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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
{X} Annual Report Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
or
{ } Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from ............... to ...............
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Commission File Number 1-14373
INSIGNIA FINANCIAL GROUP, INC.
(F/K/A INSIGNIA/ESG HOLDINGS, 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)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Par Value $0.01 Per Share
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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 report), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or any amendment to this
Form 10-K. {X}
At March 19, 1999, there were 21,789,598 shares of Common Stock outstanding.
Based on the reported closing price of $12.750 per share on the New York Stock
Exchange on such date, the aggregate market value of Registrant's Common Stock
held by non-affiliates was approximately $245 million.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Annual Meeting of Stockholders in Part III of this Form
10-K.
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Part I
Item 1. Business
ORGANIZATION
Insignia Financial Group, Inc. ("Insignia" or the "Company"),
headquartered in New York, New York, is the parent company of an international
real estate organization. Insignia's service businesses specialize in
commercial real estate services, single-family home brokerage and mortgage
origination, condominium and cooperative apartment management, real estate
oriented financial services, equity co-investment, fund management and other
services. As more fully described below, Insignia's principal operating units
are Insignia/ESG, Inc. (international commercial property services), Realty
One, Inc. (single-family home brokerage and mortgage origination) and Insignia
Residential Group, Inc. (condominium and cooperative housing management). The
European operations of Insignia/ESG consist of Richard Ellis Group Limited
("REGL") in the United Kingdom, the recently acquired British real estate
services firm St. Quintin Holdings Limited ("St. Quintin") (together with REGL,
"Richard Ellis St. Quintin" or "RESQ"), Insignia RE GmbH in Germany and a
company in formation to be known as Insignia RE SpA in Italy (collectively the
"Insignia Businesses").
Through Insignia/ESG, Insignia provides a broad spectrum of commercial
real estate services, including tenant representation, property leasing and
management, property disposition and acquisition, investment sales, debt/equity
placement, equity co-investment and consulting services. Insignia/ESG provides
these services for tenants, owners and investors in office, industrial, retail,
hospitality and mixed-use properties. Insignia/ESG is among the leading
providers of commercial real estate services in the United States. Insignia/ESG
enjoys a leadership market position in the New York metropolitan area, and also
maintains a significant market position in property owner and/or tenant
services in Washington, D.C., Philadelphia, Boston, Chicago, Atlanta, Phoenix,
Los Angeles, San Francisco, Dallas and other major central business districts.
In all, Insignia/ESG has operations in 49 markets in the United States.
Insignia/ESG also has growing international capabilities which allow it to meet
clients' expanding world-wide needs, through RESQ in the United Kingdom,
Insignia RE GmbH in Germany and the to be formed Insignia RE SpA in Italy. REGL
is among the leading property services companies in the United Kingdom, with
offices in London, Manchester, Glasgow, Birmingham, Leeds, Liverpool and
Belfast. With the March 1999 acquisition of St. Quintin, RESQ has additional
offices in Jersey.
Through Realty One, Insignia operates a full-service single-family
residential brokerage and mortgage loan origination business in northern Ohio.
Realty One is the ninth largest (based on unit volume) residential real estate
brokerage firm in the United States according to Real Trends "Big Broker
Report" published in May 1998. In 1998, Realty One handled more than 21,300
transactions valued at over $3.1 billion, and through its mortgage loan
affiliate, First Ohio Mortgage Corporation, originated in excess of 3,400
mortgage loans totaling approximately $411 million. A transaction is measured
by closed transaction "sides," which means either the listing or selling of a
closed transaction. Each side closed is a commissionable event to the broker
responsible for that side of the transaction.
Insignia's subsidiary, Insignia Residential Group, is the largest manager
of cooperatives and condominiums in the New York metropolitan area, according
to the January 1999 issue of New York Habitat, and one of the largest apartment
managers in the U.S. As of December 31, 1998, Insignia Residential Group
managed over 300 residential properties, consisting of cooperatives,
condominiums and rental properties, comprising approximately 60,000 residential
units.
SPIN-OFF
Insignia, which is incorporated under the laws of the state of Delaware on
May 6, 1998 (formerly known as Insignia/ESG Holdings, Inc.), originally was a
wholly owned subsidiary of a company known as Insignia Financial Group, Inc.
("Former Parent"). On September 21, 1998, Former Parent effected the spin-off
of Insignia through a pro rata distribution (the "Spin-Off" or "Distribution")
to the holders of common stock of Former Parent of all the outstanding common
stock, par value $0.01 per share, of Insignia ("Insignia Common Stock"). On
October 1, 1998, Former Parent (which then consisted solely of businesses and
assets relating to multi-family residential real estate) merged into Apartment
Investment and Management Company, a Maryland corporation ("AIMCO"), with AIMCO
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being the surviving corporation (the "Merger"), and on November 2, 1998,
Insignia assumed the name of Former Parent, "Insignia Financial Group, Inc.",
and reclaimed Former Parent's original New York Stock Exchange symbol, "IFS."
Insignia's principal executive offices are located at 375 Park Avenue, New
York, New York 10152, and its telephone number at that address is (212)
750-6070.
COMMERCIAL REAL ESTATE SERVICES -- INSIGNIA/ESG
UNITED STATES OPERATIONS GENERALLY
The U.S. commercial real estate services business is the largest of
Insignia's operations, accounting for an estimated 62% of Insignia's 1998
revenues. Insignia/ESG's commercial services business commenced operations on
January 1, 1991, as a division of Former Parent's residential property
management business. Its growth has come principally through acquisitions, most
notably substantially all the assets of Edward S. Gordon Company, Incorporated
("ESG") on June 30, 1996. Insignia/ESG generated approximately $98.5 million in
revenues in 1996, $246.4 million in revenues in 1997, and $312.9 million in
revenues in 1998.
Insignia/ESG's 1998 revenues made it the third-largest provider of
commercial real estate services in the United States, according to the January
1999 issue of Commercial Property News. Insignia/ESG provides a broad spectrum
of commercial real estate services to corporations and other major space users,
property owners and investors. These services include tenant representation,
property leasing and management, property acquisition and disposition services,
investment sales, debt/equity placement, equity co-investment and consulting
services. Insignia/ESG provides these services in the office, industrial,
retail and hospitality sectors of the commercial real estate industry. At
December 31, 1998, Insignia/ESG provided property management, leasing or other
services for approximately 200 million square feet of commercial real estate,
including 127 million square feet of office space, 52 million square feet of
industrial space, and 17 million square feet of retail space. These services
are provided on a third-party basis for owners such as John Hancock Mutual
Life, The Irvine Company, Teachers Insurance and Annuity Association, Chase,
J.P. Morgan and others.
All services in the U.S. are rendered under the highly regarded
Insignia/ESG brand name. Specialized divisions within Insignia/ESG include the
Capital Advisors Group, responsible for third-party investment sales and
equity/debt placement activities, and the Commercial Investments Group, which
offers fee-development and redevelopment services.
During 1998, Insignia/ESG completed in excess of 104 million square feet
of commercial real estate transactions and sold more than $3.5 billion in
commercial properties.
Insignia/ESG prides itself on the consistent, high-quality delivery of its
services across geographic markets, property types and disciplines. It is
active to varying degrees in 49 U.S. markets, and maintains substantial market
share in key central business districts, such as New York, Washington, D.C.,
Philadelphia, Boston, Chicago, Atlanta, Phoenix, Los Angeles, San Francisco,
Dallas and others.
New York City is the largest market for Insignia/ESG. Insignia/ESG
represents many leading corporations and property owners, helping them to
fulfill their requirements in this marketplace. Insignia/ESG was responsible
for 19 of the 50 largest leasing transactions in New York City during 1998. The
closest competitor to Insignia/ESG was responsible for 13 of the 50 largest
leasing transactions in New York City.
Insignia/ESG believes that its success and reputation within the New York
area serve as a catalyst for its growth nationally as well as internationally.
Insignia/ESG's growth strategy combines targeted acquisitions of companies that
offer complementary skill sets as well as the establishment of servicing
capabilities in markets where it does not currently offer these services.
Insignia/ESG's expansion is primarily focused on first tier U.S. and
international markets (those comprising 75 million square feet or more) and
secondarily on opportunities in second tier U.S. and international markets
(those comprising 25 million to 74 million square feet). Since July 1, 1998,
Insignia/ESG has completed acquisitions of real estate services companies in
Chicago, Philadelphia, and Boston, and established brokerage capabilities in
Los Angeles and San Francisco, and acquired a hotel brokerage specialist with
national and international scope of services.
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EUROPEAN OPERATIONS GENERALLY
Insignia/ESG's European operations consist of RESQ in the United Kingdom,
Insignia RE GmbH in Germany and the to be formed Insignia RE SpA in Italy.
European operations accounted for approximately 13% of Insignia's 1998
revenues. These results reflect 10 months of revenues from REGL (acquired in
February 1998), six months of revenues from Insignia RE GmbH (established in
June 1998) and a full year of revenues from Insignia/CAGISA (in March 1999
Insignia disposed of its interest in this company - see "Disposition" below).
The British Pound (Sterling) represents the only foreign currency of a material
business operation, as RESQ is currently responsible for approximately 90% of
all foreign operations.
Richard Ellis St. Quintin
REGL is a 225 year old London-based commercial real estate firm. REGL was
acquired by Former Parent in February 1998, and its operations were integrated
with Insignia/ESG's operations as part of the reorganization resulting in the
Spin-Off of Insignia from Former Parent. St. Quintin is a London-based real
estate firm acquired by Insignia in March 1999. St. Quintin's operations have
been merged with REGL's operations, and the combined companies now operate
under the name Richard Ellis St. Quintin.
REGL and St. Quintin are highly regarded names in commercial real estate
throughout the United Kingdom. RESQ provides extensive coverage of the entire
United Kingdom market through full-service offices in London, Glasgow,
Birmingham, Leeds, Manchester, Liverpool, Belfast and Jersey. During the 10
months of 1998 during which Insignia owned REGL, REGL had service revenues of
approximately $60.9 million, concluded 18 million square feet of transactions
and sold more than $3.5 billion worth of commercial property. RESQ, one of the
three largest real estate service providers in the United Kingdom, has more
than 800 employees and pro forma annual revenues of more than $100 million, in
the aggregate.
RESQ's capabilities, culture, operating philosophy and client base are
very similar to Insignia/ESG's. In an increasingly global business environment,
Insignia expects that substantial synergies and cross-selling opportunities
will accrue from the pairing of the RESQ and Insignia/ESG operations,
particularly with respect to two of the world's leading financial centers, New
York and London.
RESQ provides broad-ranging services, including consulting, project
management, appraisal, zoning and other general services. The major income
components, however, are agency leasing, tenant representation and property
sales and financing. The London market reflects growing rents and continued
construction after a marked decline from the peak in the late 1980's.
Insignia believes RESQ can serve as a springboard for the global expansion
of Insignia's commercial real estate services business. Insignia expects to
further penetrate the European market, and longer-term, expects to expand into
Asia as well. For example, in July 1998, REGL assisted in opening the offices
of Insignia RE GmbH, Insignia's German subsidiary, in Frankfurt.
Insignia/CAGISA and Insignia RE SpA
In 1997, Former Parent acquired 60% of the capital stock of
Insignia/CAGISA, a leading Italian management company, which became part of
Insignia in the Spin-Off. Insignia/CAGISA operates a mixed portfolio of
commercial and residential units throughout Italy from its offices in Rome and
Milan. In accord with Insignia's focus on commercial real estate services since
the Spin-Off, Insignia (through its Insignia UK Holdings Limited subsidiary)
disposed of its majority interest in Insignia/CAGISA in March 1999 (see
"Disposition" below). As part of the transaction, Insignia's commercial real
estate operations are being transferred to Insignia RE SpA, which intends to
develop a close cooperation with Insignia/CAGISA (which will change its name
to CAGISA SpA).
SERVICES
The full range of Insignia/ESG's services, both in the United States and
internationally, includes:
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Tenant Representation -- the acquisition or disposition of leased or owned
space on behalf of space users
Consulting -- specialization in large, multi-faceted transactions (usually
50,000 square feet or more) requiring in-depth planning, analysis and execution
Investment Sales -- the sale or acquisition of all types of commercial
property on behalf of owners
Debt/Equity Placement -- the arrangement of financing (either debt or
equity) on behalf of owners of all types of commercial properties
Agency Leasing -- the marketing of available space within commercial
properties on behalf of owners/landlords and the consummation of leases with
tenants
Property Management -- responsibility for the financial and operational
aspects of a commercial property, which sometimes involves specialized services
such as construction management, engineering or energy management
Facilities Management -- responsibility for the delivery of services for
properties owned and occupied by corporations, institutions, government
agencies, hospitals, colleges and universities
Industrial Services -- specialized services performed for the owners
and/or users of manufacturing, warehouse, distribution or flex-space (combining
office and industrial uses) facilities
Property Development and Redevelopment -- development and construction
services for owners of office, industrial and retail properties, and the
re-development/re-positioning of properties for owners looking to create
enhanced value
Real Estate Ownership -- primarily through equity co-investment
partnerships and property held for development. The co-investment program
involves the identification of investment opportunities for select clients and
investment alongside of these clients in the ownership of qualifying properties
MARKET TRENDS
United States
Management believes that the commercial real estate services industry in
the United States is undergoing consolidation. A number of factors are
driving this trend, including:
o Clients Demand More Services; Desire to Consolidate Service Providers
-- As real estate requirements become more sophisticated, clients'
needs follow. Increasingly, companies want to be able to turn to a
single source for all of their real estate use, investment and
management requirements. As a result, clients with multiple real
estate requirements ranging from occupancy needs to investment
objectives are consolidating service providers. Whereas several years
ago it might have been common for real estate owners, users and
investors to hire several different companies in different locations
to manage their needs, the industry is clearly seeing a trend towards
the hiring of fewer providers to address all of a client's
requirements.
o Industrial Consolidation is Driven by Economies of Scale -- The
ability of commercial property service providers to accommodate the
increasing demands being made by clients is in no small part driven by
their ability to deliver these services while controlling costs. The
ability of service companies to amortize their overhead costs over a
larger revenue base helps to drive consolidation.
o Increasing Sophistication of Transactions -- As companies grow the
significance of their real estate issues follow suit. It is common
today for a company's real estate occupancy and investment issues to
be second only to labor as a component of overall operating costs.
Additionally, with the increasing sophistication of
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capital markets, the trend toward real estate securitization, the
tendency of companies today to merge with others to achieve economies
of scale and capture market share, and the consolidation of worldwide
locations that accompany such mergers, the manner in which
corporations manage such issues can have profound impacts on their
financial performance. As a result, the level of sophistication
required to manage such complex requirements and interrelationships
transcends the traditional role of the real estate broker. Successful
commercial real estate services companies today must be able to
manage these requirements in order to effectively compete.
o Improvements in Real Estate Markets and the Economy Generally -- If
commercial property services firms fail to focus on expansion of
service lines, consolidation or management of complex transactions, an
improving economy can result in commoditization of their services.
o Insignia/ESG's Business Plan -- Insignia/ESG's response to all of the
foregoing is to seek to become an advisor for corporations and
financial institutions with respect to their real estate use,
investment and management requirements in the same manner that major
investment banks are advisors to a corporation's corporate finance
requirements. By focusing on providing the highest quality services
with the best talent in the major business centers of the world,
Insignia/ESG seeks to become the one-stop resource for all real estate
requirements, specializing in the more complex and creative
transactions that characterize today's worldwide marketplace.
Insignia believes that Insignia/ESG is well positioned to meet the
competitive challenges of an industry in flux. Among its competitive
strengths are:
o its strong reputation and the recognition of its brand name within
the industry;
o the quality and depth of both its management and brokerage staff;
o its entrepreneurial corporate culture, which allows it to respond
quickly to opportunities;
o its unique methodologies for implementing large, complex transactions;
o its complete array of services, which allows it to both meet existing
client needs and take advantage of cross-selling opportunities;
o its extensive nationwide property services portfolio, which provides
significant economies of scale;
o its proven mergers and acquisitions capability;
o its strong balance sheet, with assets in excess of $460 million and
minimal debt;
o Revenue growth in excess of 280% over the last 24 months;
o its market leadership in two of the world's most important financial
centers -- New York and London; and
o its focus on attracting, retaining, supporting and promoting the
highest quality, most skilled personnel in the industry.
Europe
o The general consensus among forecasters is that the United Kingdom and
European economies will see slower growth for the next three years
than has been experienced in recent years. This is likely to result in
a gentle slowdown in demand. Nevertheless, the lack of new development
in a number of key markets, especially in southeast England is likely
to sustain rental growth.
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o Indications are for a "jobless recovery" especially in France and
Germany, while productivity improvements are wrung out of the system
in both private and public sectors. This, coupled with the disciplines
exerted by the "convergence criteria" for European Monetary Union,
will restrict the appetite for business space overall.
REAL ESTATE OWNERSHIP
Equity Co-Investments in Real Estate
Insignia/ESG owns real estate in co-investment partnerships, a program
that Insignia/ESG intends to expand into European markets. Insignia/ESG
identifies investment opportunities for select clients and invests along side
of these clients in the purchase of qualifying properties.
In 1998, this unit concluded real estate investment transactions having an
aggregate value of approximately $260 million, with Insignia's ownership
interest ranging from 6% to 35%. At December 31, 1998, Insignia held
investments in 17 co-investment partnerships owning, in the aggregate, 29
properties comprising 3,300 apartment units and 5.7 million square feet of
commercial space.
Co-investment partners include ING Barings, Blackacre Capital, Lennar,
Investcorp, Lone Star, Lehman Brothers, Prudential, GE Investments, Whitehall
and CS First Boston. Insignia/ESG does not compete for acquisitions with its
advisory clients who do not seek co-investment partners. In addition, with the
acquisitions of REGL and St. Quintin, this program is being expanded to include
opportunities in the United Kingdom and Europe. This expansion is expected to
utilize the personnel of Richard Ellis Financial, Ltd., a Securities and
Futures Authority regulated entity which has substantial investment experience.
Insignia believes the European co-investment opportunities will increase as a
result of increasing investor appetites for European real estate and Insignia's
increase in the capital to be made available to the RESQ unit.
In December 1998, Insignia, through its ICIG Brookhaven LLC subsidiary,
acquired a 100% interest in Brookhaven Village, a commercial retail property
located in Norman, Oklahoma. The total consideration paid for Brookhaven
Village was approximately $9 million. The results of operations for Brookhaven
Village, which are consolidated in the Company's financial statements at
December 31, 1998, were not material.
Property Held For Development
At December 31, 1998, the Company had aggregate investments of $28.8
million in four development properties (one of which was co-invested in late
1998 with the addition of a 70% partner). Additionally, a 70% equity partner
was admitted on one of these developments in early 1999. All development
properties currently remain under development with the first expected to
commence operations no earlier than late 1999.
1998 ACQUISITIONS
The following companies were acquired by Former Parent during 1998 and
contributed to Insignia. These acquisitions were accounted for as purchases.
Goldie B. Wolfe & Company
On January 20, 1998, 100% of the stock of Goldie B. Wolfe & Company
("Goldie Wolfe") was acquired. Goldie Wolfe is a commercial real estate service
firm located in Chicago, Illinois. The purchase price was approximately $5.3
million, all of which was paid in cash.
Richard Ellis Group Limited
In February 1998, 100% of the stock of REGL was acquired. The total
purchase price was approximately $68.2 million. Additional purchase
consideration of up to approximately $12 million (exclusive of approximately
$3.3 million that
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is to be paid in April 1999) is contingent on the future performance of REGL. A
portion of the purchase price was paid by the issuance of 617,371 shares of
Former Parent common stock and the assumption of options enabling REGL
employees to purchase up to 853,741 shares of Former Parent common stock (which
options were assumed by Insignia in the Spin-Off for options to purchase up to
1,289,329 shares of Insignia Common Stock). In connection with the acquisition,
REGL retained ownership of the "Richard Ellis" trademark in the United Kingdom
and a former affiliate of REGL and present competitor of Insignia retained
ownership of the "Richard Ellis" trademark in the United States.
Hotel Partners
On May 11, 1998, Hotel Partners was acquired. Hotel Partners is a
Chicago-based international brokerage firm focused exclusively on the
hospitality segment of the real estate industry. The total purchase
consideration paid for Hotel Partners was approximately $7.0 million, which was
paid in cash at closing. Additional purchase consideration of up to $29.1
million, over a five-year period, is contingent on the future performance of
Hotel Partners.
Jackson Cross Company
On June 15, 1998, Jackson Cross Company ("Jackson Cross"), a prominent
commercial real estate service firm with operations primarily in the greater
Philadelphia area, was acquired. The total purchase consideration paid 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
purchase consideration of up to $5.4 million is contingent on the future
performance of Jackson Cross.
1999 ACQUISITIONS
Insignia acquired the following companies in 1999. These acquisitions will
be accounted for as purchases.
Lynch Murphy Walsh & Partners
On March 1, 1999, Insignia acquired Lynch Murphy Walsh & Partners ("Lynch
Murphy"), a provider of commercial real estate services located in Boston,
Massachusetts. Lynch Murphy specializes in brokerage services, including
representation of tenants and landlords, investment sales and debt placements,
valuation services and advisory/consulting services. The base purchase price
was $12.0 million, all of which was paid in cash from borrowings under
Insignia's revolving credit facility. Additional purchase consideration of up
to $10.0 million is contingent on the future performance of Lynch Murphy
St. Quintin Holdings Limited
On March 5, 1999, Insignia acquired St. Quintin; a British real estate
services firm headquartered in London. The operations of St. Quintin have been
merged with REGL. The base purchase price was approximately $32.0 million.
Additional purchase consideration of up to approximately $12.0 million is
contingent on the future performance of St. Quintin. The purchase was funded
with approximately $24.3 million in borrowings on the revolving credit
facility, the issuance of approximately 306,000 shares of Insignia Common Stock
and assumed options to purchase approximately 612,000 of Insignia Common Stock.
The acquisition will be accounted for as a purchase.
DISPOSITION
A one-time charge of $2.3 million was recorded in 1998 as a write-down of
the Company's majority interest in Insignia/CAGISA to estimated disposition
value. This decision was made in light of the Company's sale of the majority of
its U.S. residential business to AIMCO in 1998. The Company completed the sale
of its interest in Insignia/CAGISA in March 1999.
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RESIDENTIAL REAL ESTATE SERVICES -- REALTY ONE AND INSIGNIA RESIDENTIAL GROUP
SINGLE-FAMILY HOME BROKERAGE SERVICES
General
Realty One, a full-service residential real estate broker headquartered in
Cleveland, Ohio, was established in 1953 and acquired by Former Parent in 1997.
Realty One's current business operation is the result of nearly 60 separate
mergers and acquisitions. It is the largest residential real estate brokerage
firm in Ohio and the ninth largest (based on unit volume) in the United States
according to the Real Trends "Big Brokers Report" published in May 1998. With
more than 1,500 sales associates and 400 support staff located in more than 45
offices throughout northern Ohio, it represents more than 90 residential
builders and handles more than 21,300 transactions valued at more than $3.1
billion annually. Realty One's services include residential real estate sales,
corporate relocation services and residential builder representation. First
Ohio Mortgage Corporation, an affiliate of Realty One, originates single-family
home mortgages for both Realty One clients and third parties. Realty One
accounted for approximately 20% of Insignia's 1998 service revenues.
Services
The services provided by Realty One include the following:
Residential Brokerage -- the agency representation of both buyers and
sellers in the purchase and sale of residential housing. These services include
assisting the seller in pricing the property, marketing and advertising the
property, showing the property to prospective buyers, assisting the parties in
negotiating the terms of the sale and closing the transaction.
Relocation Services -- assisting both corporations and individuals in the
sale, procurement and temporary management of residential properties for
corporations and transferees. Realty One assists in large group moves as well
as individual relocations
Builder Marketing Services -- representing and consulting with large
national and local developers providing marketing, research studies, product
development and brokerage services
Mortgage Origination -- through First Ohio, Realty One offers convenient
and competitive mortgage services to its customers and many other brokerages
throughout northern Ohio. First Ohio represents more than 15 lenders, each
offering multiple financial products
Escrow Agency -- through First Ohio Escrow, Realty One provides
residential escrow agency services facilitating the closing of property sales
Industry Overview
Insignia continues to evaluate a consolidation-based strategy in the
single-family brokerage industry. The industry is currently defined by several
key trends, including:
Margin Compression. Margins are being compressed as a result of increasing
splits paid to agents and, for the larger, more progressive firms, the
investment in technology, marketing and development of one-stop shopping
services.
Market Fragmentation. There are more than 50,000 single-family brokerages
in the U.S., one quarter of which are currently estimated to be unprofitable,
according to various industry research studies. These consist of independent
brokerages as well as franchise operations. No single independent broker
commands more than 1% of the national market, and no national franchise company
maintains more than an 11% market share, with only three franchise companies
holding more than 3%.
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Aging Entrepreneurial Base of Industry Founders. According to a 1996
survey by the Real Estate Outlook, a leading industry publication, over 85% of
the principals in this industry are over 55 years old and are beginning to look
for ways to continue to grow their business, such as mergers or strategic
alliances, or for exit strategies. Although there has been some movement in the
industry over last three years; there still remain a high percentage of
principles in this industry that are currently seeking such alliances.
Strategy
The above trends coupled with the available economies of scale suggest
that pursuit of a consolidation based strategy may be capable of reversing the
downward trend in margins, exploiting proprietary technology to build real
competitive advantages, and building brand equity so as to increase the value
of the brokerage company in the eyes of the consumer. Realty One may also
benefit from horizontal and vertical expansion in related areas, such as
mortgage, escrow and title, by offering the consumer a one stop shopping
experience.
The residential brokerage industry has been consolidating for some time,
and with access to additional capital, Realty One may acquire key brokerage
firms. Realty One already has significant experience acquiring and assimilating
companies, completing 60 acquisitions over the last 15 years. The senior
officers of Realty One are highly respected within their industry and have
strong contacts with the principals of numerous other large, independent
brokerages around the United States.
In addition to consolidation strategies, opportunities exist to increase
margins to the brokerage firm as well as the sale of services to generate other
income. Realty One is a pioneer with this strategy and has been successful at
increasing its margins. Realty One's approach is to use technology to bundle
services more inexpensively and increase the value to the consumer.
COOPERATIVE AND CONDOMINIUM APARTMENT MANAGEMENT SERVICES
General
In 1995, Former Parent purchased the residential property management
business of Douglas Elliman-Gibbons & Ives and all of the outstanding capital
stock of Kreisel Company, Inc., forming the largest manager of cooperative and
condominium apartments in the New York metropolitan tri-state area according to
the January 1999 issue of New York Habitat. Its primary business is to provide
third party fee management to cooperative, condominium and rental housing in
the New York marketplace. At December 31, 1998, Insignia Residential Group,
operating under the Douglas Elliman-Gibbons & Ives and Kreisel Company, Inc.
trade names, provided full service management for more than 300 residential
properties comprised of approximately 60,000 residential units in the greater
New York metropolitan area. Insignia Residential Group's cooperative and
condominium management services accounted for approximately 5% of Insignia's
1998 service revenues. Insignia Residential Group generated service revenues of
$23.5 million in 1996, $24.4 million in 1997 and $25.7 million in 1998.
Portfolio Composition
Insignia Residential Group's management portfolio consists of
cooperatives, condominiums and rental properties. Among the notable properties
in each of these categories are the San Remo, Worldwide Plaza and Fresh
Meadows, respectively. Manhattan is the largest market for Insignia Residential
Group, although it does maintain a presence in each of the other four boroughs
of New York City as well as Long Island and Westchester County. In late 1996,
Insignia Residential Group made its foray into the Northern New Jersey
marketplace by obtaining the management of the 1,266 unit Horizon House
cooperative. Since that time, Insignia Residential Group has added
approximately 1,600 additional units in New Jersey. Insignia Residential
Group's strategy has been to focus in key markets where its size and economies
of scale allow it to become the leading player.
Services
Insignia Residential Group's revenues were generated by providing the
following services:
9
<PAGE>
Property Management -- Responsibility for all of the financial and
operational aspects of a residential property. This service involves providing
accounting on a cash or accrual basis, lease administration, central
purchasing, cash management, insurance oversight, collections and compliance
monitoring, and construction management.
Transfer Agent -- On behalf of cooperative and condominium clients,
Insignia Residential Group processes applications of prospective purchasers,
arranges and attends closings, facilitates the assignment of proprietary leases
and provides safekeeping of leases and other documents.
Brokerage -- While Insignia Residential Group does engage, to a limited
extent, in apartment resale and mortgage brokerage, there exists the potential
to expand these activities to a point where they could make a meaningful
contribution. Many cooperative and condominium management companies have used
management as a loss leader to provide business flows to more profitable
transactional activities.
Strategy
Insignia Residential Group anticipates that its reputation for quality
service and the broad experience of its personnel in managing condominiums and
cooperatives located throughout the New York metropolitan area should enable it
to successfully pursue new property management opportunities. Insignia
Residential Group also believes its economies of scale and state-of-the-art
management information system will allow it to increase margins by offering its
services efficiently and at a competitive cost. Insignia Residential Group also
anticipates pursuing opportunities in the apartment resale and mortgage
brokerage businesses, which not only could offer the potential for higher
margins but also may provide for an above average rate of growth.
MERGERS AND ACQUISITIONS
Over the past seven years, Insignia has demonstrated the ability to
recognize accretive acquisition opportunities and to successfully integrate
them within its existing infrastructure. Insignia continues to seek
opportunities to align its business with other market leading real estate
service firms that fit the Company's objectives for global expansion. Insignia
maintains an internal mergers and acquisitions staff, which includes all senior
members of Former Parent's investment banking group as well as the acquisition
analysis staff currently maintained by RESQ.
Insignia pursues a global acquisition strategy that focuses on the
development of each of its international and domestic businesses, while
simultaneously seeking principal opportunities to invest capital in real estate
assets in partnership with its clients. Such undertakings are expected to be in
the areas of both commercial and residential real estate assets and services.
Insignia also expects that, with time, it may pursue opportunities to diversify
its lines of business and investment objectives as circumstances and
opportunities change.
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COMPETITION
COMMERCIAL PROPERTY SERVICES
United States
Competition is intense in the U.S. commercial property services industry,
particularly in the areas of tenant representation, property leasing/management
and other services in which Insignia/ESG is engaged. Historically, most
competitors have been regional or local companies specializing in one or more
aspects of the business (e.g., property management, tenant representation,
etc.). However, the consolidation trend has spawned fewer, larger international
competitors that are integrated across property types and disciplines.
Insignia/ESG competes increasingly with these full-service national
competitors, including CB Richard Ellis, Cushman & Wakefield, Grubb & Ellis,
Jones Lang LaSalle and Trammel Crow.
Different factors weigh heavily in the competition for tenant
representation and property services assignments. For major tenant
representation assignments, competition is based on quality of services,
demonstrated track record, breadth of resources, analytical skills and market
knowledge. Insignia/ESG believes it has a distinct methodology for executing
major tenant representation assignments, which combines brokerage and
consulting disciplines. This methodology, honed in New York over the past
decade, is being exported to top tier markets throughout the United States.
Further, Insignia/ESG has an outstanding track record in completing major
tenant representation assignments. As tenant representative, Insignia/ESG
arranged transactions for such well-known entities as Reuters, Grey
Advertising, Marsh & McLennan, McGraw-Hill and Ziff-Davis Publishing. Moreover,
Insignia/ESG's creativity and transaction-structuring expertise have been
recognized by a leading trade group, which annually recognizes two New York
City transactions as its "Deals of the Year." Insignia/ESG has been the
recipient of both awards in each of the past three years, and has earned the
top award overall in four consecutive years. Insignia/ESG believes this
outstanding track record provides a distinct competitive advantage.
Competition for third-party commercial property services is based
principally on cost and the quality of service, including the ability to
enhance asset values. Insignia/ESG's personnel are experienced in managing a
wide variety of types of properties in locations throughout the country. This
enables Insignia/ESG to offer an owner of a large diversified portfolio the
ability to obtain experienced management for most or all of its properties
through one organization. Insignia/ESG believes it has demonstrated an ability
to effectively manage, lease and improve the value of properties. In addition,
Insignia/ESG believes it has developed a reputation for quality service and
attention to detail to clients, investors and tenants alike. Insignia/ESG also
believes its economies of scale and state-of-the-art management information
systems allow it to offer its services efficiently and at an overall cost which
is competitive with or less expensive than is offered by other property service
companies. Because of its size, Insignia/ESG is able to control operating costs
by spreading fixed overhead costs over its large service volume, which benefits
Insignia/ESG's results of operations and enables Insignia/ESG to pass on some
of these savings to the property owners for which it provides services. As a
result, Insignia/ESG believes it has competed effectively in the market for
provision of real estate services to third party entities.
Europe
Competition is intense among commercial service providers in the United
Kingdom. Only five commercial services firms in the United Kingdom currently
have annual revenues exceeding $100 million and no firm maintains greater than
a 5% market share. The newly formed Richard Ellis St. Quintin has combined
annual revenues of over $100 million, making RESQ a market leader with a "Top
3" position in commercial property markets behind only DTZ and Jones Lang
Lasalle. RESQ's combined operations and reputation place it at a strategic
advantage over other primary competitors including CB Hiller Parker, Knight
Frank, Healey & Baker, Cushman & Wakefield and Lambert Smith Hampton.
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SINGLE-FAMILY HOME BROKERAGE SERVICES
Realty One accounts for almost one-third of single-family home sales or
listings within the northern Ohio residential market. The number two firm,
Smythe, Cramer, is responsible for approximately 20% of the total sales and
listings. Other firms trail significantly further behind. Realty One believes
its success is due to a number of factors, including its leading-edge use of
technology and innovative marketing practices. For example, its proprietary
computer system (CARS) defines the "readiness" of potential customers to
purchase a home; thus allowing for highly targeted direct-marketing and
advertising programs.
COOPERATIVE AND CONDOMINIUM MANAGEMENT SERVICES
The cooperative condominium management business is extremely competitive.
In addition to several large companies, including Charles Greenthal, Inc. and
Brown, Harris and Stevens, Inc., there are many small entities that
aggressively compete for business. Further, some owner associations have opted
for self-management, which eliminates the need for third party service
provider's altogether. Despite the competitive landscape, Insignia Residential
Group believes that it has a proven record and that it has the capability to
continue to compete successfully. It has grown to be an industry leader by
offering superior service while providing its clients cost benefits not
available from smaller competitors. Examples are the lower cost of supplies,
insurance and other items that Insignia Residential Group purchases on behalf
of its clients using the buying power available because of size. In addition,
Insignia Residential Group has begun to develop a new state-of-the-art
information system that, when fully operational, should provide further product
differentiation.
CREDIT AGREEMENT
On October 22, 1998, Insignia established a three-year $185 million
revolving credit facility. 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. At December 31, 1998, there were
no borrowings on this facility; however, there was an outstanding letter of
credit against the facility in the amount of $1.5 million.
STOCK REPURCHASE
On October 27, 1998, Insignia announced the approval of a program to
repurchase up to $10 million of its outstanding Common Stock. At December 31,
1998, 139,200 shares of Insignia Common Stock had been repurchased at an
aggregate cost of approximately $1.85 million.
SEGMENT DATA
Insignia is a fully integrated real estate services company with
operations in two principal reportable segments: commercial services and
residential services. The commercial services segment provides a diversified
array of services including the following: tenant representation, agency
leasing, investment sales, property management, consulting, brokerage, and
development. Additionally, the commercial services segment includes real estate
operations, consisting primarily of ownership in co-investment partnerships and
property held for development. The residential services segment provides
property management services, brokers real estate, originates mortgages loans,
and provides escrow services. Segment operations are disclosed in the notes to
the accompanying financial statements of Insignia, included in Item 14 of this
Form 10-K. These financial statements should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 of this Form 10-K.
ENVIRONMENTAL REGULATION
Under various federal and state environmental laws and regulations, a
current or previous owner or operator of real estate may be required to
investigate and remediate certain hazardous or toxic substances or
petroleum-product releases at the property, and may be held liable to a
governmental entity or to third parties for property damage
12
<PAGE>
and for investigation and cleanup costs incurred by such parties in connection
with contamination. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. The presence of contamination or the failure
to remediate contamination may adversely affect the owner's ability to sell or
lease real estate or to borrow using the real estate as collateral. The owner
or operator of a site may be liable under common law to third parties for
damages and injuries resulting from environmental contamination emanating from
the site. There can be no assurance that Insignia, or any assets owned or
controlled by Insignia currently are in compliance with all of such laws and
regulations, or that Insignia will not become subject to liabilities that arise
in whole or in part out of any such laws, rules, or regulations. Moreover,
there can be no assurance that any of such liabilities to which Insignia may
become subject will not have a material adverse effect upon the business or
financial condition of Insignia.
EMPLOYEES
At December 31, 1998, Insignia had approximately 3,700 employees. Insignia
believes that its employee relations are excellent.
EXECUTIVE OFFICERS
The following sets forth certain information concerning persons who serve
as executive officers of the Company. All executive officers of Insignia serve
at the discretion of the Board of Directors.
NAME AGE POSITION
---- --- --------
Andrew L. Farkas 38 Director; Chairman of the Board; Chief Executive
Officer
Andrew J.M. Huntley 60 Director; Office of the Chairman; Chairman of
REGL
Stephen B. Siegel 54 Director; President; Chairman and Chief
Executive Officer of Insignia/ESG
James A. Aston 46 Chief Financial Officer
Frank M. Garrison 44 Office of the Chairman; President of Insignia
Financial Services
Adam B. Gilbert 46 Executive Vice President; General Counsel;
Secretary
Edward S. Gordon 63 Office of the Chairman
Ronald Uretta 43 Chief Operating Officer; Treasurer
The following is additional information with respect to the above named
executive officers.
Andrew L. Farkas has been a director and Chairman of Insignia since its
inception in May 1998 and Chief Executive Officer of Insignia since August
1998. Mr. Farkas served as a director of its Former Parent from its inception
in August 1990 until September 1998. Mr. Farkas served as Chairman and Chief
Executive Officer of its Former Parent from January 1991, and President from
May 1995 until September 1998. Prior to August 1993, Mr. Farkas was the sole
director of Former Parent. He served as Chief Executive Officer of Insignia
Properties Trust from December 1996 until September 1998 and Chairman of the
Board of Trustees from December 1996 until February 1999.
Andrew J.M. Huntley has been a director and member of the Office of the
Chairman of Insignia since its inception in May 1998. Mr. Huntley also serves
as Chairman of REGL, and his principal employment has been with REGL for more
than the past five years.
Stephen B. Siegel has been a director of Insignia since its inception in
May 1998 and President of Insignia since August 1998. Mr. Siegel also serves as
Chairman (since September 1998) and Chief Executive Officer of Insignia/ESG
(since July 1996). Mr. Siegel served as President of Edward S. Gordon Company
Incorporated (now Insignia/ESG) from June 1992 to May 1998. From 1988 to 1992,
Mr. Siegel was engaged in a joint venture with Chubb Corporation to develop and
acquire investment-grade office buildings throughout the United States.
James A. Aston has served as Chief Financial Officer of Insignia since
August 1998. Mr. Aston served as Executive Managing Director of Investment
Banking of the Former Parent from January 1991 and Chief Financial
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Officer from August 1996 until September 1998. Additionally, Mr. Aston served
as President of Insignia Properties Trust from December 1996 until September
1998 and as a Trustee from December 1996 until February 1999.
Frank M. Garrison has been a member of the Office of the Chairman and
President of Insignia Financial Services, a division of Insignia, since August
of 1998. Mr. Garrison served as President of Financial Services and Executive
Managing Director of the Former Parent from July 1994 until September 1998.
Additionally, Mr. Garrison served as Executive Managing Director of Insignia
Properties Trust from December 1996 until September 1998 and as a Trustee from
December 1996 until February 1999. Mr. Garrison commenced his employment with
the Former Parent in January 1992.
Adam B. Gilbert has been General Counsel and Secretary of Insignia since
its inception in May 1998 and Executive Vice President of Insignia since August
1998. Mr. Gilbert also serves as Senior Vice President of Insignia/ESG (since
July 1998) and was General Counsel and Secretary of Former Parent from March
1998 until September 1998. Prior to March 1998, Mr. Gilbert was a partner in
the law firm of Nixon, Hargrave, Devans & Doyle, LLP. Prior to January 1994,
Mr. Gilbert was a partner in the law firm of Shea & Gould. Shea & Gould filed
for protection under the federal bankruptcy laws in 1994.
Edward S. Gordon has been with the Office of the Chairman of Insignia
since its inception in May 1998. Mr. Gordon served as Chairman of Insignia/ESG
from June 1996 until August 1998. Additionally, Mr. Gordon was a member of the
Office of the Chairman of the Former Parent from June 1996 until September
1998. He is the founder and was Chairman of Edward S. Gordon Company,
Incorporated which was acquired by the Former Parent in June 1996.
Ron Uretta has served as Chief Operating Officer and Treasurer of Insignia
since August 1998. Mr. Uretta also serves as President of Insignia/ESG (since
March 1999). Mr. Uretta served as Treasurer of the Former Parent from January
1992 until September 1998 and Chief Operating Officer from August 1996 until
September 1998. Mr. Uretta served as a Trustee of Insignia Properties Trust
until October 1998.
There is no family relationship between any of the executive officers of
Insignia.
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Item 2. Properties
Insignia's principal executive office is located at 375 Park Avenue, in
New York, New York. Presently, the Company occupies approximately 6,500 square
feet at this location. The lease expires on October 31, 1999. The following
table sets forth information on the operating leases for the principal
headquarters for each of Insignia's operating units:
<TABLE>
<CAPTION>
OPERATING UNIT LOCATION ANNUAL RENT SQUARE FT. EXPIRATION
-------------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Insignia/ESG 200 Park Avenue, New York, NY $4,492,000 124,700 June 2005
RESQ Berkeley Square House, London 3,215,000 42,000 June 2003
Realty One 6000 Rockside Woods Blvd.,
Cleveland, OH 575,000 41,000 June 2005
Insignia Residential
Group 675 Third Avenue, New York, NY 1,668,000 62,800 April 2009
</TABLE>
The Company occupies office space in locations throughout the United
States, United Kingdom, Italy and Germany under leases expiring at various
dates between 1999 and 2009. Insignia believes its facilities are adequate for
current and future planned uses.
Item 3. Legal Proceedings
The Company 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 result in substantial
compensatory and punitive damages. Management believes that any such lawsuits
will be resolved without material loss to the Company or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
COMMON STOCK
On September 21, 1998, Former Parent effected the Spin-Off of Insignia by
distributing to each record holder of Former Parent common stock as of
September 15, 1998 (the "Distribution Record Date") two-thirds of a share of
Insignia Common Stock for each share of Former Parent common stock held by such
holder. Insignia Common Stock commenced trading on the New York Stock Exchange
on September 22, 1998 under the symbol "IEG". Commencing on November 2, 1998,
the Company reclaimed Former Parent's original New York Stock Exchange trading
symbol, "IFS".
The following table sets forth the high and low daily closing sales prices
for Insignia Common Stock as reported on the New York Stock Exchange since the
Spin-Off:
HIGH LOW
1998
Third Quarter (commencing September 22, 1998).......12-11/16 11-1/2
Fourth Quarter...................................... 14 8-7/8
15
<PAGE>
The closing sales price for Insignia Common Stock on March 19, 1999 as
reported on the New York Stock Exchange was $12.750.
The Company's transfer agent is First Union National Bank of North
Carolina, 1525 West W. T. Harris Blvd. 3C3, Charlotte, North Carolina
28288-1153. As of March 1, 1999, there were approximately 1,600 shareholders of
record of Insignia Common Stock.
The Company has never paid dividends on the Insignia Common Stock and does
not currently intend to pay any dividends in the foreseeable future. Any
payment of future dividends and the amounts thereof will be dependent upon the
Company's earnings, financial requirements and other factors, including
contractual obligations. The payment of dividends is subject to certain
restrictions under the Company's revolving credit facility.
OUTSTANDING OPTIONS AND WARRANTS
On September 30, 1998, in connection with the Distribution and the Merger,
Former Parent distributed to record holders of the 6.5% Trust Convertible
Preferred Securities of Insignia Financing I, a subsidiary of Former Parent
(the "Preferred Securities"), warrants to purchase approximately 1.2 million
shares of Insignia Common Stock (four warrants for each $500 liquidation amount
of Preferred Securities held by them) (the "Trust Preferred Warrants").
Each Trust Preferred Warrant represents the right to purchase one share of
Insignia Common Stock at an exercise price of $14.50 per share. The term of
each Trust Preferred Warrant is five years and is not exercisable until October
2000. Former Parent purchased the Trust Preferred Warrants from Insignia on
September 14, 1998 for $8.5 million.
On September 15, 1998, Insignia issued warrants to purchase Insignia
Common Stock (as required under the terms of the existing warrants issued by
Former Parent) to the following holders of warrants to purchase Former Parent's
common stock: (i) warrants to purchase 928,661 shares of Insignia Common Stock
at an exercise price of $8.25 per share to affiliates of Apollo Real Estate
Investment Fund, L.P.; and (ii) warrants to purchase 42,500 shares of Insignia
Common Stock at an exercise price of $8.25 per share to Gotham Partners, L.P.
In connection with the Merger, Insignia assumed substantially all existing
options to purchase shares of Former Parent's common stock and awards of
unvested restricted stock held by employees of the businesses comprising the
Spin-Off. At December 31, 1998, such options represent the right to purchase
approximately 3.2 million shares of Insignia Common Stock. These options are in
addition to approximately 1.1 million options to purchase Insignia Common Stock
granted under Insignia's 1998 Stock Incentive Plan at the time of the Spin-Off.
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Item 6. Selected Financial Data
The following table sets forth selected historical financial data of
Insignia and the Insignia Businesses for the years ended December 31, 1998,
1997, 1996, 1995 and 1994. This information has been derived from and is
qualified by reference to the consolidated and combined financial statements of
the Company and the notes thereto and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included as Item 7 in this Form 10-K.
This selected financial data presents the historical financial position,
results of continuing operations and cash flows of the Insignia Businesses
owned by the Former Parent prior to the Spin-Off of such Businesses in
September 1998 as if Insignia were a separate entity for all periods presented.
This financial information is not necessarily indicative of results that would
have occurred had Insignia and the Insignia Businesses operated as a
stand-alone entity separate from Former Parent during the periods presented.
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except per share data)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $510,780 $295,753 $122,005 $38,658 $15,665
Provision for loss on subsidiary 2,300 -- -- -- --
Depreciation and amortization 22,543 15,244 9,197 3,778 771
Net income (loss) 11,053 13,055 3,484 (2,278) 173
Earnings per share - assuming dilution (1) 0.50 0.62 0.16 N/A N/A
OTHER DATA:
EBITDA (2) $48,345 $36,633 $14,561 $1,104 $1,059
Cash provided by (used in) operating
Activities 35,857 31,370 11,203 (1,399) N/A
</TABLE>
<TABLE>
<CAPTION>
December 31,
(In thousands)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $53,489 $5,514 $44 $36 $10
Real estate interests 58,196 19,454 4,465 894 --
Total assets 595,489 337,945 171,787 43,074 19,877
Notes payable 44,438 19,969 -- -- --
Investment and net advances from Former
Parent -- 208,444 137,777 39,948 17,294
Stockholders' equity 383,243 -- -- -- --
</TABLE>
(1) Earnings per share data for 1998 is presented on a pro forma basis assuming
the Spin-Off occurred at the beginning of the year. Per share results for 1997
and 1996 are presented entirely on a pro forma basis for comparison because
Insignia did not exist as a separate entity for those periods.
(2) Defined as real estate service revenues less direct expenses and
administrative costs. In addition to net income, Insignia believes that EBITDA
is a primary indicator of the Company's financial performance. This
supplemental indicator is used by management to evaluate operations and in
making financial decisions. EBITDA should not be construed to represent cash
provided by operations pursuant to generally accepted accounting principles
("GAAP"), which takes into consideration such items as changes in elements of
working capital and deferred taxes. EBITDA is not defined by GAAP and
Insignia's usage of this term may differ from other companies' usage of the
same or similar terms.
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
INTRODUCTION
Insignia is among the leading providers of real estate services in the
United States, with a growing presence in Europe. Insignia provides a
diversified array of real estate services in two principal business segments:
commercial services and residential services. Insignia reported revenues of
$507.4 million in 1998 from real estate services.
In 1998, the commercial services businesses were comprised of
Insignia/ESG's United States operations, REGL in the United Kingdom, Insignia
RE GmbH in Germany, and Insignia/CAGISA in Italy. With the continued expansion
of the commercial services business into Europe, through the acquisition of
REGL and the establishment of Insignia RE GmbH in Germany in 1998, Insignia/ESG
is rapidly becoming a global leader in real estate services. Commercial
operations reported aggregate service revenues of $378.4 million in 1998,
accounting for 75% of the Company's total service revenues for the year.
The residential services business is comprised of Realty One, a
single-family home brokerage and mortgage banking business, and Insignia
Residential Group, a New York based cooperative and condominium apartment
services business. Realty One, located in Cleveland, is the largest provider of
residential real estate brokerage services in Ohio and the ninth largest (based
on unit volume) in the United States according to Real Trends "Big Broker
Report" published in May 1998. Insignia Residential Group is the largest
provider of management services to cooperative and condominium owners in the
New York area with a total portfolio of approximately 60,000 units. Residential
operations reported aggregate service revenues of $129.0 million in 1998.
In addition to providing real estate services, Insignia also pursues
opportunities to purchase real estate assets offering above-average return
potential, primarily through co-investment ventures with its institutional
partners and property held for development. Real estate ownership operations,
which are managed as a component of the Company's commercial services business,
included 17 co-investment partnerships (owning an aggregate 5.7 million square
feet of commercial property and 3,300 residential units) and four development
properties at December 31, 1998.
Revenues from tenant representation, investment sales, debt/equity
placements and agency leasing, which collectively comprise a substantial
portion 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, primarily in Realty One's business, may significantly impact
quarterly results. A significant portion of the expenses associated with the
above mentioned activities are directly correlated to revenue.
Insignia, which completed four strategic acquisitions in 1998 and two in
early 1999, is continually evaluating acquisition opportunities as part of its
global growth strategy. Due to the substantial non-cash amortization incurred
by the Company in connection with purchased goodwill and other intangibles and
interest expense charges associated with acquisition financing, past and future
acquisitions may adversely affect net income.
Insignia's primary objective is to increase earnings and stockholder value
through internal organic growth and acquisitions of select businesses. In
addition to net income and EBITDA, Insignia uses Net EBITDA (defined as income
before depreciation, amortization, income taxes and non-recurring one-time
charges) and Net EBITDA minus income taxes, as measures of the Company's
financial performance.
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<PAGE>
BASIS OF PRESENTATION
The financial statements for Insignia present the financial position,
results of operations and cash flows of the Insignia Businesses spun-off from
Former Parent as if Insignia were a separate entity for all periods presented.
Former Parent's historical cost basis in the assets and liabilities of the
Insignia Businesses have been reflected in these financial statements.
The Insignia Businesses utilized Former Parent's centralized systems for
cash management, payroll, employee benefit plans, insurance and various
administrative services. As a result, substantially all cash received by the
Insignia Businesses was deposited in and commingled with Former Parent's
general corporate funds. Similarly, real estate services and administrative
expenses, capital expenditures and other cash requirements of the Insignia
Businesses were paid by Former Parent and charged directly or allocated to the
Insignia Businesses. Administrative expenses, which included, among other
things, investment banking, information technology, legal, finance, accounting
and facilities expenses, were allocated to Insignia for all periods prior to
Spin-Off. These allocations approximated $5.5 million for the nine month period
prior to Spin-Off (1998), $6.8 million (1997) and $3.5 million (1996). The
allocations were based upon analysis of the operations of Former Parent using
various methods, including acquisition activities, employee headcount and
estimated management time devoted to the operations of the Insignia Businesses.
Certain assets and liabilities related to the operations of the Insignia
Businesses were managed and controlled by Former Parent on a centralized basis.
Such assets and liabilities have been allocated to 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.
The following results are based on the historical financial statements of
Insignia and the Insignia Businesses spun off in September 1998. These results
include the impact of certain assumptions used in determining the allocation of
overhead costs from Former Parent. These results are not necessarily indicative
of the actual results that may have occurred if Insignia and the Insignia
Businesses had operated on a stand-alone basis for the entire periods presented
or for the future results.
FINANCIAL CONDITION
Total assets increased by approximately $257.5 million to $595.5 million
at December 31, 1998. Approximately $116.6 million of this increase arose as a
result of 1998 acquisitions, primarily REGL, Hotel Partners and Jackson Cross
(primarily receivables and costs in excess of net assets of acquired businesses
- - see note 5 of accompanying financial statements). Cash and cash equivalents
increased by approximately $48.0 million primarily from cash provided by
operations and the contribution of $23.5 million from Former Parent on the date
of the Merger. Substantially all cash received by the Insignia Businesses prior
to the Spin-Off was deposited in, and commingled with, Former Parent's general
corporate funds, resulting in low cash holdings reported at December 31, 1997.
Real estate interests increased by $38.7 million, reflecting the continuance of
the co-investment and development programs.
Liabilities increased by approximately $83.1 million to $212.2 million at
December 31, 1998. The increase is due partly to approximately $36.4 million in
assumed liabilities in connection with 1998 acquisitions and a $24.5 million
rise in total borrowings. All historical retained earnings of Insignia and the
Insignia Businesses through September 30, 1998 represent contributed capital
from Former Parent at the time of the Spin-Off and, therefore, are included in
paid-in capital at December 31, 1998.
19
<PAGE>
RESULTS OF OPERATIONS
Insignia's results, as discussed below, have been favorably impacted by
management's ability to successfully expand the Company through acquisition
growth and the diversification of real estate services during a period of
vibrant real estate markets. The following table sets forth certain items
derived from the Company's consolidated statement of operations for the year
ended December 31, 1998 and combined statements of operations for the years
ended December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenue:
Real estate services $507,351 $295,258 $122,005
Cost and expenses:
Real estate services 451,774 251,855 103,942
Administrative 7,232 6,770 3,502
-------- -------- --------
EBITDA - Real Estate Services 48,345 36,633 14,561
Interest and other income 3,429 495 --
Real estate FFO (1) 1,735 804 362
Interest expense (1,378) (318) (18)
Minority interests 371 41 --
-------- -------- --------
Net EBITDA 52,502 37,655 14,905
Income taxes 12,975 8,703 2,135
-------- -------- --------
Net EBITDA minus income taxes 39,527 28,952 12,770
Provision for loss on disposal 2,300 -- --
Depreciation 3,090 1,429 661
Amortization of intangibles 19,453 13,815 8,536
Depreciation - real estate 3,631 653 89
-------- -------- --------
Net Income $ 11,053 $ 13,055 $ 3,484
======== ======== ========
</TABLE>
(1) Funds From Operations ("FFO") is defined as income or loss from real estate
operations before depreciation, gains or losses on sales of property and
provisions for impairment.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Insignia reported record service revenues and Net EBITDA for 1998 of
$507.4 million and $52.5 million, respectively. These results represented
increases of 72% and 39%, respectively over 1997. Net income was adversely
affected by a one-time charge of $2.3 million for the write-down of the
Company's investment in Insignia/CAGISA. As a result, net income and net income
per share for 1998 declined to $11.1 million and $0.50, respectively.
The acquisitions of REGL (February 1998), Realty One (October 1997) and
Barnes Morris Pardoe & Foster ("Barnes Morris") (October 1997), together with
selective acquisitions of domestic commercial real estate services firms and
further expansion of services in Europe during 1998, through Insignia RE GmbH
in Germany, constituted a majority of these increases. In addition, favorable
real estate markets in the United States and United Kingdom
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coupled with the strategic expansion of commercial services in certain key U.S.
markets during 1998 contributed to the record growth.
Commercial Services
Real Estate Services
Commercial real estate services in 1998 were conducted in the United
States through Insignia/ESG and in Europe through REGL in the United Kingdom,
Insignia RE GmbH in Germany, and Insignia/CAGISA in Italy. These businesses
produced service revenue increases of 53% over 1997 to $378.4 million in 1998.
The increase in service revenues attributable to the acquisitions of Barnes
Morris, REGL, Hotel Partners and Jackson Cross was approximately $106.2
million. The remaining $25 million in revenue growth was attributable primarily
to internal growth and expansion of services. The commercial segment produced
EBITDA of $46.7 million in 1998, which was 16% greater than its 1997 EBITDA.
Insignia/ESG's U.S. operations were led by strong results in the West
Coast and New York metropolitan areas in 1998. The West Coast region, which
reported revenues of $34.5 million for 1998, or 34% more than 1997 revenues of
$25.7 million. This region exhibited strength across all service lines, as
virtually all of the growth was from internal sources. This strength in the
West Coast region was aided by the launch of brokerage operations in Los
Angeles and San Francisco and by adding a tenant representation component to
the existing owner services business.
The New York metropolitan area enjoyed another strong year, even though
the fourth quarter performance did not reach the record levels achieved in the
fourth quarter of 1997. Service revenues for the New York area were $168.2
million for 1998 compared to $154.9 million in 1997, reflecting Insignia/ESG's
strong presence in this key U.S. market. In the annual ranking of the top New
York deals published in Crain's in February 1999, Insignia/ESG accounted for 19
of the top 50 leasing transactions, equaling the combined total of the number
two and three firms.
REGL, acquired in February 1998, has performed ahead of acquisition date
expectations with the production of $60.9 million of service revenues and
EBITDA of $8.6 million for the period of ownership in 1998. The acquisition of
REGL has given Insignia a formidable strategic presence in the United Kingdom,
which can be used as a delivery system for further expansion in the United
Kingdom and throughout other parts of Europe. Additionally, the Company's
alignment with REGL allows for substantial cross marketing with the U.S.
The foregoing commercial results were achieved in spite of the turmoil in
the U.S. capital markets in the fourth quarter of 1998, which resulted in a
downturn in investment sales activity. Results for the Company's investment
sales businesses, consisting of Insignia Capital Advisors and Hotel Partners,
fell materially short of management expectations in 1998. These businesses
produced revenues, in the aggregate, of only $16.6 million in 1998, which
resulted in a negative EBITDA, before common support costs of Insignia/ESG, of
approximately ($909,000). The significance in these results is that all other
commercial services, including property management, tenant representation,
agency leasing and brokerage, both domestic and internationally, continued to
provide such strong internal growth that overall results were not negatively
impacted.
Real estate ownership
Insignia's real estate ownership operations produced FFO increases of 116%
from $804,000 in 1997 to $1.7 million in 1998. This increase was achieved as a
result of the continued strategy of purchasing minority equity interests in
selected real estate assets in partnership with institutional clients, coupled
with operating income growth from existing co-investment properties. During
1998, Insignia co-invested in the purchase of approximately 2.5 million sq. ft.
of commercial property valued at more than $260 million.
Equity earnings from real estate ownership reported a loss of $1.9 million
for 1998. The difference between real estate FFO and equity earnings represents
depreciation of real estate, gains or losses from sales of property and
provisions for impairment. Results for 1998 reflected real estate depreciation
of $3.6 million, net of gains of approximately $145,000 on the sale of
property. Development properties are expected to commence operations no earlier
than late 1999.
21
<PAGE>
Residential Services
Residential services consist of Realty One, which provides single family
home brokerage and related mortgage 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
168% over 1997 to $129.0 million in 1998. This growth is substantially the
result of the October 1997 acquisition of Realty One, which accounted for
approximately $103.3 million or, 20% of the Company's total service revenues
for 1998. First Ohio Mortgage Corporation, Realty One's mortgage loan
affiliate, reflected increases in loan volume of 41% to $411 million in 1998.
Insignia Residential Group produced revenue increases of 5% over 1997 to
$25.7 million in 1998. During 1998, Insignia Residential Group expanded its
mortgage brokerage activities under which the company arranges financing for
cooperative and condominium corporations through third-party financial
institutions. During 1998, Insignia Residential Group arranged approximately
$292 million of such financing, reflecting an increase of 85% over 1997.
The residential segment reported EBITDA of $8.9 million for 1998. The
substantial increase over 1997 is virtually all a result of the October 1997
acquisition of Realty One.
Other Expenses Affecting Net Income
Administrative costs increased by 7% over 1997 to $7.2 million in 1998.
These costs consist entirely of allocations of Former Parent overhead costs for
the periods prior to the Spin-Off and direct costs of the Company after the
Spin-Off.
Interest expense was $1.4 million in 1998 compared to $318,000 in 1997.
The increase is attributable to asset financings consisting of Realty One
borrowings principally under its warehouse line used in the origination of
loans for sale, REGL borrowings substantially secured by restricted cash
deposits and a non-recourse mortgage note financing a real estate acquisition.
The results for 1998 and 1997 do not include any interest expense allocation
from the indebtedness of Former Parent.
Depreciation and amortization, excluding depreciation on real estate
properties, increased 48% to $22.5 million in 1998 compared to $15.2 million in
1997. Amortization of acquisition intangibles, which reported an increase of
41% or $5.6 million over 1997, was primarily responsible for this rise.
Results for 1998 include an impairment charge of $2.3 million recorded as
a write-down of the Company's 60% investment in Insignia/CAGISA to estimated
fair value. This write-down reflects the Company's decision to discontinue and
sell its majority interest in its Italy subsidiary. The Company completed the
sale of its interest in Insignia/CAGISA in March 1999.
Income taxes increased at a greater rate than the rise in income before
taxes as a result of the non-deductibility of the aforementioned write-down
together with a $797,000 operating loss of Insignia/CAGISA in 1998.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Insignia reported strong results in all major components of operation
activity for 1997. Favorable comparisons to 1996 were attributable to the
vibrant commercial real estate market in the United States, the inclusion of
ESG for a full year (versus only six months in 1996), and the partial year
impact of several smaller strategic acquisitions during 1997.
Insignia posted net income of $13.1 million in 1997, representing an
increase of 275% from $3.5 million in 1996. Earnings per share, on a diluted
basis, were $0.62 for 1997 compared to $0.16 in 1996. These per share results
are presented entirely on a pro forma basis, as Insignia, in its current form,
was not a separate company during these periods.
22
<PAGE>
These results are attributable to increases in all operating measures,
during 1997, substantially as a result of the impact of the aforementioned
acquisitions. These acquisitions (primarily ESG which was acquired in June
1996) contributed EBITDA of more than $25 million in 1997 on $165 million in
service revenues.
Insignia reported total service revenues of $295.3 for 1997, reflecting an
increase of 142% or $173.3 over 1996 results ($122.0 million). The growth in
revenues reflects the contributions of a full year of operations of ESG
and the eight acquisitions completed during 1997. In addition, Insignia/ESG
experienced strong internal revenue growth of over $60 million in 1997 as
compared to its 1996 results.
The combined results for 1997 reflect increases in Net EBITDA of 153%,
from $14.9 million in 1996 to $37.7 million in 1997. Net EBITDA results for
1997 were negatively impacted by approximately $1.5 million in legal and
litigation settlement costs associated with the establishment of an office in
Phoenix, AZ.
Commercial Services
Real Estate Services
The commercial services businesses produced revenue increases of 151% from
$98.5 million in 1996 to $247.1 million in 1997. This increase is attributable
to the operating impact of several acquisitions in 1997, including
Rostenberg-Doern Company, Inc.; HMB Property Services, Inc.; Frain, Camins &
Swartchild, Inc.; Forum Properties, Inc.; and Barnes Morris. Also, contributing
to this increase was a full year of operations of ESG in 1997 compared to six
months for 1996 and heightened brokerage activity of ESG in the New York
metropolitan tri-state area. The New York market, which reported service
revenues of $154.9 million for 1997, experienced an exceptionally robust level
of activity during 1997, particularly in the fourth quarter. Consistent with
revenues, the increase in direct service expenses is due primarily to the
impact of the above mentioned acquisitions coupled with a full year's effect of
ESG's operations.
European operations for 1997, comprised solely of Insignia/CAGISA in
Italy, reported service revenues of $647,000. These results reflect only one
quarter of operations for Insignia/CAGISA, which was acquired in September
1997.
Real Estate Ownership
Insignia's real estate ownership operations produced an FFO increase of
122% to $804,000 in 1997 compared to 1996 levels ($362,000). This increase
reflects the expansion of the Company's co-investment program during 1997 with
investments in seven partnerships owning 1.5 million-sq. ft. of commercial
property and 3,300 residential units in the aggregate. Equity earnings from
real estate ownership reflected a 45% decline to $151,000 in 1997 compared to
$273,000 in 1996. This decline resulted from increased real estate depreciation
compared to 1996 levels.
Residential Services
The residential services businesses, comprised of Realty One and Insignia
Residential Group, produced total service revenues of $48.2 million in 1997,
representing an increase of 105% or $24.7 million compared to 1996 levels. This
increase is due essentially to the impact of Realty One, acquired in October
1997. Realty One reported total service revenues of $23.8 million for the three
months of ownership in 1997. Insignia Residential Group service revenues
increased 4% from $23.5 million in 1996 to $24.4 million in 1997. The combined
residential services businesses produced pretax income and Net EBITDA of
approximately $800,000 and $3.1 million, respectively in 1997.
Other Expenses Affecting Net Income
Administrative costs, consisting entirely of overhead allocations from
Former Parent, increased 93% from $3.5 million in 1996 to $6.8 million in 1997.
This increase directly relates to a rise in administrative costs of Former
Parent resulting from the integration of newly acquired entities during 1997.
23
<PAGE>
Financing costs, consisting of interest expense attributable entirely to
the existing indebtedness of Realty One at the time of acquisition, were
$318,000 in 1997. The combined results for 1997 and 1996 do not include any
interest expense allocation from the indebtedness of Former Parent.
Depreciation and amortization increased 66% from $9.2 million in 1996 to
$15.2 million in 1997. This increase, consistent with the growth of Insignia
from acquisitions, is primarily attributable to amortization of acquisition
intangibles.
Income taxes increased 308% from $2.1 million in 1996 to $8.7 million in
1997. This increase primarily is attributable to higher income in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Insignia's liquidity and capital resources consist of its cash, cash
provided from operations and cash available credit under its $185 million
revolving credit facility. At December 31, 1998, Insignia had no borrowings
outstanding on this facility and was virtually debt free except for the asset
financings mentioned in "Results of Operations" above.
Unrestricted cash at December 31, 1998 was $53.5 million, compared to $5.5
million at December 31, 1997. Cash holdings of the combined Insignia Businesses
at December 31, 1997 were very low as working capital was substantially held at
the corporate level by Former Parent. The Company uses Net EBITDA and Net
EBITDA minus income taxes as measures of liquidity and working capital provided
by operations. The Company reported Net EBITDA of $52.5 million and $37.7
million for 1998 and 1997, respectively. Net EBITDA minus income taxes was
$39.5 million and $29.0 million for 1998 and 1997, respectively. The
improvement in these supplemental measures reflects the overall
period-to-period revenue growth discussed in "Results of Operations" above.
As compared to net income, Net EBITDA effectively eliminates the impact of
certain non-cash charges such as depreciation, amortization of intangible
assets relating to acquisitions and other non-recurring charges. Management
believes that the presentation of this supplemental measure enhances a reader's
understanding of the Company's operating performance, as it provides a measure
of generated cash available for use to service debt and for other required or
discretionary purposes. This measure should not be construed to represent an
alternative to operating income or cash flow determined in accordance with
GAAP.
Net cash provided by operating activities was approximately $35.9 million
in 1998 compared to $31.4 million in 1997. The increase primarily resulted from
an increase in operating income before non-cash charges and changes in
components of operating assets and liabilities.
Capital expenditure requirements are not normally extensive, consisting
primarily of periodic computer, furniture and fixture replacements. Most
capital expenditures are typically incurred in connection with acquisitions or
other personnel additions. Capital expenditures in 1998 were $19.6 million,
which Insignia considers unusually high relative to its business. Capital
expenditures in 1998 included $7.9 million for computer equipment and software
in part required by the Spin-Off, but largely in connection with new
generations of accounting and information systems being implemented at each of
the Company's business units. Additionally, the Company expended approximately
$9.5 million for furnishings and leasehold improvements, with the most
significant items consisting of the relocation of Insignia Residential Group to
larger space in Manhattan under a ten year lease and the procurement of office
space in Chicago commensurate with Insignia/ESG's aggregation of businesses
into a major presence in that market. The remaining capital expenditures were
primarily routine replacement items.
Insignia anticipates incurring capital expenditures of approximately $23.0
million during 1999 (excluding amounts that may arise with respect to
businesses acquired in 1999) as costs are expected to again significantly
exceed amounts that Insignia considers the normal needs of the business. During
1999, Insignia Residential Group will implement new computer systems for the
management of cooperatives and condominiums. Insignia/ESG will continue the
development and implementation of accounting and management systems intended to
move its business (domestically and internationally) onto a single platform.
Substantial implementation in the United States is
24
<PAGE>
expected during 1999, with international implementation and certain features to
be undertaken after 1999. Realty One has commenced a program in 1999 to
substantially improve its broker productivity and target marketing systems.
Estimated capital expenditures under these systems, development programs and
other information technology requirements (including capital expenditures of
approximately $2.0 million for Year 2000 compliance - see discussion below) are
expected to approximate $12.5 million. Other anticipated capital expenditure
needs include $5.1 million for office relocation and expansion, principally in
Atlanta, Los Angeles and Manhattan and approximately $5 million in other more
routine replacements and additions.
Insignia expects to use net cash provided by operating activities to fund
capital expenditures primarily for computer related purchases, acquisitions
(including contingent earn-out payments) and to make principal payments on the
Company's outstanding indebtedness. The Company anticipates that its existing
sources of liquidity, including operating cash flows and available credit under
its revolving credit facility, will be sufficient to meet the Company's
anticipated working capital and capital replacement needs for the foreseeable
future and, in any event for, at least the next twelve months. The Company's
working capital needs are reassessed on a routine basis and as acquisitions are
identified and pursued.
Insignia expects to use all or a portion of its Net EBITDA remaining after
capital expenditures and taxes, together with its unused credit facilities, to
finance selective acquisitions in its existing business lines and complementary
businesses, and to expand its real estate ownership.
THE YEAR 2000 ISSUE
Introduction
The Year 2000 issue relates to the inability of many computer systems to
recognize dates for the Year 2000 and afterward. Systems that use only two
digits to designate a year (e.g., 2000 is entered as `00"), can malfunction
when dates are used in processing data and recalling data from storage. The
problems arising from such programming have come to be known as "Year 2000" or
the "Year 2000 Issue." The effects of the Year 2000 Issue may be experienced
before, on, or after January 1, 2000. If not addressed, the impact on
operations and financial reporting may range from minor errors to significant
system failures or miscalculations causing disruptions of operations, including
such things as a temporary inability to process transactions, pay invoices or
conduct similar routine business operations without interruption.
State of Readiness
Former Parent began addressing the Year 2000 Issue early in 1998 prior to
the Spin-Off. Insignia, under the guidance of its Year 2000 Program team, has
developed a phased Year 2000 readiness plan to address its internal systems
that are comprised of both information technology ("IT") and non-IT systems.
The plan consists of seven key phases, which include awareness, inventory, risk
assessment, remediation, quality assurance, implementation and contingency
planning. The Company has substantially completed its awareness phase and will
continue this phase through December 31, 1999 to maintain a heightened sense of
awareness to the Year 2000 Issue. The Company, with the assistance of an
outside consultant, is currently engaged in comprehensive inventory and
assessment of its internal IT systems and anticipates substantial completion of
the inventory stage by the end of April 1999.
Insignia believes that its planned upgrade of existing IT systems and/or
conversions to new systems will enable it to address the Year 2000 Issue
without material operational difficulties. Over the second half of 1998, the
Company continued its purchase and implementation of a new generation of
computer systems for the condominium/cooperative management business, new
financial systems for its international commercial services businesses and an
upgrade to its broker productivity and target marketing systems for its
single-family home brokerage business. The implementation of these new and
upgraded systems will continue into 1999 and is expected to be completed and
tested for quality assurance by November 1999. Insignia is working on its
assessment of the Year 2000 readiness of its IT systems as it assembles the
results of its comprehensive asset inventory. Substantial completion of the
Company's assessment phase of its IT systems is anticipated by mid-year 1999.
Based upon the results of the assessment phase, the Company will determine the
appropriate levels of remediation and the areas in which detailed contingency
planning will be required. The remediation phase of the Company's IT systems is
25
<PAGE>
anticipated to be completed by the end of the third quarter or the early part
of the fourth quarter of 1999. The Company expects to complete the remediation
of its technical infrastructure first, with remediation of its mission critical
applications to be completed shortly thereafter. Insignia is also assessing its
exposure to the Year 2000 issues other than those associated to its internal IT
systems in order to develop a plan and contingencies to address these risks.
This assessment plan includes consideration of the Company's leased facilities
(including embedded systems such as devices used to control, monitor or assist
the operation of equipment and machinery at such facilities), third party
vendors and service suppliers.
The Company believes that many of its customers, suppliers and other third
parties with whom the Company transacts business are also likely to be affected
by the Year 2000 Issue, which could, in turn, affect the Company. The ability
of such third parties to adequately address their own Year 2000 issues is
outside the Company's control. At this time, the Company is in the process of
reviewing the Year 2000 readiness of its major suppliers and customers. There
can be no assurance that all aspects of the Year 2000 Issue, particularly those
related to the efforts of customers, suppliers or other third parties, will be
fully resolved. In light of the diversity of Insignia's base of customers and
suppliers, Insignia does not believe that the failure of one or more customers
or suppliers to achieve Year 2000 readiness would materially adversely affect
Insignia's operations.
Costs to Address the Company's Year 2000 Issues
The Company expects its unreimbursed out of pocket Year 2000 costs through
fiscal 1999, including the costs of external consultants and technical
resources, will be approximately $3.5 million (inclusive of approximately $2.0
million in capital expenditures). Approximately $620,000 of that amount has
been incurred through December 31, 1998. The Company plans to fund its Year
2000 effort with operating cash flows and cash on hand. Several factors that
could impact the Company's ability to make the necessary modifications or
replacements include, but are not limited to, the availability and cost of
trained personnel and the ability of such personnel to locate and correct all
relevant computer codes or to replace embedded computer chips in affected
systems. If such modifications are not completed on a timely basis or are
substantially more costly to implement than anticipated, the Company's
business, financial condition and results of operations could be materially
adversely affected.
Properties for which the Company provides management services (for third
party owners and affiliates of Insignia) rely on a variety of third party
suppliers to provide critical operating services. These suppliers may utilize
systems and embedded technologies to control the operation of building systems
such as utilities, lighting, security, elevators, heating, ventilation and air
conditioning systems. The Company is in the process of obtaining assurances
from suppliers as to their Year 2000 readiness and preparing contingency plans,
including the identification of alternative suppliers. The Company does not
control these third party suppliers, and for some suppliers, such as utility
companies, there may be no feasible alternative suppliers available. The
failure of these suppliers' systems could have a material adverse effect on the
operations of the affected property, and widespread failures could have a
material adverse effect on the Company. This information is intended solely to
advise the investment community of the steps that the Company is taking to
assist owners of company-managed properties with Year 2000 Issues relating to
non-IT systems. No owner or tenant in a Company-managed property should rely on
this statement as an indication that the Company has or will inventory or
assess the managed property on its behalf or that, in fact, such property is or
will be in a state of Year 2000 readiness. Queries in this regard should be
addressed to appropriate property management personnel. Costs of remediating
Year 2000 Issues associated with non-IT systems at managed properties should be
borne exclusively by the owners of such properties.
Risks and Contingency Plans
The Company has projected that the most likely worst case Year 2000
scenario would be the result of unidentified Year 2000 Issues, which result in
unplanned downtime at a rate that is higher than normally experienced.
Contingency plans are currently being developed and are expected to be
completed by mid-year 1999 to address the likelihood of these higher than
normal system incidents. Potential disruptions of this nature should not result
in material adverse impact on the Company's results of operations, financial
position or cash flow. Although the Company is not aware of any threatened
claims related to the Year 2000 Issue, the Company may become subject to
litigation arising from such claims and, depending on the outcome, such
litigation could have a material adverse
26
<PAGE>
effect on the Company. The Company has obtained certain insurance coverage to
offset these and other business risks related to the Year 2000. However, the
extent of any ultimate exposure is not yet known at this time.
RECENT ACCOUNTING PRONOUNCEMENTS
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 December 31, 1998,
Insignia had no amounts capitalized that would be affected by the requirements
of SOP 98-5.
In 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use ("SOP 98-1"). Under SOP 98-1, qualifying computer
software costs are required to be capitalized and amortized to income over the
software's estimated useful life. SOP 98-1 is effective for fiscal years
beginning after December 15, 1998. The adoption of SOP 98-1 is not expected to
have a material effect on the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives are either offset against the change in fair
value of assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will
be immediately recognized in earnings. SFAS 133 is effective for financial
statements for fiscal years beginning after June 15, 1999. Management has not
completed its review of SFAS 133, but does not anticipate that its adoption
will have a material effect.
IMPACT OF INFLATION AND CHANGING PRICES
Inflation has not had a significant impact on the results of operations of
Insignia in recent years and is not anticipated to have a significant negative
impact in the foreseeable future. Insignia's exposure to market risk from
changing prices consists primarily of fluctuations in rental rates of
properties managed, market interest rates on residential mortgages and debt
obligations, real estate property values, and foreign currency fluctuations of
its European operations.
The revenues of the property management operations with respect to rental
properties are highly dependent upon the aggregate rents of the properties
managed, which are affected by rental rates and building occupancy rates.
Rental rate increases are dependent upon market conditions and the competitive
environments in the respective locations of the properties. Employee
compensation is the principal cost element of property management.
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<PAGE>
The revenues associated with the commercial services business are impacted
by fluctuations in interest rates, lease rates, real property values and the
availability of space and competition in the market place. Commercial services
revenues are derived from a broad range of services which are primarily
transaction driven and are therefore volatile in nature and highly competitive.
Changes in market interest rates on residential mortgage loans and changes
in real property values in the northern Ohio area impact the revenues of the
single-family home brokerage business.
Recent price and cost trends have not significantly affected profit
margins; however, changes in these trends in the future could have a
potentially significant impact on the profitability of Insignia.
MARKET RISK AND RISK MANAGEMENT POLICIES
Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices and equity prices.
Insignia's primary market risk exposure consists of changes in foreign currency
exchange rates and interest rates.
The Company's earnings and cash flows are subject to fluctuations due to
changes in foreign currency exchange rates from the Company's operations in
foreign jurisdictions. In addition to the United States, the Company currently
conducts business in the United Kingdom, Germany and Italy. As a result, the
Company's financial results could be significantly affected by factors such as
changes in foreign currency exchange rates and weak economic conditions in
these foreign markets. Fluctuations in foreign currency exchange rates are not
expected to have a material impact on the Company.
The Company's interest income and expense are most sensitive to the
changes in the general level of interest rates. In this regard, changes in
interest rates affect the interest earned on the Company's cash equivalents and
short-term investments as well as interest paid on its debt. Interest rates are
sensitive to many factors' including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond the Company's control. Based on prevailing interest
rates at December 31, 1998, a 1% increase or decrease would not have a material
impact on the Company.
FORWARD LOOKING STATEMENTS
Certain items discussed in this report 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 the Company to be materially different from any future results, performance,
or achievements expressed or implied by such forward-looking statements. You
can identify such statements by the fact that they do not relate strictly to
historical or current facts. These statements use words such as "believe",
"expect", "should" and "anticipate". Such information includes, without
limitation, statements regarding the results of litigation, the effects of the
Spin-Off and the Merger, the effects of Year 2000 Issues, Insignia's future
financial performance and estimated capital expenditures. Actual results will
be affected by a variety of risks and factors, including, without limitation,
national and local economic conditions and real estate risks and financing
risks.
With respect to the Year 2000 Issues, actual results may be affected by
the availability of qualified personnel and other information technology
resources, the ability to identify and remediate all date-sensitive lines of
computer code or to replace embedded computer chips in affected systems or
equipment and the actions and ability of third party customers and suppliers to
successfully address their Year 2000 Issues.
Such forward-looking statements speak only as of the date of this report.
The Company 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 the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such
statement is based.
28
<PAGE>
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted in Item 14(a) of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 1999 Annual Meeting of Stockholders.
Item 11. Executive Compensation
Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 1999 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 1999 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 1999 Annual Meeting of Stockholders.
29
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2): The response to this portion of Item 14 is submitted
as a separate section of this report. See Page F-2.
(3) Exhibits:
2.1 Amended and Restated Agreement and Plan of Merger,
dated as of May 26, 1998, by and among Apartment
Investment and Management Company, AIMCO
Properties, L.P., Former Parent and Insignia
Financial Group, Inc. (incorporated herein by
reference to Exhibit 2.1 to the Registration
Statement on Form S-4 (the "Form S-4") filed by
Apartment Investment and Management Company on
August 4, 1998)
2.2 Form of Agreement and Plan of Distribution, dated
as of _______, 1998, by and between Former Parent
and Insignia Financial Group, Inc. (incorporated
herein by reference to Appendix A to the
Information Statement included in the Registration
Statement on Form 10 filed by Insignia Financial
Group, Inc. on August 4, 1998 (the "Form 10"))
3.1(a) Certificate of Incorporation of Insignia Financial
Group, Inc. (incorporated herein by referenced
to Exhibit 3.1 of the Form 10)
3.1(b) Certificate of Amendment to the Certificate of
Incorporation of Insignia Financial Group, Inc.,
dated October 16, 1998, changing the name of the
corporation from Insignia/ESG Holdings, Inc. to
Insignia Financial Group, Inc. (incorporated herein
by reference to Exhibit 3.1 of the Report on Form
10-Q of Insignia Financial Group, Inc. filed on
November 17, 1998)
3.2 By-laws of Insignia Financial Group, Inc.
(incorporated herein by reference to Exhibit 3.2
of the Form 10)
10.1(a) Asset and Stock Purchase Agreement, dated as of
June 17, 1996, among Former Parent, Insignia Buyer
Corporation, Edward S. Gordon Company Incorporated,
Edward S. Gordon Company of New Jersey, Inc. and
Edward S. Gordon (incorporated herein by reference
to Exhibit 10.15 of the Report on Form 10-K of
Former Parent filed on March 24, 1998)
10.1(b) Stock Purchase Agreement, dated March 19, 1997, by
and among Insignia Commercial Group, Inc., Former
Parent, Kirkland B. Armour, Scott J. Brandwein,
Harvey B. Camins, James L. Deiter, Lyan Homewood
Fender, Ronald T. Frain, Jay Hinshaw, Thomas E.
Moxley, Robert B. Rosen, James H. Swartchild, Jr.,
David Tropp, Gregg F. Witt, Frain, Camins &
Swartchild Incorporated, FC&S Management Company
and Construction Interiors, Incorporated
(incorporated herein by reference to Exhibit 10.22
to the Report on Form 10-K of Former Parent filed
on March 24, 1998)
30
<PAGE>
10.1(c) Stock Purchase Agreement, dated as of September 18,
1997, by and among Former Parent, Insignia RO,
Inc., Joseph T. Aveni, Vincent T. Aveni, James C.
Miller, Richard A. Golbach, Joseph T. Aveni as
Trustee of the Joseph T. Aveni Declaration of Trust
dated April 25, 1988, as amended on August 10,
1995, Vincent T. Aveni as Trustee of the Vincent T.
Aveni Declaration of Trust dated February 11, 1988,
as restated on September 14, 1995, Joseph T. Aveni
as Trustee of the Vincent T. Aveni Declaration
Trust, dated July 13, 1994, and Vincent T. Aveni as
Trustee of the Joseph T. Aveni Declaration Trust,
dated July 13, 1994 (incorporated herein by
reference to Exhibit 10.27 to Report on Form 10-K
of Former Parent filed on March 24, 1998)
10.1(d) Deed of Warranty & Indemnity, dated February 25,
1998, by and among Former Parent and each of the
Shareholders of Richard Ellis Group Limited
(incorporated herein by referenced to Exhibit 10.4
of the Form 10)
10.1(e) Amended and Restated Indemnification Agreement,
dated as of May 26, 1998, by and between Apartment
Investment and Management Company and Insignia
Financial Group, Inc. (incorporated herein by
reference to Exhibit 2.2 to the Form S-4)
10.1(f) Deed of Assumption and Variation, dated September
30, 1998, by and among Former Parent, Certain
Covenantors and Insignia/ESG, Inc.
10.1(g) Deed of Variation, dated as of March 5, 1999,
between Insignia Financial Group, Inc. and Alan
Charles Froggatt, as agent and attorney for the
Covenantors
10.1(h) Agreement for the Sale and Purchase of Shares in
the Capital of St. Quintin Holdings Limited, dated
March 5, 1999, by and among the Vendors listed
therein and Insignia Financial Group, Inc.
(incorporated herein by reference to the Report on
Form 8-K of Insignia Financial Group, Inc. filed on
March 18, 1998)
10.2(a) Form of Second Amended and Restated Employment
Agreement, dated as of July 31, 1998, by and
between Insignia Financial Group, Inc.,
Insignia/ESG, Inc. and Stephen B. Siegel
(incorporated herein by reference to Exhibit 10.6
of the Form 10)
10.2(b) Form of Employment Agreement, dated as of August 3,
1998, by and between Insignia Financial Group, Inc.
and Ronald Uretta (incorporated herein by reference
to Exhibit 10.7 of the Form 10)
10.2(c) Form of Employment Agreement, dated as of June 17,
1996, by and among Former Parent, Insignia Buyer
Corporation and Edward S. Gordon (incorporated
herein by reference to Exhibit 10.2 to the Report
on Form 8-K of Former Parent dated July 12, 1996)
10.2(d) Amendment No. 1 to Employment Agreement, dated
April 1, 1997, by and among Former Parent,
Insignia/Edward S. Gordon Co., Inc. and Edward S.
Gordon (incorporated herein by reference to Exhibit
10.24 to the Report on Form 10-K of Former Parent
filed on March 24, 1998)
10.2(e) Assignment, Assumption, Consent and Release
Agreement, dated as of July 1, 1998, by and among
Former Parent, Insignia Financial Group, Inc. and
Edward S. Gordon (Exhibit A thereto is omitted
because it is the same document as Exhibit 10.7 to
the Form 10)
31
<PAGE>
10.2(f) Form of Employment Agreement, dated as of August 3,
1998, by and between Insignia Financial Group, Inc.
and Andrew L. Farkas (incorporated herein by
reference to Exhibit 10.11 of the Form 10)
10.2(g) Form of Employment Agreement, dated as of August 3,
1998, by and between Insignia Financial Group, Inc.
and Frank M. Garrison (incorporated herein by
reference to Exhibit 10.12 of the Form 10)
10.2(h) Form of Employment Agreement, dated as of August 3,
1998, by and between Insignia Financial Group, Inc.
and James A. Aston (incorporated herein by
reference to Exhibit 10.13 of the Form 10)
10.2(i) Amended and Restated Employment Agreement, dated as
of December 23, 1998, by and between Insignia
Financial Group, Inc. and Adam B. Gilbert
10.2(j) Form of Executive Service Agreement, dated
February 4, 1998, by and among Richard Ellis Group
Limited and Andrew John Mack Huntley.
10.2(k) Form of Supplemental Service Agreement, dated
February 24, 1998, by and among Insignia Financial
Group, Inc. and Andrew John Mack Huntley.
10.2(l) Assigment, Assumption, Consent and Release
Agreement, dated July 1, 1998, by and among Former
Parent, Insignia Financial Group, Inc. and Andrew
Mack Huntley.
10.3(a) Insignia Financial Group, Inc. 1998 Stock Incentive
Plan (incorporated herein by referenced to Exhibit
10.14 of the Form 10)
10.3(b) Insignia Financial Group, Inc. 1998 Supplemental
Stock Purchase and Loan Program Under the Insignia
Financial Group, Inc. 1998 Stock Incentive Plan
(incorporated herein by referenced to Exhibit 10.15
of the Form 10)
10.3(c) Insignia Financial Group, Inc. Executive
Performance Incentive Plan (incorporated herein by
referenced to Exhibit 10.16 of the Form 10)
10.3(d) Insignia Financial Group, Inc. 1998 Employee Stock
Purchase Plan (incorporated herein by referenced to
Exhibit 10.17 of the Form 10)
10.3(e) Form of Indemnification Agreement to be entered
into separately by and between Insignia Financial
Group, Inc. and each of the directors and executive
officers listed on the schedule annexed thereto
(incorporated herein by referenced to Exhibit 10.18
of the Form 10)
10.3(f) Insignia Financial Group, Inc. 401(k) Savings Plan
(incorporated herein by reference to Exhibit 4.1 to
the Registration Statement on Form S-8 filed by
Insignia Financial Group, Inc. on September 2,
1998)
10.3(g) Richard Ellis Group Limited 1997 Unapproved Share
Option Scheme (incorporated herein by reference to
Exhibit 4.1 to the Registration Statement on Form
S-8 filed by Insignia Financial Group, Inc. on
November 18, 1998)
10.3(h) Insignia Financial Group, Inc. 401(k) Restoration
Plan
10.4(a) Technical Services Agreement, dated as of June 29,
1998, by and among Former Parent, Insignia
Financial Group, Inc. and Apartment Investment and
Management Company (incorporated herein by
referenced to Exhibit 10.19 of the Form 10)
32
<PAGE>
10.4(b) Amendment No. 1 to Technical Services Agreement,
dated as of July 28, 1998, by and among Former
Parent, Insignia Financial Group, Inc. and
Apartment Investment and Management Company
(incorporated herein by referenced to Exhibit 10.20
of the Form 10)
10.5 Credit Agreement, dated as of October 22, 1998, by
and among Insignia Financial Group, Inc., as
Borrower, the Lenders referred to therein, First
Union National Bank, as Administrative Agent, and
Lehman Commercial Paper, Inc., as Syndication Agent
10.6(a) Warrant Agreement, dated as of September 15, 1998,
between Insignia/ESG Holdings and APTS Partners,
L.P. (incorporated herein by reference to Exhibit
4.1 of the Report on Form 10-Q of Insignia
Financial Group, Inc. filed on November 17, 1998)
10.6(b) Warrant Agreement, dated as of September 15, 1998,
between Insignia/ESG Holdings and APTS Partners,
L.P. (incorporated herein by reference to Exhibit
4.2 of Form 10-Q of Insignia Financial Group, Inc.
filed on November 17, 1998)
10.6(c) Warrant Agreement, dated as of September 15, 1998,
between Insignia Financial Group, Inc. and APTS
Partners, L.P. (incorporated herein by reference to
Exhibit 4.3 of the Report on Form 10-Q of Insignia
Financial Group, Inc. filed on November 17, 1998)
10.6(d) Warrant Agreement, dated as of September 15,
1998, between Insignia Financial Group, Inc. and
APTS V, L.L.C. (incorporated herein by reference to
Exhibit 4.4 of the Report on Form 10-Q of Insignia
Financial Group, Inc. filed on November 17, 1998)
10.6(e) Warrant Agreement, dated as of September 15, 1998,
between Insignia Financial Group, Inc. and Gotham
Partners, L.P. (incorporated herein by reference to
Exhibit 4.5 of the Report on Form 10-Q of Insignia
Financial Group, Inc. filed on November 17, 1998)
10.6(f) Warrant Agreement, dated as of September 30, 1998,
between Insignia Financial Group, Inc. and First
Union National Bank of Delaware (incorporated
herein by reference to Exhibit 4.6 of the Report on
Form 10-Q of Insignia Financial Group, Inc. filed
on November 17, 1998)
21.1 Subsidiaries of Insignia Financial Group, Inc.
23.1 Consent of Independent Auditors to Annual Report on
Form 10-K for the year ended December 31, 1998.
27.1 Financial Data Schedule for the year ended
December 31, 1998 (for SEC use only)
(b) Reports on Form 8-K filed in fourth quarter of 1998:
None.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Andrew L. Farkas
-------------------------------
Andrew L. Farkas
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.
By: /s/ Andrew L. Farkas By: /s/ Robin L. Farkas
------------------------------ --------------------------------
Andrew L. Farkas Robin L. Farkas
Chairman of the Board and Director
Chief Executive Officer
By: /s/ Stephen B. Siegel By: /s/ Robert G. Koen
------------------------------ --------------------------------
Stephen B. Siegel Robert G. Koen
Director and President Director
By: /s/ James A. Aston By: /s/ H. Strauss Zelnick
------------------------------ --------------------------------
James A. Aston H. Strauss Zelnick
Chief Financial Officer Director
By: /s/ Robert J. Denison
--------------------------------
Robert J. Denison
Director
34
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEMS 8, 14(a)(1) AND (2), (c) AND (d)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1998
INSIGNIA FINANCIAL GROUP, INC. AND SUBSIDIARIES
NEW YORK, NEW YORK
<PAGE>
FORM 10-K - ITEM 14(a)(1) AND (2)
INSIGNIA FINANCIAL GROUP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS
The following consolidated and combined financial statements of Insignia
Financial Group, Inc. and subsidiaries are included in Item 8:
INSIGNIA FINANCIAL GROUP, INC. AND SUBSIDIARIES
Consolidated and combined balance sheets - December 31, 1998 and 1997
Consolidated and combined statements of operations - Years ended
December 31, 1998, 1997 and 1996
Consolidated and combined statements of stockholders' equity - Years
ended December 31, 1998, 1997 and 1996
Consolidated and combined statements of cash flows - Years ended
December 31, 1998, 1997 and 1996
Notes to consolidated and combined financial statements
ALL OTHER FINANCIAL STATEMENTS AND SCHEDULES FOR WHICH PROVISION IS MADE IN THE
APPLICABLE ACCOUNTING REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION ARE
NOT REQUIRED UNDER THE RELATED INSTRUCTIONS OR ARE INAPPLICABLE AND THEREFORE
HAVE BEEN OMITTED.
F-2
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Insignia Financial Group, Inc.
We have audited the accompanying consolidated balance sheets of Insignia
Financial Group, Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statement of operations, stockholders' equity, and cash flows for
the year ended December 31, 1998, and the combined balance sheet as of December
31, 1997, and the combined statements of operations, stockholders' equity, and
cash flows for each of the two years in the period ended December 31, 1997 of
the Insignia Financial Group, Inc. entities spun-off into Insignia/ESG
Holdings, Inc. (see Note 1). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Insignia
Financial Group, Inc. and subsidiaries at December 31, 1998, and results of
their operations and their cash flows for the year ended December 31, 1998, and
the combined financial position of the Insignia Financial Group, Inc. entities
spun-off into Insignia/ESG Holdings, Inc. at December 31, 1997, and the
combined results of their operations, and their cash flows for each of the two
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Greenville, South Carolina
March 5, 1999
F-3
<PAGE>
Insignia Financial Group, Inc.
Consolidated and Combined Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------------------------------
(In thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 53,489 $ 5,514
Receivables, net of allowance of $3,783 (1998) and $1,177 (1997) 153,807 89,662
Mortgage loans held for sale 18,409 11,991
Restricted cash 10,468 3,736
Property and equipment 27,897 11,235
Real estate interests 58,196 19,454
Property management contracts 38,033 48,614
Costs in excess of net assets of acquired businesses 213,829 138,019
Deferred taxes 9,703 3,451
Other assets 11,658 6,269
--------------------------------
Total assets $595,489 $337,945
================================
LIABILITIES, STOCKHOLDERS' EQUITY AND INVESTMENT AND NET ADVANCES FROM
FORMER PARENT
Liabilities:
Accounts payable $ 14,367 $ 9,673
Commissions payable 56,391 51,285
Accrued incentives 32,662 15,706
Accrued and sundry liabilities 47,737 23,211
Deferred taxes 16,651 9,267
Mortgage warehouse line of credit 17,915 12,495
Notes payable 17,867 7,474
Non-recourse mortgage note payable 8,656 -
--------------------------------
212,246 129,111
Minority interests - 390
Stockholders' Equity and Investment and Net Advances from Former Parent:
Common Stock, par value $.01 per share - authorized 80,000,000 shares,
21,423,646 issued and outstanding shares (1998), including 139,200
shares held in treasury 214 -
Additional paid-in-capital 383,075 -
Retained earnings 1,656 -
Other comprehensive income 141 -
Notes receivable for Common Stock (1,843) -
Investment and net advances from Former Parent - 208,444
--------------------------------
Total stockholders' equity and investment and net advances from Former Parent 383,243 208,444
--------------------------------
Total liabilities, stockholders' equity and investment and net advances from
Former Parent $595,489 $337,945
================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Insignia Financial Group, Inc.
Consolidated and Combined Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-----------------------------------------------
(In thousands)
<S> <C> <C> <C>
Revenues:
Real estate services $507,351 $295,258 $122,005
Interest 3,196 457 -
Other 233 38 -
-----------------------------------------------
510,780 295,753 122,005
Costs and expenses:
Real estate services 451,774 251,855 103,942
Administrative 7,232 6,770 3,502
Interest 1,378 318 18
Depreciation 3,090 1,429 661
Amortization of intangibles 19,453 13,815 8,536
Provision for loss on subsidiary 2,300 - -
-----------------------------------------------
485,227 274,187 116,659
-----------------------------------------------
25,553 21,566 5,346
Equity (losses) earnings in real estate ventures (1,896) 151 273
Minority interests 371 41 -
-----------------------------------------------
Income before income taxes 24,028 21,758 5,619
Provision for income taxes 12,975 8,703 2,135
===============================================
Net income $ 11,053 $ 13,055 $ 3,484
===============================================
Pro-forma per share amounts:
Net income - basic $.52 N/A N/A
Net income - assuming dilution $.50 N/A N/A
Weighted average shares and assumed conversions 21,993 N/A N/A
</TABLE>
See accompanying notes.
F-5
<PAGE>
Insignia Financial Group, Inc.
Consolidated and Combined Statements of Stockholders' Equity
<TABLE>
<CAPTION>
INVESTMENT AND NOTES
NET ADVANCES ADDITIONAL RECEIVABLE OTHER
FROM COMMON PAID-IN RETAINED FOR COMMON COMPREHENSIVE
FORMER PARENT STOCK CAPITAL EARNINGS STOCK INCOME TOTAL
-----------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $ 39,948 $ - $ - $ - $ - $ - $ 39,948
Net income 3,484 - - - - - 3,484
Equity assumed in acquisitions 24,450 - - - - - 24,450
Net transactions with Former 69,895 - - - - - 69,895
Parent
-----------------------------------------------------------------------------------------------
Balances at December 31, 1996 137,777 - - - - - 137,777
Net income 13,055 - - - - - 13,055
Equity assumed in acquisitions - - - - - - -
Net transactions with Former 57,612 - - - - - 57,612
Parent
-----------------------------------------------------------------------------------------------
Balances at December 31, 1997 208,444 - - - - - 208,444
Net transactions with Former 165,137 - - - - - 165,137
Parent
Net income (from January 1,
1998 through September 30, 9,397 - - - - - 9,397
1998)
Distribution of common stock in
connection with Spin-Off (382,978) 214 382,764 - - - -
Exercise of stock options -
18,917 - - 150 - - - 150
shares of common stock issued
Notes receivable from employees
for shares of common stock - 1 1,842 - (1,843) - -
Purchase of treasury shares - (1) (1,852) - - - (1,853)
Restricted stock awards - - 171 - - - 171
Net income (from October 1,
1998 through December 31, - - - 1,656 - - 1,656
1998)
Foreign currency translation - - - - - 141 141
--------------
Comprehensive income - - - - - - 1,797
-----------------------------------------------------------------------------------------------
Balances at December 31, 1998 $ - $214 $383,075 $1,656 $(1,843) $ 141 $383,243
===============================================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Insignia Financial Group, Inc.
Consolidated and Combined Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,053 $ 13,055 $ 3,484
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 22,543 15,490 9,326
Equity losses (earnings) 1,896 (151) (273)
Minority interests (371) (41) -
Deferred income taxes 3,966 3,415 506
Provision for loss on subsidiary 2,300 - -
Changes in operating assets and liabilities:
Receivables (36,852) (49,074) (28,721)
Other assets 644 (667) (542)
Accounts payable and accrued expenses 25,509 16,794 9,289
Commissions payable 5,169 32,549 18,134
------------------------------------------------------
Net cash provided by operating activities 35,857 31,370 11,203
INVESTING ACTIVITIES
Additions to property and equipment, net (18,167) (5,882) (4,806)
Payments made for acquisition of businesses,
net of acquired cash (65,357) (62,672) (73,879)
Net increase in mortgage loans held for sale (6,418) (3,577) -
Investment in real estate (40,563) (17,014) (3,584)
Distributions from real estate investments 9,097 5,214 1,179
Net increase in restricted cash (6,732) (3,736) -
------------------------------------------------------
Net cash used in investing activities (128,140) (87,667) (81,090)
FINANCING ACTIVITIES
Proceeds from exercise of stock options 150 - -
Purchase of treasury stock (1,853) - -
Payments on notes payable (6,129) (2,985) -
Proceeds from notes payable 11,369 7,140 -
Debt issuance costs (1,262) - -
Net transactions with Former Parent 137,919 57,612 69,895
------------------------------------------------------
Net cash provided by financing activities 140,194 61,767 69,895
Effect of exchange rate changes in cash 64 - -
------------------------------------------------------
Net increase in cash and cash equivalents 47,975 5,470 8
Cash and cash equivalents at beginning of year 5,514 44 36
------------------------------------------------------
Cash and cash equivalents at end of year $ 53,489 $ 5,514 $ 44
======================================================
</TABLE>
See accompanying notes.
F-7
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements
December 31, 1998
1. BUSINESS AND BASIS OF PRESENTATION
Insignia Financial Group, Inc. ("Insignia" or the "Company"), a Delaware
corporation, comprises a fully integrated real estate services company with
operations throughout the United States, the United Kingdom, Italy and Germany.
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, Insignia owns real estate, primarily through co-investments with
institutional partners, and property held for development. Insignia consists of
Insignia/ESG, Inc. ("Insignia/ESG"), Insignia's commercial real estate services
unit, which includes Richard Ellis Group Limited ("REGL") 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. ("Realty One"), a full
service residential real estate brokerage and mortgage banking firm
headquartered in Cleveland, Ohio (collectively, the "Insignia Businesses").
On March 17, 1998, Insignia Financial Group, Inc., the former parent of the
registrant ("Former Parent"), 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 Former Parent was merged into AIMCO, with AIMCO as the survivor (the
"Merger"). The Merger was consummated on October 1, 1998.
On September 21, 1998, Former Parent completed the spin-off of the Insignia
Businesses through a pro rata distribution (the "Spin-Off" or "Distribution")
to its stockholders of all of the outstanding Common Stock, par value $.01 per
share ("Insignia Common Stock"), of the registrant, then named Insignia/ESG
Holdings, Inc.
Former Parent effected the Distribution on the Insignia Businesses by
distributing to each record holder of Former Parent common stock as of the
September 15, 1998 (the "Distribution Record Date") certificates representing
that number of whole shares of Insignia Common Stock equal to two-thirds of the
number of shares of Former Parent common stock held by such holder.
F-8
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
1. BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
Insignia assumed Former Parent's corporate name, Insignia Financial Group,
Inc., on October 30, 1998. Insignia had conducted business under the corporate
name Insignia/ESG Holdings, Inc. following approval of the Distribution by the
stockholders of Former Parent on September 14, 1998. In addition, Insignia
reclaimed Former Parent's original New York Stock Exchange trading symbol,
"IFS", and trading of Insignia Common Stock under this symbol commenced on
November 2, 1998.
Most of Former Parent's existing liabilities, other than those directly
relating to the Insignia Businesses, remained with Former Parent
post-Distribution and were assumed by AIMCO upon consummation of the Merger.
In connection with the Merger, Former Parent was obligated to contribute $23.5
million to Insignia. This contribution, which represented funding for
liabilities of Insignia arising from the Merger and the payment for warrants,
was collected on the date of the Merger. Liabilities totaling approximately
$15.5 million were assumed from Former Parent at the time of the Distribution.
These financial statements present the consolidated balance sheet of Insignia
as of December 31, 1998, and the related consolidated statements of operations
and cash flows for the year ended December 31, 1998 (which include the combined
results of the entities prior to Spin-Off), and the combined balance sheet at
December 31, 1997, and the combined results of the operations and cash flows
for each of the two years in the period ended December 31, 1997 of the Former
Parent entities spun-off into the Insignia Businesses. Insignia's historical
cost basis in the assets and liabilities of the 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 Insignia Businesses operated as a stand-alone entity separate
from Former Parent during the periods presented or for the future results of
Insignia.
F-9
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
1. BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
The Company utilized Former Parent's centralized systems for cash management,
payroll, employee benefit plans, insurance and various administrative services.
As a result, substantially all cash received by the Insignia Businesses was
deposited in and commingled with Former Parent's general corporate funds.
Similarly, real estate services and administrative expenses, capital
expenditures and other cash requirements of the Insignia Businesses were paid
by Former Parent and charged directly or allocated to the Insignia Businesses.
The real estate services and administrative expenses, which included, among
other things, investment banking, information technology, legal, finance,
accounting, and facilities, were allocated to the Insignia Businesses. These
allocations approximated $5,543,000 for the nine month period prior to Spin-Off
(1998), $6,770,000 (1997) and $3,502,000 (1996). The allocations were based
upon analysis of the operations of Former Parent using various methods,
including acquisition activities, employee headcount, estimated personnel and
estimated management time devoted to the operations of the Insignia Businesses.
Certain assets and liabilities related to the operations of Insignia were
managed and controlled by Former Parent on a centralized basis. Such assets and
liabilities have been allocated to the Company 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 and
would not differ materially from the overhead expenses to be incurred by
Insignia on a stand-alone basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND COMBINATION
The financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned or majority owned and the Insignia
Businesses as defined in Note 1. All significant intercompany balances and
transactions have been eliminated. Certain amounts for prior years have been
reclassified to conform with the 1998 presentation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-10
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The amount of cash on deposit in federally insured institutions generally
exceeds the limit on insured deposits. The Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.
RESTRICTED CASH
At December 31, 1998, restricted cash consisted of approximately $1.4 million
pledged to secure notes payable of REGL, approximately $2.9 million in cash
pledged to secure deferred notes in connection with the REGL acquisition,
approximately $2.9 million reserved for contingent payments related to other
businesses and approximately $3.3 million segregated for the benefit of
property management customers of CAGISA. At December 31, 1997, restricted cash
of approximately $3.7 million was segregated for the benefit of property
management customers of CAGISA.
REAL ESTATE INTERESTS
Real estate interests represents co-investment partnership interests in
commercial real estate and land held for development. These investments are
accounted for by the equity method.
The Company follows Statement of Financial Accounting Standards ("SFAS") 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, which requires impairment losses to be recognized for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows are not sufficient to recover the assets'
carrying amount. Impairment losses are measured for assets held for sale by
comparing the fair value of assets (less costs to dispose) to their respective
carrying amounts.
MINORITY INTEREST
Minority interests in consolidated subsidiaries consists of the 40% minority
equity of CAGISA.
F-11
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
approximately $12,800,000, $2,800,000 and $1,007,000 in advertising costs
during 1998, 1997 and 1996, respectively. Advertising expense for 1998 includes
approximately $8.0 million related to Realty One and REGL which were acquired
in October 1997 and February 1998, respectively.
INTEREST EXPENSE
The interest expense reflected in the statements of operations is based upon
the historical debt of the Insignia Businesses. The financial statements do not
include interest expense related to Former Parent's indebtedness prior to
Spin-Off.
PROPERTY MANAGEMENT CONTRACTS AND COSTS IN EXCESS OF NET ASSETS OF ACQUIRED
BUSINESSES
Property management contracts are stated at cost, less accumulated amortization
of $30,068,000 (1998) and $13,713,000 (1997). The Company capitalizes costs
paid or payable to third parties in the successful pursuit of acquiring
management contracts. These contracts are amortized using the straight-line
method over 3 to 10 years.
Costs in excess of net assets of acquired businesses are amortized by the
straight-line method primarily over 5 to 25 years. Accumulated amortization is
$16,526,000 (1998) and $6,085,000 (1997).
Property management contracts and costs in excess of net assets of acquired
businesses are reviewed when indicators of impairment are present, using an
undiscounted cash flow methodology.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets (3 to 15 years).
F-12
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT AND NET ADVANCES FROM FORMER PARENT
Investment and net advances from Former Parent represents transactions between
the Former Parent and Insignia as a centralized cash management system was used
by Former Parent. The Company's average investment and net advances was
approximately $295,711,000 for the period January 1, 1998 to September 30, 1998
and approximately $146,210,000 and approximately $99,032,000 for the years
ended December 31, 1997 and 1996, respectively. Investment and net advances had
no due date and did not require an interest expense charge.
REVENUE RECOGNITION
Real estate services includes property management, commercial leasing, loan
origination, tenant representation and commission revenue related to real
estate sales. Such revenues are recorded when the related services are
performed, unless significant contingencies exist, or at closing in the case of
real estate sales.
FOREIGN CURRENCY TRANSLATION
The financial statements of foreign operations were prepared in their
respective local currency and translated into U.S. dollars based on the current
exchange rate at the end of the period for the balance sheet and the
weighted-average rate for the period on the statement of operations. The 1998
financial statements for REGL were translated using the following exchange
rates: $1.6587 for the balance sheet and $1.6641 for the statement of
operations. Translation adjustments for operations in Germany and Italy are
immaterial. Translation adjustments have been reflected in other comprehensive
income.
COMPREHENSIVE INCOME
The Company adopted SFAS 130, Reporting Comprehensive Income. SFAS 130 requires
that all items that are required to be recognized under accounting standards as
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. SFAS 130 requires that
an enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balances of other comprehensive
income separately from retained earnings and additional paid-in-capital in the
equity section of the consolidated balance sheet.
F-13
<PAGE>
Insignia Financial Group, Inc.
Notes to consolidated and Combined Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
Disclosures about Segments of an Enterprise and Related Information, which is
effective for years beginning after December 15, 1997. SFAS 131 establishes
standards for the way 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.
INCOME TAXES
The Company provides for income taxes under the provisions of SFAS 109,
Accounting for Income Taxes. SFAS 109 requires an asset and liability based
approach in accounting for income taxes.
Deferred income tax assets and liabilities are recorded to reflect the tax
consequences on future years of temporary differences of revenue and expense
items for financial statement and income tax purposes. Valuation allowances are
provided against assets which are not likely to be realized. Federal income
taxes are not provided on the unremitted earnings of foreign subsidiaries
because it has been the practice and is the intention of the Company to
continue to reinvest those earnings in the business outside the United States.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives are either offset against the change in fair
value of assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will
be immediately recognized in earnings. SFAS 133 is effective for financial
statements for fiscal years beginning after June 15, 1999. Management has not
completed its review of SFAS 133, but does not anticipate that its adoption
will have a material effect.
F-14
<PAGE>
Insignia Financial Group, Inc.
Notes to consolidated and Combined Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 the costs of start-up activities and
organization costs to be expensed as incurred. At December 31, 1998, Insignia
had no amounts capitalized that would be affected by the requirements of SOP
98-5.
In 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. Under SOP 98-1 qualifying computer software costs
are required to be capitalized and amortized to income over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. The Company does not expect SOP 98-1 to have a material
effect.
3. ASSET IMPAIRMENT
A one-time impairment charge of $2.3 million was recorded in 1998 as a
write-down of the Company's 60% investment in Insignia/CAGISA (principally
costs in excess of net assets of acquired businesses) to estimated disposition
value. This decision was made in light of the Company's sale of the majority of
its U.S. residential apartment management business to AIMCO in 1998. The
Company completed the disposition of its interest in Insignia/CAGISA in March
1999. The Company is establishing its commercial real estate services
operations in Italy through a company in formation to be known as Insignia
RE SpA.
F-15
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
4. PRO-FORMA EARNINGS PER SHARE
SFAS 128, Earnings Per Share, 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 excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is similar to the previously reported fully diluted earnings per share.
The pro-forma earnings per share information for 1998 is presented assuming the
Spin-Off occurred at the beginning of the year. Earnings per share information
is not presented for 1997 and 1996 because the Company was not a separate
publicly traded entity for those periods.
1998
----------------
(In thousands,
except per share
amounts)
NUMERATOR
Numerator for basic and diluted earnings per share -
net income available to common stockholders $11,053
================
DENOMINATOR
Denominator for basic earnings per share - weighted
average shares 21,063
Effect of dilutive securities:
Stock options 465
Warrants 351
Restricted stock 114
================
Dilutive securities 930
================
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions 21,993
================
Pro-forma per share amounts:
Net income - basic $.52
================
Net income - assuming dilution $.50
================
F-16
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
5. ACQUISITIONS
Significant acquisitions during the last three years are discussed below. These
acquisitions were completed by Former Parent and contributed to Insignia. All
acquisitions were accounted for as purchases.
1998 ACQUISITIONS
GOLDIE B. WOLFE & COMPANY
On January 20, 1998, 100% of the stock of Goldie B. Wolfe & Company ("Goldie
Wolfe") was acquired. Goldie Wolfe is a commercial real estate services firm
located in Chicago, Illinois. The purchase price was approximately $5.3
million, all of which was paid in cash.
RICHARD ELLIS GROUP LIMITED
In February 1998, 100% of the stock of REGL was acquired. The purchase price
was approximately $68.2 million. Additional purchase consideration of up to
approximately $12 million (exclusive of approximately $3.3 million that is to
be paid in April 1999) is contingent on future performance measures of REGL.
The acquisition was funded by Former Parent from borrowings on its revolving
credit facility, and the issuance of 617,371 shares of Former Parent common
stock and the assumption of options enabling REGL employees to purchase 853,741
shares of Former Parent common stock (which options were assumed by Insignia in
the Spin-Off for options to purchase up to 1,289,329 shares of Insignia Common
Stock).
HOTEL PARTNERS
On May 11, 1998, Hotel Partners was acquired. Hotel Partners is a Chicago-based
international brokerage firm focused exclusively on the hospitality segment of
the real estate industry. The total purchase consideration paid 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.
F-17
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
5. ACQUISITIONS (CONTINUED)
JACKSON CROSS COMPANY
On June 15, 1998, Jackson Cross Company ("Jackson Cross"), a prominent
commercial real estate service firm with operations primarily in the
Philadelphia area, was acquired. The total purchase consideration paid 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.
1997 ACQUISITIONS
FRAIN, CAMINS & SWARTCHILD, INC.
On April 1, 1997, Frain, Camins & Swartchild, Inc. ("FC&S") was acquired. FC&S
is a full service commercial, retail and industrial real estate brokerage firm
located in Chicago, Illinois. The purchase price was approximately $4.4
million, and in addition, up to $4.5 million in contingent payments may be paid
based on certain future performance measures.
REALTY ONE, INC.
Effective October 1, 1997, the outstanding stock of Realty One, Inc. and
affiliated companies, including First Ohio Mortgage Corporation were acquired.
Realty One is a full service residential real estate brokerage firm
headquartered in Cleveland, Ohio and serving primarily the northern region of
Ohio. First Ohio Mortgage Corporation originates single family home mortgages
for both Realty One clients and third parties. The total purchase consideration
was approximately $40 million.
F-18
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
5. ACQUISITIONS (CONTINUED)
BARNES, MORRIS, PARDOE & FOSTER
On October 30, 1997, substantially all of the assets of Barnes, Morris, Pardoe
& Foster ("Barnes Morris"), a commercial real estate services firm located in
the greater Washington, D.C. area were acquired. The purchase price was
approximately $17.0 million.
1996 ACQUISITIONS
EDWARD S. GORDON COMPANY, INCORPORATED
On June 30, 1996, the business and substantially all of the assets of Edward S.
Gordon Company, Incorporated ("ESG") were acquired. ESG's services include
commercial real estate leasing, including tenant and landlord representation,
real estate consulting services and commercial real estate brokerage as well as
commercial property management in the New York City metropolitan area. The
total purchase consideration was approximately $80.2 million.
PARAGON GROUP PROPERTY SERVICES, INC.
On June 30, 1996, the commercial real estate services business of Paragon Group
Property Services, Inc. ("Paragon") was acquired. Paragon's services include
property management, leasing and tenant improvement services for managed
properties as well as brokerage, fee development and real estate consulting
services performed for various institutional clients. The purchase price was
$18.1 million in cash, plus an additional $4 million in future contingent
purchase price.
F-19
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
5. ACQUISITIONS (CONTINUED)
OTHER INFORMATION (UNAUDITED)
Pro forma unaudited results of operations for the years ended December 31,
1998, 1997 and 1996 assuming consummation of the Goldie Wolfe, REGL, Hotel
Partners, and Jackson Cross acquisitions at January 1, 1998 and 1997, assuming
consummation of the FC&S, Realty One, and Barnes Morris acquisitions at January
1, 1997 and 1996, and assuming consummation of the ESG and Paragon acquisitions
at January 1, 1996, is as follows:
1998 1997 1996
----------------------------------------
(In thousands)
Revenues $534,285 $493,514 $314,915
Net income 11,507 16,256 10,841
Pro forma per share data:
Net income - assuming dilution 0.52 N/A N/A
These acquisitions were funded utilizing the working capital of Former Parent
and no debt or interest was allocated to the Company.
These results do not purport to represent the operations of the Company nor are
they necessarily indicative of the results that actually would have been
realized by the Company if the purchase of these operating entities had been in
effect the entire period.
The consideration for the Goldie Wolfe, REGL, Hotel Partners and Jackson Cross
(1998), FC&S, Realty One, and Barnes Morris (1997) and ESG and Paragon (1996)
acquisitions are summarized as follows:
1998 1997 1996
---------------------------------------------
(In thousands)
Notes payable $ 2,405 $16,735 $ -
Common stock 22,865 4,200 24,450
Accrued and sundry liabilities 36,428 14,453 1,805
Deferred tax liability, net - - 1,150
Cash paid at the closing dates 54,928 50,474 73,879
---------------------------------------------
$116,626 $85,862 $101,284
=============================================
F-20
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
5. ACQUISITIONS (CONTINUED)
The consideration was allocated as follows:
1998 1997 1996
----------------------------------
(In thousands)
Cash acquired $ 6,624 $ 1,383 $ -
Receivables 12,181 2,623 5,000
Mortgage loans held for sale - 8,414 -
Property and equipment 1,810 2,123 -
Property management contracts 175 6,343 19,759
Non-compete agreements 238 - 1,700
Costs in excess of net assets of acquired
businesses 89,389 62,415 74,232
Other assets 6,209 2,529 593
Real estate interests - 32 -
----------------------------------
$116,626 $85,862 $101,284
==================================
6. RECEIVABLES
DECEMBER 31
1998 1997
----------------------
(In thousands)
Accounts receivable $ 8,565 $ 6,177
Commissions receivable 125,652 79,243
Receivable from AIMCO for income tax refund 9,500 -
Other 3,200 -
Notes receivable:
Brokerage employees 3,119 1,894
Chairman, executive officers, and other employees
with interest ranging from 6.7% to 8.4% 1,244 492
Co-investment affiliate with interest at 24% 2,069 1,856
Other 458 -
----------------------
Total notes receivable 6,890 4,242
----------------------
$153,807 $89,662
======================
F-21
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
6. RECEIVABLES (CONTINUED)
Accounts receivable consist primarily of property management fees and cost
reimbursements. Commissions receivable consist primarily of brokerage and
leasing commissions from users of the Company's real estate services. The
receivable from AIMCO represents the estimated income tax refund of Former
Parent for the period prior to the Merger. The receivables are not
collateralized, but credit losses have been insignificant and within
management's estimate. Long-term commissions receivable have been discounted to
their present value.
Principal collections on notes and commissions receivable are scheduled as
follows:
NOTES COMMISSIONS
RECEIVABLE RECEIVABLE
------------------------------------
(In thousands)
1999 $6,113 $119,031
2000 333 5,179
2001 333 1,136
2002 111 98
2003 - 80
Later years - 128
------------------------------------
$6,890 $125,652
====================================
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
DECEMBER 31
1998 1997
------------------------------------
(In thousands)
Data processing equipment $11,496 $ 6,563
Computer software 2,560 1,293
Furniture and fixtures 8,668 3,155
Leasehold improvements 6,332 1,981
Other equipment 5,475 1,787
------------------------------------
34,531 14,779
Less: Accumulated depreciation (6,634) (3,544)
====================================
$27,897 $11,235
====================================
F-22
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
8. REAL ESTATE INTERESTS
The Company has invested in 17 co-investment partnerships which own real estate
consisting primarily of apartment and commercial property throughout the United
States. The Company's limited partner interests and ownership percentages of
such limited partnerships ranged from 6% to 35% as of December 31, 1998. These
partnerships own 29 properties comprising approximately 3,300 apartment units
and 5.7 million square feet of commercial space.
During 1998, the Company, through its ICIG Brookhaven LLC subsidiary, acquired
a 100% interest in Brookhaven Village, a commercial retail property located in
Norman, Oklahoma, for approximately $9 million. Brookhaven Village is
consolidated in the Company's financial statements at December 31, 1998. The
results of operations for Brookhaven Village were not material.
In addition, at December 31, 1998 and 1997, the Company had acquired four and
two properties for development at a cost of approximately $28.8 million and
$6.1 million, respectively. Interest capitalized in connection with the
development properties was approximately $1.3 million for 1998. No amounts were
capitalized in 1997.
Summarized financial information of the unconsolidated partnerships is as
follows:
DECEMBER 31
1998 1997
----------------------------
(In thousands)
CONDENSED STATEMENTS OF EARNINGS INFORMATION
Revenues $ 91,968 $ 27,267
Property operating expenses 45,691 11,946
Depreciation and amortization 17,767 3,231
Interest 32,188 8,522
Administrative 1,169 1,411
----------------------------
Total operating expenses 96,815 25,110
----------------------------
(Loss) income before gains on sale of property (4,847) 2,157
Gains on sale of property 3,691 -
----------------------------
Net (loss) income $ (1,156) $ 2,157
============================
F-23
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
8. REAL ESTATE INTERESTS (CONTINUED)
DECEMBER 31
1998 1997
----------------------------
(In thousands)
CONDENSED BALANCE SHEET INFORMATION
Cash and investments $ 17,265 $ 13,578
Receivables and deposits 17,817 14,605
Other assets 13,166 9,705
Real estate 619,867 376,048
Less accumulated depreciation (14,361) (3,843)
----------------------------
Net real estate 605,506 372,205
----------------------------
Total assets $653,754 $410,093
============================
Mortgage notes payable $469,625 $329,057
Other liabilities 16,599 14,028
----------------------------
Total liabilities 486,224 343,085
Partners' capital 167,530 67,008
----------------------------
Total liabilities and partners' capital $653,754 $410,093
============================
9. ACCRUED AND SUNDRY LIABILITIES
DECEMBER 31
1998 1997
----------------------------
(In thousands)
Employee compensation and benefits $13,643 $ 6,726
Lease and annuity liabilities 8,755 -
Amounts payable in connection with acquisitions 5,803 10,836
Deferred compensation 6,871 994
Settlement obligation to AIMCO 1,873 -
Deferred revenue 2,416 772
Other 8,376 3,883
----------------------------
$47,737 $23,211
============================
F-24
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
10. NOTES PAYABLE AND OTHER LONG-TERM DEBT
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------------
(In thousands)
<S> <C> <C>
Realty One $5.5 million revolving credit agreement with a bank, collateralized
by property and receivables, with a maturity date
of September 30, 2000. The interest rate was 6.3% and 6.4%
at December 31, 1998 and 1997, respectively. $ 5,500 $3,500
Realty One $4.5 million term loan with a bank, expiring on June 1, 2001,
collateralized by property and receivables, payable in monthly installments
of $75,000 with interest at
6.4% at December 31, 1997. - 2,625
Realty One has a $3 million revolving line, collateralized by accounts
receivable and due on demand. The interest rate was 7.75% and 8.2% at
December 31, 1998 and 1997, respectively. 1,446 1,349
REGL $4.3 million term loan with a bank, collateralized
by pledged funds held in escrow, with interest at 5%, and a maturity date of
July 2000. 2,239 -
REGL $3 million unsecured revolving line, with interest
at 6.5% and due on demand. 2,964 -
REGL $5.9 million unsecured revolving credit agreement with interest at 7.75%
and due on demand. 2,417 -
Notes payable bearing simple interest of 3% per annum with interest paid
semi-annually. The notes are collateralized by pledged funds held in escrow
and mature in April 2003. 2,646 -
CAGISA facilities with a bank. 655 -
====================================
$17,867 $7,474
====================================
</TABLE>
Realty One's net book value of property, plant and equipment was approximately
$4.5 million and $2.3 million and receivables were approximately $2.6 million
and $3.1 million at December 31, 1998 and 1997, respectively.
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
10. NOTES PAYABLE AND OTHER LONG-TERM DEBT (CONTINUED)
Scheduled principal maturities on notes payable after December 31, 1998 are as
follows (in thousands):
1999 $10,128
2000 7,739
--------------
$17,867
==============
Certain note agreements contain various restrictive covenants requiring, among
other things, minimum consolidated net worth, minimum liquidity, and various
other financial ratios. Realty One, First Ohio Mortgage Company and REGL are in
compliance with these restrictive covenants.
The Company paid interest of approximately $1,601,000 and $309,000 in 1998 and
1997, respectively.
CREDIT AGREEMENT
On October 22, 1998, the Company 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. At December 31, 1998, no
borrowings had been made on this facility; however, the Company had an
outstanding letter of credit against the facility in the amount of $1.5
million.
MORTGAGE WAREHOUSE LINE OF CREDIT
Realty One's affiliate First Ohio Mortgage Corporation maintains a $25,000,000
line of credit. The line of credit is collateralized by substantially all the
assets of First Ohio Mortgage Company and a $10,000,000 guarantee by Insignia.
At December 31, 1998 and 1997, First Ohio Mortgage Corporation had total assets
of approximately $23.0 million and $15.5 million. Advances on the line of
credit can only be drawn with evidence of a committed residential mortgage and
each advance is limited to the committed sales price of the related mortgage
loan. Repayment of each advance is to be made within 14 business days of the
funding. The line of credit cannot be used to fund any single residential
mortgage in excess of $400,000. The interest rate on all advances under the
line of credit is at a rate per annum equal to the prime rate minus .50% (7.25%
at December 31, 1998).
F-26
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
10. NOTES PAYABLE AND OTHER LONG-TERM DEBT (CONTINUED)
NON-RECOURSE MORTGAGE NOTE PAYABLE
The non-recourse mortgage note payable of approximately $8,656,000 represents a
first mortgage encumbering Brookhaven Village, which had a carrying amount of
approximately $9.1 million at December 31, 1998. The note includes a
participation feature whereby the lender is entitled to 35% of the net cash
flow, net refinancing proceeds or net sales proceeds after the Company has
achieved a 10% annual return on equity. The present value of amounts due the
lender under this arrangement were not material. The note bears interest at
3.25% in excess of the GECC Composite Commercial Paper Rate (8.7% at December
31, 1998). The note matures on December 7, 2002 with principal payable in full
on such date.
11. COMPENSATION PLANS
The Company's 1998 Stock Incentive Plan (the "1998 Plan") has authorized the
grant of options to management personnel for up to 3,500,000 shares of Insignia
Common Stock. The term of each option will be determined by the Company's Board
of Directors but will not be more than ten years from the date of grant. The
1998 Plan may be terminated by the Board of Directors at any time. Options
granted typically have five year terms and vest annually over a five-year
period. Options are granted at prices not less than 100% of the fair market
value of Insignia Common Stock at the date of grant. At the Spin-Off date, the
Company assumed, under this plan, approximately 1,787,000 options issued by
Former Parent to employees of the Insignia Businesses. Subsequent to the
Spin-Off, the Company granted approximately 1,078,000 options to purchase
Insignia Common Stock under the 1998 Plan. As a result, the Company has granted
a total of approximately 2,865,000 under the 1998 Plan.
F-27
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
11. COMPENSATION PLANS (CONTINUED)
The Company assumed 1,482,879 options under Non-Qualified Stock Option
Agreements in connection with the acquisition of Edward S. Gordon Company
Incorporated and Edward S. Gordon Company of New Jersey, Inc. The options had 5
year terms at the date of grant and the terms remained unchanged at the date of
assumption. At December 31, 1998 approximately 135,000 options are outstanding.
The Company assumed 1,289,329 options under Non-Qualified Stock Option
Agreements in connection with the acquisition of REGL. The options had 5 year
terms at the date of grant and the terms remained unchanged at the date of
assumption.
The Company had 247,488 outstanding restricted common stock awards to acquire
shares of Insignia Common Stock at December 31, 1998. These awards, which have
a 5 year vesting period were granted to officers and other employees of the
Company in 1998. Total compensation expense of approximately $720,000 was
recognized by the Company in 1998 for these awards.
The Company has also sold shares of Insignia Common Stock to certain employees
in exchange for notes receivable secured by the shares. The outstanding
principal balances of these notes amounted to approximately $1.8 million at
December 31, 1998 and are classified as a reduction of stockholders' equity.
The Company's 1998 Employee Stock Purchase Plan (the "Employee Plan") was
adopted to provide employees with an opportunity to purchase Insignia Common
Stock through payroll deductions at a price not less than 85% of the Fair
Market Value of Insignia Common Stock. The Employee Plan was developed to
qualify under Section 423 of the Internal Revenue Code of 1986.
In connection with the Distribution, 1,196,000 warrants to purchase Insignia
Common Stock were issued to holders of the Convertible Preferred Securities of
Former Parent. The terms of each warrant is five years, and no warrant is
exercisable for the first two years. Former Parent purchased the warrants from
Insignia for approximately $8.5 million.
The Company had no stock options outstanding as of December 31, 1997.
F-28
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
11. COMPENSATION PLANS (CONTINUED)
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related interpretations
in accounting for its employee stock based compensation because, as discussed
below, the alternative fair value accounting provided for under SFAS 123,
Accounting for Stock-Based Compensation, requires use of option valuation
models that were not developed for use in valuing employee stock options and
warrants. Under APB 25, when the exercise price equals the market price, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required
by Statement 123, which also requires that the information be determined as if
the Company has accounted for its employee stock options and warrants granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options and warrants was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions:
1998
--------
Risk-free interest rate 4.9%
Dividend yield N/A
Volatility factors of the expected market price 0.45
Weighted-average expected life of the options 4.4
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options and warrants which have no vesting
restrictions and are fully transferable. In addition, option valuation models
required the input of highly subjective assumptions including the expected
stock price volatility. Because the Company's employee stock options and
warrants have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options and warrants.
F-29
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
11. COMPENSATION PLANS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair values of the options
and warrants are amortized to expense over the options' and warrants' vesting
period. The Company's pro forma information follows (in thousands, except for
earnings per share information):
1998
----------
Pro forma net income $8,929
Pro forma earnings per share - basic $.42
Pro forma earnings per share - assuming dilution $.41
Summaries of the Company's stock option and warrant activity, and related
information for the period from distribution on September 21, 1998 to December
31, 1998 is as follows:
SHARES WEIGHTED
ISSUABLE AVERAGE
UPON EXERCISE
EXERCISE PRICE
-------------------------
Employee options assumed at date of Spin-Off 3,642,959 $11.30
Warrants assumed at date of Spin-Off 971,161 8.25
Options granted subsequent to Spin-Off 1,077,949 12.67
Warrants issued to holders of Convertible Preferred
Securities of Former Parent 1,196,000 14.50
Exercised (25,707) 3.67
Forfeited/canceled (218,964) 9.49
=========================
Outstanding at end of year 6,643,398 $10.29
=========================
Exercisable at end of year 1,585,955 $ 8.82
=========================
Weighted-average fair value of options and
warrants granted during the year $ 13.58
============
F-30
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
11. COMPENSATION PLANS (CONTINUED)
Significant option and warrant groups outstanding at December 31, 1998 and
related weighted average price and life information follows:
<TABLE>
<CAPTION>
OPTIONS/WARRANTS OUTSTANDING OPTIONS/WARRANTS EXERCISABLE
- --------------------------------------------------------------------------- ------------------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
$0.00 to $2.85 261,452 3.6 years $ 0.02 13,964 $ 0.16
$2.86 to $5.70 121,354 2.5 years 4.01 121,354 4.01
$5.71 to $8.55 3,514,141 4.5 years 7.14 1,008,082 8.20
$8.56 to $11.40 403,956 2.6 years 9.92 130,351 9.60
$11.41 to $14.25 2,274,577 4.2 years 12.71 274,511 12.44
$14.26 to $17.10 67,918 4.1 years 15.05 37,693 15.49
------------------- -------------- ------------------------------
6,643,398 $10.29 1,585,955 $ 8.82
=================== ============== ==============================
</TABLE>
12. INCOME TAXES
The Insignia Businesses were included in the consolidated federal income tax
return of Former Parent until the Spin-Off. After the Spin-Off, the U.S.
entities will join in a U.S. consolidated income tax return and the U.K.
entities will join in a U.K. consolidated return. The income tax provision
reflects the portion of Former Parent's historical income tax provision
estimated attributable to the operations of the Insignia Businesses as if they
were not included in Former Parent's consolidated federal income tax return.
Management believes the income tax provision, as reflected, is comparable to
what the income tax provision would have been if the Insignia Businesses had
filed a separate return during the periods presented. Income tax benefit
credited to equity in connection with the Spin-Off was approximately
$5,724,000.
F-31
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
12. INCOME TAXES (CONTINUED)
During the portion of 1998 after the Spin-Off, Insignia generated net operating
losses for federal tax purposes in the U.S. of approximately $6,673,000. These
losses may be carried forward for 20 years. During this same time period,
Insignia generated net operating losses for U.S. state income tax purposes of
approximately $8,098,000. The Company has carryforward state losses from prior
years of approximately $13,071,000. Due to differences in state laws in the
jurisdictions in which the Company operates, the ability and time available to
use these losses varies among the different states. Therefore, of the total
state tax losses being carried forward of approximately $21,169,000, the
Company has provided a valuation allowance for the deferred tax asset of
approximately $7,259,000 of these losses. The current year impact of this
valuation allowance resulted in an increase in income tax expense of
approximately $281,000.
During 1998, the Company's U.K. operations utilized the operating losses
recorded on acquisition of approximately $3,282,000. During 1998, the Company's
Italian operation generated operating losses in Italy of approximately
$747,000. In addition, the Company recorded a loss of $2.3 million to reflect
the net realizable value in its Italian subsidiary. Due to the lack of other
profitable operations in Italy which could benefit from the use of the loss,
the Company has provided a valuation allowance for the tax benefit of this
loss.
As a result of the acquisition of Paragon, net operating losses of
approximately $5,000,000 were acquired. These losses carryforward to the
calendar year ended December 31, 2009. The carryforward is subject to
provisions of the Internal Revenue Code Section 382, which limits the use of
the carryforward to the lesser of the value of the stock multiplied by the
Federal long-term tax-exempt rate or the subsidiary's income.
Undistributed earnings of REGL amounted to approximately $3,066,000. Deferred
income taxes are not provided on these earnings as it is intended that they
will be permanently reinvested outside of the U.S.
F-32
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
12. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the deferred tax liabilities and assets are as follows:
DECEMBER 31
1998 1997
-----------------------------
(In thousands)
Deferred tax liabilities:
Acquisition related intangibles $(10,035) $(8,018)
Tax over book depreciation (1,288) (1,249)
Commission income, net (4,519) -
Other, net (809) -
-----------------------------
Total deferred tax liabilities (16,651) (9,267)
Deferred tax assets:
Net operating losses 5,895 2,263
Partnership earnings differences 430 721
Valuation allowances 2,048 -
Compensation and benefits 2,946 -
Other, net 214 767
-----------------------------
Total deferred tax assets 11,533 3,751
Valuation allowance for deferred tax assets (1,830) (300)
-----------------------------
Deferred tax assets, net of valuation allowance 9,703 3,451
-----------------------------
Net deferred tax liabilities $ (6,948) $(5,816)
=============================
F-33
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
12. INCOME TAXES (CONTINUED)
Significant components of the provision for income taxes are as follows:
1998 1997 1996
-----------------------------------------------
(In thousands)
Current (payable):
Federal $ 5,809 $4,595 $1,408
Foreign 1,057 - -
State 2,143 693 221
-----------------------------------------------
Total current 9,009 5,288 1,629
Deferred:
Federal 1,598 2,765 707
Foreign 1,481 - -
State 887 650 (201)
-----------------------------------------------
Total deferred 3,966 3,415 506
-----------------------------------------------
$12,975 $8,703 $2,135
===============================================
The reconciliation of income tax attributable to continuing operations computed
at the U.S. statutory rate to income tax expense is shown below (Dollars in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- -------------------------- -------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates $ 8,410 35.0% $7,615 35.0% $1,967 35.0%
Effect of incremental tax rates (82) (0.3) (100) (0.5) (41) (0.7)
Effect of different tax rates in
foreign jurisdictions (410) (1.7) - - - -
State income taxes, net of federal
tax benefit 1,605 6.7 1,074 4.9 168 3.0
Effect of disallowed meals and
entertainment expenses 993 4.1 372 1.7 93 1.6
Effect of disallowed goodwill
amortization 659 2.7 35 0.2 - -
Valuation allowance for Italian
subsidiary write-down 943 3.9 - - - -
Valuation allowance for Italian
operating losses 306 1.3 - - - -
Change in valuation allowance for
U.S. operating losses 281 1.2 300 1.4 - -
Other 270 1.1 (593) (2.7) (52) (0.9)
------------------------- -------------------------- -------------------------
$12,975 54.0% $8,703 40.0% $2,135 38.0%
========================= ========================== =========================
</TABLE>
F-34
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
12. INCOME TAXES (CONTINUED)
Income tax payments of the Insignia Businesses were approximately $6,081,000
(1998) for the nine months prior to Spin-Off, $11,786,000 (1997), and $134,000
(1996). Taxes paid by the Company in the fourth quarter of 1998, subsequent to
Spin-Off, were approximately $795,000. Through the date of the Spin-Off, income
taxes payable were charged directly against the investment and net advances
from Former Parent.
13. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
INDEMNIFICATION AGREEMENT
In connection with the Merger Agreement, Insignia and AIMCO entered into an
Indemnification Agreement. The Indemnification Agreement provides generally
that following consummation of the Merger, 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 Former Parent
or Insignia in the Merger Agreement, (ii) actions taken by or on behalf of
Former Parent prior to consummation of the Merger and (iii) the Distribution.
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 Former Parent 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 Former Parent and its subsidiaries which were assumed by AIMCO
in the Merger, and (c) Insignia's ownership and operation of the Insignia
Businesses.
The Indemnification Agreement requires AIMCO to indemnify and hold harmless
Insignia from all losses that arise out of the operation of the business of
Former Parent 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.
F-35
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
13. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)
Pursuant to the Merger Agreement, Insignia and AIMCO are required to settle in
cash any differences between the actual adjusted net liabilities of Former
Parent 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. A receivable of $9.5 million due from AIMCO has been
recorded at December 31, 1998 for the estimated income tax refund of Former
Parent for the period prior to the Merger. Additionally, the Company has
recorded a liability of approximately $1.9 million for settlement based upon
preliminary estimates. Although there may be additional adjustments to the
amounts estimated on the Merger date, which would be recorded as an adjustment
to shareholders' equity, any such adjustments are expected to be immaterial.
LITIGATION
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. Claimants may demand substantial
compensatory and punitive damages. Management believes that the aforementioned
contingencies will be resolved without material loss to Insignia or its
subsidiaries.
STOCK REPURCHASE
On October 27, 1998, the Company announced the approval of a program to
repurchase up to $10 million of its outstanding Common Stock. At December 31,
1998, 139,200 shares of Insignia Common Stock had been repurchased at an
aggregate cost of approximately $1.85 million.
F-36
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
13. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)
ENVIRONMENTAL LIABILITIES
Under various federal and state environmental laws and regulations, a current
or previous owner or operator of real estate may be required to investigate and
clean up certain hazardous or toxic substances or petroleum product releases at
the property, and may be held liable to a governmental entity or to third
parties for property damage and for investigation and cleanup costs incurred by
such parties in connection with contamination. In addition, some environmental
laws create a lien on the contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. The owner or
operator of a site may be liable under common law to third parties for damages
and injuries resulting from environmental contamination emanating from the
site. The presence of contamination or the failure to remediate contamination
may adversely affect the owner's ability to sell or lease real estate or to
borrow using the real estate as collateral. There can be no assurance that the
Company, or any assets owned or controlled by the Company, currently are in
compliance with all of such laws and regulations, or that the Company will not
become subject to liabilities that arise in whole or in part out of any such
laws, rules, or regulations. Management is not currently aware of any
environmental liabilities which are expected to have a material adverse effect
on the operations or financial condition of the Company.
OPERATING LEASES
The Company leases office space and equipment under noncancelable operating
leases. Minimum annual rentals under operating leases for the five years ending
after December 31, 1998 are as follows (In thousands):
1999 $ 22,779
2000 21,603
2001 19,747
2002 17,378
2003 14,475
Thereafter 27,529
------------------
Total minimum payments required $123,511
==================
F-37
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
13. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)
Rental expense was approximately $21,753,000 (1998), $9,967,000 (1997) and
$4,796,000 (1996).
Certain of the leases are subject to annual escalation based on the Consumer
Price Index or annual increases in operating expenses.
401(K) RETIREMENT PLAN
The Company established a 401(k) savings plan covering substantially all U.S.
employees. The Company may make a contribution equal to 50% of the employees'
contribution up to a maximum of 3% of the employees' compensation and
participants fully vest in employer contributions after 5 years. The Company
expensed approximately $320,000 subsequent to Spin-Off.
The Company participated in Former Parent's 401(k) savings plan, which covered
substantially all of its employees, for the nine months of 1998 prior to the
Spin off. The Company's operating expenses were approximately $1,020,000, for
the period January 1, 1998 through September 30, 1998 and $1,302,000 and
$954,000 during, 1997 and 1996, respectively for its share of contributions.
Realty One maintains a separate 401(k) savings plan covering its employees.
Realty One may make a contribution equal to 20% of the employees' contribution
up to a maximum of $1,000 or 5% of the employees' compensation and participants
fully vest in employer contributions immediately. Realty One, acquired in
October 1997, expensed approximately $94,000 and $20,000 during 1998 and 1997,
respectively.
F-38
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
13. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)
REGL BENEFIT PLANS
DEFINED BENEFIT PLAN
REGL maintains a Defined Benefit Plan ("the Plan") for certain of its
employees. The Plan provides for benefits based upon the employees final
salary. The funding policy is to contribute annually an amount to fund pension
cost as actuarially determined by an independent pension consulting firm. As of
the date of acquisition the Plan had a funded status of approximately $825,000
and approximately $1,078,000 as of December 31, 1998. REGL's pension cost
expensed for the period February 28, 1998 to December 31, 1998 was
approximately $600,000.
The following assumptions were used in determining the Plan's benefit
obligation: (i) discount rate of 6.5%, (ii) weighted average increase in
compensation levels of 5.0% and (iii) rate of return on plan assets of 7.5%.
DEFINED CONTRIBUTION PLAN
REGL maintains a defined contribution plan which is available to all employees
at their option after the completion of six months of service and the
attainment of 25 years of age. REGL contributions are 3.5% of salary for ages
25 to 30, 4.5% of salary for ages 31 to 35 and 5.5% of salary for ages 36 and
over. REGL expensed approximately $768,000 for the period February 28, 1998 to
December 31, 1998.
14. INDUSTRY SEGMENTS
The Company has two reportable segments: commercial services and residential
services. The commercial services segment provides property and asset
management services, leasing and brokerage, investment sales and development,
and tenant representation services. Additionally, the commercial services
segment includes real estate ownership, consisting primarily of co-investment
partnerships and development property. The residential services segment
provides property management services, originates mortgage loans, and brokers
residential real estate. Other represents unallocated corporate administration
of the Company. Assets included in other consist primarily of cash and property
and equipment.
F-39
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
14. INDUSTRY SEGMENTS (CONTINUED)
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.
The Company's reportable segments are business units that offer similar
products. The reportable segments are each managed separately because they
provide different and distinct services. The following tables summarize certain
information by industry segment:
<TABLE>
<CAPTION>
COMMERCIAL RESIDENTIAL OTHER TOTAL
-----------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Revenues:
Real estate services $378,362 $ 128,989 $ - $507,351
Interest 1,196 1,153 847 3,196
Other 233 - - 233
-----------------------------------------------------------------------
379,791 130,142 847 510,780
-----------------------------------------------------------------------
Costs and expenses:
Real estate services 331,686 120,088 - 451,774
Administrative - - 7,232 7,232
Interest - 1,301 77 1,378
Depreciation and amortization 18,064 4,475 4 22,543
Provision for loss on disposal 2,300 - - 2,300
-----------------------------------------------------------------------
352,050 125,864 7,313 485,227
-----------------------------------------------------------------------
27,741 4,278 (6,466) 25,553
Equity losses (1,896) - - (1,896)
Minority interests 371 - - 371
-----------------------------------------------------------------------
Income before income taxes 26,216 4,278 (6,466) 24,028
Provision for income taxes 13,850 1,840 (2,715) 12,975
-----------------------------------------------------------------------
Net income $ 12,366 $ 2,438 $(3,751) $ 11,053
=======================================================================
Total assets $458,293 $ 96,347 $40,849 $595,489
Real estate interests 58,196 - - 58,196
Capital expenditures 12,402 7,221 - 19,623
</TABLE>
F-40
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
14. INDUSTRY SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMMERCIAL RESIDENTIAL OTHER TOTAL
-----------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Revenues:
Real estate services $247,095 $48,163 $ - $295,258
Interest 264 193 - 457
Other 38 - - 38
-----------------------------------------------------------------------
247,397 48,356 - 295,753
-----------------------------------------------------------------------
Costs and expenses:
Real estate services 206,905 44,950 - 251,855
Administrative - - 6,770 6,770
Interest - 318 - 318
Depreciation and amortization 12,946 2,298 - 15,244
-----------------------------------------------------------------------
219,851 47,566 6,770 274,187
-----------------------------------------------------------------------
27,546 790 (6,770) 21,566
Equity earnings 151 - - 151
Minority interests 41 - - 41
-----------------------------------------------------------------------
Income before income taxes 27,738 790 (6,770) 21,758
Provision for income taxes 11,095 316 (2,708) 8,703
-----------------------------------------------------------------------
Net income $ 16,643 $ 474 $(4,062) $ 13,055
=======================================================================
Total assets $245,948 $87,284 $ 4,713 $337,945
Real estate interests 19,454 - - 19,454
Capital expenditures 4,990 650 300 5,940
</TABLE>
F-41
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
14. INDUSTRY SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMMERCIAL RESIDENTIAL OTHER TOTAL
----------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Revenues:
Real estate services $ 98,493 $23,512 $ - $122,005
Interest - - - -
Other - - - -
----------------------------------------------------------------------
98,493 23,512 - 122,005
----------------------------------------------------------------------
Costs and expenses:
Real estate services 83,424 20,518 - 103,942
Administrative - - 3,502 3,502
Interest 18 - - 18
Depreciation and amortization 7,745 1,452 - 9,197
----------------------------------------------------------------------
91,187 21,970 3,502 116,659
----------------------------------------------------------------------
7,306 1,542 (3,502) 5,346
Equity earnings 273 - - 273
----------------------------------------------------------------------
Income before income taxes 7,579 1,542 (3,502) 5,619
Provision for income taxes 2,880 586 (1,331) 2,135
----------------------------------------------------------------------
Net income $ 4,699 $ 956 $(2,171) $ 3,484
======================================================================
Total assets $152,666 $18,159 $ 962 $171,787
Real estate interests 4,465 - - 4,465
Capital expenditures 2,933 1,308 659 4,900
</TABLE>
F-42
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
14. INDUSTRY SEGMENTS (CONTINUED)
Certain geographic information for the Company is as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------------------------------------------------
LONG-LIVED LONG-LIVED
REVENUES ASSETS REVENUES ASSETS
-------------------------------------------------------------
(In thousands)
United States $444,676 $209,720 $295,041 $195,143
United Kingdom 61,551 66,869 - -
Other countries 4,553 4,248 712 2,725
-------------------------------------------------------------
$510,780 $280,837 $295,753 $197,868
=============================================================
Geographic information for the year ended December 31, 1996 is not presented
because all operations were in the United States.
15. FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair value estimates of financial instruments are not necessarily
indicative of the amounts the Company might pay or receive in actual market
transactions. Potential taxes and other taxes have also not been considered in
estimating fair value. The carrying amount reported on the balance sheet for
cash and cash equivalents approximates its fair value. Receivables reported on
the balance sheet consist of property and lease commission receivables and
various note receivables. The property receivables approximate their fair
values. Lease commissions receivable are carried at their discounted present
value, therefore the carrying amount and fair value amount are the same. The
mortgage loans receivable and notes receivable earn interest at either fixed or
variable rates. Interest rates approximate current market interest rates for
similar instruments, therefore, the carrying amount approximates their fair
value for notes payable, mortgage warehouse line and the non-recourse mortgage
note.
F-43
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------------------
FOURTH THIRD SECOND FIRST
TOTAL QUARTER QUARTER QUARTER QUARTER
-----------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $510,780 $150,317 $132,664 $124,998 $102,801
Net income 11,053 1,656 3,006 3,632 2,759
EBITDA (1) 48,345 13,947 11,597 12,066 10,735
Pro forma per common share:
Net income - basic $.52 $.08 $.14 $.17 $.13
Net income- assuming dilution
$.50 $.07 $.14 $.17 $.12
</TABLE>
Fourth quarter results of 1998 include a $2.3 million provision for the
anticipated disposal of the Company's investment in CAGISA in 1999 (see also
Note 3).
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------------------
FOURTH THIRD SECOND FIRST
TOTAL QUARTER QUARTER QUARTER QUARTER
-----------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues $295,753 $117,719 $ 73,930 $ 59,944 $ 44,160
Net income 13,055 6,876 3,084 2,023 1,072
EBITDA (1) 36,633 16,301 8,339 6,995 4,998
</TABLE>
(1) EBITDA is defined as real estate services revenue less direct expenses and
administrative costs.
F-44
<PAGE>
Insignia Financial Group, Inc.
Notes to Consolidated and Combined Financial Statements (continued)
17. SUBSEQUENT EVENTS
LYNCH MURPHY WALSH & PARTNERS ACQUISITION
On March 1, 1999, the Company acquired the Lynch Murphy Walsh & Partners
("Lynch Murphy"), a provider of commercial real estate services located in
Boston, Massachusetts. Lynch Murphy specializes in brokerage services,
including representation of tenants and landlords, investment sales and debt
placement, valuation services and advisory/consulting services. The purchase
price was $12.0 million paid in cash from borrowings on the Company's revolving
credit facility. Additional purchase consideration of up to $10.0 million is
contingent upon certain performance measures of Lynch Murphy.
ST. QUINTIN ACQUISITION
On March 5, 1999, the Company acquired St. Quintin Holdings Limited ("St.
Quintin"), a British real estate services firm headquartered in London. St.
Quintin's operations merged with Insignia's existing U.K. subsidiary, REGL, to
form Richard Ellis St. Quintin. The acquisition was valued at approximately $32
million, excluding a potential earnout of up to an additional $12 million over
the next three years. The full value of the earnout will be based on certain
performance measures of St. Quintin. The purchase was funded with approximately
$24.3 million in borrowings on the revolving credit facility, the issuance of
approximately 306,000 shares of Insignia Common Stock and assumed options to
purchase approximately 612,000 shares of Insignia Common Stock.
F-45
<PAGE>
EXHIBIT INDEX
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
May 26, 1998, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., Former Parent and Insignia
Financial Group, Inc. (incorporated herein by reference to
Exhibit 2.1 to the Registration Statement on Form S-4 (the "Form
S-4") filed by Apartment Investment and Management Company on
August 4, 1998)
2.2 Form of Agreement and Plan of Distribution, dated as of
________, 1998, by and between Former Parent and Insignia
Financial Group, Inc. (incorporated herein by reference to
Appendix A to the Information Statement included in the
Registration Statement on Form 10 filed by Insignia Financial
Group, Inc. on August 4, 1998 (the "Form 10"))
3.1(a) Certificate of Incorporation of Insignia Financial Group, Inc.
(incorporated herein by referenced to Exhibit 3.1 of the Form
10)
3.1(b) Certificate of Amendment to the Certificate of Incorporation of
Insignia Financial Group, Inc., dated October 16, 1998, changing
the name of the corporation from Insignia/ESG Holdings, Inc. to
Insignia Financial Group, Inc. (incorporated herein by reference
to Exhibit 3.1 of the Report on Form 10-Q of Insignia Financial
Group, Inc. filed on November 17, 1998)
3.2 By-laws of Insignia Financial Group, Inc. (incorporated herein
by reference to Exhibit 3.2 of the Form 10)
10.1(a) Asset and Stock Purchase Agreement, dated as of June 17, 1996,
among Former Parent, Insignia Buyer Corporation, Edward S.
Gordon Company Incorporated, Edward S. Gordon Company of New
Jersey, Inc. and Edward S. Gordon (incorporated herein by
reference to Exhibit 10.15 of the Report on Form 10-K of Former
Parent filed on March 24, 1998)
10.1(b) Stock Purchase Agreement, dated March 19, 1997, by and among
Insignia Commercial Group, Inc., Former Parent, Kirkland B.
Armour, Scott J. Brandwein, Harvey B. Camins, James L. Deiter,
Lyan Homewood Fender, Ronald T. Frain, Jay Hinshaw, Thomas E.
Moxley, Robert B. Rosen, James H. Swartchild, Jr., David Tropp,
Gregg F. Witt, Frain, Camins & Swartchild Incorporated, FC&S
Management Company and Construction Interiors, Incorporated
(incorporated herein by reference to Exhibit 10.22 to the Report
on Form 10-K of Former Parent filed on March 24, 1998)
10.1(c) Stock Purchase Agreement, dated as of September 18, 1997, by and
among Former Parent, Insignia RO, Inc., Joseph T. Aveni, Vincent
T. Aveni, James C. Miller, Richard A. Golbach, Joseph T. Aveni
as Trustee of the Joseph T. Aveni Declaration of Trust dated
April 25, 1988, as amended on August 10, 1995, Vincent T. Aveni
as Trustee of the Vincent T. Aveni Declaration of Trust dated
February 11, 1988, as restated on September 14, 1995, Joseph T.
Aveni as Trustee of the Vincent T. Aveni Declaration Trust,
dated July 13, 1994, and Vincent T. Aveni as Trustee of the
Joseph T. Aveni Declaration Trust, dated July 13, 1994
(incorporated herein by reference to Exhibit 10.27 to Report on
Form 10-K of Former Parent filed on March 24, 1998)
10.1(d) Deed of Warranty & Indemnity, dated February 25, 1998, by and
among Former Parent and each of the Shareholders of Richard
Ellis Group Limited (incorporated herein by referenced to
Exhibit 10.4 of the Form 10)
10.1(e) Amended and Restated Indemnification Agreement, dated as of May
26, 1998, by and between Apartment Investment and Management
Company and Insignia Financial Group, Inc. (incorporated herein
by reference to Exhibit 2.2 to the Form S-4)
10.1(f) Deed of Assumption and Variation, dated September 30, 1998, by
and among Former Parent, Certain Covenantors and Insignia/ESG,
Inc.
<PAGE>
10.1(g) Deed of Variation, dated as of March 5, 1999, between Insignia
Financial Group, Inc. and Alan Charles Froggatt, as agent and
attorney for the Covenantors
10.1(h) Agreement for the Sale and Purchase of Shares in the Capital of
St. Quintin Holdings Limited, dated March 5, 1999, by and among
the Vendors listed therein and Insignia Financial Group, Inc.
(incorporated herein by reference to the Report on Form 8-K of
Insignia Financial Group, Inc. filed on March 18, 1998)
10.2(a) Form of Second Amended and Restated Employment Agreement, dated
as of July 31, 1998, by and between Insignia Financial Group,
Inc., Insignia/ESG, Inc. and Stephen B. Siegel (incorporated
herein by reference to Exhibit 10.6 of the Form 10)
10.2(b) Form of Employment Agreement, dated as of August 3, 1998, by and
between Insignia Financial Group, Inc. and Ronald Uretta
(incorporated herein by reference to Exhibit 10.7 of the Form
10)
10.2(c) Form of Employment Agreement, dated as of June 17, 1996, by and
among Former Parent, Insignia Buyer Corporation and Edward S.
Gordon (incorporated herein by reference to Exhibit 10.2 to the
Report on Form 8-K of Former Parent dated July 12, 1996)
10.2(d) Amendment No. 1 to Employment Agreement, dated April 1, 1997, by
and among Former Parent, Insignia/Edward S. Gordon Co., Inc. and
Edward S. Gordon (incorporated herein by reference to Exhibit
10.24 to the Report on Form 10-K of Former Parent filed on March
24, 1998)
10.2(e) Assignment, Assumption, Consent and Release Agreement, dated as
of July 1, 1998, by and among Former Parent, Insignia Financial
Group, Inc. and Edward S. Gordon (Exhibit A thereto is omitted
because it is the same document as Exhibit 10.7 to the Form 10)
10.2(f) Form of Employment Agreement, dated as of August 3, 1998, by and
between Insignia Financial Group, Inc. and Andrew L. Farkas
(incorporated herein by reference to Exhibit 10.11 of the Form
10)
10.2(g) Form of Employment Agreement, dated as of August 3, 1998, by and
between Insignia Financial Group, Inc. and Frank M. Garrison
(incorporated herein by reference to Exhibit 10.12 of the Form
10)
10.2(h) Form of Employment Agreement, dated as of August 3, 1998, by and
between Insignia Financial Group, Inc. and James A. Aston
(incorporated herein by reference to Exhibit 10.13 of the Form
10)
10.2(i) Amended and Restated Employment Agreement, dated as of December
23, 1998, by and between Insignia Financial Group, Inc. and Adam
B. Gilbert
10.2(j) Form of Executive Service Agreement, dated February 4, 1998,
by and among Richard ellis Group Limited and Andrew John Mack
Huntley.
10.2(k) Form of Supplemental Service Agreement, dated February 24, 1998,
by and among Insignia Financial Group, Inc. and Andrew John
Mack Huntley.
10.2(l) Assigment, Assumption, Consent and Release Agreement, dated
July 1, 1998, by and among Former Parent, Insignia Financial
Group, Inc. and Andrew Mack Huntley.
10.3(a) Insignia Financial Group, Inc. 1998 Stock Incentive Plan
(incorporated herein by referenced to Exhibit 10.14 of the Form
10)
10.3(b) Insignia Financial Group, Inc. 1998 Supplemental Stock Purchase
and Loan Program Under the Insignia Financial Group, Inc. 1998
Stock Incentive Plan (incorporated herein by referenced to
Exhibit 10.15 of the Form 10)
10.3(c) Insignia Financial Group, Inc. Executive Performance Incentive
Plan (incorporated herein by referenced to Exhibit 10.16 of the
Form 10)
10.3(d) Insignia Financial Group, Inc. 1998 Employee Stock Purchase Plan
(incorporated herein by referenced to Exhibit 10.17 of the Form
10)
<PAGE>
10.3(e) Form of Indemnification Agreement to be entered into separately
by and between Insignia Financial Group, Inc. and each of the
directors and executive officers listed on the schedule annexed
thereto (incorporated herein by referenced to Exhibit 10.18 of
the Form 10)
10.3(f) Insignia Financial Group, Inc. 401(k) Savings Plan (incorporated
herein by reference to Exhibit 4.1 to the Registration Statement
on Form S-8 filed by Insignia Financial Group, Inc. on September
2, 1998)
10.3(g) Richard Ellis Group Limited 1997 Unapproved Share Option Scheme
(incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-8 filed by Insignia Financial
Group, Inc. on November 18, 1998)
10.3(h) Insignia Financial Group, Inc. 401(k) Restoration Plan
10.4(a) Technical Services Agreement, dated as of June 29, 1998, by and
among Former Parent, Insignia Financial Group, Inc. and
Apartment Investment and Management Company (incorporated herein
by referenced to Exhibit 10.19 of the Form 10)
10.4(b) Amendment No. 1 to Technical Services Agreement, dated as of
July 28, 1998, by and among Former Parent, Insignia Financial
Group, Inc. and Apartment Investment and Management Company
(incorporated herein by referenced to Exhibit 10.20 of the Form
10)
10.5 Credit Agreement, dated as of October 22, 1998, by and among
Insignia Financial Group, Inc., as Borrower, the Lenders
referred to therein, First Union National Bank, as
Administrative Agent, and Lehman Commercial Paper, Inc., as
Syndication Agent
10.6(a) Warrant Agreement, dated as of September 15, 1998, between
Insignia/ESG Holdings and APTS Partners, L.P. (incorporated
herein by reference to Exhibit 4.1 of the Report on Form 10-Q of
Insignia Financial Group, Inc. filed on November 17, 1998)
10.6(b) Warrant Agreement, dated as of September 15, 1998, between
Insignia/ESG Holdings and APTS Partners, L.P. (incorporated
herein by reference to Exhibit 4.2 of Form 10-Q of Insignia
Financial Group, Inc. filed on November 17, 1998)
10.6(c) Warrant Agreement, dated as of September 15, 1998, between
Insignia Financial Group, Inc. and APTS Partners, L.P.
(incorporated herein by reference to Exhibit 4.3 of the Report
on Form 10-Q of Insignia Financial Group, Inc. filed on November
17, 1998)
10.6(d) Warrant Agreement, dated as of September 15, 1998, between
Insignia Financial Group, Inc. and APTS V, L.L.C. (incorporated
herein by reference to Exhibit 4.4 of the Report on Form 10-Q of
Insignia Financial Group, Inc. filed on November 17, 1998)
10.6(e) Warrant Agreement, dated as of September 15, 1998, between
Insignia Financial Group, Inc. and Gotham Partners, L.P.
(incorporated herein by reference to Exhibit 4.5 of the Report
on Form 10-Q of Insignia Financial Group, Inc. filed on November
17, 1998)
10.6(f) Warrant Agreement, dated as of September 30, 1998, between
Insignia Financial Group, Inc. and First Union National Bank of
Delaware (incorporated herein by reference to Exhibit 4.6 of the
Report on Form 10-Q of Insignia Financial Group, Inc. filed on
November 17, 1998)
21.1 Subsidiaries of Insignia Financial Group, Inc.
23.1 Consent of Independent Auditors to Annual Report on Form 10-K
for the year ended December 31, 1998
27.1 Financial Data Schedule for the year ended December 31, 1998
(for SEC use only)
<PAGE>
- -------------------------------------------------------------------------------
Dated 30 September 1998
(1) INSIGNIA FINANCIAL GROUP, INC.
(2) CERTAIN COVENANTORS
(3) INSIGNIA/ESG, INC.
DEED OF ASSUMPTION AND VARIATION
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171-638-1111
Fax: 0171-972-7990
PVB/FXH/Insignia/I31200091
<PAGE>
THIS DEED OF ASSUMPTION AND VARIATION is made the 30 September 1998.
BETWEEN:-
(1) INSIGNIA FINANCIAL GROUP, INC, incorporated in the state of Delaware,
USA, whose registered office is at One Insignia Financial Plaza,
Greenville, South Carolina 29602 ("IFG");
(2) THE COVENANTORS; and
(3) INSIGNIA/ESG, INC, incorporated in the state of Delaware, USA, whose
principal office is at 200 Park Avenue, New York, NY 10166, USA
("IESG").
WHEREAS:-
(A) Pursuant to an offer document dated 20 February 1998 (the "OFFER
DOCUMENT"), IFG offered to acquire all the issued and to be issued
share capital of Richard Ellis Group Limited ("REGL") and the offers
contained in the Offer Document were declared unconditional on 25
February 1998.
(B) IFG and Andrew Huntley and Others entered into a Deed of Warranty and
Indemnity dated 25 February 1998 (the "ORIGINAL DEED") pursuant to
which IFG and the Covenantors assumed obligations towards and acquired
rights against each other
(C) By an Agreement dated as of 26 May 1998, IFG agreed to merge with
Apartment Investment and Management Company ("AIMCO"), with AIMCO
operating as the surviving corporation.
(D) Prior to the merger referred to in Recital (C), IFG transferred its
commercial business, including REGL and its subsidiaries, to
Insignia/ESG Holdings, Inc. ("IESGH"), at that time a wholly-owned
subsidiary of IFG.
(E) Prior to the merger referred to in Recital (C), IFG agreed to transfer
its liabilities under and in respect of the Original Deed and the
Offer Document to IESGH, and IESGH agreed to assume such liabilities.
(F) The parties to this Deed wish to substitute IESG for IFG in respect of
the rights, obligations and liabilities of IFG under the Original Deed
in accordance with the terms set out in this Deed.
(G) The parties to this Deed also wish to substitute IESG for IFG in
respect of the rights, obligations and liabilities of IFG under the
Offer Document in accordance with the terms set out in this Deed.
NOW IT IS HEREBY AGREED:-
1. DEFINITIONS
1.1 DEFINED TERMS: In this Deed, including the Recitals, unless otherwise
provided, words and expressions defined in the Original Deed shall
bear the same meaning when used herein and, in addition:
"AIMCO SHARES" means the shares in AIMCO issued or to be issued to the
Original Covenantors, in respect of such Original Covenantors'
Non-Alternative Stock, upon the merger of IFG into AIMCO as referred
to in Recital (C);
<PAGE>
"COVENANTORS" means such of the Original Covenantors as are parties
to this Deed;
"DEED" means this deed of assumption and variation;
"DEFERRED LOAN NOTES" shall have the meaning given to it in the Offer
Document;
"EFFECTIVE DATE" means 30 September 1998;
"ESCROW SHARE VALUE" means, in respect of each Covenantor who was not
a C Ordinary Shareholder, the aggregate of the value of such
Covenantor's AIMCO Shares (if any), IESGH Shares (if any) and Share
Cash (if any) calculated on the relevant Release Date;
"IESGH SHARES" means the shares in IESGH distributed or to be
distributed to the Original Covenantors, in respect of such Original
Covenantors Non-Alternative Stock, following the transfer of IFG's
commercial business as referred to in Recital (D);
"OFFER DOCUMENT" has the meaning given to it in Recital (A);
"ORIGINAL COVENANTORS" means each of the "Covenantors" as defined in
the Original Deed; and
"SHARE CASH" means any cash distributed or to be distributed to the
Original Covenantors in lieu of fractions of, or in respect of, AIMCO
Shares or in lieu of fractions of, or in respect of, IESGH Shares, in
respect of such Original Covenantors' Non-Alternative Stock, and the
proceeds from any sale of any AIMCO Shares referred to in clause 5.3.
1.2 INTERPRETATION: Unless otherwise stated, in this Deed:
(a) references to the parties hereto include their respective
permitted assignees and/or the respective successors in title
to substantially the whole of their respective undertakings
and, in the case of individuals, to their respective estates
and personal representatives;
(b) references to persons shall include bodies corporate and
unincorporated, associations, partnerships and individuals;
(c) words denoting the singular shall include the plural and words
denoting any gender shall include all genders;
(d) references to clauses are to clauses of this Deed; and
(e) a reference to (or to any specified provision of) the Original
Deed or the Offer Document is to be construed as a reference
to the Original Deed or the Offer Document (or that provision)
as it may have been, is by this Deed or may hereafter be, from
time to time, amended, varied, supplemented, restated or
novated.
2. THE DEED
Each of IFG and each of the Covenantors hereby severally confirm to
IESG that it, he or she, as the case may be, has not assigned or
otherwise transferred any of its, his or her, as the case may be,
respective rights or obligations under or in connection with the
Original Deed and there has been no amendment to the Original Deed
since its execution, save in the case of IFG for the agreement to
transfer liabilities referred to in Recital (E).
<PAGE>
3. EFFECT OF DEED
It is the intention of each of the parties to this Deed that the
provisions of this Deed shall, as between such parties, become binding
and effective on the Effective Date, notwithstanding that:
(a) a party to this Deed may not execute this Deed until after
the Effective Date;
(b) the parties to this Deed may execute this Deed at different
times; and
(c) at any time, not all of the Original Covenantors have
executed this Deed.
4. ASSUMPTION
4.1 With effect from the Effective Date there shall be assumed by IESG in
place of IFG:
(a) the benefit of all obligations and liabilities owed to IFG
under the Original Deed and the Offer Document by the
Covenantors (the "ASSUMED BENEFITS"); and
(b) all obligations and liabilities owed by IFG under the Original
Deed and the Offer Document to the Covenantors (the "ASSUMED
OBLIGATIONS")
with the intent and to the effect that IESG shall owe to the
Covenantors the Assumed Obligations, and the Covenantors shall owe to
IESG the Assumed Benefits and each of the Covenantors and IESG shall
be entitled to exercise against the other all rights, remedies and
claims arising under the Original Deed or, as the case may be, the
Offer Document in respect of the Assumed Benefits and the Assumed
Obligations as if references in the Original Deed or, as the case may
be, the Offer Document to IFG were references to IESG.
4.2 Each Covenantor acknowledges that, with effect from the Effective
Date, it will exercise any claim it may have in respect of the Assumed
Benefits and the Assumed Obligations firstly against IESG.
4.3 Nothing in this Deed shall increase the aggregate amount of the
liability of any Covenantor beyond the aggregate amount of the
liability such Covenantor would have had under the Original Deed had
the merger, transfer and other matters referred to in Recitals (C) and
(D) not occurred and this Deed not been entered into.
5. VARIATIONS TO ESCROW ARRANGEMENTS
5.1 The parties agree that the provisions relating to escrow arrangements
set out in paragraph 5 of Schedule 2 of the Original Deed shall be
varied as set out in this clause 5, and save to the extent varied by
this clause 5, such provisions shall remain in full force and effect.
5.2 Upon issue or, as the case may be, payment to the Covenantors (or to
the Escrow Agent on their behalf), the Share Cash, the AIMCO Shares
and the IESGH Shares shall become subject to the escrow arrangements
applicable to Escrow Shares as set out in paragraph 5 of Schedule 2 of
the Original Deed, as varied by this clause 5.
5.3 At any time the Covenantors' Representative may, upon instructions
received from any Covenantor, and the Covenantors' Representative is
hereby appointed and authorised to, sell all or any part of the AIMCO
Shares issued to such Covenantor at such time and in such manner as
the Covenantors' Representative may determine.
5.4 The proceeds from any sale referred to in clause 5.3 shall be paid to
and deposited with the Escrow Agent.
<PAGE>
5.5 On 20 February 1999, subject always to paragraph 5.3 of Schedule 2 of
the Original Deed, there shall be released from the Escrow Fund to
each Covenantor who was a C Ordinary Shareholder all such Covenantor's
Share Cash (if any), AIMCO Shares (if any) and IESGH Shares.
5.6 On 20 February 1999, subject always to paragraph 5.3 of Schedule 2 of
the Original Deed, there shall be released from the Escrow Fund to
each Covenantor who was not a C Ordinary Shareholder one third of his
Escrow Share Value on such date. Unless a Covenantor instructs the
Covenantors' Representative to the contrary in accordance with the
provisions of clause 5.9 below, the one third of each Covenantor's
Escrow Share Value to be released shall be comprised as follows:
FIRST, Share Cash in an amount equal to the lower of (A) one third of
such Covenantor's Escrow Share Value and (B) such Covenantor's
unreleased Share Cash on such date;
SECOND, AIMCO Shares equal in value to one third of such Covenantor's
Escrow Share Value minus the value of the such Covenantor's Share Cash
(if any) released under sub-paragraph FIRST above; and
THIRD, IESGH Shares equal in value to one third of such Covenantor's
Escrow Share Value minus the value of such Covenantor's Share Cash (if
any) released under sub-paragraph FIRST above and minus the value of
such Covenantor's AIMCO Shares (if any) released under sub-paragraph
SECOND above.
5.7 On 20 February 2000, subject always to paragraph 5.3 of Schedule 2 of
the Original Deed, there shall be released from the Escrow Fund to
each Covenantor who was not a C Ordinary Shareholder one half of his
Escrow Share Value on such date. Unless a Covenantor instructs the
Covenantors' Representative to the contrary in accordance with the
provisions of clause 5.9 below, the one half of each Covenantor's
Escrow Share Value to be released shall be comprised as follows:
FIRST, Share Cash in an amount equal to the lower of (A) one half of
such Covenantor's Escrow Share Value and (B) such Covenantor's
unreleased Share Cash on such date;
SECOND, AIMCO Shares equal in value to one half of such Covenantor's
Escrow Share Value minus the value of the such Covenantor's Share Cash
(if any) released under sub-paragraph FIRST above; and
THIRD, IESGH Shares equal in value to one half of such Covenantor's
Escrow Share Value minus the value of such Covenantor's Share Cash (if
any) released under sub-paragraph FIRST above and minus the value of
such Covenantor's AIMCO Shares (if any) released under sub-paragraph
SECOND above.
5.8 On 20 February 2001, subject always to paragraph 5.3 of Schedule 2 of
the Original Deed, there shall be released from the Escrow Fund to
each Covenantor who was not a C Ordinary Shareholder all such
Covenantor's remaining Share Cash (if any), AIMCO Shares (if any) and
IESGH Shares (if any).
5.9 If any Covenantor who was not a C Ordinary Shareholder wishes the one
third or, as the case may be, one half of his Escrow Share Value due
to be released on 20 February 1999 or, as the case may be, 20 February
2000 to be comprised of Share Cash, AIMCO Shares and/or IESGH Shares
other than as set out in clauses 5.6 or, as the case may be, 5.7, such
Covenantor shall notify the Covenantors' Representative of his wishes
in writing, the Covenantors' Representative shall inform IESG in
writing of such Covenantor's wishes not later than 30 days prior to
relevant Release Date, and on the relevant Release Date such
Covenantor's one third or,
<PAGE>
as the case may be, one half of his Escrow Share Value shall be
comprised in accordance with his wishes.
5.10 For the purpose of paragraph 5.3 of Schedule 2 of the Original Deed,
the words "(firstly from Escrow Shares and secondly from Escrow
Notes)" shall be deemed to read "(firstly from IESGH Shares, secondly
from AIMCO Shares, thirdly from Share Cash and fourthly from Escrow
Notes)".
5.11 For the purpose of paragraph 5.4(e) of Schedule 2 of the Original
Deed, the words "firstly be taken from the Escrow Shares and secondly
from the Escrow Notes" shall be deemed to read "firstly be taken from
the IESGH Shares, secondly from the AIMCO Shares, thirdly from Share
Cash and fourthly from the Escrow Notes".
5.12 For the purpose of paragraph 5.5(a) of Schedule 2 of the Original
Deed, "Market Price" as of any date shall mean the average of the
closing price for the stock being valued over the five business days
prior to such date.
6. REPRESENTATIONS AND WARRANTIES
Each of IFG and IESG represents and warrants that:-
(a) INCORPORATION: it is a corporation validly existing and in
good standing under the law of the country and state in which
it is incorporated and it has appropriate power and authority
to own its property and assets and carry on its business as it
is now conducted;
(b) POWERS AND AUTHORITY: it has appropriate power to enter into
and perform the terms and conditions of this Deed and has
taken all necessary corporate action to authorise the
execution, delivery and performance of this Deed; and
(c) CONSENTS: no material permit, licence, approval or
authorisation of any governmental, judicial or other authority
or other third party is required in connection with the
execution, performance, validity or enforceability of this
Deed.
7. GOVERNING LAW
7.1 This Deed (and any dispute, controversy, proceedings or claim of
whatever nature arising out of or in any way relating to this
agreement or its formation) shall be governed by and construed in
accordance with English law.
7.2 The parties irrevocably submit to the non-exclusive jurisdiction of
the High Court of Justice in London for the purpose of hearing and
determining any dispute arising out of or in connection with this
agreement and for the purpose of enforcement of any judgement against
their respective assets.
8. MISCELLANEOUS
8.1 The provisions of clauses 14, 16, 17, 18.2, 19 and 20 of the Original
Deed shall apply to this Deed, mutatis mutandis, and as if references
therein to "this Deed" were references to this Deed, and as if:
(a) the references in such clauses (other than in clause 20) to
"the Offeror" were references to IFG and IESG;
(b) the facsimile number for services of notices, demands and
other communications for IESG in clause 16.1 were:
<PAGE>
fax number - 0171 972 7990
marked for the attention of Philip Broke
copy to General Counsel of Insignia/ESG, Inc.
Fax Number: 001 212 984 7153; and
(c) references in clause 20 to "the Offeror" were references to
IESG.
8.2 Save to the extent amended by this Deed, the Original Deed and the
Offer Document shall continue in full force and effect.
EXECUTED and DELIVERED as a DEED by the parties on the date stated at the
beginning of this DEED.
<PAGE>
Signed as a deed and delivered by the )
said P B ALLANSON ) /s/ P. B. Allanson Date:
in the presence of:- ) P B ALLANSON
.................... ................................
Signature of Witness Address of Witness
.................... ................................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS B ALLANSON ) /s/ Mrs. B. Allanson Date:
in the presence of:- ) MRS B ALLANSON
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by )
the said R D ARCHER ) /s/ R. D. Archer Date:
in the presence of:- ) R D ARCHER
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said C N G ARDING ) /s/ C. N. G. Arding Date:
in the presence of:- ) C N G ARDING
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MRS M G ARDING ) /s/ Mr. M. G. Arding Date:
in the presence of:- ) MRS M G ARDING
................................ .............................
Signature of Witness Address of Witness
................................ .............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D C BARKER ) /s/ D. C. Barker Date:
in the presence of:- ) D C BARKER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S D BARROWCLIFF ) /s/ S. D. Barrowcliff Date:
in the presence of:- ) S D BARROWCLIFF
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS A M BARROWCLIFF ) /s/ Mr. A. M. Barrowcliff Date:
in the presence of:- ) MRS A M BARROWCLIFF
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S L BARTER ) /s/ S. L. Barter Date:
<PAGE>
in the presence of:- ) S L BARTER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS A J BARTER ) /s/ Mrs. A. J. Barter Date:
in the presence of:- ) MRS A J BARTER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D J BERRY ) /s/ D. J. Berry Date:
in the presence of:- ) D J BERRY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J S BORNER ) /s/ J. S. Borner Date:
in the presence of:- ) J S BORNER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D R BOYNE ) /s/ D. R. Boyne Date:
in the presence of:- ) D R BOYNE
<PAGE>
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A J BOYNE ) /s/ A. J. Boyne Date:
in the presence of:- ) A J BOYNE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J BROUNGER ) /s/ J. Brounger Date:
in the presence of:- ) J BROUNGER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said K J CAESAR ) /s/ K. J. Caesar Date:
in the presence of:- ) K J CAESAR
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS C A CAESAR ) /s/ Mrs. C. A. Caesar Date:
in the presence of:- ) MRS C A CAESAR
................................ ............................
Signature of Witness Address of Witness
<PAGE>
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J R CAESAR ) /s/ J. R. Caesar Date:
in the presence of:- ) J R CAESAR
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said N J A CAESAR ) /s/ N. J. A. Caesar Date:
in the presence of:- ) N J A CAESAR
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said G CARR-JONES ) /s/ G. Carr-Jones Date:
in the presence of:- ) G CARR-JONES
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said S V CLAYTON ) /s/ S. V. Clayton Date:
in the presence of:- ) S V CLAYTON
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
S V CLAYTON (1997) CHILDREN'S TRUST
Signed for and on behalf of )
The Trust by W M H ROSE ) /s/ W. J. H. Rose Date:
in the presence of:- ) W M H ROSE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
S V CLAYTON (1997) CHILDREN'S TRUST
Signed for and on behalf of )
The Trust by S V CLAYTON ) /s/ S. V. Clayton Date:
in the presence of:- ) S V CLAYTON
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S H CLUES ) /s/ S. H. Clues Date:
in the presence of:- ) S H CLUES
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
<PAGE>
said P R COOPER-PARRY ) /s/ P. R. Cooper-Parry Date:
in the presence of:- ) P R COOPER-PARRY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said T DANN ) /s/ T. Dann Date:
in the presence of:- ) T DANN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS J E DANN ) /s/ Mrs. J. E. Dann Date:
in the presence of:- ) MRS J E DANN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said P R DAWE ) /s/ P. R. Dawe Date:
in the presence of:- ) P R DAWE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS M J DAWE ) /s/ Mrs. M. J. Dawe Date:
in the presence of:- ) MRS M J DAWE
<PAGE>
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A L DAWSON ) /s/ A. L. Dawson Date:
in the presence of:- ) A L DAWSON
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said H V A ELLINGHAM ) /s/ H. V. A. Ellingham Date:
in the presence of:- ) H V A ELLINGHAM
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS A ELLINGHAM ) /s/ Mrs. A. Ellingham Date:
in the presence of:- ) MRS A ELLINGHAM
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said I D ELLIS ) /s/ I. D. Ellis Date:
in the presence of:- ) I D ELLIS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A FORBES ) /s/ A. Forbes Date:
in the presence of:- ) A FORBES
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS J L FORBES ) /s/ Mrs. J. L. Forbes Date:
in the presence of:- ) MRS J L FORBES
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A C FROGGATT ) /s/ A. C. Froggatt Date:
in the presence of:- ) A C FROGGATT
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS N M FROGGATT ) /s/ Mrs. N. M. Froggatt Date:
<PAGE>
in the presence of:- ) MRS N M FROGGATT
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MISS P A FROGGATT ) /s/ Miss P. A. Froggatt Date:
in the presence of:- ) MISS P A FROGGATT
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MISS S V FROGGATT ) /s/ Miss S. V. Froggatt Date:
in the presence of:- ) MISS S V FROGGATT
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D A GOODFELLOW ) /s/ D. A. Goodfellow Date:
in the presence of:- ) D A GOODFELLOW
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MRS M A GOODFELLOW ) /s/ Mrs. M. A. Goodfellow Date:
in the presence of:- ) MRS M A GOODFELLOW
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A J GOODFELLOW ) /s/ A. J. Goodfellow Date:
in the presence of:- ) A J GOODFELLOW
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D A GREEN ) /s/ D. A. Green Date:
in the presence of:- ) D A GREEN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said N A GREVILLE ) /s/ N. A. Greville Date:
in the presence of:- ) N A GREVILLE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said R S GYLES ) /s/ R. S. Gyles Date:
<PAGE>
in the presence of:- ) R S GYLES
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said C M HANSON ) /s/ C. M. Hanson Date:
in the presence of:- ) C M HANSON
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said K N HARRIS ) /s/ K. N. Harris Date:
in the presence of:- ) K N HARRIS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS D A HARRIS ) /s/ Mrs. D. A. Harris Date:
in the presence of:- ) MRS D A HARRIS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said B N HARRIS ) /s/ B. N. Harris Date:
in the presence of:- ) B N HARRIS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS R M HARRIS ) /s/ Mrs. R. M. Harris Date:
in the presence of:- ) MRS R M HARRIS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said I HARVEY ) /s/ I. Harvey Date:
in the presence of:- ) I HARVEY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said R HAYES ) /s/ R. Hayes Date:
in the presence of:- ) R HAYES
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A E L HEARN ) /s/ A. E. L. Hearn Date:
<PAGE>
in the presence of:- ) A E L HEARN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D R HEIGHWAY ) /s/ D. R. Heighway Date:
in the presence of:- ) D R HEIGHWAY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D R HITCHCOCK ) /s/ D. R. Hitchcock. Date:
in the presence of:- ) D R HITCHCOCK
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS J K HITCHCOCK ) /s/ Mrs. J. K. Hitchcock Date:
in the presence of:- ) MRS J K HITCHCOCK
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said G HOLLIS ) /s/ G. Hollis Date:
in the presence of:- ) G HOLLIS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S A HUBBARD ) /s/ S. A. Hubbard Date:
in the presence of:- ) S A HUBBARD
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said G F HUGHES ) /s/ G. F. Hughes Date:
in the presence of:- ) G F HUGHES
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A J M HUNTLEY ) /s/ A. J. M. Huntley Date:
in the presence of:- ) A J M HUNTLEY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MS J M HUNTLEY ) /s/ Ms. J. M. Huntley Date:
in the presence of:- ) MS J M HUNTLEY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MS N L HUNTLEY ) /s/ Ms. N. L. Huntley Date:
in the presence of:- ) MS N L HUNTLEY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said L J JENNINGS ) /s/ L. J. Jennings Date:
in the presence of:- ) L J JENNINGS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A KIDOUSHIM ) /s/ A. Kidoushim Date:
in the presence of:- ) A KIDOUSHIM
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
<PAGE>
said MRS M KIDOUSHIM ) /s/ Mrs. M. Kidoushim Date:
in the presence of:- ) MRS M KIDOUSHIM
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J M LEA ) /s/ J. M. Lea Date:
in the presence of:- ) J M LEA
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS S LEA ) /s/ Mrs. S. Lea Date:
in the presence of:- ) MRS S LEA
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A J LEECH ) /s/ A. J. Leech Date:
in the presence of:- ) A J LEECH
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said D M LETHBRIDGE ) /s/ D. M. Lethbridge Date:
in the presence of:- ) D M LETHBRIDGE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said P H S LEYBURN ) /s/ P. H. S. Leyburn Date:
in the presence of:- ) P H S LEYBURN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS A M LEYBURN ) /s/ Mrs. A. M. Leyburn Date:
in the presence of:- ) MRS A M LEYBURN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said R P LISTER ) /s/ R. P. Lister Date:
in the presence of:- ) R P LISTER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MRS E S LISTER ) /s/ Mrs. E. S. Lister Date:
in the presence of:- ) MRS E S LISTER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said E T D LUKER ) /s/ E. T. D. Luker Date:
in the presence of:- ) E T D LUKER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS G LUKER ) /s/ Mrs. G. Luker Date:
in the presence of:- ) MRS G LUKER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said M M MCALISTER ) /s/ M. M. McAlister Date:
in the presence of:- ) M M MCALISTER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS C E MCALLISTER ) /s/ Mrs. C. E. McAllister Date:
in the presence of:- ) MRS C E MCALLISTER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A P J MCINTOSH ) /s/ A. P. J. McIntosh Date:
in the presence of:- ) A P J MCINTOSH
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS P M MCINTOSH ) /s/ Mrs. P. M. McIntosh Date:
in the presence of:- ) MRS P M MCINTOSH
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said R J MERRYWEATHER ) /s/ R. J. Merryweather Date:
in the presence of:- ) R J MERRYWEATHER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MRS A J MEYRICK ) /s/ Mrs. A. J. Meyrick Date:
in the presence of:- ) MRS A J MEYRICK
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S A MITCHELL ) /s/ S. A. Mitchell Date:
in the presence of:- ) S A MITCHELL
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said L D MORLEY ) /s/ L. D. Morley Date:
in the presence of:- ) L D MORLEY
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said P J MOSS ) /s/ P. J. Moss Date:
in the presence of:- ) P J MOSS
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said A N MURCH ) /s/ A. N. Murch Date:
in the presence of:- ) A N MURCH
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS I M MURCH ) /s/ Mrs. I. M. Murch Date:
in the presence of:- ) MRS I M MURCH
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said T H OLIVER ) /s/ T. H. Oliver Date:
in the presence of:- ) T H OLIVER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A J G OLIVER ) /s/ A. J. G. Oliver Date:
in the presence of:- ) A J G OLIVER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said P A V S OSMAN ) /s/ P. A. V. S. Osman Date:
in the presence of:- ) P A V S OSMAN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS J C OSMAN ) /s/ Mrs. J. C. Osman Date:
in the presence of:- ) MRS J C OSMAN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A OWEN ) /s/ A. Owen Date:
in the presence of:- ) A OWEN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said W G PEACH ) /s/ W. G. Peach Date:
in the presence of:- ) W G PEACH
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MRS L A PEACH ) /s/ Mrs. L. A. Peach Date:
in the presence of:- ) MRS L A PEACH
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said C POYNER ) /s/ C. Poyner Date:
in the presence of:- ) C POYNER
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A C M PRINGLE ) /s/ A. C. M. Pringle Date:
in the presence of:- ) A C M PRINGLE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MRS R A PRINGLE ) /s/ Mrs. R. A. Pringle Date:
in the presence of:- ) MRS R A PRINGLE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
THE PRINGLE CHILDREN'S SETTLEMENT )
Signed for and on behalf of )
The Trust by MR A C M PRINGLE ) /s/ A. C. M. Pringle Date:
in the presence of:- MR A C M PRINGLE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
THE PRINGLE CHILDREN'S SETTLEMENT )
Signed for and on behalf of )
The Trust by MRS R A PRINGLE ) /s/ Mrs. R. A. Pringle Date:
in the presence of:- MRS R A PRINGLE
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
THE PRINGLE CHILDREN'S SETTLEMENT )
Signed for and on behalf of )
The Trust by MR J T WORKMAN ) /s/ J. T. Workman Date:
in the presence of:- MR J T WORKMAN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said M PULLEN ) /s/ M. Pullen Date:
in the presence of:- ) M PULLEN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said K QUEEN ) /s/ K. Queen Date:
in the presence of:- ) K QUEEN
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said A RENSHAW ) /s/ A. Renshaw Date:
in the presence of:- ) A RENSHAW
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said R D ROBERTSON ) /s/ R. D. Robertson Date:
in the presence of:- ) R D ROBERTSON
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS C J ROBERTSON ) /s/ Mrs. C. J. Robertson Date:
in the presence of:- ) MRS C J ROBERTSON
................................ ............................
Signature of Witness Address of Witness
................................ ............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S N ROBINSON ) /s/ S. N. Robinson Date:
in the presence of:- ) S N ROBINSON
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said W M H ROSE ) /s/ W. M. H. Rose Date:
in the presence of:- ) W M H ROSE
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said C SCOTT ) /s/ C. Scott Date:
in the presence of:- )
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said H R SEABORN ) /s/ H. R. Seaborn Date:
in the presence of:- ) H R SEABORN
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J J SHELLARD ) /s/ J. J. Shellard Date:
in the presence of:- ) J J SHELLARD
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS S J SHELLARD ) /s/ Mrs. S. J. Shellard Date:
in the presence of:- ) MRS S J SHELLARD
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said C J SIMMONS ) /s/ C. J. Simmons Date:
in the presence of:- ) C J SIMMONS
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS J C SIMMONS ) /s/ Mrs. J. C. Simmons Date:
in the presence of:- ) MRS J C SIMMONS
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said D P SMITH ) /s/ D. P. Smith Date:
in the presence of:- ) D P SMITH
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS P A SMITH ) /s/ Mrs. P. A. Smith Date:
in the presence of:- ) MRS P A SMITH
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J A SMITH ) /s/ J. A. Smith Date:
in the presence of:- ) J A SMITH
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said M M SMITH ) /s/ M. M. Smith Date:
in the presence of:- ) M M SMITH
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S R G SMITH ) /s/ S. R. G. Smith Date:
in the presence of:- ) S R G SMITH
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS S E SMITH ) /s/ S. E. Smith Date:
in the presence of:- ) MRS S E SMITH
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S R SPENCE ) /s/ S. R. Spence Date:
in the presence of:- ) S R SPENCE
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said R J STORY ) /s/ R. J. Story Date:
in the presence of:- ) R J STORY
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said M J STRONG ) /s/ M. J. Strong Date:
in the presence of:- ) M J STRONG
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said MRS A M STRONG ) /s/ Mrs. A. M. Strong Date:
in the presence of:- ) MRS A M STRONG
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J A STRONG ) /s/ J. A. Strong Date:
in the presence of:- ) J A STRONG
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S A TAYLOR ) /s/ S. A. Taylor Date:
in the presence of:- ) S A TAYLOR
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said C J T THRIFT ) /s/ C. J. T. Thrift Date:
in the presence of:- ) C J T THRIFT
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said S TIMBS ) /s/ S. Timbs Date:
in the presence of:- ) S TIMBS
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J E VIGAR ) /s/ J. E. Vigar Date:
in the presence of:- ) J E VIGAR
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said P I WALKER ) /s/ P. I. Walker Date:
in the presence of:- ) P I WALKER
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said C M WARNER ) /s/ C. M. Warner Date:
in the presence of:- ) C M WARNER
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said A J WATERS ) /s/ A. J. Waters Date:
in the presence of:- ) A J WATERS
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS J C WATERS ) /s/ Mrs. J. C. Waters Date:
in the presence of:- ) MRS J C WATERS
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
THE WATERS CHILDREN'S TRUST Signed )
for and on behalf of The Trust ) /s/ Mr. A. J. Water Date:
by MR A J WATERS ) MR A J WATERS
in the presence of:-
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
THE WATERS CHILDREN'S TRUST Signed )
for and on behalf of The Trust ) /s/ Mrs. J. C. Waters Date:
by MRS J C WATERS ) MRS J C WATERS
in the presence of:-
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said G E WEBSTER ) /s/ G. E. Webster Date:
in the presence of:- ) G E WEBSTER
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said B D WHITE ) /s/ B. D. White Date:
in the presence of:- ) B D WHITE
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said H E WILLIAMS ) /s/ H. E. Williams
in the presence of:- ) H E WILLIAMS
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said M M WILSON ) /s/ M. M. Wilson Date:
in the presence of:- ) M M WILSON
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said MRS S M WILSON ) /s/ Mrs. S. M. Wilson Date:
in the presence of:- ) MRS S M WILSON
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said K R WOOD ) /s/ K. R. Wood Date:
in the presence of:- ) K R WOOD
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
Signed as a deed and delivered by the )
said J S WORBOYS ) /s/ J. S. Worboys Date:
in the presence of:- ) J S WORBOYS
................................ ..............................
Signature of Witness Address of Witness
................................ ..............................
Name of Witness Occupation of Witness
<PAGE>
Signed as a deed and delivered by the )
said H E WORBOYS ) /s/ H. E. Worboys Date:
in the presence of:- ) H E WORBOYS
................................ ..............................
Signature of Witness Address of Witness
............................... ..............................
Name of Witness Occupation of Witness
THE RICHARD ELLIS (KJC) TRUST signed as )
a deed and delivered for and on behalf )
of the Trust by:-
BARNETT WADDINGHAM CAPITAL TRUSTEES
LIMITED
/s/ K. Caesar Date:
................................... .................................
Director K CAESAR
................................... ........................................
Director/Secretary Signature of Witness
........................................
Name of Witness
........................................
Address of Witness
........................................
Occupation of Witness
<PAGE>
THE RICHARD ELLIS (AJW) TRUST signed as a deed )
and delivered for and on behalf of The Trust )
by:-
BARNETT WADDINGHAM CAPITAL TRUSTEES
LIMITED
/s/ A. Waters Date:
................................... .................................
Director A WATERS
................................... ........................................
Director/Secretary Signature of Witness
........................................
Name of Witness
........................................
Address of Witness
........................................
Occupation of Witness
THE RICHARD ELLIS (GEW) TRUST signed as a deed )
and delivered for and on behalf of The Trust )
by:-
BARNETT WADDINGHAM CAPITAL TRUSTEES
LIMITED
/s/ G.E. Webster Date:
................................... .................................
Director G E WEBSTER
................................... ........................................
Director/Secretary Signature of Witness
........................................
Name of Witness
........................................
Address of Witness
........................................
Occupation of Witness
THE RICHARD ELLIS (HVEA) TRUST signed as a deed )
and delivered for and on behalf of The Trust )
by:-
BARNETT WADDINGHAM CAPITAL TRUSTEES
LIMITED
/s/ H. Ellingham Date:
................................... .................................
Director H ELLINGHAM
................................... ........................................
Director/Secretary Signature of Witness
........................................
Name of Witness
........................................
Address of Witness
........................................
Occupation of Witness
THE RICHARD ELLIS (JSW) TRUST signed as a deed )
and delivered for and on behalf of The Trust )
by:-
BARNETT WADDINGHAM CAPITAL TRUSTEES
LIMITED
/s/ J. Worboys Date:
................................... .................................
Director J WORBOYS
................................... .......................................
Director/Secretary Signature of Witness
........................................
Name of Witness
........................................
Address of Witness
........................................
Occupation of Witness
Executed under the Common Seal of ) /s/ Adam B. Gilbert
INSIGNIA FINANCIAL GROUP, INC. ) ....................................
ADAM B. GILBERT
<PAGE>
in the presence of:
................................ ................................
Signature of Witness Address of Witness
................................ ................................
Name of Witness Occupation of Witness
Executed under the Common Seal of ) /s/ Steven B. Siegel
INSIGNIA/ESG, INC. ) STEVEN B. SIEGEL
in the presence of: PRESIDENT
................................ ................................
Signature of Witness Address of Witness
................................ ................................
Name of Witness Occupation of Witness
<PAGE>
THIS DEED OF VARIATION is made on the 5 MARCH 1999
BETWEEN:-
(1) INSIGNIA FINANCIAL GROUP, INC. ("INSIGNIA"), incorporated in the State
of Delaware, U.S.A., whose principal office is at 200 Park Avenue,
New York, New York 10166, U.S.A.; and
(2) ALAN CHARLES FROGGATT, as agent and attorney for the Covenantors as
defined below (the "COVENANTORS' REPRESENTATIVE").
RECITALS
(A) Pursuant to an offer document dated 20 February 1998 (the "OFFER
DOCUMENT"), Insignia's predecessor, also known as Insignia Financial
Group, Inc. ("OLD INSIGNIA"), offered to acquire all the issued and to
be issued share capital of Richard Ellis Group Limited ("REGL") and the
offers contained in the Offer Document were declared unconditional on 25
February 1998.
(B) Old Insignia and Andrew Huntley and Others entered into a deed of
warranty and indemnity dated 25 February 1998 (the "DEED OF WARRANTY AND
INDEMNITY") pursuant to which Old Insignia and the Covenantors assumed
obligations towards and acquired rights against each other.
(C) By an agreement dated 26 May 1998, Old Insignia agreed to merge with
Apartment Investment and Management Company with the latter company
operating as the surviving corporation.
(D) Prior to the merger referred to in Recital (C), Old Insignia transferred
its commercial business including REGL and its subsidiaries, to a
subsidiary of Insignia/ESG Holdings, Inc., ("IESG"), at that time a
wholly owned subsidiary of Old Insignia. Prior to such merger, Old
Insignia agreed to transfer its rights, obligations and liabilities
under and in respect of the Deed of Warranty and Indemnity and the Offer
Document to IESG.
(E) By a Deed of Assumption and Variation (the "DEED OF ASSUMPTION AND
VARIATION") which took effect from 30 September 1998, IESG was
substituted for Old Insignia in respect of the rights, obligations and
liabilities of Old Insignia under the Offer Document and the Deed of
Warranty and Indemnity.
(F) On 30 October 1998, IESG changed its name to "Insignia Financial Group,
Inc."
(G) The Covenantors' Representative was given power under the Deed of
Warranty and Indemnity and the Offer Document on behalf of the
Covenantors to vary, waive or agree any changes to the method of
calculating REGL Modified Pre-Tax Profit, Base Amount and Principal
Amount of Deferred Loan Notes to be issued, including,
<PAGE>
without limitation, in order to address any issues that may arise from
the acquisition or merger of a company by or with any member of the
Group.
(H) The parties to this Deed wish to vary the terms of the offers contained
in the Offer Document and the terms of the Deed of Warranty and
Indemnity (as varied by the Deed of Assumption and Variation) in
accordance with the terms set out in this Deed.
NOW IT IS HEREBY AGREED:-
1. DEFINITIONS
1.1 In this Deed, including the Recitals, unless otherwise provided, words
and expressions defined in the Offer Document and the Deed of Warranty
and Indemnity bear the same meaning and in addition, the following words
and expressions shall bear the following meanings:-
"DEED" this Deed of Variation;
"OFFER DOCUMENT" has the meaning given to it in Recital (A);
"COVENANTORS" means each of the "Covenantors" as defined in the
Deed of Warranty and Indemnity;
"RELEVANT OFFERS" the C Ordinary Share Offer, the Cancellation
Alternative, the Convertible Share Offer and the
Ordinary Share Offer (as each such term is defined
in the Offer Document)
1.2 Unless otherwise stated, in this Deed:-
(a) references to the parties hereto include their respective
permitted assignees and/or the respective successors in title to
substantially the whole of their respective undertakings and, in
the case of individuals, to their respective estates and personal
representatives;
(b) references to persons shall include bodies corporate and
incorporated, associations, partnerships and individuals;
(c) words denoting the singular shall include the plural and words
denoting any gender shall include all genders;
(d) references to clauses are to clauses of this Deed; and
(e) a reference to (or any specified provision of) the Deed of
Warranty and Indemnity or the Offer Document is to be construed
as a reference to the Deed of Warranty and Indemnity or the Offer
Document (or that provision) as it has been, is by this Deed or
may hereafter be, from time to time, amended, varied,
supplemented, re-stated or novated.
<PAGE>
2. EFFECT OF THE DEED
2.1 It is the intention of the parties to this Deed that the provisions of
this Deed shall become binding and effective on the date stated at the
beginning of this Deed.
2.2 Save to the extent amended by this Deed, the Deed of Warranty and
Indemnity (as subsequently amended by the Deed of Assumption and
Variation) and the Offer Document shall continue in full force and
effect.
3. VARIATION
3.1 The parties agree that the terms of the Relevant Offers as set out in
the Offer Document shall be varied as set out in this clause 3.
3.2 The calculation of the Principal amount of Deferred Loan Notes to be
issued under the Relevant Offers be and is hereby amended by making the
following amendments to paragraph 15(A) of Appendix III of the Offer
Document (Certain Definitions):-
(a) the definition of "BASE AMOUNT" be deleted and replaced by the
following definition:-
"BASE AMOUNT" shall mean in respect of the First Period, the
sum of (pounds sterling)5,750,000 and in respect
of each subsequent Relevant Period, the sum of:-
(a) (pounds sterling)6,000,000; and
(b) an amount equal to the aggregate of one
third of the Deferred Loan Notes payable in
respect of each preceding Relevant
Period(s);"
(b) the definition of "REGL Modified Pre-tax Profit" be deleted and
replaced by the following definition:-
"REGL MODIFIED
PRE-TAX PROFIT" shall mean in respect of each Relevant
Period the profit of the combined businesses
of the REGL Group (excluding Insignia RE
GmbH) and the St. Quintin Group (the
"ENLARGED GROUP") determined in accordance
with UK GAAP applied consistently (including
the recognition of all liabilities under
contractual obligations) with the audited
accounts of REGL for the year ending 31
December 1998, before UK Corporation Tax,
provided that such amount shall be adjusted
as follows:-
<PAGE>
(a) increased by an amount equal to the
effect of amortising the goodwill
arising as a result of the acquisition
of St. Quintin Holdings Limited or any
other acquisition, the financial
results of which would be included in
the combined profit of the Enlarged
Group;
(b) increased by any amount that is
deducted from the combined profit of
the Enlarged Group during the Relevant
Period in respect of relevant claims
under, and as defined in, the St.
Quintin Agreement, provided that the
aggregate of all such adjustments may
never exceed(pounds sterling)100,000 in
respect of all Relevant Periods;
(c) increased by an amount that is deducted
from the combined profit of the
Enlarged Group during the Relevant
Period in respect of relevant claims
under the Deed of Warranty and
Indemnity provided that the aggregate
of all such adjustments may never
exceed(pounds sterling)150,000 in
respect of all Relevant Periods;
(d) in addition to any adjustments in
accordance with paragraphs (b) and (c)
above, increased by any amount that is
deducted from the combined profit of
the Enlarged Group during the Relevant
Period in respect of relevant claims
under the St Quintin Agreement or
relevant claims under the Deed of
Warranty and Indemnity but only to the
extent that such amount is recovered by
Insignia from the Escrow Fund or the
escrow fund (as such latter term is
defined in the St. Quintin Agreement);
(e) decreased by any gain on sale, or
increased by any loss on disposal, of
any portion of the business of the
Enlarged Group or any sale of assets of
the Enlarged Group not in the ordinary
course of business;
(f) decreased by an amount equal to a rate
of ten per cent. per annum (calculated
on a daily basis) of all additional
capital contributed or lent by Insignia
(including any Insignia securities or,
for the avoidance of doubt, any
retained profits of the Enlarged Group)
or provided in connection with any
acquisitions (other than the
acquisition
<PAGE>
of St. Quintin Holdings Limited), the
results of which are included in the
accounts of the Enlarged Group for any
Relevant Period and so that any amount
calculated in accordance with this
sub-paragraph (f) shall be in
substitution for any other interest
charged in respect of the same capital
contributed or money lent and included
in the accounts of the Enlarged Group
in any Relevant Period;
(g) increased by an amount equal to any
interest charged on any loan provided
by Insignia to the REGL Group so that
REGL may purchase the business and
assets of the St. Quintin Group;
(h) increased by an amount equal to ten
per cent of the value of the aggregate
of the proceeds of disposal in any
Relevant Period of any portion of the
existing UK business of the St. Quintin
Group or REGL but only to the extent
that such proceeds are remitted to
Insignia;
(i) by disregarding, in respect of the
First Period, any profits or losses of
the St. Quintin Group up to and
including 28 February 1999;
(j) by disregarding any profit of REGL
attributable to its business outside
the United Kingdom applying its normal
criteria for determining such
attributions; and
(k) increased by an amount of any
professional and other external costs
incurred by the Enlarged Group in
connection with any acquisitions or
proposed acquisitions outside the
United Kingdom."
(c) the following definitions be included:-
(i) "references to the "FIRST PERIOD" are to the period
commencing on 1 January 1999 and ending on 31
December 1999 (both dates inclusive), references to
the "SECOND PERIOD" are to the period commencing on
1 January 2000 and ending on 31 December 2000,
references to the "THIRD PERIOD" are to the period
commencing on 1 January 2001 and ending on 31
December 2001 and references to the "FOURTH PERIOD"
are to the period commencing on 1 January 2002 and
ending on 31 December 2002;"
<PAGE>
(ii) "RELEVANT PERIOD" shall mean, as appropriate, the
First Period, the Second Period, the Third Period
and the Fourth Period;"
(iii) "ST. QUINTIN GROUP" shall mean St. Quintin
Holdings Limited and its subsidiaries from time to
time;"
(iv) "ST. QUINTIN AGREEMENT" shall mean the agreement
between Insignia Financial Group Inc., and the
Vendors as defined therein, whereby Insignia agrees
to buy and the Vendors agree to sell the entire
issued share capital of St. Quintin Holdings
Limited.
(d) the definition of "Principal amount of Deferred Loan Notes to be
issued" be deleted and replaced by the following definition:-
"PRINCIPAL AMOUNT OF DEFERRED LOAN NOTES TO BE ISSUED"
shall mean, for each Relevant Period, the amount, if any,
equal to 3 times the amount by which REGL Modified Pre-tax
Profit exceeds the Base Amount.
(e) the definition of "MAXIMUM AMOUNT" be amended by deleting the
words from the beginning of the second line of the definition to
the end of section C on page 33 of the Offer Document and
substituting therefor the words "below shall not exceed
(pounds sterling)7,500,000."; and
(f) the definitions of "RICHARD ELLIS AUDITED FINANCIALS" and
"PENSION FUND INDEMNITY" shall be deleted.
3.3 In consideration of the amendments made hereby, the parties hereby agree
that Insignia shall pay to each Covenantor his appropriate proportion
(as defined in the Deed of Warranty and Indemnity) of the sum of
(pounds sterling)2,000,000, such payment to be made in cleared funds on
6 April 1999 to such account as the relevant Covenantor shall have
specified in writing or if no such bank account is specified, by cheque
to the relevant Covenantor sent to his address shown in the register of
such Covenantors maintained by Insignia.
3.4 In consideration of the amendments made hereby, Insignia hereby agrees
to pay to the Covenantors an amount (the "ACQUISITION FEE") equal to 5
per cent. of the aggregate of all consideration paid or earned (as the
case may be) from time to time to any vendor(s) of any European (for
these purposes, excluding the United Kingdom) companies, partnerships,
businesses or operations of any other description acquired prior to 31
December 2002 by Insignia or any of its subsidiary undertakings from
time to time, provided that:-
(a) the acquisition of Insignia RE GmbH and Colliers Macaulay
Nicholls, Inc. ("CMN") (but not any interest in any subsidiary of
CMN held by any person
<PAGE>
other than CMN or a subsidiary of CMN) shall be disregarded for
the purposes of determining the Acquisition Fee; and
(b) the Acquisition Fee for all such acquisitions shall not exceed
(pound)1,000,000 in the aggregate.
3.5 For the purposes of clause 3.4:-
(a) "consideration paid or earned" shall include, without
limitation:-
(i) consideration in money or money's worth;
(ii) any consideration which is to be held subject to any
escrow arrangements (without discounting its value by
reason of being held subject to such escrow arrangements);
(iii) any signing-on fees paid to, or earned by, any vendor(s);
and
(iii) any stock options which will be deemed to have the same
value as attributed to such options in the transaction
from which they arise; and
(b) "vendor(s)" shall include any individual or corporate entity who/
which is entitled to receive any consideration (excluding salary,
on-going consultancy fees or other normal benefits in accordance
with any contract of employment or contract for services) as a
consequence of becoming an employee or consultant of Insignia or
any of its subsidiary undertakings from time to time,
notwithstanding that such person or corporate entity may not
dispose of any business in connection with receiving such
consideration.
3.6 Insignia shall pay to each Covenantor his appropriate proportion of any
Acquisition Fee within 10 business days of the consideration to which
such Acquisition Fee relates having been agreed or determined. Any
payment of an Acquisition Fee shall be made in the manner provided in
clause 3.3.
3.7 Notwithstanding anything to the contrary in the Deed of Warranty and
Indemnity or the Offer Document, the payments to the Covenantors
referred to in clauses 3.3, 3.4 and 3.6 shall be paid free from all
claims, liens, charges, mortgages, pledges, encumbrances and shall not
be subject to any equity set-off or cross-claim on the part of the
Company against any Covenantor, including, without limitation, the
escrow arrangements set out in clause 5 of Schedule 2 of the Deed of
Warranty and Indemnity.
3.8 Notwithstanding anything to the contrary in the Deed of Warranty and
Indemnity or the Offer Document, the Principal amount of Deferred Loan
Notes issued in any Relevant Period shall be issued to the Covenantors
free from all claims, liens, charges, mortgages, pledges, encumbrances
and shall not be subject to any equity set-off or cross-claim on the
part of the Company against any Covenantor and shall not be subject to
the Escrow Arrangements, unless and save only to the extent that if, at
the
<PAGE>
date when the Deferred Loan Notes are issued, each Covenantor's
appropriate proportion of the value of any relevant claim outstanding
under the Deed of Warranty and Indemnity exceeds the amount of such
Covenantor's Retained Escrow Security. In such event, Insignia shall
deliver to the Escrow Agent Deferred Loan Notes equal to the value of
such shortfall of each Covenantor's Escrow Security and will deliver a
copy of such certificate to each Covenantor.
4 GOVERNING LAW
4.1 This Deed (and any dispute, controversy, proceedings or claim of
whatever nature arising out of or in any way relating to this agreement
or its formation) shall be governed by and construed in accordance with
English law.
4.2 The parties irrevocably submit to the non-exclusive jurisdiction of the
High Court of Justice in London for the purpose of hearing and
determining any dispute arising out of or in connection with this Deed
and for the purpose of enforcement of any judgement against their
respective assets.
EXECUTED and DELIVERED as a DEED by the parties on the date stated at the
beginning of the DEED.
EXECUTED and DELIVERED ) By: /s/ Steven B. Siegel
as a deed by INSIGNIA FINANCIAL ) ------------------------------
GROUP, INC. acting by:- ) Steven B. Siegel
President
By: /s/ Adam B. Gilbert
------------------------------
Adam B. Gilbert
Executive Vice President
Director
Director/Authorised Signatory
EXECUTED and DELIVERED ) By: /s/ Alan Charles Froggatt
as a DEED by ALAN CHARLES ) ------------------------------
FROGGATT as agent and attorney ) Alan Charles Froggatt
for the Covenantors, in the Chief Executive Officer
presence of:- )
<PAGE>
DATED 5 March 1999
------------------
(1) INSIGNIA FINANCIAL GROUP, INC.
(2) ALAN CHARLES FROGGATT
DEED OF VARIATION
GPE(824.cln)/758725
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this "Agreement") is
entered into as of December 23, 1998, by and between INSIGNIA FINANCIAL GROUP,
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, the Company and the Executive are parties to that certain
Employment Agreement dated as of September 18, 1998 (the "Original Agreement");
and
WHEREAS, the Company and the Executive each desires to make certain
amendments to the Original Agreement in order to clarify certain of the
provisions thereof;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive hereby agree that the Original
Agreement is hereby amended and restated to read in its entirety 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 September
18, 1998 (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
<PAGE>
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
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<PAGE>
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) 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 .
(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, and all promote,
participation and other similar contractual interests not subject to the Company
Stock Plan then held by the Executive will fully, immediately and automatically
vest (i.e., no longer be subject to forfeiture for any reason), notwithstanding
any provisions to the contrary in the applicable governing agreements or other
instruments pursuant to which such interests were granted to the Executive (it
being the intent of the parties that any such contrary provisions are overridden
and superceded hereby).
(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
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<PAGE>
they existed immediately before such Extraordinary Event, 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 of the Executive
hereunder as to salary, bonus, reimbursements, payments and health and other
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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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
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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, and all promote, participation and
other similar contractual interests not subject to the Company Stock Plan then
held by the Executive will fully, immediately and automatically vest (i.e., no
longer be subject to forfeiture for any reason), notwithstanding any provisions
to the contrary in the applicable governing agreements or other instruments
pursuant to which such interests were granted to the Executive (it being the
intent of the parties that any such contrary provisions are overridden and
superceded hereby). 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 to 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, and all promote, participation and
other similar contractual interests not subject to the Company Stock Plan then
held by the Executive will fully, immediately and automatically vest (i.e., no
longer be subject to forfeiture for any reason), notwithstanding any provisions
to the contrary in the applicable governing agreements or other instruments
pursuant to which such interests were granted to the Executive (it being the
intent of the parties that any such contrary provisions are overridden and
superceded hereby). 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
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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, and all promote, participation and other
similar contractual interests not subject to the Company Stock Plan then held by
the Executive will fully, immediately and automatically vest (i.e., no longer be
subject to forfeiture for any reason), notwithstanding any provisions to the
contrary in the applicable governing agreements or other instruments pursuant to
which such interests were granted to the Executive (it being the intent of the
parties that any such contrary provisions are overridden and superceded hereby).
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 to 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
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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.
-10-
<PAGE>
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
-11-
<PAGE>
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.
-12-
<PAGE>
IN WITNESS WHEREOF, each party hereto, intending to be legally bound,
has duly executed this Agreement as of the date first written above.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
-----------------------------
Frank M. Garrison
Office of the Chairman
EXECUTIVE
/s/ Adam B. Gilbert
----------------------------------
Adam B. Gilbert
Executive Vice President
-13-
<PAGE>
DATED FEBRUARY 24 1998
-----------------------------------------------------
INSIGNIA FINANCIAL GROUP INC
- and -
ANDREW JOHN MACK HUNTLEY
==============================
SUPPLEMENTAL SERVICE AGREEMENT
==============================
DPHB(402)/715973
<PAGE>
1
DPHB(402)715973/03.02.98
THIS AGREEMENT is made on FEBRUARY 24, 1998
BETWEEN:
(1) INSIGNIA FINANCIAL GROUP INC. whose principal place of business is at
One Insignia Financial Plaza, Greenville, South Carolina 29602
("INSIGNIA").
(2) ANDREW JOHN MACK HUNTLEY of Ashhurst, Fenhurst, Haslemere, Surrey GU27
3JB (the "EXECUTIVE"); and
THE PARTIES AGREE AS FOLLOWS:
1. In this agreement terms defined in the Service Agreement (to which this
Agreement is supplemental) ("THE REGL AGREEMENT") between Richard Ellis
Group Limited ("REGL") (1) and the Executive (2) shall bear the same
meaning herein save that "Group of Companies" means Insignia and all
subsidiary and associated companies of Insignia.
2. TERM AND APPOINTMENT
2.1 The Company shall engage the Executive and the Executive shall serve the
Insignia as hereinafter provided (the "Appointment"). The Appointment
shall commence on the Commencement Date and shall continue for so long
as the Executive is employed by REGL under the REGL Agreement.
2.2 For the purposes of clause 2.5 of the REGL Agreement, the Executive's
remuneration under clause 4.1 hereof, shall be added to any remuneration
payable under clause 6.1 of the REGL Agreement for the purposes of
calculating the Variation Payment as defined in the REGL Agreement.
3. DUTIES
3.1 During the Appointment the Executive shall devote such of his time and
attention to the duties assigned to him as is reasonably necessary to
perform the same and as are consonant with his duties under the REGL
Agreement and when carrying out those duties shall well and faithfully
serve the Company and use his reasonable endeavours to promote the
interests of the Company and shall obey all reasonable and lawful
directions given to him by or under the authority of the Board provided
that:
(a) the Executive shall when undertaking duties for Insignia only
take instructions from the board of directors of Insignia; and
<PAGE>
2
(b) Insignia shall use reasonable endeavours to nominate the
Executive to be appointed to the board of directors of Insignia
at the first annual meeting following the Commencement Date.
3.2 Subject to the provisions of clause 3.1 the Executive may be required in
pursuance of his duties hereunder:
(a) to perform services not only for the Company but also for any of
the Group Companies and without further remuneration (except as
otherwise agreed and except pursuant to the REGL Agreement) to
accept such offices in any of the Group Companies as the Company
may from time to time reasonably require provided that the
Executive shall not be required to account to the Company and
shall be entitled to retain as additional remuneration/expenses
any salary, bonuses, reimbursed expenses and any other
remuneration of any kind paid to him by REGL;
(b) to travel to such places whether in or outside the United Kingdom
by such means and on such occasions as the Board and/or the Board
of the holding company may from time to time reasonably require;
(c) to make reports to the Board of Insignia on any matters
concerning the affairs of Insignia or REGL or any other Group
Company as it or they may reasonably require.
3.3 If there should be any conflict between Insignia's instructions to the
Executive hereunder and REGL's instructions to the Executive with the
REGL Agreement or the Executive's fiduciary duties as a director of
REGL, Insignia will resolve with same so that the Executive is not
placed in a position where he cannot comply both with the requirements
of this Agreement and the REGL Agreement.
4. REMUNERATION
4.1 During the Appointment, as remuneration for his services hereunder, the
Executive shall be paid a fixed salary at the rate of 50,000 per annum
or such higher rate as may from time to time be agreed. Such salary
shall be inclusive of any fees or remuneration which he would otherwise
be entitled to receive from the Company or any associated Company (save
in respect of the REGL Agreement) and shall be payable by bank credit
transfer in equal monthly instalments in arrears on or before the last
working day of each calendar month.
4.2 In addition to the said salary and at the absolute discretion of the
board and directors of Insignia the Executive shall be entitled to
participate in any bonus or incentive scheme in Insignia appropriate to
his status
<PAGE>
3
5. EXPENSES
The Executive shall be entitled to be repaid all reasonable travelling,
hotel, entertainment and other expenses properly authorised by the Board
and incurred in or about the performance of the duties hereunder, which
expenses shall be evidenced in such manner as the Company may specify
from time to time and additional allowance shall be made for expenses
for intercontinental travel including to the United States.
6. GENERAL
6.1 The provisions of clauses 5 and 7 to 21 (inclusive) of the REGL
Agreement shall mutatis mutandis apply hereto and references therein to
"the Company" shall for the purposes of this Agreement be read and
construed as references to Insignia.
6.2 Save with Insignia's agreement this Agreement shall be co-terminus with
the REGL Agreement and notice given to terminate either shall be
effective to terminate both.
IN WITNESS whereof this agreement has been executed as a deed on the date first
before written
Signed by [Andrew Farkas] )
duly authorised for and on behalf of )
INSIGNIA FINANCIAL GROUP INC. ) /s/ Andrew L. Farkas
in the presence of: ) ________________________________
Chairman & CEO
Signed as a Deed by the said )
ANDREW JOHN MACK )
HUNTLEY in the presence of: ) /s/Andrew J. M. Huntley
_________________________________
<PAGE>
DATED FEBRUARY 4, 1998
----------------------------------------------------------
RICHARD ELLIS GROUP LIMITED
- and -
ANDREW JOHN MACK HUNTLEY
===========================
EXECUTIVE SERVICE AGREEMENT
===========================
DPHB(401)/715973
<PAGE>
DPHB(401)715973/03.02.98
THIS AGREEMENT is made on FEBRUARY 4, 1998
BETWEEN:
(1) RICHARD ELLIS GROUP LIMITED (No. 3350437) whose registered office is at
Berkeley Square House, London W1X 6AN (the "COMPANY");
(2) ANDREW JOHN MACK HUNTLEY of Ashhurst, Fenhurst, Haslemere, Surrey GU27
3JB (the "EXECUTIVE"); and
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
In this agreement unless the context otherwise requires:
1.1 "ASSOCIATED COMPANY" means a company which falls to be so treated as
such for the purposes of Statement of Standard Accounting Practice No. 1
of the Institute of Chartered Accountants in England and Wales;
1.2 "BOARD" means the board of directors of the Company;
1.3 "COMMENCEMENT DATE" means the date upon which the offer of Insignia
Financial Group Inc to purchase the whole of the issued share capital of
Richard Ellis Group Limited becomes unconditional;
1.4 "GROUP COMPANIES" means the Company, its holding company and all
subsidiary and associated companies of holding company;
1.5 "RE GROUP BONUS SCHEME" means
(a) The RE Group Bonus Scheme (as amended from time to time in
accordance with the rules thereof); and/or
(b) Any other bonus scheme or arrangement in which executives of the
Group employed at the grades "REL Director", "Divisional
Director" and "Associate" (and no other employees of the Group)
are eligible to participate;
1.6 "RE SUPER PROFIT BONUS SCHEME" means the RE Super Profit Bonus Scheme
(as amended from time to time in accordance with the rules thereof);
1.7 "SUBSIDIARY" and "HOLDING COMPANY" have the meanings given them in
section 736 of the Companies Act 1985.
<PAGE>
2
2. TERM AND APPOINTMENT
2.1 The Company shall engage the Executive and the Executive shall serve the
Company as hereinafter provided (the "Appointment"). The Appointment
shall commence on the Commencement Date and shall continue subject as
hereinafter mentioned until 30 April 2004.
2.2 Notwithstanding the provisions of clause 2.1 above either party may on
giving prior written notice reduce the term of the Appointment with
effect from 31 December 2000 or 31 December in any subsequent year ("the
Variation Date"").
2.3 As from the Variation Date upon which either party exercises its right
under clause 2.2 above the Appointment shall continue for a period of
one year thereafter ("the Fixed Term")
2.4 The Executive shall be entitled to receive a payment ("the Variation
Payment") on 2 January of the calendar year immediately following the
Variation Date upon which either party has given notice to exercise its
right under clause 2.2 above calculated in accordance with clause 2.5
below.
2.5 The Variation Payment shall be an amount equal to the sum of all
payments to which the Executive would be entitled under clause 6.1 of
this agreement from the day following the Variation Date to 30 April
2004 (on the assumption that this agreement continued until that date)
discounted, in the case of each monthly payment to which he would be
entitled under clause 6.1 at a rate of 12% per annum from the date it
would have been received back to the date on which the Termination
Payment is made in accordance with clause 2.4.
2.6 In the event that the Executive dies during the term of the Appointment
and has not received the Variation Payment in accordance with clauses
2.5 and 2.6 above, the Company shall pay an amount equal to the
Variation Payment payable on the Variation Date immediately preceding
the date of the Executive's death to the Executive's surviving spouse,
or if none, to the duly appointed representatives of the Executive's
estate.
2.7 Notwithstanding the provisions of clauses 2.1 and 2.2 above, and for the
purposes only of subsisting options granted prior to the Company
Acquisition (the "Option") under the Share Scheme, if the Appointment
comes to an end before the fifth anniversary of the Company Acquisition,
save where terminated under clause 11, then:
(a) the Executive shall not be treated as having ceased employment,
as that term is used in Rule 7 of the Share Scheme, until the
fifth anniversary of the Company Acquisition (the "Deemed
Cessation Date") and on the Deemed Cessation Date the Executive
shall be treated as ceasing employment in accordance with Rule
7.5 of the Share Scheme;
<PAGE>
3
(b) in the event of the Executive being unable to exercise the Option
under clause 2.7(a) above as a result of either (i) his being
treated as ceasing employment for the purposes of the Share
Scheme on the Appointment coming to an end or (ii) the
Remuneration Committee not exercising its discretion in favour of
the Executive to allow him to exercise the Option in full (to the
extent not previously exercised) under Rule 7.5 of the Share
Scheme, the Company shall within seven days of the termination of
the Appointment , pay to the Executive (in full and final
satisfaction of all and any claims which the Executive may have
in respect of the Option) less any tax or other deduction the
Company may be obliged or required to make by law in Pounds
Sterling an amount representing the Common Shares he then holds
under the Option, on the assumption that the Option was exercised
in whole on the date of cessation of employment, and in
consideration of the Company making such payment the Executive
agrees that the Option shall immediately lapse and all and any
rights the Executive has or may have to any Common Shares under
the Option are immediately released. The amount due to the
Executive under this clause 2.7(b) shall be equal to:
(A - C) x B
where:
A is the average middle market quotation for Common Shares
(for the three dealing days prior to the date on which the
Executive's employment with the Company is terminated) on
any recognised investment exchange on which the Common
Shares are for the time being traded (and, if more than
one, on the recognised investment exchange in the United
States of America on which such Common Shares are for the
time being traded);
B is the total number of Common Shares over which the
Executive holds the Option; and
C is the price per Common Share under the option payable by
the Executive on the exercise of the Option.
For the purposes of this clause 2.7:
(c) "Common Shares" means common shares of US$0.01 each in Insignia
Financial Group, Inc.; and
"Company Acquisition" means a Company Acquisition as defined in
the Share Scheme; and
"Remuneration Committee" means the Remuneration Committee as
defined in the Share Scheme; and
<PAGE>
4
"Share Scheme" means the Richard Ellis Group Limited 1997
Unapproved Share Option Scheme as adopted on 17 December 1997 and
from time to time amended;
(d) for the purposes of determining the amount payable in Pounds
Sterling to the Executive under this clause 2.5 the US$ price of
a Common Share shall be converted into Pounds Sterling at the
spot rate for the purchase of Pounds Sterling (as certified by
Barclays Bank plc) at or about 11.00 am on the date of cessation
of employment.
3. DUTIES
3.1 During the Appointment the Executive shall devote such of his time and
attention to the duties assigned to him as is reasonably necessary to
perform the same and when carrying out those duties shall well and
faithfully serve the Company and use his reasonable endeavours to
promote the interests of the Company and shall obey all reasonable and
lawful directions given to him by or under the authority of the Board
provided that:
(a) the Executive shall be appointed and remain throughout the term
chairman of the Company;
(b) the Executive shall accept such secondments to the Company's
holding company as are agreed from time to time and shall when
undertaking duties for the said holding company only take
instructions from the board of directors of such holding company
and not the Board;
(c) when acting under the directions of the Board the Executive shall
only be required to follow directions emanating from those
members of the Board nominated to the Board by the holding
company of the Company;
(e) the Executive shall be entitled to remain a director of Richard
Ellis Limited until the expiry of the Fixed Term.
3.2 Subject to the provisions of clause 3.1 the Executive may be required in
pursuance of his duties hereunder:
(a) to perform services not only for the Company but also for any of
the Group Companies and without further remuneration (except as
otherwise agreed) to accept such offices in any of the Group
Companies as the Company may from time to time reasonably require
provided that the Executive shall not be required to account to
the Company and shall be entitled to retain as additional
remuneration/expenses any salary, bonuses, reimbursed expenses
and any other remuneration of any kind paid by the holding
company of the Company;
<PAGE>
5
(b) to work at the Company's principal place of business in London or
such other location as is the Executive's principal place of work
at the date of this agreement;
(c) to travel to such places whether in or outside the United Kingdom
by such means and on such occasions as the Board and/or the Board
of the holding company may from time to time reasonably require;
(d) to make reports to the Board and/or the Board of its holding
company on any matters concerning the affairs of the Company or
any other Group Company as it or they may reasonably require.
4. HOLIDAY ENTITLEMENT
During the Appointment the Executive shall be entitled to 30 working
days holiday (in addition to public holidays) in each calendar year
January to December at full salary to be taken at such time or times as
may be approved by the Board. Holidays not taken cannot be carried over
to a subsequent year. Upon the determination of the Appointment either
the Executive shall be entitled to receive payment in lieu of accrued
holidays not taken at that date (provided that such determination is not
pursuant to clause 12) or the Company shall be entitled to make a
deduction from the Executive's remuneration in respect of holidays taken
in excess of the accrued entitlement. The accrued holiday entitlement at
the date of determination shall be calculated on the basis of 2? days
holiday for each completed calendar month of service in the then current
calendar year and the amount of the payment in lieu or deduction shall
be calculated on the basis of 1/260 of the Executive's annual salary for
each day's holiday not taken or taken in excess of the accrued
entitlement.
5. DISCLOSURE OF INTERESTS
5.1 Except as a representative of the Company or with the previous written
approval of the Board which shall be deemed to be given in respect of
the financial interest, office or employments which the Executive holds
at the date hereof, brief details of which are attached at schedule 2 to
this agreement, the Executive shall not during the Appointment whether
directly or indirectly paid or unpaid be engaged or concerned in the
conduct of any other actual or prospective business or profession or be
or become an employee, agent, partner, consultant or director of any
other company or firm or assist or have any financial interest in any
other such business or profession.
5.2 The Executive shall be permitted to hold shares or securities of a
company any of whose shares or securities are quoted or dealt in on any
recognised investment exchange provided that any such holding shall not
exceed three per cent. of the issued share capital of the company
concerned and is held by way of bona fide investment only (an
"Investment").
<PAGE>
6
5.3 The Executive shall disclose to the Board any matters relating to his
spouse (or anyone living as such), their children, step-children,
parents or any trust or firm whose affairs or actions he controls which,
if they applied to the Executive, would contravene clause 5.1 to the
extent that the Executive has actual knowledge of such matters.
6. REMUNERATION
6.1 During the Appointment, as remuneration for his services hereunder, the
Executive shall be paid a fixed salary at the rate of $100,000 per
annum or such higher rate as may from time to time be agreed. Such
salary shall be inclusive of any fees or remuneration which he would
otherwise be entitled to receive from the Company or any associated
Company (save as otherwise provided in clause 3.2(a)) and shall be
payable by bank credit transfer in equal monthly instalments in arrears
on or before the last working day of each calendar month.
6.2 In addition to the said salary the Executive shall be entitled to
participate in:
(a) any RE Group Bonus Scheme (in accordance with the rules thereof
for the time being) and may also receive bonuses under the RE
Super Profit Bonus Scheme (in accordance with the rules thereof
for the time being) in each case subject to the compensation
committee of the holding company approving in advance the amount
of bonus to be paid to the Executive under the above Schemes; and
(b) any discretionary or other bonus scheme from time to time in
force in the Company's holding company applicable to persons of
his status
save that in respect of each calendar year between the Commencement Date
and the Variation Date (as defined in clause 2.4) the Executive shall be
entitled to receive a bonus of not less than $20,000 ("the Minimum
Bonus").
The Executive acknowledges and accepts the amendment of the rules of the
RE Group Bonus Scheme and the RE Super Profit Bonus Scheme so that the
aggregate amount of the Profit Allocation as defined in and under the RE
Group Bonus Scheme and the Super Profit Allocation as defined in and
under the RE Super Profit Bonus Scheme shall not exceed 40% Gross
Profits as defined in the above Schemes for the calender year 1998 and
the amendment of the definition of Gross Profits. The Executive
acknowledges that subject to the Minimum Bonus provisions his bonus
entitlement for the calendar year commencing 1st January 1999 and each
subsequent year shall be subject to the absolute discretion of the Board
which may amend, discontinue or vary any such Schemes. The Executive
shall have no entitlement to receive bonuses except as provided in this
clause 6.2.
6.3 No provision of benefits on retirement (including annuities) will be
made by the Company for the Executive. There is therefore no
contracting-out certificate in force under the Pension Schemes Act 1993
in respect of this Employment.
<PAGE>
7
6.4 The Executive shall be entitled to participate in such permanent health
insurance, life assurance and medical expenses insurance schemes as the
Company shall from time to time maintain for the benefit of executives
of the seniority of the Executive subject to their terms and conditions
from time to time in force provided that the benefits to be so provided
shall not be less than the benefits provided on the date of this
agreement.
6.5 The Company shall pay to the Executive in each year a car allowance such
as the Board shall fairly and reasonably determine provided that such
car allowance shall not in any event be less than the greater of
$15,500 and the amount provided for other executive directors of the
Company.
6.6 The Company shall also provide the Executive with a motor car of a make
and model of his choice and commensurate, in the reasonable opinion of
the Board, with his position as chairman of the Company, for his
business and personal use (but available for use from time to time by
others with the chairman's permission) and shall also provide a driver
and a secretary to assist the Executive in his duties as chairman of the
Company at a cost which shall be no less than the amount budgeted for
the current financial year of the Company as attached at Schedule 3.
6.7 The Company shall bear the cost of insuring, testing, taxing, repairing
and maintaining such motor car and shall reimburse the Executive for the
cost of fuel consumed during business and private use of such motor car.
7. EXPENSES
The Executive shall be entitled to be repaid all reasonable travelling,
hotel, entertainment and other expenses properly authorised by the Board
and incurred in or about the performance of the duties hereunder, which
expenses shall be evidenced in such manner as the Company may specify
from time to time provided that the maximum amount available for the
Executive for such expenses shall not be less than the amount budgeted
for in the current financial year of the Company in respect thereof to
the extent referred to in Schedule 3 and otherwise as historically
budgeted for by the Company in relation to such expenses and additional
allowance shall be made for expenses for intercontinental travel
including to the United States.
<PAGE>
8
8. CONFIDENTIAL INFORMATION
8.1 The Executive shall not use or divulge or communicate to any person
other than with proper authority any of the trade secrets or other
confidential information of or relating to the Company or any of the
Group Companies (including but not limited to details of customers,
potential customers, consultants, suppliers, potential suppliers,
designs, product details, future product details, prices, discounting
arrangements, specific product applications, existing trade
arrangements, terms of business and those in the course of negotiation,
operating systems, pricing and fee structures, financial information,
inventions, research and development activities and which he may have
created, developed, received or obtained while in the service of the
Company or any of the Group Companies. This restriction shall cease to
apply with respect to any information, confidential report or research
which comes into the public domain other than as a result of the
Executive being in breach of his obligations under this clause.
8.2 The Executive shall not during the Appointment make otherwise than for
the benefit of the Company any records (whether recorded on paper,
computer memory or discs or otherwise) relating to any matter within the
scope of the business of the Company or any of the Group Companies or
concerning any of its or their dealings or affairs nor during the
Appointment or thereafter use or permit to be used any such records
otherwise than for the benefit of the Company it being agreed by the
parties that all such records (and copies thereof) in the possession or
control of the Executive shall be the property of the Company and shall
be handed over by the Executive to the Company from time to time and on
demand and in any event upon the termination of the Appointment.
8.3 The Executive shall not during the Appointment speak in public or write
any article for publication on any matter connected with or relating to
the business of the Company or any of the Group Companies without first
obtaining the approval of the Board.
9. INVENTIONS AND CREATIVE WORKS
9.1 The Executive acknowledges that because of the nature of his duties and
the particular responsibilities arising as a result of such duties which
he owes to the Company and the Group Companies he has a special
obligation to further the interests of the Company and the Group
Companies. In particular the duties of the Executive shall include
reviewing the products and services of the Company and Group Companies
with a view to improving them by new and/or original ideas and
inventions and implementing such improvements.
9.2 The Executive shall promptly disclose to the Company any idea, invention
or work which is relevant to or capable of use in the business of the
Company or any of the Group Companies made by the Executive in the
course of his employment whether or not in the course of his duties. The
Executive acknowledges that the intellectual property rights subsisting
or which may in the future subsist in any such ideas, inventions or
works created by him in the course of his employment will, on creation,
vest in and be the exclusive property of the Company and where the same
does not automatically vest as aforesaid, the Executive shall assign the
same to the Company (upon the request and at the cost of the Company).
The Executive hereby irrevocably waives any rights which he
<PAGE>
9
may have in any such ideas, inventions or works which are or have been
conferred upon him by chapter IV of part I of the Copyright, Designs and
Patents Act 1988 headed "Moral Rights".
9.3 The Executive hereby irrevocably appoints the Company to be his attorney
in his name and on his behalf to execute and do any such instrument or
thing and generally to use his name for the purpose of giving to the
Company or its nominee the full benefit of the provisions of this clause
10 and acknowledges in favour of any third party that a certificate in
writing signed by any Director or Secretary of the Company that any
instrument or act falls within the authority hereby conferred shall be
conclusive evidence that such is the case.
10. RESTRICTIONS AFTER TERMINATION
10.1 The Executive acknowledges that he is to receive valuable consideration
in connection with the sale of the issued share capital of the Company
to Insignia Financial Group Inc, a substantial consideration being paid
to the Executive and other former shareholders of the Company in
connection with the goodwill of the Company. The Executive acknowledges
and agrees that the covenants set out below are reasonably necessary for
the proper protection of the legitimate business interests of the
Company. The Executive covenants to the Company (for itself and as
trustee for each of the Group Companies) that he shall not for the
following periods after the termination of the Appointment howsoever
arising (but excluding repudiatory breach of this agreement by the
Company) directly or indirectly, either alone or jointly with or on
behalf of any person, firm, company or entity and whether or his own
account or as principal partner, shareholder, director, employee,
consultant or in any other capacity whatsoever:
(a) for 12 months following termination in the Relevant Territory and
in competition with the Company or any of the Relevant Group
Companies engage, assist or be interested in any undertaking
which provides services similar to those provided by the Company
or any of the Relevant Group Companies in the 12 months prior to
termination and with which the Executive was concerned in the
said period of 12 months;
(b) for 12 months following termination in the Relevant Territory
solicit or interfere with or endeavour to entice aware from the
Company or any of the Relevant Group Companies any person, firm,
company or entity who was a client of the Company or any of the
Relevant Group Companies in the 12 months prior to termination
and with whom the Executive was concerned or had personal contact
in the said period of 12 months;
(c) for 12 months following termination in the Relevant Territory be
concerned with the supply of services to any person, firm,
company or entity which was a client of the Company or any of the
Relevant Group Companies in the 12 months prior to termination
where such services are identical or similar to or in competition
with those services supplied by the Company or any of the
Relevant Group
<PAGE>
10
Companies in the said 12 month period, with which supply the
Executive was concerned in the said period of 12 months;
(d) for 12 months following termination offer to employ or engage
or solicit the employment or engagement of any person who
immediately prior to the date of termination was a senior
employee or consultant of the Company or any of the Relevant
Group Companies and with whom the Executive had significant
working contact in the 12 months prior to termination (whether or
not such person would commit any breach of their contract of
employment or engagement by reason of leaving the service of such
company); and
(e) represent himself as being in any way connected with or
interested in the business of the Company or any of the Relevant
Group Companies.
10.2 Each of the obligations contained in this clause constitutes an entire
separate and independent restriction on the Executive, despite the fact
that they may be contained in the same phrase and if any part is found
to be unenforceable the remainder will remain valid and enforceable.
10.3 While the restrictions are considered by the parties to be fair and
reasonable in the circumstances, it is agreed that if any such
restrictions should be judged to be void or ineffective for any reason
but would be treated a valid and effective if part of the wording
thereof were deleted or the periods thereof reduced or the area thereof
reduced in scope, the said restrictions shall apply with such
modifications as will be necessary to make them valid and effective.
10.4 The Executive agrees that he will at the request and cost of the Company
enter into a direct agreement with any of the Group Companies under
which he will accept restrictions corresponding to the restrictions
contained in this clause (or such as will be appropriate in the
circumstances) in relation to such Group Company.
10.5 The provisions of this clause will not prevent the Executive from
holding an Investment.
10.6 For the purposes of this clause:
(a) a "Relevant Group Company" means any of the Group Companies for
which the Executive has performed services or in which he has
held office during the 12 months immediately preceding
termination and, if applicable, their predecessors in business
during such 12 month period; and
(b) "Relevant Territory" means the United Kingdom.
<PAGE>
11
11. TERMINATION BY EVENTS OF DEFAULT
The Appointment shall be subject to summary termination at any time by
the Company by notice in writing if the Executive shall have committed
any serious breach or (after warning in writing) any repeated or
continued material breach of the obligations hereunder or shall have
been guilty of any act of dishonesty or serious misconduct or shall be
declared bankrupt or shall compound with his creditors. Any delay by the
Company in exercising such right to termination shall not constitute a
waiver thereof.
12. INCAPACITY
12.1 The Company shall continue to pay the Executive's salary and other
contractual entitlements to remuneration during any period of absence on
medical grounds up to a maximum of 24 consecutive months provided that
the Executive shall from time to time if required supply the Company
with medical certificates covering any period of sickness or incapacity
exceeding 7 days (including weekends).
12.2 Payment of the salary and other remuneration pursuant to clause 12.1
shall be inclusive of any Statutory Sick Pay to which the Executive may
be entitled.
12.3 If the Executive's absence shall be occasioned by the actionable
negligence of a third party in respect of which damages are recoverable,
then all remuneration paid hereunder shall constitute loans to the
Executive who shall:
(a) forthwith notify the Company of all the relevant circumstances
and of any claim, compromise, settlement or judgement made or
awarded in connection therewith;
(b) if the Company so requires refund to the Company such sum as the
Company may determine not exceeding the lesser of:
(i) the amount of damages recovered by him under such
compromise, settlement or judgement in respect of his loss
of earnings as an Executive hereunder; and
(ii) the sums advanced to him in respect of the period of
incapacity.
In either case after deducting the amount of all professional costs
incurred by the Executive in connection with the action or negligence of
such third party.
13. OBLIGATIONS UNDER TERMINATION
Upon the termination of the Appointment howsoever arising the Executive
shall:
13.1 at any time and from time to time thereafter upon the request of the
Company, resign without claim for compensation from:
<PAGE>
12
(a) all offices held in the Company or any of the Group Companies;
and
(b) any office in any other company acquired by reason of or in
connection with the Appointment;
13.2 deliver to the Board all documents (including, but not limited to,
correspondence, lists of clients or customers, notes, memoranda, plans,
drawings and other documents of whatsoever nature and all copies
thereof) made or complied or acquired by the Executive during the
Appointment and concerning the business finances or affairs of the
Company or any of the Group Companies or clients.
14. RECONSTRUCTION AND AMALGAMATION
If at any time the Executive's employment is terminated in connection
with any reconstruction or amalgamation of the Company or any of the
Group Companies whether by winding up or otherwise and the Executive
receives an offer on terms which (considered in their entirety) are not
less favourable to any material extent than the terms of this agreement
from a company involved in or resulting from such reconstruction or
amalgamation the Executive shall have no claim whatsoever against the
Company or any such company arising out of or connected with such
termination.
15. NOTICES
Any notice to be given hereunder shall be in writing. Notices may be
given by either party by personal delivery or post or by fax addressed
to the other party at (in the case of the Company) its registered office
for the time being and (in the case of the Executive) his last known
address and any such notice given by letter of fax shall be deemed to
have been served at the time at which the letter was delivered
personally or transmitted or if sent by post would be delivered in the
ordinary course of post.
16. PREVIOUS CONTRACTS
16.1 This agreement contains the entire agreement relating to the Executive's
employment with the Company and is in substitution for and replaces any
previous contract of service between the Company or any of the Group
Companies and the Executive which shall be deemed to have been
terminated by mutual consent as from the commencement of the Appointment
and the Executive hereby waives with effect from the Commencement Date
any and all claims which he may have arising out of or in connection
with any such previous contract of service excluding (i) any claim which
the Executive may have under the RE Group Bonus Scheme or the RE Super
Profit Bonus Scheme in respect of his accrued rights for the period 2
May 1997 to 31 December 1997 and (ii) any claim for expenses reasonably
incurred by him in the performance of his duties under his previous
contract of service.
16.2 The Executive hereby warrants and represents to the Company that he will
not, in entering into this agreement or carrying out his duties
hereunder, be in breach of any
<PAGE>
13
terms of employment whether express or implied or any other obligation
binding upon him.
17. PROPER LAW
This agreement shall be governed and construed in all respects in
accordance with English law.
18. CONSTRUCTION
18.1 The headings in this agreement are inserted for convenience only and
shall not affect its construction.
18.2 Any reference to a statutory provision shall be construed as a reference
to any statutory modification or re-enactment thereof (whether before or
after the date hereof) for the time being in force.
19. STATUTORY INFORMATION AND SCHEDULE 1
Schedule 1 hereto (in addition to this agreement) constitutes a written
statement as at the date hereof of the terms of employment of the
Executive in compliance with the provisions of the Employment Rights Act
1996; it does not form part of the contract of employment and may be
varied by the Company by notice in writing to the Executive of any
changes applicable to his employment.
20. EXCLUSION OF CLAIMS
The Executive hereby agrees to exclude any right to a redundancy payment
pursuant to Part XI of the Employment Rights Act 1996 and to exclude any
claim in respect of the dismissal being unfair pursuant to Part X of the
said Act on the termination of the Appointment in accordance with the
terms hereof.
21. INDEMNITY
The Company agrees to indemnify the Executive against any and all
liabilities he may incur as a result of carrying out his duties
hereunder save in circumstances where the Executive has committed an act
of default under clause 12 above (including by way of example any act of
wilful misconduct or gross negligence).
IN WITNESS whereof this agreement has been executed as a deed on the date first
before written
<PAGE>
14
SCHEDULE 1
1. The Executive has been continuously in the employment of the Company
(including reckonable service with any of the Group Companies) since 1
May 1997.
2. Rate of remuneration and the intervals at which it is paid are contained
in clause 6.
3. There are no specific terms and conditions relating to hours of work
except as provided in clause 3.1.
4. The terms and conditions relating to holidays are contained in clause 4
and those relating to sickness are contained in clause 12.
5. Particulars as to the length of Appointment are contained in clause 2.
6. Particulars as to the work for which the Executive is employed are
contained in clause 3.
7. There are no disciplinary rules applicable to the Executive except as
provided in this agreement and if the Executive is dissatisfied with any
disciplinary decision he should apply orally or in writing to the Board.
8. Any application for the purpose of seeking redress of any grievance
relating to the Executive's employment should be made either orally or
in writing to the managing director of the Company and if still
unresolved after ten days to the Board.
9. A contracting-out certificate is not in force in respect of the
Executive's employment.
10. Details of the Executive's work outside the UK are contained in
clause 3.2.
<PAGE>
15
SCHEDULE 2
(EXECUTIVE'S PERMITTED INTERESTS)
1 DIRECTORS IN:
Ashfern Developments Limited
New Sadlers Wells Limited
Pillarcaisse PLC
BPC Limited
2 SHAREHOLDINGS IN:
REI Limited
Ashfern Developments Limited
<PAGE>
16
SCHEDULE 3
(BUDGETED EXPENDITURE)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
ANDREW CHRIS DAVID
HUNTLEY BOYCE NEWTON TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum Salary 150,000 32,000 20,000 202,000
subject to annual
review upward only
- --------------------------------------------------------------------------------------------
Bonuses To qualify To qualify To qualify
under REGL under REGL under REGL
- --------------------------------------------------------------------------------------------
Pension Included in Within REGL Within REGL
above Group Scheme Group Scheme
11.5% 10%
3,680 2,000 5,680
- --------------------------------------------------------------------------------------------
Overtime 5,000 5,000
- --------------------------------------------------------------------------------------------
NIC - 10% 15,000 3,200 2,000 20,200
- --------------------------------------------------------------------------------------------
Temporary Staff 2,500 2,500
- --------------------------------------------------------------------------------------------
Medical PPP Level A PPP Level C
Married Couple 194 876
682
- --------------------------------------------------------------------------------------------
Permanent Health 300 300
- --------------------------------------------------------------------------------------------
Life Assurance 1,000 1,000
- --------------------------------------------------------------------------------------------
Car Park 4,500 4,500 9,000
- --------------------------------------------------------------------------------------------
Car Allowance - 15,500 15,500
Personal
- --------------------------------------------------------------------------------------------
Car Allowance 15,000 15,000
- Group
- --------------------------------------------------------------------------------------------
Car Running
Costs - Group 5500 5500
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
17
Signed by [ ] )
duly authorised for and on behalf of )
RICHARD ELLIS GROUP )
LIMITED in the presence of: ) /s/Alan C. Froggatt
-----------------------------
Director
Signed as a Deed by the said )
ANDREW JOHN MACK )
HUNTLEY in the presence of: ) /s/Andrew J. M. Huntley
------------------------------
<PAGE>
ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE AGREEMENT
THIS ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE AGREEMENT (this
"Agreement") is made and entered into as of July 1, 1998, by and among Insignia
Financial Group, Inc., a Delaware corporation ("Assignor"), Insignia/ESG
Holdings, Inc., a Delaware corporation ("Assignee") and Andrew Mack Huntley
("Employee").
W I T N E S S E T H :
WHEREAS Assignor and Employee are currently parties to that certain
Supplemental Executive Service Agreement dated as of February 24, 1998, (as
amended, the "Employment Agreement"), a copy of which is attached hereto as
Exhibit A;
WHEREAS, it is contemplated that Assignor will distribute 100% of the
outstanding common stock of Assignee to Assignor's stockholders (the
"Distribution");
WHEREAS, Assignee desires to assure itself of the services of Employee
from and after the Distribution through the period contemplated by the
Employment Agreement, and Employee desires and is willing to serve in the employ
of Assignee for such period; and
WHEREAS, each of Assignor, Assignee and Employee desires to enter into
this Agreement for their mutual benefit and in order to facilitate the
Distribution;
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Assignor hereby irrevocably assigns and delegates to Assignee all of
Assignor's existing and future rights and obligations under the Employment
Agreement, and Assignee hereby irrevocably accepts and assumes all of such
rights and obligations, in each case effective simultaneously with the
consummation of the Distribution and without any further action on the part or
any party hereto (the "Assignment").
2. Subject to the provisions of Section 4 hereof, Employee hereby
irrevocably and unconditionally consents to the Assignment and, on behalf of
himself and his heirs, executors, administrators and estate, releases Assignor
and its subsidiaries and affiliates (other than Assignee) from any and all
actions, causes of action, obligations, liabilities, judgments, suits, debts,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
extents, executions, claims and demands whatsoever, in law, admiralty or equity,
whether liquidated or unliquidated, contingent or otherwise, whether
specifically mentioned or not, which Employee ever had, now has or hereafter
can, shall or may have under, arising out of or relating to the Employment
Agreement, it being understood and agreed that any liability for any such claim,
etc. shall instead be the sole responsibility of Assignee.
<PAGE>
3. By signing this Agreement, Employee acknowledges and agrees that:
(a) He has been afforded a reasonable and sufficient period of
time of at least twenty-one (21) days to review this Agreement, for
deliberation hereon and for negotiation of the terms hereof, and that,
at Employee's initiative, Employee has waived said period and any
possible renewals or extensions thereof;
(b) He has been specifically urged by Assignor to consult with
legal counsel or the representative of his choice before signing this
Agreement, and that he did, in fact, consult an attorney of his own
choosing before signing this Agreement and said attorney reviewed this
Agreement before Employee signed it;
(c) He has carefully read and understands the terms of this
Agreement, all of which have been fully explained to him;
(d) He has signed this Agreement freely and voluntarily and
without duress or coercion and with full knowledge and understanding of
its significance and consequences and of the rights relinquished,
surrendered, released and discharged hereunder; and
(e) The only consideration for signing this Agreement are the
terms stated herein and no other promise, agreement or representation of
any kind has been made to him by any person or entity whatsoever to
cause him to sign this Agreement.
4. This Agreement may be revoked in writing by Employee at any time
during the period of seven (7) calendar days following the date of execution by
Employee as indicated on the Signature Page hereto. If such seven-day revocation
period expires without Employee exercising his revocation right, the obligations
of this Agreement will then become fully effective.
5. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to conflicts of law
principles thereof.
6. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which, when taken together,
shall constitute one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment, Assumption, Consent and Release Agreement on the respective dates
indicated below.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
--------------------------------
Frank M. Garrison
Executive Managing Director
Date: July 1, 1998
INSIGNIA/ESG HOLDINGS, INC.
By: /s/ Jeffrey P. Cohen
--------------------------------
Jeffrey P. Cohen
Executive Vice President
Date: July 1, 1998
EMPLOYEE
/s/ Andrew Mack Huntley
-----------------------------------
Andrew Mack Huntley
Date: July 7, 1998
-3-
<PAGE>
EXHIBIT A
TO
ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE AGREEMENT
-----------------------------------------------------
Employment Agreement
-4-
<PAGE>
INSIGNIA/ESG HOLDINGS, INC.
401(K) RESTORATION PLAN
(TO BE RENAMED THE "INSIGNIA FINANCIAL GROUP, INC.
401(K) RESTORATION PLAN")
THIS INSIGNIA/ESG HOLDINGS, INC. 401(K) RESTORATION PLAN (this "Plan")
is adopted by Insignia/ESG Holdings, Inc. (the "Company") and certain
participating affiliated employers (the Company and each participating
affiliated employer are collectively referenced to as the "Employer") in the
Insignia/ESG Holdings, Inc. 401(k) Retirement Savings Plan (the "401(k) Plan")
on behalf of the designated executives of the Employer (each, an "Executive",
and collectively, the "Executives"). Effective November 2, 1998, the Company
will be renamed Insignia Financial Group, Inc. and the Plan will be renamed the
Insignia Financial Group, Inc.
401(k) Restoration Plan.
WHEREAS, the business operations of the Company started as a result of
the spin-off (the "Spin-Off") of the commercial real estate services business,
single-family home brokerage and mortgage origination business, condominium and
cooperative apartment management business, equity co-investment business and
certain other related businesses to the stockholders of Insignia Financial
Group, Inc. (the "Former Company") as it existed prior to its merger (the
"Merger") with and into Apartment Investment and Management Company ("AIMCO").
WHEREAS, effective as of the date of the Spin-Off, the assets (if any)
and liabilities of the Insignia Financial Group, Inc. Benefit Restoration Plan
as it existed prior to the Merger (the "Prior Plan") attributable to
participants (and their beneficiaries) other than "Retained Employees" (as
defined in the Amended and Restated Agreement and Plan of Merger dated as of May
26, 1998 by and among AIMCO and AIMCO Properties, L.P., the Former Company and
the Company) and their beneficiaries shall be transferred to this Plan in
accordance with applicable law; and
WHEREAS, the Executives are employees of the Employer; and
WHEREAS, the Company wishes to encourage the continued employment of the
Executives by the Employer; and
WHEREAS, the Company wishes to continue to enhance the ability of each
of the Executives to provide for his or her retirement needs beyond the ability
of the Executive to make contributions permitted under the 401(k) Plan and the
Company deems it appropriate and advisable to reduce to writing the agreements
and understandings governing such additional retirement enhancements;
NOW, THEREFORE, the Plan is hereby adopted, effective September 15,
1998, as follows:
1. PURPOSE. The purposes of this Plan are: (a) to allow each of the
Executives the opportunity to defer the receipt of a portion of the Executive's
salary in excess of the amount of salary that the Executive is permitted to
contribute to the 401(k) Plan; (b) to offer this Plan to the
<PAGE>
Executives to encourage their continued employment following the Spin-Off; and
(c) to enhance the long-term performance and retention of the Executives.
2. STATUS UNDER ERISA. This Plan is intended to meet the criteria of the
so-called "top-hat" provisions of the Employee Retirement Income Security Act of
1974, as amended at any time and from time to time ("ERISA"). As a top-hat plan,
this Plan is subject to the enforcement and administration provisions of ERISA
and to limited ERISA reporting and disclosure rules, and is exempt from all
other ERISA requirements. Distributions required or contemplated by Section 10
or actions required to be taken under any other section of this Plan shall not
be construed as creating a trust of any kind or a fiduciary relationship between
any Employer, the Committee (as defined below) and any Executive, any
Executive's designated beneficiary, or any other person. Should the Employer set
aside any funds or purchase any insurance contract on the life of any Executive
in anticipation of its obligations under the Plan, such funds or insurance
contract shall continue for all purposes to be a part of the general funds of
the applicable Employer and no other person other than the applicable Employer
shall, by virtue of this Plan or otherwise, have any interest in the funds or
contract.
3. ADMINISTRATION. This Plan shall be administered by an administrative
committee appointed by the Board of Directors of the Company or, if no committee
is so designated, by the Board of Directors of the Company (the "Committee").
The Committee (and, with respect to the selection of Executives who are eligible
to participate in this Plan, the President of the Company) shall have the
exclusive right, power, and authority, in its sole and absolute discretion, to
administer, apply and interpret this Plan and any other Plan documents and to
decide all matters arising in connection with the operation or administration of
this Plan. Without limiting the generality of the foregoing, the Committee shall
have the sole and absolute discretionary authority: (a) to take all actions and
make all decisions with respect to the eligibility for, and the amount of,
benefits payable under this Plan; (b) to formulate, interpret and apply rules,
regulations and policies necessary to administer this Plan in accordance with
its terms; (c) to decide questions, including legal or factual questions,
relating to the calculation and payment of benefits under this Plan; (d) to
resolve and/or clarify any ambiguities, inconsistencies and omissions arising
under this Plan or other Plan documents; and (e) to process and approve or deny
benefit claims and rule on any benefit exclusions. All determinations made by
the Committee (or any delegate) with respect to any matter arising under this
Plan and any other Plan documents including, without limitation, the
interpretation and administration of this Plan shall be final, binding and
conclusive on all parties.
The Committee shall impose such rules designed to facilitate compliance
with Federal and state securities laws, including to the extent applicable, the
limitations of Section 4(2) and Rule 701 under the Securities Act of 1933, and
shall have the authority to suspend this Plan and take any action necessary,
including revoking Executives' salary deferral elections, prospectively and/or
retroactively, to ensure that this Plan complies with Federal and state
securities laws.
<PAGE>
Decisions of the Committee shall be made by a majority of its members
attending a meeting at which a quorum is present (which meeting may be held
telephonically), or by written action in accordance with applicable law.
No member of the Committee and no officer, director or employee of the
Company shall be liable for any action or inaction with respect to his or her
functions under this Plan unless such action or inaction is adjudged to be due
to fraud. Further, no such person shall be personally liable merely by virtue of
any instrument executed by him or her or on his or her behalf in connection with
this Plan.
Each Employer shall indemnify, to the full extent permitted by law and
its Certificate of Incorporation and By-laws (but only to the extent not covered
by insurance) its officers and directors (and any employee involved in carrying
out the functions of the Employer under this Plan) and each member of the
Committee against any expenses, including amounts paid in settlement of a
liability, which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or responsibilities
with respect to this Plan (other than as an Executive), except with regard to
matters as to which he or she shall be adjudged in such action to be liable for
fraud in the performance of his or her duties.
1. PARTICIPATION. The President of the Company will designate the
Executives who are permitted to participate in the Plan. Executives so
designated will be given written notice prior to the Plan Year in which
participation in the Plan is permitted. Each of the Executives must designate
annually in writing on a form provided by the Committee his or her intention to
participate in the Plan and the contributions that each of them elects, in
accordance with Section 5. The written election must be executed by the
Executive and received by the Company's Human Resources Department before the
beginning of the Plan Year during which contributions will be made to this Plan.
Notwithstanding the foregoing, if an Executive first becomes eligible to
participate in this Plan during a Plan Year, he or she may elect to become a
participant with respect to such Plan Year (solely with respect to wages earned
after the Executive designates in writing on a form provided by the Committee
his or her intention to participate in this Plan and the contributions he or she
elects and delivered to the Company's Human Resources Department pursuant to the
procedures established by the Committee) prior to the end of the thirty (30) day
period following the date he becomes eligible to participate in this Plan.
Any notice or election required or permitted to be given hereunder shall
be in writing and shall be deemed to be given (a) on the date it is personally
delivered to the Company's Human Resources Department; or (b) three (3) business
days after it is sent by registered or certified mail, addressed to the Human
Resources Department, Insignia/ESG Holdings, Inc., 15 South Main Street, 9th
Floor, Greenville, South Carolina 29601. Once made, the election is binding and
irrevocable for the Plan Year following the election (or, in the case of the
commencement of participation in the middle of a Plan Year, for the remainder of
the Plan Year following the election).
<PAGE>
Each Executive who was a participant in the Prior Plan on September 14,
1998 and who becomes employed by the Employer on September 15, 1998, will be
allowed to continue their participation based upon their election under the
Prior Plan for the Plan Year ending on December 31, 1998, provided that the
Executive continues to be employed by the Employer during such time. Any
election to defer wages under this Plan shall apply on a pro rata basis with
respect to the entire amount of wages earned in such Plan Year, whenever
payable, or on such other basis as may be agreed to by the Committee. If no
election is made with respect to any subsequent Plan Year, no wages earned in
such Plan Year shall be deferred under this Plan.
1. DEFERRAL ELECTION. Any Executive may elect annually in accordance
with this Plan to defer the receipt of a portion of the compensation otherwise
payable to the Executive by the Employer in the Plan Year, and the election will
indicate the total compensation to be deferred under this Plan and under the
401(k) Plan. For purposes of this Plan, compensation will be defined as annual
gross wages earned while a participant in this Plan for the Plan Year. The
amount of compensation to be deferred under this Plan will be determined by
subtracting the percentage of the Executive's compensation being deferred under
the 401(k) Plan from the total overall percentage of compensation to be
deferred. Any change in the contribution percentage under the 401(k) Plan will
effect a corresponding change in the contribution percentage under this Plan
prospectively in order to maintain the overall deferral amount elected by the
Executive. The percentage of the Executive's salary to be deferred shall be
designated by the Executive. Contributions made under the Plan and under the
401(k) Plan by the Executive during any Plan Year shall not exceed, in the
aggregate, fifteen (15%) percent of the Executive's salary while a participant
in this Plan. Once the Executive's contributions under both plans reaches the
preceding limit during any Plan Year, the deductions from the Executive's salary
will stop and will not resume until the following Plan Year (if an election is
made for the following Plan Year by the Executive). Deferred amounts may be
distributed only as provided in Section 10.
For those Executives whose annual gross wages are expected to exceed
$160,000.00 (or the then current compensation limit under Section 401(a)(17) of
the Internal Revenue Code of 1986, as amended ("IRC") determined by the IRS each
year) while a participant in this Plan for the Plan Year, the following deferral
formula will apply. The amount of compensation allowed is to be determined by
subtracting the amount of compensation allowed to be deferred under the 401(k)
Plan from the amount of total compensation deferred pursuant to the Executive's
election under this Plan. For example, if an Executive earns $500,000.00 in
gross wages for the Plan Year and is a participant in both the 401(k) Plan and
this Plan for the Plan Year, assume that because of nondiscrimination rules
under the IRC, the maximum amount allowed to be deferred into the 401(k) Plan
for 1998 would be $6,400.00 (i.e., four (4%) percent of $160,000.00). In this
example, the Executive elects ten (10%) percent for his total overall
percentage. Therefore, the amount allowed to be deferred under this Plan would
be $50,000.00 (i.e., 10% of $500,000.00).
1. MATCHING CREDIT. Except as limited below with respect to deferrals
from commission income, the Employer will credit an amount, as a match to the
Executive's contribution, equal to fifty (50%) percent of the first six (6%)
percent in the aggregate of such
<PAGE>
Executive's salary that is contributed to the 401(k) Plan for the relevant Plan
Year, but will not in any event exceed the overall limit of fifty (50%) percent
of the first six (6%) percent of salary deferred under both plans during the
relevant Plan Year. Any matching credit under this Plan will vest as provided
in Section 9.
No matching credit will be made under this Plan with respect to salary
deferrals from commission income.
1. INVESTMENT RATE OF RETURN. The contributions made by each Executive
and the Employer matching credits related thereto will be credited with a
quarterly rate of return of two (2) percentage points above the 90-day treasury
bill rate as reported in The Wall Street Journal at the beginning of each
quarterly evaluation period.
2. STATEMENT OF ACCOUNT. Total contributions, matching credits, and
credited rate of return made on behalf of each Executive under this Plan shall
be referred to as the Executive's "Account". The Company shall furnish each
Executive with an annual statement of the Executive's Account in the Plan
through the statement date. The statement of the Executive's Account shall
indicate the earned rate of return, the cumulative contributions by the
Executive, the cumulative Employer matching credits, and the vested balance for
the Executive.
3. VESTING. The Employer matching credits made on behalf of an Executive
pursuant to Section 6 will vest on the following schedule:
Calendar Years of Service Vesting Percentage
------------------------- ------------------
after 1 year 0%
after 2 years 25%
after 3 years 50%
after 4 years 100%
Calendar years of service with the Employer will be used to determine the vested
percentage of the Employer matching credits. The written notice to participate
issued to the Executive pursuant to Section 4 of this Plan will specify the
number of years of past service credit granted (including any service recognized
for vesting purposes under the 401(k) Plan), if any, for employment with any
predecessor employer. The Executive's contribution is 100% vested upon
contribution. The Executive will become immediately 100% vested in Employer
matching credits upon death, disability, or retirement.
In the event that a participant in the Prior Plan does not become
employed by the Employer any amounts transferred to the Plan on behalf of such
participant shall continue to be
<PAGE>
subject to the vesting schedule set forth in the Prior Plan to the extent that
such amounts would have been subject to the vesting schedule.
1. DISTRIBUTION. The Account of an Executive shall be distributed to the
Executive in the following manner:
Termination of Employment. Upon termination of the service or
employment of an Executive with the Employer for any reason other than death,
retirement, or disability, the Executive will be entitled to receive a single
sum payment of all vested amounts credited to the Executive's Account as of the
date of such termination of service or employment. The distribution will be made
within ninety (90) days of the close of the calendar quarter in which the
Executive terminated employment.
Death of Executive. In the event of the death of an Executive,
the beneficiary last designated by the Executive will be entitled to receive a
single sum payment of all amounts credited to the Executive's Account as of the
date of the Executive's death. The distribution will be made within ninety (90)
days of the close of the calendar quarter in which the Executive dies.
If an Executive dies prior to receiving his or her total benefit,
the unpaid portion of any such benefit shall be paid to the Executive's
beneficiary in a single sum payment, as soon as administratively feasible
following the Executive's death. If no beneficiary is designated, the
Executive's beneficiary shall be his or her spouse, or if the Executive is not
married, the Executive's estate. If the Executive names someone other than his
or her spouse as a beneficiary, a spousal consent, in the form provided by the
Committee, must be signed by that participant's spouse and returned to the
Committee. Upon the acceptance by the Committee of a new beneficiary designation
form, all beneficiary designations previously filed shall be cancelled. The
Committee shall be entitled to rely on the last beneficiary designation form
filed by the Executive and accepted by the Committee prior to his or her death.
Retirement of Executive. Normal retirement age under this Plan is
sixty-five (65) years of age. Upon retirement of the Executive, on or after the
Executive's normal retirement age, the Executive will be entitled to receive a
single sum payment of all amounts credited to the Executive's Account as of the
date of the Executive's retirement. The distribution will be made within ninety
(90) days of the close of the calendar quarter in which the Executive retires or
within such other period of time as determined by the Committee to be reasonably
necessary.
Disability of Executive. If an Executive becomes disabled and
cannot continue full and gainful employment, the Executive will be entitled to
receive a single sum payment of all amounts credited to the Executive's Account
as of the date the disability is determined by the Employer. The distribution
will be made within ninety (90) days of the close of the calendar quarter in
which the disability is determined by the Employer or within such other period
of time as determined by the Committee to be reasonably necessary.
Termination for Cause. Upon termination of the service or
employment of an Executive by the Employer for Cause, the Executive will forfeit
any Employer matching credits
<PAGE>
credited to the Executive's Account but will be entitled to receive a single sum
payment of the Executives' salary deferral elections under the Plan. The
distribution will be made within ninety (90) days of the close of the calendar
quarter in which the Executive is terminated for Cause. For purposes of this
Plan, the term "Cause" means an Executive's fraud, embezzlement or commission of
a crime with regard to the Employer or its assets. The Committee shall have sole
discretion in determining whether Cause exists, and its determination shall be
final, binding and conclusive.
1. EXECUTIVE'S RIGHTS UNSECURED. All of the right, title, and interest
of the Executive and the Executive's designated beneficiary in and to the Plan
and to receive any distribution under the Plan will be an unsecured claim
against the general assets of the applicable Employer, and neither the Executive
nor the Executive's designated beneficiary will have any rights in or against
any amount credited to the Executive's Account or any other specific assets of
the applicable Employer. All amounts credited to the Executive's Account will
constitute general assets of the applicable Employer and may be disposed of by
the Employer at the time and for the purpose as it may deem appropriate. An
Executive's Account or other rights under the Plan may not be encumbered or
assigned by an Executive or any beneficiary of an Executive.
2. CLAIMS PROCEDURES. Any claim by an Executive or beneficiary
("Claimant") with respect to eligibility, participation, contributions, benefits
or other aspects of the operation of this Plan shall be made in writing to the
Committee (c/o Senior Vice President - Human Resources) or such other person
designated by the Committee from time to time for such purpose. If the Committee
believes that the claim should be denied, the Committee shall notify the
Claimant in writing of the denial of the claim within ninety (90) days after
receipt thereof (this period may be extended an additional ninety (90) days in
special circumstances and, in such event, the Claimant shall be notified in
writing of the extension). Such notice shall (a) set forth the specific reason
or reasons for the denial making reference to the pertinent provisions of this
Plan or of Plan documents on which the denial is based; (b) describe any
additional material or information necessary to perfect the claim, and explain
why such material or information, if any, is necessary; and (c) inform the
Claimant of his or her right pursuant to this section to request review of the
decision.
A Claimant may appeal the denial of a claim by submitting a written
request for review to the Committee, within sixty (60) days after the date on
which such denial is received. Such period may be extended by the Committee for
good cause shown. The claim will then be reviewed by the Committee. A Claimant
or his or her duly authorized representative may discuss any issues relevant to
the claim, may review pertinent documents and may submit issues and comments in
writing. If the Committee deems it appropriate, it may hold a hearing as to a
claim. If a hearing is held, the Claimant shall be entitled to be represented by
counsel. The Committee shall decide whether or not to grant the claim within
sixty (60) days after receipt of the request for review, but this period may be
extended by the Committee for up to an additional sixty (60) days in special
circumstances. Written notice of any such special circumstances shall be sent to
the Claimant. Any claim not decided upon in the required time period shall be
deemed denied. All interpretations, determinations and decisions of the
Committee with respect to any claim
<PAGE>
shall be made in its sole discretion based on this Plan and other relevant
documents and shall be final, conclusive and binding on all persons.
1. PARTICIPATING AFFILIATED EMPLOYERS. Any entity affiliated with the
Company within the meaning of IRC Section 414(b) with respect to a controlled
group of corporations, IRC Section 414(c) with respect to trades or businesses
under common control with the Company, IRC Section 414(m) with respect to
affiliated service groups and any other entity required to be aggregated with
the Company under IRC Section 414(o) that participates in the 401(k) Plan may
become a participating affiliated employer under this Plan upon appropriate
action by that company to adopt this Plan. No entity shall be treated as a
participating affiliated employer for any period during which it is not part of
the controlled group, under common control or otherwise required to be
aggregated under IRC Section 414.
2. MINORS AND INCOMPETENTS. In the event that the Committee finds that
an Executive is unable to care for his or her affairs because of illness or
accident, then benefits payable hereunder, unless claim has been made therefor
by a duly appointed guardian, committee, or other legal representative, may be
paid in such manner as the Committee shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Executive was or would have been otherwise entitled under
this Plan. Any payments to a minor from this Plan may be paid by the Committee
in its sole and absolute discretion (a) directly to such minor; (b) to the legal
or natural guardian of such minor; or (c) to any other person, whether or not
appointed guardian of the minor, who shall have the care and custody of such
minor. The receipt by such individual shall be a complete discharge of all
liability under this Plan therefor.
3. WITHHOLDING TAXES. The Employer shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Plan. In lieu thereof, the Employer shall
have the right to withhold the amount of such taxes from any other sums due or
to become due from the Employer to the Executive upon such terms and conditions
as the Committee may prescribe.
4. ASSIGNMENT. This Plan shall be binding upon and inure to the benefit
of the Company, its successors and assigns and the Executives and their heirs,
executors, administrators and legal representatives. In the event that the
Company sells all or substantially all of the assets of its business and the
acquiror of such assets assumes the obligations hereunder, the Company shall be
released from any liability imposed herein and shall have no obligation to
provide any benefits payable hereunder.
5. LIMITATION OF RIGHTS. Nothing contained herein shall be construed (a)
as conferring upon an Executive the right to continue in the employ of the
Employer as an executive or in any other capacity; or (b) to interfere with the
Employer's right to discharge him or her at any time for any reason whatsoever.
<PAGE>
6. ENTIRE AGREEMENT. This Plan, along with the Executive's elections
hereunder, constitutes the entire agreement between the Company and the
Executive pertaining to the subject matter herein and supersedes any other plan
or agreement, whether written or oral, pertaining to the subject matter herein.
No agreements or representations, other than as set forth herein, have been made
by the Employer with respect to the subject matter herein.
7. NON-EMPLOYMENT. This Plan is not an agreement of employment and it
shall not grant an Executive any rights of employment.
8. PAYMENT NOT SALARY. Any benefits payable under this Plan shall not be
deemed salary or other compensation to the Executive for the purposes of
computing benefits to which he or she may be entitled under any pension plan or
other arrangement of any Employer for the benefit of its employees.
9. AMENDMENTS TO THE PLAN. The Board of Directors of the Company (or a
duly authorized committee thereof) may amend the Plan at any time and from time
to time without the consent of any of the Executives or their respective
beneficiaries; provided, however, that no amendment, modification, or
restatement of the Plan shall divest any Executive or his or her beneficiary of
any credits to the Executive's Account vested immediately prior to the effective
date of the amendment, modification, or restatement, or of any rights to which
the Executive would have been entitled if the Plan had been terminated
immediately prior to the effective date of the amendment.
10. TERMINATION OF THE PLAN. The Board of Directors of the Company (or a
duly authorized committee thereof) may terminate the Plan at any time. Upon
termination of the Plan, distribution of the vested credits to an Executive's
Account shall be made in the manner and at the time heretofore prescribed;
provided however, that additional credits shall not be made to the Account of an
Executive following termination of the Plan. Notwithstanding the foregoing,
distribution of the vested credits may be made in a single sum payment at any
time following the termination of the Plan at the discretion of the Committee.
11. EXPENSES. Costs of administration of the Plan will be paid by the
Employer.
12. ALLOCATION OF FORFEITURES. Forfeitures of credited balances and
accounts shall revert to the Employer.
13. WORD USAGE. Words used in the masculine shall apply to the feminine
where applicable. Wherever the context of this Plan dictates, the plural shall
be read as the singular, and the singular as the plural.
14. FURTHER ASSURANCES. Each of the parties agrees to execute, deliver,
and perform such agreements, instruments, and other documents, and to do any
other acts and things, as any party, at any time and from time to time, may
reasonably request in order to more fully effectuate each of the transactions
contemplated by this Plan.
<PAGE>
15. NO WAIVER. The failure of any party to insist in any one or more
instances upon performance of any of the provisions of this Plan or to take
advantage of any of its rights hereunder shall not be construed as a waiver of
any provisions or the enforcement of any rights, and the same shall continue and
remain in full force and effect. No single or partial exercise by any party of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy. Waiver by any party of any breach of the
Plan shall not constitute or be construed as a continuing waiver or as a waiver
of any other breach of any other provision of this Plan.
16. SEVERABILITY. In the event that any word, phrase, sentence, or other
provision of this Plan shall violate any applicable statute, ordinance, or rule
of law in any jurisdiction which governs this Plan, the offending provision
shall be ineffective to the extent of the violation without invalidating any
other provision, and the Plan shall be construed and enforced as if such
provision had not been included.
17. GOVERNING LAW. Except to the extent preempted by Federal law, this
Plan shall be governed by and construed in accordance with the laws of the State
of New York, without reference to any conflict of law principles.
18. HEADINGS. The headings of the sections of this Plan are intended for
convenience of reference only and are not intended to be a part of, or affect
the meaning of interpretation of, this Plan.
19. PLAN YEAR. The Plan Year shall be the calendar year, except that the
first Plan Year shall be the short Plan Year commencing on the effective date of
September 15, 1998 and ending on December 31, 1998.
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Plan as of the 15th
day of September, 1998.
INSIGNIA/ESG HOLDINGS, INC.
By: /s/ Adam B. Gilbert
-----------------------------
Name: Adam B. Gilbert
---------------------------
Title: Executive Vice President
--------------------------
ATTEST
- ----------------------------------
<PAGE>
================================================================================
CREDIT AGREEMENT
Dated as of October 22, 1998
by and among
INSIGNIA/ESG HOLDINGS, INC.
(to be renamed INSIGNIA FINANCIAL GROUP, INC.),
as Borrower,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK,
as Administrative Agent
and
LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I -DEFINITIONS............................................................................................1
SECTION 1.1 Definitions.............................................................................1
SECTION 1.2 General................................................................................15
SECTION 1.3 Other Definitions and Provisions.......................................................16
ARTICLE II - CREDIT FACILITY.....................................................................................16
SECTION 2.1 Loans and Maximum Availability.........................................................16
SECTION 2.2 Procedure for Advances of Loans........................................................16
SECTION 2.3 Repayment of Loans.....................................................................18
SECTION 2.4 Notes..................................................................................19
SECTION 2.5 Permanent Reduction of the Aggregate Commitment........................................19
SECTION 2.6 Termination of Credit Facility.........................................................20
SECTION 2.7 Use of Proceeds........................................................................20
SECTION 2.8 Increase in Aggregate Commitment.......................................................20
ARTICLE III - LETTER OF CREDIT FACILITY.........................................................................21
SECTION 3.1 L/C Commitment.........................................................................21
SECTION 3.2 Procedure for Issuance of Letters of Credit............................................21
SECTION 3.3 Commissions and Other Charges..........................................................22
SECTION 3.4 L/C Participations.....................................................................22
SECTION 3.5 Reimbursement Obligation of the Borrower...............................................23
SECTION 3.6 Obligations Absolute...................................................................24
SECTION 3.7 Effect of Application..................................................................24
ARTICLE IV - GENERAL LOAN PROVISIONS.............................................................................25
SECTION 4.1 Interest...............................................................................25
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans...............................27
SECTION 4.3 Fees...................................................................................28
SECTION 4.4 Manner of Payment......................................................................28
SECTION 4.5 Crediting of Payments and Proceeds.....................................................29
SECTION 4.6 Adjustments............................................................................30
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit;
Assumption by the Administrative Agent.................................................30
SECTION 4.8 Changed Circumstances..................................................................31
SECTION 4.9 Indemnity..............................................................................33
SECTION 4.10 Capital Requirements...................................................................33
<PAGE>
SECTION 4.11 Taxes..................................................................................34
SECTION 4.12 Mandatory Redenomination of Alternative Currency Loans.................................35
SECTION 4.13 Regulatory Limitation..................................................................36
SECTION 4.14 Claims for Increased Costs and Taxes...................................................37
SECTION 4.15 Rounding of Amounts in Certain Situations..............................................37
SECTION 4.16 Security...............................................................................37
ARTICLE V - CLOSING; CONDITIONS OF CLOSING AND BORROWING.........................................................37
SECTION 5.1 Closing................................................................................37
SECTION 5.2 Conditions to Closing, Initial Loan and Letter of Credit...............................37
SECTION 5.3 Conditions to All Loans and Letters of Credit..........................................40
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE BORROWER.....................................................40
SECTION 6.1 Representations and Warranties.........................................................40
SECTION 6.2 Survival of Representations and Warranties, Etc........................................47
ARTICLE VII - FINANCIAL INFORMATION AND NOTICES.................................................................47
SECTION 7.1 Financial Statements and Projections...................................................48
SECTION 7.2 Officer's Compliance Certificate.......................................................48
SECTION 7.3 Other Reports..........................................................................49
SECTION 7.4 Notice of Litigation and Other Matters.................................................49
SECTION 7.5 Accuracy of Information................................................................50
ARTICLE VIII - AFFIRMATIVE COVENANTS...........................................................................50
SECTION 8.1 Preservation of Corporate Existence and Related Matters................................50
SECTION 8.2 Maintenance of Property................................................................50
SECTION 8.3 Insurance..............................................................................50
SECTION 8.4 Accounting Methods and Financial Records...............................................51
SECTION 8.5 Payment and Performance of Obligations.................................................51
SECTION 8.6 Compliance With Laws and Approvals.....................................................51
SECTION 8.7 Environmental Laws.....................................................................51
SECTION 8.8 Compliance with ERISA..................................................................51
SECTION 8.9 Compliance With Agreements.............................................................52
SECTION 8.10 Conduct of Business....................................................................52
SECTION 8.11 Visits and Inspections.................................................................52
SECTION 8.12 Subsidiaries...........................................................................52
SECTION 8.13 Year 2000 Compatibility................................................................53
SECTION 8.14 Further Assurances.....................................................................53
<PAGE>
ARTICLE IX - FINANCIAL COVENANTS................................................................................54
SECTION 9.1 Leverage Ratio.........................................................................54
SECTION 9.2 Minimum Net Worth......................................................................54
SECTION 9.3 Maximum Leverage.......................................................................54
SECTION 9.4 Interest Coverage Ratio................................................................54
ARTICLE X - NEGATIVE COVENANTS...................................................................................54
SECTION 10.1 Limitations on Debt.....................................................................54
SECTION 10.2 Limitations on Contingent Obligations...................................................55
SECTION 10.3 NEGATIVE PLEDGE; LIMITATION ON LIENS....................................................56
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions............................57
SECTION 10.5 Limitations on Mergers and Liquidation..................................................58
SECTION 10.6 Limitations on Sale of Assets...........................................................58
SECTION 10.7 Limitations on Dividends and Changes in Capital Structure...............................59
SECTION 10.8 Transactions with Affiliates............................................................59
SECTION 10.9 Certain Accounting Changes..............................................................60
SECTION 10.10 Amendments; Payments and Prepayments of Subordinated Debt...............................60
SECTION 10.11 Real Estate Development.................................................................60
SECTION 10.12 Lines of Business.......................................................................60
SECTION 10.13 Restrictive Agreements..................................................................61
ARTICLE XI - DEFAULT AND REMEDIES................................................................................61
SECTION 11.1 Events of Default.......................................................................61
SECTION 11.2 Remedies................................................................................64
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc.........................................64
SECTION 11.4 Judgment Currency.......................................................................65
ARTICLE XII - THE AGENTS.........................................................................................65
SECTION 12.1 Appointment and Authorization...........................................................65
SECTION 12.2 Delegation of Duties....................................................................66
SECTION 12.3 Exculpatory Provisions..................................................................66
SECTION 12.4 Reliance by the Agents..................................................................66
SECTION 12.5 Notice of Default.......................................................................67
SECTION 12.6 Non-Reliance on the Agents and Other Lenders............................................67
SECTION 12.7 Indemnification.........................................................................67
SECTION 12.8 Agent in Its Individual Capacity........................................................68
SECTION 12.9 Resignation of the Administrative Agent; Successor Administrative
Agent...................................................................................68
<PAGE>
ARTICLE - XIII - MISCELLANEOUS...................................................................................68
SECTION 13.1 Notices.................................................................................68
SECTION 13.2 Expenses; Indemnity.....................................................................70
SECTION 13.3 GOVERNING LAW...........................................................................71
SECTION 13.4 CONSENT TO JURISDICTION.................................................................71
SECTION 13.5 WAIVER OF JURY TRIAL....................................................................72
SECTION 13.6 Reversal of Payments....................................................................72
SECTION 13.7 Accounting Matters......................................................................72
SECTION 13.8 Successors and Assigns; Participations..................................................72
SECTION 13.9 Amendments, Waivers and Consents........................................................75
SECTION 13.10 Performance of Duties...................................................................76
SECTION 13.11 No Fiduciary Relationship...............................................................76
SECTION 13.12 All Powers Coupled with Interest........................................................76
SECTION 13.13 Survival of Indemnities.................................................................76
SECTION 13.14 Titles and Captions.....................................................................76
SECTION 13.15 Severability of Provisions..............................................................76
SECTION 13.16 Counterparts............................................................................77
SECTION 13.17 Term of Agreement.......................................................................77
SECTION 13.18 Independent Effect of Covenants.........................................................77
SECTION 13.19 EMU; Continuity of Contract.............................................................77
EXHIBITS
A - Notes
B - Notice of Borrowing
C - Notice of Conversion/Continuation
D - Notice of Repayment
E - Notice of Account Designation
F - Assignment and Acceptance
G - Officer's Compliance Certificate
H - Guaranty Agreement
I - Pledge and Security Agreement
J - Lender Addition and Acknowledgment Agreement
SCHEDULES
1.1(a) - Lenders
1.1(b) - Mandatory Cost Rate
6.1(a) - Subsidiaries - Organization, Ownership
6.1(i) - Employee Benefit Plans of Domestic Subsidiaries
6.1(l) - Material Contracts
6.1(s) - Debt and Contingent Obligations
6.1(t) - Litigation
10.3 - Existing Liens
10.4 - Investments in Unrestricted Subsidiaries and Affiliates
<PAGE>
10.6 - Permitted Asset Sales
10.8 - Transactions with Affiliates
</TABLE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 22nd day of October, 1998, by
and among INSIGNIA/ESG HOLDINGS, INC. (to be renamed INSIGNIA FINANCIAL GROUP,
INC.), a corporation organized under the laws of Delaware (the "Borrower"), the
Lenders who are or may become a party to this Agreement (the "Lenders"), FIRST
UNION NATIONAL BANK, as Administrative Agent for the Lenders, and LEHMAN
COMMERCIAL PAPER INC., as Syndication Agent.
STATEMENT OF PURPOSE
The Borrower has requested and the Lenders have agreed to extend
certain credit facilities to the Borrower on the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"Actual Knowledge" means information actually known to Andrew L.
Farkas, Chairman of the Board and Chief Executive Officer; James A. Aston, Chief
Financial Officer; Ronald Uretta, Chief Operating Officer and Treasurer; Adam B.
Gilbert, General Counsel and Secretary; or Stephen Siegel, President, or any
other individual hereafter holding the office of the Borrower currently held by
such individuals, in each case at the date of determination.
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 12.9.
"Administrative Agent's Correspondent" means First Union National Bank,
London Branch, or any other financial institution designated by the
Administrative Agent to act as its correspondent hereunder with respect to the
distribution and payment of Alternative Currency Loans.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
13.1.
<PAGE>
"Affiliate" means, with respect to any Person, any other Person (other
than a Subsidiary of such first Person) which directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, such first Person or any of its Subsidiaries.
"Agents" means the collective reference to the Administrative Agent and
the Syndication Agent; "Agent" means either of such Persons.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be reduced at any time or from time to
time pursuant to Section 2.5 or increased at any time or from time to time
pursuant to Section 2.8. On the Closing Date, the Aggregate Commitment shall be
One Hundred Eighty-five Million Dollars ($185,000,000).
"Agreement" means this Credit Agreement, as amended, modified, restated
or supplemented from time to time.
"Alternative Currency" means Pounds Sterling, provided that up to an
aggregate of the lesser of $10,000,000 or the Alternative Currency Commitment
may be denominated in Canadian Dollars, Dutch Guilders, French Francs or
Deutsche Marks, and, with the prior written consent of the Administrative Agent
and each of the Lenders, any other lawful currency (other than Dollars) which is
freely transferable and convertible into Dollars in the United States currency
market and freely available to all of the Lenders in the London interbank
deposit market.
"Alternative Currency Amount" means with respect to each Loan made or
continued (or to be made or continued) in an Alternative Currency, the amount of
such Alternative Currency which is equivalent to the principal amount in Dollars
of such Loan at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it at approximately 11:00 a.m. (the time
of the Administrative Agent's Correspondent) two (2) Business Days before such
Loan is made or continued (or to be made or continued). When used with respect
to any other sum expressed in Dollars, "Alternative Currency Amount" shall mean
the amount of such Alternative Currency which is equivalent to the amount so
expressed in Dollars at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it at the relevant time.
"Alternative Currency Commitment" means Fifty Million Dollars
($50,000,000), as such amount may be reduced or modified at any time or from
time to time pursuant to the terms hereof, provided that up to an aggregate of
the lesser of Ten Million Dollars ($10,000,000) or the Alternative Currency
Commitment may at any time be denominated in Canadian Dollars, Dutch Gilders,
French Francs or Deutsche Marks.
"Alternative Currency Loan" means any Loan denominated in an
Alternative Currency.
"Applicable Law" means in respect of any Person all provisions of
constitutions, statutes, laws, rules, treaties, regulations and orders of all
Governmental Authorities and all orders and decrees of all courts and
arbitrators applicable to such Person.
"Applicable Margin" shall have the meaning assigned thereto in Section
4.1(c); provided that with respect to each LIBOR Rate Loan made in an
Alternative Currency, the Applicable
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Margin shall include the Mandatory Cost Rate, as determined pursuant to the
formula set forth on the attached Schedule 1.1(b).
"Application" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 13.8(b)(iii).
"Available Commitment" means, as to any Lender at any time, an amount
equal to (a) such Lender's Commitment less (b) such Lender's Extensions of
Credit.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or (b)
the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate, as applicable.
"Base Rate Loan" means any Loan bearing interest at a rate based upon
the Base Rate as provided in Section 4.1(a).
"Borrower" means Insignia/ESG Holdings, Inc. (to be renamed Insignia
Financial Group, Inc.).
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day, other than a Saturday, Sunday or legal holiday, on
which banks in Greenville, South Carolina, Charlotte, North Carolina and New
York, New York are open for the conduct of their domestic or international
commercial banking business, as applicable, and (b) with respect to all notices
and determinations in connection with, and payments of principal and interest
on, any LIBOR Rate Loan, any day (i) that is a Business Day described in clause
(a) and that is also a day for trading by and between banks in deposits for the
applicable Permitted Currency in the London interbank market and (ii) on which
banks are open for the conduct of their domestic and international banking
business in the place where the Administrative Agent or the Administrative
Agent's Correspondent shall make available Loans in such Permitted Currency.
Notwithstanding the foregoing, with respect to any amount denominated or to be
denominated in the euro or a national currency unit, any reference to a
"Business Day" shall be construed as a reference to a day (other than a Saturday
or Sunday) on which banks are generally open for business in New York City and
prime banks in London generally provide quotations for deposits denominated
therein.
"Capital Lease" means, with respect to the Borrower and its
Subsidiaries, any lease of any property that is, in accordance with GAAP,
classified and accounted for as a capital lease on a Consolidated balance sheet
of the Borrower and its Subsidiaries.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
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"Co-Investment Entity" means any corporation, limited liability
company, partnership or other form of entity (i) in which the Borrower or a
Subsidiary of the Borrower owns an equity interest pursuant to a joint venture
or similar arrangement with one or more Persons who own more than fifty percent
(50%) of the ownership or other equity interest in such entity, (ii) which has
as its principal business the ownership of real property, and (iii) which does
not engage in any real estate development activities for its own account.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Loans or to issue or participate in Letters of Credit issued for the
account of the Borrower hereunder in an aggregate principal amount at any time
outstanding not to exceed the amount set forth opposite such Lender's name on
Schedule 1.1(a), as the same may be increased, reduced or modified at any time
or from time to time pursuant to the terms hereof.
"Commitment Percentage" means, as to any Lender at any time (a) prior
to the Termination Date, the ratio of (i) the amount of the Commitment of such
Lender to (ii) the Aggregate Commitment of all of the Lenders, and (b) on and
after the Termination Date, the ratio of (i) the amount of the Extensions of
Credit of such Lender to (ii) the aggregate amount of all Extensions of Credit
then outstanding.
"Consolidated" means, when used with reference to financial statements
or financial statement items of the Borrower and its Subsidiaries, such
statements or items on a consolidated basis in accordance with applicable
principles of consolidation under GAAP.
"Consolidated Net Worth" means, at any date of determination, an amount
equal to the sum of the total shareholders' equity (including capital stock,
additional paid-in capital and retained earnings after deducting the treasury
stock) of the Borrower and its Subsidiaries appearing on a Consolidated balance
sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP.
"Contingent Obligation" means, with respect to any Person, without
duplication, any obligation, contingent or otherwise, of such Person pursuant to
which such Person has directly or indirectly guaranteed any Debt or other
material asserted payment obligation of any other Person and, without limiting
the generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of such first Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation (whether
arising by agreement to keep well, to purchase assets, goods, securities or
services or to take-or-pay) or (b) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term Contingent Obligation shall not include (i)
endorsements for collection or deposit in the ordinary course of business and
(ii) earn-out obligations (which are included in Debt).
"Controlled Co-Investment Entity" means any Co-Investment Entity with
respect to whom the Borrower and its Subsidiaries provide property management
services and either (a) possess sole authority to sell, finance, refinance and
make daily operating decisions or (b) possess joint authority over such matters.
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"Credit Facility" means the collective reference to the Revolving
Credit Facility and the L/C Facility.
"Debt" means, with respect to the Borrower and its Subsidiaries at any
date and without duplication, the sum of the following calculated in accordance
with GAAP: (a) all Debt for Money Borrowed, (b) all obligations to pay the
deferred purchase price of property or services of any such Person, except trade
payables arising in the ordinary course of business not more than ninety (90)
days past due, (c) all Debt of any Person secured by a Lien on any asset of the
Borrower and its Restricted Subsidiaries, (d) all Contingent Obligations of any
such Person with respect to Debt, (e) the Borrower's reasonable estimate of the
aggregate liability of the Borrower and its Restricted Subsidiaries with respect
to all earn-out obligations and (f) all net obligations incurred by any such
Person pursuant to Hedging Agreements.
"Debt for Money Borrowed" means, with respect to the Borrower and its
Restricted Subsidiaries at any date and without duplication, the sum of the
following calculated in accordance with GAAP: (a) all liabilities, obligations
and indebtedness for borrowed money, including, but not limited to, obligations
evidenced by bonds, debentures, notes or other similar instruments of any
Person, (b) all obligations of any Person as lessee under Capital Leases, (c)
all Contingent Obligations of any such Person with respect to Debt for Money
Borrowed, and (d) all obligations, contingent or otherwise, of any such Person
relative to the face amount of letters of credit, whether or not drawn, and
banker's acceptances issued for the account of any such Person.
"Default" means any of the events specified in Section 11.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Defaulting Lender" shall have the meaning assigned thereto in Section
4.7.
"Dollar Amount" means (a) with respect to each Loan made or continued
(or to be made or continued) in Dollars, the principal amount thereof and (b)
with respect to each Loan made or continued (or to be made or continued) in an
Alternative Currency, the amount of Dollars which is equivalent to the principal
amount of such Loan at the most favorable spot exchange rate determined by the
Administrative Agent at approximately 11:00 a.m. (the time of the Administrative
Agent's Correspondent) two (2) Business Days before such Loan is made or
continued (or to be made or continued). When used with respect to any other sum
expressed in an Alternative Currency, "Dollar Amount" shall mean the amount of
Dollars which is equivalent to the amount so expressed in such Alternative
Currency at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it at the relevant time.
"Dollars" or "$" means, unless otherwise qualified, lawful currency of
the United States.
"EBITDA" means, with respect to the Borrower and its Restricted
Subsidiaries, for any period, (a) Net Income for such period plus (b) the sum of
the following to the extent deducted in the determination of Net Income for such
period: (i) income and franchise taxes, (ii) Interest Expense, (iii)
amortization, depreciation and other non-cash charges (including amortization of
goodwill, transaction expenses, covenants not to compete, compensation paid in
equity securities, other intangible assets and deferred charges), and (iv)
extraordinary expenses and non-recurring
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expenses (including the non-cash expenses associated with prepayment of Debt)
minus (c) extraordinary gains. For purposes of calculating EBITDA:
(a) Pro forma effect will be given for acquisitions by the Borrower and
its Restricted Subsidiaries. Historical cash flows for the acquired assets will
be included in the cash flows of the Borrower and its Restricted Subsidiaries
for the portion of the calculation period, if any, that the assets were not
owned by the Borrower or its Restricted Subsidiaries, subject to receipt by the
Administrative Agent of financial information acceptable to the Administrative
Agent, in its reasonable discretion.
(b) Retroactive effect will be given for dispositions of assets by the
Borrower or its Restricted Subsidiaries by excluding all cash flows for assets
that are disposed of in determining EBITDA at any time after the date of
disposition.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under, or which has a
branch or agency licensed under, the laws of the United States or any state
thereof, having combined capital and surplus in excess of $500,000,000, (b) a
finance company, insurance company or other financial institution which in the
ordinary course of business extends credit of the type extended hereunder and
that has total assets in excess of $500,000,000 or its equivalent in the
currency of such Person's jurisdiction of organization or operation, (c) already
a Lender hereunder (whether as an original party to this Agreement or as the
assignee of another Lender), (d) the successor (whether by transfer of assets,
merger or otherwise) to all or substantially all of the commercial lending
business of the assigning Lender, (e) any Affiliate of the assigning Lender that
is not a competitor of the Borrower and is engaged in the business of making
commercial loans in the ordinary course of its business, or (f) any other Person
that has been approved in writing as an Eligible Assignee by the Administrative
Agent and the Borrower, which approval by Borrower shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, if a Lender proposes to
assign its rights, interest and obligations hereunder to a Person that is at the
time of such assignment either (i) a competitor of the Borrower, or (ii) an
Affiliate of a competitor of the Borrower or a Person who is not engaged in the
business of making commercial loans in the ordinary course of its business, then
it shall be within the Borrower's sole discretion whether such Person is an
Eligible Assignee.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any current or former
ERISA Affiliate.
"EMU Event" means an event associated with economic and monetary union
in the European Community, including, without limitation, each (and any
combination) of the following:
(a) the introduction of, changeover to or operation of a single or
unified European currency (whether known as the euro or otherwise);
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(b) the fixing of conversion rates between a member state's currency
and the new currency or between the currencies of member states;
(c) the substitution of that new currency for the Ecu as the unit of
account of the European Community;
(d) the introduction of that new currency as lawful in a member state;
(e) the withdrawal from legal tender of any currency that, before the
introduction of the new currency, was lawful currency in one of the member
states; or
(f) the disappearance or replacement of a relevant rate option or other
price source for the Ecu or the national currency of any member state, or the
failure of the agreed sponsor (or a successor sponsor) to publish or display a
relevant rate, index, price, page or screen.
"EMU Legislation" means legislative measures of the Council of European
Union for the introduction of, change over to or operation of a single European
currency (whether or not known as the euro), being in part the implementation of
the Third Stage of EMU.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. ss. 331 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C.
ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300, et seq.), the
Environmental Protection Agency's regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act
(29 U.S.C. ss. 651 et seq.), analogous state statutes, and the rules and
regulations promulgated under the foregoing as such statutes are amended or
modified from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person which is a Restricted Subsidiary and
which, together with the Borrower, is treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA. For purposes of the definition of "Termination Event," the definition of
"Multiemployer Plan" and clause (iv) of Section 11.1(m), however, the meaning of
"ERISA Affiliate" shall be determined by disregarding the phrase "which is a
Restricted Subsidiary and" in the immediately preceding sentence.
"euro" means the single currency of Participating Member States to be
introduced on the date of commencement of the Third Stage of EMU or on which
circumstances arise which (in the
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opinion of the Administrative Agent) have substantially the same effect and
result in substantially the same consequences as the Third Stage of EMU.
"Eurodollar Reserve Percentage" means, for any day and with respect to
any Lender, the percentage (expressed as a decimal and rounded upwards, if
necessary, to the next higher 1/100th of 1%) which is in effect for such day as
prescribed by the Federal Reserve Board (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for such Lender in respect of eurocurrency
liabilities or any similar category of liabilities for a member bank of the
Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section 11.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Loans made by such
Lender then outstanding, and (b) such Lender's Commitment Percentage of the L/C
Obligations then outstanding.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Funds Rate" means the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "Federal Funds Rate" shall mean the average of
the quotations for the day for such transactions received by the Administrative
Agent from three brokers of national standing. Rates for weekends or holidays
shall be the same as the rate for the most immediate preceding Business Day.
"First Union" means First Union National Bank, a national banking
association, and its successors.
"Fiscal Year" means any fiscal year of the Borrower and its
Subsidiaries ending on December 31.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants or the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Borrower, provided, however,
that any accounting principle or practice required to be changed by the American
Institute of Certified Public Accounts or the Financial Accounting Standards
Board (or other appropriate board or committee of either) in order to continue
as a generally accepted accounting principle or practice may be so changed.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
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"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty Agreement" means the collective reference to the Guaranty
Agreement of even date executed by the Subsidiary Guarantors party thereto in
favor of the Administrative Agent for the ratable benefit of the Agents and the
Lenders substantially in the form of Exhibit H, and each supplement to the
Guaranty Agreement delivered after the Closing Date pursuant to Section 8.12 as
each such agreement may be amended or supplemented.
"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law, (d) the discharge or emission or release of which
requires a permit or license under any Environmental Law or other Governmental
Approval, (e) which are deemed by a court of law or a Governmental Authority to
constitute a nuisance or a trespass or pose a health or safety hazard to persons
or neighboring properties, (f) which are materials consisting of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance, or (g) which contain asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap or floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower under this Agreement, and any
confirming letter executed pursuant to such hedging agreement, all as amended or
modified.
"IFG" means Insignia Financial Group, Inc., a Delaware corporation.
"Interest Expense" means, with respect to the Borrower and its
Restricted Subsidiaries for any period, the gross interest expense (including
but without limitation interest expense attributable to Capital Leases) of the
Borrower and its Restricted Subsidiaries, all determined for such period on a
Consolidated basis in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
4.1(b).
"Issuing Lender" means First Union, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"L/C Commitment" means the lesser of (a) Ten Million Dollars
($10,000,000) or (b) the Aggregate Commitment.
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"L/C Facility" means the letter of credit facility established pursuant
to Article III hereof.
"L/C Obligations" means, at any time, an amount equal to the sum of (a)
the aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all of the Lenders
other than the Issuing Lender.
"Lehman" means Lehman Commercial Paper Inc., a Delaware corporation,
and its successors.
"Lender" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 13.8.
"Lender Addition and Acknowledgment Agreement" means each agreement
executed pursuant to Section 2.8 hereof by the Borrower and an existing Lender
or a Person not theretofore a Lender, as applicable, and acknowledged by the
Administrative Agent and each Subsidiary Guarantor, in the form attached hereto
as Exhibit J, providing for an increase in the Aggregate Commitment hereunder,
acknowledging that any Person not theretofore a Lender shall be a party hereto
and have the rights and obligations of a Lender hereunder, and setting forth the
Commitment of each Lender.
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section
3.1.
"Leverage Ratio" means the ratio calculated pursuant to Section 9.1
hereof.
"LIBOR" means the rate of interest per annum determined on the basis of
the rate for deposits in Dollars in minimum amounts of at least $5,000,000 (or
the Alternative Currency Amount thereof with respect to a borrowing to be made
in an Alternative Currency) for a period equal to the applicable Interest Period
which appears on the Dow Jones Markets screen 3750 at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of the applicable
Interest Period (rounded upward, if necessary, to the nearest one-sixteenth of
one percent (1/16%)). If, for any reason, such rate does not appear on Dow Jones
Markets screen 3750, then "LIBOR" shall be determined by the Administrative
Agent to be the arithmetic average (rounded upward, if necessary, to the nearest
one-sixteenth of one percent (1/16%)) of the rate per annum at which deposits in
the Permitted Currency in which the applicable Loan is denominated would be
offered by five (5) first class banks in the London interbank market to the
entity which is the Administrative Agent (or the Administrative Agent's
Correspondent) approximately 11:00 a.m. (London time) two (2) Business Days
prior to the first day of the applicable Interest Period for a period equal to
such Interest Period and in an amount substantially equal to the amount of the
applicable Loan. Each calculation by the Administrative Agent of LIBOR shall be
conclusive and
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binding for all purposes, absent manifest error.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to
the next higher one-sixteenth of one percent (1/16%) determined by the
Administrative Agent pursuant to the following formula:
LIBOR Rate = LIBOR
------------------------
1.00-Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon
the LIBOR Rate as provided in Section 4.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan" means any loan made to the Borrower pursuant to Section 2.1,
whether denominated in Dollars or in an Alternative Currency.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Guaranty Agreement, the Pledge and Security Agreement, any Application, any
Hedging Agreement executed by the Borrower with any Lender or any Affiliate of
any Lender, and each other document, instrument and agreement executed and
delivered by the Borrower, its Subsidiaries or their counsel in connection with
this Agreement or otherwise referred to herein or contemplated hereby, all as
may be amended or supplemented from time to time.
"Management Agreement" means any agreement pursuant to which property
management, asset management, partnership management and/or related services are
provided to real estate owners, or any other agreement providing for service
fees to be payable to the Borrower or any Subsidiary thereof, including all of
such agreements hereafter acquired or entered into by any such Person, and any
renewals, extensions, amendments or modifications thereto.
"Material Adverse Effect" means, with respect to the Borrower and its
Restricted Subsidiaries, a material adverse effect on the properties, business,
operations or condition (financial or otherwise) of such Persons on a
Consolidated basis taken as a whole or the ability of any such Person to perform
the payment or other material obligations under the Loan Documents to which it
is a party or which would materially impair the validity or enforceability of
any of the Loan Documents against any Person party thereto, other than the
Agents or any of the Lenders or their Affiliates.
"Material Contract" means (a) any contract or other agreement, written
or oral, of the Borrower or any of its Restricted Subsidiaries involving
monetary liability of any such Person in an amount in excess of $1,000,000 per
annum, or (b) any other contract or agreement, written or oral, of the Borrower
or any of its Restricted Subsidiaries the failure to comply with which could
reasonably be expected to have a Material Adverse Effect.
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"Maturity Date" shall have the meaning given thereto in Section 2.6.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six years.
"National Currency Unit" means the unit of currency (other than a euro
unit) of a Participating Member State.
"Net Cash Proceeds" means, with respect to any offering of capital
stock, the gross cash proceeds received by the Borrower or any of its
Subsidiaries therefrom less investment banking fees, legal fees, accountant
fees, underwriting discounts and commissions and other customary fees and
expenses actually incurred by the Borrower or any of its Subsidiaries in
connection with such offering.
"Net Income" means, with respect to the Borrower and its Restricted
Subsidiaries for any period, the Consolidated net income (or loss) of the
Borrower and its Restricted Subsidiaries for such period determined in
accordance with GAAP.
"Notes" means the separate promissory notes made by the Borrower
payable to the order of each Lender, substantially in the form of Exhibit A
hereto, evidencing the Revolving Credit Facility, and any amendments and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "Note" means
any of such Notes.
"Notice of Account Designation" shall have the meaning assigned thereto
in Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 4.2.
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans and
Reimbursement Obligations, (b) all payment and other obligations owing by the
Borrower to any Lender, an Affiliate of any Lender, or any Agent under any
Hedging Agreement and (c) all other fees and commissions (including attorney's
fees), charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by the Borrower to any Lender or any
Agent under this Agreement, any Note or any of the other Loan Documents, of
every kind, nature and description, direct or indirect, absolute or contingent,
due or to become due, contractual or tortious, liquidated or unliquidated.
"Other Taxes" shall have the meaning assigned thereto in Section
4.11(b).
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"Participating Member State" means a state which adopts a single
currency in accordance with the Treaty on European Union.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrower or any ERISA Affiliates or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any of their current
ERISA Affiliates.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Permitted Currency" means Dollars or any Alternative Currency, or each
such currency, as the context requires.
"Pledge and Security Agreement" means the collective reference to the
Pledge and Security Agreement of even date executed by the Borrower and certain
Subsidiaries thereof in favor of the Administrative Agent for the ratable
benefit of the Agents and the Lenders substantially in the form of Exhibit I,
and each Pledge and Security Agreement delivered after the Closing Date pursuant
to Section 8.12, as each such Agreement may be amended or supplemented, with the
consent of the Lenders.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union as its prime rate. The
parties hereto acknowledge that the rate announced publicly by First Union as
its Prime Rate is an index or base rate and shall not necessarily be its lowest
or best rate charged to its customers or other banks.
"Register" shall have the meaning assigned thereto in Section 13.8(d).
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Required Lenders" means, at any date, any combination of holders of
greater than sixty-six and two-thirds percent (66-2/3%) of the aggregate unpaid
principal amount of the Notes, exclusive of Notes held by Defaulting Lenders, or
if no amounts are outstanding under the Notes, any combination of Lenders whose
Commitment Percentages aggregate greater than sixty-six and two-thirds percent
(66-2/3%), if the Commitment of each Defaulting Lender were excluded from the
Aggregate Commitment.
"Restricted Subsidiary" means any Subsidiary of the Borrower other than
an Unrestricted Subsidiary.
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"Revolving Credit Facility" means the revolving credit facility
established pursuant to Article II hereof.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill
Companies, Inc.
"Solvent" means, as to the Borrower and its Restricted Subsidiaries on
a particular date, that any such Person (a) has capital sufficient to carry on
its business and transactions and all business and transactions in which it is
about to engage and is able to pay its debts as they mature and (b) is not
"Insolvent" as defined under the United States Bankruptcy Code or any applicable
State insolvency law.
"Subordinated Debt" means the collective reference to all Debt of the
Borrower and any Restricted Subsidiary which (a) has a scheduled maturity date
more than one year after the Maturity Date, (b) is not subject to any scheduled
amortization or mandatory redemption feature of any kind (other than a mandatory
redemption upon the occurrence of an event which constitutes an Event of Default
hereunder), and (c) is subordinated with respect to payment, remedies and
covenants to the Obligations and (with respect to Debt which is incurred by the
Borrower and its Restricted Subsidiaries after the date hereof) otherwise
subordinated thereto to the reasonable satisfaction of the Agents and Required
Lenders.
"Subsidiary" means, as to any Person, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity is at the time, directly or indirectly, owned by
such Person (irrespective of whether, at such time, capital stock or other
ownership interest of any other class or classes shall have or might have voting
power by reason of the happening of any contingency). Unless otherwise
qualified, references to "Subsidiary" or "Subsidiaries" herein shall refer to
those of the Borrower.
"Subsidiary Guarantor" means each Restricted Subsidiary party to a
Guaranty Agreement.
"Syndication Agent" means Lehman in its capacity as Syndication Agent.
"Taxes" shall have the meaning assigned thereto in Section 4.11(a).
"Termination Date" means the date on which the Credit Facility
terminates pursuant to Section 2.6.
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA for which notice has not been waived which results in a
Material Adverse Effect, or (b) the withdrawal of the Borrower or any ERISA
Affiliate from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA which results in a Material
Adverse Effect, or (c) the institution of proceedings to terminate, or the
appointment of a trustee with respect to, any Pension Plan by the PBGC which
results in a Material Adverse Effect, or (d) any other event or condition which
would constitute grounds under Section 4042(a) of ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan,
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or (e) the imposition of a Lien pursuant to Section 412 of the Code or Section
302 of ERISA which results in a Material Adverse Effect, or (f) any event or
condition which results in the reorganization or insolvency of a Multiemployer
Plan under Sections 4241 or 4245 of ERISA which results in a Material Adverse
Effect, or (g) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of
proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA which
results in a Material Adverse Effect.
"Third Stage of EMU" means the third stage of Economic and Monetary
Union as contemplated by the Treaty on European Union (at the date of this
Agreement expected to be January 1, 1999).
"Total Capitalization" means, at any date of determination, without
duplication, the sum of Total Debt (determined with respect to the Borrower and
its Restricted Subsidiaries) plus Consolidated Net Worth, each as of such date.
"Total Debt" means, at any date of determination, the aggregate amount
of Debt of the Borrower and its Restricted Subsidiaries determined on a
Consolidated basis.
"Treaty on European Union" means the treaty establishing the European
Community signed in Rome on March 25, 1957, as amended from time to time.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York, as amended, restated or otherwise modified.
"Uncontrolled Co-Investment Entity" means any Co-Investment Entity
which is not a Controlled Co-Investment Entity.
"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.
"United States" means the United States of America.
"Unrestricted Subsidiary" means any Subsidiary of the Borrower and of
any other Subsidiary whose Debt and Contingent Obligations are non-recourse to
the Borrower and its other Restricted Subsidiaries and which has been
designated, in writing, by the Borrower as such (without such designation having
been rescinded by the Borrower). As of the Closing Date, the Unrestricted
Subsidiaries are those set forth as such on Schedule 6.1(a).
SECTION 1.2 General. Unless otherwise specified, a reference in this
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference herein to "Charlotte time" shall refer to
the applicable time of day in Charlotte, North Carolina.
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SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
CREDIT FACILITY
SECTION 2.1 Loans and Maximum Availability. Subject to the terms and
conditions of this Agreement, each Lender severally commits to make Loans to the
Borrower from time to time from the Closing Date through the Termination Date as
requested by the Borrower in accordance with the terms of Section 2.2; provided,
that (a) the Dollar Amount of the aggregate principal amount of all outstanding
Loans (after giving effect to any amount requested and funded and the use of the
proceeds thereof) shall not exceed the Aggregate Commitment less the sum of all
outstanding L/C Obligations, (b) the Dollar Amount of the aggregate principal
amount of all outstanding Alternative Currency Loans (after giving effect to any
amount requested and funded and the use of the proceeds thereof) shall not
exceed the Alternative Currency Commitment, and (c) the Dollar Amount of the
aggregate principal amount of outstanding Loans from any Lender to the Borrower
shall not at any time exceed such Lender's Commitment less an amount equal to
such Lender's Commitment Percentage of the outstanding L/C Obligations. Each
Loan by a Lender shall be in a principal amount equal to such Lender's
Commitment Percentage of the aggregate principal amount of Loans requested on
such occasion. Loans to be made in an Alternative Currency shall be funded in an
amount equal to the Alternative Currency Amount of such Loan. Subject to the
terms and conditions hereof, the Borrower may borrow, repay and reborrow Loans
hereunder until the Termination Date.
SECTION 2.2 Procedure for Advances of Loans.
(a) Requests for Borrowing. The Borrower shall give the Administrative
Agent irrevocable prior written notice in the form attached hereto as Exhibit B
(a "Notice of Borrowing") not later than 12:00 Noon (Charlotte time) (i) on the
same Business Day as each Base Rate Loan, and (ii) at least three (3) Business
Days before each LIBOR Rate Loan denominated in Dollars and not later than 11:00
a.m. (the time of the Administrative Agent's Correspondent) at least four (4)
Business Days before each LIBOR Rate Loan denominated in an Alternative
Currency, of its intention to borrow, specifying (A) the date of such borrowing,
which shall be a Business Day, (B) whether the Loan shall be denominated in
Dollars or an Alternative Currency, (C) if denominated in Dollars, whether the
Loans are to be LIBOR Rate Loans or Base Rate Loans, (D) the amount of such
borrowing, which shall not exceed an amount equal to the amount of the Aggregate
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Commitment or Alternative Currency Commitment, as applicable, then available to
the Borrower, and shall be, (x) with respect to Base Rate Loans in an aggregate
principal amount of $2,500,000 or a whole multiple of $500,000 in excess
thereof, (y) with respect to LIBOR Rate Loans denominated in Dollars, in an
aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in
excess thereof and (z) with respect to LIBOR Rate Loans denominated in an
Alternative Currency, in an aggregate principal amount of $2,000,000 or a whole
multiple of $500,000 in excess thereof, and (E) in the case of a LIBOR Rate
Loan, the duration of the Interest Period applicable thereto. Notices received
after 12:00 Noon (Charlotte time) (or 11:00 a.m. (the time of the Administrative
Agent's Correspondent) with respect to Alternative Currency Loans) shall be
deemed received on the next Business Day. The Administrative Agent shall
promptly notify the Lenders of each Notice of Borrowing.
(b) Disbursement of Loans Denominated in Dollars. Not later than 3:00
p.m. (Charlotte time) on the proposed borrowing date for any Loan denominated in
Dollars, each Lender will make available to the Administrative Agent, for the
account of the Borrower, at the office of the Administrative Agent in Dollars in
funds immediately available to the Administrative Agent, such Lender's
Commitment Percentage of the requested Loan to be made on such borrowing date.
The Borrower hereby irrevocably authorizes the Administrative Agent to disburse
the proceeds of each borrowing requested pursuant to this Section 2.2 in
immediately available funds by crediting such proceeds to a deposit account of
the Borrower identified in the most recent notice substantially in the form of
Exhibit E hereto (a "Notice of Account Designation") delivered by the Borrower
to the Administrative Agent or by wire transfer to such account as may be agreed
upon by the Borrower and the Administrative Agent from time to time. Subject to
Section 4.7 hereof, the Administrative Agent shall not be obligated to disburse
the amounts to be funded by a Lender pursuant to this Section 2.2 to the extent
that such Lender has not made such amounts available to the Administrative
Agent.
(c) Disbursement of Alternative Currency Loans. Not later than 11:00
a.m. (the time of the Administrative Agent's Correspondent) on or before the
proposed borrowing date for any Alternative Currency Loan, each Lender will make
available to the Administrative Agent for the account of the Borrower at the
office of the Administrative Agent's Correspondent, in the requested Alternative
Currency and in funds immediately available to the Administrative Agent, such
Lender's Commitment Percentage of the Alternative Currency Amount of such
requested borrowing. The Borrower hereby irrevocably authorizes the
Administrative Agent to disburse the proceeds of each borrowing requested
pursuant to this Section 2.2 in immediately available funds by crediting or
wiring such proceeds to the deposit account of the Borrower identified in the
most recent Notice of Account Designation delivered by the Borrower to the
Administrative Agent or as may be otherwise agreed upon by the Borrower and the
Administrative Agent from time to time. Subject to Section 4.7, the
Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Loan requested pursuant to this Section 2.2 to the extent that
any Lender has not made available to the Administrative Agent its Commitment
Percentage of such Loan.
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SECTION 2.3 Repayment of Loans.
(a) Repayment on Termination Date. The Borrower shall repay the
outstanding principal amount of all Loans in full, together with all accrued but
unpaid interest thereon, on the Termination Date.
(b) Mandatory Repayment of Excess Loans; Maximum Availability.
(i) Aggregate Commitment. If at any time (as determined by the
Administrative Agent under Section 2.3(b)(iv)), and for any reason, the
aggregate principal Dollar Amount of all outstanding Loans exceeds the
Aggregate Commitment less all outstanding L/C Obligations, the Borrower
shall (A) first, if (and to the extent) necessary to eliminate such
excess, immediately repay outstanding Base Rate Loans by the Dollar
Amount of such excess (and/or reduce any pending request for a Base
Rate Loan on such day by the Dollar Amount of such excess) and (B)
second, if (and to the extent) necessary to eliminate such excess,
immediately repay LIBOR Rate Loans (and/or reduce any pending requests
for a borrowing or continuation or conversion of such Loans submitted
in respect of such Loans on such day) by the Dollar Amount of any
remaining excess.
(ii) Excess Alternative Currency Loans. If at any time (as
determined by the Administrative Agent under Section 2.3(b)(iv)) and
for any reason the Dollar Amount of the aggregate outstanding principal
amount of all outstanding Alternative Currency Loans exceeds the
Alternative Currency Commitment, such excess shall be immediately
repaid, in the currency in which such Alternative Currency Loan or
Alternative Currency Loans were initially funded, by the Borrower to
the Administrative Agent for the account of the Lenders; provided that
the Borrower shall not be required to repay such excess if and to the
extent the excess is due solely to currency fluctuations and does not
exceed 5% of the Alternative Currency Commitment.
(iii) Excess L/C Obligations. If at any time and for any
reason the aggregate principal amount of the L/C Obligations exceeds
the L/C Commitment, then the Borrower shall deposit an amount equal to
such excess in accordance with Section 11.2(b).
(iv) Compliance and Payments. The Borrower's compliance with
this Section 2.3(b) shall be tested from time to time by the
Administrative Agent at its sole discretion, but in any event on each
day an interest payment is due under Section 4.1(e). Each such
repayment pursuant to this Section 2.3(b) shall be accompanied by any
amount required to be paid pursuant to Section 4.9 hereof.
(c) Optional Repayments. The Borrower may at any time and from time to
time repay the Loans, in whole or in part, upon at least four (4) Business Days'
irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans
denominated in an Alternative Currency, upon at least three (3) Business Days'
irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans
denominated in Dollars and one (1) Business Day's irrevocable notice with
respect to Base Rate Loans, in the form attached hereto Exhibit D (a "Notice of
Repayment"), specifying the date and amount of repayment and whether the
repayment is of LIBOR Rate Loans denominated in an Alternative Currency, LIBOR
Rate Loans denominated in Dollars, Base Rate
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Loans, or a combination thereof, and, if of a combination thereof, the amount
allocable to each. Upon receipt of such notice, the Administrative Agent shall
promptly notify each Lender. If any such notice is given, the amount specified
in such notice shall be due and payable on the date set forth in such notice.
Partial repayments shall be in an aggregate amount of $2,500,000 or a whole
multiple of $500,000 in excess thereof with respect to Base Rate Loans and
$5,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to
LIBOR Rate Loans; provided, that with respect to Alternative Currency Loans,
partial repayments shall be in an Alternative Currency Amount equal to
$2,000,000 or a whole multiple of $500,000 in excess thereof.
(d) Limitation on Repayment of LIBOR Rate Loans. Any repayment of any
LIBOR Rate Loan on any day other than on the last day of the Interest Period
applicable thereto shall be subject to the payment of amounts required to be
paid pursuant to Section 4.9 hereof.
SECTION 2.4 Notes. Each Lender's Loans and the obligation of the
Borrower to repay such Loans shall be evidenced by a Note executed by the
Borrower payable to the order of such Lender representing the Borrower's
obligation to pay such Lender's Commitment or, if less, the aggregate unpaid
principal amount of all Loans made and to be made by such Lender to the Borrower
hereunder, plus interest and all other fees, charges and other amounts due
thereon. Each Note shall bear interest on the unpaid principal amount thereof at
the applicable interest rate per annum specified in Section 4.1.
SECTION 2.5 Permanent Reduction of the Aggregate Commitment.
(a) The Borrower shall have the right at any time and from time to
time, upon at least three (3) Business Days' prior written notice to the
Administrative Agent, to permanently reduce, in whole at any time or in part
from time to time, without premium, the Aggregate Commitment in an aggregate
principal amount not less than $1,000,000 or any whole multiple of $1,000,000 in
excess thereof. Upon receipt of such notice, the Administrative Agent shall
promptly notify each Lender. To the extent that the Aggregate Commitment is
reduced to an amount below the Alternative Currency Commitment, there shall be a
corresponding permanent reduction of the Alternative Currency Commitment, to the
amount of the Aggregate Commitment as so reduced.
(b) Each permanent reduction permitted or required pursuant to this
Section 2.5 shall be accompanied by a payment of principal sufficient to reduce
the aggregate outstanding Extensions of Credit of the Lenders to an amount not
in excess of the Aggregate Commitment as so reduced and if the Aggregate
Commitment as so reduced is less than the aggregate amount of all outstanding
Letters of Credit, the Borrower shall be required to deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
excess of the aggregate then undrawn and unexpired amount of such Letters of
Credit over the Aggregate Commitment as so reduced. Any reduction of the
Aggregate Commitment to zero shall be accompanied by payment of all outstanding
Obligations (and furnishing of cash collateral satisfactory to the
Administrative Agent for all L/C Obligations) and shall result in the
termination of the Commitments and Credit Facility. Such cash collateral shall
be applied in accordance with Section 11.2(b). If the reduction of the Aggregate
Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall
be accompanied by any amount required to be paid pursuant to Section 4.9 hereof.
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SECTION 2.6 Termination of Credit Facility. The Credit Facility shall
terminate on the earliest of (a) the third anniversary of the Closing Date (the
"Maturity Date"), (b) the date of termination by the Borrower pursuant to
Section 2.5(a) and (c) the date of termination by the Administrative Agent on
behalf of the Lenders pursuant to Section 11.2(a).
SECTION 2.7 Use of Proceeds. The Borrower shall use the proceeds of the
Loans for working capital and other general corporate requirements of the
Borrower and its Subsidiaries, including the payment of certain fees and
expenses incurred in connection with the transactions contemplated hereby.
SECTION 2.8 Increase in Aggregate Commitment. So long as no Default or
Event of Default shall have occurred and be continuing, at any time prior to the
Termination Date, the Borrower shall have the right from time to time upon not
less than thirty (30) days prior written notice to the Administrative Agent to
increase the Aggregate Commitment; provided, that in no event shall the
Aggregate Commitment be increased to an amount greater than $200,000,000;
provided, further, that:
(a) Any increase in the Aggregate Commitment which is
accomplished by increasing the Commitment of any Lender or Lenders who
are at the time of such increase party to this Agreement (which Lender
or Lenders shall consent to such increase in their sole and absolute
discretion) shall be accomplished as follows: (i) this Agreement will
be amended by the Borrower, the Administrative Agent and those
Lender(s) whose Commitment(s) is or are being increased (but without
any requirement that the consent of the Required Lenders be obtained)
to reflect the revised Commitment amounts of each of the Lenders, (ii)
the Administrative Agent will deliver an updated Schedule 1.1(a) to the
Borrower, the Issuing Lender and each of the Lenders reflecting the
revised Commitment amount and Commitment Percentage of each of the
Lenders, (iii) the outstanding Loans and Commitment Percentages of L/C
Obligations will be reallocated on the effective date of such increase
among the Lenders in accordance with their revised Commitment
Percentages (and the Lenders agree to make all payments and adjustments
necessary to effect the reallocation and the Borrower shall pay any and
all costs required pursuant to Section 4.9 in connection with such
reallocation as if such reallocation were a prepayment) and (iv) the
Borrower will deliver new Note(s) to the Lender or Lenders whose
Commitment(s) is or are being increased reflecting the revised
Commitment amount of such Lender(s); and
(b) Any increase in the Aggregate Commitment which is
accomplished by addition of a new Lender under the Agreement shall be
accomplished as follows: (i) such new Lender shall be an Eligible
Assignee and shall be subject to the consent of the Administrative
Agent, which consent shall not be unreasonably withheld, (ii) this
Agreement will be amended by the Borrower, the Administrative Agent and
by the party becoming an additional Lender hereunder (but without any
requirement that the consent of the Required Lenders be obtained) to
reflect the addition of such party as a Lender hereunder, (iii) the
Administrative Agent will deliver an updated Schedule 1.1(a) to the
Borrower, the Issuing Lender and each of the Lenders reflecting the
revised Commitment amounts and Commitment Percentages of each of the
Lenders, (iv) the outstanding Loans and Commitment Percentages of L/C
Obligations will be reallocated on the effective date
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of such increase among the Lenders in accordance with their revised
Commitment Percentages (and the Lenders agree to make all payments and
adjustments necessary to effect the reallocation and the Borrower shall
pay any and all costs required pursuant to Section 4.9 in connection
with such reallocation as if such reallocation were a prepayment) and
(v) the Borrower will deliver a Note to such party.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Lenders set forth
in Section 3.4(a), agrees to issue standby letters of credit ("Letters of
Credit") for the account of the Borrower on any Business Day from the Closing
Date through but not including the Termination Date in such form as may be
approved from time to time by the Issuing Lender; provided, that the Issuing
Lender shall have no obligation to issue any Letter of Credit if, after giving
effect to such issuance, (a) the L/C Obligations would exceed the lesser of (i)
the L/C Commitment or (ii) the Aggregate Commitment less the sum of the Dollar
Amount of the aggregate principal amount of all other Extensions of Credit or
(b) the Available Commitment of any Lender would be less than zero. Each Letter
of Credit shall (i) be denominated in Dollars, (ii) be a standby letter of
credit issued to support obligations of the Borrower or any of its Restricted
Subsidiaries, contingent or otherwise, (iii) expire no later than one (1) year
from the date of issuance thereof; provided, that in no case shall such
expiration date be later than five (5) Business Days prior to the Termination
Date, and (iv) be subject to the laws of the State of North Carolina and, to the
extent not inconsistent therewith, the Uniform Customs. References herein to
"issue" and derivations thereof with respect to Letters of Credit shall also
include extensions or modifications of any existing Letters of Credit, unless
the context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at the Administrative Agent's Office an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
shall process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall, subject to Section 3.1 and Article V hereof,
promptly but no later than five (5) Business Days from the date of its receipt
of the Application therefor, issue the Letter of Credit requested thereby (but
in no event shall the Issuing Lender be required to issue any Letter of Credit
earlier than three (3) Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender
and the Borrower. The Issuing Lender shall furnish to the Borrower a copy of
such Letter of Credit and furnish to each Lender a copy of such Letter of Credit
and the amount of each Lender's L/C Participation therein, all promptly
following the issuance of such Letter of Credit.
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SECTION 3.3 Commissions and Other Charges.
(a) The Borrower shall pay to the Administrative Agent, for the account
of the Issuing Lender and the L/C Participants, a letter of credit commission
with respect to each Letter of Credit in an amount equal to the face amount of
such Letter of Credit multiplied by the Applicable Margin for LIBOR Rate Loans
(determined on a per annum basis). Such commission shall be payable quarterly in
arrears on the last Business Day of each quarter and on the Termination Date.
(b) In addition to the foregoing commission, the Borrower shall pay to
the Administrative Agent, for the account of the Issuing Lender, an issuance fee
in an amount equal to the face amount of each Letter of Credit multiplied by
0.125%. Such issuance fee shall be payable on the date of issuance thereof and
on the date of each renewal, if any, thereof.
(c) In addition to the foregoing commissions, the Borrower shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses as
are incurred or charged by the Issuing Lender in issuing, effecting payment
under, amending or otherwise administering any Letter of Credit; provided, that
from time to time, as requested by the Borrower, the Administrative Agent will
provide the Borrower with information pertaining to the amount of such costs and
expenses.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all
commissions received by the Administrative Agent in accordance with their
respective Commitment Percentages.
SECTION 3.4 L/C Participations.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Commitment Percentage in
the Issuing Lender's obligations and rights under and in respect of each Letter
of Credit issued hereunder and the amount of each draft paid by the Issuing
Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees
with the Issuing Lender that, if a draft is paid under any Letter of Credit for
which the Issuing Lender is not reimbursed in full by the Borrower in accordance
with the terms of this Agreement, including, without limitation, from the
proceeds of a Base Rate Loan pursuant to Section 3.5, such L/C Participant shall
pay to the Issuing Lender upon demand at the Issuing Lender's address for
notices specified herein an amount equal to such L/C Participant's Commitment
Percentage of the amount of such draft, or any part thereof, which is not so
reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C Participant
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shall pay to the Issuing Lender on demand, in addition to such amount, interest
on such amount at a rate equal to the daily average Federal Funds Rate as
determined by the Administrative Agent during the period from and including the
date such payment is due to the date on which such payment is immediately
available to the Issuing Lender. A certificate of the Issuing Lender with
respect to any amounts owing under this Section 3.4(b) shall be conclusive in
the absence of manifest error. With respect to payment to the Issuing Lender of
the unreimbursed amounts described in this Section 3.4(b), if the L/C
Participants receive notice that any such payment is due (A) prior to 1:00 p.m.
(Charlotte time) on any Business Day, such payment shall be due that Business
Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment
shall be due on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Commitment Percentage of such payment in accordance with this Section 3.4, the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from the Borrower or otherwise), or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro rata
share thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it. With respect to any distribution by the
Issuing Lender of any payment described in this Section 3.4(c), if the Issuing
Lender receives such payment prior to 1:00 p.m. (Charlotte time) on any Business
Day, such payment shall be distributed to such L/C Participant on that Business
Day, and if received after 1:00 p.m. (Charlotte time) on any Business Day, such
distribution will be made on the following Business Day.
SECTION 3.5 Reimbursement Obligation of the Borrower. The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft paid under any Letter of
Credit for the amount of (a) such draft so paid and (b) any taxes, fees, charges
or other costs or expenses incurred by the Issuing Lender in connection with
such payment. Each such payment shall be made to the Issuing Lender at its
address for notices specified herein in Dollars and in immediately available
funds. Interest shall be payable on any and all amounts remaining unpaid by the
Borrower under this Article III from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding Base Rate Loans which were
then overdue. If the Borrower fails to timely reimburse the Issuing Lender on
the date the Borrower receives the notice referred to in this Section 3.5, the
Borrower shall be deemed to have timely given a Notice of Borrowing hereunder to
the Administrative Agent requesting the Lenders to make a Base Rate Loan on such
date in an amount equal to the amount of such drawing and, regardless of whether
or not the conditions precedent specified in Article V have been satisfied, the
Lenders shall make Base Rate Loans in such amount, the proceeds of which shall
be applied to reimburse the Issuing Lender for the amount of the related drawing
and costs and expenses. Notwithstanding the foregoing, nothing in this Section
3.5 shall obligate the Lenders to make such Base Rate Loans if the making of
such Base Rate Loans would violate the automatic stay under federal bankruptcy
laws, and no Lender shall be required to fund more than its Commitment
Percentage of any draw under any Letter of Credit.
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SECTION 3.6 Obligations Absolute. The Borrower's obligations under this
Article III (including without limitation the Reimbursement Obligation) shall be
absolute and unconditional under any and all circumstances and irrespective of
any set-off, counterclaim or defense to payment which the Borrower may have or
have had against the Issuing Lender, any L/C Participant or any beneficiary of a
Letter of Credit. The Borrower also agrees with the Issuing Lender that the
Issuing Lender and the L/C Participants shall not be responsible for, and the
Borrower's Reimbursement Obligation under Section 3.5 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee. The Issuing
Lender and the L/C Participants shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except, in
respect of the Issuing Lender, for errors or omissions caused by the Issuing
Lender's gross negligence or willful misconduct. The Borrower agrees that any
action taken or omitted by the Issuing Lender under or in connection with any
Letter of Credit or the related drafts or documents, if done in the absence of
gross negligence or willful misconduct and in accordance with the standards of
care specified in the UCC and, to the extent not inconsistent therewith, the
Uniform Customs shall be binding on the Borrower and shall not result in any
liability of the Issuing Lender to the Borrower. The responsibility of the
Issuing Lender to the Borrower in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
SECTION 3.7 Effect of Application. To the extent that any provision of
any Application related to any Letter of Credit is inconsistent with the
provisions of this Article III, the provisions of this Article III shall apply.
Not in limitation of the foregoing, any provision contained in any Application
or other certificate, document or other paper provided by the Borrower in
connection with an Application (collectively, the "Application Documents") which
purports to convey to the Issuing Bank or any of its affiliates a Lien as
security for any obligations of the Borrower in connection therewith shall be
void and of no force and effect. Further, notwithstanding any provision of an
Application Document specifying events of default, an event of default shall be
deemed to have occurred under an Application Document only upon the occurrence
of an Event of Default. Accordingly, any provision contained in any of the
Application Documents providing for or specifying events of default shall be of
no force and effect.
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ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section
4.1, at the election of the Borrower, (i) the aggregate principal balance of the
Loans or any portion thereof, denominated in Dollars, shall bear interest at (A)
the Base Rate plus the Applicable Margin or (B) the LIBOR Rate plus the
Applicable Margin and (ii) the Loans or any portion thereof denominated in an
Alternative Currency, shall bear interest at the LIBOR Rate plus the Applicable
Margin; provided that the LIBOR Rate shall not be available until three (3)
Business Days after the Closing Date (or four (4) Business Days after the
Closing Date with respect to each Loan denominated in an Alternative Currency).
The Borrower shall select the rate of interest and Interest Period, if any,
applicable to any Loan at the time a Notice of Borrowing is given pursuant to
Section 2.2 or at the time a Notice of Conversion/Continuation is given pursuant
to Section 4.2. Any Loan or any portion thereof as to which the Borrower has not
duly specified an interest rate as provided herein shall be deemed a Base Rate
Loan denominated in Dollars.
(b) Interest Periods. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 4.1(a), shall elect
an interest period (each, an "Interest Period") to be applicable to such Loan,
which Interest Period shall be a period of one (1), two (2), three (3), or six
(6) months; provided that:
(i) each Interest Period shall commence on the date of advance
of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall
commence on the date on which the next preceding Interest Period
expires;
(ii) if any Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided, that if any Interest Period
would otherwise expire on a day that is not a Business Day but is a day
of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the relevant calendar
month at the end of such Interest Period;
(iv) no Interest Period shall be permitted to extend beyond
the Termination Date; and
(v) there shall be no more than ten (10) Interest Periods
outstanding at any time, up to five (5) of which may be with respect to
Alternative Currency Loans.
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(c) Applicable Margin. The Applicable Margin provided for in Section
4.1(a) with respect to the Loans (the "Applicable Margin") shall be determined
by reference to the Leverage Ratio in accordance with the following chart:
Applicable Margin Per Annum
Level Leverage Ratio LIBOR + Base Rate +
- ----- -------------- ------- -----------
I Greater than 2.25 to 1.00 2.00% .75%
II Equal to or less than 1.75% .50%
2.25 to 1.00 but greater
than 1.50 to 1.00
III Equal to or less than 1.50% .25%
1.50 to 1.00
The Applicable Margin on the Closing Date shall be 1.50% with respect to LIBOR
Rate Loans and 0.25% with respect to Base Rate Loans.
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the tenth (10th) Business Day (the "Adjustment Date")
after receipt by the Administrative Agent of financial statements for the
Borrower and its Subsidiaries delivered under Section 7.1(a) or (b), as
applicable, and the accompanying Officer's Compliance Certificate setting forth
the Leverage Ratio as of the most recent fiscal quarter end. The Administrative
Agent agrees to give the Borrower and the Lenders notice of any adjustment in
the Applicable Margin within two (2) Business Days of such adjustment; provided,
that the Administrative Agent's failure to give such notice shall not result in
any liability to the Administrative Agent or in any way affect the validity of
any such adjustment. In the event the Borrower fails to deliver such financial
statements and certificate within the time required by Sections 7.1(a) and 7.2
hereof, the Applicable Margin shall be the highest Applicable Margin set forth
above until the delivery of such financial statements and certificate unless at
such time the outstanding principal balance of any Loans are bearing interest at
the "default rate" set forth in Section 4.1(d) below, in which case the
Applicable Margin shall not be increased pursuant to this sentence.
(d) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) all outstanding LIBOR Rate Loans shall upon the request of
the Required Lenders bear interest at a rate per annum two percent (2%) plus the
rate then applicable to LIBOR Rate Loans until the end of the applicable
Interest Period and thereafter at a rate equal to two percent (2%) plus the rate
then applicable to Base Rate Loans, and (ii) all outstanding Base Rate Loans
shall, upon the request of the Required Lenders, bear interest at a rate per
annum equal to two percent (2%) plus the rate then applicable to Base Rate
Loans. Interest shall continue to accrue on the Notes after the filing by or
against the Borrower of any petition seeking any relief in bankruptcy or under
any act or law pertaining to insolvency or debtor relief, whether state, federal
or foreign.
(e) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each fiscal quarter and
interest on each LIBOR Rate Loan shall be payable on the last day of each
Interest Period applicable thereto, provided that, in the case of an Interest
Period in excess of three (3) months, accrued interest shall also be paid on
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the day which is three (3) months after the commencement of such Interest
Period. All interest rates, fees and commissions provided hereunder shall be
computed on the basis of a 360-day year and assessed for the actual number of
days elapsed; provided that interest on Base Rate Loans and Alternative Currency
Loans denominated in Pounds Sterling shall be computed on the basis of a
365/366-day year and assessed for the actual number of days elapsed.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes and
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative
Agent's option promptly refund to the Borrower any interest received by Lenders
in excess of the maximum lawful rate or shall apply such excess to the principal
balance of the Obligations. It is the intent hereof that the Borrower not pay or
contract to pay, and that neither the Administrative Agent nor any Lender
receive or contract to receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may be paid by the Borrower under Applicable
Law.
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans.
Provided that no Default (other than a Default arising from any of the events
specified in Section 11.1(e), (f) and (n) hereof) or Event of Default has
occurred and is then continuing, and the Required Lenders have not otherwise so
notified the Borrower, the Borrower shall have the option to (a) convert at any
time all or any portion of its outstanding Base Rate Loans in a principal amount
equal to $2,500,000 or any whole multiple of $500,000 in excess thereof into one
or more LIBOR Rate Loans denominated in Dollars or (b) subject to Section 4.9,
convert all or any part of its outstanding LIBOR Rate Loans denominated in
Dollars in a principal amount equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof into Base Rate Loans or (c) upon the expiration of
any Interest Period, continue any LIBOR Rate Loan denominated in any Permitted
Currency in a principal amount of $5,000,000 or any whole multiple of $1,000,000
in excess thereof (or with respect to LIBOR Rate Loans denominated in an
Alternative Currency, the Alternative Currency Amount in each case thereof) as a
LIBOR Rate Loan in the same Permitted Currency. Whenever the Borrower desires to
convert or continue Loans as provided above, the Borrower shall give the
Administrative Agent irrevocable prior written notice in substantially the form
attached as Exhibit C (a "Notice of Conversion/Continuation") not later than
12:00 noon (Charlotte time) four (4) Business Days (with respect to any Loan
denominated in an Alternative Currency) and three (3) Business Days (with
respect to any Loan denominated in Dollars) before the day on which a proposed
conversion or continuation of such Loan is to be effective specifying (A) the
Loans to be converted or continued, the Permitted Currency in which such Loan is
denominated and, in the case of any LIBOR Rate Loan to result from any such
continuation or conversion, the last day of the Interest Period therefor, (B)
the effective date of such conversion or continuation (which shall be a Business
Day), (C) the principal amount of such Loans to be converted or continued, and
(D) the Interest Period to be applicable to the LIBOR Rate Loan resulting from
such continuation or conversion. The Administrative Agent shall promptly notify
the Lenders of such Notice of Conversion/Continuation.
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SECTION 4.3 Fees.
(a) Commitment Fee. Commencing on the Closing Date and continuing
through but excluding the Termination Date, the Borrower shall pay to the
Administrative Agent, for the account of the Lenders, a non-refundable
commitment fee at a rate per annum equal to the rate set forth below (the
"Commitment Fee Rate") on the average daily unused portion of the Aggregate
Commitment. The commitment fee shall be payable in arrears on the last Business
Day of each calendar quarter commencing on December 31, 1998, and on the
Termination Date. Such commitment fee shall be distributed by the Administrative
Agent to the Lenders pro rata in accordance with the Lenders' respective
Commitment Percentages.
The Commitment Fee Rate provided for above shall equal the percentage
set forth below corresponding to the Level at which the Applicable Margin is
determined in accordance with Section 4.1(c). Any change in the applicable Level
at which the Applicable Margin is determined shall result in a corresponding and
simultaneous change in the Commitment Fee Rate.
Level Commitment Fee Rate
----- -------------------
I 0.500%
II 0.375%
III 0.375%
(b) Other Fees. In order to compensate First Union and Lehman for
structuring and syndicating the Credit Facility and for their obligations
hereunder, the Borrower agrees to pay to First Union and Lehman, for their
respective accounts, the fees set forth in the separate fee letter agreement
executed by the Borrower and First Union and Lehman dated September 1, 1998.
SECTION 4.4 Manner of Payment.
(a) Loans Denominated in Dollars. Each payment (including repayments
described in Article II) by the Borrower on account of the principal of or
interest on the Loans denominated in Dollars or of any fee, commission or other
amounts (including the Reimbursement Obligation) payable to the Lenders under
this Agreement or any Note (except as set forth in Section 4.4(b)) shall be made
in Dollars not later than 1:00 p.m. (Charlotte time) on the date specified for
payment under this Agreement to the Administrative Agent at the Administrative
Agent's Office for the account of the Lenders (other than as set forth below)
pro rata in accordance with their respective Commitment Percentages (except as
specified below), in Dollars, in immediately available funds and shall be made
without any set-off, counterclaim or deduction whatsoever. Any payment received
after such time but before 2:00 p.m. (Charlotte time) on such day shall be
deemed a payment on such date for the purposes of Section 11.1, but for all
other purposes shall be deemed to have been made on the next succeeding Business
Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to
have been made on the next succeeding Business Day for all purposes.
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(b) Alternative Currency Loans. Each payment (including repayments
described in Article II) by the Borrower on account of the principal of or
interest on the Loans denominated in any Alternative Currency shall be made in
such Alternative Currency not later than 11:00 a.m. (the time of the
Administrative Agent's Correspondent) on the date specified for payment under
this Agreement to the Administrative Agent's account with the Administrative
Agent's Correspondent for the account of the Lenders (other than as set forth
below) pro rata in accordance with their respective Commitment Percentages
(other than as set forth below) in immediately available funds, and shall be
made without any set-off, counterclaim or deduction whatsoever. Any payment
received after such time but before 12:00 noon (the time of the Administrative
Agent's Correspondent) on such day shall be deemed a payment on such date for
the purposes of Section 11.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 12:00
noon (the time of the Administrative Agent's Correspondent) shall be deemed to
have been made on the next succeeding Business Day for all purposes.
(c) Pro Rata Treatment. Upon receipt by the Administrative Agent of
each such payment, the Administrative Agent shall distribute to each Lender at
its address for notices set forth herein its pro rata share of such payment in
accordance with such Lender's Commitment Percentage (except as specified below)
and shall wire advice of the amount of such credit to each Lender. With respect
to each distribution to be made by the Administrative Agent under this Section
4.4(c), each payment which is received by the Administrative Agent prior to 1:00
p.m. (Charlotte time) on any Business Day shall be distributed on the same
Business Day, and any payment received after 1:00 p.m. (Charlotte time) on any
Business Day shall be distributed on the following Business Day. Each payment to
the Administrative Agent of the Issuing Lender's fees or L/C Participants'
commissions shall be made in like manner, but for the account of the Issuing
Lender or the L/C Participants, as the case may be. Each payment to the
Administrative Agent of Administrative Agent's fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to any Lender
under Sections 4.9, 4.10, 4.11, 4.12, 4.13 or 13.2 shall be paid to the
Administrative Agent for the account of the applicable Lender. Subject to
Section 4.1(b)(ii) if any payment under this Agreement, any Note or any other
Loan Document shall be specified to be made upon a day which is not a Business
Day, it shall be made on the next succeeding day which is a Business Day and
such extension of time shall in such case be included in computing any interest
if payable along with such payment.
SECTION 4.5 Crediting of Payments and Proceeds. In the event that the
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 11.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied first to all expenses then due
and payable by the Borrower hereunder, then to all indemnity obligations then
due and payable by the Borrower hereunder, then to all Administrative Agent's
and Issuing Lender's fees then due and payable, then to accrued and unpaid
interest on the Notes, the Reimbursement Obligation and any termination payments
due in respect of a Hedging Agreement with any Lender (if Hedging Agreement is
permitted or required hereunder) (pro rata in accordance with all such amounts
due), then to the principal amount of the Notes and Reimbursement Obligations
and then to the cash collateral account described in Section 11.2(b) hereof to
the extent of any L/C Obligations then outstanding, in that order.
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SECTION 4.6 Adjustments. If any Lender (a "Benefited Lender") shall at
any time receive any payment of all or part of the Obligations owing to it, or
interest thereon, or if any Lender shall at any time receive any collateral in
respect of the Obligations owing to it (whether voluntarily or involuntarily, by
set-off or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of the Obligations
owing to such other Lender, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Extensions of Credit, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such Benefited Lender, such purchase shall be rescinded, and the purchase price
and benefits returned to the extent of such recovery, but without interest. The
Borrower agrees that each Lender so purchasing a portion of another Lender's
Extensions of Credit may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent. The obligations of the Lenders
under this Agreement to make the Loans and issue or participate in Letters of
Credit are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing time that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.2(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to (a) with respect
to a Loan denominated in Dollars, the amount of such Lender's Commitment
Percentage of such borrowing and interest thereon at a rate equal to the daily
average Federal Funds Rate during such period as determined by the
Administrative Agent and (b) with respect to a loan denominated in an
Alternative Currency the amount not made available by such Lender in accordance
with the terms hereof and interest thereon at a rate per annum equal to the
Administrative Agent's aggregate marginal cost (including the cost of
maintaining any required reserves or deposit insurance and of any fees,
penalties, overdraft charges or other costs or expenses incurred by the
Administrative Agent as a result of the failure to deliver funds hereunder) of
carrying such amount. A certificate of the Administrative Agent with respect to
any amounts owing under this Section shall be conclusive, absent manifest error.
If such Lender's Commitment Percentage of such borrowing is not made available
to the Administrative Agent by such Lender within three (3) Business Days of
such borrowing date, the Administrative Agent shall be entitled to recover such
amount made available by the Administrative Agent with interest thereon at the
rate per annum applicable to Base Rate Loans hereunder, on demand, from the
Borrower. The failure of any Lender (herein, a "Defaulting Lender") to make
available its Commitment Percentage of any Loan requested by the Borrower shall
not relieve it or any other Lender of its obligation, if any, hereunder to make
its Commitment Percentage of such Loan available on the
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applicable borrowing date, but no Lender shall be responsible for the failure
of any other Lender to make its Commitment Percentage of such Loan available on
the applicable borrowing date.
SECTION 4.8 Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate and Alternative Currency
Availability. If with respect to any Interest Period the Administrative Agent or
any Lender (after consultation with the Administrative Agent) shall determine
that (i) by reason of circumstances affecting the foreign exchange and interbank
markets generally, deposits in eurodollars or an Alternative Currency in the
applicable amounts are not being quoted via Dow Jones Markets screen 3750 or
offered to the Administrative Agent or such Lender for such Interest Period,
(ii) a fundamental change has occurred in the foreign exchange or interbank
markets with respect to any Alternative Currency (including, without limitation,
changes in national or international financial, political or economic conditions
or currency exchange rates or exchange controls) or (iii) it has become
otherwise materially impractical for the Administrative Agent or such Lender to
make such Loan in an Alternative Currency, then the Administrative Agent shall
forthwith give notice thereof to the Borrower. Thereafter, until the
Administrative Agent notifies the Borrower that such circumstances no longer
exist, the obligation of the Lenders to make LIBOR Rate Loans or Alternative
Currency Loans, as applicable, and the right of the Borrower to convert any Loan
to or continue any Loan as a LIBOR Rate Loan or Alternative Currency Loan, as
applicable, shall be suspended, and the Borrower shall repay in full (or cause
to be repaid in full) the then outstanding principal amount of each such LIBOR
Rate Loan or Alternative Currency Loan, as applicable, together with accrued
interest thereon, on the last day of the then current Interest Period applicable
to such LIBOR Rate Loan or Alternative Currency Loan, as applicable, or convert
the then outstanding principal amount of each such LIBOR Rate Loan or
Alternative Currency Loan, as applicable, to a Base Rate Loan as of the last day
of such Interest Period.
(b) Laws Affecting LIBOR Rate and Alternative Currency Availability.
If, after the date hereof, the introduction of, or any change in, any Applicable
Law or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any of
its respective Lending Offices) with any request or directive (whether or not
having the force of law) of any such Governmental Authority, central bank or
comparable agency, shall make it unlawful or impossible for any of the Lenders
(or any of their respective Lending Offices) to honor its obligations hereunder
to make or maintain any LIBOR Rate Loan or any Alternative Currency Loan, such
Lender shall promptly give notice thereof to the Administrative Agent and the
Administrative Agent shall promptly give notice to the Borrower and the other
Lenders. Thereafter, until the Administrative Agent notifies the Borrower that
such circumstances no longer exist, (i) the obligations of such Lender to make
LIBOR Rate Loans or Alternative Currency Loans, as applicable, and the right of
the Borrower to convert any Loan made by such Lender or continue any Loan made
by such Lender as a LIBOR Rate Loan or Alternative Currency Loan, as applicable,
shall be suspended, and (ii) if any of the Lenders may not lawfully continue to
maintain a LIBOR Rate Loan or Alternative Currency Loans, as applicable, to the
end of the then current Interest Period applicable thereto as a LIBOR Rate Loan
or Alternative Currency Loans, as applicable, the applicable LIBOR Rate
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Loan or Alternative Currency Loans, as applicable, shall immediately be
converted to a Base Rate Loan for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Governmental
Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with
respect to any Note, Letter of Credit or Application or shall change
the basis of taxation of payments to any of the Lenders (or any of
their respective Lending Offices) of the principal of or interest on
any Note, or in respect of any Letter of Credit or Application or any
other amounts due under this Agreement in respect thereof (except for
changes in the rate of tax on the overall net income of any of the
Lenders or any of their respective Lending Offices imposed by the
jurisdiction in which such Lender is organized or is or should be
qualified to do business or such Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit, insurance or capital
or similar requirement against assets of, deposits with or for the
account of, or credit extended by any of the Lenders (or any of their
respective Lending Offices) or shall impose on any of the Lenders (or
any of their respective Lending Offices) or the foreign exchange and
interbank markets any other condition affecting any Note;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or Alternative Currency Loan as
applicable, or issuing or participating in Letters of Credit, or to reduce the
yield or amount of any sum received or receivable by any of the Lenders under
this Agreement or under the Notes in respect of a LIBOR Rate Loan or Alternative
Currency Loan, as applicable, or Letter of Credit or Application, then such
Lender shall promptly notify the Borrower of such fact and demand compensation
therefor and, within fifteen (15) days after such notice, the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or Lenders for such increased cost or reduction; provided that if any Lender
claiming compensation under this Section 4.8(c) fails to give such notice within
ninety (90) days after it obtains actual knowledge of such an event, such Lender
shall, with respect to such compensation in respect of any costs resulting from
such event, only be entitled to payment under this Section 4.8(c) for costs
incurred from and after the date ninety (90) days prior to the date that such
Lender does give such notice. The Administrative Agent will promptly notify the
Borrower of any event of which it has knowledge which will entitle such Lender
to compensation pursuant to this Section 4.8(c), provided, that the
Administrative Agent shall incur no liability whatsoever to the Lenders or the
Borrower in the event it fails to do so. The amount of such compensation shall
be determined, in the applicable Lender's sole discretion, based upon the
assumption that such Lender funded its Commitment Percentage of the LIBOR Rate
Loans or Alternative Currency Loans, as
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applicable in the London interbank market and using any reasonable attribution
or averaging methods which such Lender deems appropriate and practical. A
certificate of such Lender setting forth the basis for determining such amount
or amounts necessary to compensate such Lender shall be forwarded to the
Borrower through the Administrative Agent and shall be conclusively presumed to
be correct save for manifest error. The obligations of the Borrower under this
Section 4.8(c) shall survive the payment in full of the Obligations and the
termination of the Commitments.
SECTION 4.9 Indemnity. The Borrower hereby indemnifies each Lender
against any loss or expense (including without limitation any foreign exchange
costs) which may arise or be attributable to such Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan (a) as a consequence of any failure by the Borrower to make
any payment when due of any amount due hereunder in connection with a LIBOR Rate
Loan, (b) due to any failure of the Borrower to borrow, continue or convert on a
date specified therefor in a Notice of Borrowing or Notice of
Continuation/Conversion or (c) due to any payment, prepayment or conversion of
any LIBOR Rate Loan on a date other than the last day of the Interest Period
therefor. The amount of such loss or expense shall be determined, in the
applicable Lender's sole discretion, based upon the assumption that such Lender
funded its Commitment Percentage of the LIBOR Rate Loans in the London interbank
market and using any reasonable attribution or averaging methods which such
Lender deems appropriate and practical. A certificate of such Lender setting
forth the basis for determining such amount or amounts necessary to compensate
such Lender shall be forwarded to the Borrower through the Administrative Agent
and shall be conclusively presumed to be correct save for manifest error. The
obligations of the Borrower under this Section 4.9 shall survive the payment in
full of the Obligations and the termination of the Commitments.
SECTION 4.10 Capital Requirements. If either (a) the introduction of,
or any change in or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request made from any central bank or
comparable agency or other Governmental Authority (whether or not having the
force of law), has or would have the effect of reducing the rate of return on
the capital of, or has affected or would affect the amount of capital required
to be maintained by, any Lender or any corporation controlling such Lender as a
consequence of, or with reference to the Commitments and other commitments of
this type, below the rate which such Lender or such other corporation could have
achieved but for such introduction, change or compliance, then within five (5)
Business Days after written demand by any such Lender, the Borrower shall pay to
such Lender from time to time as specified by such Lender additional amounts
sufficient to compensate such Lender or other corporation for such reduction.
Any Lender claiming compensation under this Section 4.10 shall notify the
Borrower of any event entitling such Lender to such compensation as promptly as
practicable, but in any event within ninety (90) days after such Lender obtains
actual knowledge thereof; provided that if such Lender fails to give such notice
within ninety (90) days after it obtains actual knowledge of such an event, such
Lender shall, with respect to such compensation in respect of any costs
resulting from such event, only be entitled to payment under this Section 4.10
for costs incurred from and after the date ninety (90) days prior to the date
that such Lender does give such notice. A certificate as to such amounts
submitted to the Borrower and the Administrative Agent by such Lender shall, in
the absence of manifest error, be presumed to be correct and binding for all
purposes. The obligations of the Borrower under this Section 4.10 shall survive
the payment in full of the Obligations and the
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termination of the Commitments.
SECTION 4.11 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Notes or in respect of the Letters of Credit shall be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholding, and all liabilities
with respect thereto, excluding, (i) in the case of each Lender and the
Administrative Agent, income and franchise taxes imposed by the jurisdiction
under the laws of which such Lender or the Administrative Agent (as the case may
be) is organized or is or should be qualified to do business or any political
subdivision thereof and (ii) in the case of each Lender, income and franchise
taxes imposed by the jurisdiction of such Lender's Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note or in respect of
Letter of Credit to any Lender or the Administrative Agent, (A) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.11) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the amount such party would have received had no
such deductions been made, (B) the Borrower shall make such deductions, (C) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable law, and (D) the Borrower shall
deliver to the Administrative Agent evidence of such payment to the relevant
taxing authority or other authority in the manner provided in Section 4.11(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or security interest in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrower shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(d) Evidence of Payment. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
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(e) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower and Guarantors, with a copy to the Administrative Agent, on the
Closing Date or concurrently with the delivery of the relevant Assignment and
Acceptance, as applicable, (i) two United States Internal Revenue Service Forms
4224 or Forms 1001, as applicable (or successor forms) properly completed and
certifying in each case that such Lender is entitled to a complete exemption
from withholding or deduction for or on account of any United States federal
income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding taxes. Each such Lender further agrees to deliver to
the Borrower and Guarantors, with a copy to the Administrative Agent, a Form
1001 or 4224 and Form W-8 or W-9, or successor applicable forms or manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower and
Guarantors, certifying in the case of a Form 1001 or 4224 that such Lender is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes (unless in any such case
an event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders such forms inapplicable or the exemption to which such
forms relate unavailable and such Lender notifies the Borrower and Guarantors
and the Administrative Agent that it is not entitled to receive payments without
deduction or withholding of United States federal income taxes) and, in the case
of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(f) Survival. Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 4.11 shall survive the payment in full of the
Obligations and the termination of the Commitments.
SECTION 4.12 Mandatory Redenomination of Alternative Currency Loans.
(a) If any LIBOR Rate Loan is required to be converted to a Base Rate
Loan pursuant to Section 4.1(d), Section 4.8 or any other applicable provision
hereof, such Loan shall be funded in Dollars in an amount equal to the Dollar
Amount of such Loan, all subject to the provisions of Section 2.3(c). The
Borrower shall reimburse the Lenders upon any such conversion for any amounts
required to be paid under Section 4.9 hereof.
(b) If, as result of the implementation of the European economic and
monetary union ("EMU"), (i) any Alternative Currency ceases to be lawful
currency of the nation issuing such currency and is replaced by the euro or (ii)
any Alternative Currency and the euro are at the same time recognized by any
governmental authority of the nation issuing such Alternative Currency as lawful
currency of such nation, then any amount payable hereunder by the Borrower in
such Alternative Currency shall instead be payable in the euro and the amount so
payable shall be determined by translating the amount so payable in such other
Alternative Currency to the euro at the exchange rate recognized by the European
central bank (or such other governmental or regulatory authority designated by
the EMU for establishing such exchange rate) for the purpose of implementing the
EMU. Prior to the occurrence of the event
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or events described in clause (i) or (ii) of the preceding sentence, each
amount payable hereunder in any Alternative Currency will, except as otherwise
provided herein, continue to be payable only in that Alternative Currency.
(c) The terms and provisions of this Agreement will be subject to such
reasonable changes of construction as determined by the Administrative Agent
(acting reasonably and in consultation with the Borrower) to reflect such
implementation of the euro and to put the Lenders and the Borrower in the same
position, so far as possible, that they would have been if such implementation
had not occurred. Except as provided in the foregoing provisions of this Section
4.12, no such implementation nor any economic consequences resulting therefrom
shall give rise to any right to terminate, contest, cancel, modify or
renegotiate the provisions of this Agreement.
SECTION 4.13 Regulatory Limitation. In the event, as a result of
increases in the value of Alternative Currencies against the Dollar, the
obligation of any of the Lenders to make Loans (taking into account the Dollar
Amount of the Obligations and all other indebtedness required to be aggregated
under 12 U.S.C.A. ss.84, as amended, the regulations promulgated thereunder and
any other Applicable Law) is determined by such Lender to exceed its then
applicable legal lending limit under 12 U.S.C.A. ss.84, as amended, and the
regulations promulgated thereunder, or any other Applicable Law, the amount of
additional Extensions of Credit such Lender shall be obligated to make or issue
or participate in hereunder shall immediately be reduced to the maximum amount
which such Lender may legally advance (as determined by such Lender), subject to
reinstatement to the extent that such maximum amount may thereafter increase
from time to time.
SECTION 4.14 Claims for Increased Costs and Taxes. In the event that
any Lender shall decline to make LIBOR Rate Loans or Alternative Currency Loans
pursuant to Section 4.8(a) or (b) hereof or shall have notified the Borrower
that it is entitled to claim compensation pursuant to Section 4.8(c), 4.10 or
4.11 hereof or is unable to complete the form required or is subject to
withholding as provided in Section 4.11 hereof (each such Lender being an
"Affected Lender"), the Borrower at its own cost and expense may designate a
replacement bank (a "Replacement Lender") to assume the Commitment and the
obligations of any such Affected Lender hereunder, and to purchase the
outstanding Note and L/C Obligations of such Affected Lender and such Affected
Lender's rights hereunder and with respect thereto, without recourse upon, or
warranty by, or expense to, such Affected Lender, for a purchase price equal to
(unless such Lender agrees to a lesser amount) the outstanding principal amount
of all Extensions of Credit of such Affected Lender plus all interest accrued
and unpaid thereon and all other amounts owing to such Affected Lender
hereunder, including, without limitation, any amount which would be payable to
such Affected Lender pursuant to Sections 4.8(c), 4.9, 4.10 and 4.11 and upon
such assumption and purchase by the Replacement Lender, such Replacement Lender
shall be deemed to be a "Lender" for purposes of this Agreement and such
Affected Lender shall cease to be a "Lender" for purposes of this Agreement and
shall no longer have any obligations or rights hereunder (other than any
obligations or rights which according to this Agreement shall survive the
termination of the Commitments). In the event any Lender receives a refund or
credit with respect to withholding taxes paid by the Borrower, such Lender shall
promptly repay such amounts to the Borrower.
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SECTION 4.15 Rounding of Amounts in Certain Situations. Without
prejudice and in addition to any method of conversion or rounding prescribed by
any EMU Legislation, each reference in this Agreement to a minimum amount (or an
integral multiple thereof) in a National Currency Unit or the euro to be paid to
or by the Administrative Agent or the Lenders shall be replaced by a reference
to such reasonably compatible and convenient amount (or an integral multiple
thereof) in such National Currency Unit or the euro as the Administrative Agent
or the Lenders may from time to time specify.
SECTION 4.16 Security. The Obligations of the Borrower shall be
guaranteed as provided in the Guaranty Agreement and secured as provided in the
Pledge and Security Agreement.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Suite 4200,
Charlotte, North Carolina 28202 at 10:00 a.m. on October 22, 1998, or on such
other date as the parties hereto shall mutually agree.
SECTION 5.2 Conditions to Closing, Initial Loan and Letter of Credit.
The obligation of the Lenders to close this Agreement and to make the initial
Loan or issue the initial Letter of Credit is subject to the satisfaction of
each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Notes, the
Guaranty Agreement, the Pledge and Security Agreement and a completed
Application with respect to each Letter of Credit to be issued on the
Closing Date shall have been duly authorized, executed and delivered to
the Administrative Agent by the parties thereto, shall be in full force
and effect and no Default or Event of Default shall exist.
(b) Closing Certificates; etc.
(i) Officer's Certificate of the Borrower. The
Administrative Agent shall have received a certificate from a
Responsible Officer, in form and substance satisfactory to the
Administrative Agent, to the effect that all representations
and warranties of the Borrower and its Subsidiaries contained
in this Agreement and the other Loan Documents are true,
correct and complete in all material respects; that the
Borrower is not in violation of any of the covenants contained
in this Agreement and the other Loan Documents; that, after
giving effect to the transactions contemplated by this
Agreement, no Default or Event of Default has occurred and is
continuing; and that the Borrower has satisfied each of the
closing conditions.
(ii) Certificate of Secretary of the Borrower and
each Subsidiary Guarantor. The Administrative Agent shall have
received a certificate of the
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secretary or assistant secretary of the Borrower and each
Subsidiary Guarantor certifying as to the incumbency and
genuineness of the signature of each officer of the Borrower
or such Subsidiary Guarantor executing Loan Documents to
which it is a party and certifying that attached thereto is a
true, correct and complete copy of (A) the articles of
incorporation of the Borrower or such Subsidiary Guarantor
and all amendments thereto, certified as of a recent date by
the appropriate Governmental Authority in its jurisdiction of
incorporation, (B) the bylaws of the Borrower or such
Subsidiary Guarantor as in effect on the date of such
certifications, (C) resolutions duly adopted by the Board of
Directors of the Borrower or such Subsidiary Guarantor
authorizing the borrowings contemplated hereunder and the
execution, delivery and performance of this Agreement and the
other Loan Documents to which it is a party, and (D) each
certificate required to be delivered pursuant to Section
5.2(b)(iii).
(iii) Certificates of Good Standing. The
Administrative Agent shall have received long-form
certificates as of a recent date of the good standing of the
Borrower and each Subsidiary Guarantor under the laws of its
jurisdiction of organization and, to the extent requested by
the Administrative Agent, each other jurisdiction where the
Borrower or such Subsidiary Guarantor is qualified to do
business.
(iv) Opinions of Counsel. The Administrative Agent
shall have received favorable opinions of counsel to the
Borrower and the Subsidiary Guarantors addressed to the
Administrative Agent and the Lenders with respect to the
Borrower, the Subsidiary Guarantors, the Loan Documents and
such other matters as the Lenders shall reasonably request.
(v) Tax Forms. The Administrative Agent shall have
received on behalf of the Borrower the United States Internal
Revenue Service forms required by Section 4.11(e) hereof.
(c) Collateral.
(i) Filings and Recordings. All filings and
recordations that are necessary to perfect the security
interests of the Administrative Agent for the benefit of the
Lenders in the collateral described in the Pledge and Security
Agreement shall have been received by the Administrative Agent
and the Administrative Agent shall have received evidence
satisfactory to the Administrative Agent that upon such
filings and recordations such security interests constitute
valid and perfected first priority Liens thereon.
(ii) Pledged Collateral. The Administrative Agent
shall have received original stock certificates or other
certificates evidencing the capital stock or other ownership
interests pledged pursuant to the Pledge Agreement, together
with an undated stock power for each such certificate duly
executed in blank by the registered owner thereof.
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(d) Financial Matters.
(i) Financial Statements. The Administrative Agent
shall have received recent annual and interim financial
statements and other financial information with respect to the
Borrower and its Subsidiaries prepared in accordance with
GAAP. Without limitation of the foregoing, the Administrative
Agent and each Lender shall have received the audited
Consolidated financial statements for the Borrower and its
Subsidiaries as of the end of and for the fiscal year ended
December 31, 1997 and the unaudited quarterly financial
statements for the Borrower and its Subsidiaries as of the end
of and for the quarter and six-month period ended June 30,
1998, as filed on Form 10Q.
(ii) Financial Condition Certificate. The Borrower
shall have delivered to the Administrative Agent a
certificate, in form and substance satisfactory to the
Administrative Agent, and certified as accurate by a
Responsible Officer, that (A) the Borrower and each of its
Subsidiaries are Solvent, (B) the material payables of the
Borrower and each Subsidiary Guarantor are current and not
past due, (C) attached thereto is a pro forma balance sheet of
the Borrower and its Subsidiaries setting forth on a pro forma
basis the financial condition of the Borrower and its
Subsidiaries on a Consolidated basis as of the Closing Date,
reflecting on a pro forma basis the effect of the transactions
contemplated herein, including all fees and expenses in
connection therewith, and evidencing compliance on a pro forma
basis with the covenants contained in Articles IX and X
hereof, and (D) attached thereto are the financial projections
previously delivered to the Administrative Agent representing
the good faith opinions of the Borrower and senior management
thereof as to the projected results contained therein.
(iii) Payment at Closing. The Borrower shall have
paid the fees set forth or referenced in Section 4.3 and, to
the extent that the Borrower has been notified of the amount
thereof at least two (2) Business Days prior to the Closing
Date, any other accrued and unpaid fees or commissions due
hereunder (including, without limitation, legal fees and
expenses) to the Administrative Agent and Lenders, and to any
other Person such amount as may be due thereto in connection
with the transactions contemplated hereby, including all
taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of any
of the Loan Documents.
(e) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent
shall have received a Notice of Borrowing from the Borrower in
accordance with Section 2.2(a), and a Notice of Account
Designation specifying the account or accounts to which the
proceeds of Loans made on and after the Closing Date are to be
disbursed.
(ii) Payment of IFG Debt. (A) All indebtedness and
obligations of IFG arising under that certain Amended and
Restated Credit Agreement dated as
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of March 19, 1997 between IFG, the Lenders party thereto (the
"IFG Lenders"), First Union as Administrative Agent and
Lehman as Syndication Agent (collectively, the "IFG Credit
Agreement Agents") (as amended, the "IFG Credit Agreement")
shall have been paid and satisfied in full, (B) the Borrower
and its Subsidiaries, and their respective assets and
properties, shall have been released from all guarantees,
liens, pledges and other security arrangements in favor of
the IFG Lenders and the IFG Credit Agreement Agents, and (C)
the Borrower shall have provided the Agents with evidence
reasonably satisfactory to the Agents and the Lenders
reflecting the termination of such security arrangements.
SECTION 5.3 Conditions to All Loans and Letters of Credit. The
obligation of the Lenders to make any Loan or of the Issuing Lender to issue any
Letter of Credit is subject to the satisfaction of the following conditions
precedent on the relevant borrowing or issue date, as applicable:
(a) Continuation of Representations and Warranties. The
representations and warranties of the Borrower and its Subsidiaries
contained in Article VI and in the other Loan Documents shall be true
and correct in all material respects on and as of such borrowing or
issuance date with the same effect as if made on and as of such date
except to the extent that such representations and warranties expressly
relate to an earlier date (in which case such representations and
warranties shall have been true and correct in all material respects on
and as of such earlier date).
(b) No Existing Default. No Default or Event of Default shall
have occurred and be continuing (i) on the borrowing date with respect
to such Loan or after giving effect to the Loans to be made on such
date or (ii) on the issue date with respect to such Letter of Credit or
after giving effect to such Letter of Credit to be issued on such date.
(c) Notice of Borrowing. The Administrative Agent shall have
received the Notice of Borrowing with respect to any Loan.
(d) Application. The Issuing Lender shall have received an
Application with respect to any Letter of Credit.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 6.1 Representations and Warranties. To induce the
Administrative Agent and Lenders to enter into this Agreement, the Lenders to
make Loans and the Issuing Lender to issue Letters of Credit, the Borrower
hereby represents and warrants to the Administrative Agent and Lenders that:
(a) Organization; Power; Qualification. Each of the Borrower
and its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
formation, has the power and authority to own its
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properties and to carry on its business as now being and hereafter proposed to
be conducted and is duly qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization, except where the failure
to so qualify could not reasonably be expected to have a Material Adverse
Effect. The jurisdictions in which the Borrower and its Subsidiaries are
organized are described on Schedule 6.1(a).
(b) Ownership. Each Restricted Subsidiary and each
Unrestricted Subsidiary as of the Closing Date is listed on Schedule
6.1(a). All outstanding shares or other equity interests have been duly
authorized and validly issued and, with respect to capital stock, are
fully paid and nonassessable. The holders of the capital stock or other
equity interests of the Subsidiaries of the Borrower as of the Closing
Date, are and the amount of capital stock or other equity interest
owned by each as of the Closing Date is described on Schedule 6.1(a).
As of the Closing Date, there are no outstanding stock purchase
warrants, subscriptions, options, securities, instruments or other
rights of any type or nature whatsoever, which are convertible into,
exchangeable for or otherwise provide for or permit the issuance of
capital stock or other equity interests of the Borrower or its
Subsidiaries, except as described on Schedule 6.1(a).
(c) Authorization of Agreement, Loan Documents and Borrowing.
Each of the Borrower and its Subsidiaries has the right, power and
authority and has taken all necessary corporate and other action to
authorize the execution, delivery and performance of this Agreement and
each of the other Loan Documents to which it is a party, the borrowings
hereunder and the transactions contemplated hereby and thereby, in each
case in accordance with their respective terms. This Agreement and each
of the other Loan Documents have been duly executed and delivered by
the duly authorized officers of the Borrower and each of its
Subsidiaries party thereto, and each such document constitutes the
legal, valid and binding obligation of the Borrower or its Subsidiary
party thereto, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar state or federal debtor relief laws from time to
time in effect which affect the enforcement of creditors' rights in
general and the availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with
Laws, Etc. The execution, delivery and performance by the Borrower and
its Subsidiaries of the Loan Documents to which each such Person is a
party, in accordance with their respective terms, the borrowings
hereunder and the transactions contemplated hereby and thereby do not
and will not, by the passage of time, the giving of notice or
otherwise, (i) require any Governmental Approval which has not been
obtained or violate any Applicable Law relating to the Borrower or any
of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute a default under the articles of incorporation, bylaws or
other organizational documents of the Borrower or any of its
Subsidiaries or any material indenture, agreement or other instrument
to which such Person is a party or by which any of its properties may
be bound or any material Governmental Approval relating to such Person,
or (iii) result in or require the creation or imposition of any Lien
upon or with respect to any property now owned or hereafter acquired by
such Person other than Liens arising under the Loan Documents and those
otherwise permitted hereunder.
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(e) Compliance with Law; Governmental Approvals. Each of the
Borrower and its Subsidiaries (i) has all Governmental Approvals
required by any Applicable Law for it to conduct its business, each of
which is in full force and effect, is final and not subject to review
on appeal and is not the subject of any pending or, to the best of its
knowledge, threatened attack by direct or collateral proceeding, except
for such Governmental Approvals the absence of which could not
reasonably be expected to have a Material Adverse Effect and (ii) is in
compliance with each Governmental Approval applicable to it and in
compliance with all other Applicable Laws relating to it or any of its
respective properties, except in each case where the failure to so
comply could not reasonably be expected to have a Material Adverse
Effect.
(f) Tax Returns and Payments. Each of the Borrower and its
Subsidiaries has duly filed or caused to be filed all material federal,
state, local and other tax returns required by Applicable Law to be
filed, and has paid, or made adequate provision for the payment of, all
material federal, state, local and other taxes, assessments and
governmental charges or levies upon it and its property, income,
profits and assets which are due and payable except any nonpayment
permitted under Section 8.5. No Governmental Authority has asserted any
Lien or other material claim against the Borrower or any Subsidiary
with respect to unpaid taxes which could reasonably be expected to have
a Material Adverse Effect. The charges, accruals and reserves on the
books of the Borrower and its Subsidiaries in respect of federal,
state, local and other taxes for all Fiscal Years and portions thereof
since the organization of the Borrower and its Subsidiaries are in the
judgment of the Borrower adequate, and the Borrower does not anticipate
any additional taxes or assessments for any of such years, the result
of which could reasonably be expected to have a Material Adverse
Effect.
(g) Intellectual Property Matters. Each of the Borrower and
its Subsidiaries owns or possesses rights to use all franchises,
licenses, copyrights, copyright applications, patents, patent rights or
licenses, patent applications, trademarks, trademark rights, service
marks, service mark rights, trade names, trade name rights and rights
with respect to the foregoing which are required to conduct its
business, except where the failure to so own or possess such rights
could not reasonably be expected to have a Material Adverse Effect. No
event has occurred which permits, or after notice or lapse of time or
both would permit, the revocation or termination of any such rights,
and, to the best of its knowledge, neither the Borrower nor any
Subsidiary thereof is liable to any Person for infringement under
Applicable Law with respect to any such rights as a result of its
business operations, the result of which could reasonably be expected
to have a Material Adverse Effect.
(h) Environmental Matters.
(i) To the Borrower's Actual Knowledge, the
properties owned or managed by the Borrower and its
Subsidiaries do not contain, and to their Actual Knowledge
have not previously contained, any Hazardous Materials in
amounts or concentrations which (A) constitute or constituted
a violation of, or (B) could give rise to liability under,
applicable Environmental Laws, in each case which could
reasonably be expected to have a Material Adverse Effect;
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(ii) To the Borrower's Actual Knowledge, such
properties and all operations of the Borrower and its
Subsidiaries are conducted in compliance in all respects, and
have been in compliance in all respects, with all applicable
Environmental Laws the violation of which could reasonably be
expected to have a Material Adverse Effect, and the Borrower
and its Subsidiaries have not caused contamination at, under
or about such properties or such operations which could
reasonably be expected to have a Material Adverse Effect;
(iii) Neither the Borrower nor any Subsidiary (a) has
received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws
with regard to any of their properties or their operations, or
(b) have Actual Knowledge that any such notice will be
received or is being overtly threatened, in each case which
could reasonably be expected to have a Material Adverse
Effect;
(iv) To the Borrower's Actual Knowledge, the Borrower
and its Subsidiaries have not caused Hazardous Materials to be
transported or disposed of from the properties of the Borrower
and its Subsidiaries in violation of, or in a manner or to a
location which gives rise to liability under, Environmental
Laws, which violation or liability could reasonably be
expected to have a Material Adverse Effect, nor to the
Borrower's Actual Knowledge have the Borrower and its
Subsidiaries caused any Hazardous Materials to be generated,
treated, stored or disposed of at, on or under any of such
properties in violation of, or in a manner that could give
rise to liability under, any applicable Environmental Laws
which could reasonably be expected to have a Material Adverse
Effect;
(v) No judicial proceedings or governmental or
administrative action is pending, or, to the Actual Knowledge
of the Borrower, overtly threatened, under any Environmental
Law to which the Borrower or any Subsidiary is or will be
named as a party with respect to such properties or operations
of the Borrower and its Subsidiaries conducted thereon, nor
are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to such properties or such
operations which in each case could reasonably be expected to
have a Material Adverse Effect; and
(vi) To its Actual Knowledge, neither the Borrower
nor its Subsidiaries have caused any release, or to the
Borrower's Actual Knowledge, the threat of release, of
Hazardous Materials at or from such properties, in violation
of or in amounts or in a manner that gives rise to liability
under Environmental Laws, in each case which could reasonably
be expected to have a Material Adverse Effect.
(i) ERISA.
(i) Neither the Borrower nor any ERISA Affiliate
maintains or contributes to, or has any obligation under, any
Employee Benefit Plans other than
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those identified on Schedule 6.1(i);
(ii) the Borrower and each ERISA Affiliate is in
material compliance with all applicable provisions of ERISA
and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans except for any
required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired. No
material liability has been incurred by the Borrower or any
ERISA Affiliate which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan;
(iii) No Pension Plan of the Borrower has been
terminated, and to the knowledge of the Borrower no Pension
Plan of any ERISA Affiliate has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of
the Code) been incurred (without regard to any waiver granted
under Section 412 of the Code), nor has any funding waiver
from the Internal Revenue Service been received or requested
with respect to any Pension Plan, nor has the Borrower or any
ERISA Affiliate failed to make any contributions or to pay any
amounts due and owing as required by Section 412 of the Code,
Section 302 of ERISA or the terms of any Pension Plan prior to
the due dates of such contributions under Section 412 of the
Code or Section 302 of ERISA, nor has there been any event
requiring any disclosure under Section 4041(c)(3)(C) or
4063(a) of ERISA with respect to any Pension Plan, in each
case which could reasonably be expected to result in a
Material Adverse Effect;
(iv) Neither the Borrower nor any ERISA Affiliate
has: (A) engaged in a nonexempt prohibited transaction
described in Section 406 of the ERISA or Section 4975 of the
Code, (B) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are
no premium payments which are due and unpaid, (C) failed to
make a required contribution or payment to a Multiemployer
Plan, or (D) failed to make a required installment or other
required payment under Section 412 of the Code;
(v) No Termination Event has occurred or, to the
knowledge of the Borrower, is reasonably expected to occur;
and
(vi) No proceeding, claim, lawsuit and/or
investigation (other than routine claims for benefits in the
ordinary course) is existing or, to the best knowledge of the
Borrower after due inquiry, threatened concerning or involving
any (A) employee welfare benefit plan (as defined in Section
3(1) of ERISA) currently maintained or contributed to by the
Borrower or any ERISA Affiliate or (B) Pension Plan.
(j) Margin Stock. No part of the proceeds of any of the Loans
or Letters of Credit will be used for purchasing or carrying margin
stock or for any purpose which violates, or which would be inconsistent
with, the provisions of Regulation T, U or X of the Board of Governors
of the Federal Reserve System.
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(k) Government Regulation. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled"
by an "investment company" (as each such term is defined or used in the
Investment Company Act of 1940, as amended) and neither the Borrower
nor any Subsidiary thereof is, or after giving effect to any Extension
of Credit will be, subject to regulation under the Public Utility
Holding Company Act of 1935 or the Interstate Commerce Act, each as
amended, or any other Applicable Law which limits its ability to incur
or consummate the transactions contemplated hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete
and accurate list of all Material Contracts of the Borrower and its
Subsidiaries in effect as of the Closing Date; other than as set forth
in Schedule 6.1(l), each such Material Contract is, and after giving
effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect on the Closing Date in
accordance with the terms thereof. The Borrower and its Subsidiaries
have delivered to the Administrative Agent a true and complete copy of
each Material Contract required to be listed on Schedule 6.1(l) or any
other Schedule hereto.
(m) Employee Relations. Each of the Borrower and its
Subsidiaries has an adequate work force in place and is not, as of the
Closing Date, party to any collective bargaining agreement nor has any
labor union been recognized as the representative of its employees. The
Borrower knows of no pending or threatened strikes, work stoppage or
similar collective labor actions involving its employees or those of
its Subsidiaries, which could reasonably be expected to have a Material
Adverse Effect.
(n) Financial Statements. The Consolidated balance sheet of
the Borrower and its Subsidiaries as of December 31, 1997 and the
related statements of income and retained earnings and cash flows for
the Fiscal Year then ended, copies of which have been furnished to the
Administrative Agent and each Lender, are complete and correct and
fairly present in all material respects the assets, liabilities and
financial position of the Borrower and its Subsidiaries as at such
dates, and the results of the operations and changes of financial
position for the periods then ended. All such financial statements,
including the related schedules and notes thereto, have been prepared
in accordance with GAAP. The Borrower and its Subsidiaries have no
Debt, obligation or other unusual forward or long-term commitment which
is not fairly reflected in the foregoing financial statements or in the
notes thereto.
(o) No Material Adverse Change. Since December 31, 1997, there
has been no material adverse change in the business, operations,
prospects, or condition (financial or otherwise) of the Borrower and
its Subsidiaries, taken as a whole (it being understood that the
spin-off of the Borrower from IFG does not constitute such a material
adverse change), and no event (other than such spin-off) has occurred
or condition arisen that could reasonably be expected to have a
Material Adverse Effect.
(p) Solvency. As of the Closing Date and after giving effect
to each Extension of Credit hereunder, the Borrower and each of its
Subsidiaries is and will be Solvent.
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(q) Titles to Properties. Each of the Borrower and its
Subsidiaries has such title to the real property owned by it as is
necessary or desirable to the conduct of its business and valid and
legal title to all of its personal property and assets, including, but
not limited to, those reflected on the balance sheets of the Borrower
and its Subsidiaries referred to in Section 6.1(n), except those which
have been disposed of by the Borrower or its Subsidiaries subsequent to
such date which dispositions have been in the ordinary course of
business or as otherwise expressly permitted hereunder.
(r) Liens. None of the properties and assets of the Borrower
or any Subsidiary is subject to any Lien, except Liens permitted
pursuant to Section 10.3.
(s) Debt and Contingent Obligations. Schedule 6.1(s) is a
complete and correct listing of all Debt and Contingent Obligations of
the Borrower and its Subsidiaries as of the Closing Date in excess of
$1,000,000. The Borrower and its Subsidiaries have performed and are in
material compliance with all of the terms of such Debt and Contingent
Obligations and all instruments and agreements relating thereto.
(t) Litigation. Except for matters existing as of the Closing
Date and set forth either in the public filings of the Borrower with
the Securities and Exchange Commission made prior to the Closing Date
or on Schedule 6.1(t), there are no actions, suits or proceedings
pending nor, to the knowledge of the Borrower, threatened against or in
any other way relating adversely to or affecting the Borrower or any
Subsidiary thereof or any of their respective properties in any court
or before any arbitrator of any kind or before or by any Governmental
Authority which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
(u) Absence of Defaults. No event has occurred or is
continuing which (i) constitutes a Default or an Event of Default, or
(ii) constitutes, or which with the passage of time or giving of notice
or both would constitute, a default or event of default by the Borrower
or any Subsidiary thereof under any Material Contract or judgment,
decree or order to which the Borrower or its Subsidiaries is a party or
by which the Borrower or its Subsidiaries or any of their respective
properties may be bound, which could reasonably be expected to have a
Material Adverse Effect or which would require the Borrower or any of
its Subsidiaries to make any payment thereunder in excess of $1,000,000
prior to the scheduled maturity date therefor.
(v) Accuracy and Completeness of Information. The factual
statements contained in the financial statements referred to in
Sections 7.1(a) and (b) and the Loan Documents (including the schedules
thereto), and any other certificates or documents furnished or to be
furnished to the Administrative Agent or the Lenders from time to time
in connection with this Agreement, taken as a whole, did not as of the
date when made, contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances in which
the same were made, all except as otherwise qualified herein or
therein; provided that, with respect to factual statements made by
Persons other than the Borrower or any of
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its Subsidiaries, such representation and warranty is made only to the
knowledge of the Borrower.
(w) Year 2000 Compliance. The Borrower has (i) initiated a
review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by
suppliers, vendors and customers) that could be adversely affected by
the "Year 2000 Problem" (that is, the risk that computer applications
used by the Borrower or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timetable for addressing the Year 2000 Problem on
a timely basis, and (iii) to date, used its best efforts to implement
such plan in accordance with such timetable. Based on the foregoing,
the Borrower believes that all computer applications that are material
to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "year 2000 compliant"), except to the extent that a
failure to do so could not reasonably be expected to have Material
Adverse Effect.
The Borrower has and will continue to use its best efforts to
determine whether the material suppliers, vendors and customers of the
Borrower and its Subsidiaries will prevent the Borrower or any of its
Subsidiaries from being year 2000 compliant, and the Borrower is not
aware that any material supplier, vendor or customer will prevent the
Borrower or any of its Subsidiaries from being year 2000 compliant in a
manner which would reasonably be expected to have a Material Adverse
Effect.
Nothing in this Section 6.1(w) shall obligate the Borrower or any
Subsidiary thereof to ensure that computer based systems of its suppliers,
vendors or customers are able to operate and effectively process data which
includes dates on and after January 1, 2000.
SECTION 6.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties of the Borrower and its Subsidiaries contained in
any certificate, or any of the Loan Documents (including but not limited to any
such representation or warranty made in or in connection with any amendment
thereto) shall constitute representations and warranties made under this
Agreement. All representations and warranties made under this Agreement shall be
made or deemed to be made at and as of the Closing Date, shall survive the
Closing Date and shall not be waived by the execution and delivery of this
Agreement, any investigation made by or on behalf of the Lenders or any
borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.9 hereof, the Borrower will furnish or cause to be furnished to
the Administrative Agent and to the Lenders at
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their respective addresses as set forth on Schedule 1.1(a), or such other office
as may be designated by the Administrative Agent and Lenders from time to time:
SECTION 7.1 Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in any
event within forty-five (45) days after the end of each fiscal quarter (other
than the last fiscal quarter of each fiscal year), an unaudited Consolidated
balance sheet of the Borrower and its Subsidiaries as of the close of such
fiscal quarter and unaudited Consolidated statements of income, retained
earnings and cash flows for the fiscal quarter then ended and that portion of
the Fiscal Year then ended, including the notes thereto, all in reasonable
detail setting forth in comparative form the corresponding figures for the
corresponding date and periods in the preceding Fiscal Year and prepared by the
Borrower in accordance with GAAP and, if applicable, containing disclosure of
the effect on the financial position or results of operations of any change in
the application of accounting principles and practices during the period, and
certified by the chief financial officer of the Borrower to present fairly in
all material respects the financial condition of the Borrower and its
Subsidiaries as of their respective dates and the results of operations of the
Borrower and its Subsidiaries for the respective periods then ended, subject to
normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any
event within one hundred twenty (120) days after the end of each Fiscal Year, an
audited Consolidated balance sheet filed by the Borrower and its Subsidiaries as
of the close of such Fiscal Year and audited Consolidated statements of income,
retained earnings and cash flows for the Fiscal Year then ended, including the
notes thereto, all in reasonable detail setting forth in comparative form the
corresponding figures as of the end of and for the preceding Fiscal Year and
prepared by an independent certified public accounting firm acceptable to the
Administrative Agent in accordance with GAAP and, if applicable, containing
disclosure of the effect on the financial position or results of operations of
any change in the application of accounting principles and practices during the
year, and accompanied by a report thereon by such certified public accountants
that is not qualified with respect to scope limitations imposed by the Borrower
or any of its Subsidiaries or with respect to accounting principles followed by
the Borrower or any of its Subsidiaries not in accordance with GAAP.
(c) Annual Business Plan and Financial Models. As soon as practicable
and in any event not later than March 30 of each Fiscal Year, a budget of the
Borrower and its Subsidiaries for such Fiscal Year, such plan to be prepared in
a form and on a basis similar to the plan(s) previously furnished to the Lenders
and to include, on a quarterly basis, the following: an operating and capital
budget, an income statement, a statement of cash flows and a balance sheet,
accompanied by a certificate from the chief financial officer of the Borrower,
on behalf of the Borrower, to the effect that, to the best of such officer's
knowledge, such information is a good faith estimate of the financial condition
and operations of the Borrower and its Subsidiaries for such period.
SECTION 7.2 Officer's Compliance Certificate. At each time reports are
delivered pursuant to Sections 7.1 (a) or (b) and at such other times as the
Administrative Agent shall reasonably request, a certificate of the chief
financial officer or the treasurer of the Borrower in the form of Exhibit G
attached hereto (an "Officer's Compliance Certificate"),
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which shall include a schedule of all earn-out obligations.
SECTION 7.3 Other Reports.
(a) Promptly but in any event within ten (10) Business Days after the
filing thereof, a copy of (i) each report or other filing made by the Borrower
or any of its Subsidiaries with the SEC and required by the SEC to be delivered
to the shareholders of the Borrower or any of its Subsidiaries, and (ii) each
report made by the Borrower or any of its Subsidiaries to the SEC on Form 8-K
and each final registration statement of the Borrower or any of its Subsidiaries
filed with the SEC (excluding any registration statement on Form S-8 or its
equivalent); and
(b) Such other information regarding the operations, business affairs
and financial condition of the Borrower or any of its Subsidiaries as the
Administrative Agent or any Lender (acting through the Administrative Agent) may
reasonably request.
SECTION 7.4 Notice of Litigation and Other Matters. Prompt (but in no
event later than ten (10) days after an officer of the Borrower obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by
or before any Governmental Authority and all actions and proceedings in
any court or before any arbitrator against or involving the Borrower or
any Subsidiary or any of their respective properties, assets or
businesses which if determined adversely to the Borrower or such
Subsidiary, individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect;
(b) any notice of any violation received by the Borrower or
any Subsidiary from any Governmental Authority (including, without
limitation, any notice of violation of Environmental Laws) which in any
such case could reasonably be expected to have a Material Adverse
Effect;
(c) any labor controversy that has resulted in, or threatens
to result in, a strike against the Borrower or any Subsidiary;
(d) any Default or Event of Default, or any event which
constitutes or which with the passage of time or giving of notice or
both would constitute a default or event of default by the Borrower or
any of its Subsidiaries under any Material Contract to which the
Borrower or any of its Subsidiaries is a party or by which the Borrower
or any Subsidiary thereof or any of their respective properties may be
bound;
(e) (i) any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit Plan
under Section 401(a) of the Code (along with a copy thereof), (ii) all
notices received by the Borrower or any ERISA Affiliate of the PBGC's
intent to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (iii) all notices received by the Borrower
or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant to Section 4202
of ERISA and (iv) the Borrower obtaining
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knowledge or reason to know that the Borrower or any ERISA Affiliate
has filed or intends to file a notice of intent to terminate any
Pension Plan under a distress termination within the meaning of Section
4041(c) of ERISA; and
(f) any event which makes any of the representations set forth
in Section 6.1 inaccurate in any material respect or any event which
could reasonably be expected to have a Material Adverse Effect.
SECTION 7.5 Accuracy of Information. All written information, reports,
statements and other papers and data furnished by or on behalf of the Borrower
to the Administrative Agent or any Lender (other than financial forecasts)
whether pursuant to this Article VII or any other provision of this Agreement,
or any of the other Loan Documents, shall be, at the time the same is so
furnished, complete and correct in all material respects to the extent necessary
to give the Administrative Agent or any Lender complete, true and accurate
knowledge of the subject matter based on the Borrower's knowledge thereof.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been finally paid and satisfied in
full and the Commitments terminated, unless consent has been obtained in the
manner provided for in Section 13.9, the Borrower will, and will cause each of
its Subsidiaries to:
SECTION 8.1 Preservation of Corporate Existence and Related Matters.
Except as permitted by Section 10.5, preserve and maintain its separate
existence as a corporation, partnership or other applicable form of business
entity and all rights, franchises, licenses and privileges necessary to the
conduct of its business, and qualify and remain qualified as a foreign
corporation, partnership or other such entity and authorized to do business in
each jurisdiction in which the failure to so qualify could reasonably be
expected to have a Material Adverse Effect.
SECTION 8.2 Maintenance of Property. Protect and preserve all
properties useful in and material to its business, including copyrights,
patents, trade names and trademarks and service marks; maintain in good working
order and condition all buildings, equipment and other tangible real and
personal property; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary for the conduct of its
business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; except in each case where
the failure to take such action could not reasonably be expected to have a
Material Adverse Effect.
SECTION 8.3 Insurance. Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law, and from time to time deliver to the Administrative Agent upon
its request a detailed list of the insurance then in effect, stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.
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SECTION 8.4 Accounting Methods and Financial Records. Maintain a system
of accounting, and keep such books, records and accounts (which shall be true
and complete in all material respects) as may be required or as may be necessary
to permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and perform all
Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all material taxes, assessments and other governmental charges that
may be levied or assessed upon it or any of its property, and (b) all other
material indebtedness, obligations and liabilities in accordance with customary
trade practices; provided, that the Borrower or such Subsidiary may contest any
item described in clauses (a) or (b) of this Section 8.5 in good faith so long
as adequate reserves are maintained with respect thereto in accordance with
GAAP.
SECTION 8.6 Compliance With Laws and Approvals. Subject to Section 8.7,
observe and remain in compliance with all Applicable Laws and maintain in full
force and effect all Governmental Approvals, in each case applicable to the
conduct of its business except where the failure to do so could not reasonably
be expected to have a Material Adverse Effect.
SECTION 8.7 Environmental Laws. (a) Use reasonable commercial efforts
to comply with all applicable Environmental Laws and use reasonable commercial
efforts to obtain, comply with and maintain any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, in each case where the failure to so obtain or comply with which could
reasonably be expected to have a Material Adverse Effect, and (b) defend,
indemnify and hold harmless the Agents and Lenders, and their respective
parents, Subsidiaries, Affiliates, employees, agents, officers and directors,
from and against any claims, demands, penalties, fines, liabilities, settlements
authorized by the Borrower, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under any
Environmental Laws applicable to the operations of the Borrower or its
Restricted Subsidiaries, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, reasonable
attorney's and consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of the
foregoing directly result from the gross negligence or willful misconduct of the
party seeking indemnification therefor. Notwithstanding anything in this
Agreement to the contrary, the obligations of the Borrower under this Section
8.7 shall survive the payment in full of the Obligations and the termination of
the Commitments.
SECTION 8.8 Compliance with ERISA. In addition to and without limiting
the generality of Section 8.6, and to the extent any of the following,
individually or in the aggregate, results or could reasonably be expected to
result in a Material Adverse Effect, (a) comply in all material respects with
all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans, (b) not
take any action or fail to take action the result of which could be a liability
to the PBGC or to a Multiemployer Plan, (c) not participate in any prohibited
transaction that could result in any material civil penalty under ERISA or tax
under the Code, (d) operate each Employee Benefit
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Plan in such a manner that will not incur any material tax liability under
Section 4980B of the Code or any liability to any qualified beneficiary as
defined in Section 4980B of the Code and (e) furnish to the Administrative Agent
upon the Administrative Agent's request such additional information about any
Employee Benefit Plan as may be reasonably requested by the Administrative
Agent.
SECTION 8.9 Compliance With Agreements. Comply in all respects with
each term, condition and provision of all leases, agreements and other
instruments entered into in the conduct of its business including, without
limitation, any Material Contract, except where the failure to comply could not
reasonably be expected to have a Material Adverse Effect; provided, that the
Borrower or such Subsidiary may contest any such lease, agreement or other
instrument in good faith through applicable proceedings so long as adequate
reserves are maintained in accordance with GAAP.
SECTION 8.10 Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date
and those related thereto.
SECTION 8.11 Visits and Inspections. Permit representatives of the
Administrative Agent or any Lender (acting through the Administrative Agent),
from time to time, upon reasonable prior notice, during normal business hours
and, so long as no Default or Event of Default shall have occurred and be
continuing, at the sole cost of the Administrative Agent or such Lender, to (a)
visit and inspect its properties; (b) inspect, audit and make extracts from its
books, records and files, including, but not limited to, management letters
prepared by independent accountants; and (c) discuss with its principal
officers, and its independent accountants, its business, assets, liabilities,
financial condition, results of operations and business prospects.
SECTION 8.12 Subsidiaries. Concurrently with the creation or
acquisition of any Subsidiary, (a) if such Subsidiary is a domestic Restricted
Subsidiary (unless such Subsidiary has no material assets other than capital
stock of foreign Subsidiaries, in which event such domestic Restricted
Subsidiary shall be deemed not to be a domestic Subsidiary and the provisions of
clause (b) below shall apply), cause it to execute and deliver to the
Administrative Agent (i) a supplement to the Guaranty Agreement delivered on the
Closing Date substantially in the form of Exhibit A to such Guaranty Agreement
and (ii) either (A) if such Subsidiary is a Subsidiary of a Person who is a
pledgor under an existing Pledge and Security Agreement, a supplement
substantially in the form of Exhibit A to such Pledge and Security Agreement
with respect to one hundred percent (100%) of the ownership interests of such
Restricted Subsidiary and (B) if the owner of the capital stock or other
ownership interests in such Restricted Subsidiary is not such a pledgor, a
Pledge and Security Agreement, substantially in the form of Exhibit I, executed
by such Person with respect to one hundred percent (100%) of the ownership
interest in such Restricted Subsidiary, (b) if such Restricted Subsidiary is not
a domestic Subsidiary but is owned by the Borrower or one or more domestic
Subsidiaries, cause the owner of the capital stock or other ownership interests
therein to provide to the Administrative Agent for the benefit of the Lenders a
first priority, perfected security interest in 65% of the issued and outstanding
capital stock of such Restricted Subsidiary which is owned by the pledgor,
pursuant to documentation which is in form and substance reasonably acceptable
to the Administrative Agent, (c) if such Subsidiary is an Unrestricted
Subsidiary, as
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a condition precedent to the creation or acquisition of such Unrestricted
Subsidiary, demonstrate to the Administrative Agent pro forma compliance with
all applicable covenants in this Agreement after giving effect to such creation
or acquisition, and (d) regardless of whether such Restricted Subsidiary is a
domestic Subsidiary, cause to be delivered to the Administrative Agent such
other documents as the Agents or Required Lenders shall reasonably request in
connection therewith, including without limitation, officers' certificates,
financial statements, opinions of counsel, resolutions, charter documents,
certificates of existence and authority to do business and any other closing
certificates and documents described in Section 5.2 and such stock certificates,
stock powers, UCC Financing Statements and notices as the Administrative Agent
may reasonably deem necessary to perfect its Lien for the benefit of the Lenders
thereon. At all times during the term of this Agreement the Borrower and its
Restricted Subsidiaries shall account for at least 95% of the total revenues of
the Borrower and its Consolidated Subsidiaries.
SECTION 8.13 Year 2000 Compatibility.
(a) Borrower Systems. Use commercially reasonable efforts to assure
that the computer based systems of the Borrower and any Subsidiary thereof
(other than computer related products provided to the Borrower by independent
contractors or third party product vendors for direct or indirect sale or resale
to customers of the Borrower or any Subsidiary thereof) which are primarily
responsible for processing date related data in the normal conduct of the
business of the Borrower or any Subsidiary thereof are able to operate and
effectively process data which includes dates on and after January 1, 2000. At
the reasonable request of the Administrative Agent, the Borrower shall provide
reasonable assurances satisfactory to the Administrative Agent of the Year 2000
compatibility of the Borrower or any Subsidiary thereof or plans therefor.
(b) Product Vendor Systems. Request that all of the material third
party product vendors and independent contractors of computer related products
for the Borrower and its Subsidiaries which are primarily responsible for
processing date related data in the ordinary use of such systems and are
intended for direct or indirect sale or resale to customers of the Borrower or
any Subsidiary thereof (i) certify that such systems are able to operate and
effectively process data which includes dates on and after January 1, 2000 or
(ii) provide a description of such third party vendor's plans to be able to
deliver the certification described in clause (i) above. At the reasonable
request of the Administrative Agent, the Borrower shall provide copies of any
plans delivered by third party product vendors pursuant to clause (ii) above.
Nothing in this Section 8.13 shall obligate the Borrower or any Subsidiary
thereof to ensure that computer based systems of its customers are able to
operate and effectively process data which includes dates on and after January
1, 2000.
SECTION 8.14 Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender through the Administrative Agent may reasonably require to
document and consummate the transactions contemplated hereby and to vest
completely in and insure the Administrative Agent and the Lenders their
respective rights under this Agreement, the Notes
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and the other Loan Documents.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been finally paid and satisfied in
full and the Commitments terminated, unless consent has been obtained in the
manner set forth in Section 13.9 hereof, the Borrower will not:
SECTION 9.1 Leverage Ratio. As of the end of any fiscal quarter, permit
the ratio of (a) Total Debt as of such date to (b) EBITDA for the period of four
(4) consecutive fiscal quarters ending on such date, to exceed 3.0 to 1.0.
SECTION 9.2 Minimum Net Worth. Permit, as of any fiscal quarter end,
Consolidated Net Worth to be less than the sum of (a) $300,000,000 plus (b)
fifty percent (50%) of cumulative Net Income for each quarter for which Net
Income is greater than zero during the period commencing on the Closing Date and
ending on such fiscal quarter end (excluding the income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of the Borrower or is merged
into or consolidated with the Borrower) plus (c) seventy-five percent (75%) of
the Net Cash Proceeds of any equity issuance by the Borrower or any of its
Restricted Subsidiaries subsequent to the Closing Date.
SECTION 9.3 Maximum Leverage. Permit, as of any fiscal quarter end, the
ratio of (a) Total Debt as of such fiscal quarter end to (b) Total
Capitalization as of such fiscal quarter end to exceed 0.30 to 1.00.
SECTION 9.4 Interest Coverage Ratio. Permit, as of any fiscal quarter
end, the ratio of (a) EBITDA for the period of four (4) consecutive fiscal
quarters ending on such fiscal quarter end to (b) Interest Expense for such
period, to be less than 3.50 to 1.0.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been finally paid and satisfied in
full and the Commitments terminated, unless consent has been obtained in the
manner set forth in Section 13.9 hereof, the Borrower will not and will not
permit any of its Restricted Subsidiaries to:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to
exist any Debt except:
(a) the Obligations;
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(b) Debt incurred in connection with a Hedging Agreement with
either (i) a counterparty and upon terms and conditions reasonably
satisfactory to the Agents or (ii) a Lender;
(c) Subordinated Debt not to exceed an aggregate of
$100,000,000 at any time outstanding;
(d) existing Debt set forth on Schedule 6.1(s) and the renewal
and refinancing (but not the increase) thereof;
(e) Debt of the Borrower and its Restricted Subsidiaries
incurred in connection with the acquisition of fixed or capital assets
(including, without limitation, Capitalized Leases) in an aggregate
amount not to exceed $5,000,000 on any date of determination;
(f) Debt consisting of Contingent Obligations permitted by
Section 10.2;
(g) Debt of Restricted Subsidiaries to each other, Debt of the
Borrower to its Restricted Subsidiaries or Debt of any Restricted
Subsidiary to the Borrower;
(h) Debt of Subsidiaries acquired in any acquisition and any
refinancings, renewals or extensions of such Debt; provided that such
Debt is non-recourse to the Borrower and its Subsidiaries (other than
the Subsidiaries so acquired and any Persons with which such
Subsidiaries are merged);
(i) Debt in the form of earn-out obligations; and
(j) Other Debt of the Borrower and its Restricted Subsidiaries
not to exceed an aggregate of $10,000,000 at any time outstanding.
SECTION 10.2 Limitations on Contingent Obligations. Create, incur,
assume or suffer to exist any Contingent Obligations except:
(a) Contingent Obligations in favor of the Administrative
Agent for the benefit of the Agents and the Lenders;
(b) Contingent Obligations of the Borrower on account of Debt
of its Restricted Subsidiaries, and Contingent Obligations of
Restricted Subsidiaries on account of Debt of the Borrower and its
Restricted Subsidiaries, to the extent that such Debt is permitted by
Section 10.1;
(c) Contingent Obligations on account of Debt of Unrestricted
Subsidiaries to the extent such Debt is permitted by Section 10.4(e);
(d) Contingent Obligations of Subsidiaries acquired in any
acquisition; provided that such Contingent Obligations are non-recourse
to the Borrower and its Subsidiaries other than the Subsidiaries so
acquired and any Persons with which such Subsidiaries are merged; and
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(e) Other Contingent Obligations of the Borrower and its
Restricted Subsidiaries not to exceed an aggregate of $2,500,000 at any
time outstanding.
SECTION 10.3 Negative Pledge; Limitation on Liens. Create, incur,
assume or suffer to exist any lien on or with respect to any of its assets or
properties (including the management agreements and shares of capital stock and
other ownership interests), real or personal, whether now owned or hereafter
acquired, except:
(a) Liens for taxes, assessments and other governmental
charges or levies (excluding any Lien imposed pursuant to any of the
provisions of ERISA or Environmental Laws) not yet due or as to which
the period of grace (not to exceed thirty (30) days), if any, related
thereto has not expired or which are being contested in good faith and
by appropriate proceedings if adequate reserves are maintained to the
extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers,
warehousemen, processors or landlords for labor, materials, supplies or
rentals incurred in the ordinary course of business, (i) which are not
overdue for a period of more than thirty (30) days or (ii) which are
being contested in good faith and by appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure payment
of, obligations under workers' compensation, unemployment insurance or
similar legislation or obligations under customer service contracts;
(d) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use
of real property, which in the aggregate are not substantial in amount
and which do not, in any case, detract from the value of such property
or impair the use thereof in the ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the
Agents and the Lenders;
(f) Existing Liens described on Schedule 10.3 and the
continuance or renewal of any such Liens in connection with any
refinancings, renewals or extensions of the Debt secured thereby;
(g) Liens securing purchase money Debt incurred under Section
10.1(e) or (j); provided that such liens do not at any time encumber
any property other than the property financed by such Debt;
(h) Liens not otherwise permitted hereunder securing Debt
permitted under Section 10.1 in an aggregate principal amount not to
exceed $10,000,000 at any one time outstanding;
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(i) Liens on assets of Subsidiaries at the time of acquisition
by the Borrower or any Restricted Subsidiary, provided that there is no
recourse to the Borrower or its Restricted Subsidiaries with respect to
such Liens; and
(j) Liens on the equity interest in any Co-Investment Entity
securing obligations of such Co-Investment Entity.
SECTION 10.4 Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture,
evidence of Debt or other obligation or security, substantially all or a portion
of the business or assets of any other Person or any other investment or
interest whatsoever in any other Person, or make or permit to exist, directly or
indirectly, any loans, advances or extensions of credit to, or any investment in
cash or by delivery of property in, any Person, or enter into, directly or
indirectly, any commitment or option in respect of the foregoing except:
(a) investments in Unrestricted Subsidiaries and Affiliates
existing on the Closing Date and the other existing loans, advances and
investments described on Schedule 10.4;
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any
agency thereof maturing within 120 days from the date of acquisition
thereof, (ii) marketable direct obligations issued by any State of the
United States or any political subdivision of any such State or any
public instrumentality thereof maturing within 120 days from the date
of acquisition thereof and, at the time of acquisition, having the
highest or second highest rating obtainable from S&P or Moody's; (iii)
commercial paper maturing within 120 days from the date of the
acquisition thereof, and, at the time of acquisition, having a rating
of A-1 or higher by S&P or P-1 or higher by Moody's, (iv) certificates
of deposit maturing no more than 120 days from the date of creation
thereof issued by commercial banks incorporated or licensed under the
laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having
a rating of A or better by a nationally recognized rating agency; (v)
time deposits maturing no more than 30 days from the date of creation
thereof with commercial banks or savings banks or savings and loan
associations each having membership either in the FDIC or the deposits
of which are insured by the FDIC and in amounts not exceeding the
maximum amounts of insurance thereunder; (vi) eligible bankers'
acceptances, repurchase agreements and tax-exempt municipal bonds
having a maturity of less than one year and in each case having a
rating, or being the full recourse obligation of a Person whose senior
debt rating has a rating, of A or higher by S&P or Moody's; or (vii)
any money market fund organized under the laws of the United States or
any State thereof;
(c) investments in the form of acquisitions of all or
substantially all of the business or a line of business (whether by the
acquisition of capital stock or other ownership interest, assets or any
combination thereof) of any other Person (or investments, including
loans and deposits, in anticipation thereof), if (i) no Default or
Event of Default then exists or would be created thereby, (ii) the
Borrower has delivered to the Agents and
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the Lenders a certificate of the Chief Financial Officer or Treasurer
of the Borrower (on behalf of the Borrower) demonstrating pro forma
compliance with the covenants contained in Article IX after giving
effect to such acquisition and (iii) any acquired Person is, in the
reasonable opinion of the Borrower, in a similar or complementary line
of business to that of the Borrower or any of its Restricted
Subsidiaries;
(d) investments in or loans to Restricted Subsidiaries;
(e) investments in or loans to Unrestricted Subsidiaries,
provided that the aggregate amount of such loans and investments,
together with all Contingent Obligations of the Borrower and its
Restricted Subsidiaries on account of Debt of Unrestricted Subsidiaries
shall at no time exceed an amount equal to fifteen percent (15%) of the
Consolidated Net Worth of the Borrower and its Subsidiaries;
(f) (i) loans to officers and directors of the Borrower and
its Restricted Subsidiaries to finance the purchase of newly issued
capital stock of the Borrower pursuant to its executive stock purchase
program and (ii) other loans to executive officers and directors not to
exceed (in the case of this clause (ii)) an aggregate of $5,000,000 at
any time outstanding;
(g) investments in or loans to Controlled Co-Investment
Entities; and
(h) investments in or loans to Uncontrolled Co-Investment
Entities not to exceed an aggregate of $15,000,000 at any time
outstanding.
SECTION 10.5 Limitations on Mergers and Liquidation. Merge, consolidate
or enter into any similar combination with any other Person or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution) except:
(a) any Restricted Subsidiary may be merged or consolidated
with or into the Borrower or any other Restricted Subsidiary, or be
liquidated, wound up or dissolved;
(b) any Restricted Subsidiary may merge into the Person such
Restricted Subsidiary was formed to acquire in connection with an
acquisition permitted by Section 10.4(c); and
(c) any Person may merge with the Borrower or any Restricted
Subsidiary, provided such Person is engaged in a similar or
complementary line of business to that of the Borrower or any of its
Restricted Subsidiaries, no Event of Default or Default shall result
from such merger and, if such merger is with the Borrower, the Borrower
shall be the surviving Person.
SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, any capital stock or other ownership interest in
any Subsidiary or Affiliate or the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
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(a) All or substantially all of the business or assets of any
Restricted Subsidiary may be conveyed, sold, assigned, leased,
transferred, or otherwise disposed of, in one transaction or a series
of transactions, to the Borrower or any other Restricted Subsidiary;
(b) the sale of obsolete assets no longer used or usable in
the business of the Borrower or any of its Subsidiaries;
(c) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection
with the compromise or collection thereof;
(d) sales of assets, other than as otherwise permitted by this
Section 10.6, not exceeding $7,500,000 in any Fiscal Year; provided
that, to the extent the allowance for sale of assets provided for in
this Section 10.6(c) is not utilized, the same may be carried over to
the next Fiscal Year, provided that the allowance shall in no event
exceed $15,000,000 in any Fiscal Year (sales of assets shall be
permitted in excess of the limitation provided for this subsection (c),
provided that the Aggregate Commitment is reduced by the amount of net
proceeds from the sale of such assets;
(e) the sale of real property and other assets owned by and
interests in Co-Investment Entities; and
(f) the sale of assets listed on Schedule 10.6.
Each Lender hereby authorizes and instructs the Administrative Agent to release
any collateral security and guarantee obligations provided by any Subsidiary of
the Borrower upon the sale, transfer or other disposition of such Subsidiary in
accordance with the provisions of this Section 10.6.
SECTION 10.7 Limitations on Dividends and Changes in Capital Structure.
Declare or pay any dividends upon any of its capital stock or other ownership
interests; purchase, redeem, retire or otherwise acquire, directly or
indirectly, any shares of its capital stock or other ownership interests, or
make any distribution of cash, property or assets among the holders of shares of
its capital stock or other ownership interests, or make any change in its
capital structure or amend any organizational document which change or amendment
could reasonably be expected to have a Material Adverse Effect; provided that:
(a) the Borrower or any Restricted Subsidiary may pay
dividends in shares of its own capital stock or other ownership
interest;
(b) any Restricted Subsidiary may pay cash or other dividends
to the Borrower and its other owners, if any;
(c) during such time as no Default or Event of Default shall
have occurred and be continuing or would result therefrom, the Borrower
may, during any fiscal quarter, pay cash dividends on its common stock
to the holders thereof or purchase, redeem or otherwise acquire (by way
of open market purchases, tender offers and/or put
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agreements) shares of the capital stock of the Borrower in an
aggregate amount not to exceed twenty-five percent (25%) of Net Income
for the immediately preceding fiscal quarter; provided that any
amounts available for dividends or the purchase or redemption of stock
in any quarter which are not so dividended or used to purchase or
redeem stock during such quarter may be carried over to subsequent
quarters; and
(d) during such time as no Default or Event of Default shall
have occurred and be continuing or would result therefrom, the Borrower
may purchase, redeem or otherwise acquire (by way of open market
purchases, tender offers and/or put agreements) shares of the capital
stock of the Borrower; provided, that the aggregate amount spent by
the Borrower on account of such purchases, redemptions and other
acquisitions shall not exceed an amount equal to the sum of (i)
$10,000,000 plus (ii) twenty-five percent (25%) of the of the Net Cash
Proceeds of any equity issuance by the Borrower subsequent to the
Closing Date (other than the issuance of capital stock pursuant to the
Borrower's executive stock purchase program) plus (iii) fifty percent
(50%) of the amount realized by the Borrower from the exercise
subsequent to the Closing Date by third Persons of stock options
granted by the Borrower.
SECTION 10.8 Transactions with Affiliates. Except (i) as set forth on
Schedule 10.8, (ii) with respect to service agreements with Controlled
Co-Investment Entities and (iii) as otherwise expressly permitted hereunder,
directly or indirectly: (a) make any loan or advance to, or purchase or assume
any note or other obligation to or from, any of its officers, directors,
shareholders or other Affiliates, or to or from any member of the immediate
family of any of its officers, directors, shareholders or other Affiliates, or
subcontract any operations to any of its Affiliates, or (b) enter into, or be a
party to, any transaction with any of its Affiliates, in both cases except upon
fair and reasonable terms no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not its Affiliate.
SECTION 10.9 Certain Accounting Changes. Change its Fiscal Year end, or
make any change in its accounting treatment and reporting practices except as
permitted by GAAP.
SECTION 10.10 Amendments; Payments and Prepayments of Subordinated
Debt. Amend or modify (or permit the modification or amendment of) any of the
terms or provisions of any Subordinated Debt in any manner which would
reasonably be expected to have an adverse effect upon the rights or interests of
the Administrative Agent or the Lenders, or make any voluntary or optional
payment or prepayment on, or redeem or acquire for value (including without
limitation by way of depositing with any trustee with respect thereto money or
securities before due for the purpose of paying when due) any Subordinated Debt.
SECTION 10.11 Real Estate Development. Engage in any real estate
development activities for its own account.
SECTION 10.12 Lines of Business. Change the lines of business in which
it currently is engaged or change, directly or indirectly, or substantially
alter its method of doing business in a manner which would have a Material
Adverse Effect.
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SECTION 10.13 Restrictive Agreements. Enter into any Debt which (a)
contains any negative pledge on assets or any other covenants more restrictive
(taken as a whole) than the provisions of Articles VIII, IX and X hereof, or (b)
restricts, limits or otherwise encumbers its ability to incur Liens on or with
respect to any of its assets or properties other than the assets or properties
securing such Debt or (c) restricts, limits or otherwise encumbers the ability
of any Restricted Subsidiary to pay dividends or distributions to the Borrower.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower
shall default in any payment of principal of any Loan, Note or
Reimbursement Obligation when and as due (whether at maturity, by
reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the
payment when and as due (whether at maturity, by reason of acceleration
or otherwise) of interest on any Loan, Note or Reimbursement Obligation
or the payment of any other Obligation and such payment shall not have
been made within five (5) Business Days after such payment becomes due.
(c) Misrepresentation. Any representation or warranty made or
deemed to be made by the Borrower or any of its Subsidiaries under this
Agreement, any other Loan Document or any amendment hereto or thereto,
shall at any time prove to have been incorrect or misleading in any
material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. The Borrower
shall default in the performance or observance of any covenant or
agreement contained in Sections 7.4(d) or (e)(i) or Articles IX or X of
this Agreement.
(e) Default in Performance of Other Covenants and Conditions.
The Borrower or any Subsidiary thereof shall default in the performance
or observance of any term, covenant, condition or agreement contained
in this Agreement (other than as specifically provided for otherwise in
this Section 11.1) or any other Loan Document and such default shall
continue for a period of thirty (30) days after written notice thereof
has been given to the Borrower by the Administrative Agent except that
no such notice shall be required with respect to any default in the
performance or observance of any covenant or agreement contained in
Section 8.12.
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(f) Hedging Agreement. Any termination payment shall be due by
the Borrower under any Hedging Agreement and such amount is not paid
within ten (10) Business Days of the due date thereof.
(g) Debt Cross-Default. (i) There shall occur any acceleration
of the maturity of an aggregate principal amount outstanding of any
Debt for Money Borrowed (other than the Notes) of the Borrower or any
Restricted Subsidiary in excess of $5,000,000 (other than any such
acceleration resulting from the sale of an asset to the extent that
such Debt for Money Borrowed was incurred to finance the acquisition of
such asset, by its terms is due and payable on the sale of such asset
and is paid in full when due), or (ii) any other event shall occur or
condition shall exist under any agreement, mortgage, indenture or
instrument relating to any Debt for Money Borrowed of the Borrower or
any Restricted Subsidiary in excess of $5,000,000 and shall continue
after the applicable grace or cure period, if any, specified in such
agreement, mortgage, indenture or instrument, if the effect of any such
event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt for Money Borrowed (other than any such
acceleration resulting from the sale of an asset to the extent that
such Debt for Money Borrowed was incurred to finance the acquisition of
such asset, by its terms is due and payable on the sale of such asset
and is paid in full when due), or (iii) the Borrower or any Restricted
Subsidiary shall default in the payment of any Debt for Money Borrowed
at final maturity.
(h) Other Cross-Defaults. The Borrower or any of its
Restricted Subsidiaries shall default in the payment when due, or in
the performance or observance, of any material obligation or condition
of any Material Contract (other than Debt for Money Borrowed) involving
monetary liability in an amount in excess of $1,000,000 unless, but
only as long as, the existence of any such default is being contested
by the Borrower or such Restricted Subsidiary in good faith by
appropriate proceedings and adequate reserves in respect thereof have
been established on the books of the Borrower or such Subsidiary to the
extent required by GAAP.
(i) Change in Ownership and Control. Any person or group of
persons (within the meaning of Section 13(d) of the Securities Exchange
Act of 1934, as amended) other than Andrew L. Farkas (and any trusts of
which he and/or any of his children are beneficiaries and any other
Persons of which he or any of his children is the beneficial
equityholder), Metropolitan Acquisition Partners IV, L.P. and
Metropolitan Acquisition Partners V, L.P. and their respective
Affiliates, shall obtain ownership or control in one or more series of
transactions of more than twenty-five percent (25%) of the common stock
and twenty-five percent (25%) of the voting power of the Borrower
entitled to vote in the election of members of the board of directors
of the Borrower and Andrew L. Farkas (and any trusts of which he and/or
any of his children are beneficiaries and any other Persons of which he
or any of his children is the beneficial equityholder), Metropolitan
Acquisition Partners IV, L.P. and Metropolitan Acquisition Partners V,
L.P. and their respective Affiliates cease to own 51% or more of the
common stock of the Borrower.
(j) Voluntary Bankruptcy Proceeding. The Borrower or any
Restricted Subsidiary shall (i) commence a voluntary case under the
federal bankruptcy laws (as now or hereafter in effect), (ii) file a
petition seeking to take advantage of any other laws,
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domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and appropriate manner
any petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator
of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of
authorizing any of the foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other
proceeding shall be commenced against the Borrower or any Restricted
Subsidiary thereof in any court of competent jurisdiction seeking (i)
relief under the federal bankruptcy laws (as now or hereafter in
effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like for the Borrower or any Restricted Subsidiary
thereof or for all or any substantial part of their respective assets,
domestic or foreign, and such case or proceeding shall continue
undismissed or unstayed for a period of ninety (90) consecutive days,
or an order granting the relief requested in such case or proceeding
(including, but not limited to, an order for relief under such federal
bankruptcy laws) shall be entered.
(l) Failure of Agreements. Any material provision of this
Agreement or of any other Loan Document shall for any reason cease to
be valid and binding on the Borrower or Restricted Subsidiary party
thereto or any such Person shall so state in writing, or this Agreement
or the Pledge and Security Agreement shall for any reason cease to
create a valid and perfected first priority Lien on, or security
interest in, any of the collateral purported to be covered thereby, in
each case other than in accordance with the express terms hereof or
thereof and except where due solely to the failure to file, on a timely
basis, appropriate continuation statements under the Uniform Commercial
Code.
(m) Termination Event. The occurrence of any of the following
events: (i) the Borrower or any ERISA Affiliate fails to make full
payment when due of all amounts which, under the provisions of any
Pension Plan or Section 412 of the Code, the Borrower or any ERISA
Affiliate is required to pay as contributions thereto which results in
a Material Adverse Effect, (ii) an accumulated funding deficiency in
excess of $250,000 occurs or exists, whether or not waived, with
respect to any Pension Plan, (iii) a Termination Event or (iv) the
Borrower or any ERISA Affiliate as employers under one or more
Multiemployer Plan makes a complete or partial withdrawal from any such
Multiemployer Plan and the plan sponsor of such Multiemployer Plans
notifies such withdrawing employer that such employer has incurred a
withdrawal liability requiring payments in an amount which in the
aggregate with all other withdrawal liabilities then due and payable
exceeds $5,000,000.
(n) Judgment. A judgment or order for the payment of money not
covered by insurance which causes the aggregate amount of such
undischarged, unstayed and not removed judgments to exceed $5,000,000
in any Fiscal Year shall be entered against the
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Borrower or any of its Restricted Subsidiaries by any court and such
judgment or order shall continue undischarged, unstayed or not removed
to bond for a period of thirty (30) days.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower:
(a) Acceleration; Termination of Facilities. Declare the
principal of and interest on the Loans, the Notes and Reimbursement
Obligations at the time outstanding, and all other amounts owed to the
Lenders and Agents under this Agreement or any of the other Loan
Documents (including, without limitation, all L/C Obligations, whether
or not the beneficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder) and all other
Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest
or other notice of any kind, all of which are expressly waived,
anything in this Agreement or the other Loan Documents to the contrary
notwithstanding, and terminate the Credit Facility and any right of the
Borrower to request borrowings thereunder and any right of the Borrower
to request borrowings or Letters of Credit thereunder; provided, that
upon the occurrence of an Event of Default specified in Section 11.1(j)
or (k), the Credit Facility shall be automatically terminated and all
Obligations shall automatically become due and payable without
presentment, demand, protest or other notice of any kind, all of which
are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding.
(b) Letters of Credit. With respect to all Letters of Credit
for which presentment for honor shall not have occurred at the time of
an acceleration pursuant to the preceding paragraph, require the
Borrower at such time to deposit in a cash collateral account opened by
the Administrative Agent an amount equal to the aggregate then undrawn
and unexpired amount of such Letters of Credit. Amounts held in such
cash collateral account shall be applied by the Administrative Agent to
the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have
expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired
or been fully drawn upon, the Reimbursement Obligation shall have been
satisfied and all other Obligations shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to
the Borrower.
(c) Rights of Collection. Exercise on behalf of the Lenders
all of its other rights and remedies under this Agreement, the other
Loan Documents and Applicable Law, in order to satisfy all of the
Borrower's Obligations.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Agents and the Lenders set forth
in this Agreement is not intended to be exhaustive and the exercise by the
Agents and Lenders of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder or under the other Loan
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Documents or that may now or hereafter exist at law or in equity or by suit or
otherwise. No delay or failure to take action on the part of any Agent or Lender
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege or shall be construed to be a waiver of any Event of
Default. No course of dealing between the Borrower, the Agents and Lenders or
their respective agents or employees shall be effective to change, modify or
discharge any provision of this Agreement or any of the other Loan Documents or
to constitute a waiver of any Event of Default.
SECTION 11.4 Judgment Currency. The obligation of the Borrower to make
payments of the principal of and interest on the Notes and the obligation of any
such Person to make payments of any other amounts payable hereunder or pursuant
to any other Loan Document in the currency specified for such payment shall not
be discharged or satisfied by any tender, or any recovery pursuant to any
judgment, which is expressed in or converted into any other currency, except to
the extent that such tender or recovery shall result in the actual receipt by
each of the Administrative Agent and Lenders of the full amount of the
particular Permitted Currency expressed to be payable pursuant to the applicable
Loan Document. The Administrative Agent shall, using all amounts obtained or
received from the Borrower pursuant to any such tender or recovery in payment of
principal of and interest on the Obligations, promptly purchase the applicable
Permitted Currency at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it. The obligation of the Borrower to
make payments in the applicable Permitted Currency shall be enforceable as an
alternative or additional cause of action solely for the purpose of recovering
in the applicable Permitted Currency the amount, if any, by which such actual
receipt shall fall short of the full amount of the Permitted Currency expressed
to be payable pursuant to the applicable Loan Document. The obligations of the
Borrower under this Section 11.4 shall survive the payment in full of the
Obligations and the termination of the Commitments.
ARTICLE XII
THE AGENTS
SECTION 12.1 Appointment and Authorization. Each of the Lenders hereby
irrevocably designates and appoints First Union as Administrative Agent of such
Lender and Lehman as Syndication Agent of such Lender under this Agreement and
the other Loan Documents and each Lender irrevocably authorizes First Union as
Administrative Agent for such Lender, and Lehman as Syndication Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to such Agent by the terms of this Agreement and such
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, no Agent shall have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against any Agent. The
Administrative Agent shall administer the Credit Facility in the same manner as
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the Administrative Agent administers similar loans for its own portfolio.
SECTION 12.2 Delegation of Duties. Each Agent may execute any of its
respective duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Agent shall be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
such Agent with reasonable care.
SECTION 12.3 Exculpatory Provisions. Neither any Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or the
other Loan Documents (except for actions occasioned by its or such Person's own
gross negligence or willful misconduct), or (b) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by the Borrower or any of its Subsidiaries or any officer thereof contained in
this Agreement or the other Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by such
Agent under or in connection with, this Agreement or the other Loan Documents or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the other Loan Documents or for any failure of
the Borrower or any of its Subsidiaries to perform its obligations hereunder or
thereunder. No Agent shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement, or to inspect the properties,
books or records of the Borrower or any of its Subsidiaries.
SECTION 12.4 Reliance by the Agents. Each Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by such Agent.
Each Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with Section
13.8 hereof. Each Agent shall be fully justified in failing or refusing to take
any action under this Agreement and the other Loan Documents unless it shall
first receive such advice or concurrence of the Required Lenders (or, when
expressly required hereby or by the relevant other Loan Document, all the
Lenders) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action
except for its own gross negligence or willful misconduct. Each Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement and the Notes in accordance with a request of the Required Lenders
(or, when expressly required hereby, all the Lenders), and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
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SECTION 12.5 Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that an Agent receives such a
notice, it shall promptly give notice thereof to the other Agent and Lenders.
Each Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders (or, when
expressly required hereby, all the Lenders); provided that unless and until such
Agent shall have received such directions, such Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
SECTION 12.6 Non-Reliance on the Agents and Other Lenders. Each Lender
expressly acknowledges that neither any Agent nor any of its respective
officers, directors, employees, agents, attorneys-in-fact, subsidiaries or
affiliates has made any representations or warranties to it and that no act by
any Agent hereafter taken, including any review of the affairs of the Borrower
or any of its Subsidiaries, shall be deemed to constitute any representation or
warranty by such Agent to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and its
Subsidiaries and made its own decision to make its Loans and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon any Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower and its
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by an Agent hereunder or by the other Loan
Documents, such Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrower or
any of its Subsidiaries which may come into the possession of such Agent or any
of its respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates.
SECTION 12.7 Indemnification. The Lenders agree to indemnify each Agent
in its capacity as such and (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
the respective amounts of their Commitment Percentages, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Notes) be imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from
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such Agent's gross negligence or willful misconduct. The agreements in this
Section 12.7 shall survive the payment of the Notes and all other amounts
payable hereunder and the termination of this Agreement.
SECTION 12.8 Agent in Its Individual Capacity. Each Agent and its
respective subsidiaries and affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though it were
not an Agent hereunder. With respect to any Loans made or renewed by it and any
Note issued to it, each Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not an Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
SECTION 12.9 Resignation of the Administrative Agent; Successor
Administrative Agent. Subject to the appointment and acceptance of a successor
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders with, as long as no Event of Default has occurred and is
continuing, the consent of the Borrower, which consent shall not be unreasonably
withheld, shall have the right to appoint a successor Administrative Agent,
which successor shall have minimum capital and surplus of at least
$1,000,000,000. If no successor Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within thirty (30) days after the Administrative Agent's giving of notice of
resignation, then the Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which successor shall be either (a)
any Lender or (b) with the consent of the Borrower (not to be unreasonably
withheld), so long as no Event of Default has occurred and is continuing, a
commercial bank organized or licensed under the laws of the United States or any
political subdivision thereof which has minimum capital and surplus of at least
$1,000,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 12.9 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Administrative Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii)
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on the third Business Day following the date sent by certified mail, return
receipt requested.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to the Borrower: Insignia/ESG Holdings, Inc.
200 Park Avenue
New York, New York 10166
Attention: Ronald Uretta
Telecopy Number: (212) 984-8251
With a copy to: Insignia/ESG Holdings, Inc.
200 Park Avenue
New York, New York 10166
Attention: Adam B. Gilbert, Esq.
Telecopy Number: (212) 984-7153
Insignia/ESG Holdings, Inc.
Suite 900
15 South Main Street
Greenville, South Carolina 29601
Attention: James A. Aston
Telecopy Number: (864) 298-8489
With a copy (in the case of
extraordinary notices only) to
(which shall not constitute
notice hereunder): Simpson Thacher & Bartlett
425 Lexington Avenue - 19th Floor
New York, New York 10017-3954
Attention: Charles H. F. Garner
Telecopy Number: (212) 455-2502
If to First Union as First Union National Bank
Administrative Agent One Insignia Financial Plaza
P.O. Box 1329
Greenville, South Carolina 29602
Attention: Portfolio Management and
Relationship Manager
Telecopy Number: (864) 255-8357
With a copy to: First Union National Bank
One First Union Center
301 S. College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telecopy Number: (704) 383-0288
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With a copy to (which shall
not constitute notice
hereunder): Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, North Carolina 28202-4006
Attention: J. Donnell Lassiter, Esquire
Telecopy Number: (704) 331-7598
If to the
Syndication Agent: Lehman Commercial Paper Inc.
Three World Financial Center
10th Floor
New York, New York 10285
Attention: Michelle Swanson
Telecopy Number: (212) 528-0819
If to any Lender: To the Address set forth on Schedule 1.1(a)
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed and
Letters of Credit issued.
SECTION 13.2 Expenses; Indemnity. The Borrower will (a) pay all
out-of-pocket expenses of the Agents in connection with: (i) the preparation,
execution and delivery of this Agreement and each other Loan Document, whenever
the same shall be executed and delivered, including without limitation all
reasonable out-of-pocket syndication and due diligence expenses and reasonable
fees and disbursements of a single counsel for the Agents (with the right of
such counsel to engage such special or local counsel as the Agents reasonably
deem necessary), (ii) the preparation, execution and delivery of any waiver,
amendment or consent by the Agents or the Lenders relating to this Agreement or
any other Loan Document, including without limitation reasonable fees and
disbursements of a single counsel for the Agents and (iii) the administration
and enforcement of any rights and remedies of the Agents and Lenders under the
Credit Facility, including, with respect to the Administrative Agent only,
consulting with appraisers, accountants, engineers and attorneys employed by the
Administrative Agent concerning the nature, scope or value of any right or
remedy of any Agent or Lender hereunder or under any other Loan Document or any
factual matters in connection therewith, which expenses shall include without
limitation the reasonable fees and disbursements of such Persons, and (b)
defend, indemnify and hold harmless the Agents and Lenders, and their respective
parents, Subsidiaries, Affiliates, employees, agents, officers and directors
(collectively, the "indemnitees"), from and against any losses, penalties,
fines, liabilities, settlements, damages, costs and expenses, suffered by any
such indemnitee in connection with any claim, investigation, litigation or other
proceeding (whether or not any Agent or Lender is a party thereto) and the
prosecution and defense thereof, arising out of this
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Agreement, any other Loan Document or the Loans, including without limitation
reasonable attorney's and consultant's fees, except to the extent that any of
the foregoing result from the gross negligence or willful misconduct of the
party seeking indemnification therefor or the breach by the Agents or the
Lenders of this Agreement. If any claim, demand, action or cause of action is
asserted against any indemnitee, such indemnitee shall promptly notify the
Borrower, but the failure to so promptly notify the Borrower shall not affect
the Borrower's obligations under this Section 13.2 unless such failure
materially prejudices the Borrower's right to participate in the contest of such
claim, demand, action or cause of action, as hereinafter provided. If requested
by the Borrower in writing, and so long as no Default or Event of Default shall
have occurred and be continuing, such indemnitee shall in good faith contest the
validity, applicability and amount of such claim, demand, action or cause of
action and shall permit the Borrower to participate in such contest. Any
indemnitee that proposes to settle or compromise any claim or proceeding for
which the Borrower may be liable for payment of indemnity hereunder shall give
the Borrower written notice of the terms of such proposed settlement or
compromise reasonably in advance of settling or compromising such claim or
proceeding and shall obtain the Borrower's concurrence thereto. The Agents are
authorized at the Borrower's cost and expense to employ one counsel in enforcing
the rights of the Agents and Lenders hereunder and in defending against any
claim, demand, action or cause of action covered by this Section 13.2. In
addition, each indemnitee shall have the right to employ its own separate
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnitee unless the employment of such counsel shall have
been authorized in writing by the Borrower in connection with the defense of
such action, in which case such fees and expenses shall be paid by the Borrower.
If an indemnitee shall have reasonably concluded (based upon the written advice
of counsel to the Administrative Agent) that the representation by one counsel
of the Agents and Lenders creates a conflict of interest for such counsel, the
reasonable fees and expenses of such additional counsel as are necessary to
resolve that conflict chosen by such indemnitee and reasonably satisfactory to
the Borrower (provided that the Borrower's approval of such counsel shall not be
unreasonably delayed or withheld) shall be borne by the Borrower. Any obligation
or liability of the Borrower to any indemnitee under this Section 13.2 shall
survive the expiration or termination of this Agreement and the repayment of the
Obligations.
SECTION 13.3 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER
LOAN DOCUMENTS, UNLESS OTHERWISE EXPRESSLY SET FORTH THEREIN, SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
SECTION 13.4 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
NEW YORK COUNTY, NEW YORK, IN ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF A SUMMONS AND COMPLAINT AND OTHER PROCESS IN ANY ACTION, CLAIM OR
PROCEEDING BROUGHT BY
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ANY AGENT OR LENDER IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS, ON BEHALF OF ITSELF OR ITS PROPERTY,
BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OTHERWISE IN THE
MANNER SPECIFIED IN SECTION 13.1. NOTHING IN THIS SECTION 13.4 SHALL AFFECT THE
RIGHT OF ANY AGENT OR LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW OR AFFECT THE RIGHT OF ANY AGENT OR LENDER TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF
ANY OTHER JURISDICTIONS.
SECTION 13.5 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH AGENT AND LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 13.6 Reversal of Payments. To the extent the Borrower makes a
payment or payments to any Agent for the ratable benefit of the Lenders or any
Agent receives any payment or proceeds of the collateral which payments or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
repaid, the Obligations or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if such payment or proceeds
had not been received by such Agent.
SECTION 13.7 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Agents to the contrary
agreed to by the Borrower, be performed in accordance with GAAP. In the event of
changes in GAAP in accordance with the definition thereof, the Borrower and the
Lenders will thereafter negotiate in good faith to revise, by amendment of this
Agreement, any covenants of this Agreement affected thereby in order to make
such covenants consistent with GAAP then in effect. All projections and
estimates of financial results shall be made in good faith and based on
reasonable assumptions.
SECTION 13.8 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agents and Lenders, all future holders
of the Notes, and their respective successors and assigns, except that the
Borrower shall not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
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(b) Assignment by Lenders. Each Lender may, with the consent of the
Administrative Agent, which consent shall not be unreasonably withheld or
delayed, and, as long as no Event of Default has occurred and is continuing, the
consent of the Borrower, which consent of the Borrower shall not be unreasonably
withheld or delayed, assign to one or more Eligible Assignees all or a portion
of its interests, rights and obligations under this Agreement (including,
without limitation, all or a portion of the Loans at the time owing to it and
the Note held by it); provided that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) if less than all of the assigning Lender's Commitment is
to be assigned, the Commitment so assigned shall not be less than
$5,000,000 and the assigning Lender shall retain a Commitment of at
least $5,000,000;
(iii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance in the form of Exhibit F
(an "Assignment and Acceptance"), together with any Note or Notes
subject to such assignment;
(iv) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with
the Securities and Exchange Commission or apply to or qualify the Loans
or the Notes under the blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative Agent
an assignment fee of $3,000 upon the execution by such Lender of the
Assignment and Acceptance; provided that no such fee shall be payable
upon any assignment by a Lender to an Affiliate thereof, upon any
assignment requested by the Borrower pursuant to the terms of Section
4.14 or upon any increase in the Aggregate Commitment in accordance
with Section 2.8 which does not involve a new Lender. (Barclays Bank
PLC shall not be considered a new Lender for purposes of Section 2.8.).
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, (A) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Loans with respect
to each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
73
<PAGE>
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with the Note subject to such assignment and the written consent to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is substantially in the form of Exhibit F:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the
Borrower; and
(iv) promptly deliver a copy of such Assignment and Acceptance
to the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note, a new Note to the order of such Eligible Assignee in an amount equal to
the Commitment assumed by it pursuant to such Assignment and Acceptance and a
new Note to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Note shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note, shall be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of the assigned Note delivered by
the assigning Lender. Each surrendered Note shall be canceled and returned to
the Borrower.
(f) Participations. Each Lender may sell participations to one or more
banks or other financial institutions which are not competitors of the Borrower
in all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Loans and the Note held
by it); provided that:
(i) such Lender's obligations under this Agreement (including,
without limitation, its Commitment) shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(iii) such Lender shall remain the holder of the Note held by
it for all purposes of this Agreement;
(iv) the Borrower, the Agents and the other Lenders shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement;
74
<PAGE>
(v) such Lender shall not permit such participant the right to
approve any waivers, amendments or other modifications to this
Agreement or any other Loan Document other than waivers, amendments or
modifications which would reduce the principal of or the interest rate
on any Loan or Reimbursement Obligation or extend the term or increase
the amount of the Commitment, reduce the amount of any fees to which
such participant is entitled, extend any scheduled payment date for
principal of any Loan or, except as expressly contemplated hereby or
thereby, release all or substantially all of the collateral securing
the Obligations; and
(vi) any such disposition shall not, without the consent of
the Borrower, require the Borrower to file a registration statement
with the Securities and Exchange Commission to apply to qualify the
Loans or the Notes under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. Each Agent and each
Lender agree to hold any confidential information which it may receive from the
Borrower pursuant to this Agreement in confidence, except for disclosure (i) to
legal counsel, accountants, and other professional advisors, on a need-to-know
basis, (ii) to regulatory officials, (iii) as required by law or legal process
(including by subpoena) or in connection with any legal proceeding, (iv) to
another financial institution in connection with a disposition or proposed
disposition of any of its interests hereunder or under any other Loan Document,
upon execution by such institution of an agreement to keep such information
confidential to the extent described in this Section 13.8(g), (v) in court
filings (which such Lender will use its reasonable efforts to seek to have
sealed by the court) in connection with (and to the extent related to)
litigation to which a Lender or an Agent is a party, (vi) of information which
subsequently becomes public or is disclosed by a Person not known by a Lender or
an Agent to be bound by a duty of confidentiality or (vii) to any Affiliate of
such Lender. The Agents and Lenders agree that the breach of this Section
13.8(g), including the disclosure of any confidential information received from
the Borrower pursuant to this Agreement, shall constitute a material breach of
this Agreement. Notwithstanding (iii) above, in the event that any such Person
is requested pursuant to, or required by, Applicable Law or Governmental
Authority to disclose any such information, such Person will provide the
Borrower with prompt notice of such request or requirement, unless prohibited by
law or regulation, in order to enable the Borrower to seek an appropriate
protective order or other remedy, or to consult with such Person with respect to
the Borrower's taking steps to resist or narrow the scope of such request or
legal process. If, in such event, the Borrower has not provided such Person with
a protective order or other remedy in sufficient time, with such Person acting
in good faith and otherwise in its sole discretion, for such Person to avoid
unlawful nondisclosure of such information, such Person may disclose such
information pursuant to such Applicable Law or Governmental Authority, as the
case may be, without any recourse or remedy against such Person by the Borrower
or any Affiliate of the Borrower, which the Borrower hereby expressly waives.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 13.9 Amendments, Waivers and Consents. Except as set forth
below and as otherwise provided in Section 2.8, any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be amended or
waived by the Lenders, and any consent given by the Lenders, if, but only if,
such amendment, waiver or consent is in
75
<PAGE>
writing signed by the Required Lenders (other than Defaulting Lenders) (or by
the Administrative Agent with the consent of the Required Lenders) and delivered
to the Administrative Agent and, in the case of an amendment, signed by the
Borrower; provided, that no amendment, waiver or consent shall (a) except as
specifically set forth in Section 2.8, increase the amount or extend the time of
the obligation of the Lenders to make Loans or issue or participate in Letters
of Credit (including without limitation pursuant to Section 2.6), (b) extend the
originally scheduled time or times of payment of the principal of any Loan or
Reimbursement Obligation or the time or times of payment of interest on any Loan
or Reimbursement Obligation or any fee, (c) reduce the rate of interest or fees
payable on any Loan or Reimbursement Obligation or reduce the principal amount
of any Loan or Reimbursement Obligation, (d) permit any subordination of the
principal or interest on any Loan or Reimbursement Obligation, (e) release any
substantial portion of the collateral or any material guarantee obligation
(other than as specifically permitted in this Agreement) or (f) amend the
provisions of this Section 13.9, the definition of Required Lenders or any
provision of any Loan Document which, by its terms, requires the consent,
approval or satisfaction of all Lenders or each Lender, without the prior
written consent of each Lender. In addition, no amendment, waiver or consent to
the provisions of Article XII shall be made without the written consent of the
Agents.
SECTION 13.10 Performance of Duties. The Borrower's obligations under
this Agreement and each of the other Loan Documents shall be performed by the
Borrower at its sole cost and expense.
SECTION 13.11 No Fiduciary Relationship. Notwithstanding any provision
to the contrary elsewhere in this Agreement or the other Loan Documents, neither
the Agent nor any Lender shall have any duties or responsibilities, except those
expressly set forth herein and therein, or any fiduciary relationship with the
Borrower or any of its Subsidiaries.
SECTION 13.12 All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lenders, the Agents and any Persons
designated by any Agent or Lender pursuant to any provisions of this Agreement
or any of the other Loan Documents shall be deemed coupled with an interest and
shall be irrevocable so long as any of the Obligations remain unpaid or
unsatisfied or the Credit Facility has not been terminated.
SECTION 13.13 Survival of Indemnities. Notwithstanding any termination
of this Agreement, the indemnities to which the Agents and the Lenders are
entitled under the provisions of this Article XIII and any other provision of
this Agreement and the other Loan Documents shall continue in full force and
effect and shall protect the Agents and Lenders against events arising after
such termination as well as before.
SECTION 13.14 Titles and Captions Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 13.15 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability
76
<PAGE>
without invalidating the remainder of such provision or the remaining provisions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 13.16 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 13.17 Term of Agreement. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 13.18 Independent Effect of Covenants. The Borrower expressly
acknowledges and agrees that each covenant contained in Articles VIII, IX or X
hereof shall be given independent effect. Accordingly, the Borrower shall not
engage in any transaction or other act otherwise permitted under any covenant
contained in Articles VIII, IX or X if, before or after giving effect to such
transaction or act, the Borrower shall or would be in breach of any other
covenant contained in Articles VIII, IX or X.
SECTION 13.19 EMU; Continuity of Contract. The parties hereto confirm
that the occurrence or non-occurrence of an EMU Event will not have the effect
of altering any term of, or discharging or excusing performance under, this
Agreement or any other Loan Document, give any party the right unilaterally to
alter or terminate this Agreement or any other Loan Document or, in and of
itself, give rise to an Event of Default, provided, however, that no currency
shall be included as an Alternative Currency within the meaning of the
definition thereof if the Administrative Agent or any Lender reasonably believes
that it is impracticable or impossible for any Lender to fund Loans in such
currency.
77
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
[CORPORATE SEAL] INSIGNIA/ESG HOLDINGS, INC.
By: /s/ Adam B. Gilbert
-----------------------------------
Name: Adam B. Gilbert
-----------------------------
Title: Executive Vice President
----------------------------
<PAGE>
FIRST UNION NATIONAL BANK,
as Administrative Agent and Lender
By: /s/ Sarah T. Warren
-----------------------------------
Name: Sara T. Warren
-----------------------------
Title: Vice President
----------------------------
<PAGE>
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent and Lender
By: /s/ William J. Gallagher
-----------------------------------
Name: William J. Gallagher
-----------------------------
Title: Syndication Agent
----------------------------
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ Gary Andresen
-----------------------------------
Name: Gary Andresen
-----------------------------
Title: Associate
----------------------------
By: /s/ William E. McCollum, Jr.
-----------------------------------
Name: William E. McCollum, Jr.
-----------------------------
Title: Senior Associate
----------------------------
<PAGE>
THE BANK OF NEW YORK
By /s/ Anthony Verzi
-----------------------------------
Name: Anthony Verzi
-----------------------------
Title: Vice President
----------------------------
<PAGE>
BARCLAYS BANK PLC
By: /s/ Matthew Tuck
-----------------------------------
Name: Matthew Tuck
-----------------------------
Title: Associate Director/V.P.
----------------------------
<PAGE>
LASALLE NATIONAL BANK
By: /s/ Julie Anne Eck
-----------------------------------
Name: Julie Anne Eck
-----------------------------
Title: Comm. Banking Officer
----------------------------
<PAGE>
NATIONAL BANK OF SOUTH CAROLINA
By: /s/ John B. Wood, Jr.
-----------------------------------
Name: John B. Wood, Jr.
-----------------------------
Title: Vice President
----------------------------
<PAGE>
NATIONAL CITY BANK
By: /s/ Gary L. Wimer
-----------------------------------
Name: Gary L. Wimer
-----------------------------
Title: Vice President
----------------------------
<PAGE>
NATIONSBANK, N.A.
By: /s/ Ann K. Robinson
-----------------------------------
Name: Ann K. Robinson
-----------------------------
Title: Vice President
----------------------------
<PAGE>
Schedule 1.1(b)
MANDATORY COST RATE
(1) The Mandatory Cost Rate for an Alternative Currency Loan for its
Interest Period(s) is the rate per annum determined by the
Administrative Agent to be the rate calculated by it in accordance
with the following formula:
(a) in relation to an Alternative Currency Loan denominated in
Pounds Sterling:
BY + S(Y - Z) + F x 0.01% per annum
-----------------------------------
100 - (B + S)
(b) in relation to any other Alternative Currency Loan in an
Alternative Currency:
F x 0.01% per annum
-------------------
300
(c) where on the date of calculation:
B is the average of the percentage of eligible liabilities (in
excess of any stated minimum) which the Bank of England then
requires each of the Lenders to maintain on a non-interest
bearing account in accordance with its cash ratio
requirements;
Y is LIBOR for the Interest Period of the relevant Loan;
S is the average percentage of eligible liabilities which the
Bank of England requires each Lender to place as a special
deposit;
Z is the interest rate per annum allowed by the Bank of England
on special deposits; and
F is the average of the percentage of the charges payable by the
Lenders to the Financial Services Authority under paragraph
2.02 or 2.03 (as appropriate) of the Fees Regulations (but
where for the purpose of this calculation, any minimum amount
required to be paid to the Financial Services Authority under
paragraph 2.02b or 2.03b will not be deemed to apply)
expressed in pounds per (pound)1 million of the average of
percentage of the fee bases of the Lenders.
(2) For the purposes of this Schedule 1.1(b):
(a) "eligible liabilities" and "special deposits" have the
meanings given to them at the time of application of the
formula by the Bank of England;
(b) "fee base" has the meaning given to it in the Fees
Regulations; and
<PAGE>
(c) "Fees Regulations" means:
(i) prior to 31st of March, 1999 the Banking Supervision
(Fees) Regulations 1998; and
(ii) on and after 31st of March 1999, any regulations
governing the payment of fees for banking
supervision;
and any reference to a paragraph or specific provision in The Fees
Regulations in force at the date of this Agreement shall be deemed to
be a reference to any replacement provision in any superceding
regulations under paragraph (2) above.
(3) In the application of the formula, B,Y,S and Z are included in the
formula as figures and not as percentages e.g., if B = 0.05% and Y =
15%, BY is calculated as 0.05 x 15.
(4) (a) The formula is applied on the date the interest rate is
determined for the relevant Interest Period of the Loan; and
(b) Each rate calculated in accordance with the formula is, if
necessary, rounded upward to the nearest four decimal places.
(5) If the Administrative Agent determines that a change in circumstances has
rendered or will render the formula inappropriate, the Administrative Agent
(after consultation with and by notice to the Lenders and the Borrower) shall
modify the manner in which the Mandatory Cost Rate will subsequently be
calculated and specify the date from which such modification will apply. The
manner of calculation so notified by the Administrative Agent shall in the
absence of manifest error be binding on all the parties hereto.
<PAGE>
Schedule 6.1(t)
LITIGATION
None.
<PAGE>
Schedule 10.6
PERMITTED ASSET SALES
None.
<PAGE>
INSIGNIA FINANCIAL GROUP, INC.
(FORMERLY INSIGNIA/ESG HOLDINGS, INC.)
I. SUBSIDIARIES
- -----------------
ENTITY STATE OF FORMATION
Barnes Morris Pardoe & Foster Management Services, L.L.C. Delaware
Beattie Place, L.L.C. Delaware
Compagnie di Amministazgione e Gastioni Immobiliare S.p.A. Italy
Construction Interiors, Inc. Delaware
Corporate Relocation Management, Inc. Ohio
E.S.G. Operating Co., Inc. New York
Insignia/Edward S. Gordon Co., Inc. of Long Island, L.L.C. New York LLC
Edward S. Gordon Management Corporation New York
FC&S Management Company Illinois
First Ohio Escrow Corporation, Inc. Ohio
First Ohio Mortgage Corporation, Inc. Ohio
FMG Acquisition, L.L.C. Delaware
Forum Properties, Inc. Oregon
Goldie B. Wolfe & Company Illinois
Hotel Partners Limited United Kingdom
ICIG Directives, L.L.C. Delaware
IFC Acquisition Corp. I Delaware
IFC Acquisition Corp. II Delaware
IFSE Holding Co. LLC Delaware LLC
IPCG, Inc. Delaware
Insignia Acquisition Corporation Delaware
Insignia/ESG, Inc. Delaware
Insignia/ESG Capital Corporation Delaware
Insignia/ESG of Alabama, Inc. Delaware
Insignia/ESG, of California, Inc. Delaware
Insignia/ESG of Colorado, Inc. Delaware
Insignia/ESG of Texas, Inc. Delaware
Insignia Commercial Group West, Inc. Delaware
Insignia Commercial Investments Group, Inc. Delaware
Insignia Commercial Management, Inc. Delaware
Insignia Construction Management Services B New York, Inc. Delaware
Insignia Development Corporation Delaware
Insignia EC Corporation Delaware
Insignia/RE Advisors Limited Ireland
Insignia/RE BV Dutch
Insignia/RE GmbH Germany
Insignia RO, Inc. Delaware
Insignia Residential Group, Inc. Delaware
Insignia Residential Investment Corporation Delaware
Insignia Rooney Management, Inc. Delaware
1
<PAGE>
I. SUBSIDIARIES (CONTINUED)
- -----------------------------
ENTITY STATE OF FORMATION
Insignia (UK) Holdings Limited United Kingdom
Kreisel Company, Inc. New York
MAP VII Acquisition Corporation Delaware
Metropolitan Acquisition VII, L.L.C. Delaware LLC
O'Donnell Property Services, Inc. California
Payroll Services, Inc. Pennsylvania
Property Consulting Services, Inc. Delaware
RJN Corporation Delaware
Realty One, Inc. Ohio
Richard Ellis St. Quintin United Kingdom
Richard Ellis Group Subsidiaries - (see attachment 1)
Rostenberg-Doern Management Corp. New York
S.I.A., Inc. South Carolina
Soren Management Inc. New York
INSIGNIA/ESG, INC., A DELAWARE CORPORATION, IS THE SURVIVING CORPORATION IN THE
MERGERS OF THE FOLLOWING ENTITIES:
First Clayton Properties Corp.
Insignia Capital Advisors, Inc.
Insignia/ESG Hotel Partners, Inc.
Insignia Retail Group, Inc.
RICHARD ELLIS ST. QUINTIN IS THE SURVIVING ENTITY IN THE MERGER OF RICHARD ELLIS
GROUP LIMITED AND ST. QUINTIN
2
<PAGE>
ATTACHMENT 1
Richard Ellis Holdings Limited
Richard Ellis Financial Holdings Limited
Richard Ellis Corporate Finance Limited
Richmount Enterprise Zone Managers Limited
Richmount Management Limited
Richmount Underwriting Limited
Richmount Marketing Limited
30 Marsh Wall Limited
Richard Ellis Fund Management Limited
Richard Ellis Structured Finance Limited
Richard Ellis Financial Limited
R.E.F. Services Limited
Richard Ellis Facilities Management Limited
Richard Ellis Gunne (Northern Ireland) Limited
Richard Ellis Gunne Limited
Waresure Limited
Richard Ellis Services Limited
REFS Holdings Limited
Richard Ellis Corporate Capital Limited
Richard Ellis (Incorporating Hepper Robinson) Limited
Richard Ellis Midlands Limited
Richard Ellis Regional Limited
3
<PAGE>
Exhibit 23.1 - Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in (1) the Registration Statement
(Form S-8 No. 333-62725) pertaining to the registration of 400,000 shares of
Common Stock in the Insignia/ESG Holdings, Inc. 401(k) Savings Plan, (2) the
Registration Statement (Form S-8 No. 333-62727) pertaining to the registration
of 1,500,000 shares of Common Stock under Insignia/ESG Holdings, Inc. 1998
Employee Stock Purchase Plan, (3) the Registration Statement (Form S-8 No.
333-62731) pertaining to the registration of 3,500,000 shares of Common Stock
under Insignia/ESG Holdings, Inc. 1998 Stock Incentive Plan and (4) the
Registration Statement (Form S-8 No. 333-67475) pertaining to the registration
of 1,289,329 shares of Common Stock of Insignia Financial Group, Inc.(f/k/a
Insignia/ESG Holdings, Inc.) under the Richard Ellis Group Limited 1997
Unapproved Share Option Scheme of our report dated March 5, 1999 with respect to
the consolidated and combined financial statements of Insignia Financial Group,
Inc. included in the Annual Report (Form 10-K) for the year ended December 31,
1998.
ERNST & YOUNG LLP
Greenville, South Carolina
March 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 53,489
<SECURITIES> 0
<RECEIVABLES> 153,807
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 27,897
<DEPRECIATION> 0
<TOTAL-ASSETS> 595,489
<CURRENT-LIABILITIES> 0
<BONDS> 44,438
0
0
<COMMON> 214
<OTHER-SE> 383,029
<TOTAL-LIABILITY-AND-EQUITY> 595,489
<SALES> 0
<TOTAL-REVENUES> 510,780
<CGS> 0
<TOTAL-COSTS> 451,774
<OTHER-EXPENSES> 32,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,378
<INCOME-PRETAX> 24,028
<INCOME-TAX> 12,975
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,053
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.50
</TABLE>
