (i)~represents that it is acquiring the Warrants
for its own account for investment and not with a view to any
distribution or public offering within the meaning of the Securities
Act, (ii)~acknowledges that the Warrants and the Warrant Shares
issuable upon exercise thereof have not been registered under the
Securities Act or any state securities laws and (iii)~agrees that it
will not sell or otherwise transfer any of its Warrants or Warrant
Shares except upon the terms and conditions specified herein, provided
that the Warrant Holders may sell the Warrants or the Warrant Shares
purchased upon exercise of the Warrants in one or more private
transactions not requiring registration under the Securities Act.
b Except as otherwise provided in section~14(d) hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to a
Warrant Holder shall include a legend in substantially the following
form (with such changes therein as may be appropriate to reflect
whether such legend refers to Warrants or Warrant Shares), provided
that such legend shall not be required if such transfer is being made
in connection with a sale which is exempt from registration pursuant
to Rule~144 under the Securities Act or if the opinion of counsel
referred to in section~14(c) hereof is to the further effect that
neither such legend nor the restrictions on transfer in this
section~14 are required in order to ensure compliance with the
Securities Act:
THE [WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS,]
[SHARES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
c Each Warrant Holder wishing to effect such a transfer of any Warrant
or Warrant Shares shall furnish to the Corporation an agreement by the
transferee thereof that it is taking and holding the same subject to
the terms and conditions specified herein and a written opinion of
such Warrant Holder's counsel, in form reasonably satisfactory to the
Corporation, to the effect that the proposed transfer may be effected
without registration under the Securities Act and any applicable state
securities laws.
d The restrictions set forth in this section~14 shall terminate and
cease to be effective with respect to any Warrants or Warrant Shares
registered under the Securities Act or receipt by the Corporation of
an opinion of counsel, in form reasonably satisfactory to the
Corporation, to the effect that compliance with such restrictions is
not necessary in order to comply with the Securities Act and any
applicable state securities laws with respect to the transfer of the
Warrants and/or the Warrant Shares. Whenever such restrictions shall
so terminate the holder of such Warrants and/or Warrant Shares shall
be entitled to receive from the Corporation, without expense (other
than transfer taxes, if any), Warrant Certificates or certificates for
such Warrant Shares not bearing the legend set forth in section~14(b)
hereof and the Corporation will rescind any transfer restrictions
relating thereto.
e It is the intention of the parties hereto that each Warrant Holder who
acquires Warrants by transfer be a third party beneficiary, to the
extent of Warrants acquired and held by such Warrant Holder, of the
provisions of this Warrant Agreement that bestow rights on Warrant
Holders.
15 Covenants. Holdings covenants to include in any filings made with any
taxing authority the issuance of these warrants as being pursuant to the
plan of reorganization (with respect to the distribution of the Corporation
by IFG).
16 Amendments and Waivers. Any provision of this Warrant Agreement may be
amended, supplemented, waived, discharged or terminated by a written
instrument signed by the Corporation and the holders of not less than a
majority of the outstanding Warrants, provided that the Exercise Price per
Share may not be increased by amendment, the number of Warrant Shares
issuable upon exercise of the Warrants may not be reduced by amendment and
this section~15 may not be changed by amendment except with the unanimous
consent of the holders of outstanding Warrants.
17 Specific Performance. The holders of the Warrants shall have the right to
specific performance by the Corporation of the provisions of this Warrant
Agreement. The Corporation hereby irrevocably waives, to the extent that it
may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Corporation for specific
performance of this Warrant Agreement by the holders of the Warrants.
18 Notices.
a Any notice or demand to be given or made by the Warrant Holders or the
holders of Warrant Shares to or on the Corporation pursuant to this
Warrant Agreement shall be sufficiently given or made if sent by
registered mail, return receipt requested, postage prepaid, addressed
to the Corporation at the Warrant Office.
b Any notice to be given by the Corporation to the Warrant Holders or
the holders of Warrant Shares shall be sufficiently given or made if
sent by registered mail, return receipt requested, postage prepaid,
addressed to such holder as such holder's name and address shall
appear on the Warrant Register or the Common Stock registry of the
Corporation, as the case may be.
19 Binding Effect. This Warrant Agreement shall be binding upon and inure to
the sole and exclusive benefit of the Corporation and the Warrant Holder,
and their respective successors and assigns.
20 Continued Validity. A holder of Warrant Shares shall continue to be
entitled with respect to such Warrant Shares to all rights and subject to
all obligations to which it would have been entitled or subject as a holder
under sections~14 through 22 hereof.
21 Counterparts. This Warrant Agreement may be executed in one or more
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
22 New York Law. THIS WARRANT AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
23 Benefits of This Agreement. Nothing in this Warrant Agreement shall be
construed to give any Person other than the Corporation and the Warrant
Holder any legal or equitable right, remedy or claim under this Warrant
Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Warrant Agreement to
be duly executed and delivered by their proper and duly authorized officers, as
of the date and year first above written.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ Andrew L. Farkas
-----------------------
Name: Andrew L. Farkas
Title: Chairman and Chief Executive Officer
APTS V, L.L.C.
By: APTS Partners, L.P., the managing member
By: APTS GP Partners, L.P., its general partner
By: APTS Acquisition Corporation, its general partner
By:/s/ John R. S. Jacobsson
---------------------------
Name: John R. S. Jacobsson
Title: Vice President
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS, REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
EXERCISABLE ONLY ON OR BEFORE
JANUARY 1, 1999
[Date] Warrant Certificate Warrant No. [ ]
This Warrant Certificate is one of the Warrant Certificates referred to in
the Warrant Agreement dated as of September 15, 1998 (the "Warrant Agreement")
between the Corporation and APTS V, L.L.C., a Delaware limited liability
company. The Warrant Agreement is hereby incorporated by reference in and made a
part of this instrument and is hereby referred to for a description of the
rights, limitations, obligations, duties and immunities thereunder of the
Corporation and the holders of Warrants. Terms defined in the Warrant Agreement
and used herein have the same meanings herein as therein.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of _____ Warrants to purchase shares of Common Stock of
INSIGNIA/ESG HOLDINGS, INC., a Delaware corporation (the "Corporation"). Each
Warrant entitles the holder, but only subject to the conditions set forth herein
and in the Warrant Agreement, to purchase from the Corporation before 5:00~PM,
New York City time, on the Expiration Date, one fully paid and nonassessable
share of Common Stock (subject to adjustment as described below) at a price
equal to the Exercise Price per Share.
The Exercise Price per Share shall be payable in lawful money of the United
States of America. The Warrants represented by this certificate may be exercised
by surrender of this Warrant Certificate, along with an executed copy of the
annexed Form of Election to Purchase and payment of the applicable Exercise
Price at the office of the Corporation at 200 Park Avenue, New York, New York
10166, or such other address as the Corporation may specify in writing to the
registered holder of the Warrants evidenced hereby. The Exercise Price per Share
and the number of shares of Common Stock purchasable upon exercise of the
Warrants is subject to adjustment prior to the Expiration Date as set forth in
the Warrant Agreement.
No Warrant may be exercised after 5:00~PM, New York City time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00~PM, New
York City time, on the Expiration Date.
The Corporation may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary.
This Warrant Certificate, when surrendered at the Warrant Office by the
registered holder hereof in person or by a legal representative duly authorized
in writing, may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor registered
in the name of the holder and representing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to
be signed by its duly authorized officers and has caused its corporate seal to
be affixed hereunto.
INSIGNIA/ ESG HOLDINGS, INC.
By:__________________________
Name:
Title:
(CORPORATE SEAL)
ATTEST
____________________________
Secretary
<PAGE>
ANNEX TO FORM OF WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise, in accordance with
section 6(b) of the Warrant Agreement, Warrants, representing the right to
purchase shares of Common Stock, and herewith tenders payment for such shares of
Common Stock to the order of the Corporation in the amount of $ as payment of
the exercise price in accordance with the terms hereof.
The undersigned requests that a certificate for such shares of Common Stock
be registered in the name of whose address is and that such certificate be
delivered to whose address is . If said number of shares of Common Stock is less
than all of the shares of Common Stock purchasable hereunder, the undersigned
hereby requests that a new Warrant Certificate representing the remaining
balance of the Warrants be registered in the name of whose address is and that
such Warrant Certificate be delivered to whose address is .
Signature:
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:
LOANS/GOTHWAR
0839/39038-028 NYLIB2/549878 v4 09/22/98 09:02 AM (10559)
WARRANT AGREEMENT dated as of September 15, 1998 between Insignia/ESG
Holdings, Inc., a Delaware corporation (the "Corporation"), and Gotham Partners,
L.P., a Delaware limited partnership ("Gotham").
Preliminary Statement
This Warrant Agreement sets forth the terms and conditions of Warrants
transferred to Gotham in connection with the exchange of the warrants held by
Gotham to purchase shares of Class A Common Stock, par value $.01 per share, of
Insignia Financial Group, Inc. ("IFG") under the Amended and Restated Warrant
Agreement dated as of November 7, 1995 between IFG and Gotham, such exchange
resulting from the distribution by IFG to its stockholders of all of the then
outstanding shares of Common Stock of the Corporation in a transaction intending
to qualify as a tax-free distribution and reorganization under Sections 355 and
368 of the Internal Revenue Code.
Accordingly, the parties hereto agree as follows.
1. Definitions. As used in this Warrant Agreement, the following terms shall
have the following meanings, unless the context otherwise requires.
a. "Aggregate Consideration Receivable" by the Corporation in connection
with the issuance of any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities entitling
the holders thereof to subscribe for or purchase any shares of Common
Stock or any stock appreciation rights entitling the holders thereof
to any interest in an increase in value, however measured, of shares
of Common Stock) shall mean the sum of:
i. the aggregate consideration paid to the Corporation for such
shares, rights, warrants, options or convertible or exercisable
securities, and
ii. the aggregate consideration or premiums stated in such rights,
warrants, options or convertible or exercisable securities to be
payable for the shares of Common Stock covered thereby.
In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of
Directors or a duly authorized committee thereof (irrespective of the
accounting treatment thereof), and described in a resolution of the
Board of Directors or such committee.
b. "Board of Directors" shall mean the board of directors of the
Corporation.
c. "Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are required by
law to close.
d. "Capital Stock" shall mean any and all shares, rights to purchase,
warrants, options, convertible securities, participations in or other
equivalents of or interests (other than security interests) in
(however designated and whether voting or nonvoting) corporate stock.
e. "Change in Control" shall mean the occurrence of any of the following
events:
i. Andrew Farkas has ceased to serve on a full-time basis as the
Chief Executive Officer of the Corporation for any reason;
ii. Andrew Farkas has ceased to own beneficially (within the meaning
of rule 13d-3 promulgated under the Exchange Act) at least
700,000 shares of Common Stock (as adjusted to reflect stock
dividends or distributions, subdivisions or reclassifications,
splits and combinations);
iii. any Person or group (within the meaning of section 13(d)(3) or
14(d)(2) of the Exchange Act) other than a group controlled by
Andrew Farkas or by Gotham or any affiliate of Andrew Farkas or
Gotham acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 45% or more of the
number of shares of Common Stock or the combined voting power of
Voting Stock of the Corporation outstanding immediately prior to
such acquisition;
iv. individuals who, as of the Distribution Date, constitute the
Board of Directors and individuals nominated or elected to serve
on the Board of Directors by individuals described in this
section 2(f)(iv) cease for any reason to constitute at least a
majority of the Board of Directors; and
v. the Corporation consummates any merger or consolidation (other
than a Permitted Merger or Consolidation) of the Corporation with
or into any other entity, the sale of all or substantially all of
the assets of the Corporation, the reorganization, liquidation or
dissolution of the Corporation, or any similar transaction or
event.
f. "Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Corporation and, in the case of a reclassification,
recapitalization or other similar change in such Common Stock or in
the case of a consolidation or merger of the Corporation with or into
another Person, such consideration to which a holder of a share of
Common Stock would have been entitled upon the occurrence of such
event.
g. "Common Stock Equivalents" shall mean, without double counting:
i. shares of Common Stock, where one share of Common Stock shall
constitute one Common Stock Equivalent;
ii. shares of Capital Stock convertible into Common Stock, where any
one share of Capital Stock shall constitute a number of Common
Stock Equivalents equal to the number of shares of Common Stock
issuable in respect of such share of Capital Stock;
iii. any rights, warrants, options and convertible or exercisable
securities entitling the holder thereof to subscribe for or
purchase any shares of Common Stock, where any such rights,
warrants, options and convertible or exercisable securities shall
constitute a number of Common Stock Equivalents equal to the
number of shares of Common Stock issuable in respect of such
rights, warrants, options or convertible or exercisable
securities; and
iv. any stock appreciation rights entitling the holders thereof to
any interest in an increase in value, however measured, of shares
of Common Stock, where any such stock appreciation rights shall
constitute a number of Common Stock Equivalents equal to the
Common Stock equivalent, as nearly as it may be calculated, of
such stock appreciation rights.
h. "Corporation" shall mean Insignia /ESG Holdings, Inc., a Delaware
corporation.
i. "Distribution" shall mean the distribution by Insignia Financial
Group, Inc. to its stockholders of all of the then outstanding shares
of Common Stock of the Corporation.
j. "Distribution Date" shall mean the record date for the Distribution.
k. "Effective Purchase Price per Share" at which the Corporation issues
any shares of Common Stock (or any rights, warrants, options or
convertible or exercisable securities entitling the holders thereof to
subscribe for or purchase any shares of Common Stock or any stock
appreciation rights entitling the holders thereof to any interest in
an increase in value, however measured, of shares of Common Stock)
shall mean an amount equal to the ratio of:
i. the Aggregate Consideration Receivable by the Corporation in
connection with the issuance of such shares of Common Stock (or
any such rights, warrants, options, convertible or exercisable
securities or stock appreciation rights) to
ii. the number of shares of Common Stock so issued (or issuable upon
the exercise or conversion of such rights, warrants, options or
convertible or exercisable securities or the Common Stock
Equivalents, as nearly as it may be calculated, of such stock
appreciation rights).
l. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
m. "Excluded Transaction" shall mean any of the following transactions:
i. the issuance of any shares of Capital Stock of the Corporation to
employees or directors of the Corporation under an employee
benefit plan or arrangement adopted by the Corporation, whether
or not referred to or described in the Form 10;
ii. the issuance of Common Stock Equivalents in an amount not to
exceed 200,000 (as adjusted, as appropriate, to reflect any stock
dividends, distributions, subdivisions, reclassifications or
combinations of the Common Stock), provided that, within 10
Business Days following such issuance, the Corporation has
furnished to each Warrant Holder written notice of the fact that
the Corporation intends to treat such issuance as an Excluded
Transaction within the meaning of this clause (ii); and
iii. any issuance of securities referred to or described in the Form
10.
n. "Exercise Price per Share" of any Warrant shall mean:
i. until adjusted in accordance with section 12 hereof, an amount
equal to $8.25 per share, and
ii. thereafter, such other amount as may from time to time be
determined in accordance with the provisions of section 12
hereof.
o. "Expiration Date" shall mean January 1, 1999.
p. "Fair Market Value" of a share of Common Stock as of any date shall
mean, as of any date, the average of the closing prices of Common
Stock for the 20 consecutive Trading Days next preceding the date five
days prior to the date in question. The closing price for each day
shall be:
i. the average of the closing sale price or, in the absence of a
closing sale price, the highest bid and lowest asked prices of
one share of Common Stock quoted in the NYSE Composite Tape or,
if not then listed on the NYSE, the NASDAQ National Market System
or any similar system of automated dissemination of quotations of
securities prices then in common use, if so quoted; or
ii. if not quoted as described in clause (i), the average of the
highest bid and lowest offered quotations for Common Stock as
reported by the National Quotation Bureau Incorporated if at
least two securities dealers have inserted both bid and offered
quotations for Common Stock on at least five of the 20
consecutive Trading Days next preceding the date five days prior
to the date in question; or
iii0 if the Common Stock is listed or admitted for trading on any
national securities exchange, the last sale price, or the closing
bid price if no sale occurred, of Common Stock on the principal
securities exchange on which the Common Stock is listed or
admitted for trading.
If none of the conditions set forth above is met, the closing price of
Common Stock on any day or the average of such closing prices for any
period shall be the Fair Market Value of Common Stock for such day or
period as determined by a member firm of the NYSE selected by the
Corporation and approved by the Holders of a majority of the
outstanding Warrants. If the Corporation and such Holders are unable
to agree on the selection of a member firm, then the issue of
selection of a member firm shall be submitted to the American
Arbitration Association.
q "Form 10" shall mean the Registration Statement on Form 10 of the
Corporation with respect to the Common Stock in the form in which it
is declared effective by the Securities and Exchange Commission.
r "GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles
Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently
applied for all periods after the date hereof so as to properly
reflect the financial condition, results of operations and changes in
financial position of any Person, except that any accounting principle
or practice required to be changed by such Accounting Principles Board
or Financial Accounting Standards Board (or other appropriate board or
committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
s "Gotham" shall mean Gotham Partners, L.P., a Delaware limited
partnership.
t "Merger Transaction" shall mean any business combination transaction
or series of transactions involving the Corporation, regardless of
whether such transactions take the form of a merger, purchase and sale
of securities, purchase or sale of assets or otherwise, immediately
prior to which, following which or in connection with which a Change
in Control occurs.
u "NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
v "NYSE" shall mean the New York Stock Exchange.
w "Permitted Merger or Consolidation" shall mean any merger or
consolidation of the Corporation:
i0 with or into any wholly owned Subsidiary; or
ii0 immediately after which Persons who were stockholders of the
Corporation prior to such merger or consolidation hold at least
80% of the outstanding shares of Capital Stock of the Corporation
measured by voting power.
x "Person" shall mean an individual, corporation, joint venture, general
or limited partnership, trust, unincorporated organization, limited
liability company, limited liability partnership, government or any
agency or political subdivision thereof, association, sole
proprietorship or any other form of entity not specifically listed
herein.
y "Qualifying Transaction" shall mean:
i0 any acquisition by the Corporation of stock or other assets of
any kind in exchange, in whole or in part, for shares of any
class of Capital Stock of the Corporation; and
ii0 any transaction in which shares of Capital Stock of the
Corporation are issued for cash proceeds;
provided, however, that the term "Qualifying Transaction" shall not
include a Merger Transaction.
z "Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute.
aa "Subsidiary" shall mean:
i0 any corporation 50% or more of the Voting Stock of which is
owned, directly or indirectly, by the Corporation; or
ii0 any other Person whose accounts are required under GAAP to
be included in the Corporation's consolidated financial
statements,
but shall exclude limited partnerships.
bb "Trading Day" shall mean, with respect to the Common Stock: (i)
if the Common Stock is quoted on the NYSE, the NASDAQ National
Market System, any similar system of automated dissemination of
quotations of securities prices, or the National Quotation Bureau
Incorporated, each day on which quotations may be made on such
system; or (ii) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such
national securities exchange is open for business; or (iii)~if
shares of the Corporation's Common Stock are not quoted on any
system or listed or admitted for trading on any securities
exchange, a Business Day.
cc "Voting Stock" shall mean, with respect to any Person, all
classes of Capital Stock of such Person then outstanding and
normally entitled to vote for the election of directors of such
Person. Any reference to a percentage of Voting Stock shall refer
to the percentage of votes eligible to be cast for the election
of directors which are attributable to the applicable shares of
Voting Stock.
dd "Warrant Agreement" shall mean this warrant agreement.
ee "Warrant Certificate" shall mean a certificate evidencing one or
more Warrants, substantially in the form of Exhibit~A hereto.
ff "Warrant Holder" shall mean Gotham, as the original registered
holder of the Warrants, and any registered transferee of a
Warrant Holder.
gg "Warrant Office" shall mean the office or agency of the
Corporation at which the Warrant Register shall be maintained and
where the Warrants may be presented for exercise, exchange,
substitution and transfer, which office or agency will be the
office of the Corporation at 200 Park Avenue, New York, New York
10166, which office or agency may be changed by the Corporation
pursuant to notice in writing to the Persons named in the Warrant
Register as the holders of the Warrants.
hh "Warrant Register" shall mean the register, substantially
maintained by the Corporation at the Warrant Office.
ii "Warrant Shares" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants, as the same may be
adjusted from time to time pursuant to section 12 hereof, and any
other shares of Capital Stock issued or issuable upon the
exercise of the Warrants pursuant to section 12 hereof.
jj "Warrants" shall mean the warrants to purchase Common Stock
issued by the Corporation pursuant to this Warrant Agreement;
individually, a "Warrant."
2 Representations and Warranties. The Corporation hereby represents and
warrants as follows:
a The Corporation is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has the
corporate power and authority to conduct its business as presently
conducted, has the corporate power and authority to execute and
deliver this Warrant Agreement and the Warrant Certificates, to issue
the Warrants and to perform its obligations under this Warrant
Agreement and the Warrant Certificates.
b The execution, delivery and performance by the Corporation of this
Warrant Agreement and the Warrant Certificates, the issuance of the
Warrants, and the issuance of the Warrant Shares upon exercise of the
Warrants have been duly authorized by all necessary corporate action.
c This Warrant Agreement has been duly executed and delivered by the
Corporation and constitutes a legal, valid, binding and enforceable
obligation of the Corporation. When the Warrants and Warrant
Certificates have been issued as contemplated hereby the Warrants and
the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Corporation. The Warrant Shares, when
issued upon exercise of the Warrants in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and
nonassessable shares of the Common Stock or, in the event of an
adjustment pursuant to section 12, other shares of Capital Stock.
Statements in this section 2(c) as to validity, binding effect and
enforceability are subject to (i) limitations as to enforceability
imposed by bankruptcy, reorganization, moratorium, insolvency and
other laws of general application relating to or affecting the
enforceability of creditors' rights, including, without limitation,
limitations as to enforceability that may be imposed under Section 548
of the United States Bankruptcy Code, Article 10 of the New York
Debtor Creditor Law or other provisions of law relating to fraudulent
transfers and obligations and (ii) equitable principles limiting the
availability of equitable remedies.
3 Number of Warrants. The Corporation hereby agrees to issue and deliver to
Gotham on the Distribution Date Warrant Certificates evidencing 42,500
Warrants.
4 Registration, Transfer and Exchange of Certificates.
a The Corporation shall maintain at the Warrant Office the Warrant
Register for registration of the Warrants and Warrant Certificates and
transfers thereof. On the Distribution Date the Corporation shall
register the Warrants and Warrant Certificates in the Warrant Register
in the name of the Warrant Holder. The Corporation may deem and treat
the registered holders of the Warrant Certificates as the absolute
owners thereof and the Warrants represented thereby (notwithstanding
any notation of ownership or other writing on the Warrant Certificates
made by any person) for the purpose of any exercise thereof or any
distribution to the Warrant Holders thereof, and for all other
purposes, and the Corporation shall not be affected by any notice to
the contrary.
b Subject to section 14 hereof, the Corporation shall register the
transfer of any outstanding Warrants in the Warrant Register upon
surrender of the Warrant Certificates evidencing such Warrants to the
Corporation at the Warrant Office, accompanied (if so required by it)
by a written instrument or instruments of transfer in form
satisfactory to it, duly executed by the registered holder or holders
thereof or by the duly appointed legal representative thereof. Upon
any such registration of transfer, new Warrant Certificates evidencing
such transferred Warrants shall be issued to the transferee and the
surrendered Warrant Certificates shall be cancelled. If less than all
the Warrants evidenced by Warrant Certificates surrendered for
transfer are to be transferred, new Warrant Certificates shall be
issued to the holder surrendering such Warrant Certificates evidencing
such remaining number of Warrants.
c Warrant Certificates may be exchanged at the option of the holders
thereof when surrendered to the Corporation at the Warrant Office, for
another Warrant Certificate or other Warrant Certificates of like
tenor and representing in the aggregate a like number of Warrants.
Warrant Certificates surrendered for exchange shall be cancelled.
d No charge shall be made for any such transfer or exchange except for
any tax or other governmental charge imposed in connection therewith.
Except as provided in section 14(b) hereof, each Warrant Certificate
issued upon transfer or exchange shall bear the legend set forth in
section 14(b) hereof if the Warrant Certificate presented for transfer
or exchange bore such legend.
5 Mutilated or Missing Warrant Certificates. If any Warrant Certificate shall
be mutilated, lost, stolen or destroyed, the Corporation shall issue, in
exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon
receipt of evidence satisfactory to the Corporation of such loss, theft or
destruction of such Warrant Certificate and, if requested, indemnity
satisfactory to it. The Corporation acknowledges that a written indemnity
by the Warrant Holder shall be satisfactory to the Corporation for such
purpose. No service charge shall be made for any such substitution, but all
expenses and reasonable charges associated with procuring such indemnity
and all stamp, tax and other governmental duties that may be imposed in
relation thereto shall be borne by the holder of such Warrant Certificate.
Each Warrant Certificate issued in any such substitution shall bear the
legend set forth in section 14(b) hereof if the Warrant Certificate for
which such substitution was made bore such legend.
6 Duration and Exercise of Warrants.
a The Warrants evidenced by a Warrant Certificate shall be exercisable
in whole or in part by the registered holder thereof on any Business
Day after the Distribution Date and on or before 5:00 PM, New York
City time, on the Expiration Date.
b Upon presentation to the Corporation at the Warrant Office of the
Warrant Certificate evidencing the Warrants to be exercised, with the
form of election to purchase attached thereto duly completed, signed
by the Warrant Holder, and upon payment of an amount equal to the
product of:
i0 the Exercise Price per Share; and
ii0 the number of Warrant Shares being purchased,
in lawful money of the United States of America, the Corporation shall
issue and cause to be delivered to or upon the written order of the
registered holders of such Warrants and in such name or names as such
registered holder may designate, a certificate for the Warrant Share
or Warrant Shares issued upon such exercise of the Warrants being
exercised. Any Persons so designated to be named therein shall be
deemed to have become Warrant Holders of record of such Warrant Share
or Warrant Shares as of the date of exercise of such Warrants.
Any Persons so designated to be named therein shall be deemed to have
become holders of record of such Warrant Share or Warrant Shares as of
the date of exercise of such Warrants.
c If less than all of the Warrants evidenced by a Warrant Certificate
are exercised at any time, a new Warrant Certificate or Certificates
shall be issued for the remaining number of Warrants evidenced by such
Warrant Certificate. Each new Warrant Certificate so issued shall bear
the legend set forth in section 14(b) hereof if the Warrant
Certificate presented in connection with partial exercise thereof bore
such legend. All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled.
7 No Fractional Shares. The Corporation shall not be required to issue
fractional Warrant Shares upon exercise of the Warrants but shall pay for
any such fraction of a share an amount in cash equal to such fraction of
the Fair Market Value of a share of Common Stock.
8 Payment of Taxes. The Corporation will pay all taxes attributable to the
initial issuance of Warrant Shares to a Warrant Holder upon the exercise of
his Warrants, provided that the Corporation shall not be required to pay
any income tax incurred by the Warrant Holder or the holder of the Warrant
Shares upon exercise of the Warrants or issuance of the Warrant Shares.
9 Stockholder Rights.
a Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof
the right to vote or to consent or to receive notice as a stockholder
in respect of the meetings of stockholders or the election of
directors of the Corporation or any other matter, or any rights
whatsoever as a stockholder of the Corporation.
b Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the
registered holders thereof to purchase any securities or as imposing
any liabilities on such Warrant Holders as stockholders of the
Corporation, whether such obligation or liabilities are asserted by
the Corporation or by creditors of the Corporation.
10 Reservation and Issuance of Warrant Shares.
a The Corporation will at all times have authorized, and reserve and
keep available, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants,
the number of shares of Common Stock deliverable upon exercise of all
outstanding Warrants.
b The Corporation will take any corporate action which may be necessary
in order that the Corporation may validly and legally issue fully paid
and nonassessable Warrant Shares at the Exercise Price per Share.
c The Corporation covenants that all Warrant Shares will, upon issuance
to the Warrant Holder in accordance with the terms of this Warrant
Agreement and the Corporation's certificate of incorporation, be fully
paid and nonassessable and free from all taxes with respect to the
issuance thereof and from all liens, charges and security interests
(other than any created by or on behalf of any Warrant Holder).
11 Obtaining of Governmental Approvals and Stock Exchange Listings. The
Corporation will, at its own expense, from time to time take all action
which may be necessary to obtain and keep effective any and all permits,
consents, orders and approvals of governmental agencies and authorities
which are or become requisite in connection with the issuance, sale,
transfer and delivery of the Warrant Certificates and the exercise of the
Warrants and the issuance, sale, transfer and delivery of the Warrant
Shares, and all action which may be necessary so that any Common Stock,
immediately upon its issuance upon the exercise of Warrants, will be listed
on each securities exchange or listing or quotation service, if any, on
which the Common Stock is then listed.
12 Adjustment of Exercise Price per Share and number of Warrant Shares
issuable on exercise of Warrants.
a Prior to the Expiration Date, the Exercise Price per Share, and in
some cases the number of Warrant Shares issuable upon exercise of each
Warrant, are subject to adjustment from time to time in the manner
provided in this section 12 upon the occurrence of any of the events
enumerated in this section~12.
b In the event that the Corporation shall at any time after the
Distribution Date:
i0 declare a dividend or make a distribution on any series of its
Common Stock in shares of any series of its Common Stock;
ii0 subdivide or reclassify shares of any series of its outstanding
Common Stock into a greater number of shares;
iii0 combine shares of any series of its outstanding Common Stock into
a smaller number of shares;
iv0 pay a dividend or make a distribution on any series of its Common
Stock in shares of any series of its Capital Stock other than
Common Stock; or
v0 issue by reclassification of any series of its Common Stock
shares of any series of its Capital Stock;
then each Warrant outstanding on the record date for such dividend or
distribution or on the effective date of such subdivision,
reclassification or combination shall thereafter entitle the holder
thereof to receive the aggregate number and kind of shares, other
securities and property which, if such Warrant had been exercised
immediately prior to such time, such holder would have owned or have
become entitled to receive by virtue of such dividend, distribution,
subdivision, reclassification or combination and, if after such
dividend, distribution, subdivision, reclassification or combination
the Warrants continue to represent the right to purchase only shares
of Common Stock (and not other securities or property), the Exercise
Price per Share shall be adjusted to be an amount equal to the product
of:
(x) the Exercise Price per Share in effect immediately prior to such
dividend, distribution, subdivision, reclassification or
combination and
(y) the ratio of:
(1) the number of shares of Common Stock issuable on exercise of
a single Warrant immediately before giving effect to the
dividend, distribution, subdivision, reclassification or
combination and
(2) the number of shares of Common Stock issuable on exercise of
a single Warrant immediately after giving effect to such
dividend, distribution, subdivision, reclassification or
combination.
If after such dividend, distribution, subdivision, reclassification or
combination the Warrants represent the right to purchase securities
other than shares of Common Stock or other property, the Exercise
Price per Share shall be adjusted equitably. An adjustment made
pursuant to this section 12(b) shall become effective immediately
after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the
case of subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall
occur.
c
i0 "Full-ratchet" Anti-dilution Adjustment. In the event that the
Corporation shall at any time after the Distribution Date issue
any shares of Common Stock (or any rights, warrants, options or
convertible or exercisable securities entitling the holders
thereof to subscribe for or purchase any shares of Common Stock,
or any stock appreciation rights entitling the holders thereof to
any interest in an increase in value, however measured, of shares
of Common Stock) other than in a Qualifying Transaction and other
than in an Excluded Transaction, at an Effective Purchase Price
per Share less than the Exercise Price per Share in effect
immediately prior to such issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to such Effective Price per Share and
(2) no adjustment shall be made as a result of such issuance in
the number of Warrant Shares issuable on exercise of the
Warrants.
For example, if on any given date the Corporation issues (other
than in a Qualifying Transaction and other than in an Excluded
Transaction) warrants exercisable at $3.00 per share to purchase
shares of Common Stock for a purchase price of $5.00 per warrant
and the Exercise Price per Share in effect immediately prior to
such issuance is $8.25 per share, then the Exercise Price per
Share will be adjusted to $8.00 per share and no adjustment will
be made in the number of Warrant Shares issuable upon exercise of
a Warrant.
ii0 "Proportional" Anti-dilution Adjustment. In the event that
the Corporation shall at any time after the Distribution
Date issue any shares of Common Stock (or any rights,
warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase
any shares of Common Stock, or any stock appreciation rights
entitling the holders thereof to any interest in an increase
in value, however measured, of shares of Common Stock) in a
Qualifying Transaction or in an Excluded Transaction
described in clause (i) or (ii) of the definition of that
term, at an Effective Purchase Price per Share less than the
Exercise Price per Share in effect immediately prior to such
issuance, then:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to the ratio of:
(a) the sum of:
(i) the product of:
1 the number of shares of Common Stock
outstanding immediately prior to such
issuance and
2 the Exercise Price per Share in effect
immediately prior to such issuance and
(ii) the Aggregate Consideration Receivable
by the Corporation in connection with such
issuance, to
(b) the sum of:
(i) the number of shares of Common Stock
outstanding immediately prior to such issuance and
(ii) the number of additional shares of Common Stock
to be so issued (including the number of shares
underlying such rights, warrants, options or
convertible or exercisable securities); and
(2) no adjustment shall be made as a result of such issuance in
the number of Warrant Shares issuable on exercise of the
Warrants.
For example, if on any given date the Corporation has 10,000,000
shares of Common Stock outstanding, the Corporation issues (in a
Qualifying Transaction or in an Excluded Transaction described in
clause (i) or (ii) of the definition of that term) warrants
exercisable at $3.00 per share to purchase an additional
1,000,000 shares of Common Stock for a purchase price of $5.00
per warrant and the Exercise Price per Share in effect
immediately prior to such issuance is $8.25 per share, then the
Exercise Price per Share shall be adjusted to $8.227 per share
(calculated as follows: $8.227 per share = [(10,000,000 shares x
$8.25 per share) + $8,000,000] / (10,000,000 shares + 1,000,000
shares), and no adjustment will be made in the number of Warrant
Shares issuable upon exercise of a Warrant.
d No change in either the Exercise Price per Share or the number of
Warrant Shares issuable upon exercise of the Warrants shall occur
solely as the result of the issuance by the Corporation at any time
after the Distribution Date of any shares of Common Stock (or any
rights, warrants, options or convertible or exercisable securities
entitling the holders thereof to subscribe for or purchase any shares
of Common Stock or any stock appreciation rights entitling the holders
thereof to any interest in an increase in value, however measured, of
shares of Common Stock) in an Excluded Transaction described in clause
(iii) of the definition of that term.
e In case all or any portion of the consideration to be received by the
Corporation may be paid in a form other than cash, the value of such
consideration shall be determined in good faith by the Board of
Directors or a duly authorized committee thereof (irrespective of the
accounting treatment thereof), and described in a resolution of the
Board of Directors or such committee. An adjustment made pursuant to
section 12(c) hereof shall become effective immediately upon the
effective date of the issuance resulting in such adjustment. Such
adjustment shall be made successively whenever any shares, rights,
warrants, options or convertible or exercisable securities are so
issued at an Effective Purchase Price per Share that is less than the
Exercise Price per Share in effect on the date of such issuance. To
the extent that any such rights, warrants, options or convertible or
exercisable securities or stock appreciation rights expire without
having been converted or exercised, each Warrant outstanding shall, as
of the date of such expiration, have the same Exercise Price per Share
as would have been the case had such expired rights, warrants,
options, convertible or exercisable securities or stock appreciation
rights not been issued, but such readjustment shall not affect the
Exercise Price per Share paid for any shares of Common Stock or other
shares of Capital Stock delivered upon any exercise prior to the date
such readjustment is made.
f In the event that the Corporation shall distribute to all holders of
its Common Stock any of its assets or debt securities, or rights,
options, warrants or convertible or exercisable securities of the
Corporation (including securities for cash, but excluding:
i0 distributions of Capital Stock referred to in section 12(b)
hereof,
ii0 distributions of rights, warrants, options, convertible or
exercisable securities or stock appreciation rights referred to
in section 12(c) hereof, if the decrease in the Exercise Price
per Share under section 12(c) hereof would be greater than the
decrease in the Exercise Price per Share under this section 12(f)
(with section 12(c) applying rather than this section 12(f)), and
iii0 cash dividends or other cash distributions that are paid out of
Consolidated Net Income for any dividend period, earned surplus
or retained earnings,
then in each such case:
(1) the Exercise Price per Share shall be adjusted to be an
amount equal to the difference between:
(a) the Exercise Price per Share in effect immediately
prior to such issuance and
(b) an amount equal to the then fair market value (as
reasonably determined by the Board of Directors, in
good faith and as described in a resolution of the
Board of Directors) of the portion of the assets or
debt securities of the Corporation so distributed or of
such rights, options, warrants or convertible or
exercisable securities applicable to one share of
Common Stock, and
(2) no adjustment shall be made in any such case in the number
of Warrant Shares issuable on exercise of the Warrants.
Such adjustment shall become effective immediately after the
record date for the determination of shares entitled to receive
such distribution. Notwithstanding the foregoing, no such
adjustment shall be made upon any such distribution if the plan
or arrangement under which such distribution is made provides for
a distribution to holders of Warrant Shares in the same pro rata
amounts upon exercise of the Warrants. Such adjustment shall be
made successively whenever any event listed above shall occur.
g If at any time, as a result of an adjustment made pursuant to this
section 12, the holder of any Warrant thereafter exercised shall
become entitled to receive any shares of the Corporation other than
shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares
contained in this section 12, and the provisions of this Warrant
Agreement with respect to the Warrant Shares shall apply on like terms
to such other shares.
h If any of the following events occur, namely:
i0 any reclassification or change of Warrant Shares (other than a
change in par value, or from par value to no par value, or from
no par value to par value, or as a result of subdivision or
combination);
ii0 any consolidation or merger of the Corporation with another
Person shall be effected as a result of which holders of Warrant
Shares shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in
exchange for Warrant Shares; or
iii0 any sale or conveyance of the properties and assets of the
Corporation as, or substantially as, an entirety to any other
Person;
then the Corporation or such successor or purchasing Person, as the
case may be, shall make provisions to establish that each Warrant then
outstanding shall be exercisable for the kind and amount of shares of
stock and other securities or property or assets (including cash)
receivable upon the occurrence of such event by a holder of Warrant
Shares immediately prior to such event. The Corporation shall not
consummate any such event unless, prior to or simultaneously with such
consummation, the successor Person (if other than the Corporation)
resulting from such consolidation or merger or the Person purchasing
such properties and assets shall assume by written instrument, the
obligation to deliver to each Warrant Holder the shares of stock,
securities or assets to which, in accordance with the foregoing
provisions, such holder may be entitled and all other obligations of
the Corporation under this Warrant Agreement. The provisions of this
section 12(h) shall similarly apply to successive reclassifications,
consolidations, mergers, sales and conveyances.
i Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrant, Warrant Certificates
theretofore or thereafter issued may continue to express the same
number and kind of shares as are stated on the Warrant Certificates
initially issuable pursuant to this Warrant Agreement.
j Anything in this section 12 to the contrary notwithstanding, the
Corporation shall be entitled to make such decreases in the Exercise
Price per Share and such increases in the number of Warrant Shares
issuable upon the exercise of each Warrant, in addition to those
adjustments required by this section 12, as it in its sole discretion
shall determine to be advisable in order that any dividends,
distributions or, issuances of securities, rights, options, warrants
or convertible or exchangeable securities made by the Corporation to
its stockholders shall not be taxable to them.
13 Notices to Holders.
a Upon any adjustment pursuant to section 12 hereof in the Exercise
Price per Share or in the number of Warrant Shares issuable upon
exercise of a Warrant, the Corporation shall promptly but in any event
within 30 days thereafter, cause to be given to each of the Warrant
Holders, at its address appearing on the Warrant Register by
registered mail, postage prepaid, return receipt requested, a
certificate signed by its chairman, president or chief financial
officer setting forth the Exercise Price per Share and the number of
Warrant Shares purchasable upon exercise of a Warrant as so adjusted
and describing in reasonable detail the facts accounting for such
adjustment and the method of calculation used. When appropriate, such
certificate may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this
section 13.
b In the event:
i0 that the Corporation shall authorize the issuance to all holders
of Common Stock of rights or warrants to subscribe for or
purchase Capital Stock of the Corporation or of any other
subscription rights or warrants;
ii0 that the Corporation shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or
assets (including, without limitation, cash dividends or cash
distributions payable out of consolidated earnings or earned
surplus or dividends payable in Common Stock);
iii0 of any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the
Corporation is required, or of the conveyance or transfer of the
properties and assets of the Corporation substantially as an
entirety, or of any capital reorganization or reclassification or
change of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination);
iv0 of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; or
v0 that the Corporation proposes to take any other action which
would require an adjustment in the Exercise Price per Share or in
the number of Warrant Shares or other securities or assets to
which each holder is entitled pursuant to section 12 hereof;
then the Corporation shall cause to be given to each of the
Warrant Holders at its address appearing on the Warrant Register,
at least 30 calendar days prior to the applicable record date, if
any, hereinafter specified, or, if no such record date is
specified, 30 calendar days prior to the taking of any action
referred to in clauses (i) through (v) above (except that, if the
action taken by the Corporation is an issuance described in
section 12(c)(i) or (ii) hereof, then as promptly as possible but
in no event later than the date that the Corporation provides
public notice of such issuance), by registered mail, postage
prepaid, return receipt requested, a written notice stating (i)
the date as of which the holders of record of Common Stock to be
entitled to receive any such rights, warrants or distribution are
to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective, or
(iii) the date as of which any such other action is to be
effected, and, if applicable and known to the Corporation, the
date as of which it is expected that holders of record of Common
Stock shall be entitled to exchange their shares for securities
or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up; provided, however, that
in the event that the Corporation provides public notice of such
proposed action or event specifying the information set forth
above at least 10 days prior to the proposed record date or
effective date, then the Corporation shall be deemed to have
satisfied its obligation to provide notice pursuant to this
section 13(b). The failure to give the notice required by this
section 13 or any defect therein shall not affect the legality or
validity of any distribution, right, warrant, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding
up or other action referred to above, or the vote upon any such
action.
c The Corporation shall promptly, but in any event no less than 30 days
prior to the effective date of any Change in Control, cause to be
given to each of the registered holders of the Warrants, at its
address appearing on the Warrant Register by registered mail, postage
prepaid, return receipt requested, written notice of the pendency of
such Change in Control.
14 Restrictions on Transfer; Subsequent Transferees as Third Party
Beneficiaries.
a The Warrant Holder (i)~represents that it is acquiring the Warrants
for its own account for investment and not with a view to any
distribution or public offering within the meaning of the Securities
Act, (ii)~acknowledges that the Warrants and the Warrant Shares
issuable upon exercise thereof have not been registered under the
Securities Act or any state securities laws and (iii)~agrees that it
will not sell or otherwise transfer any of its Warrants or Warrant
Shares except upon the terms and conditions specified herein, provided
that the Warrant Holders may sell the Warrants or the Warrant Shares
purchased upon exercise of the Warrants in one or more private
transactions not requiring registration under the Securities Act.
b Except as otherwise provided in section~14(d) hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to a
Warrant Holder shall include a legend in substantially the following
form (with such changes therein as may be appropriate to reflect
whether such legend refers to Warrants or Warrant Shares), provided
that such legend shall not be required if such transfer is being made
in connection with a sale which is exempt from registration pursuant
to Rule~144 under the Securities Act or if the opinion of counsel
referred to in section~14(c) hereof is to the further effect that
neither such legend nor the restrictions on transfer in this
section~14 are required in order to ensure compliance with the
Securities Act:
THE [WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS,]
[SHARES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT OR LAWS.
c Each Warrant Holder wishing to effect such a transfer of any Warrant
or Warrant Shares shall furnish to the Corporation an agreement by the
transferee thereof that it is taking and holding the same subject to
the terms and conditions specified herein and a written opinion of
such Warrant Holder's counsel, in form reasonably satisfactory to the
Corporation, to the effect that the proposed transfer may be effected
without registration under the Securities Act and any applicable state
securities laws.
d The restrictions set forth in this section~14 shall terminate and
cease to be effective with respect to any Warrants or Warrant Shares
registered under the Securities Act or receipt by the Corporation of
an opinion of counsel, in form reasonably satisfactory to the
Corporation, to the effect that compliance with such restrictions is
not necessary in order to comply with the Securities Act and any
applicable state securities laws with respect to the transfer of the
Warrants and/or the Warrant Shares. Whenever such restrictions shall
so terminate the holder of such Warrants and/or Warrant Shares shall
be entitled to receive from the Corporation, without expense (other
than transfer taxes, if any), Warrant Certificates or certificates for
such Warrant Shares not bearing the legend set forth in section~14(b)
hereof and the Corporation will rescind any transfer restrictions
relating thereto.
e It is the intention of the parties hereto that each Warrant Holder who
acquires Warrants by transfer be a third party beneficiary, to the
extent of Warrants acquired and held by such Warrant Holder, of the
provisions of this Warrant Agreement that bestow rights on Warrant
Holders.
15 Covenants. Holdings covenants to include in any filings made with any
taxing authority the issuance of these warrants as being pursuant to the
plan of reorganization (with respect to the distribution of the Corporation
by IFG).
16 Amendments and Waivers. Any provision of this Warrant Agreement may be
amended, supplemented, waived, discharged or terminated by a written
instrument signed by the Corporation and the holders of not less than a
majority of the outstanding Warrants, provided that the Exercise Price per
Share may not be increased by amendment, the number of Warrant Shares
issuable upon exercise of the Warrants may not be reduced by amendment and
this section~15 may not be changed by amendment except with the unanimous
consent of the holders of outstanding Warrants.
17 Specific Performance. The holders of the Warrants shall have the right to
specific performance by the Corporation of the provisions of this Warrant
Agreement. The Corporation hereby irrevocably waives, to the extent that it
may do so under applicable law, any defense based on the adequacy of a
remedy at law which may be asserted as a bar to the remedy of specific
performance in any action brought against the Corporation for specific
performance of this Warrant Agreement by the holders of the Warrants.
18 Notices.
a Any notice or demand to be given or made by the Warrant Holders or the
holders of Warrant Shares to or on the Corporation pursuant to this
Warrant Agreement shall be sufficiently given or made if sent by
registered mail, return receipt requested, postage prepaid, addressed
to the Corporation at the Warrant Office.
b Any notice to be given by the Corporation to the Warrant Holders or
the holders of Warrant Shares shall be sufficiently given or made if
sent by registered mail, return receipt requested, postage prepaid,
addressed to such holder as such holder's name and address shall
appear on the Warrant Register or the Common Stock registry of the
Corporation, as the case may be.
19 Binding Effect. This Warrant Agreement shall be binding upon and inure to
the sole and exclusive benefit of the Corporation and the Warrant Holder,
and their respective successors and assigns.
20 Continued Validity. A holder of Warrant Shares shall continue to be
entitled with respect to such Warrant Shares to all rights and subject to
all obligations to which it would have been entitled or subject as a holder
under sections~14 through 22 hereof.
21 Counterparts. This Warrant Agreement may be executed in one or more
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
22 New York Law. THIS WARRANT AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
23 Benefits of This Agreement. Nothing in this Warrant Agreement shall be
construed to give any Person other than the Corporation and the Warrant
Holder any legal or equitable right, remedy or claim under this Warrant
Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Warrant Agreement to be
duly executed and delivered by their proper and duly authorized officers, as of
the date and year first above written.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ Andrew L. Farkas
-----------------------
Name: Andrew L. Farkas
Title: Chairman and Chief Executive Officer
GOTHAM PARTNERS, L.P.
By: Section H. Partners, L.P.,
its general partner
By: DPB Corp., a general partner
By:/s/David P. Berkowitz
------------------------
Name: David P. Berkowitz
Title: President
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE WARRANTS, AND THE SHARES ISSUABLE ON EXERCISE OF THE WARRANTS, REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
EXERCISABLE ONLY ON OR BEFORE
JANUARY 1, 1999
[Date] Warrant Certificate Warrant No. [ ]
This Warrant Certificate is one of the Warrant Certificates referred to in
the Warrant Agreement dated as of September 15, 1998 (the "Warrant Agreement")
between the Corporation and Gotham Partners, L.P., a Delaware limited
partnership. The Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitations, obligations, duties and immunities thereunder of the
Corporation and the holders of Warrants. Terms defined in the Warrant Agreement
and used herein have the same meanings herein as therein.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of _____ Warrants to purchase shares of Common Stock of
INSIGNIA/ESG HOLDINGS, INC., a Delaware corporation (the "Corporation"). Each
Warrant entitles the holder, but only subject to the conditions set forth herein
and in the Warrant Agreement, to purchase from the Corporation before 5:00~PM,
New York City time, on the Expiration Date, one fully paid and nonassessable
share of Common Stock (subject to adjustment as described below) at a price
equal to the Exercise Price per Share.
The Exercise Price per Share shall be payable in lawful money of the United
States of America. The Warrants represented by this certificate may be exercised
by surrender of this Warrant Certificate, along with an executed copy of the
annexed Form of Election to Purchase and payment of the applicable Exercise
Price at the office of the Corporation at 200 Park Avenue, New York, New York
10166, or such other address as the Corporation may specify in writing to the
registered holder of the Warrants evidenced hereby. The Exercise Price per Share
and the number of shares of Common Stock purchasable upon exercise of the
Warrants is subject to adjustment prior to the Expiration Date as set forth in
the Warrant Agreement.
No Warrant may be exercised after 5:00~PM, New York City time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00~PM, New
York City time, on the Expiration Date.
The Corporation may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary.
This Warrant Certificate, when surrendered at the Warrant Office by the
registered holder hereof in person or by a legal representative duly authorized
in writing, may be exchanged, in the manner and subject to the limitations
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor registered
in the name of the holder and representing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to
be signed by its duly authorized officers and has caused its corporate seal to
be affixed hereunto.
INSIGNIA/ ESG HOLDINGS, INC.
By:__________________________
Name:
Title:
(CORPORATE SEAL)
ATTEST
____________________________
Secretary
ANNEX TO FORM OF WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise, in accordance with
section 6(b) of the Warrant Agreement, Warrants, representing the right to
purchase shares of Common Stock, and herewith tenders payment for such shares of
Common Stock to the order of the Corporation in the amount of $ as payment of
the exercise price in accordance with the terms hereof.
The undersigned requests that a certificate for such shares of Common Stock
be registered in the name of whose address is and that such certificate be
delivered to whose address is . If said number of shares of Common Stock is less
than all of the shares of Common Stock purchasable hereunder, the undersigned
hereby requests that a new Warrant Certificate representing the remaining
balance of the Warrants be registered in the name of whose address is and that
such Warrant Certificate be delivered to whose address is .
Signature:
(Signature must conform in all respects to name of holder as specified on
the face of the Warrant Certificate.)
Date:
loans/topr
0532/39038-028 NYLIB2/513320 v7 09/24/98 02:17 PM (10559)
EXECUTION COPY
WARRANT AGREEMENT
BETWEEN
INSIGNIA/ESG HOLDINGS, INC.
AND
FIRST UNION NATIONAL BANK
DATED AS OF SEPTEMBER 30, 1998
532/39038-028 NYLIB2/513320 v7 09/24/98 02:17 PM (10559)
WARRANT AGREEMENT, dated as of September 30, 1998 between INSIGNIA/ESG
HOLDINGS, INC., a Delaware corporation (the "Company"), and FIRST UNION NATIONAL
BANK, a national banking association incorporated under the laws of the United
States of America (the "Warrant Agent").
WHEREAS, the Company issued to Insignia Financial Group, Inc. ("Insignia")
on September~18, 1998, warrants (the "Warrants") to purchase an aggregate of
1,196,000 shares (the "Warrant Shares") of the Company's common stock, par value
$.01 per share (the "Common Stock"), subject to adjustment as provided herein,
and Insignia proposes to transfer such Warrants on September 30, 1998 to the
holders of record of 62% Trust Convertible Preferred Securities ("TOPRs") issued
by Insignia Financing I, a Delaware trust, on September 15, 1998 (the "Record
Date"), in connection with (i)~the proposed merger of Insignia with and into
Apartment Investment and Management Company, a Maryland corporation ("AIMCO"),
pursuant to an Amended and Restated Agreement and Plan of Merger dated as of
May~26, 1998, with AIMCO being the surviving corporation, and (ii)~the
distribution by Insignia of the Common Stock of the Company to the holders of
record of Insignia Class A Common Stock, par value $.01 per share, on September
15, 1998.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
registration, transfer, exchange and exercise of the Warrants.
THEREFORE, in consideration of the mutual undertakings contained herein,
the Company and the Warrant Agent hereby agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as warrant agent for the Company in accordance with the
instructions hereinafter set forth in this Warrant Agreement, and the Warrant
Agent hereby accepts such appointment.
2. Warrant Certificates. Each certificate for Warrants (a "Warrant
Certificate") shall be substantially as set forth in Annex A attached hereto.
The Warrant Certificates shall be executed on behalf of the Company by the
manual or facsimile signature of the present or any future Chairman or Chief
Executive Officer or President or Vice President of the Company, attested to by
the manual or facsimile signature of the present or any future Treasurer or
Secretary or Assistant Secretary of the Company.
Warrant Certificates shall be dated as of the date of authentication by the
Warrant Agent upon transfer or exchange. The Warrant Agent shall countersign and
deliver Warrant Certificates to such Holders and in such number as provided in
this Warrant Agreement. The Warrant Certificates shall be countersigned manually
or by facsimile by the Warrant Agent (or by any successor to the Warrant Agent
then acting as warrant agent under this Warrant Agreement) and shall not be
valid for any purpose unless so countersigned. Warrant Certificates may,
however, be so countersigned by the Warrant Agent (or by its successor as
Warrant Agent) and be delivered by the Warrant Agent, notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature or delivery.
14 0532/39038-028 NYLIB2/513320 v7 09/24/98 02:17 PM (10559) 3.
Registration. The Warrant Agent shall maintain a register for the Warrants at
its principal executive offices in Charlotte, North Carolina, for the
registration of the transfer and exchange of Warrants. The Warrant Agent shall
register the Warrants initially in the name of Insignia. The Company and the
Warrant Agent each shall be entitled to treat the registered holder of any
Warrant (the "Holder") as the owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other person.
4. Transfer and Exchange of Warrants. Any Warrant shall be transferable
only upon surrender thereof at the Warrant Agent's principal executive offices
located in Charlotte, North Carolina, duly endorsed by its Holder or by such
Holder's duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer, in each case in
form satisfactory to the Warrant Agent, together with payment of any taxes which
may be payable in connection with such transfer. Upon any registration of
transfer, the Warrant Agent shall deliver a new Warrant Certificate(s) to the
persons entitled thereto and the surrendered Warrant Certificate shall be
canceled. Warrants so canceled shall be delivered to the Company from time to
time upon request. In addition, a Warrant Certificate may be exchanged, at the
option of the Holder thereof, for another Warrant Certificate(s) of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares upon surrender at the Warrant Agent's
principal executive offices located in Charlotte, North Carolina, duly endorsed
by its Holder or by such Holder's duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer, in each case in form satisfactory to the Warrant Agent. The Warrants
shall be freely transferable, subject only to compliance with applicable
securities laws.
5. Exercise of Warrants.
5.1 Exercise Price and Term. Each Warrant shall entitle the Holder thereof
to purchase from the Company one Warrant Share at a purchase price per share
equal to $14.50 (the "Exercise Price"), as such purchase price and number of
Warrant Shares may be adjusted from time to time pursuant to the provisions of
Section 9 hereof, payable in full at the time of exercise of such Warrant. The
Warrants may be exercised, in whole or in part, at any time or from time to time
during the three-year period commencing on September 15, 2000 and ending at
5:00~p.m., New York City time, on September 15, 2003 or, in the event such date
is a Saturday or Sunday, or a legal holiday on which the New York Stock Exchange
("NYSE") is closed, then the Warrants may be exercised until 5:00~p.m. Eastern
time on the next succeeding Business Day (the "Expiration Date"). A "Business
Day" shall be a day on which banks in New York City are open for business. After
the Expiration Date, any unexercised Warrants shall be void and all rights of
the Holders with respect thereto shall cease.
5.2 Payment of Exercise Price. At the election of any Holder, the aggregate
Exercise Price for any Warrants being exercised may be paid: (a) in cash in the
amount of the aggregate Exercise Price then in effect for the number of Warrants
being exercised, (b) by surrender to the Company of shares of Common Stock
having an aggregate Fair Market Value (as defined below) on the date of exercise
equal to the aggregate Exercise Price then in effect for the number of Warrants
being exercised, (c) by a surrender of Warrants covering a number of Warrant
Shares having an aggregate Fair Market Value, net of the applicable aggregate
Exercise Price therefor, equal to the aggregate Exercise Price then in effect
for the number of Warrants being exercised, or (d) by a combination of the
aforementioned methods of payment. For purposes of this Agreement, the "Fair
Market Value" per share of Common Stock on a given date shall be: (i) if the
Common Stock is listed on a national securities exchange or included on the
NASDAQ National Market, the closing price per share of Common Stock on such date
(or, if there was no trading on such date, on the next preceding day on which
there was trading); (ii) if the Common Stock is not listed on a national
securities exchange or included on the Nasdaq National Market, the average of
the closing bid and asked quotations per share of Common Stock as reported by
Nasdaq (or the National Quotation Bureau Incorporated or any similar
organization) on such date (or, if there were no quotations for the Common Stock
on such date, on the next preceding day on which there were quotations) as
provided by such organization; and (iii) if the Common Stock is not traded on a
national securities exchange or included on the Nasdaq National Market and bid
and asked quotations are not provided by Nasdaq (or the National Quotation
Bureau Incorporated or any similar organization), as determined by the agreement
of the parties in good faith or, in the absence of such agreement, as determined
pursuant to arbitration under the auspices of the American Arbitration
Association; provided, that if the Fair Market Value is determined by agreement
of the parties or arbitration, such agreement or arbitration determination shall
be provided to the Warrant Agent in connection with the exercise of such
Warrants.
5.3 Exercise Procedure. Warrants may be exercised by their surrender to the
Company at the Warrant Agent's principal executive offices in Charlotte, North
Carolina, with the election to purchase form attached thereto duly completed and
executed, accompanied by payment of the aggregate Exercise Price for the Warrant
Shares to be purchased upon such exercise. Payment for the Warrant Shares shall
be made (a) if payment is to be made in cash, by a certified or bank cashier's
check payable to the order of the Company or by wire transfer to an account
designated by the Company, (b) if payment is to be made through a surrender of
shares of Common Stock, by surrender of certificates duly endorsed for transfer
(with all transfer taxes paid or provided for), and (c) if payment is to be made
by a surrender of Warrants, by surrender of certificates representing such
Warrants. The Warrant Agent shall promptly forward to the Company all monies and
certificates for shares of Common Stock received by the Warrant Agent for the
purchase of shares of Common Stock through the exercise of Warrants. Promptly
after the exercise of any Warrants and the payment of the Exercise Price, upon
compliance with Section 6 hereof, the Company shall issue a certificate or
certificates for the number of full Warrant Shares to which the Holder thereof
is entitled, registered in accordance with the instructions set forth in the
election to purchase, together with cash as provided in Section 11 of this
Warrant Agreement payable in respect of fractional shares and (if applicable) a
new Warrant Certificate representing all remaining unexercised Warrants. The
Warrant Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant Certificate(s) pursuant to the provisions of this Section
and of Section 4 of this Warrant Agreement and the Company, whenever requested
by the Warrant Agent, will supply the Warrant Agent with Warrant Certificates
duly executed on behalf of the Company for such purpose. All Warrant Shares
shall be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights, and listed on the NYSE or on such other national securities
exchange or Nasdaq National Market, as the case may be, on which such Common
Stock is listed or included. Upon compliance with Section 6 hereof, certificates
representing such Warrant Shares and remaining unexercised Warrants shall be
issued in such names and denominations, and shall be delivered to such persons,
as are specified by written instructions of the Holder.
5.4 Record Holder. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have become the
holder of record of the Warrant Shares represented thereby on the date upon
which such Warrants were surrendered for exercise, accompanied by payment of the
aggregate Exercise Price and any taxes as aforesaid, irrespective of the date of
issuance or delivery of such certificate for Warrant Shares; provided, however,
that if, at the date of the surrender of such Warrants and payment of the
aggregate Exercise Price and any taxes, the transfer books for the Common Stock
or any other class of stock purchasable upon the exercise of such Warrants shall
be closed, the certificates for the Warrant Shares or for shares of such other
class of stock in respect of which such Warrants are then exercisable shall be
issuable as of the date on which such books shall next be opened (whether before
or after the Expiration Date) and, until such date, the Company shall be under
no duty to deliver any certificate for such Warrant Shares or for shares of such
other class of stock.
6. Payment of Taxes. The Company shall promptly pay all documentary stamp
taxes attributable to the issuance of Warrants or the issuance of Warrant Shares
upon the exercise of any Warrants, except that any taxes payable in connection
with the issuance of Warrants or Warrant Shares in any name other than that of
the Holder of the Warrants surrendered shall be paid by such Holder and, if any
such tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax or it is established to the satisfaction
of the Company that any such tax has been paid. The Company shall provide the
Warrant Agent with information as to any applicable taxes to be paid in
connection with the issuance, transfer or exercise of the Warrants, Warrant
Certificates and Warrant Shares, and the Warrant Agent shall be entitled to rely
on such information in undertaking its duties under this Warrant Agreement and
shall not be liable for any action taken in reliance thereon. In no event shall
the Warrant Agent be responsible for paying any such taxes, but the Warrant
Agent shall apply any tax payments received by it to the Company's account.
7. Replacement Warrants. In case any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue, and, upon
instruction of the Company, the Warrant Agent shall countersign and deliver, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the lost, stolen or destroyed
Warrant Certificate, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate, together with an appropriate agreement regarding
indemnification of the Warrant Agent and the Company relating to the issuance of
a replacement Warrant Certificate. Applicants for substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such reasonable charges as the Company or the Warrant Agent shall prescribe.
8. Warrants.
8.1 Reservation of Warrant Shares. The Company shall at all times reserve
and keep available for issuance the number of its authorized but unissued shares
of Common Stock or other capital stock sufficient to permit the exercise in full
of the Warrants and any transfer agent for the Common Stock or other capital
stock issuable upon the exercise of Warrants shall be directed at all times to
reserve such number as shall be sufficient for such purpose. The Company will
keep a copy of this Warrant Agreement on file with each such transfer agent and
will supply such transfer agent with duly executed stock certificates for such
purpose and will provide or otherwise make available any cash that may be
payable as provided in Section~11 hereof. All Warrants surrendered upon the
exercise thereof shall be canceled by the Warrant Agent and shall thereafter be
delivered to the Company, and such canceled Warrants shall constitute sufficient
evidence of the number of shares of Common Stock which have been issued upon the
exercise of such Warrants. After the Expiration Date, the Warrant Agent shall
certify to the Company the total aggregate amount of Warrants then outstanding,
and thereafter, no shares shall be subject to reservation in respect of any
unexercised Warrants.
8.2 Purchase of Warrants by the Company. The Company shall have the right,
except as limited by law, other agreement or herein, to purchase or otherwise
acquire Warrants at such times, in such manner and for such consideration as it
may deem appropriate.
8.3 Redemption of Warrants by the Company. The Company shall have the right
to redeem any or all of the Warrants at $1.00 per Warrant at any time after
September 15, 2000, except that the Warrants may not be so redeemed unless the
closing price (as determined in accordance with Section~5.1 hereof) for the
Common Stock on any 20 trading days within a period of 30 consecutive trading
days ending no more than five days prior to the date upon which notice of call
is first mailed is at least 150% of the Exercise Price in effect on such day.
Notice of the redemption shall be mailed at least 30 days prior to the date
scheduled for such redemption (the "Redemption Date") and shall be given to the
Warrant Agent and the Holders in accordance with the provisions of Section~20
hereof. Such notice shall state the date, place and price of such call. The
notice of redemption also shall be given no more than 60 nor less than 30 days
prior to the mailing of notice to the Holders pursuant to this Section, by
publishing, at least once in the Wall Street Journal (national edition), or if
such edition is not then published, then in one or more newspapers printed in
the English language and in general circulation in New York City, and such
notice shall state the date, place and price of such redemption. If fewer than
all the Warrants outstanding at the time are to be called, the Company shall
give the Warrant Agent written notice as to the aggregate number of Warrants to
be called, and thereupon the Warrant Agent shall select the Warrants to be
called in such manner as it deems, in its discretion, to be fair and
appropriate; provided, that the Warrant Agent shall not be liable to any Holder
for such selection and shall be indemnified by the Company pursuant to Section
14(v) for any liability arising out of such selection. Each Holder shall
continue to have the right to exercise the Warrant until the close of business
on the Business Day which is 15 days prior to the Redemption Date. No less than
one Business Day prior to the Redemption Date, the Company shall deposit with
the Warrant Agent funds sufficient to purchase all of the Warrants called for
redemption which are outstanding at the close of business on the date when the
right to exercise expired.
8.4 Cancellation of Warrants. In the event the Company shall purchase or
otherwise acquire Warrants, the same shall thereupon be delivered to the Warrant
Agent and be canceled by it and retired. The Warrant Agent shall cancel any
Warrant surrendered for exchange, substitution, transfer or exercise in whole or
in part. Warrant Certificates so cancelled shall be delivered to the Company
from time to time upon request or disposed of at the instruction of the Company.
9. Adjustments.
9.1 Adjustment of Exercise Price.
9.1.1 Initial Exercise Price. The Exercise Price, which initially will be
as provided in Section 5.1, shall be adjusted and readjusted from time to time
as provided in this Section 9.1 and, as so adjusted or readjusted, shall remain
in effect until a further adjustment or readjustment thereof is required by this
Section 9.1.
9.1.2 Issuance of Additional Shares of Common Stock. In case the Company,
at any time after the Record Date, shall issue additional shares of Common Stock
for no consideration in connection with a dividend, stock split or other
distribution on the Common Stock (including, without limitation, any
distribution of Common Stock by way of spin-off, reclassification or corporate
rearrangement), then, and in each such case, the Exercise Price shall be reduced
concurrently with such issuance to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the number of shares of Common Stock outstanding
immediately prior to such issuance; and
(b) the denominator shall be the number of shares of Common Stock
outstanding immediately after such issuance.
9.1.3 Dividends and Distributions. In case the Company, at any time after
the Record Date, shall pay or make a dividend or other distribution on the
Common Stock (including, without limitation, any distribution of stock (other
than Common Stock) or other securities, including securities that are
convertible into or exchangeable or exercisable for Common Stock, property or
options by way of dividend, spin-off, reclassification or corporate
rearrangement) then, and in each such case, the Exercise Price in effect
immediately prior to the close of business on the record date fixed for the
determination of the holders of the Common Stock entitled to receive such
dividend or other distribution shall be reduced, effective as of the close of
business on such record date, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the Exercise Price in effect immediately prior
to the close of business on such record date minus the value on such record date
of such dividend or other distribution (as determined in good faith by the Board
of Directors of the Company) applicable to one share of Common Stock; and
(b) the denominator shall be such Exercise Price in effect immediately
prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this
Section~9.1.3 for a dividend payable in shares of Common Stock (which is subject
to Section~9.1.2) or payable in cash or other property and declared out of the
earned surplus (i.e., retained earnings) of the Company (excluding any portion
thereof resulting from a revaluation of property) or which is declared but is
then not paid or made. For purposes of the foregoing, a dividend or distribution
payable other than in cash shall be considered payable out of earned surplus
only to the extent that such earned surplus is charged an amount equal to the
fair value of such dividend or distribution at the time of payment as determined
in good faith by the Board of Directors of the Company. If a dividend or
distribution covered under this Section 9.1.3 is declared prior to the
Expiration Date but not paid by such date, the Expiration Date shall be extended
until the payment thereof.
9.1.4 Adjustments for Combinations, etc. In case the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall be
proportionately increased concurrently with the effectiveness of such
combination or consolidation.
9.1.5 Minimum Adjustment of Exercise Price. If the amount of any adjustment
of the Exercise Price required pursuant to this Section~9.1 would be less than
1% of the Exercise Price, such amount shall be carried forward, and an
adjustment with respect thereto shall be made at the time of and together with
any subsequent adjustment that, together with such amount and any other amount
or amounts so carried forward, shall aggregate at least 1% of the Exercise
Price.
9.1.6 Minimum Exercise Price. Notwithstanding anything to the contrary set
forth herein, no adjustment provided for in this Section 9.1 shall reduce the
Exercise Price below the par or stated value of the Common Stock and the Company
shall have no obligation to change such value to permit a further reduction of
the Exercise Price; provided, however, that, except in the event of any
transactions of the type contemplated under Section 9.1.4 hereof, the Company
agrees not to change the par or stated value of the Common Stock.
9.1.7 Voluntary Adjustment by the Company. The Company may at its option,
at any time during the term of the Warrants, reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by the Board
of Directors of the Company.
9.2 Adjustment of Number of Warrant Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of Section 9.1, the number of Warrant
Shares that the Holder of a Warrant shall be entitled to receive upon exercise
thereof shall be adjusted to equal that number of Warrant Shares determined by
multiplying the number of Warrant Shares issuable upon exercise of such Warrant
immediately prior to such adjustment of the Exercise Price by a fraction of
which:
(a) the numerator shall be the Exercise Price in effect immediately prior
to such adjustment of the Exercise Price; and
(b) the denominator shall be the Exercise Price in effect immediately
following such adjustment of the Exercise Price.
9.3 Notice, Evidence of Adjustments. Within a reasonable time after the
close of the quarterly fiscal period of the Company during which the Exercise
Price is adjusted as herein provided, the Company shall file with the Warrant
Agent a certificate signed by an executive officer of the Company setting forth
the adjusted Exercise Price and adjusted number of Warrant Shares issuable upon
exercise of each Warrant. The Warrant Agent shall have no duty with respect to
any such certificate filed with it except to keep the same on file and available
for inspection by the Holders during reasonable business hours, and the Warrant
Agent may conclusively rely upon the latest certificate furnished to it
hereunder. In the absence of a certificate having been furnished, the Warrant
Agent may conclusively rely upon the provisions of the Warrant Certificates with
respect to the Common Stock deliverable upon exercise of the Warrants and the
Exercise Price. The Company shall retain a firm of independent public
accountants of nationally recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Company) to make any
computation required by this Section 9, and a certificate signed by such firm
shall accompany said notice and shall be conclusive evidence of the correctness
of such adjustments. Notwithstanding anything in this Warrant Agreement to the
contrary, the Warrant Agent shall not at any time be under any duty or
responsibility to any Holder or beneficial owner of a Warrant to determine
whether any facts exist which may require any adjustment pursuant to Section 9
hereof or otherwise, or with respect to the nature or extent of any such
adjustment made or with respect to the method employed in making such
adjustment, and shall be indemnified and held harmless to the extent specified
in Section 14(v) hereof in connection with any claim or dispute arising from any
such adjustment, any failure or asserted failure to make such adjustment, or any
insufficiency or asserted insufficiency of any such adjustment.
9.4 Statement on Warrants. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the exercise of the
Warrants, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Warrant Agreement.
10. Consolidation, Merger, Sale of Assets, Reorganization, etc.
10.1 General Provisions. In case the Company at any time after the Record
Date (a)~shall consolidate with or merge into any other person and not be the
continuing or surviving person of such consolidation or merger, or (b~shall
permit any other person to consolidate with or merge into the Company and the
Company shall be the continuing or surviving person but, in connection with such
consolidation or merger, the Common Stock or other securities then issuable upon
exercise of the Warrants shall be changed into or exchanged for cash, stock or
other securities or property, or (c)~shall transfer, directly or indirectly, all
or substantially all its properties and assets to any other person, or (d)~shall
effect a capital reorganization or reclassification of the Common Stock or other
securities then issuable upon exercise of the Warrants (other than a capital
reorganization or reclassification resulting in an adjustment of the Exercise
Price as provided in Section 9.1), then, and in the case of each such
transaction, the Company shall make proper provision such that, upon the terms
and in the manner provided in this Warrant Agreement, the Holder of each
Warrant, upon the exercise thereof at any time after the consummation of such
transaction, shall be entitled to receive, at the Exercise Price then in effect,
in lieu of the Common Stock or other securities issuable upon such exercise
immediately prior to such transaction, the amount of cash, stock or other
securities or property to which such Holder would have been entitled if such
Warrant had been exercised in full immediately prior to such transaction,
subject to adjustments subsequent to such transaction as nearly equivalent as
possible to the adjustments provided for in Section 9 and this Section 10.
10.2 Assumption of Obligation. Notwithstanding anything contained in this
Warrant Agreement to the contrary, the Company shall not effect any of the
transactions described in Section 10.1(a), (b), (c) or (d) unless, prior to the
consummation thereof, the person (other than the Company) that may be required
to deliver any cash, stock or other securities or property upon exercise of any
Warrant as provided herein shall assume, by written instrument, (a)~the
obligations of the Company under this Warrant Agreement and the Warrants (and if
the Company shall survive the consummation of any such transaction, such
assumption shall not release the Company from any continuing obligations of the
Company under this Warrant Agreement and the Warrants) and (b)~the obligation to
deliver to such Holder such cash, stock or other securities or other property as
such Holder may be entitled to receive in accordance with the provisions of this
Section~10; provided, however, that this Section~10.2 shall not be applicable to
any transaction described in Section~10.1(c) if all such cash, stock, property
or other consideration receivable upon consummation of such transaction is
delivered to the Company at such time. Such person shall similarly deliver to
the Company an opinion of counsel to the effect that this Warrant Agreement and
the Warrants shall continue in full force and effect after any such transaction
and that the terms hereof (including, without limitation all of the provisions
of Section~9 and this Section~10) and thereof shall be applicable to the cash,
stock or other securities or property that such person may be required to
deliver upon any exercise of the Warrants.
10.3 No Dilution or Impairment. The Company shall not, by amendment of its
certificate of incorporation or by-laws or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant Agreement or
the Warrants, but will at all times, whether or not requested to do so, in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holders against dilution or other impairment. Without limiting the generality of
the foregoing, but subject to Section~9.1.6, the Company agrees that it shall
take all such reasonable action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and non-assessable shares
of stock upon the exercise of all Warrants from time to time outstanding.
11. Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock upon the exercise of any Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
Holder, the number of Warrant Shares that shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this Section 11, be issuable
on the exercise of any Warrant, the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Fair Market Value of one share
of Common Stock on the date of exercise.
12. Securities Law Compliance. The Company covenants that it will use its
reasonable best efforts to timely file all reports required to be filed by it
under the Securities Act of 1933, as amended (the "Act"), and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). So long as the Company is
subject to the periodic reporting requirements of the Exchange Act, the Company
covenants to use its reasonable best efforts to make publicly available such
information as may be necessary to permit the sale of Warrant Shares without
registration under the Act pursuant to the exemption provided by Rule 144 under
the Act, as such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission. Upon
request of any Holder of Warrants or Warrant Shares, the Company will deliver to
such Holder a written statement as to whether it has complied with such
information requirements.
13. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation or company which may succeed to the corporate trust business of the
Warrant Agent by any merger, consolidation, asset transfer or otherwise shall be
the successor to the Warrant Agent hereunder without the execution or filing of
any paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible as a successor Warrant Agent under the
provisions of Section~15 of this Warrant Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Warrant Agreement, any of the Warrants shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrants so
countersigned. In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned. In all such cases such Warrants
shall have the full force provided in the Warrants and in this Warrant
Agreement.
14. Duties of Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Warrant Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance
thereof, shall be bound:
(i) The statements of fact and recitals contained herein and in the Warrant
Certificates shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent. The Warrant Agent assumes no responsibility with
respect to the distribution of the Warrants except as herein expressly provided.
(ii) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants in this Agreement or in the Warrants
to be complied with by the Company.
(iii) The Warrant Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any Holder in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel. The Company shall
promptly pay the reasonable fees and expenses of any such counsel.
(iv) The Warrant Agent shall incur no liability or responsibility to the
Company or to any Holder for any action taken in reliance on any notice,
resolution, waiver, consent, order, certificate or other instrument believed by
it to be genuine and to have been signed, sent or presented by the proper party
or parties.
(v) The Company agrees to pay to the Warrant Agent compensation to be
agreed for all services rendered by the Warrant Agent in the performance of its
duties under of this Warrant Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind
reasonably incurred by the Warrant Agent in the performance of its duties under
this Warrant Agreement and to indemnify the Warrant Agent and its officers,
directors, employees and agents and save each of them harmless against any and
all losses, liabilities and expenses, including, without limitation, judgments,
costs and reasonable counsel fees, for anything arising from or in connection
with this Warrant Agreement or done or omitted by the Warrant Agent pursuant to
this Warrant Agreement except as a result of the Warrant Agent's gross
negligence, willful misconduct or bad faith. In no event shall the Warrant Agent
be liable for incidental, indirect, special, consequential or punitive damages.
All such amounts to which any indemnified party is entitled under this Section
14(v) shall be paid by the Company from time to time as incurred, both in
advance of and after the final disposition of any action or claim giving rise to
such indemnifiable amount. This Section 14(v) will survive any termination of
this Warrant Agreement and the resignation or removal of the Warrant Agent.
(vi) The Warrant Agent shall not be obligated to take any legal action or
commence any proceeding on behalf of, or at the request of, any party in
connection with this Warrant Agreement, or to appear in, prosecute or defend any
such legal action or proceeding. The Warrant Agent shall incur no liability for
delaying performance of its obligations under this Warrant Agreement if there is
any dispute regarding the Warrant Agent's obligations hereunder or if the
Warrant Agent is otherwise uncertain of its obligations hereunder. Unless
otherwise agreed between the Warrant Agent and the Company, the Warrant Agent
shall have no liability for interest on any monies at any time received by the
Warrant Agent pursuant to any provisions of this Warrant Agreement or the
Warrant Certificates. In no event shall the Warrant Agent be under any
obligation to take any other action likely to involve expenses unless the
Company or one or more Holders shall furnish the Warrant Agent with reasonable
security and indemnity for any costs and expenses which may be incurred, but
this provision shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether with or without any
such security or indemnity. All rights of action under this Warrant Agreement or
under any of the Warrants may be enforced by the Warrant Agent without the
possession of any of the Warrants or the production thereof at any trial or
other proceeding, and any such action, suit or proceeding instituted by the
Warrant Agent shall be brought in its name as Warrant Agent, and any recovery or
judgment shall be for the ratable benefit of the Holders, as their respective
rights and interests may appear.
(vii) The Warrant Agent and any stockholder, director, officer, partner or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not the Warrant
Agent under this Warrant Agreement or such stockholder, director, officer,
partner or employee. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
(viii) The Warrant Agent shall act hereunder solely as agent for the
Company and its duties shall be determined solely by the provisions hereof, and
no implied duties of the Warrant Agent shall be read into this Warrant Agreement
or any Warrant Certificate or other document or instrument executed in
connection herewith. The Warrant Agent does not assume any obligations or
relationship of agency or trust for or with the Holders of the Warrants or the
beneficial owners of the Warrant Shares. The Warrant Agent shall not be liable
for anything which it may do or refrain from doing in connection with this
Warrant Agreement except for its own gross negligence, willful misconduct or bad
faith.
(ix) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any such attorneys, agents or employees or for any
loss to the Company resulting from their neglect or misconduct, provided
reasonable care had been exercised in the selection and continued employment
thereof.
(x) The Warrant Agent is hereby authorized and directed to accept
instruction with respect to the performance of its duties hereunder from any
executive officer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in accordance with instructions of
any such officer or officers. Any request, direction, election, order or demand
of the Company shall be sufficiently evidenced by an instrument signed in the
name of the Company by an executive officer (unless other evidence in respect
thereof be herein specifically prescribed); and any resolution of the Board of
Directors may be evidenced to the Warrant Agent by a copy thereof certified by
the Secretary or an Assistant Secretary of the Company.
(xi) The Warrant Agent shall not be under any responsibility in respect of
the validity of this Warrant Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Warrant
Shares or other stock) to be issued pursuant to this Warrant Agreement or any
Warrant, or as to whether any Warrant Shares (or other stock) will, when issued,
be validly issued, fully paid and nonassessable, or as to the Exercise Price or
the number or amount of Warrant Shares or other securities or other property
issuable upon exercise of any Warrant.
15. Change of Warrant Agent. The Warrant Agent may resign and be discharged
from its duties under this Warrant Agreement by giving to the Company notice in
writing, and to the Holders notice by mailing such notice to the Holders at
their addresses appearing on the Warrant register, of such resignation,
specifying a date when such resignation shall take effect. The Warrant Agent may
be removed by like notice to the Warrant Agent from the Company and the like
mailing of notice to the Holders. If the Warrant Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Warrant Agent or after the Company has received such notice
from a Holder of a Warrant (who shall, with such notice, submit his Warrant for
inspection by the Company), then such Holder may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under the laws
of the United States of America or any state thereof. The Company shall
indemnify and hold harmless the Warrant Agent to the extent set forth in Section
14(v) hereof for any failure to appoint a successor Warrant Agent. After
appointment, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed and the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent all canceled Warrants,
records and property at the time held by it hereunder, and execute and deliver
any further assurance or conveyance necessary for the purpose. Failure to file
or mail any notice provided for in this Section 15, however, or any defect
therein, shall not affect the validity of the resignation or removal of the
Warrant Agent or the appointment of the successor Warrant Agent, as the case may
be.
160 Identity of Transfer Agent. Forthwith upon the appointment of any
transfer agent for the shares of Common Stock or of any subsequent transfer
agent for the shares of Common Stock or other shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such transfer agent.
170 Notices to Holders.
17.1 No Rights as Stockholders. Nothing contained in this Warrant Agreement
or in any of the Warrants shall be construed as conferring upon the Holders
thereof as such the right to vote or to receive dividends or to consent or to
receive notice as stockholders in respect of the meetings of stockholders or the
election of directors of the Company or any other matter or any other rights
whatsoever as stockholders of the Company.
17.2 Required Notice to Holders from the Company. In the event the Company
intends to:
(a) make any distribution on or with respect to its Common Stock (or other
securities that may then be issuable in lieu thereof upon the exercise of
Warrants), including without limitation any dividend or distribution from earned
surplus, any dividend or distribution of stock, assets or evidences of
indebtedness, or any similar distribution,
(b) issue subscription rights or warrants to holders of its Common Stock,
(c) consolidate or merge with or into another entity,
(d) liquidate, dissolve or sell or otherwise dispose of substantially all
its assets, or
(e) take any other action that would result in an adjustment to the
Exercise Price or an adjustment to the number of Warrant Shares that the Holder
of a Warrant shall be entitled to receive upon exercise thereof,
then the Company shall cause a notice of its intention to take such action
to be delivered to the Warrant Agent and, at the Company's expense, sent by
first-class mail, postage prepaid, at least 10 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such distribution or issuance or to vote upon such
proposed consolidation, merger, liquidation, dissolution, sale or disposition to
each Holder at its address appearing on the Warrant register, but failure to
mail or to receive such notice or any defect therein or in the mailing thereof
shall not affect the validity of any action taken in connection with such
distribution, issuance, consolidation, merger, liquidation, sale or conveyance.
180 Governing Law. The validity, interpretation and performance of this
Warrant Agreement, of each Warrant issued hereunder and of the respective terms
and provisions thereof shall be governed by the laws of the State of New York
without giving effect to principles of conflicts of law.
190 Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
200 Notices. Any notice or demand required by this Warrant Agreement to be
given or made by any Holder or the Warrant Agent to or on the Company shall be
sufficiently given or made if sent by registered or certified mail, postage
prepaid, or by facsimile transmission addressed as follows:
Insignia/ESG Holdings, Inc.
200 Park Avenue
New York, New York 10166
Telephone: (212) 984-6644
Facsimile: (212) 984-7153
Attention: Adam B. Gilbert, Esq.
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Tel: (212) 969-3220
Fax: (212) 969-2900
Attn: Allan R. Williams, Esq.
Any notice or demand required by this Warrant Agreement to be given or made
by the Company or the Warrant Agent to or on the Holder of any Warrant shall be
sufficiently given or made, whether or not such Holder receives the notice, if
sent by first-class mail, postage prepaid, addressed to such Holder at his last
address as shown on the books of the Company.
Any notice or demand required by this Warrant Agreement to be given or made
by the Company or any Holder to or on the Warrant Agent shall be sufficiently
given or made if sent by registered or certified mail, postage prepaid, or by
facsimile transmission addressed as follows:
First Union National Bank
Shareholder Services Group
1525 W. T. Harris Blvd., #3C3
Charlotte, North Carolina 28262-1153
Tel: (704) 590-7387
Fax: (704) 590-7598
Attn: Myron O. Gray
210 Supplements and Amendments. The Company and the Warrant Agent may from
time to time supplement or amend this Warrant Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interest of the Holders.
220 Benefits of this Agreement. Except as provided in Section~23, nothing
in this Agreement shall be construed to give to any person or corporation other
than the Company, the Warrant Agent and the Holders any legal or equitable
right, remedy or claim under this Warrant Agreement.
230 Successors. All of the covenants and provisions of this Warrant
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as of
the date first set forth above.
INSIGNIA/ESG HOLDINGS, INC.
By /s/ Adam B. Gilbert
----------------------
Name: Adam B. Gilbert
Title:Executive Vice-President
FIRST UNION NATIONAL BANK, as Warrant Agent
By: /s/ Joan K. Kaprinski
-------------------------
Name: Joan K. Kaprinski
Title: Assistant Vice-President
ANNEX A
THE WARRANTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i)~AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR
(ii)~AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND UPON DELIVERY TO THE COMPANY OF AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION
FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
COMMON STOCK PURCHASE WARRANTS
C No. __ C C [Number] Warrants C
Void After 5:00 p.m. New York City Time
CUSIP No. 45766D 1 1 8
On September 15, 2003
INSIGNIA/ESG HOLDINGS, INC.
THIS CERTIFIES THAT, for value received, [Name], or registered assigns, is
the Holder of the number of Warrants set forth above, each Warrant entitling the
Holder to purchase at any time during the period commencing on September 15,
2000 and ending at 5:00 p.m., New York City time, on September 15, 2003 (the
"Expiration Date"), one fully paid and non-assessable share of common stock, par
value $.01 per share ("Common Stock"), of Insignia/ESG Holdings, Inc., a
Delaware corporation (the "Company"), at a purchase price per share (the
"Exercise Price") initially equal to $_____, upon presentation and surrender of
this Warrant Certificate with the Form of Election to Purchase (attached hereto)
duly executed. The number of Warrants evidenced by this Warrant Certificate (and
the number of shares that may be purchased upon exercise hereof (the "Warrant
Shares") set forth above and the Exercise Price set forth above are the number
and Exercise Price as of the date of original issuance of this Warrant
Certificate, based on the Common Stock as constituted at such date. As provided
in the Warrant Agreement referred to below, the Exercise Price and the number or
kind of shares that may be purchased upon the exercise of the Warrants evidenced
by this Warrant Certificate are subject to modification and adjustment upon the
happening of certain events. The Warrants are subject to redemption by the
Company for $1.00 per Warrant at any time after September 15, 2000 except that
the Warrants may not be so redeemed unless the closing price (as determined in
accordance with Section~5.1 of the Warrant Agreement) for the Common Stock of
the Company on any 20 trading days within a period of 30 consecutive trading
days ending no more than five days prior to the date upon which notice of
redemption is first mailed is at least 150% of the Exercise Price in effect on
that day.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of the Warrant Agreement dated as of
September 30, 1998 between the Company and First Union National Bank, a national
banking association incorporated under the laws of the United States of America,
which Warrant Agreement is hereby incorporated herein reference and made a part
hereof and to which reference is hereby made for a full description of the
rights, limitations of rights, duties and immunities hereunder of the Company,
the Warrant Agent and the Holders. Terms used herein and not otherwise defined
shall have the meanings set forth in the Warrant Agreement. A copy of the
Warrant Agreement is on file at the principal executive office of the Company.
This Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or Warrant Certificates of like tenor, evidencing Warrants
entitling the Holder to purchase a like aggregate number of shares of Common
Stock (or other shares) as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered entitled such Holder to purchase. If this
Warrant Certificate shall be exercised in part, the Holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
The Exercise Price may be paid in cash or by surrender of the appropriate
number of Warrants or shares of Common Stock in a cashless exercise or in a
combination thereof as provided in Section~5.2 of the Warrant Agreement.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made as provided in Section~11 of the Warrant Agreement.
No Holder of this Warrant Certificate, as such, shall be entitled to vote
or to receive dividends or to consent or to receive notice as a stockholder of
the meetings of stockholders for the election of directors of the Company or any
other matter or to any rights whatsoever as stockholder of the Company, until
the Warrant or Warrant evidenced by this Warrant Certificate shall have been
exercised and the Warrant Shares shall have been delivered as provided in the
Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other class of
stock issuable upon exercise of this Warrant Certificate are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares issuable upon such exercise until the date of the reopening of said
transfer books as provided in the Warrant Agreement.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
Dated: ______________________
INSIGNIA/ESG HOLDINGS, INC.
By:
Name:
Title:
Attest: Countersigned:
FIRST UNION NATIONAL BANK,
WARRANT AGENT
By: By :
Name: Authorized Officer
Title:
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder desires to transfer this Warrant
Certificate).
TO INSIGNIA/ESG HOLDINGS, INC.
FOR VALUE RECEIVED, __________________________________________ hereby sells
assigns and transfers unto ________________________ (name and address of
assignee must be printed or type written) ______________ Warrants represented by
this Warrant Certificate, together with all rights, title and interest therein,
and does hereby irrevocably constitute and appoint ______________________ to
transfer said Warrants on the books of the within-named Company, with full power
of substitution, and if said number of Warrants shall not be all the Warrants
represented by this Warrant Certificate, a new Warrant Certificate is to be
issued in the name of the undersigned for the remaining Warrants represented by
this Warrant Certificate.
DATED:
Signature
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants evidenced by this
Warrant Certificate).
TO INSIGNIA/ESG HOLDINGS, INC.
The undersigned hereby (1) irrevocably elects to exercise
___________________________________ Warrants represented by this Warrant
Certificate to purchase __________ shares of Common Stock (or other shares)
issuable upon the exercise of such Warrants, (2) makes payment in full of the
aggregate Exercise Price for such Warrants by enclosure of a certified or bank
cashier's check therefor or by surrendering Warrants or shares of Common Stock
for application to the aggregate Exercise Price, upon condition that new
Warrants be issued for the balance of the Warrants remaining, and (3) requests
that certificates for shares and Warrants be issued in the name of and delivered
to:
(Please insert social security or other
identifying number)
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number)
(Please print name and address)
DATED:
Signature
Signature Guaranteed:
NOTICE:
The signature on the foregoing election to purchase must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
September 18, 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 ADAM B. GILBERT, an individual residing at 60 Cowdin Circle,
Chappaqua, New York 10514 (the "Executive").
WHEREAS, it is contemplated that the Company will be "spun-off" from its
parent company, Insignia Financial Group, Inc. ("Insignia"), sometime during the
third calendar quarter of 1998 (the actual date such spin-off occurs being
referred to herein as the "Spin-Off Date"); and
WHEREAS, the Company desires to assure itself of the services of the
Executive from and after the Spin-Off Date 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;
NOW, THEREFORE, 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:
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 Spin-Off Date
(the "Commencement Date") and ending on December 31, 2001 (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").
Section 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve as
Executive Vice President-Legal, Secretary and General Counsel of the Company,
with principal responsibility for the Company's legal affairs. In addition, at
the request of the Company, the Executive shall serve as an officer and/or
director of one or more subsidiaries of the Company. In the performance of his
duties hereunder, the Executive shall report to and shall be responsible to the
Chief Executive Officer and the Board of Directors of the Company. The Executive
agrees to his employment as described in this Section 2, and agrees to devote
substantially all of his working 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 Company reasonably require.
(b) Location of Office. During the Employment Period, the Executive's
office shall be located at 200 Park Avenue, New York, New York, or at such other
location in New York, New York as the Company may reasonably request. The
Company shall provide the Executive with an appropriate office, an executive
secretary reasonably acceptable to him and other reasonable support appropriate
to his duties hereunder.
(c) Primary Responsibilities. During the Employment Period, the Executive
shall (i) have such appropriate and lawful responsibilities assigned to him by
the Chief Executive Officer and/or the Board of Directors of the Company, and
(ii) comply with all lawful written policies and procedures of the Company.
(d) Other Activities. The Executive may (i) devote reasonable time to the
management of his personal financial affairs and (ii) to the extent that he may
do so without unduly interfering with his duties at the Company, participate on
boards of directors of other enterprises which do not directly or indirectly
compete with the Company; provided, however, that (x) the Executive shall not
join the board of directors of any public company without first obtaining the
approval of the Chief Executive Officer of the Company and (y) the Executive
shall give prompt notice of his election or appointment to any other board of
directors, whether of a private for-profit company or any not-for-profit
company, to the Chief Executive Officer of the Company. The Executive may retain
any compensation paid to him for such service.
Section 3. Compensation. Except as otherwise provided herein, as full
compensation for the Executive's services under this Agreement, the Company
shall pay, grant, issue or give, as the case may be, to the Executive the
following compensation and benefits:
(a) Base Salary. Subject to the provisions of Section 6, an annual base
salary ("Base Salary") at the rate of $360,000 per annum, payable in cash in
accordance with the customary executive payroll policy of the Company as in
effect from time to time; provided, however, that the Base Salary may be
increased by action of the Board of Directors of the Company or the Compensation
Committee thereof (the "Compensation Committee").
(b) Annual Bonus. An annual discretionary bonus ("Bonus"), the amount, if
any, of which shall be determined by the Board of Directors of the Company or
the Compensation Committee, and which shall be paid to the Executive, with
respect to any given fiscal year of the Company, before the expiration of 74
days after the end of such fiscal year.
(c) 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 and/or to senior
executives 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.
(d) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses reasonably incurred by him in connection with the
performance of his duties hereunder, including without limitation (i)
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 Board of Directors, Chief Executive Officer or
President of the Company, (ii) expenses required for licensing of the Executive,
and (iii) business-related cellular phone expenses, all upon the presentation of
appropriate documentation therefor in accordance with the then regular
procedures of the Company. (e) Vacations, etc. Twenty (20) paid vacation days
per year on a non-cumulative basis; and leaves-of-absence in accordance with the
regular procedures of the Company governing senior officers in existence from
time to time.
Section 4. Extraordinary Event.
(a) Defined. As used herein, "Extraordinary Event" shall mean the cessation
of Andrew L. Farkas to serve as either the Chairman of the Board of Directors of
the Company or an executive officer of the Company for any reason effective
simultaneously with or within one year following a merger, consolidation, asset
sale or other similar transaction involving the Company or a subsidiary of the
Company which requires approval by the stockholders of the Company.
(b) Extraordinary Event Bonus. Within ten business days after the
occurrence of an Extraordinary Event, the Company shall, regardless of whether
the Executive elects to convert this Agreement into a consulting agreement
pursuant to Section 4(c), pay to the Executive an amount in cash equal to 100%
of the Base Salary then in effect. In addition, if the Executive elects to
convert this Agreement into a consulting agreement pursuant to Section 4(c),
then: (i) within ten business days after the effective date of such election,
the Company shall pay to the Executive an amount in cash equal to the product of
(x) the number of days that have elapsed from and including the first day of the
fiscal year in which such Extraordinary Event occurred, multiplied by (y) the
amount of Bonus paid to the Executive by the Company (or bonus paid by Insignia,
if applicable) in respect of the fiscal year immediately preceding the fiscal
year in which such Extraordinary Event occurred, multiplied by (z) 0.00274; and
(ii) upon the effective date of such election, all stock options, shares of
restricted stock and other awards granted under or otherwise subject to the 1998
Stock Incentive Plan of the Company (the "Company Stock Plan") then held by the
Executive will fully, immediately and automatically vest and be exercisable as
and to the extent permitted by the Company Stock Plan.
(c) Conversion to Consulting Agreement. During the 120-day period following
the occurrence of an Extraordinary Event, the Executive shall have the right, in
his sole discretion, to elect in writing to convert this Agreement into a
consulting agreement, whereupon: (i) the Executive will cease to be an employee
of the Company and shall resign all officer and other positions with the Company
and its subsidiaries; (ii) the Executive shall be required, through the
Expiration Date, to consult with respect to the assets, liabilities and
transactions of the Company as they existed immediately before such
Extraordinary Transaction, such consultation to be at the reasonable times
convenient to the Executive on no less than five business days' notice, but in
no event for more than five days or portions of a day in any calendar month, the
parties recognizing that the Executive during the consulting period likely will
have significant other business interests; and (iii) the terms of this Agreement
(including all rights hereunder of the Executive as to salary, bonus, payments
and benefits) shall continue unabridged through the Expiration Date, except that
(1) Section 2 hereof will be superseded by this Section 4(c) and (2) references
herein to the "employment" of the Executive shall be deemed to be references to
the consultancy by the Executive.
Section 5. Representations and Warranties of the Executive and the Company;
Key Person Insurance.
(a) The Executive represents and warrants to the Company as follows:
(i) 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
(ii) He is under no physical or mental disability that would hinder his
performance of duties under this Agreement.
(b) The Company represents and warrants to the Executive that the execution
and delivery of this Agreement by the Company has been duly approved by the
Board of Directors of the Company or the Compensation Committee.
(c) The Executive agrees to cooperate with the Company, upon request, in
connection with the obtaining by the Company of a key person insurance policy
upon the life of Executive. The Executive is not aware of any fact or
circumstance which would preclude the Company from obtaining such insurance, and
the Executive has not heretofore been declined by an insurance company or
provider for life insurance.
Section 6. Non-Competition and Non-Solicitation; Confidentiality.
(a) Non-Competition and Non-Solicitation.
(i) In view of the unique and valuable services it is expected the
Executive will render to the Company and its Subsidiaries (as hereinafter
defined), the Executive's knowledge of the customers, trade secrets and other
proprietary information relating to the business of the Company and its
customers and suppliers, and similar knowledge regarding Subsidiaries of the
Company it is expected the Executive will obtain, the Executive agrees that,
through and including the Expiration Date plus any additional period during
which the Executive is employed by the Company, 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 competes with or is engaged in the same
business as the Company or any of its Subsidiaries, with respect to any product
or service sold or activity engaged in by the Company or any Subsidiary of the
Company in any geographical area in which, at the time of such expiration or
cessation, such product or service is sold or activity is engaged in by the
Company or any Subsidiary of the Company; provided, however, that the provisions
of this Section 6(a)(i) shall not be interpreted to preclude the Executive, at
any time and from time to time, from (1) Participating In any other organization
if approved by the Board of Directors of the Company, or (2) owning not more
than five percent (5%) of the outstanding capital stock of any publicly-traded
entity. The terms "Participate In" and "Participating In" 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, or acquiesce or
acquiescing, as the case may be, in the use of his name in." The term
"Subsidiary" means "any entity actually directly or indirectly controlled by the
Company or of which the Company directly or indirectly owns (in the aggregate)
in excess of 20% of the outstanding voting or economic interests."
(ii) In recognition of the close personal contact the Executive will have
with the Company's and its Subsidiaries' trade secrets, confidential
information, records and business relationships, and the position of trust in
which the Company will hold the Executive, the Executive covenants and agrees
that for so long as the Executive is employed by the Company, and for a period
lasting for two (2) years following the later of the date on which the
Executive's employment with the Company ceases for any reason or the Expiration
Date, the Executive will not, either for himself or as an officer, director,
employee, agent, representative, independent contractor or in any other
relationship to any person, partnership, corporation or other entity (other than
the Company and its Subsidiaries), (A) directly or indirectly interfere with or
disturb, or seek to interfere with or disturb, any contractual relation in favor
of the Company or any of its Subsidiaries or (B) solicit, directly or
indirectly, including by assisting others, business from any customer or client
of the Company of any of its Subsidiaries 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
for the purpose of providing goods or services to such customer or client. For
purposes of this Agreement, the Executive shall be deemed to have had "Material
Contact" with a customer or client of the Company or a Subsidiary (x) with whom
the Executive actually dealt, or (y) whose dealings with the Company or
Subsidiary were handled, coordinated or supervised by the Executive, or (z)
about whom the Executive obtained confidential information in the ordinary
course of business through the Executive's association with the Company or the
Subsidiary.
(iii) The Executive covenants and agrees that, for a period of two (2)
years following the later of the Commencement Date or the date on which the
Executive's employment with the Company ceases, the Executive will not solicit,
employ, engage or in any manner encourage any employee, broker or sales person
of the Company or of any of its Subsidiaries (other than the Executive's
personal secretary), to leave his or her employ for the employ of a person or
entity which directly or indirectly competes with the Company or of any of its
Subsidiaries unless and until he or she (A) has been terminated by the Company
or a Subsidiary other than for cause or (B) has not been employed by the Company
or any of its Subsidiaries for a period of two (2) years.
(iv) The Executive acknowledges that the foregoing provisions are intended
to protect the Company's and its Subsidiaries business and customer contacts,
and not to prevent the Executive from pursuing a livelihood in the general area
of his previous training, and that such provisions should be interpreted
accordingly.
(b) Confidentiality. The Executive covenants and agrees that he shall not
publish, disclose or make accessible by him to any other person, either during
or after the cessation of his employment, or use except during his employment
with the Company in the business and for the benefit of the Company and its
Subsidiaries, any 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 relating to the business of the
Company or any of its Subsidiaries or of any customer or supplier of 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. Upon demand therefor,
the Executive shall return all tangible evidence of such confidential
information to the Chief Executive Officer of the Company (or his designee)
prior to or at the cessation of his employment.
(c) Interpretation and Enforcement. The Executive acknowledges and agrees
that a breach of the provisions of this Section 6 could not adequately be
compensated by money damages, and, therefore, 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 further acknowledges and
agrees that the provisions of this Section 6 are necessary and reasonable to
protect the Company and its Subsidiaries in the conduct of their 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 provision
hereof, and in its reduced form such restriction or other provision 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 any such breach or threatened breach.
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 as a result of a single or related series of illnesses or conditions
for a period of 100 consecutive days.
(iii) Estate. As used herein, the term "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 (A) 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 (after notice to the Executive
and an opportunity for the Executive and/or his representative to appear before
the Board of Directors of the Company) that termination of this Agreement is
necessary by reason of (1) the conviction of the Executive of a felony under
state or federal law, or the commission by the Executive an act of employment
discrimination or sexual harassment under state or federal law, or the failure
by the Executive to observe any policy of the Company set forth in a written
policy manual or handbook, as amended from time to time, (2) the continued
breach by the Executive of any provision of this Agreement for a period of
thirty (30) days after written notice of such breach is given to the Executive
by the Company, including gross negligence in the performance by the Executive
of his duties or responsibilities hereunder, (3) the failure by the Executive to
comply with any lawful directive of the Board of Directors or the Chief
Executive Officer of the Company, which failure continues for ten (10) days
after written notice thereof is given to the Executive, (4) a material violation
of any provision of Section 5 of this Agreement by the Executive, (5) the taking
by the Executive of any action on behalf of the Company or any of its
Subsidiaries without the possession by the Executive of the appropriate
authority to take such action (other than as a result of innocent error), (6)
the taking by the Executive of any action that the Executive knows to be in
conflict of interest with the Company or any of its Subsidiaries given the
Executive's position with the Company and its Subsidiaries, or (7) the
usurpation by the Executive of an opportunity that the Executive knows to be a
corporate opportunity of the Company or any of its Subsidiaries; or (B) the
voluntary cessation of employment by the Executive prior to the Expiration Date.
(v) Termination Without Cause. As used herein, "Termination Without Cause"
shall mean any termination of the Executive's employment by the Company
hereunder other than as a result of a Termination For Cause, a Death Termination
Event or a Disability Termination Event.
(b) Death Termination Event. Subject to the provisions of Section 9, this
Agreement shall terminate automatically upon the occurrence of a Death
Termination Event, whereupon (i) the Company will continue to pay to the Estate
the Base Salary, as then in effect, through the Expiration Date, and (ii) all
stock options, shares of restricted stock and other awards granted under or
otherwise subject to the Company Stock Plan then held by the Executive will
fully, immediately and automatically vest and be exercisable as and to the
extent permitted by the Company Stock Plan. In addition, if (i) an Extraordinary
Event occurs within one year after the occurrence of such Death Termination
Event and (ii) a definitive agreement relating to the specific merger,
consolidation, asset sale or other similar transaction (or relating another
substantially similar transaction) which gave rise to such Extraordinary Event
had been executed and delivered by all parties thereto and was in effect at the
time such Death Termination Event occurred, then the Company shall pay to the
Estate, within ten business days after the occurrence of such Extraordinary
Event, all amounts (without duplication) to which the Executive would have been
entitled pursuant to Section 4(b) assuming the Executive had made the election
to convert this Agreement to a consulting agreement pursuant to Section 4(c)
immediately after the occurrence of such Extraordinary Event.
(c) Disability Termination Event. Subject to the provisions of Section 9,
this Agreement shall terminate automatically upon the occurrence of a Disability
Termination Event, whereupon (i) the Company will continue to pay to the
Executive the Base Salary, as then in effect, through the Expiration Date, and
(ii) all stock options, shares of restricted stock and other awards granted
under or otherwise subject to the Company Stock Plan then held by the Executive
will fully, immediately and automatically vest and be exercisable as and to the
extent permitted by the Company Stock Plan. In addition, if (i) an Extraordinary
Event occurs within one year after the occurrence of such Disability Termination
Event and (ii) a definitive agreement relating to the specific merger,
consolidation, asset sale or other similar transaction (or relating another
substantially similar transaction) which gave rise to such Extraordinary Event
had been executed and delivered by all parties thereto and was in effect at the
time such Disability Termination Event occurred, then the Company shall pay to
the Executive, within ten business days after the occurrence of such
Extraordinary Event, all amounts (without duplication) to which the Executive
would have been entitled pursuant to Section 4(b) assuming the Executive had
made the election to convert this Agreement to a consulting agreement pursuant
to Section 4(c) immediately after the occurrence of such Extraordinary Event.
(d) Termination For Cause.
(i) The Executive acknowledges and agrees that the Company shall have the
absolute right to terminate the Executive for any of the reasons enumerated in
Section 6(a)(iii)(A).
(ii) Subject to the provisions of Section 9, this Agreement shall terminate
automatically upon the occurrence of a Termination For Cause, whereupon (A) 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 (B) the Company shall be entitled to any
and all remedies and damages available to it.
(e) Termination Without Cause. Subject to the provisions of Section 9, this
Agreement shall terminate automatically upon the occurrence of a Termination
Without Cause, whereupon (i) the Company shall: (1) continue to pay the Base
Salary, as then in effect, to the Executive until the Expiration Date, in the
same manner and at the same times as such Base Salary would have otherwise been
payable to the Executive had this Agreement not been terminated; (2) within 90
days of the occurrence of such Termination Without Cause, pay to the Executive
an amount in cash equal to two times the amount of Bonus paid to the Executive
in respect of the fiscal year of the Company immediately preceding the year in
which such Termination Without Cause occurs; and (3) continue to provide health,
life and, to the extent permissible under the applicable plans, disability
insurance benefits to the Executive until the Expiration Date, which benefits
shall not at any time be less favorable than those which the Executive would
have received had he continued to be employed by the Company at such time
pursuant to this Agreement; provided, however, that if the Executive should
subsequently obtain employment from any source which provides such insurance
benefits to Executive at no out-of-pocket cost to him, then the benefits to be
provided to the Executive under this clause (3) shall be appropriately reduced
for so long as such subsequent employment continues and the Executive continues
to receive such benefits from such subsequent employer; and (ii) all stock
options, shares of restricted stock and other awards granted under or otherwise
subject to the Company Stock Plan then held by the Executive will fully,
immediately and automatically vest and be exercisable as and to the extent
permitted by the Company Stock Plan. In addition, if (i) an Extraordinary Event
occurs within one year after the occurrence of such Termination Without Cause
and (ii) a definitive agreement relating to the specific merger, consolidation,
asset sale or other similar transaction (or relating another substantially
similar transaction) which gave rise to such Extraordinary Event had been
executed and delivered by all parties thereto and was in effect at the time such
Termination Without Cause, then the Company shall pay to the Executive, within
ten business days after the occurrence of such Extraordinary Event, all amounts
(without duplication) to which the Executive would have been entitled pursuant
to Section 4(b) assuming the Executive had made the election to convert this
Agreement to a consulting agreement pursuant to Section 4(c) immediately after
the occurrence of such Extraordinary Event.
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, the provisions of Sections 3 through 18 (inclusive) of this Agreement
shall survive any termination of this Agreement or cessation of the Executive's
employment hereunder through the later of (i) the Expiration Date or (ii) the
applicable period stated therein.
Section 10. Entire Agreement; Modification; Waiver. This Agreement sets
forth the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all existing agreements between the parties
concerning such subject matter. This Agreement may be modified (or the
application of any provision hereof waived) only by a written instrument duly
executed by the party charged therewith.
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 otherwise 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). 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 this 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 provision or any other
provision of this Agreement. Any waiver must be in writing and signed by the
party charged therewith.
Section 13. Binding Effect. The Executive's rights and obligations under
this Agreement are not 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
and of no effect. 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. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
reference to any otherwise applicable conflict of law provisions.
Section 16. 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 which 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. No provision of this Agreement shall be interpreted in favor of, or
against, any party hereto by reason of the extent to which such party or its
counsel participated in the drafting hereof or by reason of the extent to which
any such provision is inconsistent with any prior draft hereof.
Section 17. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ANY AND ALL RIGHTS IT
MAY HAVE 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 HEREIN 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 PARTY WILL CONTINUE TO RELY ON THIS WAIVER IN THE
RELATED FUTURE DEALINGS BETWEEN THE PARTIES. EACH PARTY HERETO FURTHER
REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
SUCH 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.
Section 18. Available Remedies. The Executive acknowledges and agrees that
the Executive's employment hereunder was granted by the Company primarily in
reliance upon the covenants, agreements, duties, obligations and assurances of
the Executive contained herein, and in the event of a breach of any such
covenant, agreement, duty, obligation or assurance of the Executive, including a
voluntary cessation by Executive of his employment hereunder prior to the
Expiration Date, (i) the Company and its Subsidiaries, including their
respective businesses and properties, would suffer irreparable damage for which
money damages alone would not adequately compensate the Company, and (ii) the
Company shall be entitled, in addition to any other remedies and damages
available to it, to obtain injunctive relief in the form of a temporary
injunction, permanent injunction, restraining order or other comparable remedies
in order to prevent or cease the violation of such covenant, agreement, duty,
obligation or assurance.
Section 19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, each party hereto, intending to be legally bound, has
duly executed this Agreement as of the date first written above.
INSIGNIA/ESG HOLDINGS, INC.
By: /s/Andrew L. Farkas
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Andrew L. Farkas
Chief Executive Officer
EXECUTIVE
Adam B. Gilbert
