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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-17189
KOLL REAL ESTATE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 02-0426634
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4343 VON KARMAN AVENUE
NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 833-3030
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
CLASS A COMMON STOCK, PAR VALUE $.05 PER SHARE
(TITLE OF CLASS)
SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
12% SENIOR SUBORDINATED PAY-IN-KIND DEBENTURES DUE MARCH 15, 2002
(TITLE OF CLASS)
12% SUBORDINATED PAY-IN-KIND DEBENTURES DUE MARCH 15, 2002
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES _X_ NO ___
INDICATE 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 INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF MARCH 1, 1993 WAS $13,339,445.
THE NUMBER OF SHARES OF CLASS A COMMON STOCK OUTSTANDING AS OF MARCH 1, 1993
WAS 43,319,703.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE 1994 ANNUAL MEETING OF
STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF THIS ANNUAL REPORT
ON FORM 10-K.
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PART I
ITEM 1. BUSINESS
Koll Real Estate Group, Inc., a Delaware corporation, formerly known as The
Bolsa Chica Company (from July 16, 1992 to September 30, 1993) and as Henley
Properties Inc. (from December 1989 to July 16, 1992), is a real estate
development company with properties principally in Southern California, as well
as New Hampshire. The principal activity of Koll Real Estate Group, Inc. and its
consolidated subsidiaries (the "Company") has been to obtain zoning and other
entitlements for land it owns and to improve the land principally for
residential development. Once the land is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to home
builders; or participate in joint ventures with other developers, investors or
home builders to finance and construct infrastructure and homes.
With the acquisition of the domestic real estate development business of The
Koll Company on September 30, 1993, the Company's principal activities have been
expanded to include providing commercial, industrial, retail and residential
real estate development services to third parties, including feasibility
studies, entitlement coordination, project planning, construction management,
financing, marketing, acquisition, disposition and asset management services on
a national basis, through its current offices throughout California, and in
Seattle, Dallas and Denver. The Company intends to consider additional real
estate acquisition opportunities; however, over the next two years the Company's
principal objective is to maintain adequate liquidity to fully support the Bolsa
Chica project entitlement efforts.
The Company's executive offices are located at 4343 Von Karman Avenue,
Newport Beach, California 92660 (telephone: (714) 833-3030).
PRINCIPAL PROPERTIES
The following sections describe the Company's principal properties.
BOLSA CHICA. The Bolsa Chica property is the principal property in the
Company's portfolio. The Company owns approximately 1,200 acres of the 1,700
acres of undeveloped Bolsa Chica land located on the Pacific Ocean in
northwestern Orange County, California. Bolsa Chica is bordered on the north and
east by residential development, to the south by open space and residential
development, and to the west by the Pacific Coast Highway and the Bolsa Chica
State Beach. Bolsa Chica is one of the last large undeveloped coastal properties
in Southern California, approximately 35 miles south of downtown Los Angeles.
In 1986, the California State Coastal Commission certified a local coastal
program/land use plan for the Bolsa Chica property, which was subject to the
satisfaction of certain conditions, including presentation of favorable
economic, environmental and physical feasibility studies. The proposed
development of the Bolsa Chica property as a marina/residential development
provoked substantial controversy and highlighted public awareness of an earlier
lawsuit related to the potential impact of development on the environmentally
sensitive wetland areas, among other issues. In order to achieve a public
consensus on the plans for Bolsa Chica's development and to expedite development
of the property, in November 1988 the Company helped organize the Bolsa Chica
Planning Coalition (the "Coalition"), consisting of representatives of the
Company, city, county and state officials, and the Amigos de Bolsa Chica, a
local environmental organization which had previously opposed the project and
was a party to the earlier lawsuit. The objective of the Coalition was to
consider alternative land use plans for Bolsa Chica. In 1989, the Coalition
reached an agreement in principle on a concept plan permitting the development
of an oceanfront residential community featuring protected wetlands (the
"Coalition Plan"). The parties to the litigation also dismissed the litigation
which had halted development of Bolsa Chica.
In November 1991, in accordance with the Coalition Plan, the Company
announced its plan to develop a master planned community of approximately 4,900
homes at Bolsa Chica, including approximately 4,300 units on the Company's land.
The planned community at Bolsa Chica is expected to offer a broad mix of home
choices, including single-family homes, townhomes and condominiums at a wide
range of prices. In September 1992, environmental impact documents for the Bolsa
Chica project's master planned community were released by the City of Huntington
Beach, California, and the U.S. Army Corps of Engineers for a ninety-day public
comment period which concluded in December 1992. In March 1993, the Company
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transferred local processing of the Coalition Plan to the County of Orange in
order to integrate the Bolsa Chica regional park and wetlands restoration with
the rest of the land use planning. Given the extent of comments received from
the public, including a variety of state and federal agencies, the County of
Orange recirculated a revised draft of the environmental impact report in
December 1993, for public omment which concluded on February 18, 1994. The
revised draft contains an in-depth analysis of an alternative plan which
includes 3,500 homes, in addition to the in-depth analysis of the Coalition
Plan.
Despite efforts to date in the Bolsa Chica entitlement process, the Company
has not yet obtained any of the final approvals from local, state or federal
governmental entities that are required for development of the project. Due to a
number of factors beyond the Company's control, including possible objections to
the Coalition Plan by various environmental and so-called public interest groups
that may be made in legislative, administrative or judicial forums, such
approvals could be delayed substantially. Subject to these and other
uncertainties inherent in the entitlement process, the Company's goal is to
obtain all material governmental approvals in the first half of 1995 and to
begin infrastructure construction in the second half of 1995, depending on
economic and market conditions. Realization of the Company's investment in Bolsa
Chica will also depend upon various economic factors, including the demand for
residential housing in the Southern California market and the availability of
credit to the Company and to the housing industry.
EAGLE CREST. In the City of Escondido in San Diego County, approximately 30
miles north of downtown San Diego, the Company is developing an 860-acre, gated
community consisting of 580 residential lots surrounding an 18-hole championship
golf course. The golf course opened during May 1993. Construction of the
remaining infrastructure and the permanent clubhouse has been deferred until the
residential market for trade-up homes improves and financing for such
infrastructure construction becomes available.
FAIRBANKS HIGHLANDS. This property consists of approximately 390 acres near
the communities of Fairbanks Ranch and Rancho Santa Fe in the northern part of
the City of San Diego. The property is located within an area designated by the
City of San Diego as the "Future Urbanizing Area." The City of San Diego
recently approved a "Framework Plan" which generally defines land use, locations
and densities for the Future Urbanizing Area, subject to voter approval. The
Framework Plan could allow development of significantly greater density (up to
800 residential units) on the Company's Fairbanks Highlands property if
ultimately approved by the voters in June 1994, along with approximately 12,000
acres to be developed by neighboring landowners.
WENTWORTH BY THE SEA. This project is currently being managed, at the
direction of the Company, by a local real estate management and development
company, with the objective of developing 130 new residential and vacation homes
in New Hampshire, approximately 60 miles north of Boston. The project currently
includes an 18-hole golf course, a 170-slip marina, 21 single-family detached
condominium homes built by the previous owner and related commercial
development. The Company began marketing the 21 existing homes in September
1993, and since then four homes have been sold and nine additional homes are in
escrow. The Company is continuing to hold discussions with a community group
interested in purchasing and restoring the original Wentworth Hotel, which
closed in 1981.
OTHER PROPERTIES. The Company owns various other commercial and industrial
properties in Southern California, including land zoned for
commercial/industrial use in Coronado, Rancho Murrieta and Signal Hill,
California. All of these properties are currently held for sale, subject to
market conditions.
PROPERTY DISPOSITIONS. See Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a description of the
Company's property dispositions during 1992 and 1993.
ENVIRONMENTAL AND REGULATORY MATTERS
Before the Company can develop a property, it must obtain a variety of
discretionary approvals from local and state governments, as well as the federal
government in certain circumstances, with respect to such matters as zoning,
subdivision, grading, architecture and environmental matters. The entitlement
approval process is often a lengthy and complex procedure requiring, among other
things, the submission of development plans and reports and presentations at
public hearings. Because of the provisional nature of these approvals and the
concerns of various environmental and public interest groups, the approval
process can be
2
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delayed by withdrawals or modifications of preliminary approvals and by
litigation and appeals challenging development rights. Accordingly, the ability
of the Company to develop properties and realize income from such projects could
be delayed or prevented due to difficulties in obtaining necessary governmental
approvals.
As more fully described above, the Company is in the process of seeking the
necessary local, state and federal approvals and permits to begin development of
its Bolsa Chica property. The Company reached an agreement in 1989 on the
Coalition Plan, and the Company's goal is to obtain the necessary approvals in
the first half of 1995. Nevertheless, the approval process for the Bolsa Chica
property remains subject to the uncertainties described above, and there is no
assurance that such approvals will ultimately be obtained or will not be
substantially delayed. Failure to obtain such approvals would have, and a
substantial delay in obtaining such approvals could have, a material adverse
effect on the Company.
The Company has expended and will continue to expend significant financial
and managerial resources to comply with environmental regulations and local
permitting requirements. Although the Company believes that its operations are
in general compliance with applicable environmental regulations, certain risks
of unknown costs and liabilities are inherent in developing and owning real
estate. However, the Company does not believe that such costs will have a
material adverse effect on its business or financial condition, including
current environmental litigation discussed in Part I, Item 3 -- "Legal
Proceedings" and the potential remediation expenditures required in connection
with certain indemnity obligations discussed below in "Corporate Indemnification
Matters."
CORPORATE INDEMNIFICATION MATTERS
The Company and its predecessors have, through a variety of transactions
effected since 1986, disposed of several assets and businesses, many of which
are unrelated to the Company's current operations. By operation of law or
contractual indemnity provisions, the Company has retained liabilities relating
to certain of these assets and businesses, including certain tax liabilities.
See Note 9 "Income Taxes -- Tax Sharing Agreements" in Notes to Financial
Statements on pages F-20 to F-21 of this Annual Report. Many of such liabilities
are supported by insurance or by indemnities from certain of the Company's
predecessor and currently or previously affiliated companies. The Company
believes its balance sheet reflects adequate reserves for these matters.
Abex Inc. ("Abex") and the Company have agreed that, following the Company's
1992 merger with The Henley Group, Inc., each company will be responsible for
environmental liabilities relating to its existing, past and future assets and
businesses and will indemnify the other in respect thereof.
The United States Environmental Protection Agency ("EPA") has designated
Universal Oil Products ("UOP"), among others, as a Potentially Responsible Party
("PRP") with respect to an area of the Upper Peninsula of Michigan (the "Torch
Lake Site") under the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"). UOP is allegedly the successor
in interest to one of the companies that conducted mining operations in the
Torch Lake area and an affiliate of Allied-Signal Inc., a predecessor of the
Company. The Company has not been named as a PRP at the site. However,
Allied-Signal has, through UOP, asserted a contractual indemnification claim
against the Company for claims that may be asserted against UOP by EPA or other
parties with respect to the site. EPA has proposed a cleanup plan which would
involve covering certain real property both contiguous and non-contiguous to
Torch Lake with soil and vegetation in order to address alleged risks posed by
copper tailings and slag at an estimated cost of approximately $7.2 million. EPA
estimates that it has spent in excess of $2 million to date in performing
studies of the site. Under CERCLA, EPA could assert claims against the Torch
Lake PRPs, including UOP, to recover the cost of these studies, the cost of all
remedial action required at the site, and natural resources damages. An earlier
settlement in principle with EPA staff pursuant to which UOP would pay $1.7
million in exchange for a release similar to those normally granted by EPA in
such circumstances was rejected by certain other governmental authorities in
July 1993. Settlement negotiations between the Company, on behalf of UOP, and
EPA resumed shortly thereafter and are ongoing.
EMPLOYEES
As of March 1, 1994, the Company and its subsidiaries had approximately 92
employees.
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EXECUTIVE OFFICERS OF THE COMPANY
Certain of the executive officers of the Company are also executive officers
of The Koll Company ("Koll") and its affiliates. Accordingly, they will devote
less than all of their working time to the businesses of the Company. Set forth
below is information with respect to each executive officer.
<TABLE>
<CAPTION>
NAME AND TITLE AGE* BUSINESS EXPERIENCE
- ------------------------------ ---- ------------------------------------------
<S> <C> <C>
Donald M. Koll 61 Chairman of the Board of the Company since
Chairman of the Board March 1993. Managing Director-President
and a director of the Company from 1990 to
1992. Chairman of the Board and Chief
Executive Officer of Koll (general
contracting and international real estate
development) and Chairman of the Board of
Koll Management Services, Inc. ("KMS")
(real estate management) since prior to
1989.
Ray Wirta 50 Vice Chairman of the Board and Chief
Vice Chairman of the Board and Executive Officer of the Company since
Chief Executive Officer March 1993. Vice Chairman of the Board and
Chief Executive Officer of KMS and
President and Chief Operating Officer of
Koll since prior to 1989.
Richard M. Ortwein 52 President of the Company since October
President 1993. President, Southern California
Division of Koll since prior to 1989.
Executive Vice President of KMS from 1991
to 1993, and director of KMS from 1992 to
March 1994.
Raymond J. Pacini 38 Secretary of the Company since December
Executive Vice President, 1993; Executive Vice President since March
Chief Financial Officer, 1993; Vice President, Chief Financial
Treasurer and Secretary Officer and Treasurer of the Company since
1992. Managing Director of the Company
from 1990 to 1992. Director of Financial
Reporting for The Henley Group, Inc.
during 1989. Executive Vice President and
Chief Financial Officer of KMS from March
to November 1993.
<FN>
- ------------------------
* Ages as of April 1, 1994
</TABLE>
ITEM 2. PROPERTIES
The Company's principal executive offices are located in Newport Beach,
California. The Company and each of its subsidiaries believe that their
properties are generally well maintained, in good condition and adequate for
their present and proposed uses. The inability to renew any short-term real
property lease would not be expected to have a material adverse effect on the
Company's results of operations.
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The principal properties of the Company and its subsidiaries, which are
owned in fee unless otherwise indicated, are as follows:
<TABLE>
<CAPTION>
PROPERTY LOCATION ACRES PRESENT OR PLANNED USE
- ----------------------- -------------------- ----- -----------------------
<S> <C> <C> <C>
Newport Beach* Newport Beach, CA -- Headquarters
Bolsa Chica Huntington Beach, CA 1,200 Oceanfront residential
community
Eagle Crest Escondido, CA 860 Golf/residential
community
Fairbanks Highlands San Diego, CA 390 Residential community
Wentworth By The Sea New Castle & Rye, NH 275 Resort/residential
community/golf/marina
Michigan Land Upper Peninsula, MI 3,900 Resort/residential lots
Grand Caribe Isle** Coronado, CA 5 Commercial land
Rancho Murrieta Murrieta, CA 20 Commercial/industrial
Business Park land
Signal Hill Signal Hill, CA 2 Commercial/industrial
land
<FN>
- ------------------------
* Leased
** Ground lease
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The owners of undeveloped real property located in San Diego County sued
Signal Landmark, a subsidiary of the Company ("Signal"), in San Diego Superior
Court, in May 1990, alleging that Signal had deposited contaminated soils on
their property and was liable under theories of nuisance, negligence, trespass
and strict liability. The plaintiffs sought general damages in the amount of
approximately $40 million and, additionally, punitive damages in an unspecified
amount, plus prejudgment interest and costs. On August 5, 1991, the plaintiffs
filed a complaint in federal court against Signal, the Company and several other
parties asserting claims under CERCLA seeking essentially the same relief sought
in the state action.
In April 1992, a jury awarded the plaintiffs damages in the amount of $2.5
million following a trial in the state action. Signal appealed the verdict in
the state action and posted a bond and cash collateral of $3.75 million in
August 1992. On March 5, 1993, Signal reached an agreement in principle with the
plaintiffs in such litigation to settle both the federal and state actions. On
July 2, 1993, the Federal Court for The Southern District of California approved
the settlement under the terms of which funds from such cash collateral account
were disbursed approximately as follows: 1) $1.3 million deposited in trust for
remediation expenditures, 2) $1.3 million disbursed to the plaintiffs, and 3)
$1.1 million returned to Signal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following tables set forth information with respect to bid quotations
for the Class A Common Stock of the Company for the periods indicated as
reported by NASDAQ. These quotations are interdealer prices without retail
markup, markdown or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1993
First Quarter............................................................ $ .343 $ .188
Second Quarter........................................................... .313 .125
Third Quarter............................................................ .219 .063
Fourth Quarter........................................................... .969 .125
1992
First Quarter............................................................ $ 1.250 $ .625
Second Quarter........................................................... 1.000 .250
Third Quarter............................................................ .375 .094
Fourth Quarter........................................................... .282 .094
</TABLE>
The number of holders of record of the Company's Class A Common Stock as of
March 1, 1994 was approximately 28,000. The Company has not paid any cash
dividends on its Class A Common Stock to date, nor does the Company currently
intend to pay regular cash dividends on the Class A Common Stock. Such dividend
policy is and will continue to be subject to prohibitions on the declaration or
payment of dividends contained in debt agreements of the Company. See Note 7 --
Notes to Financial Statements on pages F-17 to F-18 of this Annual Report, which
Note is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data with respect to the Company and its subsidiaries
are set forth on pages F-1 to F-2 of this Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is set forth on pages F-3 to F-6 of this Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements, schedules and supplementary data of the Company and
its subsidiaries, listed under Item 14, are submitted as a separate section of
this Annual Report, commencing on page F-7.
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
DIRECTORS. The information appearing under the caption "Election of
Directors" of the Company's Proxy Statement for its 1994 Annual Meeting of
Stockholders is incorporated herein by reference in this Annual Report.
EXECUTIVE OFFICERS. Information with respect to executive officers appears
under the caption "Executive Officers of the Company" in Item 1 of this Annual
Report.
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ITEM 11. EXECUTIVE COMPENSATION
Information in answer to this Item appears under the caption "Compensation
of Directors and Executive Officers" of the Company's Proxy Statement for its
1994 Annual Meeting of Stockholders, and is incorporated herein by reference in
this Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in answer to this Item appears under the captions "Voting
Securities and Principal Holders Thereof" and "Election of Directors" of the
Company's Proxy Statement for its 1994 Annual Meeting of Stockholders, and is
incorporated herein by reference in this Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in answer to this Item appears under the captions "Certain
Transactions" and "Compensation of Directors and Executive Officers" of the
Company's Proxy Statement for its 1994 Annual Meeting of Stockholders, and is
incorporated herein by reference in this Annual Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
The following financial statements and supplementary data of the Company are
included in a separate section of this Annual Report on Form 10-K commencing on
the page numbers specified below:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Selected Financial Data................................................. F-1
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... F-3
Independent Auditors' Report -- Deloitte & Touche....................... F-7
Independent Auditors' Report -- Kenneth Leventhal & Company............. F-8
Balance Sheets as of December 31, 1992 and 1993......................... F-9
Statements of Operations for the Years Ended December 31, 1991, 1992 and
1993................................................................... F-10
Statements of Cash Flows for the Years Ended December 31, 1991, 1992 and
1993................................................................... F-11
Statements of Changes in Stockholders' Equity for the Three Years Ended
December 31, 1993...................................................... F-12
Notes to Financial Statements........................................... F-13
</TABLE>
(2) Financial Statement Schedules:
All schedules have been omitted since they are not applicable, not required,
or the information is included in the financial statements or notes thereto.
(3) Listing of Exhibits:
<TABLE>
<S> <C>
3.01 Restated Certificate of Incorporation of the Registrant,
incorporated by reference to Exhibit 3.01 to the Registrant's Annual
Report on Form 10-K for 1992.
3.02 Amended By-Laws of the Registrant, incorporated by reference to
Exhibit 3.02 to the Registrant's Annual Report on Form 10-K for
1992.
4.01 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3.01).
4.02 Amended By-Laws of the Registrant (filed as Exhibit 3.02).
4.03 Second Amended and Restated Credit Agreement between the Registrant
and Bank of America National Trust and Savings Association dated as
of July 16, 1992, incorporated by reference to Exhibit 4.03 to the
Registrant's Annual Report on Form 10-K for 1992.
4.04 1992 Restatement of Credit Agreement (the "Credit Agreement") dated
as of July 16, 1992 among Great Island Trust Partnership, Wentworth
By The Sea, Inc., and The First
</TABLE>
7
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<TABLE>
<S> <C>
National Bank of Boston, for itself and as agent (the "Agent"), and
Wentworth Holdings, Inc., and Wentworth Holdings II, Inc.,
incorporated by reference to Exhibit 4.04 to the Registrant's Annual
Report on Form 10-K for 1992.
4.04A 1992 Amendment No. 1 to the Credit Agreement dated as of December
30, 1992, incorporated by reference to Exhibit 4.04A to the
Registrant's Annual Report on Form 10-K for 1992.
4.05 1992 Restatement of Guarantee Agreement between the Registrant and
the Agent dated as of July 16, 1992, incorporated by reference to
Exhibit 4.05 to the Registrant's Annual Report on Form 10-K for
1992.
4.06 Additional Guarantee Agreement dated as of July 16, 1992 between the
Registrant and the Agent, incorporated by reference to Exhibit 4.06
to the Registrant's Annual Report on Form 10-K for 1992.
4.07 Indenture dated as of July 15, 1992 for 12% Senior Subordinated
Pay-In-Kind Debentures Due March 15, 2002 ("Senior Subordinated
Debentures"), issued by the Registrant in the aggregate principal
amount of $127,550,000, incorporated by reference to Exhibit 4.08 to
the Registrant's Annual Report on Form 10-K for 1992.
4.08 Indenture dated as of July 15, 1992 for 12% Subordinated Pay-In-Kind
Debentures Due March 15, 2002, ("Subordinated Debentures"), issued
by the Registrant in the aggregate principal amount of $75,688,000,
incorporated by reference to Exhibit 4.09 to the Registrant's Annual
Report on Form 10-K for 1992.
4.09 Form of Senior Subordinated Debentures (included in Exhibit 4.07).
4.10 Form of Subordinated Debentures (included in Exhibit 4.08).
10.01 Tax Sharing Agreement dated as of December 18, 1989, between the
Registrant and The Henley Group, Inc. ("Henley Group") incorporated
by reference to Exhibit 10.03 to the Registrant's Annual Report on
Form 10-K for 1989.
10.02 Tax Sharing Agreement dated as of December 15, 1988, between
Wheelabrator Technologies, Inc. (formerly The Wheelabrator Group,
Inc.) ("WTI") and the Registrant ("WTI Tax Sharing Agreement"),
incorporated by reference to Exhibit 10.02 to Amendment No. 3 on
Form 8 to the Registrant's Registration Statement on Form 10.
10.02A Amendment No. 1 to WTI Tax Sharing Agreement dated February 14,
1994.*
10.03 1988 Stock Plan for Executive Employees of the Registrant and its
Subsidiaries, incorporated by reference to Exhibit 10.12 to
Amendment No. 3 on Form 8 to the Registrant's Registration Statement
on Form 10.
10.03A 1993 Stock Option/Stock Issuance Plan.*
10.04 Restricted Stock Plan for Non-Employee Directors of the Registrant,
incorporated by reference to Exhibit 10.13 to the Registrant's
Registration Statement on Form 10.
10.05 Deferred Compensation Plan for Non-Employee Directors of the
Registrant, incorporated by reference to Exhibit 10.14 to the
Registrant's Registration Statement on Form 10.
10.06 Retirement Plan for Non-Employee Directors of the Registrant,
incorporated by reference to Exhibit 10.15 to the Registrant's
Registration Statement on Form 10.
10.07 Retirement Plan of the Registrant, incorporated by reference to
Exhibit 10.16 to Amendment No. 3 on Form 8 to the Registrant's
Registration Statement on Form 10.
10.07A Amendment to Retirement Plan of the Registrant dated December 8,
1993*.
10.08 Koll Company 401(k) Plus Plan and Trust Agreement dated July 1, 1989
under which the Registrant elected to participate as an employer
effective as of October 1, 1993*.
</TABLE>
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<TABLE>
<S> <C>
10.09 Restated Environmental Matters Agreement dated as of July 28, 1989,
among a predecessor to the Registrant, Allied-Signal, New Hampshire
Oak, Fisher Scientific Group Inc. ("Fisher Group") and the
Registrant, incorporated by reference to Exhibit 10(b) to the
Registrant's quarterly report on Form 10-Q for the quarter ended
June 30, 1989 as amended by the Assignment, Assumption and
Indemnification Agreement dated as of December 21, 1989, among the
Registrant, Henley Group, New Hampshire Oak, Fisher Group, WTI and
Allied-Signal, incorporated by reference to Exhibit 10.21 to the
Registrant's Annual Report on Form 10-K for 1989.
10.10 Environmental Expenditures Agreement dated as of July 28, 1989,
among the Registrant, WTI, New Hampshire Oak and Fisher Group,
incorporated by reference to Exhibit 10(b) to the Registrant's
quarterly report on Form 10-Q for the quarter ended June 30, 1989 as
amended by Assignment and Assumption Agreement dated as of January
1, 1990, among the Registrant, Henley Group, New Hampshire Oak,
Fisher Group, WTI and Henley Holdings, Inc., incorporated by
reference to Exhibit 10.22 to the Registrant's Annual Report on Form
10-K for 1989.
10.11 Option Agreement dated December 30, 1992, among Wentworth Holdings
Inc., NC Holding Company, WLP Holding Company and Wentworth Holdings
II Inc., incorporated by reference to Exhibit 10.13 to the
Registrant's Annual Report on Form 10-K for 1992.
10.12 Transition Agreement dated as of July 16, 1992 ("Transition
Agreement"), among Henley Group, the Registrant and Abex Inc.,
incorporated by reference to Exhibit 10.14 to the Registrant's
Annual Report on Form 10-K for 1992.
10.12A Amendment to Transition Agreement dated April 1, 1993.*
10.13 Tax Sharing Agreement dated as of June 10, 1992, between Henley
Group and Abex Inc., incorporated by reference to Exhibit 10.15 to
the Registrant's Annual Report on Form 10-K for 1992.
10.14 Conditional Guarantee dated as of July 9, 1992, among Abex Inc.,
Henley Group, the Registrant and Allied-Signal, incorporated by
reference to Exhibit 10.16 to the Registrant's Annual Report on Form
10-K for 1992.
10.15 Reimbursement Agreement dated as of July 16, 1992, among Henley
Group, the Registrant and Abex Inc., incorporated by reference to
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for
1992.
10.16 Pension Agreement dated as of July 16, 1992, among the Registrant,
Henley Group and Abex Inc., incorporated by reference to Exhibit
10.18 to the Registrant's Annual Report on Form 10-K for 1992.
10.17 Option Agreement dated as of July 16, 1992, between the Registrant
and Abex Inc., incorporated by reference to Exhibit 10.19 to the
Registrant's Annual Report on Form 10-K for 1992.
10.17A Option Termination Agreement dated August 27, 1993 between the
Registrant and Abex Inc., incorporated by reference to Exhibit 10.1
to Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
10.18 Asset Purchase Agreement ("Asset Agreement") dated as of September
30, 1993 between the Registrant and The Koll Company, incorporated
by reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
10.18A Amendment No. 1 to the Asset Agreement dated as of December 29,
1993.*
10.19 Stock Purchase Agreement ("Stock Agreement") dated December 17, 1993
between the Registrant, certain of its subsidiaries and Libra Invest
& Trade Ltd.*
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
10.19A Amendment No. 1 to the Stock Agreement dated as of February 15,
1994.*
10.20 Exchange Agreement dated December 17, 1993 between the Registrant
and Libra Invest & Trade Ltd.*
10.21 Financing and Accounting Services Agreement dated as of September
30, 1993 between the Registrant and The Koll Company.*
10.22 Management Information Systems and Human Resources Services
Agreement dated as of September 30, 1993 between the Registrant and
Koll Management Services, Inc.*
10.23 License Agreement dated September 30, 1993 between the Registrant,
The Koll Company and Mr. Donald M. Koll, incorporated by reference
to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993.
10.24 Sublease Agreement dated September 30, 1993 between the Registrant
and The Koll Company.*
21.01 Subsidiaries of the Registrant.*
</TABLE>
- ------------------------
* Filed herewith.
(b) Reports on Form 8-K:
Report on Form 8-K dated December 17, 1993, reporting under Item 5 Other
Events, regarding (i) the disposition of Lake Superior Land Company to Libra
Invest & Trade Ltd. ("Libra"), and; (ii) the issuance of common stock to Libra
in exchange for Libra's subordinated debentures of the Company.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 30, 1994 KOLL REAL ESTATE GROUP, INC.
By: /s/ RAYMOND J. PACINI
------------------------------------
Raymond J. Pacini
Executive Vice President -- Chief
Financial 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 and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- --------------------------- --------------
<C> <S> <C>
/s/ DONALD M. KOLL Chairman of the Board March 30, 1994
- -----------------------------------
(Donald M. Koll)
/s/ RAY WIRTA Vice Chairman of the Board March 30, 1994
- ----------------------------------- and Chief Executive
(Ray Wirta) Officer (Principal
Executive Officer)
/s/ RAYMOND J. PACINI Executive Vice President March 30, 1994
- ----------------------------------- and Chief Financial
(Raymond J. Pacini) Officer (Principal
Financial Officer)
/s/ HAROLD A. ELLIS, JR. Director March 30, 1994
- -----------------------------------
(Harold A. Ellis, Jr.)
/s/ PAUL C. HEGNESS Director March 30, 1994
- -----------------------------------
(Paul C. Hegness)
/s/ J. THOMAS TALBOT Director March 30, 1994
- -----------------------------------
(J. Thomas Talbot)
/s/ MARCO F. VITULLI Director March 30, 1994
- -----------------------------------
(Marco F. Vitulli)
</TABLE>
11
<PAGE>
KOLL REAL ESTATE GROUP, INC.
SELECTED FINANCIAL DATA
The following selected financial data of Koll Real Estate Group, Inc. and
its consolidated subsidiaries (the "Company") should be read in conjunction with
the financial statements included elsewhere herein. The financial statements for
the year ended December 31, 1989 do not necessarily reflect the results of
operations of the Company had it been a separate, stand-alone company. For
further discussion of the formation of the Company and the basis of presentation
see the Notes to Financial Statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1989 1990 1991 1992 1993
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents and short-term investments (a).... $ 54.6 $ 22.1 $ 7.8 $ 41.6 $ 43.5
Total assets (a)............................................ 680.6 590.0 472.9 486.1 446.3
Senior bank debt (b)........................................ 75.0 95.3 82.4 65.4 7.0
Nonrecourse debt (b)........................................ 45.0 25.0 24.9 -- --
Subordinated debentures (b)................................. 144.0 161.5 184.7 165.1 134.9
Total stockholders' equity (c).............................. 148.9 208.0 101.3 149.6 163.5
Fully diluted shares outstanding at end of year............. 20.9 20.0 20.0 86.4 91.4
Book value per fully diluted share.......................... 7.12 10.40 5.07 1.73 1.79
Statement of Operations Data:
Revenues (d),(e)............................................ 123.0 97.0 34.7 28.3 16.7
Income (loss) from continuing operations (e),(f)............ 4.9 62.6 (105.5) (41.9) (20.1)
Net income (loss) (f)....................................... 6.4 64.7 (106.7) (38.4) 14.3
Per common share:
Income (loss) from continuing operations (c),(e),(f)........ .23 3.05 (5.27) (1.44) (.24)
Net income (loss) (f),(g)................................... .30 3.15 (5.33) (1.32) .17
Weighted average shares outstanding........................... 20.9 20.5 20.0 29.0 83.0
</TABLE>
<TABLE>
<S> <C>
<FN>
- ------------------------
(a) The decrease in total assets at December 31, 1990 is primarily due to
asset sales and revaluations and the decrease in cash and cash
equivalents, which primarily reflects the settlement of certain
liabilities from available cash. The decrease in total assets at December
31, 1991 is primarily due to asset revaluations (Note 3) and the decrease
in cash and cash equivalents, which primarily reflects principal
repayments on senior bank debt. The increase in cash and cash equivalents
and total assets at December 31, 1992 is primarily attributable to the
1992 merger with The Henley Group, Inc. (the "Merger")(Note 1), partially
offset by the elimination of hotel assets from the Company's balance sheet
in connection with the Long Beach Airport Marriott Hotel foreclosure. The
decrease in total assets at December 31, 1993 is primarily due to the
disposition of the Company's investment in Deltec Panamerica S.A.
("Deltec") and the sale of Lake Superior Land Company (Note 4).
(b) The increase in senior bank debt at December 31, 1990 reflects the
consolidation of Wentworth By the Sea, and the decrease in nonrecourse
debt at December 31, 1990 is due to the sale of a trash-to-energy
facility. The decrease in senior bank debt at December 31, 1991 is due to
principal repayments on such debt. The decreases in debt at December 31,
1992 reflect the elimination of nonrecourse debt from the Company's
balance sheet in connection with the hotel foreclosure and the reduction
of subordinated debentures and principal repayments on senior bank debt in
connection with the Merger (Notes 1 and 7). The decrease in debt at
December 31, 1993 reflects principal repayments on senior bank debt (Note
7) and the exchange of subordinated debentures in connection with the sale
of Lake Superior Land Company and issuance of 3.4 million shares of Class
A Common Stock of the Company to Libra Invest & Trade Ltd. ("Libra")
(Notes 4 and 7).
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
(c) The increase in equity at December 31, 1992 reflects the July 16, 1992
Merger, partially offset by the net loss for the year then ended. The
increase in equity at December 31, 1993 primarily reflects net income for
the year then ended.
(d) The decrease in 1990 revenues was principally due to decreased residential
sales as a result of the substantial completion and sale of the Coronado
Cays, California project, partially offset by increases in land sales. The
decrease in 1991 revenues was primarily due to a further decrease in
residential sales at the Coronado Cays project, as well as a decrease in
land sales and poor market conditions in the real estate industry. The
decrease in 1992 revenues was principally due to the commencement of a
foreclosure against the Company's Long Beach Airport Marriott Hotel in
September 1992 and lower hotel operating revenues prior to that date. The
decrease in 1993 revenues is principally due to a decrease in land sales
and the absence of hotel revenues, partially offset by revenues from the
Eagle Crest golf course which opened in May 1993 and development fees
generated by the business acquired in September 1993 (Note 4).
(e) Amounts have been reclassified to present Lake Superior Land Company and
Deltec as discontinued operations.
(f) Income from continuing operations, net income and earnings per common
share for the year ended December 31, 1990 include approximately $104
million ($5.07 per share) from the sale of the Company's interests in two
trash-to-energy facilities, partially offset by greater interest expense
related to the Company's post 1989 capital structure, asset revaluations
and costs related to personnel reductions. The loss from continuing
operations, net loss and loss per common share for the year ended December
31, 1991 include approximately $65 million ($3.24 per share) of charges
related to asset revaluations. The loss from continuing operations, net
loss and loss per common share for the year ended December 31, 1992
reflect lower interest expense related to lower debt outstanding as a
result of the July 16, 1992 Merger and concurrent prepayment of $15
million of senior bank debt, along with lower interest rates. The loss
from continuing operations for the year ended December 31, 1993 reflects
lower interest expense related to lower debt outstanding (Note 7), as well
as $3 million received upon termination of a put option agreement with
Abex Inc. and a $2 million insurance reimbursement related to costs
incurred in 1992. Net income and net income per common share for 1993
reflect gains on the dispositions of Lake Superior Land Company and Deltec
(Note 4) and an extraordinary gain on debt extinguishment (Notes 4 and 7).
(g) The 1989 earnings per-share amount is based on the assumption that the
shares outstanding as of December 31, 1989 were outstanding since January
1, 1989. On July 16, 1992, approximately 19.7 million shares of Class A
Common Stock and 42.5 million shares of Series A Preferred Stock were
issued in connection with the Merger. The Series A Preferred Stock is not
included in the loss per share calculations for 1991 and 1992 since the
effect is antidilutive. In December 1993, the Company issued 3.4 million
shares of its Class A Common Stock in exchange for all of Libra's
approximately $10.6 million in aggregate principal amount plus accrued
interest of subordinated debentures issued by the Company (Note 4). The
1993 earnings per share calculation includes these newly issued shares,
along with the Series A Preferred Stock and stock options outstanding.
</TABLE>
F-2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The principal activity of the Company has been to obtain zoning and other
entitlements for land it owns and to improve the land for residential
development. Once the land is entitled, the Company may sell unimproved land to
other developers or investors; sell improved land to home builders; or
participate in joint ventures with other developers, investors or home builders
to finance and construct infrastructure and homes. With the acquisition of the
domestic real estate development business of The Koll Company on September 30,
1993, the Company's principal activities have been expanded to include providing
commercial, industrial, retail and residential development services to third
parties, including feasibility studies, entitlement coordination, project
planning, construction management, financing, marketing, acquisition,
disposition and asset management services on a national basis, through its
current offices throughout California, and in Seattle, Dallas and Denver. The
Company intends to consider additional real estate acquisition opportunities;
however, over the next two years the Company's principal objective is to
maintain adequate liquidity to fully support the Bolsa Chica project entitlement
efforts.
Real estate held for development or sale and land held for development (real
estate properties) are carried at the lower of cost or estimated net realizable
value (Note 2). The Company's real estate properties are subject to a number of
uncertainties which can affect the future values of those assets. These
uncertainties include delays in obtaining zoning and regulatory approvals,
withdrawals or appeals of regulatory approvals and availability of adequate
capital, financing and cash flow. In addition, future values may be adversely
affected by heightened environmental scrutiny, limitations on the availability
of water in Southern California, increases in property taxes, increases in the
costs of labor and materials and other development risks, changes in general
economic conditions, including higher mortgage interest rates, and other real
estate risks such as the demand for housing generally and the supply of
competitive products. Real estate properties do not constitute liquid assets
and, at any given time, it may be difficult to sell a particular property for an
appropriate price. The state of the nation's economy, and California's economy
in particular, has had a negative impact on the real estate market generally, on
the availability of potential purchasers for such properties and upon the
availability of sources of financing for carrying and developing such
properties.
LIQUIDITY AND CAPITAL RESOURCES
The principal assets remaining in the Company's portfolio are residential
land which must be held over an extended period of time in order to be developed
to a condition that, in management's opinion, will ultimately maximize the
return to the Company. Consequently, the Company requires significant capital to
finance its real estate development operations. Sales of the Company's
non-strategic assets, such as its 44% interest in Deltec Panamerica S.A.
("Deltec"), the LaJolla, California office buildings and Lake Superior Land
Company (Note 4) have been pursued as a source of capital. During 1993, the
Company generated an aggregate of approximately $97 million through the Lake
Superior Land Company financing, the disposition of the Company's investment in
Deltec and the sale of its LaJolla office buildings, and utilized $58.4 million
of such proceeds to reduce outstanding senior bank debt. At December 31, 1993
the Company's cash, cash equivalents and short-term investments aggregated $43.5
million. Historically, sources of capital have included bank lines of credit,
specific property financings, asset sales and available internal funds. Although
the Company reported income in 1993 as a result of gains on dispositions and
extinguishment of debt, it reported losses in 1991 and 1992, and expects to
report losses in the foreseeable future. While a significant portion of such
losses is attributable to noncash interest expense on the Company's subordinated
debentures, the Company's capital expenditures for project development are
significant. In addition, the Company was notified in March 1994 that a
Stipulation of Settlement has been entered into between a predecessor company
and the Internal Revenue Service regarding the settlement of an alleged tax
deficiency that is the subject of certain tax sharing agreements (Note 9). The
Company has been informed by the other parties to these tax sharing agreements
that it is being charged with a net obligation of approximately $21 million
under this settlement, which the Company accrued for in December 1989. The
Company is currently evaluating the scope of this claimed obligation under the
settlement and potential sources of financing for such amount that the Company
may ultimately be obligated to pay. However, there can be no assurance that any
financing will
F-3
<PAGE>
be available, or that if available, it can be obtained on terms that are
favorable to the Company and its stockholders. Given the limited availability of
capital for real estate development under current conditions in the financial
markets, the Company will be dependent primarily on cash and short-term
investments on hand to fund project investments, and general and administrative
costs during 1994 and 1995. However, if the Company is required to pay all or a
significant portion of the $21 million claimed under the tax sharing agreements
as discussed above, and any such amount is not financed, the Company will need
to obtain other sources of financing or sell additional assets in order to meet
projected cash requirements for the first quarter of 1995.
In January 1993, Lake Superior Land Company, which was a wholly owned
subsidiary of the Company at that time, sold $45 million of secured notes due
May 1, 2012 to certain pension funds of the State of Michigan. The obligations
under the note agreement are secured by all of the assets of Lake Superior Land
Company, which principally consist of approximately 300,000 acres of timberlands
and shorefront property on Lake Superior in Michigan and Wisconsin. Lake
Superior Land Company dividended the proceeds to the Company, which used $21
million of the financing proceeds to make a principal prepayment in accordance
with a term loan agreement with Bank of America.
At December 31, 1993, the Company's only outstanding senior bank debt is due
to the Bank of Boston in the principal amount of $7.0 million, under a term note
due on July 31, 1995. The term note agreement with Bank of Boston requires
additional principal prepayments to be made from the net proceeds from the sales
of Wentworth and other assets. The term note agreement also requires additional
principal repayments of $.2 million in the second half of 1994 and $.4 million
in the first half of 1995, with any remaining balance due at maturity on July
31, 1995. Amounts outstanding under the term note bear interest at prime plus
1%. The term note agreement with Bank of Boston is secured by a first mortgage
on the Wentworth property, stock pledge agreements of substantially all
significant subsidiaries of the Company and first mortgages on certain other
properties. The term note agreement contains certain restrictive covenants that
prohibit the declaration or payment of dividends and limit, among other things,
(i) the incurrence of indebtedness, (ii) the making of investments, loans and
advances, (iii) the creation or incurrence of liens on existing and future
assets of Wentworth or its subsidiaries, (iv) stock repurchases, and (v) project
development spending in excess of certain planned levels. The term note
agreement also contains various financial covenants and events of default
customary for such agreements.
FINANCIAL CONDITION
DECEMBER 31, 1993 COMPARED WITH DECEMBER 31, 1992
Cash, cash equivalents and short-term investments aggregated $43.5 million
at December 31, 1993 compared with $41.6 million at December 31, 1992. The
change in cash and cash equivalents reflects the activity presented in the
Statements of Cash Flows and described below.
The $15.9 million decrease in real estate held for development or sale is
primarily due to the November 1993 sale of the Company's office properties in
LaJolla, California, as well as the placement into service in May 1993 of the
Eagle Crest golf course and its related reclassification to operating
properties.
The $25.0 million decrease in other assets primarily reflects the sale of
the Company's investment in Deltec, partially offset by the acquisition of the
domestic real estate development business of The Koll Company (Note 4).
The $9.5 million increase in accounts payable and accrued liabilities
primarily reflects reclassification of approximately $21 million in taxes
payable from other liabilities in 1993 (Notes 8 and 9), partially offset by the
1993 payments of $7.6 million in income taxes (Note 9) and $3.2 million to
settle shareholder litigation related to the July 1992 merger with The Henley
Group, Inc. (the "Merger") (Note 1).
The $58.4 million decrease in senior bank debt reflects principal
prepayments to Bank of America and Bank of Boston in connection with Lake
Superior Land Company's financing, the disposition of the Company's investment
in Deltec (Note 4) and the sale of the Company's office properties in LaJolla,
California.
F-4
<PAGE>
The $30.2 million decrease in subordinated debentures reflects the exchange
of approximately $42.4 million in aggregate face amount of senior subordinated
debentures held by Libra Invest & Trade Ltd. ("Libra") for the Company's Lake
Superior Land Company subsidiary, and the exchange of approximately $10.6
million in aggregate face amount of subordinated debentures held by Libra for
approximately 3.4 million shares of the Company's Class A Common stock (Notes 4
and 7), offset by payments of interest through the issuance of additional
pay-in-kind debentures on March 15 and September 15, 1993 and the accrual of
interest since September 15, 1993.
The $25.4 million increase in other liabilities is principally due to the
adoption of FAS 109 (Note 9), as well as the tax effect of the extraordinary
gain on extinguishment of debt, partially offset by the reclassification of
approximately $21 million in taxes payable to accounts payable and accrued
liabilities.
DECEMBER 31, 1992 COMPARED WITH DECEMBER 31, 1991
Cash aggregated $41.6 million at December 31, 1992 compared with $7.8
million at December 31, 1991. The increase in cash principally reflects the
Merger, along with the activity presented in the Statement of Cash Flows and
described below. The Company received $58.3 million of cash in connection with
the Merger, $15 million of which was used to repay senior bank debt on July 16,
1992 (Note 7).
The $7.7 million decrease in real estate held for development or sale
primarily reflects the sale of the Company's Ontario, California property for
net cash proceeds of approximately $6.1 million and a $1.7 million note.
The $35.2 million increase in other assets primarily reflects the Company's
investment in Deltec as a result of the Merger (Note 1).
On February 4, 1993, the Long Beach Airport Marriott Hotel (the "Hotel") was
transferred to California Federal Bank ("CalFed") in a foreclosure sale. The
foreclosure process was initiated as a result of the Hotel's inability to make
its July 1992 interim interest payment deposits under a letter of credit
reimbursement agreement with CalFed, which secured $25 million in principal
amount of Industrial Revenue Bonds (the "Bonds") issued by the City of Long
Beach on September 1, 1985 for construction of the Hotel. The Bonds and letter
of credit were nonrecourse to an indirect subsidiary of the Company that
previously owned the Hotel, and neither the Company nor any of its other
subsidiaries was a party to, or a guarantor with respect to, these obligations.
On September 15, 1992, the Company stipulated to the appointment of a receiver
to control and manage the assets of the Hotel, and the receiver took control of
the Hotel on September 16, 1992. Accordingly, the December 31, 1992 balance
sheet reflects the elimination of $24.9 million in nonrecourse project debt of
the Hotel, $.9 million of related Hotel liabilities, and a corresponding
reduction in assets of $24.3 million, with the difference of $1.5 million
reflected in other income in the 1992 statement of operations.
The $30.7 million decrease in operating properties in 1992 principally
reflects the elimination from the Company's balance sheet of the Hotel's assets
as discussed above, along with the sale of the Company's Long Beach, California
office building for approximately $6 million.
The $8.4 million increase in accounts payable and accrued liabilities
primarily reflects the classification of $7.6 million of obligations paid in
January 1993 under the tax sharing agreement with a predecessor company,
Wheelabrator Technologies Inc. ("WTI") (Note 9), as current at December 31,
1992.
The $41.0 million increase in other liabilities primarily reflects
liabilities received in connection with the Merger (Note 1), partially offset by
the reclassification of certain tax liabilities as discussed above.
The $17.0 million decrease in senior bank debt primarily reflects a $15.0
million principal prepayment in connection with the Merger (Note 7).
The $19.6 million decrease in subordinated debentures reflects the $42.5
million book value reduction in connection with the Merger (Notes 1 and 7),
partially offset by a $22.9 million increase related to pay-in-kind interest.
The changes in stockholders' equity primarily reflect the issuance by the
Company of preferred and common stock in connection with the Merger (Notes 2 and
13), partially offset by the net loss for the year.
F-5
<PAGE>
RESULTS OF OPERATIONS
The nature of the Company's business is such that individual transactions
often cause significant fluctuations in operating results from year to year.
1993 COMPARED WITH 1992
The $11.6 million decrease in revenues from $28.3 million in 1992 to $16.7
million in 1993 and the decrease in cost of sales from $26.5 million in 1992 to
$16.3 million in 1993 were both principally related to the Company's 1992 sale
of California properties in Ontario, Long Beach and Coronado, along with the
February 1993 foreclosure sale of the Hotel, offset by the Company's sale in
November 1993 of two office buildings located in LaJolla, California and
revenues from golf operations and the domestic real estate development business
acquired from The Koll Company (Note 4). The pro forma impact of this
acquisition assuming it had occurred on January 1, 1993, would have been to
increase the Company's revenues and income from continuing operations before
income taxes and amortization of goodwill by $10.0 million and $2.4 million,
respectively.
The $1.8 million decrease in general and administrative expenses for 1993 as
compared with 1992 was primarily attributed to reduced personnel and occupancy
costs.
The decrease in interest expense from $31.2 million in 1992 to $24.4 million
in 1993 primarily reflects the reduction in outstanding subordinated debentures
and senior bank debt in connection with the July 1992 Merger and the 1993
prepayments of senior bank debt (Note 7).
The improvement in other expense (income), net from $2.9 million of expense
for 1992 to $2.4 million of income for 1993 primarily reflects $3.0 million
received in 1993 in connection with the termination of a put option agreement
with Abex Inc. ("Abex"), a former subsidiary of The Henley Group, Inc., and a
$2.0 million insurance reimbursement received in 1993 related to prior year
environmental litigation costs.
The Company adopted Financial Accounting Standard No. 109 "Accounting for
Income Taxes," in the first quarter of 1993, resulting in an increase in its
deferred tax liability of $36.0 million through a charge to income at the time
of adoption (Notes 2 and 9). Under this new accounting standard, the Company
also recognized $10.4 million of tax benefits on continuing operations for the
year ended December 31, 1993.
1992 COMPARED WITH 1991
The decrease in revenues from $34.7 million in 1991 to $28.3 million in 1992
and the decrease in cost of sales from $28.8 million in 1991 to $26.5 million in
1992 were both principally due to the commencement of foreclosure proceedings
against the Hotel in September 1992, and lower Hotel operating revenues prior to
that date.
The decrease in gross operating margin from $5.9 million in 1991 to $1.8
million in 1992 is primarily attributable to lower margins on asset sales and
lower Hotel operating margins in 1992 discussed above.
The $3.3 million decrease in interest expense from 1991 to 1992 is primarily
due to the reduction in outstanding subordinated debentures and senior bank debt
in connection with the Merger, as well as lower interest rates on the senior
bank debt.
The change in other expense (income), net from $65.5 million of expense for
1991 to $2.9 million of expense for 1992 primarily reflects approximately $65
million of charges in 1991 related to asset revaluations.
1991 COMPARED WITH 1990
The decrease in revenues from $97.0 million in 1990 to $34.7 million in
1991, the decrease in cost of sales from $78.9 million in 1990 to $28.8 million
in 1991, and the decrease in gross operating margin from $18.1 million in 1990
to $5.9 million in 1991, principally reflect the $42 million sale in 1990 of a
90% interest in approximately 3,500 acres of land on the island of Hawaii, along
with the substantial completion of residential sales at Coronado Cays in 1990.
The change in other expense (income), net from $97.5 million of income for
1990 to $65.5 million of expense in 1991 primarily reflects the gain on sale of
the Company's interest in two trash-to-energy facilities to WTI in 1990 and
asset revaluations in 1991.
F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
of Koll Real Estate Group, Inc.:
We have audited the accompanying balance sheets of Koll Real Estate Group,
Inc. (formerly The Bolsa Chica Company) as of December 31, 1993 and 1992 and the
related statements of operations, cash flows and changes in stockholders' equity
for the years then ended. 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. The financial statements of the
Company for the year ended December 31, 1991 were audited by other auditors
whose report, dated February 3, 1992, expressed an unqualified opinion on those
statements and included explanatory paragraphs that described the uncertainties
associated with the Company's ability to continue as a going concern and the
inherent uncertainty involved in the process of estimating the net realizable
value of its real estate properties.
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, such 1993 and 1992 financial statements present fairly, in
all material respects, the financial position of Koll Real Estate Group, Inc. at
December 31, 1993 and 1992 and the results of its operations and its cash flows
for the years ended December 31, 1993 and 1992 in conformity with generally
accepted accounting principles.
The Company carries its real estate properties at the lower of cost or
estimated net realizable value. As discussed in Note 2, the estimation process
is inherently uncertain and relies to a considerable extent on future events and
market conditions. As discussed in Note 6, the development of the Company's
Bolsa Chica project is dependent upon obtaining various governmental approvals
and various economic factors. Accordingly, the amount ultimately realized from
such project may differ materially from the current estimate of net realizable
value.
As discussed in Note 9, the Company changed its method of accounting for
income taxes in 1993. Also as discussed in Note 9, the Company was notified in
March 1994 that a Stipulation of Settlement has been entered into between a
predecessor company and the Internal Revenue Service regarding the settlement of
an alleged tax deficiency that is the subject of certain tax sharing agreements.
The Company has been informed by the other parties to these tax sharing
agreements that it is being charged with a net obligation of approximately $21
million under this settlement, which has been accrued in the Company's financial
statements since December 1989.
DELOITTE & TOUCHE
San Diego, California
February 15, 1994 (March 28, 1994 as to the
last paragraph of Note 9)
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
of Koll Real Estate Group, Inc.:
We have audited the accompanying statements of operations, changes in
stockholders' equity and cash flows of Koll Real Estate Group, Inc. (formerly
The Bolsa Chica Company and Henley Properties Inc.) for the year ended December
31, 1991. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects the results of operations and cash flows of Koll Real
Estate Group, Inc. for the year ended December 31, 1991 in conformity with
generally accepted accounting principles.
The financial statements referred to above have been prepared assuming that
the Company will continue as a going concern. The Company has suffered losses
from operations and must obtain significant capital for financing its real
estate development activities and scheduled repayments of debt obligations
during 1992. The uncertainties associated with the Company's ability to obtain
sufficient capital, restructure its debt agreements and return to profitable
operations raise substantial doubt about the Company's ability to continue as a
going concern. The Company has announced a recapitalization and merger plan to
deal with these matters. The financial statements referred to above do not
include any adjustments that might result from the outcome of these
uncertainties.
The Company carries its real estate held for development or sale and land
held for development at the lower of cost or estimated net realizable value. As
discussed in Note 2, the estimation process is inherently uncertain and relies
to a considerable extent on future events and market conditions, the ability to
achieve financing for its real estate development activities and the resolution
of political, environmental and other related issues. Accordingly, ultimate
realization of asset values may differ materially from amounts presently
estimated.
KENNETH LEVENTHAL & COMPANY
Orange County, California
February 3, 1992
F-8
<PAGE>
KOLL REAL ESTATE GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1992 1993
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 41.6 $ 21.8
Short-term investments...................................... -- 21.7
Real estate held for development or sale.................... 64.5 48.6
Operating properties, net................................... 24.4 16.3
Land held for development................................... 308.6 315.9
Other assets................................................ 47.0 22.0
------- -------
$ 486.1 $ 446.3
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities.................. $ 21.3 $ 30.8
Senior bank debt.......................................... 65.4 7.0
Subordinated debentures................................... 165.1 134.9
Other liabilities......................................... 84.7 110.1
------- -------
Total liabilities....................................... 336.5 282.8
------- -------
Stockholders' equity:
Series A (convertible redeemable nonvoting) Preferred
Stock -- $.01 par value; 42,505,504 shares authorized and
outstanding.............................................. .4 .4
Class A (voting) Common Stock -- $.05 par value;
625,000,000 shares authorized; 39,785,131 and 43,192,847
shares outstanding, respectively......................... 2.0 2.2
Class B (convertible nonvoting) Common Stock -- $.05 par
value; 25,000,000 shares authorized and no shares
outstanding.............................................. -- --
Capital in excess of par value............................ 228.7 230.0
Deferred proceeds from stock issuance..................... -- (1.5)
Minimum pension liability................................. (1.1) (1.5)
Accumulated deficit....................................... (80.4) (66.1)
------- -------
Total stockholders' equity.............................. 149.6 163.5
------- -------
$ 486.1 $ 446.3
------- -------
------- -------
</TABLE>
See the accompanying notes to financial statements.
F-9
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December
31,
------------------------------
1991 1992 1993
-------- ------- -------
(in millions, except per share
amounts)
<S> <C> <C> <C>
Revenues:
Asset sales..................................... $ 15.8 $ 16.3 $ 11.1
Operations...................................... 18.9 12.0 5.6
-------- ------- -------
34.7 28.3 16.7
-------- ------- -------
Costs of:
Asset sales..................................... 12.1 15.5 11.1
Operations...................................... 16.7 11.0 5.2
-------- ------- -------
28.8 26.5 16.3
-------- ------- -------
Gross operating margin............................ 5.9 1.8 .4
General and administrative expenses............... 11.4 10.7 8.9
Interest expense.................................. 34.5 31.2 24.4
Other expense (income), net....................... 65.5 2.9 (2.4)
-------- ------- -------
Loss from continuing operations before income
taxes............................................ (105.5) (43.0) (30.5)
Provision (benefit) for income taxes.............. -- (1.1) (10.4)
-------- ------- -------
Loss from continuing operations................... (105.5) (41.9) (20.1)
Discontinued operations:
Income from operations, net of income taxes of
$.5, $1.5 and $3.1, respectively............... .8 3.5 5.8
Gains on dispositions, net of income taxes of
$1.4........................................... -- -- 41.0
-------- ------- -------
Income (loss) before extraordinary gain and
cumulative effect of accounting changes.......... (104.7) (38.4) 26.7
Extraordinary gain on extinguishment of debt, net
of income taxes of $12.5......................... -- -- 23.6
Cumulative effect of accounting changes........... (2.0) -- (36.0)
-------- ------- -------
Net income (loss)................................. $ (106.7) $ (38.4) $ 14.3
-------- ------- -------
Earnings (loss) per common share:
Continuing operations........................... $ (5.27) $ (1.44) $ (0.24)
Discontinued operations......................... 0.04 0.12 0.56
Extraordinary gain.............................. -- -- 0.28
Cumulative effect of accounting changes......... (0.10) -- (0.43)
-------- ------- -------
Net income (loss) per common share................ $ (5.33) $ (1.32) $ 0.17
-------- ------- -------
-------- ------- -------
</TABLE>
See the accompanying notes to financial statements.
F-10
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December
31,
------------------------------
1991 1992 1993
-------- ------- -------
(in millions)
<S> <C> <C> <C>
Cash flows from operating activities:
Income (loss) before extraordinary gain and
cumulative effect of accounting changes........ $ (104.7) $ (38.4) $ 26.7
Adjustments to reconcile to cash used by
operating activities:
Depreciation and amortization................. 3.7 2.7 1.2
Non-cash interest expense..................... 23.2 22.9 21.9
Non-cash asset revaluations................... 65.5 -- --
Gains on asset sales.......................... (4.2) (4.3) --
Gains on dispositions of discontinued
operations................................... -- -- (41.0)
Proceeds from asset sales, net................ 14.6 16.7 10.4
Investments in real estate held for
development or sale.......................... (9.5) (3.1) (3.8)
Investment in land held for development....... (6.7) (5.6) (7.3)
Decrease (increase) in other assets........... 19.1 3.5 (10.0)
Decrease in accounts payable, accrued and
other liabilities............................ (.6) (9.9) (14.9)
Other, net.................................... (1.8) (.2) (.2)
-------- ------- -------
Cash used by operating activities........... (1.4) (15.7) (17.0)
-------- ------- -------
Cash flows from investing activities:
Purchase of short-term investments.............. -- -- (21.7)
Sale of fixed assets............................ -- 8.2 --
Acquisition of real estate development
business....................................... -- -- (9.8)
Sale of equity investment....................... -- -- 43.7
-------- ------- -------
Cash provided by investing activities....... -- 8.2 12.2
-------- ------- -------
Cash flows from financing activities:
Net proceeds from nonrecourse debt.............. -- -- 43.4
Proceeds from Merger............................ -- 58.3 --
Repayments of senior bank debt.................. (12.9) (17.0) (58.4)
-------- ------- -------
Cash provided (used) by financing
activities................................. (12.9) 41.3 (15.0)
-------- ------- -------
Net increase (decrease) in cash and cash
equivalents...................................... (14.3) 33.8 (19.8)
Cash and cash equivalents -- beginning of year.... 22.1 7.8 41.6
-------- ------- -------
Cash and cash equivalents -- end of year.......... $ 7.8 $ 41.6 $ 21.8
-------- ------- -------
-------- ------- -------
</TABLE>
See the accompanying notes to financial statements.
F-11
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFERRED
PROCEEDS RETAINED
CAPITAL IN MINIMUM FROM EARNINGS
PREFERRED COMMON EXCESS OF PENSION STOCK (ACCUMULATED
STOCK STOCK PAR VALUE LIABILITY ISSUANCE DEFICIT) TOTAL
------------ ---------- ---------- ----------- --------- ------------ ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990..... -- 1.0 142.3 -- -- 64.7 208.0
Net loss..................... -- -- -- -- -- (106.7) (106.7)
------------ ---------- ---------- ----------- --------- ------------ ---------
Balance, December 31, 1991..... -- 1.0 142.3 -- -- (42.0) 101.3
Net loss..................... -- -- -- -- -- (38.4) (38.4)
Minimum pension liability.... -- -- -- (1.1) -- -- (1.1)
Merger....................... .4 1.0 86.4 -- -- -- 87.8
------------ ---------- ---------- ----------- --------- ------------ ---------
Balance, December 31, 1992..... .4 2.0 228.7 (1.1) -- (80.4) 149.6
Net income................... -- -- -- -- -- 14.3 14.3
Minimum pension liability.... -- -- -- (.4) -- -- (.4)
Deferred proceeds from stock
issuance.................... -- .2 2.0 -- (2.2) -- --
Valuation adjustment to
deferred proceeds from stock
issuance.................... -- -- (.7) -- .7 -- --
------------ ---------- ---------- ----------- --------- ------------ ---------
Balance, December 31, 1993..... $.4 $2.2 $230.0 $(1.5) $(1.5) $(66.1) $163.5
------------ ---------- ---------- ----------- --------- ------------ ---------
------------ ---------- ---------- ----------- --------- ------------ ---------
</TABLE>
See the accompanying notes to financial statements.
F-12
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- FORMATION AND BASIS OF PRESENTATION
On December 31, 1989, The Henley Group, Inc. separated its business into two
public companies through a distribution to its Class A and Class B common
stockholders of all of the common stock of a newly formed Delaware corporation
to which The Henley Group, Inc. had contributed its non-real estate development
operations, assets and related liabilities. The new company was named The Henley
Group, Inc. ("Henley Group") immediately following the distribution. The
remaining company was renamed Henley Properties Inc. ("Henley Properties") and
consisted of the real estate development business and assets of Henley Group.
On July 16, 1992, a subsidiary of Henley Properties merged with and into
Henley Group (the "Merger") and Henley Group became a wholly owned subsidiary of
Henley Properties. Henley Properties, through its Henley Group subsidiary,
received in the Merger net assets having a book value as of July 16, 1992 of
approximately $45.3 million, consisting of approximately $103.6 million of
assets, including $58.3 million of cash and a 44% interest in Deltec Panamerica
S.A. ("Deltec"), and $58.3 million of liabilities. In connection with the
Merger, Henley Properties was renamed The Bolsa Chica Company.
On September 30, 1993, a subsidiary of The Bolsa Chica Company acquired the
domestic real estate development business and related assets of The Koll Company
(Note 4). In connection with this acquisition, The Bolsa Chica Company was
renamed Koll Real Estate Group, Inc. (the "Company").
Immediately prior to the July 1992 Merger, Henley Group distributed to its
stockholders among other consideration (the "Distribution"), in respect of each
share of its outstanding common stock (the "Henley Group Common Stock"): (i)
$6.00 aggregate principal amount of the 12% Senior Subordinated Pay-In-Kind
Debentures due March 15, 2002 of the Company (the "Senior Subordinated
Debentures"); and (ii) $1.50 aggregate principal amount of the 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002 of the Company (the "Subordinated
Debentures", and, together with the Senior Subordinated Debentures, the
"Debentures"). Approximately $159.4 million aggregate principal amount of the
Debentures were distributed in the Distribution and approximately $43.8 million
aggregate principal amount of the Debentures were retained by the Company's
Henley Group subsidiary in the Merger. In the Merger, Henley Group stockholders
also received, in respect of each share of Henley Group Common Stock, the
following securities of the Company: (i) two shares of Series A Convertible
Redeemable Preferred Stock (the "Series A Preferred Stock"); and (ii) one share
of Class A Common Stock (the "Class A Common Stock").
Certain prior-period amounts have been reclassified to conform with the
current presentation.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
STATEMENTS OF CASH FLOWS
For purposes of the Statements of Cash Flows, all highly liquid instruments
purchased with a maturity of three months or less are considered to be cash
equivalents.
EARNINGS PER COMMON SHARE
In connection with the Merger, on July 16, 1992, the Company issued
approximately 19.7 million shares of its Class A Common Stock and 42.5 million
shares of its Series A Preferred Stock.
On December 17, 1993, the Company issued 3.4 million shares of its Class A
Common Stock to Libra Invest & Trade Ltd. ("Libra") in exchange for all of
Libra's approximately $10.6 million in aggregate principal amount of
Subordinated Debentures plus accrued interest.
The weighted average numbers of common shares outstanding for the years
ended December 31, 1991, 1992, and 1993 were 20.0 million, 29.0 million, and
83.0 million, respectively. The Series A Preferred Stock is
F-13
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
not included in the loss per share calculation for 1991 and 1992 because the
effect is antidilutive. The 1993 earnings per share calculation includes the
Series A Preferred Stock and the effect of 5.7 million shares of common and
preferred stock granted under the 1988 Stock Option Plan (Note 14).
SHORT-TERM INVESTMENTS
The Company accounts for short-term investments at the lower of cost or
market value.
REAL ESTATE
Real estate held for development or sale and land held for development (real
estate properties) are carried at the lower of cost or estimated net realizable
value. The estimation process involved in the determination of net realizable
value is inherently uncertain since it requires estimates as to future events
and market conditions. Such estimation process assumes the Company's ability to
complete development and dispose of its real estate properties in the ordinary
course of business based on management's present plans and intentions. Economic,
market, environmental and political conditions may affect management's
development and marketing plans. In addition, the implementation of such
development and marketing plans could be affected by the availability of future
financing for development and construction activities. Accordingly, the ultimate
net realizable values of the Company's real estate properties are dependent upon
future economic and market conditions, the availability of financing, and the
resolution of political, environmental and other related issues.
The cost of sales of multi-unit projects is computed using the relative
sales value method. Direct construction costs are accumulated by phase, using
the specific identification method; land and all other common costs are
allocated between phases benefited, using area or unit methods. These methods do
not differ significantly from the relative sales value method. Interest,
carrying costs, indirect general and administrative costs that relate to several
real estate projects and property taxes are capitalized to projects during their
development period.
No interest expense incurred during the years ended December 31, 1991, 1992,
and 1993 was capitalized.
Operating properties are generally depreciated using estimated lives that
range principally from 5 to 30 years. For financial statement purposes,
depreciation is computed utilizing the straight-line method. For tax purposes,
depreciation is generally computed by accelerated methods based on allowable
useful lives. Accumulated depreciation amounted to $12.6 million and $9.7
million at December 31, 1992 and 1993, respectively.
The Company's rental operations consist primarily of the leasing of office
and marina space and all of the Company's leases are classified as operating
leases. Such leases are generally for periods of up to 5 years.
INTANGIBLE ASSETS
Goodwill, which represents the difference between the purchase price of a
business acquired in 1993 (Note 4) and the related fair value of net assets
acquired, is amortized on a straight-line basis over 15 years. Goodwill of $8.7
million as of December 31, 1993 is included in other assets.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions," ("FAS 106") was implemented by
the Company on the immediate recognition basis effective January 1, 1991
resulting in a $2 million charge to earnings. This standard requires that the
cost of these benefits, which are primarily health care related, be recognized
in the financial statements during each employee's active working career. The
Company's previous practice was to charge these costs to expense as they were
paid. As of December 31, 1993 the accrued unfunded costs totalled $1.5 million.
F-14
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). FAS 109 supersedes both APB Opinion No. 11 and FAS No. 96, "Accounting
for Income Taxes." With the adoption of FAS 109 in the first quarter of 1993,
the Company changed to the liability method of accounting for income taxes,
which resulted in an increase in its deferred tax liability of approximately $36
million, through a charge to income (Note 9). Also see Note 9 for a discussion
of the tax sharing agreements with Abex Inc.("Abex") and Wheelabrator
Technologies Inc. ("WTI").
RECOGNITION OF REVENUES
Sales are recorded using the full accrual method when title to the real
estate sold is passed to the buyer and the buyer has made an adequate financial
commitment. When it is determined that the earning process is not complete,
income is deferred using the installment, cost recovery or percentage of
completion methods of accounting.
NOTE 3 -- ASSET REVALUATIONS
During the fourth quarter of 1991, the Company recorded approximately $65
million of charges for the revaluation of certain assets, including goodwill.
Management believes that these revalued amounts better reflected market values
based on real estate market conditions and the Company's plan to sell certain
non-strategic assets.
NOTE 4 -- ACQUISITIONS AND DISPOSITIONS
On August 27, 1993 the Company disposed of its entire 44% interest in Deltec
for $43.7 million in net cash proceeds, resulting in a gain of $1.9 million.
Discontinued operations for the years ended December 31, 1992 and 1993 also
includes $.9 million and $4.2 million of net income through the date of
disposition. The Company used $23.8 million of the proceeds to make principal
prepayments in accordance with term loan agreements with Bank of America and
Bank of Boston. The Company also terminated its put option agreement with Abex
(Note 10) on August 27, 1993 and received $3 million in cash from Abex which was
used to prepay senior bank debt.
On September 30, 1993, the Company acquired the domestic real estate
development business and related assets of The Koll Company ("Koll"). The
principal activity of the acquired business is to provide commercial,
industrial, retail and residential real estate development services, including
feasibility studies, entitlement coordination, project planning, construction
management, financing, marketing, acquisition, disposition and asset management
services throughout the nation. The acquired business generates income
principally through fees and participating interests in equity partnerships. No
real property was involved in the transaction. In connection with the
acquisition, the Company paid $4.75 million in cash, approximately $1 million in
reimbursement of investments in transferred development projects, and agreed to
pay an earn-out over the next four and one-quarter years based on the future
profitability of the business acquired. On December 29, 1993 the Company amended
its agreement with Koll, under which the Company paid $4.25 million in cash to
Koll in exchange for the immediate termination of the earn-out payments with
retroactive effect to the initial date of the acquisition agreement. Under the
earn-out, the Company was entitled to a 20% preferred return on its original
$4.75 million investment, Koll was then entitled to a matching return subject to
available profits, with all remaining profits split equally between the Company
and Koll. In addition, on September 30, 1993, Koll and Mr. Donald M. Koll (an
officer and director of the Company and owner of Koll) entered into covenants
not to compete with the Company with respect to domestic real estate
development, subject to certain limited exceptions. The Koll covenant is
perpetual in duration while the covenant of Mr. Koll is limited to the five-year
period following his ceasing to be either an officer, director or stockholder of
the Company. In connection with the acquisition, the Company also paid
F-15
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- ACQUISITIONS AND DISPOSITIONS (CONTINUED)
Koll $325,000 to terminate its June 11, 1990 management agreement in lieu of
continuing to receive and pay for duplicative services during the 90-day notice
period which would otherwise have been required under the management agreement.
On September 30, 1993, the Company and Koll also entered into various other
agreements regarding services they provide to one another (Note 11).
On December 17, 1993, the Company completed a transaction with Libra whereby
it exchanged the Company's Lake Superior Land Company subsidiary for (1)
approximately $42.4 million in aggregate face amount of Senior Subordinated
Debentures held by Libra; (2) net cash proceeds to be generated by Libra's
periodic sale of up to approximately 3.4 million shares of the Company's Class A
Common Stock held by Libra through a series of transactions to be effected in an
orderly manner within a three-year period; and (3) the right of the Company to
receive a contingent payment if the proceeds from any disposition by Libra of
Lake Superior Land Company during the 15 year period following the closing of
the transaction exceed a 20% preferred return on the negotiated value of Libra's
investment. Accordingly, the financial information included in the statements of
operations for all periods has been reclassified to present Lake Superior Land
Company as a discontinued operation. Lake Superior Land Company owns and manages
a commercial hardwood timber business on approximately 300,000 acres of forest
lands and shoreline property on Lake Superior in Michigan and Wisconsin.
Revenues related to the discontinued operation were $6.2 million and $8.9
million for the years ended December 31, 1991 and 1992, respectively and $10.6
million for 1993 through the date of the disposition. Net income from the
discontinued operation for 1991 , 1992 and 1993 through the date of disposition
was $.8 million, $2.6 million and $1.6 million, respectively. The accumulated
deficit of Lake Superior Land Company at the date of the disposition was
approximately $24.8 million. The Company also completed a separate transaction
with Libra in December 1993, whereby the Company exchanged approximately 3.4
million newly issued shares of its Class A Common Stock for approximately $10.6
million in aggregate face amount of Subordinated Debentures held by Libra. In
connection with these transactions, the Company recorded an after-tax gain of
$39.1 million on the disposition of Lake Superior Land Company and an after-tax
extraordinary gain on extinguishment of the Debentures of $23.6 million (Note
7). After these transactions, Libra and affiliates presently hold approximately
7.4 million shares, or 17%, of the Company's Class A Common Stock, including
approximately 3.4 million shares which have been deposited in a custodial
account for periodic sale in accordance with instructions from the Company, and
approximately 11.9 million shares, or 28%, of the Company's preferred stock. In
February 1994, the Company received $1 million in cash from Libra in exchange
for the immediate termination of the contingent payment provision described
above.
NOTE 5 -- REAL ESTATE HELD FOR DEVELOPMENT OR SALE
Real estate held for development or sale consists of the following at
December 31 (in millions):
<TABLE>
<CAPTION>
1992 1993
----- -----
<S> <C> <C>
Residential............................. $51.4 $43.3
Commercial/industrial................... 13.1 5.3
----- -----
$64.5 $48.6
----- -----
----- -----
</TABLE>
The decrease in real estate held for development or sale during 1993 relates
primarily to the sale of the Company's LaJolla, California office property for
$10.0 million in cash, as well as the placement into service of the Eagle Crest
golf course and its related reclassification to operating properties.
NOTE 6 -- LAND HELD FOR DEVELOPMENT
Land held for development consists of approximately 1,200 acres known as
Bolsa Chica located in Orange County, California, surrounded by the City of
Huntington Beach and approximately 35 miles south of downtown Los Angeles
("Bolsa Chica"). The Company is currently seeking approvals from local, state
and federal governmental entities for a 4,900 unit (approximately 4,300 units on
Company-owned land)
F-16
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- LAND HELD FOR DEVELOPMENT (CONTINUED)
residential project on this site. A revised environmental impact report was
released for public comments in December 1993 for a 60-day period ending
February 18, 1994. The County of Orange requested that this document contain an
in-depth analysis of an alternative plan which includes 3,500 homes, in addition
to the in-depth analysis of the Company's plan. Due to a number of factors
beyond the Company's control, including possible objections of various
environmental and so-called public interest groups that may be made in
legislative, administrative or judicial forums, the required approvals could be
delayed substantially. Subject to these and other uncertainties inherent in the
entitlement process, the Company's goal is to obtain all material governmental
approvals in the first half of 1995 and to begin construction in the second half
of 1995, depending on economic and market conditions. Realization of the
Company's investment in Bolsa Chica will also depend upon various economic
factors, including the demand for residential housing in the Southern California
market and the availability of credit to the Company and to the housing
industry.
NOTE 7 -- DEBT
SENIOR BANK DEBT
TERM LOAN
During 1993, the Company retired the entire balance of senior bank debt owed
to Bank of America with proceeds from the January 1993 Lake Superior Land
Company financing, the August Deltec disposition and termination of the Abex put
option agreement (see Note 4), and the November sale of two office buildings
located in La Jolla, California.
TERM NOTE
On July 16, 1992, in connection with the Merger, the Company entered into a
$13.8 million term note agreement due on July 31, 1995 with the Bank of Boston,
principally secured by resort and residential property in New Hampshire
("Wentworth"). Approximately $6.4 million of the proceeds from the August 1993
Deltec disposition and termination of the Abex put option agreement (Note 4)
were used to make principal prepayments to Bank of Boston. The term note
agreement with Bank of Boston requires additional principal prepayments to be
made from the net proceeds from the sale of Wentworth and other assets. The term
note agreement also requires additional principal repayments of $.2 million in
the second half of 1994 and $.4 million in the first half of 1995, with any
remaining balance due at maturity on July 31, 1995. Amounts outstanding under
the term note bear interest at prime plus 1%. The term note agreement with Bank
of Boston is secured by a first mortgage on the Wentworth property, stock pledge
agreements of substantially all significant subsidiaries of the Company and
first mortgages on certain other properties. The term note agreement contains
certain restrictive covenants that prohibit the declaration or payment of
dividends and limit, among other things, (i) the incurrence of indebtedness,
(ii) the making of investments, loans and advances, (iii) the creation or
incurrence of liens on existing and future assets of Wentworth or its
subsidiaries, (iv) stock repurchases, and (v) project development spending in
excess of certain planned levels. The term note agreement also contains various
financial covenants and events of default customary for such agreements.
SUBORDINATED DEBENTURES
The Debentures were comprised of the following as of December 31 (in
millions):
<TABLE>
<CAPTION>
1992 1993
------- -------
<S> <C> <C>
Senior Subordinated Debentures.......... $ 135.2 $ 109.4
Subordinated Debentures................. 33.8 27.4
------- -------
Total face amount..................... 169.0 136.8
Less unamortized discount............... (9.8) (6.7)
Plus accrued interest................... 5.9 4.8
------- -------
$ 165.1 $ 134.9
------- -------
------- -------
</TABLE>
F-17
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- DEBT (CONTINUED)
The Debentures give the Company the right to pay interest in-kind, in cash
or, subject to certain conditions, in the Company's common stock. It is
currently anticipated that interest on the Debentures will be paid in-kind. The
Debentures, which are due March 15, 2002, do not require any sinking fund
payments and may be redeemed by the Company at any time in cash only, or at
maturity in cash or stock, subject to certain conditions. The Debentures
prohibit the payment of any dividends or other distributions on the Company's
equity securities.
As a result of the Distribution and the Merger on July 16, 1992 (Note 1),
approximately $159.4 million aggregate principal amount of the Debentures were
distributed to stockholders of Henley Group and approximately $43.8 million
aggregate principal amount of the Debentures were retained by Henley Group,
which is now a wholly owned subsidiary of the Company.
As a result of the transactions with Libra (Note 4) in which approximately
$42.4 million in aggregate principal amount of Senior Subordinated Debentures
and $10.6 million in aggregate principal amount of Subordinated Debentures held
by Libra were retired, the Company recorded on extraordinary gain of $36.1
million, less an applicable income tax provision of $12.5 million, in the
accompanying consolidated financial statements.
At December 31, 1993 the estimated fair value of the Company's Debentures
was within a range of approximately $40 million to $60 million. The fair value
of the Debentures is estimated based on the negotiated values in the Libra
transactions (lower end of range) and current quotes from certain bond traders
making a market in the Debentures (upper end of range). However, due to the low
trading volume and illiquid market for the Debentures, current quotes from bond
traders may not be meaningful indications of value. The carrying amount for all
other debt of the Company approximates market primarily as a result of floating
interest rates.
INTEREST
The Company made cash payments of interest of $10.6 million, $7.4 million
and $2.5 million for the years ended December 31, 1991, 1992 and 1993,
respectively.
NOTE 8 -- OTHER LIABILITIES
Other liabilities were comprised of the following as of December 31 (in
millions):
<TABLE>
<CAPTION>
1992 1993
----- ------
<S> <C> <C>
Deferred taxes payable (Note 9)......... $-- $ 45.1
Other tax liabilities (Note 9).......... 32.7 14.5
Accrued pensions and benefits........... 12.7 12.0
Accrued indemnity obligations........... 29.3 29.4
Other reserves.......................... 10.0 9.1
----- ------
$84.7 $110.1
----- ------
----- ------
</TABLE>
NOTE 9 -- INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). FAS 109
requires a change from the deferred method of accounting for income taxes under
APB Opinion No. 11 to the asset and liability method of accounting for income
taxes. Under FAS 109, deferred income taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect in the years in which these
differences are expected to reverse. At January 1, 1993, the Company recorded
the cumulative effect of this change in accounting for income taxes as a $36
million charge to earnings in the consolidated statement of operations.
F-18
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- INCOME TAXES (CONTINUED)
The tax effects of items that gave rise to significant portions of the
deferred tax accounts as of December 31, 1993 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Real estate held for development or sale and
operating properties, principally due to asset
revaluations and interest capitalized for tax
purposes....................................... $ 21.3
Accruals not deductible until paid.............. 14.5
Net operating loss carryforwards................ 37.1
Other........................................... 1.5
Valuation allowance............................. (13.9)
-------
$ 60.5
-------
-------
Deferred tax liabilities:
Land held for development, principally due to
accounting for a prior business combination.... $ 101.6
Other........................................... 4.0
-------
$ 105.6
-------
-------
</TABLE>
At December 31, 1993, the Company had available tax net operating loss
carryforwards of approximately $106 million which expire in the years 2003
through 2008 if not utilized. The Internal Revenue Code (the "Code") imposes an
annual limitation on the use of loss carryforwards upon the occurrence of an
"ownership change" (as defined in Section 382 of the Code). Such an ownership
change occurred in connection with the Merger. As a result, approximately $25
million of the Company's net operating loss carryforwards will generally be
limited to the extent that Henley Properties and its subsidiaries recognize
certain gains in the five-year period following the ownership change (ending
July 16, 1997).
The following is a summary of the income tax provision (benefit) on
continuing operations for the years ended December 31 (in millions):
<TABLE>
<CAPTION>
1991 1992 1993
---- ------ -------
<S> <C> <C> <C>
Income Tax Provision:
Current..................... $.0 $ (1.1) $ (2.9)
Deferred.................... -- -- (7.5)
---- ------ -------
$.0 $ (1.1) $ (10.4)
---- ------ -------
---- ------ -------
</TABLE>
Cash payments for federal, state and local income taxes were approximately
$1.6 million, $1.3 million and $7.8 million for the years ended December 31,
1991, 1992 and 1993, respectively. Tax refunds received in 1993 were
approximately $5.1 million.
F-19
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- INCOME TAXES (CONTINUED)
The principal items accounting for the difference in taxes on income
computed at the statutory rate and as recorded are as follows for the years
ended December 31 (in millions):
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Provision for income taxes at statutory rate...... $ (36.5) $ (14.6) $ (10.7)
State income taxes, net........................... .2 .2 (.6)
Nondeductible expenses............................ 10.2 2.0 --
Nonbenefitable book losses........................ 17.6 7.5 --
Excess of book over tax basis of assets sold
during the year.................................. 6.8 2.6 --
Effect of tax rate increase....................... -- -- .9
All other items, net.............................. 1.7 1.2 --
------- ------- -------
$ .0 $ (1.1) $ (10.4)
------- ------- -------
------- ------- -------
</TABLE>
TAX SHARING AGREEMENTS
Henley Group and Abex, a former subsidiary of Henley Group whose stock was
distributed to stockholders of Henley Group, entered into a tax sharing
agreement in 1992 prior to the Distribution to provide for the payment of taxes
for periods during which Henley Group and Abex were included in the same
consolidated group for federal income tax purposes, the allocation of
responsibility for the filing of tax returns, the cooperation of the parties in
realizing certain tax benefits, the conduct of tax audits and various related
matters.
1989-1992 INCOME TAXES. The Company is generally charged with
responsibility for all of its federal, state, local or foreign income taxes for
this period and, pursuant to the tax sharing agreement with Abex, all such taxes
attributable to Henley Group and their consolidated subsidiaries, including any
additional liability resulting from adjustments on audit (and any interest or
penalties payable with respect thereto), except that Abex is generally charged
with responsibility for all such taxes attributable to it and its subsidiaries
for 1990-1992. In addition, under a separate tax sharing agreement between
Henley Group and a former subsidiary of Henley Group, Fisher Scientific
International Inc. ("Fisher"), Fisher is generally charged with responsibility
for its own income tax liabilities for this period.
PRE-1989 INCOME TAXES. Under tax sharing agreements with WTI and Abex, the
parties are charged with sharing responsibility for paying any increase in the
federal, state or local income tax liabilities (including any interest or
penalties payable with respect thereto) for any consolidated, combined or
unitary tax group which included WTI, Henley Group or any of their subsidiaries
for tax periods ending on or before December 31, 1988. WTI is charged with
responsibility for paying the first $51 million of such increased taxes,
interest and penalties, plus any amounts payable with respect to such
liabilities by certain former affiliates of WTI under their tax sharing
agreements with WTI. Should the amounts payable exceed $51 million, the Company
is charged with responsibility for paying the next $25 million, plus amounts
payable with respect to liabilities which are attributable to certain of the
Company's subsidiaries. Liabilities in excess of amounts payable by WTI and the
Company, as described above, will generally be assumed by Abex (the "Abex
Indemnification"). In the first quarter of 1993, the Company paid approximately
$7.6 million related to the tax sharing agreements. Of this amount,
approximately $4.5 million will be applied against the Company's $25 million
limitation (as discussed above). The remaining $3.1 million relates to
liabilities which are attributable to certain of the Company's subsidiaries.
Therefore the Company's potential liability for additional payments under these
tax sharing agreements is approximately $21 million, which has been accrued in
the Company's financial statements since December 1989 and is included in
accounts payable and accrued liabilities as of December 31, 1993.
F-20
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- INCOME TAXES (CONTINUED)
In January 1993, the Internal Revenue Service completed its examination of
the Federal tax returns of WTI for the periods May 27, 1986 through December 31,
1988 and asserted a material deficiency relating to the tax basis of a former
subsidiary of WTI. WTI, Abex and the Company disagreed with the position taken
by the IRS and WTI filed a petition with the U.S. Tax Court. A trial date had
been scheduled for June 1994; however, in March 1994, WTI and the IRS entered
into a Stipulation of Settlement that will result in a tax payable together with
interest of approximately $72 million which is due in April 1994. The Company
has been informed by the other parties to these tax sharing agreements that it
is being charged with a net obligation of approximately $21 million under this
settlement. The Company is currently evaluating the scope of this claimed
obligation under the settlement and potential sources of financing for such
amount that the Company may ultimately be obligated to pay. However, there can
be no assurance that any financing will be available, or that if available, it
can be obtained on terms that are favorable to the Company and its stockholders.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
TRANSITION AGREEMENTS
Pursuant to a 1989 transition agreement, Henley Group provided to the
Company and its subsidiaries certain services, including management, strategic
planning and advice, legal, tax, accounting, data processing, cash management,
employee benefits, operational, corporate secretarial, insurance purchasing and
claims administration consulting services for a quarterly fee of $750,000,
commencing on the date of the 1989 distribution, plus an amount for the use of
office space in Henley Group's Hampton, New Hampshire offices for such period.
This rent amounted to approximately $.8 million for the year ended December 31,
1991, and $.4 million for the first half of 1992. The 1989 Transition Agreement
was cancelled in July 1992 in connection with the Merger.
Pursuant to a 1992 transition agreement, each of Abex and the Company
provides to the other certain administrative support services until the first
anniversary of the Merger, and thereafter until 60 days' prior written notice of
termination is given by one company to the other and each company reimburses the
other for its out-of-pocket expenses. Effective March 16, 1993, the 1992
transition agreement was amended to provide that all transitional services would
be provided by Abex to the Company for a period ending on March 31, 1994, and
that the Company would pay $.5 million quarterly for such services. Accordingly,
the Company reimbursed Abex approximately $1.0 million and $1.8 million for the
years ended December 31, 1992 and 1993. The amendment also provided for the
termination of the New Hampshire facilities lease on March 31, 1993.
In connection with the Merger, the Company entered into a put option
agreement with Abex, through December 31, 1995, which provided the Company the
right to require Abex to purchase certain assets of the Company at 85% of
appraised value, subject to an annual limitation of no more than $50 million and
an aggregate limitation of $75 million for such assets. On August 27, 1993, the
Company received $3.0 million from Abex in exchange for the termination of this
agreement (Note 4).
LEGAL PROCEEDINGS
The owners of undeveloped real property located in San Diego County sued
Signal Landmark, a subsidiary of the Company ("Signal"), in San Diego Superior
Court, in May 1990, alleging that Signal had deposited contaminated soils on
their property and was liable under theories of nuisance, negligence, trespass
and strict liability. The plaintiffs sought general damages in the amount of
approximately $40 million and additionally, punitive damages in an unspecified
amount, plus prejudgment interest and costs. On August 5, 1991, the plaintiffs
filed a complaint in Federal court against Signal and several other parties
asserting claims under the Federal Comprehensive Environmental Response,
Compensation and Liability Act, seeking essentially the same relief sought in
the state action.
F-21
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
In April 1992, a jury awarded the plaintiffs damages in the amount of $2.5
million following a trial in the state action. Signal appealed the verdict in
the state action and posted a bond and cash collateral of $3.75 million in
August 1992. On March 5, 1993, Signal reached an agreement in principle with the
plaintiffs in such litigation to settle both the federal and state actions. On
July 2, 1993, the Federal Court for the Southern District of California approved
the settlement agreement under the terms of which funds from such cash
collateral account were disbursed approximately as follows: 1) $1.3 million was
deposited in trust for remediation expenditures; 2) $1.3 million was disbursed
to the plaintiffs; and 3) $1.1 million was returned to Signal.
There are various other lawsuits and claims pending against the Company and
certain subsidiaries. In the opinion of the Company's management, ultimate
liability, if any, will not have a material adverse effect on the Company's
liquidity or financial condition.
CORPORATE INDEMNIFICATION MATTERS
The Company and its predecessors have, through a variety of transactions
effected since 1986, disposed of several assets and businesses, many of which
are unrelated to the Company's current operations. By operation of law or
contractual indemnity provisions, the Company has retained liabilities relating
to certain of these assets and businesses. Many of such liabilities are
supported by insurance or by indemnities from certain of the Company's
predecessor and currently or previously affiliated companies. The Company
believes its balance sheet reflects adequate reserves for these matters.
Abex and the Company agreed that, following the Distribution and the Merger,
each company will be responsible for environmental liabilities relating to its
existing, past and future assets and businesses and will indemnify the other in
respect thereof.
The United States Environmental Protection Agency ("EPA") has designated
Universal Oil Products ("UOP"), among others, as a Potentially Responsible Party
("PRP") with respect to an area of the Upper Peninsula of Michigan (the "Torch
Lake Site") under the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"). UOP is allegedly the successor
in interest to one of the companies that conducted mining operations in the
Torch Lake area and an affiliate of Allied-Signal Inc., a predecessor of the
Company. The Company has not been named as a PRP at the site. However,
Allied-Signal has, through UOP, asserted a contractual indemnification claim
against the Company for claims that may be asserted against UOP by EPA or other
parties with respect to the site. EPA has proposed a cleanup plan which would
involve covering certain real property both contiguous and non-contiguous to
Torch Lake with soil and vegetation in order to address alleged risks posed by
copper tailings and slag at an estimated cost of approximately $7.2 million. EPA
estimates that it has spent in excess of $2 million to date in performing
studies of the site. Under CERCLA, EPA could assert claims against the Torch
Lake PRPs, including UOP, to recover the cost of these studies, the cost of all
remedial action required at the site, and natural resources damages. An earlier
settlement in principle with EPA staff pursuant to which UOP would pay $1.7
million in exchange for a release similar to those normally granted by EPA in
such circumstances was rejected by certain other governmental authorities in
July 1993. Settlement negotiations between the Company, on behalf of UOP, and
EPA resumed shortly thereafter and are ongoing.
NOTE 11 -- RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
In June 1990 the Company entered into a management agreement with Koll. On
September 30, 1993, in connection with the Company's acquisition of the domestic
real estate development business and related assets of Koll, the Company paid
Koll $325,000 to terminate the management agreement in lieu of continuing to
receive and pay for duplicative services during the 90-day notice period which
would otherwise have been required under the management agreement. Under the
terms of the management agreement, the
F-22
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- RELATED PARTY TRANSACTIONS (CONTINUED)
Company was obligated to pay a quarterly management fee equal to .125% of the
average book value of its assets managed by Koll. Additionally, the Company was
obligated to reimburse Koll for certain personnel costs and other expenses and
Koll was generally entitled to a disposition fee of 1% of the net sale proceeds
(as defined) upon the sale of any real estate property (other than the Bolsa
Chica and Wentworth properties) managed by Koll. During 1991, 1992 and 1993 the
Company incurred management fees of $2.5 million, $2.0 million and $1.4 million
through September 30, 1993, respectively, and reimbursable personnel costs and
other expenses of $1.6 million, $.9 million and $.1 million, respectively, under
this management agreement. In 1990, the Company also entered into construction
management agreements with Koll Construction, a wholly owned subsidiary of Koll,
with respect to the Eagle Crest and Murrieta projects. In 1993, the Company
entered into a construction management agreement with Koll Construction for
demolition of bunkers at the Bolsa Chica project. During 1991, 1992 and 1993 the
Company incurred fees aggregating approximately $.5 million, $.2 million and $.1
million, respectively, to Koll Construction in consideration of these services
and related reimbursements.
SERVICE AGREEMENTS
On September 30, 1993, the Company entered into a Financing and Accounting
Services Agreement to provide Koll with financing, accounting, billing,
collections and other related services until 30 days' prior written notice of
termination is given by one company to the other. Fees earned for the year ended
December 31, 1993 were approximately $.1 million.
The Company also entered into a Management Information Systems and Human
Resources Services Agreement on September 30, 1993 with Koll Management
Services, Inc. ("KMS"), a public company majority owned by Koll. Under this
agreement, KMS provides computer programming, data organization and retention,
record keeping, payroll and other related services until 30 days' prior written
notice of termination is given by one company to the other. Fees and related
reimbursements accrued during the year ended December 31, 1993 were
approximately $.1 million.
SUBLEASE AGREEMENTS
On September 30, 1993, the Company entered into a month-to-month Sublease
Agreement with Koll to sublease a portion of a Koll affiliate's office building
located in Newport Beach, California. The Company also entered into lease
agreements on a month-to-month basis for office space in Northern California and
San Diego, California with KMS and Koll Construction, respectively. Combined
annual lease costs on these month-to-month leases during the year ended December
31, 1993 were approximately $.1 million.
DEVELOPMENT FEES
For the year ended December 31, 1993, the Company earned fees of
approximately $.7 million for real estate development services provided to
partnerships in which Koll and certain directors and officers of the Company
have an ownership interest.
LOAN RECEIVABLE
In December 1993, the Company purchased a nonrecourse construction loan,
secured by a first trust deed on four multi-tenant industrial buildings, for
which the borrower is a partnership in which Koll and certain directors and
officers of the Company have an ownership interest. The loan balance of $.8
million as of December 31, 1993 is included in other assets.
OTHER TRANSACTIONS
See Notes 4, 9 and 10 for descriptions of other transactions and agreements
with Koll, Libra, Abex and WTI.
F-23
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- RETIREMENT PLANS
The Company has noncontributory defined benefit retirement plans covering
substantially all employees of the Company prior to September 30, 1993 who had
completed one year of continuous employment. Net periodic pension cost for the
years ended December 31, consisted of the following (in millions):
<TABLE>
<CAPTION>
1991 1992 1993
----- ----- -----
<S> <C> <C> <C>
Service cost...................................... $ .1 $ .1 $ .1
Interest cost..................................... .5 .5 .5
Actual return on assets........................... (.4) (.1) (.2)
Net amortization and deferral..................... .1 (.2) (.3)
Curtailment loss.................................. -- -- .8
----- ----- -----
Net periodic pension cost......................... $ .3 $ .3 $ .9
----- ----- -----
----- ----- -----
</TABLE>
The curtailment loss in 1993 resulted from the freeze of benefit accruals
for former participants in April 1993.
The funded status and accrued pension cost at December 31, 1992 and 1993 for
defined benefit plans were as follows (in millions):
<TABLE>
<CAPTION>
1992 1993
------ ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................... $ (6.8) $ (6.9)
Nonvested................................................. -- --
------ ------
Accumulated benefit obligation.............................. $ (6.8) $ (6.9)
------ ------
------ ------
Projected benefit obligation................................ $ (7.2) $ (6.9)
Plan assets at fair value................................... 5.4 5.5
------ ------
Projected benefit obligation in excess of plan assets....... (1.8) (1.4)
Unrecognized transition liability........................... .1 --
Unrecognized prior service cost............................. .9 --
Unrecognized net loss....................................... 1.4 1.3
Adjustment required to recognize additional minimum
liability.................................................. (2.0) (1.5)
------ ------
Accrued pension cost........................................ $ (1.4) $ (1.4)
------ ------
------ ------
</TABLE>
The development of the projected benefit obligation for the plans at
December 31, 1991, 1992 and 1993 are based on the following assumptions:
discount rates of 8.5%, 8% and 7%, respectively, rates of increase in employee
compensation of 5.5%, 4% and 0%, respectively, and expected long-term rates of
return on assets of 9%. The date used to measure plan assets and liabilities was
October 31 in each year. Assets of the plans are invested primarily in stocks,
bonds, short-term securities and cash equivalents.
NOTE 13 -- CAPITAL STOCK
COMMON STOCK
Under its restated certificate of incorporation, the Company has authority
to issue up to 750 million shares of common stock, par value $.05 per share,
subject to approval of the Board of Directors (the "Board"), of which 625
million shares of Class A Common Stock and 25 million shares of Class B Common
Stock are initially authorized for issuance and an additional 100 million shares
may be issued in one or more series, and have such voting powers or other rights
and limitations as the Board may authorize.
F-24
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- CAPITAL STOCK (CONTINUED)
On June 11, 1992, all shares of Class B Common Stock (convertible nonvoting)
were converted into an equal number of shares of Class A Common Stock (voting).
On July 16, 1992, in connection with the Merger, the Company issued
approximately 19.7 million shares of its Class A Common Stock (Notes 1 and 2).
On December 17, 1993, the Company issued 3.4 million shares of its Class A
Common Stock in exchange for all of Libra's approximately $10.6 million in
aggregate principal amount of Subordinated Debentures plus accrued interest. In
connection with the Company's sale of Lake Superior Land Company to Libra, the
net cash proceeds from the sale of 3.4 million shares of Class A Common Stock
held by Libra will be forwarded to the Company. The estimated amount of proceeds
to be received from such sale is reflected in the equity section of the balance
sheet as deferred proceeds from stock issuance.
Under the Company's term loan agreement with Bank of Boston and Indentures
for the Debentures (Note 7), the Company is prohibited from purchasing shares of
its common stock.
PREFERRED STOCK
Under its restated certificate of incorporation, the Company has authority
to issue 150 million shares of preferred stock, par value $.01 per share, in one
or more series, with such voting powers and other rights as authorized by the
Board. Effective July 16, 1992, in connection with the Merger, the Board
authorized approximately 42.5 million shares of Series A Preferred Stock, which
have a liquidation preference of $.75 per share, participate in any dividend or
distribution paid on the Class A Common Stock on a share for share basis, and
have no voting rights, except as required by law (Notes 1 and 2).
The Series A Preferred Stock is redeemable at the Company's option, on 30
days' notice given at any time after the second anniversary of issuance, at the
liquidation preference of $.75 per share, in cash or generally in shares of
Class A Common Stock. Each share of the Series A Preferred Stock is convertible
at the holder's option, at any time after the second anniversary of issuance,
generally into one share of Class A Common Stock.
NOTE 14 -- STOCK PLANS
The Company has various plans which are described below:
1993 STOCK OPTION/STOCK ISSUANCE PLAN
The 1993 Stock Option/Stock Issuance Plan ("1993 Plan"), was adopted by the
Board on November 29, 1993, subject to stockholder approval at the 1994 Annual
Meeting of Stockholders, as the successor equity incentive program to the
Company's 1988 Stock Plan. Outstanding options under the 1988 Stock Plan will be
incorporated into the 1993 Plan upon its approval. Under the 1993 Plan 7,500,000
shares each (including 3,000,000 shares each authorized under the 1988 Stock
Plan) of Series A Preferred Stock and Class A Common Stock have been reserved
for issuance to officers, key employees and consultants of the Company and its
subsidiaries and the non-employee members of the Board. Options generally become
exercisable for 40% of the option shares upon completion of one year of service
and become exercisable for the balance in two equal annual installments
thereafter.
The 1993 Plan includes an automatic option grant program, pursuant to which
each individual serving as a non-employee Board member on the November 29, 1993
effective date of the 1993 Plan received an option grant for 125,000 shares each
of Series A Preferred Stock and Class A Common Stock with an exercise price of
$.4063 per share, equal to the fair market value of the underlying securities on
the grant date. Each individual who first joins the Board as a non-employee
director after such effective date will receive a similar option grant. Of the
shares subject to each option, 40% will vest upon completion of one year of
Board service measured from the grant date, and the balance will vest in two
equal annual installments thereafter. Each automatic grant will have a maximum
term of 10 years, subject to earlier termination upon the optionee's cessation
of Board service.
F-25
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 -- STOCK PLANS (CONTINUED)
Each non-employee Board member may also elect to apply all or any portion of
his or her annual retainer fee to the acquisition of shares of Series A
Preferred Stock or Class A Common Stock which will vest incrementally over the
individual's period of Board service during the year for which the election is
in effect.
During the fiscal year ended December 31, 1993, options for 3,520,000 shares
each of Series A Preferred Stock and Class A Common Stock were granted under the
1993 Plan, including options for an aggregate of 500,000 shares of each class to
non-employee directors, subject to stockholder approval at the 1994 Annual
Meeting. The exercise price for these options is $.4063 per share, equal to the
fair market value of the underlying securities as of the grant date.
1988 STOCK PLAN
The 1988 Stock Plan will be replaced by the 1993 Plan, subject to
stockholder approval at the 1994 Annual Meeting of Stockholders. The 1988 Stock
Plan of the Company provides for the grant of awards covering a maximum of
3,000,000 shares each of Class A Common Stock and Series A Preferred Stock to
officers and other executive employees of the Company and to persons who provide
management services to the Company. Awards under the 1988 Stock Plan may be
granted in the form of: (i) incentive stock options, (ii) non-qualified stock
options, (iii) restricted shares, (iv) restricted units to acquire shares, (v)
stock appreciation rights or (vi) limited stock appreciation rights. No
incentive stock options grants may be made thereunder after December 14, 1999.
Options may be accompanied by stock appreciation rights or limited stock
appreciation rights. During the year ended December 31, 1993, options for
1,860,000 shares each of Class A Common Stock and Series A Preferred Stock were
cancelled and options for 2,630,000 shares of each class were granted at an
exercise price of $.25 and $.2813, respectively. No Class A Common Stock options
were granted during 1991 and no Series A Preferred Stock options were granted
prior to 1992. Options vest 40%, 70%, and 100% at the first, second, and third
anniversaries, respectively, from the grant date.
RESTRICTED STOCK PLAN
Under the Restricted Stock Plan, each individual joining the Company as an
non-employee Board member received an immediate one-time grant of 2,000 shares
of Class A Common Stock. The shares are subject to certain transfer restrictions
for a specified period, during which the director has the right to receive
dividends and the right to vote the shares. After the restricted period expires,
the shares will vest based upon certain terms related to service. The shares are
forfeited if the director ceases to be a nonemployee director prior to the end
of the restricted period. During 1993, 8,000 shares were granted and 3,600
shares were forfeited under such Restricted Stock Plan. No shares were granted
during 1991 or 1992. The Restricted Stock Plan was terminated in November 1993
in connection with the implementation of the 1993 Plan.
F-26
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of quarterly financial information for 1992 and
1993 (in millions, except per share amounts):
<TABLE>
<CAPTION>
FULL
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1993
Revenues (a)................ $ .2 $ .9 $ 2.2 $ 13.4 $ 16.7
Cost of sales (a)........... .6 .9 1.5 13.3 16.3
Loss from continuing
operations (a)............. (5.8) (6.6) (2.6) (5.1) (20.1)
Net income (loss) (b) (c)... (38.4) (3.5) (2.1) 58.3 14.3
Income (loss) per common
share...................... (.96) (.09) (.05) .69 .17
Weighted average common
shares outstanding (d)
(e)........................ 39.8 39.8 39.8 84.9 83.0
1992
Revenues (a)................ 12.1 4.4 10.9 .9 28.3
Cost of sales (a)........... 11.7 4.0 9.9 .9 26.5
Loss from continuing
operations (a)............. (14.1) (8.3) (7.1) (12.4) (41.9)
Net loss.................... (13.6) (8.0) (6.3) (10.5) (38.4)
Loss per common share....... (.68) (.40) (.18) (.26) (1.32)
Weighted average common
shares outstanding (e)..... 20.0 20.0 36.3 39.8 29.0
<FN>
- ------------------------
(a) Amounts have been reclassified to present Lake Superior Land Company and
Deltec as discontinued operations.
(b) The Company recorded a $36 million ($.90 per share) charge to income in the
first quarter of 1993 in connection with the adoption of FAS 109 (Note 9).
(c) The Company recognized a $39.1 million gain on the disposition of Lake
Superior Land Company and a $23.6 million extraordinary gain on the
extinguishment of debt in the fourth quarter of 1993 (Notes 4 and 7).
(d) On December 17, 1993 the Company issued 3.4 million shares of Class A
Common Stock to Libra in exchange for $10.6 million face amount plus
accrued interest of Subordinated Debentures. The fourth quarter 1993
calculation of weighted average shares outstanding includes these newly
issued shares, along with the 42.5 million shares of Series A Preferred
Stock and options for 5.7 million common and preferred shares granted under
the 1988 Stock Plan.
(e) On July 16, 1992, in connection with the Merger, the Company issued
approximately 19.7 million shares of Class A Common Stock and 42.5 million
shares of Series A Preferred Stock. The Series A Preferred Stock is not
included in the calculation of weighted average shares outstanding in 1992
and the first three quarters of 1993 because the effect is antidilutive.
</TABLE>
F-27
<PAGE>
AMENDMENT NO. 1 TO
TAX SHARING AGREEMENT
This Amendment Agreement ("Amendment Agreement") is made this 14th day of
February 1994 by and among Wheelabrator Technologies Inc. ("WTI"), Koll Real
Estate Group, Inc. ("Koll") and Abex, Inc. ("Abex") to amend certain provisions
of the Tax Sharing Agreement dated December 15, 1993 (the "Agreement") between
WTI (then known as The Wheelabrator Group Inc.) and Koll (then known as Henley
Newco Inc. and subsequently known at various times as The Henley Group, Inc.,
Henley Properties Inc. and The Bolsa Chica Company).
RECITALS
A. In connection with the formation of Koll, WTI transferred certain
assets, liabilities and businesses to Koll in December 1988;
B. In consideration of such transfer to Koll and to ensure that WTI had
minimum total equity, Koll agreed to pay to WTI the amount by which WTI's net
liabilities for certain federal, state or local taxes and related interest and
penalties exceed $50 million;
C. The agreement sets forth the respective rights and responsibilities of
WTI and Koll with respect to such tax indemnifications;
D. In consideration of Koll's contribution of certain assets, liabilities
and businesses to The Henley Group, Inc. ("HGI") in December 1989, HGI assumed
certain of Koll's obligations under the Agreement;
E. In consideration of HGI's contribution of certain assets, liabilities
and businesses to Abex in July 1992, Abex assumed certain of HGI's obligations
under the Agreement;
F. As a result of the various transactions referred to above, Abex is now
charged with responsibility to administer the Agreement;
G. At the request of Abex, Kill made a payment totaling $7,646,802 to WTI
in January 1993 to enable WTI to proceed with a partial settlement of
liabilities relating to an examination of the 1986-1988 federal income tax
returns of WTI and its consolidated subsidiaries; and
H. Certain issues have arisen among the parties as to the proper
interpretation of certain provisions of the Agreement and the parties desire to
amend and clarify the Agreement so as to resolve such issues.
<PAGE>
AGREEMENT
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration in hand paid, the parties agree as follows:
1. The definition of "Old Henley Increase" included the Agreement shall
be modified as follows:
a. The word "or" immediately prior to "(iv)" shall be stricken.
b. The following shall be added immediately after the word
"Agreement," and before the word "net" in the definition:
"; or (v) any interest, penalties or additions to tax (and all
reasonable out-of-pocket costs incurred in connection with the
assessment or collection thereof) incurred in connection with
payments that are "Old Henley Increases" pursuant to this
paragraph, in each case . . . "
2. The definition of "Old Henley Limitation" included in the Agreement
shall be modified in its entirety to read as follows:
"'Old Henley Limitation' means $51 million."
3. Section 3.01(c) of the Agreement shall be modified in its entirety to
read as follows:
"(c) DETERMINATION OF THE AMOUNT OF ANY OLD HENLEY INCREASE. For
purposes of determining the amount of any Old Henley Increase
described in clause (i) of the definition of "Old Henley
Increase" provided in Article I, any Final Determination which
results in a net increase in the Tax Detriments or a net decrease
in the Tax Benefits of any member of the Old Henley Affiliated
Group or of any Old Henley State or Local Affiliated Group or of
any Old Henley Company filing a Stand alone state or local income
or franchise tax return for any tax period ending before or
including the Disaffiliation Date (ignoring, for this purpose,
(1) any adjustment to a Tax Item of, the Tax Basis of, or any
excess loss account maintained with respect to, a WESI Company or
a WTI Business, or (2) the disallowance or reduction of any
carryback from a tax period beginning after the Disaffiliation
Date), shall be deemed to result in an Old Henley Increase in an
amount equal to (i) in the case of Old Henley Increases resulting
from net increases in income and gains, or net decreases in
deductions, losses or carryforwards of deductions or losses, the
amount of such net increase or net decrease multiplied (x) in
the case
2
<PAGE>
of adjustments affecting federal income tax items, by the highest
marginal rate of federal income tax in the year to which such
Final Determination relates (or the average of the highest
marginal rates in the event of an adjustment to rates during such
year) applicable to the particular category (such as long-term
capital gains) of corporate income for the year to which such
Final Determination relates and (y) in the case of adjustments
affecting state, local or income tax items, the actual effective
state or local tax rate, and (ii) in the case of Old Henley
Increases resulting from net decreases in credits or carry
forwards of credits or net increases in recapture of credits, the
amount of such net increase or net decrease. The amount of any
Old Henley Increase shall be increased by any interest, penalties
or additions to tax (and all reasonable out-of-pocket costs
incurred in connection with the assessment or collection thereof)
which are actually paid by any Old Henley Company to any
government or taxing authority as a result of the Final
Determination giving rise to such Old Henley Increase, and shall
be reduced by (1) the amount of any reduction in Taxes payable by
any Old Henley Company (computed as described in clauses (i) and
(ii) of this Section 3.01(c)) as a result of the payment of
Taxes, interest, penalties or addition to tax (and all reasonable
out-of-pocket costs incurred in connection with the assessment or
collection thereof) resulting from the Final Determination giving
rise to such Old Henley Increase and (m) any amount received by
Old Henley from HMC or Fisher pursuant to Section 2.02(b),
Section 5.03 or Section 5.04 of the Old Henley/HMC Tax Sharing
Agreement or Section 3.01(c) of the Old Henley/Fisher Tax Sharing
Agreement as a result of the Final Determination giving rise to
such Old Henley Increase. On or before December 31 of each year,
WTI shall provide the effective state and local tax rate to be
used in the following year. This effective rate shall be based
upon WTI's actual tax rate for returns filed each year."
4. In interpreting the Agreement as amended hereby, the parties agree
that:
a. The adjustment to 1987 taxable income related to the Master
Support Agreement As Amended and Restated as of December 7, 1988
among, inter alia, Allied-Signal Inc. and Resco Holdings Inc. (a
subsidiary of WTI) in the amount of $64,185,000, together with
the amortization allowed in 1987 and 1988 of $14,263,334 and all
future amortization in respect thereof, is a Tax Item of a WTI
Business.
b. It is understood and agreed among the parties that Old Henley's
actual effective state tax rate net of federal benefit. for years
through 1992 is 2% and such rate shall be used in calculations
through December 31, 1993.
3
<PAGE>
c. An analysis of the Old Henley Limitation will be prepared and
provided to the parties no less often than quarterly and will
reflect the Old Henley Increases charged to the limitation.
5. Except as specifically amended by this Amendment Agreement, the
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to be
executed by their duly authorized officers on the date first above written.
KOLL REAL ESTATE GROUP, INC.
By: /s/
---------------------------
Its Chief Financial Officer
WHEELABRATOR TECHNOLOGIES, INC.
By: /s/
---------------------------
Its Assistant Treasurer
ABEX INC.
By: /s/
---------------------------
Its Vice President - Taxes
4
<PAGE>
KOLL REAL ESTATE GROUP
1993 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1993 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of Koll Real Estate Group, a Delaware
corporation (the "Corporation"), by providing (i) key employees (including
officers) of the Corporation (or its parent or subsidiary corporations) who
are responsible for the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations), (ii) the non-employee
members of the Board and (iii) consultants and other independent contractors
who provide valuable services to the Corporation (or its parent or subsidiary
corporations) with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation (or its parent
or subsidiary corporations).
B. The Plan shall become effective immediately upon adoption by
the Board on November 29, 1993. Such date is hereby designated as the
Effective Date of the Plan.
C. The Corporation was formerly known as The Bolsa Chica
Company, and this Plan shall serve as the successor to the 1988 Stock Plan of
The Bolsa Chica Company (the "Predecessor Plan"). No further option grants or
share issuances shall be made under the Predecessor Plan from and after the
Effective Date of this Plan. All outstanding stock options under the
Predecessor Plan on the Effective Date are hereby incorporated into this Plan
and shall accordingly be treated as outstanding stock options under this Plan.
However, each outstanding option grant so incorporated shall continue to be
governed solely by the express terms and conditions of the instrument
evidencing such grant, and no provision of this Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of the
Corporation's Series A Preferred Stock or Class A Common Stock thereunder.
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be
in effect:
<PAGE>
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
a. any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept; or
b. a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members (rounded up to the next whole number) ceases, by
reason of one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were
still in office at the time such election or nomination was approved by
the Board.
CLASS A COMMON STOCK: shares of the Corporation's Class A
Common Stock, par value $.05 per share.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Plan.
CORPORATE TRANSACTION: any of the following
stockholder-approved transactions to which the Corporation is a party:
a. a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal purpose
of which is to change the state in which the Corporation is
incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
2
<PAGE>
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
merger.
EMPLOYEE: an individual who performs services while in the
employ of the Corporation or one or more parent or subsidiary corporations,
subject to the control and direction of the employer entity not only as to the
work to be performed but also as to the manner and method of performance.
EXERCISE DATE: the date on which the Corporation shall have
received written notice of the option exercise.
FAIR MARKET VALUE: the Fair Market Value per share of Series A
Preferred Stock or Class A Common Stock determined in accordance with the
following provisions:
a. If the Series A Preferred Stock or Class A Common
Stock is not at the time listed or admitted to trading on any national
securities exchange but is traded on the Nasdaq National Market, the
Fair Market Value shall be the closing selling price per share of that
security on the date in question, as such price is reported by the
National Association of Securities Dealers through the Nasdaq National
Market or any successor system. If there is no reported closing selling
price for the Series A Preferred Stock or Class A Common Stock on the
date in question, then the closing selling price per share of that
security on the last preceding date for which such quotation exists
shall be determinative of Fair Market Value.
b. If the Series A Preferred Stock or Class A Common
Stock is at the time listed or admitted to trading on any national stock
exchange, then the Fair Market Value shall be the closing selling price
per share of that security on the date in question on the exchange
serving as the primary market for the Series A Preferred Stock or the
Class A Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of Series A Preferred Stock or Class A Common Stock on
such exchange on the date in question, then the Fair Market Value shall
be the closing selling price per share of that security on the exchange
on the last preceding date for which such quotation exists.
3
<PAGE>
HOSTILE TAKE-OVER: a change in ownership of the Corporation
effected through the following transaction:
a. any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept, AND
b. more than fifty percent (50%) of the securities so
acquired in such tender or exchange offer are accepted from holders
other than the officers and directors of the Corporation subject to the
short-swing profit restrictions of Section 16 of the 1934 Act.
INCENTIVE OPTION: a stock option which satisfies the
requirements of Code Section 422.
1934 ACT: the Securities and Exchange Act of 1934, as amended.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program in effect under
the Plan.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of
the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
PLAN ADMINISTRATOR: the Committee in its capacity as the
administrator of the Plan.
SERIES A PREFERRED STOCK: shares of the Corporation's Series A
Convertible Redeemable Preferred Stock, par value $.01 per share.
SERVICE: the performance of services on a periodic basis to the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of
4
<PAGE>
directors or an independent consultant or advisor, except to the extent
otherwise specifically provided in the applicable stock option or stock
issuance agreement.
TAKE-OVER PRICE: the GREATER of (a) the Fair Market Value per
share of the Series A Preferred Stock or the Class A Common Stock subject to
the particular option surrendered to the Corporation in connection with a
Hostile Take-Over on the date such option surrender is effected or (b) the
highest reported price per share of that security paid by the tender offeror
in effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (a) price
per share.
B. The following provisions shall be applicable in determining
the parent and subsidiary corporations of the Corporation:
- Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT of the Corporation, provided each such
corporation in the unbroken chain (other than the Corporation) owns, at
the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
- Each corporation (other than the Corporation) in an
unbroken chain of corporations which begins with the Corporation shall
be considered to be a SUBSIDIARY of the Corporation, provided each
such corporation in the unbroken chain (other than the last corporation)
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
III. STRUCTURE OF THE PLAN
A. STOCK PROGRAMS. The Plan shall be divided into three (3)
separate components: the Discretionary Option Grant Program specified in
Article Two, the Automatic Option Grant Program specified in Article Three and
the Director Fee Program specified in Article Four. Under the Discretionary
Option Grant Program, eligible individuals may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Series A Preferred
Stock or Class A Common Stock in accordance with the provisions of Article
Two. Under the Automatic Option Grant Program, non-employee Board members
shall at periodic intervals receive special option grants to purchase shares
of Series A
5
<PAGE>
Preferred Stock and Class A Common Stock in accordance with the provisions of
Article Three. Under the Director Fee Program, each non-employee Board member
may, in accordance with the provisions of Article Four, elect to apply all or
any portion of his or her annual retainer fee to the acquisition of unvested
shares of Series A Preferred Stock or Class A Common Stock.
B. GENERAL PROVISIONS. Unless the context clearly indicates
otherwise, the provisions of Articles One and Five shall apply to the
Discretionary Option Grant Program, the Automatic Option Grant Program and the
Director Fee Program and shall accordingly govern the interests of all
individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant Program shall be administered
by the Committee in its capacity as Plan Administrator. No non-employee Board
member shall be eligible to serve on the Committee if such individual has,
within the twelve (12)-month period immediately preceding the date of his or
her appointment to the Committee, received an option grant or direct stock
issuance under this Plan or any other stock plan of the Corporation (or any
parent or subsidiary corporation), other than pursuant to the Automatic Option
Grant or Director Fee Program.
B. Members of the Committee shall serve for such period of time
as the Board may determine and shall be subject to removal by the Board at any
time.
C. The Committee as Plan Administrator shall have full power
and authority (subject to the express provisions of the Plan) to establish
rules and regulations for the proper administration of the Discretionary
Option Grant Program and to make such determinations under, and issue such
interpretations of, the provisions of such program and any outstanding option
grants thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Discretionary Option Grant Program or any outstanding option
or unvested share issuance thereunder.
D. Administration of the Automatic Option Grant and Director
Fee Programs shall be self-executing in accordance with the express terms and
conditions of Article Three and Article Four, respectively, and the Committee
as Plan Administrator shall exercise no discretionary functions with respect
to option grants or share issuances made pursuant to those programs.
6
<PAGE>
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Discretionary
Option Grant Program under Article Two shall be limited to the following:
- officers and other key employees of the Corporation
(or its parent or subsidiary corporations) who render services which
contribute to the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations);
- members of the Board or the members of the board of
directors of any parent or subsidiary corporation; and
- those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. Non-employee Board members who serve as Plan Administrator
shall NOT, during their period of service as such, be eligible to
participate in the Discretionary Option Grant Program or in any other stock
option, stock purchase, stock bonus or other stock plan of the Corporation (or
its parent or subsidiary corporations), other than the Automatic Option Grant
and Director Fee Programs, to the extent they are eligible for participation
in those latter programs in accordance with the provisions of Articles Three
and Four.
C. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants under the
Discretionary Option Grant Program, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or
a Non-Statutory Option, the time or times at which each granted option is to
become exercisable and the maximum term for which the option is to remain
outstanding.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Series A Preferred Stock and Class A Common Stock
shall be available for issuance under the Plan and shall be drawn from either
the Corporation's authorized but unissued shares of Series A Preferred Stock
and Class A Common Stock or from reacquired shares of Series A Preferred Stock
and Class A Common Stock, including shares repurchased by the Corporation on
the open market. 7,500,000 shares of Series A Preferred Stock and 7,500,000
shares of Class A Common Stock may be issued over the term of the Plan,
subject to adjustment from time to time in accordance with the provisions of
this Section VI. Such authorized share reserve is comprised of (i) the number
of shares
7
<PAGE>
of Series A Preferred Stock and Class A Common Stock which remained available
for issuance, as of the Effective Date, under the Predecessor Plan, including
the shares subject to the outstanding options incorporated into this Plan and
any other shares which remained available for future option grant under the
Predecessor Plan (estimated to be 3,000,000 shares of Class A Common Stock and
3,000,000 shares of Series A Preferred Stock), plus (ii) an additional
increase of 4,500,000 shares of Series A Preferred Stock and (iii) an
additional increase of 4,500,000 shares of Class A Common Stock.
B. Upon each redemption or conversion of the outstanding shares
of Series A Preferred Stock, the number of shares of Series A Preferred Stock
at the time available for issuance under the Plan and the number of shares of
Series A Preferred Stock subject to stock options at the time outstanding
under the Plan shall be decreased by the same percentage by which the number
of outstanding shares of Series A Preferred Stock is decreased by reason of
such redemption or conversion, and the number of shares of Class A Common
Stock at the time available for issuance under the Plan and the number of
shares of Class A Common Stock subject to stock options at the time
outstanding under the Plan which would otherwise be exercisable for Series A
Preferred Stock shall be correspondingly increased by the number of shares
obtained by multiplying (i) the number of shares of Series A Preferred Stock
no longer issuable under the Plan or no longer subject to each such
outstanding stock option by (ii) the number of shares of Class A Common Stock
into which each such redeemed or converted share of Series A Preferred Stock
was at the time convertible on a per-share basis. In addition, the option
exercise price per share of Series A Preferred Stock in effect under each
outstanding option shall, upon each redemption or conversion of the
outstanding shares of Series A Preferred Stock, be adjusted by dividing (i)
such exercise price per share (as such price relates to the shares of Class A
Common Stock issuable under the option in place of the Series A Preferred
Stock) by (ii) the number of shares of Class A Common Stock into which each
such redeemed or converted share of Series A Preferred Stock was at the time
convertible on a per-share basis.
C. In no event shall there be issued over the term of the Plan
more than (i) 15,000,000 shares in the aggregate of Series A Preferred Stock
and Class A Common Stock plus (ii) any additional shares of Class A Common
Stock which become issuable under Section B of this Article VI by reason of
the conversion or redemption of the outstanding shares of Series A Preferred
Stock, to the extent each such Series A share was convertible for more than
one share of Class A Common Stock at the time of such conversion or
redemption. The foregoing share limitations shall be subject to periodic
adjustment in accordance with the provisions of Section G of this Article VI.
8
<PAGE>
D. In no event may the aggregate number of shares of Series A
Preferred Stock and Class A Common Stock for which any one individual
participating in this Plan may be granted stock options, separately
exercisable stock appreciation rights and direct share issuances exceed
5,000,000 shares over the term of this Plan.
E. To the extent one or more outstanding options under the
Predecessor Plan which have been incorporated into this Plan are subsequently
exercised, the number of shares of Series A Preferred Stock or Class A Common
Stock issued with respect to each such option shall reduce, on a
share-for-share basis, the number of shares of Series A Preferred Stock or
Class A Common Stock (as the case may be) available for subsequent issuance
under this Plan.
F. Should one or more outstanding options under this Plan
(including outstanding options under the Predecessor Plan incorporated into
this Plan) expire or terminate for any reason prior to exercise in full then
the shares subject to the portion of each option not so exercised shall be
available for subsequent issuance under the Plan. Shares subject to any
option or portion thereof surrendered in accordance with Section IV of Article
Two and all share issuances under the Plan, whether or not the shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares
of Series A Preferred Stock and Class A Common Stock available for subsequent
issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan (including any option incorporated from the
Predecessor Plan) be paid with shares of Series A Preferred Stock or Class A
Common Stock or should shares of Series A Preferred Stock or Class A Common
Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an outstanding option under the Plan or the vesting of a direct share
issuance made under the Plan, then the number of shares of Series A Preferred
Stock or Class A Common Stock (as the case may be) available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the share issuance, and not by the net
number of shares of Series A Preferred Stock or Class A Common Stock actually
issued to the holder of such option or share issuance.
G. Should any change be made to the Series A Preferred Stock or
Class A Common Stock issuable under the Plan by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Series A Preferred Stock or Class A
Common Stock as a class without the Corporation's receipt of consideration,
then appropriate adjustments shall be made to (i) the maximum number and/or
class of securities issuable under the Plan, (ii) the maximum number and/or
class of securities in the aggregate for
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which any one individual participating in the Plan may be granted stock
options, separately exercisable stock appreciation rights and direct share
issuances over the term of the Plan, (iii) the number and/or class of
securities for which automatic option grants or share issuances are
subsequently to be made to each newly-elected or continuing non-employee Board
member under the Automatic Option Grant or Director Fee Program, (iv) the
number and/or class of securities and price per share in effect under each
option outstanding under the Discretionary Option Grant or Automatic Option
Grant Program and (v) the number and/or class of securities and price per
share in effect under each outstanding option incorporated into this Plan from
the Predecessor Plan. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees of the Corporation or its parent
or subsidiary corporations may only be granted Non-Statutory Options. Each
granted option shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; PROVIDED, however, that each such
instrument shall comply with the terms and conditions specified below. Each
instrument evidencing an Incentive Option shall, in addition, be subject to
the applicable provisions of Section II of this Article Two.
A. EXERCISE PRICE.
1. The exercise price per share of Series A Preferred
Stock or Class A Common Stock subject to any option granted under this Article
Two shall be fixed by the Plan Administrator at the time of the grant, but in
no event shall such exercise price be less than one hundred percent (100%) of
the Fair Market Value per share of that security on the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and, subject to the provisions of Section I of Article
Five and the instrument evidencing the grant, shall be payable in one of the
following alternative forms specified below:
a. full payment in cash or check made payable to
the Corporation's order;
b. full payment in shares of Series A Preferred
Stock or Class A Common Stock held for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date;
c. full payment in a combination of shares of
Series A Preferred Stock or Class A Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
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Exercise Date and cash or check drawn to the Corporation's order; or
d. to the extent the option is exercised for vested
shares, full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (i) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation in connection with such purchase and (ii) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option for vested shares, payment of
the exercise price for the purchased shares must accompany the exercise
notice.
B. TERM AND EXERCISE OF OPTIONS. Each option granted under
this Discretionary Option Grant Program shall be exercisable at such time or
times and during such period as is determined by the Plan Administrator and
set forth in the instrument evidencing the grant. No such option, however,
shall have a maximum term in excess of ten (10) years from the grant date.
During the lifetime of the Optionee, the option, together with any stock
appreciation rights pertaining to such option, shall be exercisable only by
the Optionee and shall not be assignable or transferable by the Optionee
except for a transfer of the option effected by will or by the laws of descent
and distribution following the Optionee's death.
C. TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise
period applicable to any outstanding options under this Article Two held by
the Optionee at the time of cessation of Service or death.
- Should an Optionee cease Service for any reason
(including death or Permanent Disability) while holding one or more
outstanding options under this Article Two, then none of those options
shall (except to the extent otherwise provided pursuant to subparagraph
3 below) remain exercisable for more than a thirty-six (36)-month period
(or such shorter period determined by
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the Plan Administrator and set forth in the instrument evidencing the
grant) measured from the date of such cessation of Service.
- Any option held by the Optionee under this Article Two
and exercisable in whole or in part on the date of his or her death may
be subsequently exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. The right to exercise such option,
however, shall lapse upon the EARLIER of (i) the third anniversary of
the date of the Optionee's death (or such shorter period determined by
the Plan Administrator and set forth in the instrument evidencing the
grant) or (ii) the specified expiration date of the option term.
Accordingly, upon the occurrence of the earlier event, the option shall
terminate and cease to be outstanding.
- During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the
number of shares (if any) in which the Optionee is vested at the time of
his or her cessation of Service. Upon the expiration of the limited
post-Service exercise period or (if earlier) upon the specified
expiration date of the option term, each such option shall terminate and
cease to be outstanding with respect to any vested shares for which the
option has not otherwise been exercised. However, each outstanding
option shall immediately terminate and cease to be outstanding, at the
time of the Optionee's cessation of Service, with respect to any shares
for which the option is not otherwise at that time exercisable or in
which the Optionee is not otherwise vested.
- Under no circumstances shall any such option be
exercisable after the specified expiration date of the option term.
- Should (i) the Optionee's Service be terminated for
misconduct (including, but not limited to, any act of dishonesty,
willful misconduct, fraud or embezzlement) or (ii) the Optionee make any
unauthorized use or disclosure of confidential information or trade
secrets of the Corporation or its parent or subsidiary corporations,
then in any such event all outstanding options held by the Optionee
under this Article Two shall terminate immediately and cease to be
outstanding.
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2. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited post-Service
exercise period applicable under subparagraph 1 above, not only with respect
to the number of vested shares of Series A Preferred Stock or Class A Common
Stock for which each such option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more subsequent
installments of vested shares for which the option would otherwise have become
exercisable had such cessation of Service not occurred.
3. The Plan Administrator shall also have full power and
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to extend the period of time for which
the option is to remain exercisable following the Optionee's cessation of
Service or death from the limited period in effect under subparagraph 1 above
to such greater period of time as the Plan Administrator shall deem
appropriate. In no event, however, shall such option be exercisable after the
specified expiration date of the option term.
D. STOCKHOLDER RIGHTS. An Optionee shall have no stockholder
rights with respect to any shares covered by the option until such individual
shall have exercised the option and paid the exercise price for the purchased
shares.
E. REPURCHASE RIGHTS. The shares of Series A Preferred Stock
or Class A Common Stock acquired upon the exercise of any Article Two option
grant may be subject to repurchase by the Corporation in accordance with the
following provisions:
- The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Series A Preferred Stock or
Class A Common Stock under this Article Two. Should the Optionee cease
Service while holding such unvested shares, the Corporation shall have
the right to repurchase any or all of those unvested shares at the
exercise price paid per share. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set
forth in the instrument evidencing such repurchase right.
- All of the Corporation's outstanding repurchase rights
under this Article Two shall automatically terminate, and all shares
subject to such terminated rights shall immediately vest in full, upon
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the occurrence of a Corporate Transaction, except to the extent: (i)
any such repurchase right is expressly assigned to the successor
corporation (or parent thereof) in connection with the Corporate
Transaction or (ii) such termination is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is
issued.
- The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation
of Service, to cancel the Corporation's outstanding repurchase rights
with respect to one or more shares purchased or purchasable by the
Optionee under this Discretionary Option Grant Program and thereby
accelerate the vesting of such shares in whole or in part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to
all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Corporation. Options
which are specifically designated as Non-Statutory Options when issued under
the Plan shall NOT be subject to such terms and conditions.
A. DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the Series A
Preferred Stock and Class A Common Stock for which one or more options granted
to any Employee under this Plan (or any other option plan of the Corporation
or its parent or subsidiary corporations) may for the first time become
exercisable as incentive stock options under the Federal tax laws during any
one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as incentive stock
options under the Federal tax laws shall be applied on the basis of the order
in which such options are granted. Should the number of shares of Series A
Preferred Stock or Class A Common Stock for which any Incentive Option first
becomes exercisable in any calendar year exceed the applicable One Hundred
Thousand Dollar ($100,000) limitation, then that option may nevertheless be
exercised in that calendar year for the excess number of shares as a
non-statutory option under the Federal tax laws.
B. 10% STOCKHOLDER. If any individual to whom an Incentive
Option is granted is the owner of stock (as determined under Section 424(d) of
the Code) possessing ten percent (10%) or more of the total combined voting
power of all classes of stock of
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the Corporation or any one of its parent or subsidiary corporations, then the
exercise price per share or the Series A Preferred Stock or Class A Common
Stock subject to that option shall not be less than one hundred and ten
percent (110%) of the Fair Market Value per share of that security on the
grant date, and the option term shall not exceed five (5) years, measured from
the grant date.
Except as modified by the preceding provisions of this Section II,
the provisions of Articles One, Two and Five of the Plan shall apply to all
Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any Corporate Transaction, each option which
is at the time outstanding under this Article Two shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable for all
of the shares of Series A Preferred Stock or Class A Common Stock at the time
subject to such option and may be exercised for all or any portion of such
shares. However, an outstanding option under this Article Two shall NOT so
accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares
of the capital stock of the successor corporation or parent thereof, (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of the
Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration
of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of option
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate
and cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two which is
assumed in connection with the Corporate Transaction or is otherwise to
continue in effect shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issued to the option holder, in consummation
of such Corporate Transaction, had such person exercised the option
immediately prior to such Corporate Transaction. Appropriate adjustments
shall also be made to the exercise price payable per share, PROVIDED the
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aggregate exercise price payable for such securities shall remain the same.
In addition, the class and number of securities available for issuance under
the Plan on both an aggregate and per participant basis following the
consummation of the Corporate Transaction shall be appropriately adjusted.
D. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide (upon such terms as it may deem
appropriate) for both (i) the automatic acceleration of one or more
outstanding options granted under this Article Two Plan which are assumed or
replaced in a Corporate Transaction and do not otherwise accelerate at that
time and (ii) the immediate termination of one or more of the Corporation's
outstanding repurchase rights which are assigned in connection with such
Corporate Transaction and do not otherwise terminate at that time, in the
event the Optionee's Service should subsequently terminate within a designated
period following the effective date of such Corporate Transaction.
E. The Plan Administrator shall have the discretionary
authority, exercisable either in advance of any actually-anticipated Change in
Control or at the time of an actual Change in Control, to provide for the
automatic acceleration of one or more outstanding options under this Article
Two (and the immediate termination of one or more of the Corporation's
outstanding repurchase rights under this Article Two) upon the occurrence of
the Change in Control. The Plan Administrator shall also have full power and
authority to condition any such option acceleration (and the termination of
any outstanding repurchase rights) upon the subsequent termination of the
Optionee's Service within a specified period following the Change in Control.
F. Any options accelerated in connection with the Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
G. The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
H. The exercisability as incentive stock options under the
Federal tax laws of any options accelerated under this Section III in
connection with a Corporate Transaction or Change in Control shall remain
subject to the dollar limitation of Section II of this Article Two. To the
extent such dollar limitation is exceeded, the accelerated option shall be
exercisable as a non-statutory option under the Federal tax laws.
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IV. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in
its discretion to implement the stock appreciation right provisions of this
Section IV, one or more Optionees may be granted the right, exercisable upon
such terms and conditions as the Plan Administrator may establish, to
surrender all or part of an unexercised option under this Article Two in
exchange for a distribution from the Corporation in an amount equal to the
excess of (i) the Fair Market Value (on the option surrender date) of the
number of shares of Series A Preferred Stock or Class A Common Stock in which
the Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (ii) the aggregate exercise price payable
for such vested shares.
B. No surrender of an option shall be effective hereunder
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall accordingly become
entitled under this Section IV may be made in shares of Series A Preferred
Stock or Class A Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the LATER
of (i) five (5) business days after the receipt of the rejection notice or
(ii) the last day on which the option is otherwise exercisable in accordance
with the terms of the instrument evidencing such option, but in no event may
such rights be exercised more than ten (10) years after the date of the option
grant.
D. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the
Plan Administrator's sole discretion, be granted limited stock appreciation
rights with respect to their outstanding options under the Plan. Upon the
occurrence of a Hostile Take-Over, the officer shall have a thirty (30)-day
period in which he or she may surrender any outstanding options with such a
limited stock appreciation right in effect for at least six (6) months to the
Corporation, to the extent such option is at the time exercisable for
fully-vested shares of Series A Preferred Stock or Class A Common Stock. The
officer shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
vested shares of Series A Preferred Stock or Class A Common Stock at the time
subject to each surrendered option (or surrendered portion of such option)
over (ii) the aggregate exercise price payable for such shares. The
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cash distribution payable upon such option surrender shall be made within five
(5) days following the date the option is surrendered to the Corporation.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option surrender and cash
distribution. Any unsurrendered portion of the option shall continue to
remain outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
E. The shares of Series A Preferred Stock or Class A Common
Stock subject to any option surrendered for an appreciation distribution
pursuant to this Section IV shall NOT be available for subsequent issuance
under the Plan.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants
pursuant to the provisions of this Article Three program shall be limited to
the following individuals:
- each individual serving as a non-employee Board member
on the Effective Date; and
- each individual who is first elected or appointed as a
non-employee Board member after the Effective Date, whether through
appointment by the Board or election by the Corporation's stockholders.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. GRANT DATES. Each individual serving as a non-employee
Board member on the Effective Date shall automatically be granted on such
Effective Date a Non-Statutory Option to purchase 125,000 shares of Class A
Common Stock and a Non-Statutory Option to purchase 125,000 shares of Series A
Preferred Stock upon the terms and conditions of this Article Three. Each
individual who is first elected or appointed as a non-employee Board member
after the Effective Date shall automatically be granted, on the date of such
initial election or appointment, a Non-Statutory Option to purchase 125,000
shares of Class A Common Stock and a Non-Statutory Option to purchase 125,000
shares of Series A Preferred Stock upon the terms and conditions of this
Article Three. In no event, however, shall any non-employee Board member be
eligible to receive any such automatic option grant if such individual has
previously been in the employ of the Corporation or any parent or subsidiary
corporation.
Upon each redemption or conversion of the outstanding shares of
Series A Preferred Stock, the number of shares of Series A Preferred Stock at
the time subject to the outstanding stock options under this Automatic Option
Grant Program and the number of shares of Series A Preferred Stock for which
automatic option grants are subsequently to be made to each newly-elected
non-employee Board member shall be decreased by the same percentage by which
the number of outstanding shares of Series A Preferred Stock is decreased by
reason of such redemption or conversion, and both (A) the number of shares of
Class A Common Stock at the time subject to outstanding stock options under
this Automatic Option Grant Program which would otherwise be exercisable for
Series A
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Preferred Stock and (B) the number of shares of Class A Common Stock for which
automatic option grants are subsequently to be made to each newly-elected
non-employee Board member shall be correspondingly increased by the number of
shares obtained by multiplying (i) the number of shares of Series A Preferred
Stock no longer subject to each such outstanding stock option or no longer
issuable in the future per newly-elected non-employee Board member by (ii) the
number of shares of Class A Common Stock into which each such redeemed or
converted share of Series A Preferred Stock was at the time convertible on a
per-share basis. In addition, the option exercise price per share of Series A
Preferred Stock in effect under each outstanding automatic option grant shall,
upon each redemption or conversion of the outstanding shares of Series A
Preferred Stock, be adjusted by dividing (i) such exercise price per share (as
such price relates to the shares of Class A Common Stock issuable under the
option in place of the Series A Preferred Stock) by (ii) the number of shares
of Class A Common Stock into which each such redeemed or converted share of
Series A Preferred Stock was at the time convertible on a per-share basis.
B. EXERCISE PRICE. The exercise price per share of Series A
Preferred Stock or Class A Common Stock subject to each automatic option grant
made under this Article Three shall be equal to one hundred percent (100%) of
the Fair Market Value per share of that security on the automatic grant date.
C. PAYMENT. The exercise price shall be payable in one of
the alternative forms specified below:
1. full payment in cash or check made payable to the
Corporation's order;
2. full payment in shares of Series A Preferred Stock or
Class A Common Stock held for the requisite period necessary to avoid a
charge to the Corporation's reported earnings and valued at Fair Market
Value on the Exercise Date;
3. full payment in a combination of shares of Series A
Preferred Stock or Class A Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's reported earnings and
valued at Fair Market Value on the Exercise Date and cash or check
payable to the Corporation's order; or
4. to the extent the option is exercised for vested
shares, full payment through a sale and remittance procedure pursuant to
which the non-employee Board member shall concurrently provide
irrevocable written instructions to (i) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares
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and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares and (ii) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction.
Except to the extent the sale and remittance procedure specified
above is utilized in connection with the exercise of the option for vested
shares, payment of the exercise price must accompany the exercise notice.
However, if the option is exercised for any unvested shares, then the optionee
must also execute and deliver to the Corporation, at time of such exercise, a
stock purchase agreement for those unvested shares which provides the
Corporation with the right to repurchase, at the exercise price paid per
share, any unvested shares held by the optionee at the time of cessation of
Board service and which precludes the sale, transfer or other disposition of
any shares purchased under the option while those shares remain subject to the
Corporation's repurchase right.
D. OPTION TERM. Each automatic grant under this Article
Three shall have a maximum term of ten (10) years measured from the automatic
grant date.
E. EXERCISABILITY/VESTING. Each automatic grant shall be
immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. The option
shares shall vest, and the Corporation's repurchase right shall lapse, as
follows:
- Forty percent (40%) of the option shares shall vest
upon the Optionee's completion of one (1) year of Board service measured
from the automatic grant date.
- An additional thirty percent (30%) of the option
shares shall vest upon the Optionee's completion of two (2) years of
Board service measured from the automatic grant date.
- The remaining thirty percent (30%) of the option
shares shall vest upon the Optionee's completion of three (3) years of
Board service measured from the automatic grant date.
Vesting of the option shares shall be subject to acceleration as
provided in Section II.G and Section III of this Article Three. In no event,
however, shall any additional option shares vest after the Optionee's
cessation of Board service.
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F. NON-TRANSFERABILITY. During the lifetime of the Optionee,
each automatic option grant, together with the limited stock appreciation
right pertaining to such option, shall be exercisable only by the Optionee and
shall not be assignable or transferable by the Optionee other than a transfer
of the option effected by will or by the laws of descent and distribution
following Optionee's death.
G. EFFECT OF TERMINATION OF BOARD SERVICE.
- Should the Optionee cease to serve as a Board member
for any reason (other than death or Permanent Disability) while holding an
automatic option grant under this Article Three, then such individual shall
have a six (6)-month period following the date of such cessation of Board
service in which to exercise such option for any or all of the option shares
in which the Optionee is vested at the time of such cessation of Board
service. The option shall immediately terminate and cease to be outstanding,
at the time of such cessation of Board service, with respect to any option
shares in which the Optionee is not otherwise at that time vested.
- Should the Optionee die within six (6) months after
cessation of Board service, then any automatic option grant held by the
Optionee at the time of death may subsequently be exercised, for any or all of
the option shares in which the Optionee is vested at the time of his or her
cessation of Board service (less any option shares subsequently purchased by
the Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution. The right to exercise such option shall lapse upon the
expiration of the (12)-month period measured from the date of the Optionee's
death.
- Should the Optionee die or become Permanently Disabled
while serving as a Board member, then the shares of Series A Preferred Stock
and Class A Common Stock at the time subject to any automatic option grant
held by such Optionee under this Article Three shall immediately vest in full,
and the Optionee (or the representative of the Optionee's estate or the person
or persons to whom the options are transferred upon the Optionee's death)
shall have a twelve (12)-month period following the date of the Optionee's
cessation of Board service in which to exercise such option for any or all of
those vested shares of Series A Preferred Stock or Class A Common Stock.
- In no event shall any automatic grant under this
Article Three remain exercisable after the expiration date of the ten
(10)-year option term. Upon the expiration of the applicable post-service
exercise period above or (if earlier) upon
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the expiration of the ten (10)-year option term, the automatic grant shall
terminate and cease to be outstanding for any option shares in which the
Optionee was vested at the time of his or her cessation of Board service but
for which the option was not otherwise exercised.
H. STOCKHOLDER RIGHTS. The holder of an automatic option
grant under this Article Three shall have none of the rights of a stockholder
with respect to any shares subject to such option until such individual shall
have exercised the option and paid the exercise price for the purchased
shares.
I. REMAINING TERMS. The remaining terms and conditions of
each automatic option grant shall be as set forth in the form Automatic Stock
Option Agreements attached as Exhibits A and B.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE
TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Series A Preferred Stock or Class A Common Stock at the time subject to each
outstanding option under this Article Three but not otherwise vested shall
automatically vest in full, and the Corporation's repurchase right with
respect to those shares shall terminate, so that each such option shall,
immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the shares of Series A
Preferred Stock or Class A Common Stock at the time subject to that option and
may be exercised for all or any portion of such shares as fully vested shares.
Immediately following the consummation of the Corporate Transaction, all
automatic option grants under this Article Three shall terminate and cease to
be outstanding, except to the extent assumed by the successor entity (or
parent thereof).
B. In connection with any Change in Control of the Corporation,
the shares of Series A Preferred Stock or Class A Common Stock at the time
subject to each outstanding option under this Article Three but not otherwise
vested shall automatically vest in full, and the Corporation's repurchase
right with respect to those shares shall terminate, so that each such option
shall, immediately prior to the specified effective date for the Change in
Control, become fully exercisable for all of the shares of Series A Preferred
Stock or Class A Common Stock at the time subject to that option and may be
exercised for all or any portion of such shares as fully vested shares. Each
such option shall remain so exercisable following the Change in Control until
the expiration or sooner termination of the option term.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender any option held by
him or her under this Article Three to the
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Corporation, to the extent such option has been outstanding for a period of at
least six (6) months. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Series A Preferred Stock or Class A Common
Stock at the time subject to the surrendered option (whether or not the
Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the surrender of the option to
the Corporation. Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
surrender and cash distribution.
D. The shares of Series A Preferred Stock or Class A Common
Stock subject to each option surrendered in connection with the Hostile
Take-Over shall NOT be available for subsequent issuance under the Plan.
E. The automatic option grants outstanding under this Article
Three shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
A. LIMITED AMENDMENTS. The provisions of this Automatic
Option Grant Program, together with the automatic option grants outstanding
under this Article Three, may not be amended at intervals more frequently than
once every six (6) months, other than to the extent necessary to comply with
applicable Federal income tax laws and regulations.
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ARTICLE FOUR
DIRECTOR FEE PROGRAM
I. ELIGIBILITY
Each individual serving as a non-employee Board member shall be
eligible to apply all or any portion of the annual retainer fee otherwise
payable to him or her in cash to the acquisition of unvested shares of Class A
Common Stock or Series A Preferred Stock under this Article Four Program.
II. ELECTION PROCEDURE
A. FILING. The non-employee Board member must make the
stock-in-lieu-of-fee election prior to the start of the calendar year for
which the election is to be effective. The first calendar year for which any
such election may be filed shall be the 1994 calendar year. The election must
be filed with the Plan Administrator on the appropriate form provided for this
purpose, and the election, once filed, shall be irrevocable. The election for
any upcoming calendar year may be filed at any time prior to the start of that
year, but in no event later than December 31 of the immediately preceding
calendar year. The non-employee Board member may file a standing election to
be in effect for two or more consecutive calendar years or to remain in effect
indefinitely until revoked by written instrument filed with the Plan
Administrator at least six (6) months prior to the start of the first calendar
year for which such standing election is no longer to remain in effect.
B. ELECTION FORM. On the election form, the non-employee
Board member must indicate the percentage or dollar amount of his or her
annual retainer fee to be applied to the acquisition of unvested shares under
this Article Four Program and the type of shares (Series A Preferred Stock or
Class A Common Stock) to be issued in lieu of such fee. The non-employee
Board member may elect to apply a portion of the fee to the acquisition of
Series A Preferred Stock and a portion to the acquisition of Class A Common
Stock.
III. SHARE ISSUANCE
A. ISSUE DATE. On the first trading day in January of the
calendar year for which the election is effective, the portion of the retainer
fee subject to such election shall automatically be applied to the acquisition
of the selected shares of Series A Preferred Stock or Class A Common Stock by
dividing the elected dollar amount by the Fair Market Value per share of the
Class A Common Stock or Series A Preferred Stock (as the case may be) on that
trading day. The number of issuable shares shall be rounded
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down to the next whole share, and the issued shares shall be held in escrow by
the Secretary of the Corporation until the non-employee Board member vests in
those shares. The non-employee Board member shall have full stockholder
rights, including voting, dividend and liquidation rights, with respect to all
issued shares held in escrow on his or her behalf, but such shares shall not
be assignable or transferable while they remain unvested.
B. VESTING. Upon completion of each calendar quarter of
Board service during the year for which the election is in effect, the
non-employee Board member shall vest in one-fourth of the issued shares, and
the stock certificate for those shares shall be released from escrow.
Immediate vesting in all the issued shares shall occur in the event (i) the
non-employee Board member should die or become Permanently Disabled during his
or her period of Board service or (ii) there should occur a Corporate
Transaction or Change in Control while such individual remains in Board
service. Should such individual cease Board service prior to vesting in one
or more quarterly installments of the issued shares, then those unvested
shares shall immediately be surrendered to the Corporation for cancellation,
and the non-employee Board member shall not be entitled to any cash payment or
other consideration from the Corporation with respect to the cancelled shares
and shall have no further stockholder rights with respect to such shares.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
A. LIMITED AMENDMENTS. The provisions of this Director Fee
Program, together with the unvested share issuances outstanding under this
Article Four, may not be amended at intervals more frequently than once every
six (6) months, other than to the extent necessary to comply with applicable
Federal income tax laws and regulations.
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ARTICLE FIVE
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any
Optionee (including an officer of the Corporation) in the exercise of one or
more options granted to such Optionee under the Discretionary Option Grant
Program, including the satisfaction of any Federal, state and local income and
employment tax obligations arising therefrom, by (i) authorizing the extension
of a loan from the Corporation to such Optionee or (ii) permitting the
Optionee to pay the exercise price for the purchased shares in installments
over a period of years. The terms of any loan or installment method of
payment (including the interest rate and terms of repayment) shall be upon
such terms as the Plan Administrator specifies in the applicable option
agreement or otherwise deems appropriate under the circumstances. Loans or
installment payments may be authorized with or without security or collateral.
However, the maximum credit available to the Optionee may not exceed the
exercise price of the acquired shares (less the par value of such shares) plus
any Federal, state and local income and employment tax liability incurred by
the Optionee in connection with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under this financial assistance
program shall be subject to forgiveness by the Corporation in whole or in part
upon such terms and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to
amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. However, (i) no such amendment or modification shall adversely
affect rights and obligations with respect to options at the time outstanding
under the Plan, unless the Optionee consents to such amendment, and (ii) any
amendment made to the Automatic Option Grant or Director Fee Program (or any
stock options or share issuances outstanding thereunder) shall be in
compliance with the limitation of Section IV of Article Three and Section IV
of Article Four. In addition, the Board may not, without the approval of the
Corporation's stockholders, amend the Plan to (i) materially increase the
maximum number of shares issuable under the Plan, increase the number of
shares issuable per newly-elected non-employee Board member under the
Automatic Option Grant Program or increase the maximum number of shares of
Series A
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Preferred Stock and Class A Common Stock for which any one participant may
receive stock options, separately exercisable stock appreciation rights and
direct share issuances over the term of the Plan, except for permissible
adjustments under Section VI.G and Section VI. H of Article One, (ii)
materially modify the eligibility requirements for plan participation or (iii)
materially increase the benefits accruing to plan participants.
B. Options to purchase shares of Series A Preferred Stock and
Class A Common Stock may be granted under the Discretionary Option Grant
Program, which are in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under the
Discretionary Option Grant Program are held in escrow until stockholder
approval is obtained for a sufficient increase in the number of shares
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess option
grants are made, then (i) any unexercised excess options shall terminate and
cease to be exercisable and (ii) the Corporation shall promptly refund the
purchase price paid for any excess shares actually issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Series A
Preferred Stock and Class A Common Stock upon the exercise of stock options
for such shares or the vesting of such shares under the Plan shall be subject
to the satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in
accordance with the provisions of this Section III of Article Five and such
supplemental rules as the Plan Administrator may from time to time adopt
(including the applicable safe-harbor provisions of Securities and Exchange
Commission Rule 16b-3), provide any or all holders of Non-Statutory Options
(other than the automatic option grants made pursuant to Article Three of the
Plan) or unvested shares (other than the unvested shares issued under the
Director Fee Program) with the right to use shares of the Corporation's Series
A Preferred Stock and Class A Common Stock in satisfaction of all or part of
the Federal, state and local income and employment tax liabilities incurred by
such holders in connection with the exercise of their options or the vesting
of their shares (the "Taxes"). Such right may be provided to any such holder
in either or both of the following formats:
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STOCK WITHHOLDING: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Series A Preferred Stock or Class A Common Stock
otherwise issuable upon the exercise of such Non-Statutory Option or the
vesting of the shares, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the applicable Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The Plan Administrator may, in its discretion,
provide the holder of the Non-Statutory Option or the unvested shares with the
election to deliver to the Corporation, at the time the Non-Statutory Option
is exercised or the shares vest, one or more shares of Series A Preferred
Stock or Class A Common Stock previously acquired by such individual (other
than in connection with the option exercise triggering the Taxes) with an
aggregate Fair Market Value equal to the percentage of the Taxes incurred in
connection with such option exercise or share vesting (not to exceed one
hundred percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan shall become effective immediately upon adoption
by the Board, and the initial stock options may be made under the Plan
immediately upon the November 29, 1993 Effective Date. However, no stock
options granted under the Plan shall become exercisable, and no share
issuances under the Plan shall vest, unless and until the Plan is approved by
the Corporation's stockholders at the 1994 Annual Meeting. Should such
stockholder approval not be obtained, then all stock options and share
issuances initially made under this Plan shall terminate and cease to be
outstanding, and no further stock option grants or share issuances shall be
made under this Plan. However, in such event, the Predecessor Plan shall
automatically be reinstated, as of the date of the 1994 Annual Stockholders
Meeting, in accordance with the provisions of the plan document as last
approved by the Corporation's stockholders (including the available share
reserve thereunder), and all options incorporated into this Plan from the
Predecessor Plan shall be retransferred to the reinstated Predecessor Plan.
B. Each stock option grant outstanding under the Predecessor
Plan immediately prior to the Effective Date shall be incorporated into this
Plan and treated as an outstanding option under this Plan, but each such
option shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant, and nothing in this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
options with respect to their acquisition of shares of Series A Preferred
Stock or Class A Common Stock thereunder.
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C. The option/vesting acceleration provisions of Section III of
Article Two relating to Corporate Transactions and Changes in Control may, in
the Plan Administrator's discretion, be extended to one or more stock options
which are outstanding under the Predecessor Plan on the Effective Date but
which do not otherwise provide for such acceleration.
D. The Plan shall terminate upon the EARLIER of (i) November
28, 2003 or (ii) the date on which all shares available for issuance under the
Plan shall have been issued or cancelled pursuant to the exercise, surrender
or cash-out of the options granted under the Plan or the issuance of shares
(whether vested or unvested) under the Director Fee Program. If the date of
termination is determined under clause (i) above, then all option grants and
unvested share issuances outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing such grants or issuances.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or share issuances under the Plan shall be
used for general corporate purposes
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan, the issuance of any shares under the Director Fee Program and
the issuance of Series A Preferred Stock or Class A Common Stock upon the
exercise or surrender of the option grants made hereunder shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options granted
under it and the Series A Preferred Stock and Class A Common Stock issued
pursuant to it.
B. No shares of Series A Preferred Stock or Class A Common
Stock or other assets shall be issued or delivered under this Plan unless and
until there shall have been compliance with all applicable requirements of
Federal and state securities laws, including the filing and effectiveness of
the Form S-8 registration statement for the shares of Series A Preferred Stock
and Class A Common Stock issuable under the Plan, and all applicable listing
requirements of any securities exchange on which the Series A Preferred Stock
or Class A Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any
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individual the right to remain in the Service of the Corporation (or any
parent or subsidiary corporation) for any period of specific duration, and the
Corporation (or any parent or subsidiary corporation retaining the services of
such individual) may terminate such individual's Service at any time and for
any reason, with or without cause.
VIII. MISCELLANEOUS PROVISIONS
A. Except to the extent otherwise expressly provided under the
Plan, the right to acquire Series A Preferred Stock or Class A Common Stock or
other assets under the Plan may not be assigned, encumbered or otherwise
transferred by any Optionee or Participant.
B. The provisions of the Plan relating to the exercise of
options and the vesting of shares shall be governed by the laws of the State
of California, as such laws are applied to contracts entered into and
performed in such State.
C. The provisions of the Plan shall inure to the benefit of,
and be binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Optionees and any holders of
unvested shares under the Plan, the legal representatives of their respective
estates, their respective heirs or legatees and their permitted assignees.
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KOLL REAL ESTATE GROUP
STOCK ISSUANCE AGREEMENT
AGREEMENT made as of this ___ day of _________, 199__ by
and between Koll Real Estate Group, a Delaware corporation (the
"Corporation"), and ______________________________, a non-employee member of
the Corporation's Board of Directors ("Board") and a participant ("Director")
in the special Director Fee Program in effect under the Corporation's 1993
Stock Option/Stock Issuance Plan (the "Plan").
I. ISSUANCE OF SHARES
1.1 ISSUANCE. In accordance with the Director's election to
receive shares of the Corporation's Series A Convertible Redeemable Preferred
Stock (the "Series A Preferred Stock") in lieu of $____________ of the annual
retainer fee otherwise payable to such Director in cash for his or her service
as a Board member during the 199__ calendar year, the Corporation hereby
issues to Director __________ shares of Series A Preferred Stock (the "Series
A Shares") pursuant to the provisions of the Plan and this Agreement.
1.2 DELIVERY OF CERTIFICATES. The Series A Shares issued
under this Agreement are unvested and are subject to cancellation by the
Corporation upon the Director's cessation of Board service prior to vesting in
such Series A Shares. The certificates representing the unvested Series A
Shares issued hereunder shall be held in escrow by the Secretary of the
Corporation in accordance with the provisions of Article V of this Agreement,
and the Director shall deliver to the Secretary of the Corporation,
concurrently with the execution of this Agreement, a duly-executed Assignment
Separate from Certificate (in the form attached hereto as Exhibit I) with
respect to the unvested Series A Shares. The issued Shares shall possess all
the rights, preferences and privileges and shall be subject to all the
restrictions and limitations applicable to the Corporation's outstanding
shares of Series A Preferred Stock, as set forth in the Certificate of
Determination for such Series A Preferred Stock.
1.3 STOCKHOLDER RIGHTS. Until such time as the Series A
Shares issued under this Agreement are cancelled by the Corporation upon the
Director's cessation of Board service prior to vesting in those Series A
Shares, the Director shall have all the rights of a stockholder (including
voting, dividend and liquidation rights) with respect to the Series A Shares,
subject, however, to the transfer restrictions of Article IV.
<PAGE>
1.4 COMPLIANCE WITH LAW. Under no circumstances shall
shares of the Series A Preferred Stock or other assets be issued or delivered
to the Director pursuant to the provisions of this Agreement unless and until,
in the opinion of counsel for the Corporation or its successors, there shall
have been compliance with all applicable requirements of the Federal and state
securities laws, all applicable listing requirements of any securities
exchange on which shares of the Series A Preferred Stock are then listed for
trading and all other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery.
II. VESTING
2.1 SCHEDULE. The Director shall acquire a vested interest
in the Series A Shares in four equal and successive quarterly installments
upon the Director's completion of each calendar quarter of Board service
during the 199__ calendar year. All the Series A Shares issued under this
Agreement shall immediately vest in full in the event (i) the Director should
die or become Permanently Disabled during his or her period of Board service
or (ii) there should occur a Corporate Transaction or Change in Control while
such individual remains in Board service.
2.2 DEFINITIONS. For purposes of this Agreement, the
following definitional provisions shall be in effect:
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept; or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members (rounded up to the next whole number)
ceases, by reason of one or more contested elections for Board
membership,
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to be comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were
still in office at the time such election or nomination was approved by
the Board.
CORPORATE TRANSACTION: any of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the State in which the
Corporation is incorporated,
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Corporation in complete
liquidation and dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is
the surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to person or persons different
from the persons holding those securities immediately prior to such
merger.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of
the Director to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
III. AUTOMATIC CANCELLATION
3.1 CANCELLATION. Should the Director cease Board service
prior to vesting in one or more quarterly installments of the Series A Shares,
then those unvested Series A Shares shall immediately be surrendered to the
Corporation for cancellation, and the Director shall not be entitled to any
cash payment or other consideration from the Corporation with respect to the
cancelled Series A Shares and shall have no further stockholder rights with
respect to such Series A Shares.
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3.2 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES.
A. In the event of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Series A Preferred Stock as a class without the
Corporation's receipt of consideration (other than the redemption or
conversion of the Series A Preferred Stock), any new, substituted or
additional securities or other property (including money paid other than as a
regular cash dividend) which is by reason of any such transaction distributed
with respect to the unvested Series A Shares at the time subject to this
Agreement shall be immediately delivered to the Corporation to be held subject
to the provisions of this Agreement, including (without limitation) the
provisions governing the automatic surrender and cancellation of such
securities or property upon the Director's cessation of Board service prior to
vesting in such securities or property.
B. In the event of the redemption or conversion of any unvested
Series A Shares at the time subject to this Agreement, the new, substituted or
additional securities (including any shares of the Corporation's Class A
Common Stock issued in conversion of the Series A Shares) or other property
(including money or any debt or equity securities issued in redemption of the
Series A Shares) which is paid or issued in connection with such redemption or
conversion shall be immediately delivered to the Corporation to be held
subject to all of the provisions of this Agreement, including (without
limitation) the provisions governing the automatic surrender and cancellation
of such securities or property upon the Director's cessation of Board service
prior to vesting in such securities or property. To the extent shares of the
Corporation's Class A Common Stock are issued in conversion or redemption of
the unvested Series A Shares subject to this Agreement, all references to such
unvested Series A Shares in this Agreement shall automatically be converted
into references to those unvested shares of the Class A Common Stock.
IV. TRANSFER RESTRICTIONS
4.1 RESTRICTION ON TRANSFER. The Director shall not
transfer, assign, encumber or otherwise dispose of any of the unvested Series
A Shares which are subject to the automatic cancellation provisions of Article
III.
4.2 RESTRICTIVE LEGENDS. The stock certificates for the
unvested Series A Shares subject to this Agreement shall be endorsed with the
following restrictive legend:
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THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE SUBJECT TO
TRANSFER RESTRICTIONS AND CANCELLATION IN THE EVENT THE REGISTERED HOLDER
CEASES TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS AND
THE TERMS AND CONDITIONS OF SUCH CANCELLATION ARE SET FORTH IN A STOCK
ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE
SHARES WHICH IS DATED ______________, 199__. A COPY OF SUCH AGREEMENT
IS ON FILE AT THE CORPORATION'S PRINCIPAL OFFICES.
V. ESCROW
5.1 DEPOSIT. The certificates for the unvested Series A
Shares issued hereunder shall be immediately deposited in escrow with the
Secretary of the Corporation to be held in accordance with the provisions of
this Article V. Each deposited certificate shall be accompanied by a
duly-executed Assignment Separate from Certificate in the form of Exhibit I.
The deposited certificates, together with any other assets or securities from
time to time deposited with the Secretary of the Corporation pursuant to the
requirements of this Agreement, shall remain in escrow until such time or
times as the certificates (or other assets and securities) are to be released
or otherwise surrendered for cancellation in accordance with paragraph 5.3.
Upon delivery of the certificates (or other assets and securities) to the
Secretary of the Corporation, the Director shall be issued an instrument of
deposit acknowledging the number of unvested Series A Shares (or other assets
and securities) delivered in escrow.
5.2 RECAPITALIZATION. All regular cash dividends on the
unvested Series A Shares (or on any other securities at the time held in
escrow) shall be paid directly to the Director and shall not be held in
escrow. However, in the event of (i) any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Series A Preferred Stock as a class
effected without the Corporation's receipt of consideration, (ii) any
reorganization of the Corporation (including, without limitation, a Corporate
Transaction) or (iii) the redemption or conversion of the unvested Series A
Shares at the time subject to this Agreement, any new, substituted or
additional securities or other property (including money paid other than as a
regular cash dividend) which is by reason of such transaction distributed,
paid or issued with respect to the unvested Series A Shares at the time
subject to this Agreement (including any shares of the Corporation's Class A
Common Stock issued in conversion of such Series A Shares or any money or debt
or equity securities issued in redemption of such Series A Shares) shall be
immediately delivered to the Secretary of the Corporation to be held in escrow
under this Article V.
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5.3 RELEASE/SURRENDER. The unvested Series A Shares,
together with any other assets or securities held in escrow hereunder, shall
be subject to the following terms and conditions relating to their release
from escrow or their surrender to the Corporation for cancellation:
(i) Upon the Director's cessation of Board service for any
reason other than death or Permanent Disability, the escrowed certificates for
the unvested Series A Shares at the time subject to this Agreement (together
with any other assets or securities attributable thereto) shall be delivered
to the Corporation for cancellation, and the Director shall immediately cease
to have any further rights or claims with respect to such unvested Series A
Shares (or other assets or securities attributable to those unvested shares).
(ii) As the interest of the Director in the Series A Shares
issued under this Agreement (or any other assets or securities attributable
thereto) vests in accordance with the provisions of Article II, the
certificates for those vested shares (as well as all other vested assets and
securities) shall be released from escrow and delivered to the Director.
VI. SPECIAL TAX ELECTION
6.1 SECTION 83(B) ELECTION. The Director shall be
subject to income taxation with respect to the unvested Series A Shares in
accordance with the applicable tax principles of Section 83 of the Internal
Revenue Code (the "Code"). The Director accordingly understands that there
will be no taxation of the unvested Series A Shares at the time of issuance
under this Agreement, but as the Director's interest in such Series A Shares
vests in quarterly increments over the Director's period of Board service, the
fair market value of the Series A Shares which vest on each such quarterly
date will be reportable as ordinary income. Director understands, however,
that he or she may elect under Code Section 83(b) to be taxed at the time the
unvested Series A Shares are issued under this Agreement, rather than when and
as the Series A Shares subsequently vest. Such election must be filed with
the Internal Revenue Service within thirty (30) days after the date of this
Agreement. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II
HERETO. DIRECTOR UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE
THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY
THE DIRECTOR UPON THE VESTING OF HIS OR HER INTEREST IN THE SERIES A SHARES
ISSUED HEREUNDER.
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6.2 DIRECTOR RESPONSIBILITY. DIRECTOR ACKNOWLEDGES THAT IT IS
DIRECTOR'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF DIRECTOR REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
VII. GENERAL PROVISIONS
7.1 NO IMPAIRMENT OF RIGHTS. This Agreement shall not in
any way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time
in accordance with the provisions of applicable law.
7.2 NOTICES. Any notice required in connection with this
Agreement shall be given in writing and shall be deemed effective upon
personal delivery or upon deposit in the United States mail, registered or
certified, postage prepaid and addressed to the party entitled to such notice
at the address indicated below such party's signature line on this Agreement
or at such other address as such party may designate by ten (10) days advance
written notice under this paragraph 7.2 to all other parties to this
Agreement.
VIII. MISCELLANEOUS PROVISIONS
8.1 DIRECTOR UNDERTAKING. Director hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may in its judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions imposed on either
the Director or the Series A Shares pursuant to the express provisions of this
Agreement.
8.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes
the entire contract between the parties hereto with regard to the subject
matter hereof. This Agreement is made pursuant to the provisions of the Plan
and shall in all respects be construed in conformity with the express terms
and provisions of the Plan.
7
<PAGE>
8.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such
laws are applied to contracts entered into and performed in such State without
resort to that State's conflict-of-laws provisions.
8.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and the Director and the Director's legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to join herein and be bound by the
terms and conditions hereof.
8.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts. Each such counterpart shall be deemed to be an original
and all such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
KOLL REAL ESTATE GROUP
By:
------------------------------------
Title: _________________________________
Address: ______________________________
______________________________
_______________________________________
DIRECTOR
Address: ______________________________
______________________________
8
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _______________________ hereby
assign(s) and transfer(s) unto Koll Real Estate Group (the "Corporation"),
____________________________ (_______) shares of the Series A Convertible
Redeemable Preferred Stock of the Corporation standing in ______________
name on the books of the Corporation represented by Certificate No. ___________
herewith and do hereby irrevocably constitute and appoint _____________________
Attorney to transfer the said stock on the books of the Corporation with
full power of substitution in the premises.
Dated: ____________________
Signature _______________________________
INSTRUCTION: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable the Corporation to
automatically cancel unvested shares in the event of the Director's
termination of Board service in accordance with the Agreement without
requiring additional signatures on the part of the Director.
<PAGE>
EXHIBIT II
SECTION 83(B) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
shares of the Series A Convertible Redeemable Preferred Stock of Koll
Real Estate Group.
(3) The property was issued on January ____, 199__.
(4) The taxable year in which the election is being made is the calendar
year 199__.
(5) The property is subject to a substantial risk of forfeiture pursuant to
which the taxpayer's right to the property will be cancelled if
taxpayer's service with the issuer is terminated for any reason other
than death or disability. The property will cease to be subject to such
forfeiture risk and will vest in four quarterly installments at the end
of each calendar quarter during the 199__ calendar year.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will
never lapse) is $______________ per share.
(7) The amount paid for such property is $-0- per share.
(8) A copy of this statement was furnished to Koll Real Estate Group for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: _________________, 199__.
____________________________________ ______________________________________
Spouse (if any) Taxpayer
THIS FORM MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS/HER FEDERAL INCOME TAX RETURNS. THE FILING MUST BE MADE
WITHIN 30 DAYS AFTER THE EXECUTION DATE OF THE STOCK ISSUANCE AGREEMENT AND
SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.
DIRECTOR MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS
OR HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAX YEAR AND AN
ADDITIONAL COPY FOR HIS OR HER RECORDS.
<PAGE>
KOLL REAL ESTATE GROUP
STOCK ISSUANCE AGREEMENT
AGREEMENT made as of this ___ day of _________, 199__ by and between
Koll Real Estate Group, a Delaware corporation (the "Corporation"), and 1-, a
non-employee member of the Corporation's Board of Directors ("Board") and a
participant ("Director") in the special Director Fee Program in effect under the
Corporation's 1993 Stock Option/Stock Issuance Plan (the "Plan").
I. ISSUANCE OF SHARES
1.1 ISSUANCE. In accordance with the Director's election to receive
shares of the Corporation's Class A Common Stock in lieu of $2- of the annual
retainer fee otherwise payable to such Director in cash for his or her service
as a Board member during the 1993- calendar year, the Corporation hereby issues
to Director 4- shares of Class A Common Stock (the "Class A Shares") pursuant to
the provisions of the Plan and this Agreement.
1.2 DELIVERY OF CERTIFICATES. The Class A Shares issued under this
Agreement are unvested and are subject to cancellation by the Corporation upon
the Director's cessation of Board service prior to vesting in such Class A
Shares. The certificates representing the unvested Class A Shares issued
hereunder shall be held in escrow by the Secretary of the Corporation in
accordance with the provisions of Article V of this Agreement, and the Director
shall deliver to the Secretary of the Corporation, concurrently with the
execution of this Agreement, a duly-executed Assignment Separate from
Certificate (in the form attached hereto as Exhibit I) with respect to the
unvested Class A Shares.
1.3 STOCKHOLDER RIGHTS. Until such time as the Class A Shares issued
under this Agreement are cancelled by the Corporation upon the Director's
cessation of Board service prior to vesting in those Class A Shares, the
Director shall have all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Class A Shares, subject, however, to
the transfer restrictions of Article IV.
1.4 COMPLIANCE WITH LAW. Under no circumstances shall shares of the
Series A Preferred Stock or other assets be issued or delivered to the Director
pursuant to the provisions of this Agreement unless and until, in the opinion of
counsel for the Corporation or its successors, there shall have been compliance
with all applicable requirements of the Federal and state securities laws, all
applicable listing requirements of any
<PAGE>
securities exchange on which shares of the Corporation's Class A Common Stock
are then listed for trading and all other requirements of law or of any
regulatory bodies having jurisdiction over such issuance and delivery.
II. VESTING
2.1 SCHEDULE. The Director shall acquire a vested interest in the
Class A Shares in four equal and successive quarterly installments upon the
Director's completion of each calendar quarter of Board service during the 1995-
calendar year. All the Class A Shares issued under this Agreement shall
immediately vest in full in the event (i) the Director should die or become
Permanently Disabled during his or her period of Board service or (ii) there
should occur a Corporate Transaction or Change in Control while such individual
remains in Board service.
2.2 DEFINITIONS. For purposes of this Agreement, the following
definitional provisions shall be in effect:
CHANGE IN CONTROL: a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) any person or related group of persons (other than
the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept; or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members (rounded up to the next whole number)
ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.
2.
<PAGE>
CORPORATE TRANSACTION: any of the following stockholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Corporation
is not the surviving entity, except for a transaction the principal
purpose of which is to change the State in which the Corporation is
incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation and dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to person or persons different
from the persons holding those securities immediately prior to such
merger.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Director to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
III. AUTOMATIC CANCELLATION
3.1 CANCELLATION. Should the Director cease Board service prior to
vesting in one or more quarterly installments of the Class A Shares, then those
unvested Class A Shares shall immediately be surrendered to the Corporation for
cancellation, and the Director shall not be entitled to any cash payment or
other consideration from the Corporation with respect to the cancelled Class A
Shares and shall have no further stockholder rights with respect to such Class A
Shares.
3.2 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES.
A. In the event of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Class A Common Stock as a class without the
Corporation's receipt of consideration, any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which is by reason of any such transaction distributed with respect to
the unvested Class A Shares at the time subject to this Agreement shall
3.
<PAGE>
be immediately delivered to the Corporation to be held subject to the provisions
of this Agreement, including (without limitation) the provisions governing the
automatic surrender and cancellation of such securities or property upon the
Director's termination of Board service prior to vesting in such securities or
property.
B. Neither the redemption nor the conversion of the shares of the
Corporation's outstanding Series A Convertible Redeemable Preferred Stock shall
have any effect or impact upon the unvested Class A Shares at the time subject
to this Agreement or any other securities or property held in escrow pursuant to
the provisions of Article V.
IV. TRANSFER RESTRICTIONS
4.1 RESTRICTION ON TRANSFER. The Director shall not transfer,
assign, encumber or otherwise dispose of any of the unvested Class A Shares
which are subject to the automatic cancellation provisions of Article III.
4.2 RESTRICTIVE LEGENDS. The stock certificates for the unvested
Class A Shares subject to this Agreement shall be endorsed with the following
restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE SUBJECT TO
TRANSFER RESTRICTIONS AND CANCELLATION IN THE EVENT THE REGISTERED HOLDER
CEASES TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER RESTRICTIONS
AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION ARE SET FORTH IN A STOCK
ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE
SHARES WHICH IS DATED ______________, 199___. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE CORPORATION'S PRINCIPAL OFFICES.
V. ESCROW
5.1 DEPOSIT. The certificates for the unvested Class A Shares issued
hereunder shall be immediately deposited in escrow with the Secretary of the
Corporation to be held in accordance with the provisions of this Article V.
Each deposited certificate shall be accompanied by a duly-executed Assignment
Separate from Certificate in the form of Exhibit I. The deposited certificates,
together with any other assets or securities from time to time deposited with
the Secretary of the Corporation pursuant to the requirements of this Agreement,
shall remain in escrow until such time or times as the certificates (or other
assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with paragraph 5.3. Upon delivery of the
certificates (or other assets and securities) to the Secretary of the
4.
<PAGE>
Corporation, the Director shall be issued an instrument of deposit acknowledging
the number of unvested Class A Shares (or other assets and securities) delivered
in escrow.
5.2 RECAPITALIZATION. All regular cash dividends on the unvested
Class A Shares (or on any other securities at the time held in escrow) shall be
paid directly to the Director and shall not be held in escrow. However, in the
event of (i) any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the Corporation's
outstanding Series A Preferred Stock as a class effected without the
Corporation's receipt of consideration or (ii) any reorganization of the
Corporation (including, without limitation, a Corporate Transaction), any new,
substituted or additional securities or other property (including money paid
other than as a regular cash dividend) which is by reason of such transaction
distributed with respect to the unvested Class A Shares at the time subject to
this Agreement shall be immediately delivered to the Secretary of the
Corporation to be held in escrow under this Article V.
5.3 RELEASE/SURRENDER. The unvested Class A Shares, together with
any other assets or securities held in escrow hereunder, shall be subject to the
following terms and conditions relating to their release from escrow or their
surrender to the Corporation for cancellation:
(i) Upon the Director's cessation of Board service for any
reason other than death or Permanent Disability, the escrowed certificates for
the unvested Class A Shares at the time subject to this Agreement (together with
any other assets or securities attributable thereto) shall be delivered to the
Corporation for cancellation, and the Director shall immediately cease to have
any further rights or claims with respect to such unvested Class A Shares (or
other assets or securities attributable to those unvested shares).
(ii) As the interest of the Director in the Class A Shares issued
under this Agreement (or any other assets or securities attributable thereto)
vests in accordance with the provisions of Article II, the certificates for
those vested shares (as well as all other vested assets and securities) shall be
released from escrow and delivered to the Director.
5.
<PAGE>
VI. SPECIAL TAX ELECTION
6.1 SECTION 83(B) ELECTION. The Director shall be subject to income
taxation with respect to the unvested Class A Shares in accordance with the
applicable tax principles of Section 83 of the Internal Revenue Code (the
"Code"). The Director accordingly understands that there will be no taxation
of the unvested Class A Shares at the time of issuance under this Agreement, but
as the Director's interest in such Class A Shares vests in quarterly increments
over the Director's period of Board service, the fair market value of the Class
A Shares which vest on each such quarterly date will be reportable as ordinary
income. Director understands, however, that he or she may elect under Code
Section 83(b) to be taxed at the time the unvested Class A Shares are issued
under this Agreement, rather than when and as the Class A Shares subsequently
vest. Such election must be filed with the Internal Revenue Service within
thirty (30) days after the date of this Agreement. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT II HERETO. DIRECTOR UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE DIRECTOR UPON THE VESTING OF HIS OR HER
INTEREST IN THE CLASS A SHARES ISSUED HEREUNDER.
6.2 DIRECTOR RESPONSIBILITY. DIRECTOR ACKNOWLEDGES THAT IT IS
DIRECTOR'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(B), EVEN IF DIRECTOR REQUESTS THE CORPORATION OR
ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
VII. GENERAL PROVISIONS
7.1 NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
7.2 NOTICES. Any notice required in connection with this Agreement
shall be given in writing and shall be deemed effective upon personal delivery
or upon deposit in the United States mail, registered or certified, postage
prepaid and addressed to the party entitled to such notice at the address
indicated below such party's signature line on this Agreement or at such other
address as such party may designate by ten (10) days advance written notice
under this paragraph 7.2 to the other party.
6.
<PAGE>
VIII. MISCELLANEOUS PROVISIONS
8.1 DIRECTOR UNDERTAKING. Director hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Director or the
Class A Shares pursuant to the express provisions of this Agreement.
8.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
8.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State without resort
to that State's conflict-of-laws rules.
8.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Director and the Director's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts. Each such counterpart shall be deemed to be an original and all
such counterparts shall together constitute one and the same instrument.
7.
<PAGE>
EXHIBIT A
STOCK OPTION AGFEEMENT
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED 1 - hereby assign(s) and transfer(s) unto Koll
Real Estate Group (the "Corporation"), _________________________________ (_____)
shares of the Class A Common Stock of the Corporation standing in __________
name on the books of the Corporation represented by Certificate No.
___________________ herewith and do hereby irrevocably constitute and appoint
_______________________________ Attorney to transfer the said stock on the books
of the Corporation with full power of substitution in the premises.
Dated: ________________
Signature ____________________________
1-
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to automatically
cancel unvested shares in the event of the Director's termination of Board
service in accordance with the Agreement without requiring additional signatures
on the part of the Director.
<PAGE>
01/07/94
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
KOLL REAL ESTATE GROUP
By: ________________________________________
Title: _____________________________________
Address: ___________________________________
___________________________________
____________________________________________
1-, DIRECTOR
Address: 6-
7-
8-
8.
<PAGE>
EXHIBIT II
SECTION 83(B) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: 1-
Address: 6-
7-
8-
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is 4- shares
of the Class A Common Stock of Koll Real Estate Group.
(3) The property was issued on January, 1993-.
(4) The taxable year in which the election is being made is the calendar year
1993-.
(5) The property is subject to a substantial risk of forfeiture pursuant to
which the taxpayer's right to the property will be cancelled if taxpayer's
service with the issuer is terminated for any reason other than death or
disability. The property will cease to be subject to such forfeiture risk
and will vest in four quarterly installments at the end of each calendar
quarter during the 1995- calendar year.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $9- per share.
(7) The amount paid for such property is $-0- per share.
(8) A copy of this statement was furnished to Koll Real Estate Group for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed as of: _________________, 199__.
__________________________ ______________________________
Spouse (if any) Taxpayer
THIS FORM MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS/HER FEDERAL INCOME TAX RETURNS. THE FILING MUST BE MADE
WITHIN 30 DAYS AFTER THE EXECUTION DATE OF THE STOCK ISSUANCE AGREEMENT AND
SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.
DIRECTOR MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS OR
HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL
COPY FOR HIS OR HER RECORDS.
<PAGE>
KOLL REAL ESTATE GROUP
NOTICE OF GRANT OF
AUTOMATIC STOCK OPTION
Notice is hereby given of the following stock option (the "Option") to
purchase shares of the Class A Common Stock of Koll Real Estate Group (the
"Corporation") which has been granted pursuant to the automatic grant program in
effect under the Corporation's 1993 Stock Option/Stock Issuance Plan ( the
"Plan"):
OPTIONEE: _______________________________
GRANT DATE: _______________________________
TYPE OF OPTION: Non-Statutory Stock Option
OPTION EXERCISE PRICE: $___________ per share
NUMBER OF OPTION SHARES: 125,000 shares of Series A
Convertible Redeemable Preferred Stock
EXPIRATION DATE: _____________________________
EXERCISE SCHEDULE: The option is immediately exercisable for all
the Option Shares.
VESTING SCHEDULE: The Option Shares shall be unvested and
subject to repurchase by the Corporation, at the Option Exercise
Price paid per share, upon Optionee's cessation of service as a
member of the Corporation's Board of Directors (the "Board")
prior to vesting in the Option Shares. Optionee shall acquire a
vested interest in, and the Corporation's repurchase right shall
lapse with respect to: (i) forty percent (40%) of the Option
Shares upon Optionee's completion of one (1) year of Board
service measured from the Grant Date, (ii) an additional thirty
percent (30%) of the Option Shares upon the Optionee's completion
of two (2) years of Board service measured from the Grant Date,
and (iii) the remaining thirty percent (30%) of the Option Shares
upon the Optionee's completion of three (3) years of Board
service measured from the Grant Date. In no event shall any
additional Option Shares vest following Optionee's cessation of
Board service other than by reason of death or permanent
disability.
<PAGE>
Optionee understands and agrees that the Option is granted subject to
and in accordance with the express terms and conditions of the Plan governing
automatic option grants made to non-employee Board members. Optionee further
agrees to be bound by the terms and conditions of the Plan and the terms and
conditions of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official Plan
Summary and Prospectus attached hereto as Exhibit B. A copy of the Plan is also
available upon request made to the Corporate Secretary at the Corporate Offices
at 4343 Von Karman Boulevard, Newport Beach, CA 92660.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERRABLE AND
SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION AND ITS ASSIGNS, AT THE OPTION
EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S TERMINATION OF BOARD SERVICE
PRIOR TO VESTING IN SUCH SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE
RIGHT SHALL BE SET FORTH IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No provision of this Notice of Grant or the attached Automatic Stock
Option Agreement shall in any way be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the stockholders
to remove Optionee from the Board at any time in accordance with the provisions
of applicable law.
DATED: ____________________, 199__
KOLL REAL ESTATE GROUP
By: __________________________
Title: _______________________
______________________________
OPTIONEE
Address: ____________________
____________________
ATTACHMENTS:
EXHIBIT A: STOCK OPTION AGREEMENT
EXHIBIT B: PLAN SUMMARY AND PROSPECTUS
<PAGE>
KOLL REAL ESTATE GROUP
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has approved and implemented an automatic option
grant program under the 1993 Stock Option/Stock Issuance Plan (the "Plan")
pursuant to which eligible non-employee members of the Corporation's Board of
Directors (the "Board") will automatically receive special option grants at
periodic intervals over their period of Board service in order to provide such
individuals with a meaningful incentive to continue to serve as Board members.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of a stock option to purchase
shares of the Corporation's Series A Convertible Redeemable Preferred Stock
("Series A Preferred Stock") under the Plan.
C. The granted option is intended to be a non-statutory option which
does NOT meet the requirements of Section 422 of the Internal Revenue Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, there is hereby granted to Optionee, as of the date
of grant (the "Grant Date") specified in the accompanying Notice of Grant of
Automatic Stock Option (the "Grant Notice"), a stock option to purchase up to
the number of shares of Series A Preferred Stock (the "Option Shares") specified
in the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term at the price per share (the "Option Exercise Price")
specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business on
the expiration date specified in the Grant Notice ("Expiration Date"), unless
sooner terminated pursuant to Paragraph 5, 7 or 8.
3. LIMITED TRANSFERABILITY. This option, together with the special
stock appreciation right provided under Paragraph 8.B., shall be neither
transferable nor assignable by Optionee, other
<PAGE>
than a transfer of this option effected by will or by the laws of descent and
distribution following Optionee's death, and may be exercised, during Optionee's
lifetime, only by Optionee.
4. EXERCISABILITY. This option shall be immediately exercisable for
any or all of the Option Shares, whether or not the Option Shares are vested in
accordance with the Vesting Schedule set forth in the Grant Notice and shall
remain so exercisable until the expiration or sooner termination of the option
term. In no event, however, shall any additional Option Shares vest following
Optionee's cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a Board
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to remain
outstanding) prior to the Expiration Date in accordance with the following
provisions:
- Should Optionee cease to serve as a Board member for any reason
(other than death or permanent disability) while holding this option, then the
period for exercising this option shall be reduced to a six (6)-month period
commencing with the date of such cessation of Board service, but in no event
shall this option be exercisable at any time after the Expiration Date. During
such limited period of exercisability, this option may not be exercised for more
than the number of Option Shares (if any) in which the Optionee is vested on the
date Optionee ceases service as a Board member. Upon the EARLIER of (i) the
expiration of such six (6)-month period or (ii) the specified Expiration Date,
the option shall terminate and cease to remain outstanding with respect to any
vested Option Shares for which the option has not otherwise been exercised.
- Should Optionee die during the six (6)-month period following his
or her cessation of Board service, then the personal representative of
Optionee's estate or the person or persons to whom the option is transferred
pursuant to Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option for any or all of the
Option Shares in which the Optionee is vested at the time of Optionee's
cessation of Board service (less any Option Shares subsequently purchased by
Optionee but prior to death). Such right of exercise shall terminate, and this
option shall accordingly cease to remain outstanding with respect to all vested
Option Shares for which this option has not otherwise been exercised, upon the
EARLIER of (i) the expiration of the twelve (12)-month period measured from the
date of Optionee's death or (ii) the specified Expiration Date of the option
term.
2.
<PAGE>
- Should Optionee die or become permanently disabled while serving
as a Board member, then all the Option Shares subject to this option at the time
of such cessation of Board service shall immediately vest, and Optionee, or the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution, shall have the right to exercise this option
for any or all of those vested Option Shares. Such right of exercise shall
terminate, and this option shall cease to remain outstanding with respect to all
Option Shares for which this option has not otherwise been exercised, upon the
EARLIER of (i) the expiration of the twelve (12)-month period measured from the
date on which Optionee dies or becomes permanently disabled or (ii) the
specified Expiration Date of the option term.
- Upon Optionee's cessation of Board service for any reason other
than death or permanent disability, this option shall immediately terminate and
cease to be outstanding with respect to any and all Option Shares in which the
Optionee is not otherwise at that time vested in accordance with the Vesting
Schedule set forth in the Grant Notice or the special vesting acceleration
provisions of Paragraph 7 or 8.
- Optionee shall be deemed to be PERMANENTLY DISABLED if Optionee
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
6. ADJUSTMENT IN OPTION SHARES.
A. Should any change be made to the Series A Preferred Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting such Series A Preferred Stock as a class without the Corporation's
receipt of consideration (other than the redemption or conversion of such Series
A shares), then the number and class of securities purchasable under this option
and the Option Exercise Price payable per share shall be appropriately adjusted
to prevent the dilution or enlargement of Optionee's rights hereunder; PROVIDED,
however, the aggregate Option Exercise Price shall remain the same.
B. Upon each redemption or conversion of the Corporation's
outstanding shares of Series A Preferred Stock, the number of shares of Series A
Preferred Stock at the time subject to this option shall automatically be
decreased by the same percentage by which the number of outstanding shares of
Series A Preferred Stock is decreased by reason of such redemption or
conversion, and
3.
<PAGE>
this option shall, in lieu of such Series A shares, automatically become
exercisable for that number of shares of the Corporation's Class A Common Stock
obtained by multiplying (i) the number of shares of Series A Preferred Stock no
longer subject to this option by (ii) the number of shares of Class A Common
Stock into which each such redeemed or converted share of Series A Preferred
Stock was at the time convertible on a per-share basis. In addition, the Option
Exercise Price payable per share of the Class A Common Stock which becomes
subject to this option shall be determined by dividing (i) the Option Exercise
Price per share in effect for the Series A Preferred Stock immediately prior to
the redemption or conversion of such Series A shares by (ii) the number of
shares of Class A Common Stock into which each such redeemed or converted share
of Series A Preferred Stock was at the time convertible on a per-share basis.
To the extent this option becomes exercisable for shares of Class A Common
Stock, all references in this Agreement to the Series A Preferred Stock shall
automatically be converted into references to shares of the Class A Common
Stock.
C. To the extent this option is assumed in connection with any
Corporate Transaction under Paragraph 7 or is otherwise to continue in effect,
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the Optionee, in consummation of such Corporate
Transaction, had this option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the Exercise Price
payable per share, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
7. CORPORATE TRANSACTION. In the event of any of the following
stockholder-approved transactions to which the Corporation is a party (a
"Corporate Transaction"):
a. a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Corporation is
incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or
4.
<PAGE>
persons different from the persons holding those securities immediately
prior to such merger,
all Option Shares at the time subject to this option but not otherwise
vested shall automatically vest so that this option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable for all of the Option Shares at the time subject to this option and
may be exercised for all or any portion of such shares as fully-vested shares of
Series A Preferred Stock. Immediately following the consummation of the
Corporate Transaction, this option shall terminate and cease to be outstanding,
except to the extent assumed by the successor entity (or parent thereof).
8. CHANGE IN CONTROL/HOSTILE TAKEOVER.
A. All Option Shares subject to this option at the time of a Change
in Control (as defined below) but not otherwise vested shall automatically vest
so that this option shall, immediately prior to the effective date of such
Change in Control, become fully exercisable for all of the Option Shares at the
time subject to this option and may be exercised for all or any portion of such
shares as fully-vested shares of Series A Preferred Stock. This option shall
remain exercisable for such fully-vested Option Shares until the EARLIEST to
occur of (i) the specified Expiration Date of the option term, (ii) the sooner
termination of this option in accordance with Paragraph 5 or 7 or (iii) the
surrender of this option under Paragraph 8.B.
B. Provided this option has been outstanding for at least six (6)
months prior to the occurrence of a Hostile Take-Over (as defined below),
Optionee shall have the unconditional right (exercisable during the thirty (30)-
day period immediately following the consummation of such Hostile Take-Over) to
surrender this option to the Corporation in exchange for a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
(as defined below) of the Option Shares at the time subject to the surrendered
option (whether or not those Option Shares are at the time vested) over (ii) the
aggregate Option Exercise Price payable for such shares.
To exercise this limited stock appreciation right, Optionee must,
during the applicable thirty (30)-day exercise period, provide the Corporation
with written notice of the option surrender in which there is specified the
number of Option Shares as to which the Option is being surrendered. Such
notice must be accompanied by the return of Optionee's copy of this Agreement,
together with any written amendments to such Agreement. The cash distribution
shall be paid to Optionee within five (5) days
5.
<PAGE>
following such delivery date, and neither the approval of the Plan Administrator
nor the consent of the Board shall be required in connection with such option
surrender and cash distribution. Upon receipt of such cash distribution, this
option shall be cancelled with respect to the shares subject to the surrendered
option (or the surrendered portion), and Optionee shall cease to have any
further right to acquire those Option Shares under this Agreement. In the event
this option is surrendered for only a portion of the Option Shares at the time
subject thereto, the Corporation shall issue a new stock option agreement
(substantially in the form of this Agreement) for the balance of the Option
Shares for which this option is not surrendered.
This limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may
not be assigned or transferred by Optionee.
C. DEFINITIONS: For purposes of this Agreement, the following
definitions shall be in effect:
A CHANGE IN CONTROL shall be deemed to occur in the event:
(1) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934 (the
"1934 Act")) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend
such stockholders to accept; or
(2) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members (rounded up to the next whole number)
ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members
during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.
6.
<PAGE>
A HOSTILE TAKE-OVER shall be deemed to occur in the event (i) any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept AND (ii) more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer are accepted from holders other
than officers and directors of the Corporation subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.
The TAKE-OVER PRICE per share shall be deemed to be equal to the
GREATER of (i) the Fair Market Value per share of Series A Preferred Stock on
the option surrender date, as determined in accordance with the valuation
provisions of Paragraph 9.B. or (ii) the highest reported price per share of
Series A Preferred Stock paid by the tender offeror in effecting the Hostile
Take-Over.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee (or in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be) must take the following actions:
- To the extent the option is exercised for vested Option
Shares, the Secretary of the Corporation shall be provided with
written notice of the option exercise (the "Exercise Notice"), in
substantially the form of Exhibit I attached hereto, in which there is
specified the number of vested Option Shares which are to be purchased
under the exercised option. To the extent the option is exercised for
one or more unvested Option Shares, the Optionee (or other person
exercising the option) shall deliver to the Secretary of the
Corporation a stock purchase agreement in form and substance
satisfactory to the Corporation (the "Purchase Agreement") which
grants the Corporation the right to repurchase, at the Option Exercise
Price, any and all
7.
<PAGE>
unvested Option Shares held by the Optionee at the time of his or her
cessation of Board service and which precludes the sale, transfer or other
disposition of any purchased Option Shares subject to such repurchase
right.
- The aggregate Option Exercise Price for the purchased
Option Shares shall be paid in one of the following alternative forms:
(a) full payment in cash or check made payable to
the Corporation's order; or
(b) full payment in shares of Series A Preferred
Stock held by Optionee for the requisite period necessary to avoid a
charge to the Corporation's reported earnings and valued at Fair
Market Value (as defined below) on the Exercise Date (as defined
below); or
(c) full payment in a combination of shares of
Series A Preferred Stock held for the requisite period necessary to
avoid a charge to the Corporation's reported earnings and valued at
Fair Market Value on the Exercise Date and cash or check made payable
to the Corporation's order; or
(d) to the extent the option is exercised for
vested Option Shares, full payment through a broker-dealer sale and
remittance procedure pursuant to which Optionee shall concurrently
provide irrevocable written instructions to (i) a Corporation-
designated brokerage firm to effect the immediate sale of the vested
shares purchased under the option and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds
to cover the aggregate Option Exercise Price payable for those shares
and (ii) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale.
- Appropriate documentation evidencing the right to
exercise this option shall be furnished the Corporation if the person
or persons exercising the option is other than the Optionee.
B. For all other valuation purposes under this Agreement, the FAIR
MARKET VALUE per share of Series A Preferred Stock on any relevant date shall be
the determined in accordance with the following provisions:
8.
<PAGE>
- If the Series A Preferred Stock is not at the time
listed or admitted to trading on any national stock exchange but is
traded on the Nasdaq National Market, the Fair Market Value shall be
the closing selling price per share on the date in question, as such
price is reported by the National Association of Securities Dealers
through the Nasdaq National Market or any successor system. If there
is no reported closing selling price for the Series A Preferred Stock
on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative
of Fair Market Value.
- If the Series A Preferred Stock is at the time listed
or admitted to trading on any national stock exchange, then the Fair
Market Value shall be the closing selling price per share on the date
in question on the exchange serving as the primary market for the
Series A Preferred Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of Series A Preferred Stock on such exchange on the date
in question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such
quotation exists.
C. The EXERCISE DATE shall be the date on which the Exercise Notice
is delivered to the Secretary of the Corporation, together with the appropriate
Purchase Agreement for any unvested shares acquired under the option. Except to
the extent the sale and remittance procedure specified above is utilized in
connection with the exercise of the option for vested Option Shares, payment of
the Option Exercise Price for the purchased shares must accompany such notice.
D. As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or other person or persons exercising
this option) a certificate or certificates representing the purchased Option
Shares. To the extent any such Option Shares are unvested, the certificates for
those Option Shares shall be endorsed with an appropriate legend evidencing the
Corporation's repurchase rights and may be held in escrow with the Corporation
until such shares vest.
E. In no event may this option be exercised for any fractional
share.
9.
<PAGE>
10. STOCKHOLDER RIGHTS. The holder of this option shall not have any
of the rights of a stockholder with respect to the Option Shares until such
individual shall have exercised this option and paid the Option Exercise Price
for the purchased shares. The purchased Option Shares shall possess all the
rights, preferences and privileges and shall be subject to all the restrictions
and limitations applicable to the Corporation's Series A Preferred Stock, as set
forth in the Certificate of Determination for the Series A Preferred Stock.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of any stock
exchange on which shares of the Series A Preferred Stock may be listed for
trading at the time of such exercise and issuance.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 7, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the Corporation's successors and
assigns.
14. DISCHARGE OF LIABILITY. The inability of the Corporation to
obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Series A
Preferred Stock pursuant to this option shall relieve the Corporation of any
liability with respect to the non-issuance or sale of the Series A Preferred
Stock as to which such approval shall not have been obtained. However, the
Corporation shall use its best efforts to obtain all such applicable approvals.
15. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at the Corporate Offices
at 4343 Von Karman Boulevard, Newport Beach, CA 92660. Any notice required to
be
10.
<PAGE>
given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed to have been given or delivered upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
16. CONSTRUCTION/GOVERNING LAW. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan,
including the automatic option grant provisions of Article Three of the Plan.
The interpretation, performance, and enforcement of this Agreement shall be
governed by the laws of the State of California without resort to that State's
conflict-of-laws rules.
17. STOCKHOLDER APPROVAL. Notwithstanding any provision to the
contrary in this Agreement, this option may not be exercised in whole or in part
at any time prior to the approval of the Plan by the Corporation's stockholders
at the 1994 Annual Meeting. In the event such stockholder approval is not
obtained, this option shall thereupon terminate and cease to remain outstanding
without ever becoming exercisable for any of the Option Shares.
11.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE OF
NON-STATUTORY AUTOMATIC STOCK OPTION
I hereby notify Koll Real Estate Group (the "Corporation") that I
elect to purchase _________ shares of Series A Convertible Redeemable Preferred
Stock of the Corporation (the "Purchased Shares") at the option exercise price
of $________ per share (the "Option Exercise Price") pursuant to that certain
option (the "Option") granted to me under the Corporation's 1993 Stock
Option/Stock Issuance Plan on ___________, 199_.
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Option
Exercise Price for the Purchased Shares in accordance with the provisions of my
agreement with the Corporation evidencing the Option and shall deliver whatever
additional documents may be required by such agreement as a condition for
exercise. Alternatively, I may utilize the special broker/dealer sale and
remittance procedure specified in my agreement to effect payment of the Option
Exercise Price for any Purchased Shares in which I am vested at the time of
exercise.
___________________________ __________________________________
Date Optionee
Address: _______________________
_______________________
Print name in exact manner
it is to appear on the
stock certificate: __________________________________
Address to which certificate
is to be sent, if different
from address above: __________________________________
__________________________________
Social Security Number: __________________________________
<PAGE>
KOLL REAL ESTATE GROUP
NOTICE OF GRANT OF
AUTOMATIC STOCK OPTION
Notice is hereby given of the following stock option (the "Option") to
purchase shares of the Class A Common Stock of Koll Real Estate Group (the
"Corporation") which has been granted pursuant to the automatic grant program in
effect under the Corporation's 1993 Stock Option/Stock Issuance Plan ( the
"Plan"):
OPTIONEE: _______________________________
GRANT DATE: _______________________________
TYPE OF OPTION: Non-Statutory Stock Option
OPTION EXERCISE PRICE: $___________ per share
NUMBER OF OPTION SHARES: 125,000 shares of Class A
Common Stock
EXPIRATION DATE: ______________________________
EXERCISE SCHEDULE: The option is immediately exercisable for all
the Option Shares.
VESTING SCHEDULE: The Option Shares shall be unvested and
subject to repurchase by the Corporation, at the Option Exercise
Price paid per share, upon Optionee's cessation of service as a
member of the Corporation's Board of Directors (the "Board")
prior to vesting in the Option Shares. Optionee shall acquire a
vested interest in, and the Corporation's repurchase right shall
lapse with respect to: (i) forty percent (40%) of the Option
Shares upon Optionee's completion of one (1) year of Board
service measured from the Grant Date, (ii) an additional thirty
percent (30%) of the Option Shares upon the Optionee's completion
of two (2) years of Board service measured from the Grant Date,
and (iii) the remaining thirty percent (30%) of the Option Shares
upon the Optionee's completion of three (3) years of Board
service measured from the Grant Date. In no event shall any
additional Option Shares vest following Optionee's cessation of
Board service other than by reason of death or permanent
disability.
<PAGE>
Optionee understands and agrees that the Option is granted subject to
and in accordance with the express terms and conditions of the Plan governing
automatic option grants made to non-employee Board members. Optionee further
agrees to be bound by the terms and conditions of the Plan and the terms and
conditions of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official Plan
Summary and Prospectus attached hereto as Exhibit B. A copy of the Plan is also
available upon request made to the Corporate Secretary at the Corporate Offices
at 4343 Von Karman Boulevard, Newport Beach, CA 92660.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERRABLE AND
SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION AND ITS ASSIGNS, AT THE OPTION
EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S TERMINATION OF BOARD SERVICE
PRIOR TO VESTING IN SUCH SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE
RIGHT SHALL BE SET FORTH IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION
EXERCISE.
No provision of this Notice of Grant or the attached Automatic Stock
Option Agreement shall in any way be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the stockholders
to remove Optionee from the Board at any time in accordance with the provisions
of applicable law.
DATED: ____________________, 199__
KOLL REAL ESTATE GROUP
By: __________________________
Title: _______________________
______________________________
OPTIONEE
Address: ____________________
____________________
ATTACHMENTS:
EXHIBIT A: STOCK OPTION AGREEMENT
EXHIBIT B: PLAN SUMMARY AND PROSPECTUS
<PAGE>
KOLL REAL ESTATE GROUP
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has approved and implemented an automatic option
grant program under the 1993 Stock Option/Stock Issuance Plan (the "Plan")
pursuant to which eligible non-employee members of the Corporation's Board of
Directors (the "Board") will automatically receive special option grants at
periodic intervals over their period of Board service in order to provide such
individuals with a meaningful incentive to continue to serve as Board members.
B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of a stock option to purchase
shares of the Corporation's Class A Common Stock ("Class A Common Stock) under
the Plan.
C. The granted option is intended to be a non-statutory option which
does NOT meet the requirements of Section 422 of the Internal Revenue Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, there is hereby granted to Optionee, as of the date
of grant (the "Grant Date") specified in the accompanying Notice of Grant of
Automatic Stock Option (the "Grant Notice"), a stock option to purchase up to
the number of shares of Class A Common Stock (the "Option Shares") specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term at the price per share (the "Option Exercise Price")
specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business on
the expiration date specified in the Grant Notice ("Expiration Date"), unless
sooner terminated pursuant to Paragraph 5, 7 or 8.
3. LIMITED TRANSFERABILITY. This option, together with the special
stock appreciation right provided under Paragraph 8.B., shall be neither
transferable nor assignable by Optionee, other
<PAGE>
than a transfer of this option
effected by will or by the laws of descent and distribution following Optionee's
death, and may be exercised, during Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This option shall be immediately exercisable for
any or all of the Option Shares, whether or not the Option Shares are vested in
accordance with the Vesting Schedule set forth in the Grant Notice and shall
remain so exercisable until the expiration or sooner termination of the option
term. In no event, however, shall any additional Option Shares vest following
Optionee's cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a Board
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to remain
outstanding) prior to the Expiration Date in accordance with the following
provisions:
- Should Optionee cease to serve as a Board member for any reason
(other than death or permanent disability) while holding this option, then the
period for exercising this option shall be reduced to a six (6)-month period
commencing with the date of such cessation of Board service, but in no event
shall this option be exercisable at any time after the Expiration Date. During
such limited period of exercisability, this option may not be exercised for more
than the number of Option Shares (if any) in which the Optionee is vested on the
date Optionee ceases service as a Board member. Upon the EARLIER of (i) the
expiration of such six (6)-month period or (ii) the specified Expiration Date,
the option shall terminate and cease to remain outstanding with respect to any
vested Option Shares for which the option has not otherwise been exercised.
- Should Optionee die during the six (6)-month period following his
or her cessation of Board service, then the personal representative of
Optionee's estate or the person or persons to whom the option is transferred
pursuant to Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option for any or all of the
Option Shares in which the Optionee is vested at the time of Optionee's
cessation of Board service (less any Option Shares subsequently purchased by
Optionee but prior to death). Such right of exercise shall terminate, and this
option shall accordingly cease to remain outstanding with respect to all vested
Option Shares for which this option has not otherwise been exercised, upon the
EARLIER of (i) the expiration of the twelve (12)-month period measured from the
date of Optionee's death or (ii) the specified Expiration Date of the option
term.
2.
<PAGE>
- Should Optionee die or become permanently disabled while serving
as a Board member, then all the Option Shares subject to this option at the time
of such cessation of Board service shall immediately vest, and Optionee, or the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution, shall have the right to exercise this option
for any or all of those vested Option Shares. Such right of exercise shall
terminate, and this option shall accordingly cease to remain outstanding with
respect to all Option Shares for which this option has not otherwise been
exercised, upon the EARLIER of (i) the expiration of the twelve (12)-month
period measured from the date on which Optionee dies or becomes permanently
disabled or (ii) the specified Expiration Date of the option term.
- Upon Optionee's cessation of Board service for any reason other
than death or permanent disability, this option shall immediately terminate and
cease to be outstanding with respect to any and all Option Shares in which the
Optionee is not otherwise at that time vested in accordance with the Vesting
Schedule set forth in the Grant Notice or the special vesting acceleration
provisions of Paragraph 7 or 8.
- Optionee shall be deemed to be PERMANENTLY DISABLED if Optionee
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.
6. ADJUSTMENT IN OPTION SHARES.
A. Should any change be made to the Class A Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting such Class A
Common Stock as a class without the Corporation's receipt of consideration, then
the number and class of securities purchasable under this option and the Option
Exercise Price payable per share shall be appropriately adjusted to prevent the
dilution or enlargement of Optionee's rights hereunder; PROVIDED, however, the
aggregate Option Exercise Price shall remain the same.
B. No adjustments shall be made to either the number of Option
Shares or the Option Exercise Price payable per share, in the event the
Corporation's outstanding shares of Series A Convertible Redeemable Preferred
Stock are converted into shares of the Class A Common Stock or are redeemed for
consideration payable in such Class A shares or in cash or other securities.
3.
<PAGE>
C. To the extent this option is assumed in connection with any
Corporate Transaction under Paragraph 7 or is otherwise to continue in effect,
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the Optionee, in consummation of such Corporate
Transaction, had this option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the Exercise Price
payable per share, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
7. CORPORATE TRANSACTION. In the event of any of the following
stockholder-approved transactions to which the Corporation is a party (a
"Corporate Transaction"):
a. a merger or consolidation in which the Corporation is
not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Corporation is
incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior
to such merger,
all Option Shares at the time subject to this option but not otherwise
vested shall automatically vest so that this option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable for all of the Option Shares at the time subject to this option and
may be exercised for all or any portion of such shares as fully-vested shares of
Class A Common Stock. Immediately following the consummation of the Corporate
Transaction, this option shall terminate and cease to be outstanding, except to
the extent assumed by the successor entity (or parent thereof).
8. CHANGE IN CONTROL/HOSTILE TAKEOVER.
A. All Option Shares subject to this option at the time of a Change
in Control (as defined below) but not otherwise vested
4.
<PAGE>
shall automatically vest so that this option shall, immediately prior to the
effective date of such Change in Control, become fully exercisable for all of
the Option Shares at the time subject to this option and may be exercised for
all or any portion of such shares as fully-vested shares of Class A Common
Stock. This option shall remain exercisable for such fully-vested Option Shares
until the EARLIEST to occur of (i) the specified Expiration Date of the option
term, (ii) the sooner termination of this option in accordance with Paragraph 5
or 7 or (iii) the surrender of this option under Paragraph 8.B.
B. Provided this option has been outstanding for at least six (6)
months prior to the occurrence of a Hostile Take-Over (as defined below),
Optionee shall have the unconditional right (exercisable during the thirty (30)-
day period immediately following the consummation of such Hostile Take-Over) to
surrender this option to the Corporation in exchange for a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
(as defined below) of the Option Shares at the time subject to the surrendered
option (whether or not those Option Shares are at the time vested) over (ii) the
aggregate Option Exercise Price payable for such shares.
To exercise this limited stock appreciation right, Optionee must,
during the applicable thirty (30)-day exercise period, provide the Corporation
with written notice of the option surrender in which there is specified the
number of Option Shares as to which the Option is being surrendered. Such
notice must be accompanied by the return of Optionee's copy of this Agreement,
together with any written amendments to such Agreement. The cash distribution
shall be paid to Optionee within five (5) days following such delivery date, and
neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option surrender and cash
distribution. Upon receipt of such cash distribution, this option shall be
cancelled with respect to the shares subject to the surrendered option (or the
surrendered portion), and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. In the event this option is
surrendered for only a portion of the Option Shares at the time subject thereto,
the Corporation shall issue a new stock option agreement (substantially in the
form of this Agreement) for the balance of the Option Shares for which this
option is not surrendered.
This limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may
not be assigned or transferred by Optionee.
5.
<PAGE>
C. DEFINITIONS: For purposes of this Agreement, the following
definitions shall be in effect:
A CHANGE IN CONTROL shall be deemed to occur in the event:
(1) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934 (the "1934 Act")) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept; or
(2) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority of the
Board members (rounded up to the next whole number) ceases, by reason of one or
more contested elections for Board membership, to be comprised of individuals
who either (A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or nomination was
approved by the Board.
A HOSTILE TAKE-OVER shall be deemed to occur in the event (i) any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept AND (ii) more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer are accepted from holders other
than officers and directors of the Corporation subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.
6.
<PAGE>
The TAKE-OVER PRICE per share shall be deemed to be equal to the
GREATER of (i) the Fair Market Value per share of Class A Common Stock on the
option surrender date, as determined in accordance with the valuation provisions
of Paragraph 9.B. or (ii) the highest reported price per share of Class A Common
Stock paid by the tender offeror in effecting the Hostile Take-Over.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee (or in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be) must take the following actions:
- To the extent the option is exercised for vested Option
Shares, the Secretary of the Corporation shall be provided with
written notice of the option exercise (the "Exercise Notice"), in
substantially the form of Exhibit I attached hereto, in which there is
specified the number of vested Option Shares which are to be purchased
under the exercised option. To the extent the option is exercised for
one or more unvested Option Shares, the Optionee (or other person
exercising the option) shall deliver to the Secretary of the
Corporation a stock purchase agreement in form and substance
satisfactory to the Corporation (the "Purchase Agreement") which
grants the Corporation the right to repurchase, at the Option Exercise
Price, any and all unvested Option Shares held by the Optionee at the
time of his or her cessation of Board service and which precludes the
sale, transfer or other disposition of any purchased Option Shares
subject to such repurchase right.
- The aggregate Option Exercise Price for the purchased
Option Shares shall be paid in one of the following alternative forms:
(a) full payment in cash or check made payable to
the Corporation's order; or
(b) full payment in shares of Class A Common
Stock held by Optionee for the requisite period necessary to avoid a
charge to the Corporation's reported earnings and valued at Fair
Market Value (as defined below) on the Exercise Date (as defined
below); or
7.
<PAGE>
(c) full payment in a combination of shares of
Class A Common Stock held for the requisite period necessary to avoid
a charge to the Corporation's reported earnings and valued at Fair
Market Value on the Exercise Date and cash or check made payable to
the Corporation's order; or
(d) to the extent the option is exercised for
vested Option Shares, full payment through a broker-dealer sale and
remittance procedure pursuant to which Optionee shall concurrently
provide irrevocable written instructions to (i) a Corporation-
designated brokerage firm to effect the immediate sale of the vested
shares purchased under the option and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds
to cover the aggregate Option Exercise Price payable for those shares
and (ii) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale.
- Appropriate documentation evidencing the right to
exercise this option shall be furnished the Corporation if the person
or persons exercising the option is other than the Optionee.
B. For purposes of subparagraph 9.B. above and for all other
valuation purposes under this Agreement, the FAIR MARKET VALUE per share of
Class A Common Stock on any relevant date shall be the determined in accordance
with the following provisions:
- If the Class A Common Stock is not at the time listed
or admitted to trading on any national stock exchange but is traded on
the Nasdaq National Market, the Fair Market Value shall be the closing
selling price per share on the date in question, as such price is
reported by the National Association of Securities Dealers through the
Nasdaq National Market or any successor system. If there is no
reported closing selling price for the Class A Common Stock on the
date in question, then the closing selling price on the last preceding
date for which such quotation exists shall be determinative of Fair
Market Value.
- If the Class A Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the Fair
Market Value shall be the closing selling price per share on the date
in question on the exchange serving as the primary market for the
Class A
8.
<PAGE>
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Class A
Common Stock on such exchange on the date in question, then the Fair Market
Value shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
C. The EXERCISE DATE shall be the date on which the Exercise Notice
is delivered to the Secretary of the Corporation, together with the appropriate
Purchase Agreement for any unvested shares acquired under the option. Except to
the extent the sale and remittance procedure specified above is utilized in
connection with the exercise of the option for vested Option Shares, payment of
the Option Exercise Price for the purchased shares must accompany such notice.
D. As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or other person or persons exercising
this option) a certificate or certificates representing the purchased Option
Shares. To the extent any such Option Shares are unvested, the certificates for
those Option Shares shall be endorsed with an appropriate legend evidencing the
Corporation's repurchase rights and may be held in escrow with the Corporation
until such shares vest.
E. In no event may this option be exercised for any fractional
share.
10. STOCKHOLDER RIGHTS. The holder of this option shall not have any
of the rights of a stockholder with respect to the Option Shares until such
individual shall have exercised this option and paid the Option Exercise Price
for the purchased shares.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of any stock
exchange on which
9.
<PAGE>
shares of the Class A Common Stock may be listed for trading at the time of such
exercise and issuance.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 7, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the Corporation's successors and
assigns.
14. DISCHARGE OF LIABILITY. The inability of the Corporation to
obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Class A
Common Stock pursuant to this option shall relieve the Corporation of any
liability with respect to the non-issuance or sale of the Class A Common Stock
as to which such approval shall not have been obtained. However, the
Corporation shall use its best efforts to obtain all such applicable approvals.
15. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at the Corporate Offices
at 4343 Von Karman Boulevard, Newport Beach, CA 92660. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed to have been given or delivered upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
16. CONSTRUCTION/GOVERNING LAW. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan,
including the automatic option grant provisions of Article Three of the Plan.
The interpretation, performance, and enforcement of this Agreement shall be
governed by the laws of the State of California without resort to that State's
conflict-of-laws rules.
17. STOCKHOLDER APPROVAL. Notwithstanding any provision to the
contrary in this Agreement, this option may not be exercised in whole or in part
at any time prior to the approval of the Plan by the Corporation's stockholders
at the 1994 Annual Meeting. In the event such stockholder approval is not
obtained, this option shall thereupon terminate and cease to remain outstanding
without ever becoming exercisable for any of the Option Shares.
10.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE OF
NON-STATUTORY AUTOMATIC STOCK OPTION
I hereby notify Koll Real Estate Group (the "Corporation") that I
elect to purchase _________ shares of Class A Common Stock of the Corporation
(the "Purchased Shares") at the option exercise price of $________ per share
(the "Option Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1993 Stock Option/Stock Issuance Plan on
___________, 199_.
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Option
Exercise Price for the Purchased Shares in accordance with the provisions of my
agreement with the Corporation evidencing the Option and shall deliver whatever
additional documents may be required by such agreement as a condition for
exercise. Alternatively, I may utilize the special broker/dealer sale and
remittance procedure specified in my agreement to effect payment of the Option
Exercise Price for any Purchased Shares in which I am vested at the time of
exercise.
___________________________ __________________________________
Date Optionee
Address: _______________________
_______________________
Print name in exact manner
it is to appear on the
stock certificate: __________________________________
Address to which certificate
is to be sent, if different
from address above: __________________________________
__________________________________
Social Security Number: __________________________________
<PAGE>
THE KOLL REAL ESTATE GROUP
RETIREMENT PLAN
PLAN AMENDMENT
THE KOLL REAL ESTATE GROUP RETIREMENT PLAN, as amended and restated
effective August 1, 1992 as the Bolsa Chica Company Retirement Plan, is hereby
amended, effective December 31, 1993, as indicated below. All capitalized terms
used in this Plan Amendment shall have the meanings assigned to such terms in
the Plan, unless otherwise specifically defined in this Plan Amendment.
1. The name of the Bolsa Chica Company Retirement Plan is hereby
officially changed to the Koll Real Estate Group Retirement Plan to reflect the
name change of Bolsa Chica Company to Koll Real Estate Group.
2. Notwithstanding anything to the contrary in the Plan, there shall be
no new Participants in the Plan after December 31, 1993, and any Employees who
would otherwise commence their participation in the Plan after December 31, 1993
shall not be eligible for such participation and shall not accrue any retirement
or other benefits under the Plan. Accordingly, the participant group in the Plan
shall be fixed and frozen as of December 31, 1993.
3. Notwithstanding anything to the contrary in the Plan, no Participant
shall accrue any additional retirement benefits under the Plan after December
31, 1993, and the Accrued Benefit of each Participant shall be fixed and frozen
on December 31, 1993 on the basis of the Participant's Average Final
Compensation (through December 31, 1993), years of Credited Service and Covered
Compensation through December 31, 1993. Accordingly, the Normal Retirement
Benefit under Section 3.2 of the Plan, the Early Retirement Benefit under
Section 3.4 of the Plan, the Disability Retirement Benefit under Section 3.5 of
the Plan, and the Vested Retirement Benefit under Section 3.10 of the Plan which
each Participant may have accrued through December 31, 1993 shall be fixed and
frozen in accordance with the following principles:
- The Average Final Compensation of the Participant shall be calculated
for a consecutive monthly period under Section 1.7 of the Plan ending no later
than December 31, 1993, and no Compensation paid or earned after December 31,
1993 shall be taken into account. Accordingly, the Average Final Compensation of
each Participant shall be a fixed dollar amount as of December 31, 1993 which
shall not be subsequently adjusted for any Compensation earned or paid after
December 31, 1993.
<PAGE>
- The Credited Service of each Participant shall, for benefit accrual
purposes under the Plan, be fixed and frozen as of December 31, 1993, and no
Credited Service shall, for benefit accrual purposes, be earned for any service
rendered after December 31, 1993. However, Credited Service may continue to be
earned after December 31, 1993, in accordance with the provisions of Section
1.19 of the Plan, solely and exclusively for purposes of the early retirement
subsidies available under the Plan as of December 31, 1993 and protected under
Internal Revenue Code Section 411(d)(6).
- The Covered Compensation of each Participant shall be calculated under
Section 1.18 of the Plan as of December 31, 1993. For purposes of such
calculation, it shall be assumed that the Taxable Wage Base for each year in the
remainder of the 35-year period applicable to the Participant shall remain at
the Taxable Wage Base in effect for that Participant for the 1993 calendar year.
Accordingly, the Covered Compensation of each Participant shall be set at a
fixed dollar amount as of December 31, 1993 and shall not be adjusted for (i)
any Compensation or other remuneration the Participant may in fact earn after
December 31, 1993 or (ii) any changes in the Taxable Wage Base for calendar
years after the 1993 calendar year.
4. There is hereby added to Section 3.10 of the Plan new subsection (e)
to read as follows:
(e) If the present value of the Participant's vested Accrued Benefit
is zero at the time of his Separation from the Service, then that
Participant shall be deemed to have received an immediate distribution of
that vested Accrued Benefit on his Severance from Service Date.
5. Except to the extent specifically modified by this Plan Amendment, all
the terms and conditions of the Koll Real Estate Group Retirement Plan, as
amended and restated August 1, 1992, shall continue in full force and effect.
IN WITNESS WHEREOF, KOLL REAL ESTATE GROUP has caused this Plan Amendment
to be executed by its duly-authorized officer as of the 8th day of December
1993.
KOLL REAL ESTATE GROUP
BY /s/
-----------------------------------
TITLE: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
2.
<PAGE>
RESOLUTIONS ADOPTED BY
THE ADMINISTRATOR AMENDING THE
Koll Company 401(k) Plus Plan
WHEREAS, the Koll Company (the "Company") approved and adopted the Koll
Company 401(k) Plus Plan (the "Plan") and Trust Agreement (the "Trust") which
were originally effective April 1, 1978, and which have subsequently been
amended;
WHEREAS, the Company reserved the right to amend the Plan and Trust;
WHEREAS, Koll Management Services is affiliated with the Company, but not
considered a Related Company
WHEREAS, the Company has decided that it is in the best interest of
participants and beneficiaries to amend the Plan and Trust, and to modify their
operations; and
NOW, THEREFORE, RESOLVED, that the Plan is amended as follows:
1. Plan section 1 is amended in its entirety as attached to change the
definition of Employer and to the definition of Subsidiary.
2. Plan section 2 is amended in its entirety as attached to eliminate the
one year eligibility requirement.
3. As was provided for in Plan section 5, the matching contribution was
suspended (a 0% matching rate) effective with the pay period beginning
January 31, 1991 by notifying Participants in advance.
4. Plan section 6 is amended in its entirety by revising section 6.6 to
allow "other Plan expenses" to be paid from the Trust.
5. Plan section 10 is amended in its entirety as attached to allow
withdrawals during 1991 for Participants who were 100% vested and only
from Profit Sharing Accounts of which all contributions were made at
least 24 months ago.
IN WITNESS WHEREOF, each of the undersigned directors has hereunto signed
his name as of the date herein shown below.
Date: 2-28, 1992 Koll Company
By: /s/
------------------------------------
Title: SR. V.P. ADMINISTRATION
-----------------------------
<PAGE>
1 DEFINITIONS
When capitalized, the following words and phrases have the following
meanings unless a different meaning is clearly required by the context:
1.1 "Account". The record maintained for purposes of accounting for a
Participant's interest in the Plan.
1.2 "Administrator". The Company, or the committee to whom the Company has
delegated all or a portion of the duties of the Administrator under
the Plan.
1.3 "Beneficiary". The person or persons who is to receive benefits after
the death of the Participant pursuant to the Participant's designation
or the Administrator's determination, or as a result of a QDRO.
1.4 "Break in Service". The fifth anniversary of the date for which a
Participant is last credited with an Hour of Service.
1.5 "Code". The Internal Revenue Code of 1986, as amended. Reference to
any specific Code section shall include such section, any valid
regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such
section.
1.6 "Company". The Koll Company or any successor by merger, purchase or
otherwise. Company also refers to any officer appointed by its board
of directors to act on the Company's behalf.
1.7 "Compensation". The sum of a Participant's Taxable Income and salary
reductions, if any, pursuant to Code sections 125, 402(a)(8), 402(h)
or 403(b). For purposes of determining benefits under this Plan,
Compensation is limited to $200,000 (as indexed by the cost of living
pursuant to Code section 415(d)) per Plan Year. For Plan Years
beginning before 1990 (or any later date provided for under the Code),
Compensation is limited to amounts paid while a Participant.
1.8 "Contributions". Amounts contributed to the Plan by the Employer or an
Eligible Employee. The specific types of Contributions included are:
(a) "Pre-Tax Contributions". Amounts contributed on a pre-tax basis
in conjunction with a Participant's Code section 401(k) salary
deferral agreement.
(b) "Rollover Contributions". Amounts contributed by an Eligible
Employee which originated from another employer's qualified plan.
1
<PAGE>
(c) "Matching Contributions". Amounts contributed by the Employer
based upon the amount contributed by the eligible Participant.
(d) "Profit Sharing Contributions". Amounts contributed by the
Employer and allocated on a pay based formula to eligible
Participants' Accounts, which are no longer permitted, but
previously contributed amounts continue to be accounted for in
the Plan.
1.9 "Disability". A Participant's total and permanent, mental or physical
disability resulting in termination of employment as evidenced by (a)
receipt of disability payments under the Employer's long-term
disability program or (b) presentation of medical evidence
satisfactory to the Committee.
1.10 "Effective Date". July 1, 1989.
1.11 "Eligible Employee". An Employee of the Employer, except any Employee:
(a) whose compensation and conditions of employment are covered by a
collective bargaining agreement to which the Employer is a party
unless the agreement calls for the Employee's participation in
the Plan;
(b) who is treated as an Employee because he or she is a Leased
Employee; or
1.12 "Employee". An individual who is (a) directly employed by any Related
Company and for whom any income for such employment is subject to
withholding of income or social security taxes, or (b) indirectly
employed as a Leased Employee.
1.13 "Employer". The Company and any Subsidiary or other Related Company of
either the Company or a Subsidiary which adopts this Plan with the
approval of the Company.
1.14 "ERISA". The Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific section shall include such section,
any valid regulation promulgated thereunder, and any comparable
provision of any future legislation amending, supplementing or
superseding such section.
1.15 "Forfeiture Account". An account holding amounts forfeited by
Participants who have left the Employer, which are to be used to
reduce subsequent Employer Contributions.
1.16 "Highly Compensated Employee" or "HCE". An Employee described as a
highly compensated employee in Code section 414(q).
2
<PAGE>
1.17 "Hour of Service". Each hour for which an Employee is entitled to:
(a) payment for the performance of duties for any Related Company;
(b) payment from any Related Company for any period during which no
duties are performed due to vacation, holiday, sickness,
incapacity (including disability), layoff, leave of absence, jury
duty or military service;
(c) back pay, irrespective of mitigation of damages, by award or
agreement with any Related Company (and these hours shall be
credited to the period to which the agreement pertains); or
(d) no payment, but is on a Leave of Absence or Parental Leave (and
these hours shall be based upon his or her normally scheduled
hours per week or a 40 hour week if there is no regular
schedule), provided that, for Parental Leave, hours shall be
credited for the Plan Year the Leave occurs only if no hours have
been credited for that Plan Year.
The crediting of hours shall be made in accordance with Department of
Labor regulation section 2530.200b-2(b). Actual hours shall be used
whenever an accurate record of hours are maintained for an Employee.
Otherwise, an equivalent number of hours shall be credited for each
payroll period in which the Employee would be credited with at least 1
hour. The payroll period equivalencies are 45 hours weekly, 90 hours
biweekly, 95 hours semimonthly and 190 hours monthly.
Hours credited prior to a Break in Service are included. Hours shall
be credited for the period prior to the acquisition of a Related
Company by an Employer only if the Company directs that credit for
such period shall be granted.
1.18 "Ineligible". An individual during the period in which he or she is
(1) an Employee of a Related Company which is not then an Employer,
(2) an Employee, but not an Eligible Employee, or (3) not an Employee.
1.19 "Investment Fund". An investment fund consisting of a collective
investment fund, a pool of assets or deposits of the Trustee. The
Investment Funds authorized by the Administrator as of the Effective
Date are listed in Appendix A.
1.20 "Leased Employee". An individual who is deemed to be an employee of
any Related Company as provided in Code section 414(n) or (o).
1.21 "Leave of Absence". A period during which an individual is deemed to
be an Employee, but is absent from active employment, provided that
the absence:
3
<PAGE>
(a) was authorized by a Related Company; or
(b) due to military service in the United States armed forces and the
individual returns to active employment within the period during
which he or she retains employment rights under federal law.
1.22 "Non-Highly Compensated Employee" or "NHCE". An Employee who is
neither an HCE nor a family member of certain HCEs as defined in Code
section 414(q).
1.23 "Normal Retirement Date". The date of a Participant's 65th birthday.
1.24 "Owner". A person with an ownership interest in the capital, profits,
outstanding stock or voting power of a Related Company within the
meaning of Code section 318 or 416 (which exclude indirect ownership
through a qualified retirement plan).
1.25 "Parental Leave". The period of absence from work by reason of
pregnancy, the birth of an Employee's child, the placement of a child
with the Employee in connection with the child's adoption, or caring
for such child immediately after birth or placement as described in
Code section 410(a)(5)(E).
1.26 "Participant". An Eligible Employee who begins to participate in the
Plan after completing the eligibility requirements. A Participant's
participation continues until his or her employment with the Employer
(and all Related Companies) ends and his or her Account is distributed
or forfeited.
1.27 "Pay". The base pay and overtime paid to an Eligible Employee by the
Employer while a Participant during the current period.
Pay is neither increased nor decreased by any salary credit or
reduction pursuant to Code sections 125 or 402(a)(8). Pay is limited
to $200,000 (as indexed by the cost of living pursuant to Code section
415(d)) per Plan Year.
1.28 "Period of Employment". The period beginning on the date an Employee's
employment first begins and ending on the date his or her employment
ends. Employment ends on the date the Employee quits, retires, is
discharged, dies or (if earlier) the first anniversary of his or her
absence for any other reason. The period of absence starting with the
date an Employee's employment temporarily ends and ending on the date
he or she is subsequently reemployed is (1) included in his or her
Period of Employment if the period of absence does not exceed one
year, and (2) excluded if such period exceeds one year.
Period of Employment includes the period prior to a Break in Service.
Period of Employment includes the period prior to acquisition of a
Related Company by an
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Employer only if the Company directs that credit for such period shall
be granted.
1.29 "Plan". The Koll Company 401(k) Plus Plan set forth in this document,
as from time to time amended.
1.30 "Plan Year". The annual accounting period of the Plan and Trust which
ends on each December 31.
1.31 "Pre-Tax Dollar Limit". The annual limit placed on each Participant's
Pre-Tax Contributions, which shall be $7,000 per calendar year (as
indexed by the cost of living pursuant to Code section 415(d)).
1.32 "QDRO". A domestic relations order which the Administrator has
determined to be a qualified domestic relations order within the
meaning of Code section 414(p).
1.33 "Related Company". The Company and any corporation, trade or business
which is, together with the Company, a member of the same controlled
group of corporations, a trade or business under common control, or an
affiliated service group within the meaning of Code section 414(b),
(c), (m) or (o) and, solely for purposes of the maximum annual
addition limits, as modified by Code section 415(h).
1.34 "Settlement Date". The date on which the transactions from the most
recent Trade Date are settled.
1.35 "Spousal Consent". The written consent given by a spouse to a
Participant's election of a specified form of benefit or Beneficiary
designation. The spouse's consent must acknowledge the effect on the
spouse of the Participant's election and be duly witnessed by a notary
public. Spousal Consent also means a determination by the
Administrator that there is no spouse, the spouse cannot be located or
such other circumstances as may be established by applicable law.
1.36 "Subsidiary". A company which is 50% or more owned, directly or
indirectly, by the Company.
1.37 "Sweep Account". The subsidiary Account for each Contribution type
within each Participant's Account through which all transactions for
such Contribution type are processed and which is invested in interest
bearing deposits of the Trustee.
1.38 "Sweep Date". The cut off date and time for receiving instructions for
transactions to be processed on the next Trade Date.
1.39 "Taxable Income". The wages, salary, fees for professional services
and other amounts paid by the Employer or a Related Company to a
Participant during a
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Limitation Year for personal services actually rendered in the course
of employment, including (by way of example) overtime, bonuses,
commissions and incentive compensation, but after excluding such
amounts which are not currently treated as Taxable Income as a result
of their:
(a) deferral under a Code section 125, 402(a)(8), 402(h) or 403(b)
salary deferral arrangement,
(b) contribution to a retirement, deferred compensation or other
plan, or
(c) not being treated as income for services currently rendered, such
as amounts realized from the sale, exercise or exchange or
Employer stock or stock options.
1.40 "Trade Date". Each day the Investment Funds are valued, which is the
last business day of each month.
1.41 "Trust". The legal entity created by those provisions of this document
which relate to the Trustee. The Trust is part of the Plan and holds
the Plan assets which are comprised of the aggregate of Participants'
Accounts and the Forfeiture Account.
1.42 "Trustee". Wells Fargo Bank, National Association.
1.43 "Year of Vesting Service". For any Employee hired on or after July 1,
1989, a 12 month Period of Employment. For any Employee hired prior to
July 1, 1989, service shall be credited differently before and after
January 1, 1990 as follows:
(a) For service from January 1, 1990, a 12 month Period of
Employment; and
(b) For Plan Years ending before January 1, 1990, a 12 month period
ending on the last day of any Plan Year in which an Employee is
credited with at least 1,000 Hours of Service.
Years of Vesting Service shall include service credited prior to April
1, 1978. In the case of the acquisition of a Related Company by an
Employer, the Company will determine what, if any, pre-acquisition
employment will be counted in determining Years of Vesting Service.
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2 ELIGIBILITY
2.1 Eligibility
Each Eligible Employee shall become a Participant on January 1, 1991
or the first subsequent January 1, April 1, July 1 or October 1 after
the date he or she becomes an Eligible Employee.
2.2 Ineligible Employees
If an Employee completes the above eligibility requirements, but is
Ineligible at the time participation would otherwise begin (if he or
she were not Ineligible), he or she shall become a Participant on the
first subsequent date on which he or she is an Eligible Employee.
2.3 Ineligible Participants
A Participant may not make or share in Plan Contributions, nor be
eligible for a new Plan loan, during the period he or she is
Ineligible, but he or she shall continue to participate for all other
purposes. An Ineligible Participant shall automatically become an
active Participant on the date he or she again becomes an Eligible
Employee.
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3 PARTICIPANT CONTRIBUTIONS
3.1 Pre-Tax Contribution Election
Upon becoming a Participant, an Eligible Employee may elect to reduce
his or her Pay and have the amount contributed to the Plan by the
Employer as a Pre-Tax Contribution. The election shall be made as a
whole percentage of pay and in the form prescribed by the
Administrator.
3.2 Changes
A Participant who is an Eligible Employee may change his or her
Pre-Tax Contribution election as of January 1, April 1, July 1 or
October 1 by giving the Administrator such advance notice as it
requires. The changed percentage shall become effective with the
first payroll paid after such date. Participants' Contribution
election percentages shall automatically apply to Pay increases
or decreases.
3.3 Stopping Contributions
A Participant may revoke his or her Contribution election at any time
by giving written notice to the Administrator, and such election shall
be effective as soon as administratively feasible. A Participant may
contribute again by making a new Contribution election in the same
manner in which a Participant may change his or her election.
3.4 Contribution Percentage Limits
The Administrator may establish (and subsequently change) the maximum
Pre-Tax Contribution percentage, prospectively or retrospectively (for
the current Plan Year), for all Participants. In addition, the
Administrator may establish any lower percentage limits for Highly
Compensated Employees as it deems necessary. As of the Effective
Date, the maximum percentages are:
Highly
Contribution Compensated All
Type Employees Participants
------------ ----------- ------------
Pre-Tax 15% 15%
3.5 Refunds When Pre-Tax Dollar Limit Exceeded
A Participant who makes pre-tax contributions to this and any other
qualified contribution plan in excess of the Pre-Tax Dollar Limit
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may notify the Administrator in writing by the following March 1 (or as late as
April 14 if allowed by the Administrator) that an excess has occurred. In this
event, the amount of the excess specified by the Participant shall be returned
to him by April 15, subject to an adjustment for net investment gain or loss as
described below:
E x G x (1 + (10% x M))
-----
(AB-G)
where:
E = the excess amount specified,
G = the net gain or loss for the Plan Year
in the Participant's Pre-Tax Accounts,
AB = the total value of the Participant's
Pre-Tax Account, determined as of the
end of the calendar year being
corrected,
M = the number of full months from the
calendar year end to the date the excess
amount is paid, plus one for the month
during which payment is to be made if
payment will occur after the 15th of
that month.
3.6 Timing, Posting and Tax Considerations
Participants' Contributions may only be made through payroll
deduction. Such amounts shall be paid to the Trustee in cash and
posted to each Participant's Account as soon as such amounts can
reasonably be separated from the Employer's general assets and
balanced against the specific amount made on behalf of each
Participant. In no event, however, shall such amounts be paid to the
Trustee more than 90 days after the date amounts are deducted from a
Participant's Pay or 30 days after the end of the Plan Year in which
deducted. Pre-Tax Contributions shall be treated as employer
contributions in determining tax deductions under Code section 404(a).
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4 ROLLOVERS & TRUST-TO-TRUST TRANSFERS
4.1 Rollovers
The Administrator may authorize the Trustee to accept a rollover
contribution, within the meaning of Code section 402(a)(5) or
408(d)(3)(A)(ii), from an Eligible Employee in cash, even if he or she
is not yet a Participant. The Employee shall furnish satisfactory
evidence to the Administrator that the amount is eligible for rollover
treatment. A rollover contribution must be paid to the Trustee in
cash within 60 days after the date received by the Eligible Employee
from a qualified plan or conduit individual retirement account. Such
amount shall be posted to the Employee's Rollover Account as of the
date received by the Trustee.
If it is later determined that an amount transferred pursuant to the
above paragraph did not in fact qualify as a rollover contribution
under Code section 402(a)5) or 408(d)(3)(A)(ii), the balance credited
to the Employee's Rollover Account shall immediately be (1) segregated
from all other Plan assets, (2) treated as a nonqualified trust
established by and for the benefit of the Employee, and (3)
distributed to the Employee. Any such nonqualifying rollover shall be
deemed never to have been a part of the Plan.
4.2 Transfers From Other Qualified Plans
The Administrator may instruct the Trustee to receive assets in cash
or in kind from another qualified plan. The Trustee may refuse the
receipt of any transfer if:
(a) the Trustee finds the in-kind assets unacceptable,
(b) instructions for posting amounts to Participants' Accounts
are incomplete,
(c) any amounts are not exempted by Code section 401(a)(11)(B)
from the annuity requirements of Code section 417, or
(d) any amounts include benefits protected by Code section
411(d)(6) which would not be preserved under applicable Plan
provisions.
Such amounts shall be posted to the appropriate Accounts of
Participants as of the date received by the Trustee.
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5 EMPLOYER CONTRIBUTIONS
5.1 Matching Contributions
(a) Frequency and Eligibility. For each time Participants'
Contributions are made, the Employer shall make Matching
Contributions on behalf of each Participant (except for any
officer of the Employer who is a regular participant in
equity partnership interests) who contributed during the
period.
(b) Allocation Method. The Matching Contribution, including any
available Forfeiture Account amount, shall be equal to 50%
of each eligible participant's Pre-Tax Contributions for the
period, provided that no Matching Contributions shall be
made based upon a Participant's Contributions in excess of
5% of his or her Pay. The Employer may change the 50%
matching rate or the 5% of considered Pay to any other
percentages, including 0%, by notifying eligible
Participants in sufficient time to adjust their Contribution
elections prior to the start of the period for which the new
percentages apply.
(c) Timing, Medium and Posting. The Employer shall make each
period's Matching Contribution in cash as soon as is
feasible, and not later than the Employer's federal tax
filing date, including extensions, for deducting such
Contribution. The Trustee shall post such amount to each
Participant's Matching Account once the total Contribution
received has been balanced against the specific amount to be
credited to each Participant's Matching Account.
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6 ACCOUNTING
6.1 Individual Participant Accounting
The Administrator shall maintain an individual set of Accounts for
each Participant in order to reflect transactions both by type of
Contribution and investment medium. Financial transactions shall be
accounted for at the individual Account level by "posting" each
transaction to the appropriate Account of each affected Participant.
Participants' Account values shall be maintained in shares for the
Investment Funds and in dollars for their Sweep and Participant loan
Accounts. At any point in time, the Account value shall be determined
using the most recent Trade Date values provided by the Trustee.
6.2 Sweep Account is Transaction Account
All transactions related to amounts being contributed to or
distributed from the Trust shall be posted to each affected
Participant's Sweep Account. Any amount held in the Sweep Account will
be credited with interest up until the Settlement Date or the later
date on which it is removed from the Sweep Account.
6.3 Trade Date Accounting and Investment Cycle
Participant Account values shall be determined as of each Trade Date.
For any transaction to be processed as of a Trade Date, the Trustee
must receive all transaction instructions by the Sweep Date. Such
instructions shall apply to amounts held in the Account on that Sweep
Date. Financial transactions of the Investment Funds shall be posted
to Participants' Accounts as of the Trade Date and based upon the
Trade Date values provided by the Trustee. All Trade Date transactions
shall be effected on the Settlement Date relating to that Trade Date
(or as soon thereafter as is administratively feasible).
6.4 Accounting for Investment Funds
Investments in each Investment Fund shall be maintained in shares. The
Trustee is responsible for determining the share values of each
Investment Fund as of each Trade Date. To the extent an Investment
Fund is comprised of collective investment funds of the Trustee, the
net asset and share values shall be determined in accordance with the
rules governing such collective investment funds, which are
incorporated herein by reference. All other net asset and share values
shall be determined by the Trustee. The net asset value of each
Investment Fund shall be based on the fair market value of its
underlying assets.
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<PAGE>
6.5 Accounting for Participant Loans
Participant loans shall be held in a separate Account of the
Participant and accounted for in dollars as an earmarked asset of the
borrowing Participant's Account.
6.6 Company Decides Who Pays Fees and Expenses
The Company shall decide whether administrative fees and expenses
related to the Plan and Trust, including those incurred by agents and
advisors retained by the Administrator, shall be paid by the Employer,
to have them charged directly to the Participants' Accounts, or a
combination of both. The Company may direct the Employer to pay a
lower portion of the fees and expenses allocable to the Accounts of
Participants who are no longer Employees or Beneficiaries than for
active Employees. All other Plan fees and expenses (such as government
annual report preparation, audit and legal fees, nondiscrimination
testing, and any other special services) shall be paid separately from
the Trust, unless paid by the Employer.
6.7 How Fees and Expenses are Charged to Participants
Account maintenance fees shall be charged to each Participant's
Account on a per Participant basis, provided that no fee shall
reduce a Participant's Account balance below zero. Transaction type
fee (such as special asset fees, investment election change fees,
etc.) shall be charged to the Accounts involved in the transaction.
Fees and expenses incurred for the management and maintenance of
Investment Funds shall be charged at the Investment Fund level and
reflected in the net gain or loss of each Fund.
6.8 Error Correction
The Administrator may correct any errors or omissions in the
administration of the Plan by restoring any Participant's Account
balance with the amount that would be credited to the Account had no
error or omission been made. Funds necessary for any such restoration
shall be provided through payment made by the Employer, or if the
restoration involves an Employer Contribution Account, the Company may
direct the Trustee to use amounts from the Forfeiture Account.
6.9 Participant Statements
The Administrator shall provide Participants with statements of their
Accounts as soon after the end of each quarter of the Plan Year as is
administratively feasible. Participants' Account statements will be
expressed in dollars without reference to any underlying shares and
share values used in determining the Account value.
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<PAGE>
6.10 Special Accounting During Conversion Period
The Administrator and Trustee may use any reasonable accounting
methods in performing their respective duties during the period of
converting the prior accounting system of the Plan and Trust to
conform to the individual Participant accounting system described in
this Section. This includes, but is not limited to, the method for
allocating net investment gains or losses and the extent, if any, to
which contributions received by and distributions paid from the Trust
during this period share in such allocation. All or a portion of the
Trust assets may be held, if necessary, in a short term interest
bearing vehicle, which may include deposits of the Trustee, during the
conversion period for establishing such individual Participant
Accounts.
6.11 Accounts for QDRO Beneficiaries
A separate Account shall be established for a Beneficiary entitled to
any portion of a Participant's Account under a QDRO as of the date and
in accordance with the directions specified in the QDRO. Such Account
shall be valued and accounted for in the same manner as any other
Account.
(a) Investment Direction. A QDRO Beneficiary may direct the
investment of such Account in the same manner as any other
Participant.
(b) Distributions. A QDRO Beneficiary shall be entitled to payment as
provided in the QDRO and permissible under the Distribution Once
Employment Ends Section regardless of whether the Participant is
an Employee, and to name a Beneficiary as specified in the QDRO.
(c) Participant Loans. A QDRO Beneficiary shall not be entitled to
borrow from his or her Account. If a QDRO specifies that the QDRO
Beneficiary is entitled to any portion of the Account of a
Participant who has an outstanding loan balance, all outstanding
loans shall continue to be held in the Participant's Account and
shall not be divided between the Participant's and QDRO
Beneficiary's Accounts.
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7 INVESTMENT FUNDS AND ELECTIONS
7.1 Investment Funds
Except for a Participants' Sweep and loan Accounts, the Trustee shall
be maintained in various Investment Funds. The Administrator may
change the number of composition of the Investment Funds, subject to
the terms and conditions agreed to with the Trustee.
7.2 Investment Fund Elections
Each Participant (or Beneficiary) shall make a single election
covering all of his or her Contribution Accounts. A Participant (or
Beneficiary) shall make his or her investment election in any
combination of whole percentage increments of one or any number of the
Investment Funds offered. Each election shall specify whether it
applies only to the amounts not yet received by the Trustee or to both
such future amounts and the current Account balance. The
Administrator may set a maximum percentage of the total election that
a Participant may direct into any specific Investment Fund.
7.3 Responsibility for Investment Choice
Each Participant shall be solely responsible for the selection of his
or her investment election. No fiduciary with respect to the Plan is
empowered to advise a Participant as to the manner in which his or her
Accounts are to be invested, and the fact that an Investment Fund is
offered shall not be construed to be a recommendation for investment.
The Administrator may, however, establish a maximum percentage which a
Participant may choose for any investment fund.
7.4 Default if No Election
If a Participant does not have a valid investment election on file,
his or her election shall be deemed to be a 100% election of the
Investment Fund designated by the Administrator as the default option.
"GIC"
7.5 Timing
A Participant shall make his or her initial investment election upon
becoming a Participant and may change his or her election at any time
in accordance with the procedures established by the Trustee.
Investment elections received by the Trustee by the Sweep Date
deadline will be effective on the next following Trade Date.
7.6 Switching Fees
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<PAGE>
A reasonable processing fee may be charged directly to a Participant's
Account for investment election changes in excess of a specified
number per Plan Year as determined by the Administrator.
first four changes free
each additional = $10
16
<PAGE>
8 VESTING & FORFEITURES
8.1 Fully Vested Contribution Accounts
A Participant shall be fully vested in these Accounts at all times:
Pre-Tax Account
Rollover Account
8.2 Full Vesting upon Certain Events
A Participant's entire Account shall become fully vested once he or
she has attained his or her Normal Retirement date as an Employee, or
upon his or her leaving the employer due to his or her Disability or
death.
8.3 Vesting Schedule
In addition to the vesting provided above, a Participant's Matching
and Profit Sharing Accounts shall become vested in accordance with the
following schedule:
Years of Vesting Vested
Service Percentage
---------------- ----------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
If this vesting schedule is changed, the vested percentage for each
Participant shall not be less than his or her vested percentage
determined as of the last day prior to this change, and for any
Participant with at least three Years of Vesting Service when the
schedule is changed, vesting shall be determined using the more
favorable vesting schedule.
8.4 Forfeitures
A Participant's non-vested Account balance shall be forfeited as of
the Settlement Date next following the Sweep Date on which the
Administrator has reported to the Trustee that the Participant's
employment has terminated. Forfeitures from all Participants'
Employer Contribution Accounts shall be transferred to and maintained
in a single Forfeiture Account, which shall be invested in interest
bearing deposits of the Trustee. Forfeiture Account amounts shall be
credited to eligible
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Participants' Accounts as soon as is administratively feasible as part
of Employer Matching Contributions for the period.
8.5 Rehired Employees
(a) Service. If an Employee is rehired, all Years of Vesting
Service credited prior to his or her termination of
employment shall be counted in determining his or her vested
interest.
(b) Account Restoration. If an Employee is rehired before he or
she has a Break in Service, the amount forfeited when his or
her employment last terminated shall be restored to his or
her Account. The restoration shall include the interest
which would have been credited had such forfeiture been
invested in the Sweep Account from the date forfeited until
the date the restoration amount is determined. The amount
shall come from the Forfeiture Account to the extent
possible, and any additional amount needed shall be
contributed by the Employer. The vested interest in his or
her restored Account shall then be equal to:
V% times (AB + D) - D
where:
V% = current vested percentage
AB = current account balance
D = amount previously distributed
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9 PARTICIPANT LOANS
9.1 Participant Loans Permitted
Loans to Participants are permitted pursuant to the terms and
conditions set forth in this Section. All loans are made (and limits
determined) as of the Sweep Date occurring on or next following the
date the loan approval directive is received by the Trustee. The
funds will be disbursed to the Participant as soon as is
administratively feasible after the next following Settlement Date.
9.2 Loan Funding Limits
The loan amount must meet all of the following limits:
(a) Plan Minimum Limit. The minimum amount for any loans if
$500.
(b) Plan Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing Plan loans, is
based upon the following Accounts of the Participant which
are fully vested (the "Source Amount"):
Pre-Tax Account
Rollover Account
The maximum amount is equal to:
IF SOURCE AMOUNT IS: MAXIMUM LOAN AMOUNT IS:
Under $20,000 100% of Source Amount, not to
exceed $10,000
$20,000 or over 50% of Source Amount, not to exceed
$50,000
(c) Legal Maxumum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing loans, is
based upon his or her vested interest in this Plan and all
other qualified plans maintained by a Related Company (the
"Vested Interest"). The maximum amount is equal to 50% of
Vested Interest, not to exceed $50,000*
* The $50,000 amount is reduced by the Participant's highest
outstanding balance of all loans from any Related Company's
qualified plans during the 12 month period ending on the day
before the Sweep Date on which the loan is made.
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<PAGE>
9.3 Maximum Number of Loans
A Participant may have only one loan outstanding at any given time.
9.4 Source of Loan Funding
A loan to a Participant shall be made solely from the assets of his or
her own Accounts. The available assets shall be determined first by
Contribution Account and then by investment type within each type of
Contribution Account. The hierarchy for loan funding by type of
Contribution Account shall be the order listed in the preceding Plan
Maximum Limit paragraph. Within each Account used for funding,
amounts shall first be taken from the cash Account and then taken by
type of investment in direct proportion to the market value of the
Participant's interest in each Investment Fund as of the Sweep Date on
which the loan is made.
9.5 Interest Rate
The interest rate charged on Participant loans shall be fixed and
equal to the Trustee's prime rate, plus 1%.
9.6 Repayment
Substantially level amortization shall be required of each loan with
payments made at least quarterly, through payroll deduction, provided
that payment can be made by check for advance loan payments, or when a
Participant is on a Leave of Absence or transferred to the employ of a
Related Company which is not participating in the Plan. Loans may be
prepaid in full or in part at any time. The loan repayment period
shall be as mutually agreed upon by the Participant and Administrator,
not to exceed five years. However, the term may be for any period not
to exceed 10 years if the purpose of the loan is to acquire the
Participant's principal residence.
9.7 Repayment Hierarchy
Loan principal repayments shall be credited to the Participant's
Contribution Accounts in the inverse of the order used to fund the
loan. Loan interest shall be credited to the Contribution Account in
direct proportion to the principal repayment. Loan payments are
credited by investment type based upon the Participant's current
investment election for new Contributions.
9.8 Loan Application, Note and Security
A Participant shall apply for any loan in writing. The Administrator
shall
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<PAGE>
specify the time frame for approving loan applications. All loans
shall be evidenced by a promissory note and secured only by a
Participant's vested Account balance. The Plan shall have a lien on a
Participant's Account to the extent of any outstanding loan balance.
9.9 Default, Suspension and Call Feature
(a) Default. A loan is treated as a default if scheduled loan
payments are more than 90 days late, provided that the
Administrator may agree to a suspension of loan payments for
up to 12 months for a Participant who is on a Leave of
Absence. A Participant shall then have 30 days from the
time he or she receives written notice of the default and a
demand for past due amounts to cure the default before it
becomes final.
(b) Actions upon Default. In the event of default, the
Administrator may direct the Trustee to execute upon its
security interest in the Participant's Account by deducting
the unpaid loan balance from the Account, including interest
to the date of default and report the default as a taxable
distribution. As soon as a Plan withdrawal or distribution
to such Participant would otherwise be permitted, the
Administrator may instruct the Trustee to distribute the
note to the Participant. A default constitutes a permitted
distribution to the extent it does not involve a
Participant's Pre-Tax Account.
(c) Call Feature. The Administrator shall have the right to
call any Participant loan once employment with all Related
Companies terminates.
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10 IN-SERVICE WITHDRAWALS
10.1 Withdrawals for Hardship
(a) Requirements. A Participant may request the withdrawal of any
amount needed to satisfy a financial need by submitting a
completed withdrawal request form to the Administrator. The
Administrator shall only approve those requests for withdrawals
(1) on account of a Participant's "Deemed Financial Need", and
(2) which are "Deemed Necessary" to satisfy the financial need.
(b) "Deemed Financial Need". Financial commitments relating to:
(1) medical expenses described under Code section 213(d)
incurred by the Employee, his or her spouse or his or her
dependents;
(2) the purchase (excluding mortgage payments) of the Employee's
principal residence;
(3) the payment of next semester's or quarter's tuition for
postsecondary education for the Employee, his or her spouse
or dependents;
(4) the need to pay for the funeral expenses of a family member;
(5) the need for the Employee to prevent losing his or her
principal residence through eviction or foreclosure on the
mortgage; or
(6) any other circumstance specifically permitted under the
Code.
(c) "Deemed Necessary". A withdrawal is "deemed necessary" to satisfy
the financial need only if all of these conditions are met:
(1) the Employee has obtained all other possible withdrawals and
nontaxable loans available from all plans maintained by the
Related Companies;
(2) the Employee is suspended from making any Contributions to
any qualified plan maintained by the Employer for 12 months
from the date the withdrawal payment is processed; and
(3) the Pre-Tax Dollar Limit for the calendar year next
following the calendar year of the hardship withdrawal shall
be reduced by the
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amount of the Employee's Pre-Tax Contributions for the
calendar year of the hardship withdrawal.
(d) Contribution Account Sources for Withdrawal. The withdrawal
amount shall come only from his or her fully vested Accounts, in
the following priority order of Contribution Accounts:
Rollover Account
Matching Account
Profit Sharing Account
Pre-Tax Account
The amount that may be withdrawn from a Participant's Pre-Tax
Account shall not include any earnings credited to his or her
Pre-Tax Contribution Account after the first Plan Year beginning
after December 31, 1988.
10.2 Withdrawals for Participants over Age 59-1/2
(a) Requirements. A Participant who is over age 59-1/2 may withdraw
from the Contribution Accounts listed in paragraph (b) below.
(b) Contribution Account Sources for Withdrawal. The withdrawal
amount shall come only from his or her fully vested Accounts, in
the following priority order of Contribution Accounts:
Pre-Tax Account
Rollover Account
Matching Account
Profit Sharing Account
(c) Permitted Frequency. There is no restriction on the number of
times a Participant may withdraw from these Accounts after age
59-1/2.
10.3 Withdrawals of Amounts on Deposit Two Years
Requirements. During 1991, a Participant may withdraw any amount
credited to his or her Profit Sharing Account attributable to
Contributions made at least 24 months prior to the withdrawal.
10.4 Withdrawal Processing
(a) Minimum Amount. The minimum payment for any type of withdrawal is
$500.
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(b) Application by Participant. A Participant must submit a completed
withdrawal request form to the Administrator to apply for any
type of withdrawal.
(c) Approval by Administrator. The Administrator is responsible for
determining that a withdrawal request conforms to the
requirements described in this Section and notifying the Trustee
of any payments to be made in a timely manner.
(d) Time of Processing. The Trustee shall process all withdrawal
requests which it receives by the Sweep Date cut off, based on
the value as of the Sweep Date, and fund them on the next
Settlement Date. The Trustee shall then make payment to the
Participant as soon thereafter as is administratively feasible.
(e) Medium and Form of Payment. The medium of payment for withdrawals
is either cash or direct deposit. The form of payment for
withdrawals shall be a single installment.
(f) Investment Fund Sources. Within each Contribution Account used
for funding a withdrawal, amounts shall first be taken from the
Sweep Account and then taken by type of investment in direct
proportion to the market value of the Participant's interest in
each Investment Fund (which excludes Participant loans) at the
time the withdrawal is made.
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11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS
11.1 Benefit Election
Subject to the other requirements of this Section, a Participant (or
his or her Beneficiary in the case of his or her death) may elect to
have his or her vested Account balance paid to him or her beginning
upon any Settlement Date following his or her termination of
employment with all Related Companies, by submitting his or her
completed election forms to the Administrator. The election must be
submitted in sufficient time for the Administrator to instruct the
Trustee to process the payment by the Sweep Date that relates to the
Settlement Date upon which payments are to begin.
11.2 Payment Form and Medium
A Participant shall be paid in the form of a lump sum.
Payments will generally be made in cash (generally by check).
11.3 Small Amounts Paid Immediately
If the Participant's vested Account BALANCE IS $3,500 or less, the
Participant's benefit shall be paid as a single lump sum as soon as
administratively feasible after his or her employment with all Related
Companies ends.
11.4 Latest Commencement Permitted
Unless a Participant elects otherwise, his or her benefit payments
will begin not later than 60 days after the end of the Plan Year in
which he or she attains his or her Normal Retirement Date or retires,
whichever is later. However, if the amount of the payment or the
location of the Participant (after a reasonable search) cannot be
ascertained by that deadline, payment shall be made no later than 60
days after the earliest date on which such amount or location is
ascertained. In any case, benefit payments shall begin by the April 1
immediately following the end of the calendar year in which he or she
attains age 70-1/2 (whether or not he or she is an Employee).
11.5 Payment Within Life Expectancy
The Participant's payment election must be consistent with the
requirement of Code section 401(a)(9) that all payments are to be
completed within a
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period not to exceed the lives or the joint and last survivor life
expectancy of the Participant and his or her Beneficiary. The life
expectancies of a Participant and his or her spouse may be recomputed
annually.
11.6 Incidental Benefit Rule
The Participant's payment election must be consistent with the
requirement that, if the Participant's spouse is not his or her sole
primary Beneficiary, the minimum annual distribution for each calendar
year, beginning with the year in which he or she attains age 70-1/2,
shall not be less than the quotient obtained by dividing (a) the
Participant's vested Account balance as of the last Trade Date of the
preceding year by (b) the applicable divisor as determined under the
incidental benefit requirements of Code section 401(a)(9).
11.7 Payment to Beneficiary
Payment to a Beneficiary must either: (1) be completed within five
years of the Participant's death or (2) begin within one year of the
his or her death and be completed within the period of the
Beneficiary's life or life expectancy, except that:
(a) If the Participant dies after the April 1 immediately
following the end of the calendar year in which he or she
attains age 70-1/2, payment to his or her Beneficiary must
be at least as rapidly as provided in the Participant's
distribution election;
(b) If the surviving spouse is the Beneficiary, payments need
not begin until the end of the calendar year in which the
Participant would have attained age 70-1/2; and
(c) If the Participant and the surviving spouse who is the
Beneficiary die before (1) the end of the calendar year in
which April 1 on which the Participant would have attained
age 70-1/2 and (2) payments have begun to the spouse, the
spouse's Beneficiary will be treated as the Participant's
Beneficiary in applying these rules.
11.8 Beneficiary Designation
Each Participant shall complete a beneficiary designation form
indicating the Beneficiary who is to receive the Participant's
remaining Plan interest at the time of his or her death. The
designation may be changed at any time. However, a Participant's
spouse shall be the Beneficiary unless the designation includes
Spousal Consent for the other Beneficiary. If no designation is in
effect at the time of a Participant's death or if the Beneficiary does
not survive the Participant, the Beneficiary shall be, in the order
listed, the:
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(a) Participant's surviving spouse,
(b) Beneficiary named by the Participant in the Employer's
primary life insurance plan, or
(c) Participant's estate.
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12 ADP AND ACP TESTS
12.1 Contribution Limitation Definitions
(a) "Average Contribution Percentage" or "ACP". The Average
Percentage calculated using Contributions.
(b) "Average Deferral Percentage" or "ADP". The Average
Percentage calculated using Deferrals.
(c) "Average Percentage". The average of the calculated
percentages for Participants within the specified group.
The calculated percentage refers to either the "Deferrals"
or "Contributions" (as defined in this Section) made on the
Participant's behalf for the Plan Year, divided by his or
her Compensation for such year. (Pre-Tax Contributions
which will be refunded because they exceed the Pre-Tax
Dollar Limit are included in the percentage.)
(d) "Contributions" shall include Matching Contributions. In
addition, Contributions may include Pre-Tax Contributions, but
only to the extent that (1) the Employer elects to use them, (2)
they are not used or counted in the ADP Test, and (3) they are
necessary to meet the ACP Test Alternative Limitation.
(e) "Deferrals" shall include Pre-Tax Contributions.
(f) "HCE Group" and "NHCE Group". The respective group of HCEs and
NHCEs who are eligible to have amounts contributed on their
behalf for the Plan Year.
(1) If the Related Companies maintain two or more plans which
are subject to the ADP or ACP Test, and are considered as
one plan for purposes of Code sections 401(a)(4) or 410(b),
all such plans shall be aggregated and treated as one plan
for purposes of meeting the ADP and ACP Tests.
(2) If an HCE has any "family members" (within the meaning of
Code section 414(g)(6)(B)), the Deferrals, Contributions and
Compensation of the HCE's family members shall be treated as
made or earned by the HCE.
(3) If an HCE is covered by more than one cash or deferred
arrangement maintained by the Related Companies, all such
plans shall be aggregated and treated as one plan for
purposes of calculating the separate percentage for the HCE
which is used in the determination of the Average
Percentage.
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12.2 ADP and ACP Tests
The ADP and ACP for the HCE Group must meet either the Basic or
Alternative Limitation when compared to the respective ADP and ACP for
the NHCE group:
(a) Basic Limitation. The HCE Group percentage may not exceed 1.25
times the NHCE Group percentage.
(b) Alternative Limitation. The HCE group percentage is limited by
reference to the NHCE group percentage as follows:
If the NHCE Group Then the Maximum HCE
Percentage is: Group Percentage is:
Less than 2% 2 times NHCE Group %
2% to 8% NHCE Group % plus 2%
More than 8% Basic Limitation applies
12.3 Correction of ADP and ACP Tests
If the ADP or ACP Tests are not met, the Administrator shall determine
a maximum percentage to be used in place of the calculated percentage
for all HCEs that would reduce the ADP and/or ACP for the HCE group by
a sufficient amount to meet the ADP and ACP Tests.
(a) ADP Correction. Pre-Tax Contributions shall be refunded
(including amounts previously refunded because they exceeded the
Pre-Tax Dollar Limit) to the Participant in an amount equal to
the actual Deferral minus the product of the maximum percentage
and the HCE's Compensation.
(b) ACP Correction. Contribution amounts in excess of the maximum
percentage of an HCE's Compensation shall be refunded to the
Participant to the extent vested, and forfeited to the extent
such amounts were not vested as of the end of the Plan Year being
tested. The excess amounts shall first be taken from unmatched
After-Tax Contributions, and then as a proportional combination
of matched After-Tax and Matching Contributions.
(c) Investment Fund Sources. Once the amount of excess Deferrals
and/or Contributions is determined by type of Contribution,
amounts shall then be taken by type of investment in direct
proportion to the market value of the Participant's interest in
each Investment Fund (which excludes Participant loans) at the
time the correction is processed.
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12.4 Multiple Use Test
If the Alternative Limitation is used to meet both the ADP and ACP
Tests, the ADP and ACP for the HCE Group must also comply with the
requirements of Code section 401(m)(9), which as of the Effective Date
require that the sum of these two percentages (as determined after any
corrections needed to meet the ADP and ACP Tests have been made) must
not exceed the sum of:
(a) the larger of the ADP or ACP for the NHCE Group times 1.25, and
(b) the smaller of the ADP or ACP for the NHCE Group, times 2 if the
NHCE percentage is less than 2%, or plus 2% if it is greater than
2%.
If the multiple use limit is exceeded, the Administrator shall
determine a maximum percentage to be used in place of the calculated
percentage for all HCEs that would reduce either or both the ADP or
ACP for the HCE Group by a sufficient amount to meet the multiple use
limit. Any excess shall be handled in the same manner that excess
Deferrals or Contributions are handled.
12.5 Adjustment for Investment Gain or Loss
The net investment gain or loss associated with the excess Deferral or
Contribution amount shall be distributed or forfeited in the same
manner as the excess amount. Such gain or loss is calculated as
follows:
E x G x (1 + (10% x M))
------
(AB - G)
where:
E = the total excess amount,
G = the net gain or loss for the Plan Year from all of an HCE's
affected Accounts,
AB= the total value of an HCE's affected Accounts, determined as
of the end of the Plan Year being corrected,
M = the number of full months from the Plan Year end to the date
excess amounts are paid, plus one for the month during which
payment is to be made if payment will occur after the 15th
of that month.
12.6 Required Records
The Administrator shall maintain records which are sufficient to
demonstrate that the ADP, ACP and Multiple Use Tests have been met for
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each Plan Year for at least as long as the Employer's corresponding tax year is
open to audit.
12.7 Incorporation by Reference
The provisions of this Section are intended to satisfy the
requirements of Code sections 401(k)(3) and (m)(2) and, to the extent
not otherwise stated in this Section, those Code sections are
incorporated herein by reference.
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13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS
13.1 "Annual Addition" Defined
The sum of all contributions (excluding rollovers and transfers from
another qualified plan) and forfeitures allocated to the Participant's
accounts in this Plan and all other defined contribution plans
(currently or previously) maintained by any Related Company for the
Plan Year (which shall be the Code section 415 limitation year). The
Plan Year refers to the year the allocation pertains, regardless of
when it is allocated.
13.2 Maximum Annual Addition
The Annual Addition to a Participant's accounts under this Plan and
any other defined contribution plan maintained by the Employer for any
Plan Year shall not exceed the lesser of (1) 25% of his or her Taxable
Income or (2) the greater of $30,000 or one-quarter of the dollar
limitation in effect under Code section 415(b)(1)(A).
13.3 Avoiding an Excess Annual Addition
If the allocation of Employer Contributions would produce an excess
Annual Addition, the affected Participant shall receive the maximum
Annual Addition from Employer Contributions and the remainder of the
Employer Contribution will be allocated in the prescribed manner to
all other eligible Participants.
13.4 Correcting an Excess Annual Addition
Upon the discovery of a reasonable error (due to estimating a
Participant's compensation or other limited facts and circumstances
acceptable to the Internal Revenue Service) which has resulted in the
allocation to a Participant's Account of an amount which exceeds the
Annual Addition limit, the excess amount (adjusted to reflect
investment gains) shall be forfeited by the Participant and used to
reduce subsequent Contributions as soon as is administratively
feasible. The Employer shall pay each affected Participant an amount
equal to any forfeiture from his or her Pre-Tax Account.
13.5 Correcting a Multiple Plan Excess
If a Participant, whose Account is credited with an excess Annual
Addition, received allocations to more than one defined contribution
plan, the excess shall be corrected by reducing the Annual Addition to
this Plan only after all possible reductions have been made to the
other defined contribution plans.
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13.6 "Defined Benefit Fraction" Defined
The fraction, for any Plan Year, where the numerator is the "projected
annual benefit" and the denominator is the greater of 125% of the
"protected current accrued benefit" or the normal limit which is the
lesser of (1) 125% of the maximum dollar limitation provided under
Code section 415(b)(1)(A) for the Plan Year or (2) 140% of the amount
which may be taken into account under Code section 415(b)(1)(B) for
the Plan Year, where a Participant's:
(a) "projected annual benefit" is the annual benefit provided by the
Plan determined pursuant to Code section 415(e)(2)(A), and
(b) "protected current accrued benefit" in a defined benefit plan in
existence on July 1, 1982, shall be the accrued annual benefit
provided for under Public Law 97-248, section 235(g)(4), as
amended.
13.7 "Defined Contribution Fraction" Defined
The fraction where the numerator is the sum of the Participant's
Annual Addition for each Plan Year to date and the denominator is the
sum of the "annual amounts" for each year in which the Participant has
performed service with a Related Company. The "annual amount" for any
Plan Year is the lesser of (1) 125% of the Code section 415(c)(1)(A)
dollar limitation (determined without regard to subsection (c)(6)) in
effect for the Plan Year and (2) 140% of the Code section 415(c)(1)(B)
amount in effect for the Plan Year, where:
(a) each Annual Addition is determined pursuant to the Code section
415(c) rules in effect for such Plan Year, and
(b) the numberator is adjusted pursuant to Public Law 97-248, section
235(g)(3), as amended.
13.8 Combined Plan Limits and Correction
If a Participant has also participated in a defined benefit plan
maintained by a Related Company, the sum of the Defined Benefit
Fraction and the Defined Contribution Fraction for any Plan Year may
not exceed 1.0. If the combined fraction exceeds 1.0 for any Plan
Year, the Participant's defined benefit amount shall be limited so
that the combined fraction does not exceed 1.0.
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14 TOP HEAVY RULES
14.1 Top Heavy Definitions
When capitalized, the following words and phrases have the following
meanings when used in this Section:
(a) "Aggregation Group". The group consisting of each qualified plan
maintained by a Related Company (1) in which a Key Employee is a
participant, or (2) which enables another plan in the group to
meet the requirements of Code sections 401(a)(4) and 410. The
Employer may also treat any other qualified plan as part of the
group if the group would continue to meet the requirements of
Code sections 401(a)(4) and 410 with such plan being taken into
account.
(b) "Determination Date". The last day of the preceding Plan Year
or, in the case of the Plan's first year, the last day of the
first Plan Year.
(c) "Key Employee". A current or former Employee (or his or her
Beneficiary) who at any time during the five year period ending
on the Determination Date was:
(1) an officer of the Employer whose Taxable Income (i) exceeds
150% of the amount in effect under Code section 415(c)(1)(A)
and (ii) places him within the following highest paid group
of officers:
Number of Highest Paid
Employees Officers Included
Less than 30 3
30 to 500 10% of the Employees
More than 500 50
(2) a more than 5% Owner,
(3) a more than 1% Owner whose Taxable Income exceeds $150,000,
or
(4) a more than 0.5% Owner who is among the 10 Employees owning
the largest interest in the Company and whose Taxable Income
exceeds the amount in effect under Code section
415(c)(1)(A).
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(d) "Plan Benefit". The sum as of the Determination Date of (1) an
Employee's Account, (2) the present value of his or her other
accrued benefits provided by all qualified plans within the
Aggregation Group, and (3) the aggregate distributions made
within the five year period ending on such date. Plan Benefits
shall exclude rollover contributions from a non-related employer
made after December 31, 1983.
(e) "Top Heavy". The Plan's status when the Plan Benefits of Key
Employees account for more than 60% of the Plan Benefits of all
Employees who have performed services at any time during the five
year period ending on the Determination Date. The Plan Benefits
of Employees who were, but are no longer Key Employees (because
they have not been an officer or Owner during the five year
period), are excluded in the determination.
14.2 Special Contributions
(a) Minimum Contribution Requirement. For each Plan Year in which
the Plan is Top Heavy, the Employer shall not allow any
contributions (other than a Rollover Contribution) to be made by
or on behalf of any Key Employee unless the Employer makes a
Profit Sharing or Special contribution on behalf of all
Participants who were Eligible Employees as of the last day of
the Plan Year in an amount equal to at least 3% of each such
Participant's Taxable Income. The Administrator shall remove any
such contributions (including applicable investment gain or loss)
credited to a Key Employee's Account in violation of the
foregoing rule and return them to the Employer or Employee to the
extent permitted by the Limited Return of Contributions
paragraph.
(b) Overriding Minimum Benefit. Notwithstanding, contributions shall
be permitted on behalf of Key Employees if the Employer also
maintains a defined benefit plan which automatically provides a
benefit which satisfies the Code section 416(c)(1) minimum
benefit requirements, including the adjustment provided in Code
section 416(h)(2)(A), if applicable.
14.3 Special Vesting
If a Plan becomes Top Heavy after the Effective Date, vesting for all
Employees shall thereafter be accelerated to the extent the following
vesting schedule produces a greater vested percentage for the Employee
than the normal vesting schedule at any relevant time:
Years of Vesting Vested
Service Percentage
---------------- -----------
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Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
14.4 Adjustment to Combined Limits for Different Plans
For each Plan Year in which the Plan is Top Heavy, 100% shall be
substituted for 125% in determining the Defined Benefit Fraction and
the Defined Contribution Fraction.
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15 PLAN ADMINISTRATION
15.1 Plan Delineates Authority and Responsibility
Plan fiduciaries include the Company, the Administrator and the
Trustee, whose specific duties are delineated in this Plan and Trust.
In addition, Plan fiduciaries also include any other person to whom
fiduciary duties or responsibility is delegated with respect to the
Plan. Any person or group may serve in more than one fiduciary
capacity with respect to the Plan. To the extent permitted under
ERISA section 405, no fiduciary shall be liable for a breach by
another fiduciary.
15.2 Fiduciary Standards
Each fiduciary shall:
(a) discharge his or her duties in accordance with this Plan and
Trust to the extent they are consistent with ERISA;
(b) use that degree of care, skill, prudence and diligence that a
prudent person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims;
(c) act with the exclusive purpose of providing benefits to
Participants and their Beneficiaries, and defraying reasonable
expenses of administering the Plan;
(d) diversify Plan investments so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not
to do so; and
(e) treat similarly situated Participants and Beneficiaries in a
uniform and nondiscriminatory manner.
15.3 Company is ERISA Plan Administrator
The Company is the plan administrator, within the meaning of ERISA
section 3(16), responsible for compliance with all reporting and
disclosure requirements, except those that are explicitly the
responsibility of the Trustee under applicable law. The Administrator
shall have any necessary authority to carry out such functions through
the actions of its duly appointed officers.
15.4 Administrator Duties
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The Administrator shall have the authority to construe this Plan and
Trust, other than the provisions which relate to the Trustee, and to
do all things necessary or convenient to effect the intent and purpose
of the Plan, whether or not such powers are specifically set forth in
this Plan and Trust. Actions taken in good faith by the Administrator
shall be conclusive and binding on all interested parties, and shall
be given the maximum possible deference allowed by law. In addition
to the duties listed elsewhere in this Plan and Trust, the
Administrator's authority shall include, but not be limited to, the
authority to:
(a) Determine who is eligible to participate, the allocation of
Contributions, and the eligibility for withdrawals, loans and
distributions;
(b) Provide each Participant with a summary plan description no later
than 90 days after he or she has become a Participant (or such
other period permitted under ERISA section 104(b)(1)), as well as
informing each Participant of any material modification to the
Plan in a timely manner;
(c) Make a copy of the following documents available to Participants
during normal work hours: this Plan and Trust (including
subsequent amendments), all annual and interim reports of the
Trustee related to the entire Plan, the latest annual report and
the summary plan description;
(d) Determine the fact of a Participant's death and of any
Beneficiary's right to receive the deceased Participant's
interest based upon such proof and evidence as it deems
necessary; and
(e) Establish and review at least annually a funding policy bearing
in mind both the short-run and long-run needs and goals of the
Plan. To the extent Participants may direct their own
investments, the funding policy shall focus on which Investment
Funds are available for Participants to use.
15.5 Advisors May be Retained
The Administrator may retain such agents and advisors (including
attorneys, accountants, actuaries, consultants, record keepers,
investment counsel and administrative assistants) as it considers
necessary to assist it in the performance of its duties. The
Administrator shall also comply with the bonding requirements of ERISA
section 412.
15.6 Delegation of Administrator Duties
The Administrator shall provide the Trustee with the names and
specimen
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signatures of any person who is authorized to act as or on behalf of
the Administrator. The Company may, but shall not be required to,
delegate its duties as Administrator by appointing a committee (the
"Committee") which shall be responsible for performing the duties
allocated to the Administrator in this Plan and Trust. Any Committee
member appointed by the Company shall serve at the pleasure of the
Company, but may resign by written notice to the Company. Committee
members shall serve without compensation from the Plan for such
services.
15.7 Committee Operating Rules
(a) Actions on Majority. Any act delegated by the Administrator to
the Committee may be done by a majority of its members. The
majority may be expressed by a vote at a meeting or in writing
without a meeting, and a majority action shall be equivalent to
an action of all Committee members.
(b) Meetings. The Committee shall hold meetings upon such notice,
place and times as it determines necessary to conduct its
functions properly.
(c) Reliance by Trustee. The Committee may authorize one or more of
its members to execute documents on its behalf and give written
direction to the Trustee in the performance of its duties. The
Trustee shall accept such direction and rely upon it until
notified in writing that the Committee has revoked the
authorization to give such direction. The Trustee shall not be
deemed to be on notice of any change in the membership of the
Committee or the duties delegated to the Committee until notified
in writing.
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16 MANAGEMENT OF INVESTMENTS
16.1 Trust Agreement
All Plan assets shall be held by the Trustee in trust, in accordance
with those provisions of this Plan and Trust which relate to the
Trustee, for use in providing Plan benefits and paying Plan expenses
not paid directly by the Employer. Plan benefits will be drawn solely
from the Trust and paid by the Trustee as directed by the
Administrator.
16.2 Investment Funds
The Administrator is hereby granted authority to direct the Trustee to
invest Trust assets in various Investment Funds. The Investment Funds
shall be comprised of:
(a) collective investment funds maintained by the Trustee which are
available for investment by trusts which are qualified under Code
sections 401(a) and 501(a);
(b) guaranteed investment contracts purchased from a bank or
insurance company prior to the Effective Date;
(c) interest bearing deposits of the Trustee; and
(d) Employer common or preferred stock which is readily tradable and
listed on a national securities exchange (or quoted on a system
sponsored by a national securities association) registered under
the Securities Exchange Act of 1934, as amended.
Any Investment Fund assets invested in a collective investment fund of
the Trustee shall be subject to all the provisions of the instruments
establishing and governing the collective investment fund. These
instruments, including any subsequent amendments, are incorporated
hereby by reference. Notwithstanding, the Administrator may appoint,
with the approval of the Trustee, another trustee to hold and
administer Plan assets which do not meet these requirements.
16.3 Authority to Hold Cash
Each Participant's Sweep Account, which is used to hold assets pending
investment or disbursement, shall consist of interest bearing deposits
of the Trustee. The Trustee may also maintain sufficient deposit or
money market type assets in each Investment Fund to handle the
ordinary administration of the Plan and disbursement of funds.
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16.4 Trustee to Act Upon Instructions
The Trustee shall carry out investment instructions during each
investment cycle that begins on the Sweep Date after such instructions
are received from the Administrator or Participants. Such
instructions shall remain in effect until changed by the Administrator
or Participants.
16.5 Trustee is Investment Manager
The authority to manage, acquire and dispose of Trust assets in the
Investment Funds is hereby vested in the Trustee.
16.6 Investment in Employer Stock
If the Company provides an Employer Stock Investment Fund option for
Participants, the Trustee may acquire and hold sufficient Employer
common or preferred stock to comply with Participants' investment
elections of such Fund.
16.7 Voting and Tendering Employer Stock
Each Participant shall be entitled to direct the Trustee to vote or
tender Employer common or preferred stock held on his or her behalf in
the Employer Stock Investment Fund based upon the customary procedure
of the Trustee for the voting and tendering of employer securities it
holds in trust. The Administrator shall instruct the Trustee with
respect to how to vote or tender any shares for which directions are
not received from Participants.
16.8 Registration and Disclosure for Employer Stock
The Administrator shall be responsible for determining the
applicability (and, if applicable, complying with) the requirements of
the Securities Act of 1933, as amended, the California Corporate
Securities Law of 1968, as amended, and any other applicable blue sky
law. The Administrator shall also specify what restrictive legend or
transfer restriction, if any, is required to be set forth on the
certificates for the securities and the procedure to be followed by
the Trustee to effectuate a resale of such securities.
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17 TRUST ADMINISTRATION
17.1 Trustee to Construe Trust
The Trustee shall have the authority to construe those provisions of
this Plan and Trust which relate to the Trustee and to do all things
necessary or convenient to the administration of the Trust, whether or
not such powers are specifically set forth in this Plan and Trust.
Actions taken in good faith by the Trustee shall be conclusive and
binding on all interested parties, and shall be given the maximum
possible deference allowed by law.
17.2 Trustee To Act As Owner of Trust Assets
Subject to the specific conditions and limitations set forth in this
Plan and Trust, the Trustee shall have all the power, authority,
rights and privileges of an absolute owner of the Trust assets and,
not in limitation but in amplification of the foregoing, may:
(a) receive, hold, manage, invest and reinvest, sell, tender,
exchange, dispose of, encumber, hypothecate, pledge, mortgage,
lease, grant options respecting, repair, alter, insure, or
distribute any and all property in the Trust;
(b) borrow money, participate in reorganizations, pay calls and
assessments, vote or execute proxies, exercise subscription or
conversion privileges, exercise options and register any
securities in the Trust in the name of the nominee, in federal
book entry form or in any other form as will permit title thereto
to pass by delivery;
(c) renew, extend the due date, compromise, arbitrate, adjust,
settle, enforce or foreclose, by judicial proceedings or
otherwise, or defend against the same, any obligations or claims
in favor of or against the Trust; and
(d) lend, through a collective investment fund, any securities held
in such collective investment fund to brokers, dealers or other
borrowers and to permit such securities to be transferred into
the name and custody and be voted by the borrower of others.
17.3 United States Indicia of Ownership
The Trustee shall not maintain the indicia or ownership of any Trust
assets outside the jurisdiction of the United States, except as
authorized by ERISA section 404(b).
17.4 Tax Withholding and Payment
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(a) Withholding. The Administrator shall provide the Trustee with a
signed withholding form (which is acceptable to the Trustee) for
any Participant or Beneficiary who is to receive a taxable
distribution from the Trust. The Trustee shall calculate and
withhold federal (and, if agreed to with the Administrator,
state) income taxes as directed on the withholding form.
(b) Taxes Due From Investment Funds. The Trustee shall pay from the
Investment Fund any taxes or assessments imposed by any taxing or
governmental authority on such Fund or its income, including
related interest and penalties.
17.5 Trustee Duties and Limitations
The Trustee's duties shall be confined to receiving funds on behalf of
and making payments from the Trust, safeguarding and valuing Trust
assets, and investing and reinvesting Trust assets in the Investment
Funds as directed by the Administrator or Participants. The Trustee
shall have no duty or authority to ascertain whether Contributions are
in compliance with the Plan, to enforce collection or to compute or
verify the accuracy or adequacy or any amount to be paid to it by the
Employer. The Trustee shall not be liable for the proper application
of any part of the Trust with respect to any disbursement made in
accordance with the written directions of the Administrator.
17.6 Trust Accounting
(a) Annual Report. Within 60 days (or other reasonable period)
following the close of the Plan Year, the Trustee shall provide
the Administrator with an annual accounting of Trust assets and
information to assist the Administrator in meeting ERISA's annual
reporting and audit requirements.
(b) Periodic Reports. The Trustee shall maintain records and provide
sufficient reporting to allow the Administrator to properly
monitor the Trust's assets and activity.
(c) Administrator Approval. Approval of any Trustee accounting will
automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files a
written objection with the Trustee within such time period. Such
approval shall be final as to all matters and transactions stated
or shown therein and binding upon the Administrator.
17.7 Valuation of Certain Assets
43
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If the Trustee determines the Trust holds any asset which is not
readily tradable and listed on a national securities exchange
registered under the Securities Exchange Act of 1934, as amended, the
Trustee may engage a qualified independent appraiser to determine the
fair market value of such property, and the appraisal fees shall be
paid from the Investment Fund containing the asset.
17.8 Legal Counsel
The Trustee may consult with legal counsel of its choice, including
counsel for the Employer or counsel of the Trustee, upon any question
or matter arising under this Plan and Trust. When relied upon by the
Trustee, the opinion of such counsel shall be evidence that the
Trustee has acted in good faith.
17.9 Fees and Expenses
The Trustee's fees for its services as Trustee shall be such as may be
mutually agreed upon by the Company and the Trustee. Trustee fees and
all reasonable expenses of counsel and advisors retained by the
Trustee may be paid by the Employer. If the Employer chooses not to
pay for these fees and expenses, or if they remain unpaid by the
Employer for a period of 60 days, the Trustee may cause such fees and
expenses to be paid from the Trust.
44
<PAGE>
18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION
18.1 Plan Does Not Affect Employment Rights
The Plan does not provide any employment rights to any Employee. The
Employer expressly reserves the right to discharge an Employee without
regard to the effect such discharge would have upon the Employee's
interest in the Plan.
18.2 Limited Return of Contributions
Except as provided in this paragraph, (1) Plan assets shall not revert
to the Employer nor be diverted for any purpose other than the
exclusive benefit of Participants or their Beneficiaries; and (2) a
Participant's vested interest shall not be subject to divestment. As
provided in ERISA's section 403(c)(2), the actual amount of a
Contribution (or the current value of the Contribution if a net loss
has occurred) may revert to the Employer if such Contribution is:
(a) made by reason of a mistake or fact;
(b) conditioned on the initial qualification of the Plan under Code
section 401(a); or
(c) conditioned upon its deductibility under Code section 404.
The reversion to the Employer must be made within one year of the
mistaken payment of the Contribution, the date of denial of
qualification, or disallowance of deduction, as the case may be. A
Participant shall have no rights under the Plan with respect to any
such reversion.
18.3 Assignment and Alienation
As provided by Code section 401(a)(13), no benefit provided by the
Plan may be anticipated, assigned or alienated, except:
(a) to create, assign or recognize a right to any benefit with
respect to a Participant pursuant to a QDRO, or
(b) to use a Participant's vested Account balance as security for a
loan from the Plan.
18.4 Facility of Payment
If a Plan benefit is due to be paid to a minor or a person who is
unable to care for his or her affairs due to illness or accident, the
Administrator
45
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may instead direct that the benefit be paid in complete satisfaction
of its obligation, to any person acting as his or her custodian under
the California Uniform Transfers to Minors Act, his or her legal
representative or a near relative, or directly for his or her support,
maintenance or education.
18.5 Reallocation of Lost Participant's Accounts
If the Administrator cannot locate a person entitled to payment of a
Plan benefit after a reasonable search, the Administrator may at any
time thereafter treat such person's Account as it would a forfeiture.
If such person subsequently presents the Administrator with a valid
claim for the benefit, such person shall be paid the amount treated as
forfeited, plus the interest that would have been earned in the Sweep
Account to the date of determination. The Administrator shall direct
the Trustee to pay the amount from the Forfeiture Account or through
an additional Employer Contribution.
18.6 Claims Procedure
(a) Right to Make Claim. An interested party who disagrees with the
Administrator's determination of his or her right to Plan
benefits, must submit a written claim and exhaust this claim
procedure before legal recourse of any type is sought. The claim
must include the important issues the interested party believes
support the claim.
(b) Process for Denying a Claim. The Administrator's partial or
complete denial of an initial claim must include an
understandable, written response covering (1) the specific
reasons why the claim is being denied (with reference to the
pertinent Plan provisions) and (2) the steps necessary to perfect
the claim and obtain a final review.
(c) Appeal of Denial and Final Review. The interested party may make
a written appeal of the Administrator's initial decision, and the
Administrator shall respond in the same manner and form as
prescribed for denying a claim initially.
(d) Time Frame. The initial claim, its review, appeal and final
review shall be made in a timely fashion, subject to the
following time table:
ACTION MAXIMUM RESPONSE TIME
File initial claim 60 days after benefit determined
Initial claim review 90 days after claim filed
46
<PAGE>
However, the Administrator may take up to twice the maximum
response time for its initial and final review if it provides an
explanation within the normal period of why an extension is
needed and when its decision will be forthcoming.
18.7 Construction
Headings are included for reading convenience. The text shall control
if any ambiguity or inconsistency exists between the headings and the
text. The singular and plural shall be interchanged wherever
appropriate.
18.8 Jurisdiction and Severability
The Plan and Trust shall be construed, regulated and administered
under ERISA and other applicable federal laws and, where not otherwise
preempted, by the laws of the State of California. If any provision
of this Plan and Trust shall become invalid or unenforceable, that
fact shall not affect the validity or enforceability of any other
provision of this Plan and Trust. All provisions of this Plan and
Trust shall be so construed as to render them valid and enforceable in
accordance with their intent.
18.9 Indemnification by Employer
The Company hereby agrees to indemnify all Plan fiduciaries against
any and all liabilities resulting from any action or inaction, in
relation to the Plan or Trust (1) including (without limitation)
expenses reasonably incurred in the defense of any claim relating to
the Plan or its assets, and amounts paid in any settlement relating to
the Plan or its assets, but (2) excluding actions or inactions made in
bad faith, or resulting from the negligence or or breach of fiduciary
duty of the Trustee. The Company shall have the right, but not the
obligation, to conduct the defense of any action to which this
paragraph applies. The fiduciaries are not entitled to indemnity from
the Plan assets relating to any such action.
47
<PAGE>
19 AMENDMENT, MERGER AND TERMINATION
19.1 Amendment
The Company reserves the right to amend this Plan and Trust at any
time, to any extent and in any manner it may deem necessary or
appropriate. The Company (and not the Trustee) shall be responsible
for adopting any amendments necessary to maintain the qualified status
of this Plan and Trust under Code sections 401(a) and 501(a). The
Administrator shall have the authority to adopt Plan amendments which
have no substantial adverse financial impact upon the Employer or the
Plan. All interested parties shall be bound by any amendment,
provided that no amendment shall:
(a) Become effective until it is accepted in writing by the Trustee;
(b) Make it possible for any portion of the Trust assets to revert to
the Employer or to be used for, or diverted to, any purpose other
than for the exclusive benefit of Participants and Beneficiaries
entitled to Plan benefits:
(c) Decrease the rights of any affected Employee to benefits accrued
to the date on which the amendment is adopted, or if later, the
date upon which the amendment becomes effective; or
(d) Permit an Employee to be paid the balance of his or her Pre-Tax
Account unless the Related Company (or the subsidiary) employing
the Employee (1) terminates its participation in the Plan and
does not maintain another defined contribution plan (other than
an employee stock ownership plan as defined in Code section 4975)
or (2) transfers the Employee to an acquiring company through the
disposition of corporate assets (within the meaning of Code
section 409(d)(2)) as provided for in Code sections 401(k)(2)(B)
and (10).
19.2 Merger
This Plan and Trust may not be merged or consolidated with, nor may
its assets or liabilities transferred to another Plan, unless each
Participant and Beneficiary would receive a benefit just after the
merger, consolidation or transfer which is at least equal to the
benefit which would be received if the Plan had terminated just before
such event.
19.3 Plan Termination
The Company may, at any time and for any reason, terminate the Plan in
full or in part, or completely discontinue contributions. Upon any of
these
48
<PAGE>
events, the rights of each affected Employee to benefits accrued to
that date shall be fully vested. Distributions or withdrawals will be
made in accordance with the terms of the Plan which are subject to
amendment at the time of the Plan's termination. The Trustee's
authority shall continue beyond the Plan's termination date until all
Trust assets have been liquidated and distributed.
19.4 Termination of Related Company's Participation
Any Related Company may terminate its Plan participation upon written
notice executed by the Related Company and delivered to the Company.
Upon the Related Company's request, the Company may instruct the
Trustee and Administrator to spin off all affected Accounts and
underlying assets into a separate qualified plan under which the
Related Company shall assume the powers and duties of the Company.
Alternatively, the Company may treat the event as a partial
termination described above or continue to maintain the Accounts under
the Plan.
19.5 Replacement of the Trustee
The Trustee may resign as Trustee under this Plan and Trust or may be
removed by the Company at any time upon at least 90 days written
notice (or less if agreed to by both parties). In such event, the
Company shall appoint a successor trustee by the end of the notice
period. The successor trustee shall then succeed to all the powers
and duties of the Trustee under this Plan and Trust. If no successor
trustee has been named by the end of the notice period, the Company's
chief executive officer shall become the trustee, or if he or she
declines, the Trustee may petition the court for the appointment of a
successor Trustee.
19.6 Final Settlement and Accounting of Trustees
(a) Final Settlement. As soon as is administratively feasible after
its resignation or removal as Trustee, the Trustee shall transfer
to the successor trustee all property currently held by the
Trust. However, the Trustee is authorized to reserve such sum of
money as it may deem advisable for payment of its accounts and
expenses in connection with the settlement of its accounts or
other fees or expenses payable by the Trust. Any balance
remaining after payment of such fees and expenses shall be paid
to the successor trustee.
(b) Final Accounting. The Trustee shall provide a final accounting
to the Administrator within 90 days of the date Trust assets are
transferred to the successor trustee.
(c) Administrator Approval. Approval of the final accounting will
49
<PAGE>
automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files a
written objection with the Trustee within such time period. Such
approval shall be final as to all matters and transactions stated
or shown therein and binding upon the Administrator.
50
<PAGE>
APPENDIX A
The Investment Funds offered to Participants and Beneficiaries as of the
Effective Date include this set of monthly valued funds:
Employer's Transition GIC Fund
Asset Allocation Fund
Tilts and Timing Fund
If investment instructions are not received from any Participant, his or her
investment instructions shall be assumed to be a 100% investment in the
Employer's Transition GIC Fund.
51
<PAGE>
ACTION OF THE BOARD OF DIRECTORS OF
KOLL MANAGEMENT SERVICES
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its eligible
employees;
WHEREAS, the Koll Management Services (the "Related Company") is a Related
Company as defined in the Plan;
WHEREAS, the Plan provides that any Related Company may become a
participating Employer as defined in the Plan with the approval of the company;
NOW, THEREFORE, RESOLVED, that the Related Company hereby adopts the
amended and restated Plan and Trust which is effective as of July 1, 1989 and
thereby elects to participate as an Employer;
IN WITNESS WHEREOF, each of the undersigned directors has hereunto signed
his name as of the date herein shown below.
Date:9-3-91 Koll Management Services
By: /s/
---------------------------------
Title: President
---------------------------------
The adoption of the Plan by the Related Company is hereby approved.
Date:9-3-91 The Koll Company
By: /s/ Lynda M. Lane
---------------------------------
Title: Sr. V.P., Administration
---------------------------------
<PAGE>
ACTION OF THE BOARD OF DIRECTORS OF
KOLL REALTY ADVISORS
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its eligible
employees;
WHEREAS, the Koll Realty Advisors (the "Related Company") is a Related
Company as defined in the Plan;
WHEREAS, the Plan provides that any Related Company may become a
participating Employer as defined in the Plan with the approval of the Company;
NOW, THEREFORE, RESOLVED, that the Related Company hereby adopts the
amended and restated Plan and Trust which is effective as of July 1, 1989 and
thereby elects to participate as an Employer;
IN WITNESS WHEREOF, each of the undersigned directors has hereunto signed
his name as of the date herein shown below.
Date: ______________________ Koll Realty Advisors
By:
---------------------------------
Title:
---------------------------------
The adoption of the Plan by the Related Company is hereby approved.
Date:9-22-89 The Koll Company
By: /s/ Lynda M. Lane
---------------------------------
Title:
---------------------------------
<PAGE>
ACTION OF THE BOARD OF DIRECTORS OF
KOLL CONSTRUCTION COMPANY
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its eligible
employees;
WHEREAS, the Koll Construction Company (the "Related Company") is a Related
Company as defined in the Plan;
WHEREAS, the Plan provides that any Related Company may become a
participating Employer as defined in the Plan with the approval of the Company;
NOW, THEREFORE, RESOLVED, that the Related Company hereby adopts the
amended and restated Plan and Trust which is effective as of July 1, 1989 and
thereby continue its participation as an Employer;
IN WITNESS WHEREOF, each of the undersigned directors has hereunto signed
his name as of the date herein shown below.
Date: ________________ Koll Construction Company
By:
---------------------------------
Title:
---------------------------------
The adoption of the Plan by the Related Company is hereby approved.
Date:9-22-89 The Koll Company
By: /s/ Lynda M. Lane
---------------------------------
Title: Sr. V.P. Administration
---------------------------------
<PAGE>
RESOLUTIONS ADOPTED BY
THE ADMINISTRATOR AMENDING
THE KOLL COMPANY 401(k) PLUS PLAN
WHEREAS, The Koll Company (the "Company") approved and adopted The Koll
Company 401(k) Plus (the "Plan") and Trust Agreement (the "Trust") which were
originally effective April 1, 1978, and which have subsequently been amended;
and
WHEREAS, the Company reserved the right, through the Board of Directors or
Plan Administrator, to amend the Plan and Trust; and
WHEREAS, the Company has determined that it is in the best interests of the
Company and the participants and beneficiaries to amend the Plan and Trust.
NOW, THEREFORE, BE IT RESOLVED that Section 9.2(b) of the Plan is amended,
effective July 1, 1989, as follows:
"(b) Plan Maximum Limit. Subject to the legal limit described in Section 9.2(c),
the maximum a Participant may borrow, including the outstanding balance of
existing Plan loans, is based upon the following Accounts of the
Participant which are fully vested (the "Source Amount"):
Pre-Tax Account
Rollover Account
The maximum loan amount is equal to 100% of the Source Amount, up to a
maximum of $50,000."
IN WITNESS WHEREOF, the Company, as Plan Administrator, has adopted the
above amendment as evidenced by signature of the undersigned representative of
the Plan committee.
Date: 10-11 1990 By: /s/ Lynda M. Lane
---------------------------------
Title: Sr. Vice Pres.
---------------------------------
<PAGE>
October 2, 1990
Ms. Sharon Leahy
Manager, Compensation & Benefits
The Koll Company
4343 Von Karman Avenue
Newport Beach, CA 92660-2083
Re: Amendment to The Koll Company 401(k) Plus Plan
Dear Shari:
Enclosed, as we discussed, is a revised proposed amendment to The Koll Company
401(k) Plus Plan. This one clarifies that a participant may borrow up to 100% of
his "Source Amount", as long as he does not borrow more than 50% of his "Vested
Interest".
Let me know if you have any questions. Otherwise, please send me an executed
copy of the amendment as soon as it is available.
Sincerely,
/s/ Cornelia R. Cooper
Cornelia R. Cooper
<PAGE>
ACTION OF THE BOARD OF DIRECTORS OF THE KOLL COMPANY
AMENDMENT AND RESTATEMENT OF THE
THE KOLL COMPANY 401(k) PLUS PLAN
WHEREAS, The Koll Company (the "Company") approved and adopted the The Koll
Company 401(k) Plus Plan, formerly called The Koll Company Profit Sharing and
401(k) Plan, (the "Plan"), and Trust Agreement (the "Trust") which were
originally effective April 1, 1978, and which have subsequently been amended;
WHEREAS, the Company reserved the right to amend the Plan and Trust;
WHEREAS, the purpose of the Plan has changed sufficiently to warrant a
change in the Plan name;
WHEREAS, the Company has decided that it is in the best interest of
participants and beneficiaries to amend the Plan and Trust, and to modify their
operations; and
WHEREAS, the Company has entered into a letter of understanding with Wells
Fargo Bank to provide record keeping, trustee and investment management services
for the Plan and Trust under its 401(k) MasterWorks program;
NOW, THEREFORE, RESOLVED, that the attached document renames, amends and
restates the Plan and Trust into a single document effective as of July 1, 1989;
FURTHER RESOLVED, that Wells Fargo Bank, National Association, continue as
Trustee for the Plan in conjunction with its 401(k) MasterWorks program;
FURTHER RESOLVED, that the Company is the Administrator under the Plan, and
that as the Administrator, the Company appoints the following committee to carry
out the Company's responsibilities as Administrator under the Plan and Trust:
Raymond E. Wirta
Lynda M. Lane
Lawrence W. Kellner
FURTHER RESOLVED, the Company authorizes the committee members to do all
things, perform all acts and execute all documents deemed by them to be
necessary or appropriate to give effect to the purpose and intent of these
resolutions which include, but are not limited to (1) executing the Plan and
Trust, (2) securing a favorable determination letter for the amended and
restated Plan and Trust, and (3) amending the Plan and Trust as necessary to
obtain such a determination letter or to make other changes which do not have a
material cost impact to the Company.
Signed: /s/ Lynda M. Lane Date: 9-22-89
-------------------------- --------
<PAGE>
RESOLUTION ADOPTED BY THE ADMINISTRATOR
REGARDING THE KOLL COMPANY 401(k) PLUS PLAN
Whereas, The Koll Company (the "Company") approved and adopted The Koll Company
401(k) Plus Plan (the "Plan") and Trust Agreement (the "Trust") which were
originally adopted April 1, 1978, which has subsequently been amended;
Whereas, the Company has decided that it is in the best interest of the
participants and beneficiaries to adopt a resolution relative to the payment of
Company Matching Contributions as provided in paragraph 5.1(b);
It is now, therefore, resolved that:
1. For the quarter of October 1, 1989 through December 31, 1989, the
Matching Contribution shall be equal to 100% of each eligible
Participant's Pre-Tax Contribution for the period, provided that no
Matching Contributions shall be made based upon a Participant's
Contribution in excess of 5% of his or her pay.
2. Beginning January 1, 1990, the Matching Contribution will be changed
to 50% of each eligible Participant's Pre-Tax Contribution provided
that no Matching Contributions shall be made based upon a
Participant's Contribution in excess of 5% of his or her pay.
In witness whereof, the adoption of this resolution is hereby approved.
Date August 30, 1990 By /s/ Lynda M. Lane
------------------- ------------------------------------
Lynda M. Lane
Senior Vice President
Administration
<PAGE>
THE KOLL COMPANY 401(k) PLUS PLAN AND TRUST
As Amended and Restated July 1, 1989
The Koll Company established The Koll Company 401(k) Plus Plan for the benefit
of eligible employees of the Company and its participating affiliates. The Plan
is intended to constitute a qualified profit sharing plan, as described in Code
section 401(a), which includes a qualified cash or deferred arrangement, as
described in Code section 401(k).
The provisions of this Plan and Trust relating to the Trustee constitute the
trust agreement which is entered into by and between The Koll Company and Wells
Fargo Bank, National Association. The Trust is intended to be tax exempt as
described under Code section 501(a).
The Plan constitutes an amendment and restatement of The Koll Company Profit
Sharing & 401(k) Plan which was originally established effective as of April 1,
1978, and its related trust agreement.
The Koll Company 401(k) Plus Plan and Trust, as set forth in this document, is
hereby executed.
Date: 9-22, 1989 The Knoll Company
By: /s/ Lynda M. Lane
-----------------------------------
Title: Sr V.P. Administration
-----------------------------
The trust agreement set forth in those provisions of this Plan and Trust which
relate to the Trustee is hereby executed.
Date: 10-2, 1989 Wells Fargo Bank, National Association
By: /s/
-----------------------------------
Title: ASSISTANT VICE PRESIDENT AND
TRUST OFFICER
<PAGE>
RESOLUTIONS ADOPTED BY
THE ADMINISTRATOR AMENDING THE
KOLL COMPANY 401(k) PLUS PLAN
WHEREAS, The Koll Company (the "Company") approved and adopted the Koll
Company 401(k) Plus (the "Plan") and Trust Agreement (the "Trust") which were
originally effective April 1, 1978, and which have subsequently been amended;
WHEREAS, the Company reserved the right to amend the Plan and Trust;
WHEREAS, the Company has decided that it is in the best interest of the
participants and beneficiaries to amend the Plan and Trust, and to modify their
operations; and
NOW, THEREFORE, RESOLVED, that the Plan is amended as follows:
1. Section 1.16 is amended by adding the following sentence:
Pursuant to Code Section 414 (q), the Company elects for the lookback
year to be the 12 months ending immediately prior to the start of the
Plan year
IN WITNESS WHEREOF, each of the undersigned directors has hereunto signed
his/her name as of the date herein shown below.
The Koll Company
Date 19 By:
---------- --- -----------------------------------
Title:
---------------------------------
Date 19 By:
---------- --- -----------------------------------
Title:
---------------------------------
The adoption of the amendment is hereby approved.
Date FEB 1 1990 By: /s/ Lynda Lane
-----------------------------------
Lynda Lane
Title: Senior Vice President,
--------------------------------
Administration
<PAGE>
AMENDMENT
TO
THE KOLL COMPANY
PROFIT SHARING AND 401(K) PLAN
WHEREAS The Koll Company (the "Employer") adopted The Koll Company Profit
Sharing and 401(K) Plan (the "Plan") in order to provide retirement income to
its eligible employees; and
WHEREAS it has become necessary to amend said plan;
NOW THEREFORE, said plan is amended as follows;
1. Section 7.4, "Valuation of Accounts" is amended to include the following:
The net earnings, gains and losses of the Trust Fund and Changes in the
fair market value of the Trust Fund assets that are a part of the
Participants' Employer Regular Profit Sharing Account described in Section
7.1(b) shall be allocated annually except for the six months ended June 30,
1989 where they will be allocated at that date.
The effective date of this Amendment shall be February 15, 1988.
IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this
16 day of October 1989.
THE KOLL COMPANY
APPROVED: /s/ Lynda Lane BY: /s/ Lynda Lane
------------------------ -----------------------------------
Sr. V.P. Administration
-----------------------------------
<PAGE>
TABLE OF CONTENTS
1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Ineligible Employees. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Ineligible Participants . . . . . . . . . . . . . . . . . . . . . . . 7
3 PARTICIPANT CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Pre-Tax Contribution Election . . . . . . . . . . . . . . . . . . . . 8
3.2 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Stopping Contributions. . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Contribution Percentage Limits. . . . . . . . . . . . . . . . . . . . 8
3.5 Refunds When Pre-Tax Dollar Limit Exceeded. . . . . . . . . . . . . . 8
3.6 Timing, Posting and Tax Considerations. . . . . . . . . . . . . . . . 9
4 ROLLOVERS & TRUST-TO-TRUST TRANSFERS . . . . . . . . . . . . . . . . . . . 10
4.1 Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Transfers From Other Qualified Plans. . . . . . . . . . . . . . . . . 10
5 EMPLOYER CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Matching Contributions. . . . . . . . . . . . . . . . . . . . . . . . 11
6 ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Individual Participant Accounting . . . . . . . . . . . . . . . . . . 12
6.2 Sweep Account is Transaction Account. . . . . . . . . . . . . . . . . 12
6.3 Trade Date Accounting and Investment Cycle. . . . . . . . . . . . . . 12
6.4 Accounting for Investment Funds . . . . . . . . . . . . . . . . . . . 12
6.5 Accounting for Participant Loans. . . . . . . . . . . . . . . . . . . 13
6.6 Company Decides Who Pays Fees and Expenses. . . . . . . . . . . . . . 13
6.7 How Fees and Expenses are Charged to Participants . . . . . . . . . . 13
6.8 Error Correction. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.9 Participant Statements. . . . . . . . . . . . . . . . . . . . . . . . 13
6.10 Special Accounting During Conversion Period . . . . . . . . . . . . . 14
6.11 Accounts for QDRO Beneficiaries . . . . . . . . . . . . . . . . . . . 14
7 INVESTMENT FUNDS AND ELECTIONS . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Investment Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Investment Fund Elections . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Responsibility for Investment Choice. . . . . . . . . . . . . . . . . 15
7.4 Default if No Election. . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Timing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Switching Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8 VESTING & FORFEITURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
8.1 Fully Vested Contribution Accounts. . . . . . . . . . . . . . . . . . 17
8.2 Full Vesting upon Certain Events. . . . . . . . . . . . . . . . . . . 17
8.3 Vesting Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.4 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.5 Rehired Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9 PARTICIPANT LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.1 Participant Loans Permitted . . . . . . . . . . . . . . . . . . . . . 19
9.2 Loan Funding Limits . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.3 Maximum Number of Loans . . . . . . . . . . . . . . . . . . . . . . . 19
9.4 Source of Loan Funding. . . . . . . . . . . . . . . . . . . . . . . . 20
9.5 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.6 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.7 Repayment Hierarchy . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.8 Loan Application, Note and Security . . . . . . . . . . . . . . . . . 20
9.9 Default, Suspension and Call Feature. . . . . . . . . . . . . . . . . 21
10 IN-SERVICE WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 Withdrawals for Hardship . . . . . . . . . . . . . . . . . . . . . . 22
10.2 Withdrawals for Participants over Age 59-1/2 . . . . . . . . . . . . 23
10.3 Withdrawal Processing. . . . . . . . . . . . . . . . . . . . . . . . 23
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS. . . . . . . . . . . . . . . . . . . . 25
11.1 Benefit Election . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.2 Payment Form and Medium. . . . . . . . . . . . . . . . . . . . . . . 25
11.3 Small Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.4 Latest Commencement Permitted. . . . . . . . . . . . . . . . . . . . 25
11.5 Payment Within Life Expectancy . . . . . . . . . . . . . . . . . . . 25
11.6 Incidental Benefit Rule. . . . . . . . . . . . . . . . . . . . . . . 26
11.7 Payment to Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 26
11.8 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12 ADP AND ACP TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1 Contribution Limitation Definitions. . . . . . . . . . . . . . . . . 28
12.2 ADP and ACP Tests. . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3 Correction of ADP and ACP Tests. . . . . . . . . . . . . . . . . . . 29
12.4 Multiple Use Test. . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.5 Adjustment for Investment Gain or Loss . . . . . . . . . . . . . . . 30
12.6 Required Records . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.7 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . 31
13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS. . . . . . . . . . . . . . . 32
13.1 "Annual Addition" Defined. . . . . . . . . . . . . . . . . . . . . . 32
13.2 Maximum Annual Addition. . . . . . . . . . . . . . . . . . . . . . . 32
13.3 Avoiding an Excess Annual Addition . . . . . . . . . . . . . . . . . 32
13.4 Correcting an Excess Annual Addition . . . . . . . . . . . . . . . . 32
13.5 Correcting a Multiple Plan Excess. . . . . . . . . . . . . . . . . . 32
13.6 "Defined Benefit Fraction" Defined . . . . . . . . . . . . . . . . . 33
13.7 "Defined Contribution Fraction" Defined. . . . . . . . . . . . . . . 33
<PAGE>
13.8 Combined Plan Limits and Correction . . . . . . . . . . . . . . . . . 33
14 TOP HEAVY RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.1 Top Heavy Definitions. . . . . . . . . . . . . . . . . . . . . . . . 34
14.2 Special Contributions. . . . . . . . . . . . . . . . . . . . . . . . 35
14.3 Special Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.4 Adjustment to Combined Units for Different Plans . . . . . . . . . . 36
15 PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.1 Plan Delineates Authority and Responsibility . . . . . . . . . . . . 37
15.2 Fiduciary Standards. . . . . . . . . . . . . . . . . . . . . . . . . 37
15.3 Company is ERISA Plan Administrator. . . . . . . . . . . . . . . . . 37
15.4 Administrator Duties . . . . . . . . . . . . . . . . . . . . . . . . 37
15.5 Advisors May be Retained . . . . . . . . . . . . . . . . . . . . . . 38
15.6 Delegation of Administrator Duties . . . . . . . . . . . . . . . . . 38
15.7 Committee Operating Rules. . . . . . . . . . . . . . . . . . . . . . 39
16 MANAGEMENT OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . 40
16.1 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
16.2 Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 40
16.3 Authority to Hold Cash . . . . . . . . . . . . . . . . . . . . . . . 40
16.4 Trustee to Act Upon Instructions . . . . . . . . . . . . . . . . . . 41
16.5 Trustee is Investment Manager. . . . . . . . . . . . . . . . . . . . 41
16.6 Investment in Employer Stock . . . . . . . . . . . . . . . . . . . . 41
16.7 Voting and Tendering Employer Stock. . . . . . . . . . . . . . . . . 41
16.8 Registration and Disclosure for Employer Stock . . . . . . . . . . . 41
17 TRUST ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
17.1 Trustee to Construe Trust. . . . . . . . . . . . . . . . . . . . . . 42
17.2 Trustee To Act As Owner of Trust Assets. . . . . . . . . . . . . . . 42
17.3 United States Indicia of Ownership . . . . . . . . . . . . . . . . . 42
17.4 Tax Withholding and Payment. . . . . . . . . . . . . . . . . . . . . 42
17.5 Trustee Duties and Limitations . . . . . . . . . . . . . . . . . . . 43
17.6 Trust Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 43
17.7 Valuation of Certain Assets. . . . . . . . . . . . . . . . . . . . . 43
17.8 Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17.9 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 44
18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION . . . . . . . . . . . . 45
18.1 Plan Does Not Affect Employment Rights . . . . . . . . . . . . . . . 45
18.2 Limited Return of Contributions. . . . . . . . . . . . . . . . . . . 45
18.3 Assignment and Alienation. . . . . . . . . . . . . . . . . . . . . . 45
18.4 Facility of Payment. . . . . . . . . . . . . . . . . . . . . . . . . 45
18.5 Reallocation of Lost Participant's Accounts. . . . . . . . . . . . . 46
18.6 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 46
18.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
18.8 Jurisdiction and Severability. . . . . . . . . . . . . . . . . . . . 47
18.9 Indemnification by Employer. . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
19 AMENDMENT, MERGER AND TERMINATION . . . . . . . . . . . . . . . . . . . . 48
19.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
19.2 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
19.3 Plan Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 48
19.4 Termination of Related Company's Participation . . . . . . . . . . . 49
19.5 Replacement of the Trustee . . . . . . . . . . . . . . . . . . . . . 49
19.6 Final Settlement and Accounting of Trustee . . . . . . . . . . . . . 49
<PAGE>
1 DEFINITIONS
When capitalized, the following words and phrases have the following
meanings unless a different meaning is clearly required by the context:
1.1 "Account". The record maintained for purposes of accounting for a
Participant's interest in the Plan.
1.2 "Administrator". The Company, or the committee to whom the Company has
delegated all or a portion of the duties of the Administrator under
the Plan.
1.3 "Beneficiary". The person or persons who is to receive benefits after
the death of the Participant pursuant to the Participant's designation
or the Administrator's determination, or as a result of a QDRO.
1.4 "Break in Service". The fifth anniversary of the date for which a
Participant is last credited with an Hour of Service.
1.5 "Code". The Internal Revenue Code of 1986, as amended. Reference to
any specific Code section shall include such section, any valid
regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such
section.
1.6 "Company". The Koll Company or any successor by merger, purchase or
otherwise. Company also refers to any officer appointed by its board
of directors to act on the Company's behalf.
1.7 "Compensation". The sum of a Participant's Taxable Income and salary
reductions, if any, pursuant to Code sections 125, 402(a)(8), 402(h)
or 403(b). For purposes of determining benefits under this Plan,
Compensation is limited to $200,000 (as indexed by the cost of living
pursuant to Code section 415(d)) per Plan Year. For Plan Years
beginning before 1990 (or any later date provided for under the Code),
Compensation is limited to amounts paid while a Participant.
1.8 "Contributions". Amounts contributed to the Plan by the Employer or an
Eligible Employee. The specific types of Contributions included are:
(a) "Pre-Tax Contributions". Amounts contributed on a pre-tax basis
in conjunction with a Participant's Code section 401 (k) salary
deferral agreement.
(b) "Rollover Contributions". Amounts contributed by an Eligible
Employee which originated from another employer's qualified plan.
1
<PAGE>
(c) "Matching Contributions". Amounts contributed by the Employer
based upon the amount contributed by the eligible Participant.
(d) "Profit Sharing Contributions". Amounts contributed by the
Employer and allocated on a pay based formula to eligible
Participants' Accounts, which are no longer permitted, but
previously contributed amounts continue to be accounted for in
the Plan.
1.9 "Disability". A Participant's total and permanent, mental or physical
disability resulting in termination of employment as evidenced by (a)
receipt of disability payments under the Employer's long-term
disability program or (b) presentation of medical evidence
satisfactory to the Committee.
1.10 "Effective Date". July 1, 1989.
1.11 "Eligible Employee". An Employee of the Employer, except any Employee:
(a) whose compensation and conditions of employment are covered by a
collective bargaining agreement to which the Employer is a party
unless the agreement calls for the Employee's participation in
the Plan;
(b) who is treated as an Employee because he or she is a Leased
Employee; or
1.12 "Employee". An individual who is (a) directly employed by any Related
Company and for whom any income for such employment is subject to
withholding of income or social security taxes, or (b) indirectly
employed as a Leased Employee.
1.13 "Employer". The Company and any other Related Company which adopts
this Plan with the approval of the Company.
1.14 "ERISA". The Employee Retirement Income Security Act of 1974, as
amended. Reference to any specific section shall include such section,
any valid regulation promulgated thereunder, and any comparable
provision of any future legislation amending, supplementing or
superseding such section.
1.15 "Forfeiture Account". An account holding amounts forfeited by
Participants who have left the Employer, which are to be used to
reduce subsequent Employer Contributions.
1.16 "Highly Compensated Employee" or "HCE". An Employee described as a
highly compensated employee in Code section 414(q).
2
<PAGE>
1.17 "Hour of Service". Each hour for which an Employee is entitled to:
(a) Payment for the performance of duties for any Related Company;
(b) payment from any Related Company for any period during which no
duties are performed due to vacation, holiday, sickness,
incapacity (including disability), layoff, leave of absence, jury
duty or military service;
(c) back pay, irrespective of mitigation of damages, by award or
agreement with any Related Company (and these hours shall be
credited to the period to which the agreement pertains); or
(d) no payment, but is on a Leave of Absence or Parental Leave (and
these hours shall be based upon his or her normally scheduled
hours per week or a 40 hour week if there is no regular
schedule), provided that, for Parental Leave, hours shall be
credited for the Plan Year the Leave occurs only if no hours have
been credited for that Plan Year.
The crediting of hours shall be made in accordance with Department of
Labor regulation section 2530.200b-2(b). Actual hours shall be used
whenever an accurate record of hours are maintained for an Employee.
Otherwise, an equivalent number of hours shall be credited for each
payroll period in which the Employee would be credited with at least 1
hour. The payroll period equivalencies are 45 hours weekly, 90 hours
biweekly, 95 hours semimonthly and 190 hours monthly.
Hours credited prior to a Break in Service are included. Hours shall
be credited for the period prior to the acquisition of a Related
Company by an Employer only if the Company directs that credit for
such period shall be granted.
1.18 "Ineligible". An individual during the period in which he or she is
(1) an Employee of a Related Company which is not then an Employer,
(2) an Employee, but not an Eligible Employee, or (3) not an Employee.
1.19 "Investment Fund". An investment fund consisting of a collective
investment fund, a pool of assets or deposits of the Trustee. The
Investment Funds authorized by the Administrator as of the Effective
Date are listed in Appendix A.
1.20 "Leased Employee". An individual who is deemed to be an employee of
any Related Company as provided in Code section 414(n) or (o).
1.21 "Leave of Absence". A period during which an individual is deemed to
be
3
<PAGE>
an Employee, but is absent from active employment, provided that the
absence:
(a) was authorized by a Related Company; or
(b) due to military service in the United States armed forces and the
individual returns to active employment within the period during
which he or she retains employment rights under federal law.
1.22 "Non-Highly Compensated Employee" or "NHCE". An Employee who is
neither an HCE nor a family member of certain HCEs as defined in Code
section 414(q).
1.23 "Normal Retirement Date". The date of a Participant's 65th birthday.
1.24 "Owner". A person with an ownership interest in the capital, profits,
outstanding stock or voting power of a Related Company within the
meaning of Code section 318 or 416 (which exclude indirect ownership
through a qualified retirement plan).
1.25 "Parental Leave". The period of absence from work by reason of
pregnancy, the birth of an Employee's child, the placement of a child
with the Employee in connection with the child's adoption, or caring
for such child immediately after birth or placement as described in
Code section 410(a)(5)(E).
1.26 "Participant". An Eligible Employee who begins to participate in the
Plan after completing the eligibility requirements. A Participant's
participation continues until his or her employment with the Employer
(and all Related Companies) ends and his or her Account is distributed
or forfeited.
1.27 "Pay". The base pay and overtime paid to an Eligible Employee by the
Employer while a Participant during the current period.
Pay is neither increased nor decreased by any salary credit or
reduction pursuant to Code sections 125 or 402(a)(8). Pay is limited
to $200,000 (as indexed by the cost of living pursuant to Code section
415(d)) per Plan Year.
1.28 "Period of Employment". The period beginning on the date an Employee's
employment first begins and ending on the date his or her employment
ends. Employment ends on the date the Employee quits, retires, is
discharged, dies or (if earlier) the first anniversary of his or her
absence for any other reason. The period of absence starting with the
date an Employee's employment temporarily ends and ending on the date
he or she is subsequently reemployed is (1) included in his or her
Period of Employment if the period of absence does not exceed one
year, and (2)
4
<PAGE>
excluded if such period exceeds one year.
Period of Employment includes the period prior to a Break in Service.
Period of Employment includes the period prior to acquisition of a
Related Company by an Employer only if the Company directs that credit
for such period shall be granted.
1.29 "Plan". The Koll Company 401(k) Plus Plan set forth in this document,
as from time to time amended.
1.30 "Plan Year". The annual accounting period of the Plan and Trust which
ends on each December 31.
1.31 "Pre-Tax Dollar Limit". The annual limit placed on each Participant's
Pre-Tax Contributions, which shall be $7,000 per calendar year (as
indexed by the cost of living pursuant to Code section 415(d)).
1.32 "QDRO". A domestic relations order which the Administrator has
determined to be a qualified domestic relations order within the
meaning of Code section 414(p).
1.33 "Related Company". The Company and any corporation, trade or business
which is, together with the Company, a member of the same controlled
group of corporations, a trade or business under common control, or an
affiliated service group within the meaning of Code section 414(b),
(c), (m) or (o) and, solely for purposes of the maximum annual
addition limits, as modified by Code section 415(h).
1.34 "Settlement Date". The date on which the transactions from the most
recent Trade Date are settled.
1.35 "Spousal Consent". The written consent given by a spouse to a
Participant's election of a specified form of benefit or Beneficiary
designation. The spouse's consent must acknowledge the effect on the
spouse of the Participant's election and be duly witnessed by a notary
public. Spousal Consent also means a determination by the
Administrator that there is no spouse, the spouse cannot be located or
such other circumstances as may be established by applicable law.
1.36 "Sweep Account". The subsidiary Account for each Contribution type
within each Participant's Account through which all transactions for
such Contribution type are processed and which is invested in interest
bearing deposits of the Trustee.
1.37 "Sweep Date". The cut off date and time for receiving instructions for
transactions to be processed on the next Trade Date.
5
<PAGE>
Participant during a Limitation Year for personal services actually
rendered in the course of employment, including (by way of example)
overtime, bonuses, commissions and incentive compensation, but after
excluding such amounts which are not currently treated as Taxable
Income as a result of their:
(a) deferral under a Code section 125, 402(a)(8), 402(h) or 403(b)
salary deferral arrangement,
(b) contribution to a retirement, deferred compensation or other
plan, or
(c) not being treated as income for services currently rendered, such
as amounts realized from the sale, exercise or exchange or
Employer stock or stock options.
1.39 "Trade Date". Each day the Investment Funds are valued, which is the
last business day of each month.
1.40 "Trust". The legal entity created by those provisions of this document
which relate to the Trustee. The Trust is part of the Plan and holds
the Plan assets which are comprised of the aggregate of Participants'
Accounts and the Forfeiture Account.
1.41 "Trustee". Wells Fargo Bank, National Association.
1.42 "Year of Vesting Service". For any Employee hired on or after July 1,
1989, a 12 month Period of Employment. For any Employee hired prior to
July 1, 1989, service shall be credited differently before and after
January 1, 1990 as follows:
(a) For service from January 1, 1990, a 12 month Period of
Employment; and
(b) For Plan Years ending before January 1, 1990, a 12 month period
ending on the last day of any Plan Year in which an Employee is
credited with at least 1,000 Hours of Service.
Years of Vesting Service shall include service credited prior to April
1, 1978. In the case of the acquisition of a Related Company by an
Employer, the Company will determine what, if any, pre-acquisition
employment will be counted in determining Years of Vesting Service.
6
<PAGE>
2 ELIGIBILITY
2.1 Eligibility
Each Eligible Employee shall become a Participant on July 1, 1989 or
the first subsequent January 1, April 1, July 1 or October 1 after the
date he or she completes a 12 month eligibility period in which he or
she is credited with at least 1,000 Hours of Service. The initial
eligibility period begins on the date an Employee first performs an
Hour of Service. Subsequent eligibility periods begin with the start
of each Plan Year beginning after the first Hour of Service is
performed.
2.2 Ineligible Employees
If an Employee completes the above eligibility requirements, but is
Ineligible at the time participation would otherwise begin (if he or
she were not Ineligible), he or she shall become a Participant on the
first subsequent date on which he or she is an Eligible Employee.
2.3 Ineligible Participants
A Participant may not make or share in Plan Contributions, nor be
eligible for a new Plan loan, during the period he or she is
Ineligible, but he or shall continue to participate for all other
purposes. An Ineligible Participant shall automatically become an
active Participant on the date he or she again becomes an Eligible
Employee.
7
<PAGE>
3 PARTICIPANT CONTRIBUTIONS
3.1 Pre-Tax Contribution Election
Upon becoming a Participant, an Eligible Employee may elect to reduce
his or her Pay and have the amount contributed to the Plan by the
Employer as a Pre-Tax Contribution. The election shall be made as a
whole percentage of Pay and in the form prescribed by the
Administrator.
3.2 Changes
A Participant who is an Eligible Employee may change his or her
Pre-Tax Contribution election as of any January 1, April 1, July 1 or
October 1 by giving the Administrator such advance notice as it
requires. The changed percentage shall become effective with the first
payroll paid after such date. Participants' Contribution election
percentages shall automatically apply to Pay increases or decreases.
3.3 Stopping Contributions
A Participant may revoke his or her Contribution election at any time
by giving written notice to the Administrator, and such election shall
be effective as soon as administratively feasible. A Participant may
contribute again by making a new Contribution election in the same
manner in which a Participant may change his or her election.
3.4 Contribution Percentage Limits
The Administrator may establish (and subsequently change) the maximum
Pre-Tax Contribution percentage, prospectively or retrospectively (for
the current Plan Year), for all Participants. In addition, the
Administrator may establish any lower percentage limits for Highly
Compensated Employees as it deems necessary. As of the Effective Date,
the maximum percentages are:
<TABLE>
<CAPTION>
HIGHLY
CONTRIBUTION COMPENSATED ALL
TYPE EMPLOYEES PARTICIPANTS
------------ ----------- ------------
<S> <C> <C>
Pre-Tax 15% 15%
</TABLE>
3.5 Refunds When Pre-Tax Dollar Limit Exceeded
A Participant who makes pre-tax contributions to this and any other
qualified defined contribution plan in excess of the Pre-Tax Dollar
Limit
8
<PAGE>
may notify the Administrator in writing by the following March 1 (or
as late as April 14 if allowed by the Administrator) that an excess
has occurred. In this event, the amount of the excess specified by the
Participant shall be returned to him by April 15, subject to an
adjustment for net investment gain or loss as described below:
E x G x (1 + (10% x M))
--------
(AB - G)
where:
E = the excess amount specified,
G = the net gain or loss for the Plan Year in the
Participant's Pre-Tax Accounts,
AB = the total value of the Participant's Pre-Tax Account,
determined as of the end of the calendar year being
corrected,
M = the number of full months from the calendar year end to
the date the excess amount is paid, plus one for the
month during which payment is to be made if payment
will occur after the 15th of that month.
3.6 Timing, Posting and Tax Considerations
Participants' Contributions may only be made through payroll
deduction. Such amounts shall be paid to the Trustee in cash and
posted to each Participant's Account as soon as such amounts can
reasonably be separated from the Employer's general assets and
balanced against the specified amount made on behalf of each
Participant. In no event, however, shall such amounts be paid to the
Trustee more than 90 days after the date amounts are deducted from a
Participant's Pay or 30 days after the end of the Plan Year in which
deducted. Pre-Tax Contributions shall be treated as employer
contributions in determining tax deductions under Code section 404(a).
9
<PAGE>
4 ROLLOVERS & TRUST-TO-TRUST TRANSFERS
4.1 Rollovers
The Administrator may authorize the Trustee to accept a rollover
contribution, within the meaning of Code section 402(a)(5) or
408(d)(3)(A)(ii), from an Eligible Employee in cash, even if he or she
is not yet a Participant. The Employee shall furnish satisfactory
evidence to the Administrator that the amount is eligible for rollover
treatment. A rollover contribution must be paid to the Trustee in cash
within 60 days after the date received by the Eligible Employee from a
qualified plan or conduit individual retirement account. Such amount
shall be posted to the Employee's Rollover Account as of the date
received by the Trustee.
If it is later determined that an amount transferred pursuant to the
above paragraph did not in fact qualify as a rollover contribution
under Code section 402(a)(5) or 408(d)(3)(A)(ii), the balance credited
to the Employee's Rollover Account shall immediately be (1) segregated
from all other Plan assets, (2) treated as a nonqualified trust
established by and for the benefit of the Employee, and (3)
distributed to the Employee. Any such nonqualifying rollover shall be
deemed never to have been a part of the Plan.
4.2 Transfers From Other Qualified Plans
The Administrator may instruct the Trustee to receive assets in cash
in or kind from another qualified plan. The Trustee may refuse the
receipt of any transfer if:
(a) the Trustee finds the in-kind assets unacceptable,
(b) instructions for posting amounts to Participants' Accounts are
incomplete,
(c) any amounts are not exempted by Code section 401(a)(11)(B) from
the annuity requirements of Code section 417, or
(d) any amounts include benefits protected by Code section 411(d)(6)
which would not be preserved under applicable Plan provisions.
Such amounts shall be posted to the appropriate Accounts of
Participants as of the date received by the Trustee.
10
<PAGE>
5 EMPLOYER CONTRIBUTIONS
5.1 Matching Contributions
(a) Frequency and Eligibility. For each time Participants'
Contributions are made, the Employer shall make Matching
Contributions on behalf of each Participant (except for any
officer of the Employer who is a regular participant in equity
partnership interests) who contributed during the period.
(b) Allocation Method. The Matching Contribution, including any
available Forfeiture Account amount, shall be equal to 50% of
each eligible Participant's Pre-Tax Contributions for the period,
provided that no Matching Contributions shall be made based upon
a Participant's Contributions in excess of 5% of his or her Pay.
The Employer may change the 50% matching rate or the 5% of
considered Pay to any other percentages, including 0%, by
notifying eligible Participants in sufficient time to adjust
their Contribution elections prior to the start of the period for
which the new percentages apply.
(c) Timing, Medium and Posting. The Employer shall make each period's
Matching Contribution in cash as soon as is feasible, and not
later than the Employer's federal tax filing date, including
extensions, for deducting such Contribution. The Trustee shall
post such amount to each Participant's Matching Account once the
total Contribution received has been balanced against the
specific amount to be credited to each Participant's Matching
Account.
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<PAGE>
6 ACCOUNTING
6.1 Individual Participant Accounting
The Administrator shall maintain an individual set of Accounts for
each Participant in order to reflect transactions both by type of
Contribution and investment medium. Financial transactions shall be
accounted for at the individual Account level by "posting" each
transaction to the appropriate Account of each affected Participant.
Participants' Account values shall be maintained in shares for the
Investment Funds and in dollars for their Sweep and Participant loan
Accounts. At any point in time, the Account value shall be determined
using the most recent Trade Date values provided by the Trustee.
6.2 Sweep Account is Transaction Account
All transactions related to amounts being contributed to or
distributed from the Trust shall be posted to each affected
Participant's Sweep Account. Any amount held in the Sweep Account will
be credited with interest up until the Settlement Date or the later
date on which it is removed from the Sweep Account.
6.3 Trade Date Accounting and Investment Cycle
Participant Account values shall be determined as of each Trade Date.
For any transaction to be processed as of a Trade Date, the Trustee
must receive all transaction instructions by the Sweep Date. Such
instructions shall apply to amounts held in the Account on that Sweep
Date. Financial transactions of the Investment Funds shall be posted
to Participants' Accounts as of the Trade Date and based upon the
Trade Date values provided by the Trustee. All Trade Date transactions
shall be effected on the Settlement Date relating to that Trade Date
(or as soon thereafter as is administratively feasible).
6.4 Accounting for Investment Funds
Investments in each Investment Fund shall be maintained in shares. The
Trustee is responsible for determining the share values of each
Investment Fund as of each Trade Date. To the extent an Investment
Fund is comprised of collective investment funds of the Trustee, the
net asset and share values shall be determined in accordance with the
rules governing such collective investment funds, which are
incorporated herein by reference. All other net asset and share values
shall be determined by the Trustee. The net asset value of each
Investment Fund shall be based on the fair market value of its
underlying assets.
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6.5 Accounting for Participant Loans
Participant loans shall be held in a separate Account of the
Participant and accounted for in dollars as an earmarked asset of the
borrowing Participant's Account.
6.6 Company Decides Who Pays Fees and Expenses
The Company shall decide whether administrative fees and expenses
related to the Plan and Trust, including those incurred by agents and
advisors retained by the Administrator, shall be paid by the Employer,
to have them charged directly to the Participants' Accounts, or a
combination of both. The Company may direct the Employer to pay a
lower portion of the fees and expenses allocable to the Accounts of
Participants who are no longer Employees or Beneficiaries than for
active Employees. All other Plan fees and expenses (such as government
annual report preparation, audit and legal fees, nondiscrimination
testing, and any other special services) shall be paid separately
by the Employer.
6.7 How Fees and Expenses are Charged to Participants
Account maintenance fees shall be charged to each Participant's
Account on a per Participant basis, provided that no fee shall reduce
a Participant's Account balance below zero. Transaction type fees
(such as special asset fees, investment election change fees, etc.)
shall be charged to the Accounts involved in the transaction. Fees and
expenses incurred for the management and maintenance of Investment
Funds shall be charged at the Investment Fund level and reflected in
the net gain or loss of each Fund.
6.8 Error Correction
The Administrator may correct any errors or omissions in the
administration of the Plan by restoring any Participant's Account
balance with the amount that would be credited to the Account had no
error or omission been made. Funds necessary for any such restoration
shall be provided through payment made by the Employer, or if the
restoration involves an Employer Contribution Account, the Company may
direct the Trustee to use amounts from the Forfeiture Account.
6.9 Participant Statements
The Administrator shall provide Participants with statements of their
Accounts as soon after the end of each quarter of the Plan Year as is
administratively feasible. Participants' Account statements will be
expressed in dollars without reference to any underlying shares and
share values used in determining the Account value.
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6.10 Special Accounting During Conversion Period
The Administrator and Trustee may use any reasonable accounting
methods in performing their respective duties during the period of
converting the prior accounting system of the Plan and Trust to
conform to the individual Participant accounting system described in
this Section. This includes, but is not limited to, the method for
allocating net investment gains or losses and the extent, if any, to
which contributions received by and distributions paid from the Trust
during this period share in such allocation. All or a portion of the
Trust assets may be held, if necessary, in a short term interest
bearing vehicle, which may include deposits of the Trustee, during the
conversion period for establishing such individual Participant
Accounts.
6.11 Accounts for QDRO Beneficiaries
A separate Account shall be established for a Beneficiary entitled to
any portion of a Participant's Account under a QDRO as of the date and
in accordance with the directions specified in the QDRO. Such Account
shall be valued and accounted for in the same manner as any other
Account.
(a) Investment Direction. A QDRO Beneficiary may direct the
investment of such Account in the same manner as any other
Participant.
(b) Distributions. A QDRO Beneficiary shall be entitled to payment as
provided in the QDRO and permissible under the Distribution Once
Employment Ends Section regardless of whether the Participant is
an Employee, and to name a Beneficiary as specified in the QDRO.
(c) Participant Loans. A QDRO Beneficiary shall not be entitled to
borrow from his or her Account. If a QDRO specifies that the QDRO
Beneficiary is entitled to any portion of the Account of a
Participant who has an outstanding loan balance, all outstanding
loans shall continue to be held in the Participant's Account and
shall not be divided between the Participant's and QDRO
Beneficiary's Accounts.
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7 INVESTMENT FUNDS AND ELECTIONS
7.1 Investment Funds
Except for a Participants' Sweep and loan Accounts, the Trust shall be
maintained in various Investment Funds. The Administrator may change
the number or composition of the Investment Funds, subject to the
terms and conditions agreed to with the Trustee.
7.2 Investment Fund Elections
Each Participant (or Beneficiary) shall make a single election
covering all of his or her Contribution Accounts. A Participant (or
Beneficiary) shall make his or her investment election in any
combination of whole percentage increments of one or any number of the
Investment Funds offered. Each election shall specify whether it
applies only to the amounts not yet received by the Trustee or to both
such future amounts and the current Account balance. The Administrator
may set a maximum percentage of the total election that a Participant
may direct into any specific Investment Fund.
7.3 Responsibility for Investment Choice
Each Participant shall be solely responsible for the selection of his
or her investment election. No fiduciary with respect to the Plan is
empowered to advise a Participant as to the manner in which his or her
Accounts are to be invested, and the fact that an Investment Fund is
offered shall not be construed to be a recommendation for investment.
The Administrator may, however, establish a maximum percentage which a
Participant may choose for any Investment fund.
7.4 Default if No Election
If a Participant does not have a valid investment election on file,
his or her election shall be deemed to be a 100% election of the
Investment Fund designated by the Administrator as the default option.
7.5 Timing
A Participant shall make his or her initial investment election upon
becoming a Participant and may change his or her election at any time
in accordance with the procedures established by the Trustee.
Investment elections received by the Trustee by the Sweep Date
deadline will be effective on the next following Trade Date.
7.6 Switching Fees
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A reasonable processing fee may be charged directly to a Participant's
Account for investment election changes in excess of a specified
number per Plan Year as determined by the Administrator.
16
<PAGE>
8 VESTING & FORFEITURES
8.1 Fully Vested Contribution Accounts
A Participant shall be fully vested in these Accounts at all times:
Pre-Tax Account
Rollover Account
8.2 Full Vesting upon Certain Events
A Participant's entire Account shall become fully vested once he or
she has attained his or her Normal Retirement Date as an Employee, or
upon his or her leaving the Employer due to his or her Disability or
death.
8.3 Vesting Schedule
In addition to the vesting provided above, a Participant's Matching
and Profit Sharing Accounts shall become vested in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years of Vesting Vested
Service Percentage
---------------- ----------
<S> <C>
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
</TABLE>
If this vesting schedule is changed, the vested percentage for each
Participant shall not be less than his or her vested percentage
determined as of the last day prior to this change, and for any
Participant with at least three Years of Vesting Service when the
schedule is changed, vesting shall be determined using the more
favorable vesting schedule.
8.4 Forfeitures
A Participant's non-vested Account balance shall be forfeited as of
the Settlement Date next following the Sweep Date on which the
Administrator has reported to the Trustee that the Participant's
employment has terminated. Forfeitures from all Participants' Employer
Contribution Accounts shall be transferred to and maintained in a
single Forfeiture Account, which shall be invested in interest bearing
deposits of the Trustee. Forfeiture Account amounts shall be credited
to eligible
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Participants' Accounts as soon as is administratively feasible as part
of Employer Matching Contributions for the period.
8.5 Rehired Employees
(a) Service. If an Employee is rehired, all Years of Vesting Service
credited prior to his or her termination of employment shall be
counted in determining his or her vested interest.
(b) Account Restoration. If an Employee is rehired before he or she
has a Break in Service, the amount forfeited when his or her
employment last terminated shall be restored to his or her
Account. The restoration shall include the interest which would
have been credited had such forfeiture been invested in the Sweep
Account from the date forfeited until the date the restoration
amount is determined. The amount shall come from the Forfeiture
Account to the extent possible, and any additional amount needed
shall be contributed by the Employer. The vested interest in his
or her restored Account shall then be equal to:
V% times (AB + D) - D
where:
V% = current vested percentage
AB = current account balance
D = amount previously distributed
18
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9 PARTICIPANT LOANS
9.1 Participant Loans Permitted
Loans to Participants are permitted pursuant to the terms and
conditions set forth in this Section. All loans are made (and limits
determined) as of the Sweep Date occurring on or next following the
date the loan approval directive is received by the Trustee. The funds
will be disbursed to the Participant as soon is as administratively
feasible after the next following Settlement Date.
9.2 Loan Funding Limits
The loan amount must meet all of the following limits:
(a) Plan Minimum Limit. The minimum amount for any loan is $500.
(b) Plan Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing Plan loans, is
based upon the following Accounts of the Participant which are
fully vested (the "Source Amount"):
Pre-Tax Account
Rollover Account
The maximum amount is equal to:
If Source Amount is: Maximum Loan Amount is:
-------------------- -----------------------
Under $20,000 50% of Source Amount, not to exceed
$10,000
$20,000 or over 50% of Source Amount, not to exceed
$50,000
(c) Legal Maximum Limit. The maximum a Participant may borrow,
including the outstanding balance of existing loans, is based
upon his or her vested interest in this Plan and all other
qualified plans maintained by a Related Company (the "Vested
Interest"). The maximum amount is equal to 50% of Vested
Interest, not to exceed $50,000*
* The $50,000 amount is reduced by the Participant's highest
outstanding balance of all loans from any Related Company's
qualified plans during the 12 month period ending on the day
before the Sweep Date on which the loan is made.
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<PAGE>
9.3 Maximum Number of Loans
A Participant may have only one loan outstanding at any given time.
9.4 Source of Loan Funding
A loan to a Participant shall be made solely from the assets of his or
her own Accounts. The available assets shall be determined first by
Contribution Account and then by investment type within each type of
Contribution Account. The hierarchy for loan funding by type of
Contribution Account shall be the order listed in the preceding Plan
Maximum Limit paragraph. Within each Account used for funding, amounts
shall first be taken from the cash Account and then taken by type of
investment in direct proportion to the market value of the
Participant's interest in each Investment Fund as of the Sweep Date on
which the loan is made.
9.5 Interest Rate
The interest rate charged on Participant loans shall be fixed and
equal to the Trustee's prime rate, plus 1%.
9.6 Repayment
Substantially level amortization shall be required of each loan with
payments made at least quarterly, through payroll deduction, provided
that payment can be made by check for advance loan payments, or when a
Participant is on a Leave of Absence or transferred to the employ of a
Related Company which is not participating in the Plan. Loans may be
prepaid in full or in part at any time. The loan repayment period
shall be as mutually agreed upon by the Participant and Administrator,
not to exceed five years. However, the term may be for any period not
to exceed 10 years if the purpose of the loan is to acquire the
Participant's principal residence.
9.7 Repayment Hierarchy
Loan principal repayments shall be credited to the Participant's
Contribution Accounts in the inverse of the order used to fund the
loan. Loan interest shall be credited to the Contribution Account in
direct proportion to the principal repayment. Loan payments are
credited by investment type based upon the Participant's current
investment election for new Contributions.
9.8 Loan Application, Note and Security
A Participant shall apply for any loan in writing. The Administrator
shall
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<PAGE>
specify the time frame for approving loan applications. All loans
shall be evidenced by a promissory note and secured only by a
Participant's vested Account balance. The Plan shall have a lien on a
Participant's Account to the extent of any outstanding loan balance.
9.9 Default, Suspension and Call Feature
(a) Default. A loan is treated as a default if scheduled loan
payments are more than 90 days late, provided that the
Administrator may agree to a suspension of loan payments for up
to 12 months for a Participant who is on a Leave of Absence. A
Participant shall then have 30 days from the time he or she
receives written notice of the default and a demand for past due
amounts to cure the default before it becomes final.
(b) Actions upon Default. In the event of default, the Administrator
may direct the Trustee to execute upon its security interest in
the Participant's Account by deducting the unpaid loan balance
from the Account, including interest to the date of default and
report the default as a taxable distribution. As soon as a Plan
withdrawal or distribution to such Participant would otherwise be
permitted, the Administrator may instruct the Trustee to
distribute the note to the Participant. A default constitutes a
permitted distribution to the extent it does not involve a
Participant's Pre-Tax Account.
(c) Call Feature. The Administrator shall have the right to call any
Participant loan once employment with all Related Companies
terminates.
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<PAGE>
10 IN-SERVICE WITHDRAWALS
10.1 Withdrawals for Hardship
(a) Requirements. A Participant may request the withdrawal of any
amount needed to satisfy a financial need by submitting a
completed withdrawal request form to the Administrator. The
Administrator shall only approve those requests for withdrawals
(1) on account of a Participant's "Deemed Financial Need", and
(2) which are "Deemed Necessary" to satisfy the financial need.
(b) "Deemed Financial Need". Financial commitments relating to:
(1) medical expenses described under Code section 213(d)
incurred by the Employee, his or her spouse or his or her
dependents;
(2) the purchase (excluding mortgage payments) of the Employee's
principal residence;
(3) the payment of next semester's or quarter's tuition for
postsecondary education for the Employee, his or her spouse
or dependents;
(4) the need to pay for the funeral expenses of a family member;
(5) the need for the Employee to prevent losing his or her
principal residence through eviction or foreclosure on the
mortgage; or
(6) any other circumstance specifically permitted under the
Code.
(c) "Deemed Necessary". A withdrawal is "deemed necessary" to satisfy
the financial need only if all of these conditions are met:
(1) the Employee has obtained all other possible withdrawals and
nontaxable loans available from all plans maintained by the
Related Companies;
(2) the Employee is suspended from making any Contributions to
any qualified plan maintained by the Employer for 12 months
from the date the withdrawal payment is processed; and
(3) the Pre-Tax Dollar Limit for the calendar year next
following the calendar year of the hardship withdrawal shall
be
22
<PAGE>
reduced by the amount of the Employee's Pre-Tax
Contributions for the calendar year of the hardship
withdrawal.
(d) Contribution Account Sources for Withdrawal. The withdrawal
amount shall come only from his or her fully vested Accounts, in
the following priority order of Contribution Accounts:
Rollover Account
Matching Account
Profit Sharing Account
Pre-Tax Account
The amount that may be withdrawn from a Participant's Pre-Tax
Account shall not include any earnings credited to his or her
Pre-Tax Contribution Account after the first Plan Year beginning
after December 31, 1988.
10.2 Withdrawals for Participants over Age 59-1/2
(a) Requirements. A Participant who is over age 59-1/2 may withdraw
from the Contribution Accounts listed in paragraph (b) below.
(b) Contribution Account Sources for Withdrawal. The withdrawal
amount shall come only from his or her fully vested Accounts, in
the following priority order of Contribution Accounts:
Pre-Tax Account
Rollover Account
Matching Account
Profit Sharing Account
(c) Permitted Frequency. There is no restriction on the number of
times a Participant may withdraw from these Accounts after age
59-1/2.
10.3 Withdrawal Processing
(a) Minimum Amount. The minimum payment for any type of withdrawal is
$500.
(b) Application by Participant. A Participant must submit a completed
withdrawal request form to the Administrator to apply for any
type of withdrawal.
(c) Approval by Administrator. The Administrator is responsible for
determining that a withdrawal request conforms to the
requirements
23
<PAGE>
described in this Section and notifying the Trustee of any
payments to be made in a timely manner.
(d) Time of Processing. The Trustee shall process all withdrawal
requests which it receives by the Sweep Date cut off, based on
the value as of the Sweep Date, and fund them on the next
Settlement Date. The Trustee shall then make payment to the
Participant as soon thereafter as is administratively feasible.
(e) Medium and Form of Payment. The medium of payment for withdrawals
is either cash or direct deposit. The form of payment for
withdrawals shall be a single installment.
(f) Investment Fund Sources. Within each Contribution Account used
for funding a withdrawal, amounts shall first be taken from the
Sweep Account and then taken by type of investment in direct
proportion to the market value of the Participant's interest in
each Investment Fund (which excludes Participant loans) at the
time the withdrawal is made.
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<PAGE>
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS
11.1 Benefit Election
Subject to the other requirements of this Section, a Participant (or
his or her Beneficiary in the case of his or her death) may elect to
have his or her vested Account balance paid to him or her beginning
upon any Settlement Date following his or her termination of
employment with all Related Companies, by submitting his or her
completed election forms to the Administrator. The election must be
submitted in sufficient time for the Administrator to instruct the
Trustee to process the payment by the Sweep Date that relates to the
Settlement Date upon which payments are to begin.
11.2 Payment Form and Medium
A Participant shall be paid in the form of a lump sum.
Payments will generally be made in cash (generally by check).
11.3 Small Amounts Paid Immediately
If the Participant's vested Account balance is $3,500 or less, the
Participant's benefit shall be paid as a single lump sum as soon as
administratively feasible after his or her employment with all Related
Companies ends.
11.4 Latest Commencement Permitted
Unless a Participant elects otherwise, his or her benefit payments
will begin not later than 60 days after the end of the Plan Year in
which he or she attains his or her Normal Retirement Date or retires,
whichever is later. However, if the amount of the payment or the
location of the Participant (after a reasonable search) cannot be
ascertained by that deadline, payment shall be made no later than 60
days after the earliest date on which such amount or location is
ascertained. In any case, benefit payments shall begin by the April 1
immediately following the end of the calendar year in which he or she
attains age 70-1/2 (whether or not he or she is an Employee).
11.5 Payment Within Life Expectancy
The Participant's payment election must be consistent with the
requirement of Code section 401(a)(9) that all payments are to be
completed within a
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<PAGE>
period not to exceed the lives or the joint and last survivor life
expectancy of the Participant and his or her Beneficiary. The life
expectancies of a Participant and his or her spouse may be recomputed
annually.
11.6 Incidental Benefit Rule
The Participant's payment election must be consistent with the
requirement that, if the Participant's spouse is not his or her sole
primary Beneficiary, the minimum annual distribution for each calendar
year, beginning with the year in which he or she attains age 70-1/2,
shall not be less than the quotient obtained by dividing (a) the
Participant's vested Account balance as of the last Trade Date of the
preceding year by (b) the applicable divisor as determined under the
incidental benefit requirements of Code section 401(a)(9).
11.7 Payment to Beneficiary
Payment to a Beneficiary must either: (1) be complete within five
years of the Participant's death or (2) begin within one year of the
his or her death and be completed within the period of the
Beneficiary's life or life expectancy, except that:
(a) If the Participant dies after the April 1 immediately following
the end of the calendar year in which he or she attains age
70-1/2, payment to his or her Beneficiary must be at least as
rapidly as provided in the Participant's distribution election;
(b) If the surviving spouse is the Beneficiary, payments need not
begin until the end of the calendar year in which the Participant
would have attained age 70-1/2; and
(c) If the Participant and the surviving spouse who is the
Beneficiary die before (1) the end of the calendar year in which
April 1 on which the Participant would have attained age 70-1/2
and (2) payments have begun to the spouse, the spouse's
Beneficiary will be treated as the Participant's Beneficiary in
applying these rules.
11.8 Beneficiary Designation
Each Participant shall complete a beneficiary designation form
indicating the Beneficiary who is to receive the Participant's
remaining Plan interest at the time of his or her death. The
designation may be changed at any time. However, a Participant's
spouse shall be the Beneficiary unless the designation includes
Spousal Consent for the other Beneficiary. If no designation is in
effect at the time of a Participant's death or if the Beneficiary does
not survive the Participant, the Beneficiary shall be, in the order
listed, the:
26
<PAGE>
(a) Participant's surviving spouse,
(b) Beneficiary named by the Participant in the Employer's primary
life insurance plan, or
(c) Participant's estate.
27
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12 ADP AND ACP TESTS
12.1 Contribution Limitation Definitions
(a) "Average Contribution Percentage" or "ACP". The Average
Percentage calculated using Contributions.
(b) "Average Deferral Percentage" or "ADP". The Average Percentage
calculated using Deferrals.
(c) "Average Percentage". The average of the calculated percentages
for Participants within the specified group. The calculated
percentage refers to either the "Deferrals" or "Contributions"
(as defined in this Section) made on the Participant's behalf for
the Plan Year, divided by his or her Compensation for such year.
(Pre-Tax Contributions which will be refunded because they exceed
the Pre-Tax Dollar Limit are included in the percentage.)
(d) "Contributions" shall include Matching Contributions. In
addition, Contributions may include Pre-Tax Contributions, but
only to the extent that (1) the Employer elects to use them, (2)
they are not used or counted in the ADP Test, and (3) they are
necessary to meet the ACP Test Alternative Limitation.
(e) "Deferrals" shall include Pre-Tax Contributions.
(f) "HCE Group" and "NHCE Group". The respective group of HCEs and
NHCEs who are eligible to have amounts contributed on their
behalf for the Plan Year.
(1) If the Related Companies maintain two or more plans which
are subject to the ADP or ACP Test, and are considered as
one plan for purposes of Code sections 401(a)(4) or 410(b),
all such plans shall be aggregated and treated as one plan
for purposes of meeting the ADP and ACP Tests.
(2) If an HCE has any "family members" (within the meaning of
Code section 414(g)(6)(B)), the Deferrals, Contributions and
Compensation of the HCE's family members shall be treated as
made or earned by the HCE.
(3) If an HCE is covered by more than one cash or deferred
arrangement maintained by the Related Companies, all such
plans shall be aggregated and treated as one plan for
purposes of calculating the separate percentage for the HCE
which is used in the determination of the Average
Percentage.
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<PAGE>
12.2 ADP and ACP Tests
The ADP and ACP for the HCE Group must meet either the Basic or
Alternative Limitation when compared to the respective ADP and ACP for
the NHCE group:
(a) Basic Limitation. The HCE Group percentage may not exceed 1.25
times the NHCE Group percentage.
(b) Alternative Limitation. The HCE group percentage is limited by
reference to the NHCE group percentage as follows:
If the NHCE Group Then the Maximum HCE
Percentage is: Group Percentage is:
-------------- --------------------
Less than 2% 2 time NHCE Group %
2% to 8% NHCE Group % plus 2%
More than 8% Basic Limitation applies
12.3 Correction of ADP and ACP Tests
If the ADP or ACP Tests are not met, the Administrator shall determine
a maximum percentage to be used in place of the calculated percentage
for all HCEs that would reduce the ADP and/or ACP for the HCE group by
a sufficient amount to meet the ADP and ACP Tests.
(a) ADP Correction. Pre-Tax Contributions shall be refunded
(including amounts previously refunded because they exceeded the
Pre-Tax Dollar Limit) to the Participant in an amount equal to
the actual Deferral minus the product of the maximum percentage
and the HCE's Compensation.
(b) ACP Correction. Contribution amounts in excess of the maximum
percentage of an HCE's Compensation shall be refunded to the
Participant to the extent vested, and forfeited to the extent
such amounts were not vested as of the end of the Plan Year being
tested. The excess amounts shall first be taken from unmatched
After-Tax Contributions, and then as a proportional combination
of matched After-Tax and Matching Contributions.
(c) Investment Fund Sources. Once the amount of excess Deferrals
and/or Contributions is determined by type of Contribution,
amounts shall then be taken by type of investment in direct
proportion to the market value of the Participant's interest in
each Investment Fund (which excludes Participant loans) at the
time the correction is processed.
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12.4 Multiple Use Test
If the Alternative Limitation is used to meet both the ADP and ACP
Tests, the ADP and ACP for the HCE Group must also comply with the
requirements of Code section 401(m)(9), which as of the Effective Date
require that the sum of these two percentages (as determined after any
corrections needed to meet the ADP and ACP Tests have been made) must
not exceed the sum of:
(a) the larger of the ADP or ACP for the NHCE Group times 1.25, and
(b) the smaller of the ADP or ACP for the NHCE Group, times 2 if the
NHCE percentage is less than 2%, or plus 2% if it is greater than
2%.
If the multiple use limit is exceeded, the Administrator shall
determine a maximum percentage to be used in place of the calculated
percentage for all HCEs that would reduce either or both the ADP or
ACP for the HCE Group by a sufficient amount to meet the multiple use
limit. Any excess shall be handled in the same manner that excess
Deferrals or Contributions are handled.
12.5 Adjustment for Investment Gain or Loss
The net investment gain or loss associated with the excess Deferral or
Contribution amount shall be distributed or forfeited in the same
manner as the excess amount. Such gain or loss is calculated as
follows:
E x G x (1 + (10% x M))
---------
(AB - G)
where:
E = the total excess amount,
G = the net gain or loss for the Plan Year from all of an HCE's
affected Accounts,
AB= the total value of an HCE's affected Accounts, determined as
of the end of the Plan Year being corrected,
M = the number of full months from the Plan Year end to the date
excess amounts are paid, plus one for the month during which
payments is to be made if payment will occur after the 15th
of that month.
12.6 Required Records
The Administrator shall maintain records which are sufficient to
demonstrate that the ADP, ACP and Multiple Use Tests have been met for
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<PAGE>
each Plan Year for at least as long as the Employer's corresponding
tax year is open to audit.
12.7 Incorporation by Reference
The provisions of this Section are intended to satisfy the
requirements of Code sections 401(k)(3) and (m)(2) and, to the extent
not otherwise stated in this Section, those Code sections are
incorporated herein by reference.
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13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS
13.1 "Annual Addition" Defined
The sum of all contributions (excluding rollovers and transfers from
another qualified plan) and forfeitures allocated to the Participant's
accounts in this Plan and all other defined contribution plans
(currently or previously) maintained by any Related Company for the
Plan Year (which shall be the Code section 415 limitation year). The
Plan Year refers to the year the allocation pertains, regardless of
when it is allocated.
13.2 Maximum Annual Addition
The Annual Addition to a Participant's accounts under this Plan and
any other defined contribution plan maintained by the Employer for any
Plan Year shall not exceed the lesser of (1) 25% of his or her Taxable
Income or (2) the greater of $30,000 or one-quarter of the dollar
limitation in effect under Code section 415(b)(1)(A).
13.3 Avoiding an Excess Annual Addition
If the allocation of Employer Contributions would produce an excess
Annual Addition, the affected Participant shall receive the maximum
Annual Addition from Employer Contributions and the remainder of the
Employer Contribution will be allocated in the prescribed manner to
all other eligible Participants.
13.4 Correcting an Excess Annual Addition
Upon the discovery of a reasonable error (due to estimating a
Participant's compensation or other limited facts and circumstances
acceptable to the Internal Revenue Service) which has resulted in the
allocation to a Participant's Account of an amount which exceeds the
Annual Addition limit, the excess amount (adjusted to reflect
investment gains) shall be forfeited by the Participant and used to
reduce subsequent Contributions as soon as is administratively
feasible. The Employer shall pay each affected Participant an amount
equal to any forfeiture from his or her Pre-Tax Account.
13.5 Correcting a Multiple Plan Excess
If a Participant, whose Account is credited with an excess Annual
Addition, received allocations to more than one defined contribution
plan, the excess shall be corrected by reducing the Annual Addition to
this Plan only after all possible reductions have been made to the
other defined contribution plans.
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13.6 "Defined Benefit Fraction" Defined
The fraction, for any Plan Year, where the numerator is the "projected
annual benefit" and the denominator is the greater of 125% of the
"protected current accrued benefit" or the normal limit which is the
lesser of (1) 125% of the maximum dollar limitation provided under
Code section 415(b)(1)(A) for the Plan Year or (2) 140% of the amount
which may be taken into account under Code section 415(b)(1)(B) for
the Plan Year, where a Participant's:
(a) "projected annual benefit" is the annual benefit provided by the
Plan determined pursuant to Code section 415(e)(2)(A), and
(b) "protected current accrued benefit" in a defined benefit plan in
existence on July 1, 1982, shall be the accrued annual benefit
provided for under Public Law 97-248, section 235(g)(4), as
amended.
13.7 "Defined Contribution Fraction" Defined
The fraction where the numerator is the sum of the Participant's
Annual Addition for each Plan Year to date and the denominator is the
sum of the "annual amounts" for each year in which the Participant has
performed service with a Related Company. The "annual amount" for any
Plan Year is the lesser of (1) 125% of the Code section 415(c)(1)(A)
dollar limitation (determined without regard to subsection (c)(6)) in
effect for the Plan Year and (2) 140% of the Code section 415(c)(1)(B)
amount in effect for the Plan Year, where:
(a) each Annual Addition is determined pursuant to the Code section
415(c) rules in effect for such Plan Year, and
(b) the numerator is adjusted pursuant to Public Law 97-248, section
235(g)(3), as amended.
13.8 Combined Plan Limits and Correction
If a Participant has also participated in a defined benefit plan
maintained by a Related Company, the sum of the Defined Benefit
Fraction and the Defined Contribution Fraction for any Plan Year may
not exceed 1.0. If the combined fraction exceeds 1.0 for any Plan
Year, the Participant's defined benefit amount shall be limited so
that the combined fraction does not exceed 1.0.
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14 TOP HEAVY RULES
14.1 Top Heavy Definitions
When capitalized, the following words and phrases have the following
meanings when used in this Section:
(a) "Aggregation Group". The group consisting of each qualified plan
maintained by a Related Company (1) in which a Key Employee is a
participant, or (2) which enables another plan in the group to
meet the requirements of Code sections 401(a)(4) and 410. The
Employer may also treat any other qualified plan as part of the
group if the group would continue to meet the requirements of
Code sections 401(a)(4) and 410 with such plan being taken into
account.
(b) "Determination Date". The last day of the preceding Plan Year or,
in the case of the Plan's first year, the last day of the first
Plan Year.
(c) "Key Employee". A current or former Employee (or his or her
Beneficiary) who at any time during the five year period ending
on the Determination Date was:
(1) an officer of the Employer whose Taxable Income (i) exceeds
150% of the amount in effect under Code section 415(c)(1)(A)
and (ii) places him within the following highest paid group
of officers:
Number of Highest Paid
Employees Officers Included
--------- -----------------
Less than 30 3
30 to 500 10% of the Employees
More than 500 50
(2) a more than 5% Owner,
(3) a more than 1% Owner whose Taxable Income exceeds $150,000,
or
(4) a more than 0.5% Owner who is among the 10 Employees owning
the largest interest in the Company and whose Taxable Income
exceeds the amount in effect under Code section
415(c)(1)(A).
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(d) "Plan Benefit". The sum as of the Determination Date of (1) an
Employee's Account, (2) the present value of his or her other
accrued benefits provided by all qualified plans within the
Aggregation Group, and (3) the aggregate distributions made
within the five year period ending on such date. Plan Benefits
shall exclude rollover contributions from a non-related employer
made after December 31, 1983.
(e) "Top Heavy". The Plan's status when the Plan Benefits of Key
Employees account for more than 60% of the Plan Benefits of all
Employees who have performed services at any time during the five
year period ending on the Determination Date. The Plan Benefits
of Employees who were, but are no longer Key Employees (because
they have not been an officer or Owner during the five year
period), are excluded in the determination.
14.2 Special Contributions
(a) Minimum Contribution Requirement. For each Plan Year in which the
Plan is Top Heavy, the Employer shall not allow any contributions
(other than a Rollover Contribution) to be made by or on behalf
of any Key Employee unless the Employer makes a Profit Sharing or
Special contribution on behalf of all Participants who were
Eligible Employees as of the last day of the Plan Year in an
amount equal to at least 3% of each such Participant's Taxable
Income. The Administrator shall remove any such contributions
(including applicable investment gain or loss) credited to a Key
Employee's Account in violation of the foregoing rule and return
them to the Employer or Employee to the extent permitted by the
Limited Return of Contributions paragraph.
(b) Overriding Minimum Benefit. Notwithstanding, contributions shall
be permitted on behalf of Key Employees if the Employer also
maintains a defined benefit plan which automatically provides a
benefit which satisfies the Code section 416(c)(1) minimum
benefit requirements, including the adjustment provided in Code
section 416(h)(2)(A), if applicable.
14.3 Special Vesting
If a Plan becomes Top Heavy after the Effective Date, vesting for all
Employees shall thereafter be accelerated to the extent the following
vesting schedule produces a greater vested percentage for the Employee
than the normal vesting schedule at any relevant time:
Years of Vesting Vested
Service Percentage
---------------- ----------
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Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
14.4 Adjustment to Combined Limits for Different Plans
For each Plan Year in which the Plan is Top Heavy, 100% shall be
substituted for 125% in determining the Defined Benefit Fraction and
the Defined Contribution Fraction.
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15 PLAN ADMINISTRATION
15.1 Plan Delineates Authority and Responsibility
Plan fiduciaries include the Company, the Administrator and the
Trustee, whose specific duties are delineated in this Plan and Trust.
In addition, Plan fiduciaries also include any other person to whom
fiduciary duties or responsibility is delegated with respect to the
Plan. Any person or group may serve in more than one fiduciary
capacity with respect to the Plan. To the extent permitted under ERISA
section 405, no fiduciary shall be liable for a breach by another
fiduciary.
15.2 Fiduciary Standards
Each fiduciary shall:
(a) discharge his or her duties in accordance with this Plan and
Trust to the extent they are consistent with ERISA;
(b) use that degree of care, skill, prudence and diligence that a
prudent person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims;
(c) act with the exclusive purpose of providing benefits to
Participants and their Beneficiaries, and defraying reasonable
expenses of administering the Plan;
(d) diversify Plan investments so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not
to do so; and
(e) treat similarly situated Participants and Beneficiaries in a
uniform and nondiscriminatory manner.
15.3 Company is ERISA Plan Administrator
The Company is the plan administrator, within the meaning of ERISA
section 3(16), responsible for compliance with all reporting and
disclosure requirements, except those that are explicitly the
responsibility of the Trustee under applicable law. The Administrator
shall have any necessary authority to carry out such functions through
the actions of its duly appointed officers.
15.4 Administrator Duties
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The Administrator shall have the authority to construe this Plan and
Trust, other than the provisions which relate to the Trustee, and to
do all things necessary or convenient to effect the intent and purpose
of the Plan, whether or not such powers are specifically set forth in
this Plan and Trust. Actions taken in good faith by the Administrator
shall be conclusive and binding on all interested parties, and shall
be given the maximum possible deference allowed by law. In addition to
the duties listed elsewhere in this Plan and Trust, the
Administrator's authority shall include, but not be limited to, the
authority to:
(a) Determine who is eligible to participate, the allocation of
Contributions, and the eligibility for withdrawals, loans and
distributions;
(b) Provide each Participant with a summary plan description no later
than 90 days after he or she has become a Participant (or such
other period permitted under ERISA section 104(b)(1)), as well as
informing each Participant of any material modification to the
Plan in a timely manner;
(c) Make a copy of the following documents available to Participants
during normal work hours: this Plan and Trust (including
subsequent amendments), all annual and interim reports of the
Trustee related to the entire Plan, the latest annual report and
the summary plan description;
(d) Determine the fact of a Participant's death and of any
Beneficiary's right to receive the deceased Participant's
interest based upon such proof and evidence as it deems
necessary; and
(e) Establish and review at least annually a funding policy bearing
in mind both the short-run and long-run needs and goals of the
Plan. To the extent Participants may direct their own
investments, the funding policy shall focus on which Investment
Funds are available for Participants to use.
15.5 Advisors May be Retained
The Administrator may retain such agents and advisors (including
attorneys, accountants, actuaries, consultants, record keepers,
investment counsel and administrative assistants) as it considers
necessary to assist it in the performance of its duties. The
Administrator shall also comply with the bonding requirements of ERISA
section 412.
15.6 Delegation of Administrator Duties
The Administrator shall provide the Trustee with the names and
specimen
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signatures of any person who is authorized to act as or on behalf of
the Administrator. The Company may, but shall not be required to,
delegate its duties as Administrator by appointing a committee (the
"Committee") which shall be responsible for performing the duties
allocated to the Administrator in this Plan and Trust. Any Committee
member appointed by the Company shall serve at the pleasure of the
Company, but may resign by written notice to the Company. Committee
members shall serve without compensation from the Plan for such
services.
15.7 Committee Operating Rules
(a) Actions of Majority. Any act delegated by the Administrator to
the Committee may be done by a majority of its members. The
majority may be expressed by a vote at a meeting or in writing
without a meeting, and a majority action shall be equivalent to
an action of all Committee members.
(b) Meetings. The Committee shall hold meetings upon such notice,
place and times as it determine$ necessary to conduct its
functions properly.
(c) Reliance by Trustee. The Committee may authorize one or more of
its members to execute documents on its behalf and give written
direction to the Trustee in the performance of its duties. The
Trustee shall accept such direction and rely upon it until
notified in writing that the Committee has revoked the
authorization to give such direction. The Trustee shall not be
deemed to be on notice of any change in the membership of the
Committee or the duties delegated to the Committee until notified
in writing.
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16 MANAGEMENT OF INVESTMENTS
16.1 Trust Agreement
All Plan assets shall be held by the Trustee in trust, in accordance
with those provisions of this Plan and Trust which relate to the
Trustee, for use in providing Plan benefits and paying Plan expenses
not paid directly by the Employer. Plan benefits will be drawn solely
from the Trust and paid by the Trustee as directed by the
Administrator.
16.2 Investment Funds
The Administrator is hereby granted authority to direct the Trustee to
invest Trust assets in various Investment Funds. The Investment Funds
shall be comprised of:
(a) collective investment funds maintained by the Trustee which are
available for investment by trusts which are qualified under Code
sections 401(a) and 501(a);
(b) guaranteed investment contracts purchased from a bank a insurance
company prior to the Effective Date;
(c) interest bearing deposits of the Trustee; and
(d) Employer common or preferred stock which is readily tradable and
listed on a national securities exchange (or quoted on a system
sponsored by a national securities association) registered under
the Securities Exchange Act of 1934, as amended.
Any Investment Fund assets invested in a collective investment fund of
the Trustee shall be subject to all the provisions of the instruments
establishing and governing the collective investment fund. These
instruments, including any subsequent amendments, are incorporated
herein by reference. Notwithstanding, the Administrator may appoint,
with the approval of the Trustee, another trustee to hold and
administer Plan assets which do not meet these requirements.
16.3 Authority to Hold Cash
Each Participant's Sweep Account, which is used to hold assets pending
investment or disbursement, shall consist of interest bearing deposits
of the Trustee. The Trustee may also maintain sufficient deposit or
money market type assets in each Investment Fund to handle the
ordinary administration of the Plan and disbursement of funds.
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16.4 Trustee to Act Upon Instructions
The Trustee shall carry out investment instructions during each
investment cycle that begins on the Sweep Date after such instructions
are received from the Administrator or Participants. Such instructions
shall remain in effect until changed by the Administrator or
Participants.
16.5 Trustee is Investment Manager
The authority to manage, acquire and dispose of Trust assets in the
Investment Funds is hereby vested in the Trustee.
16.6 Investment in Employer Stock
If the Company provides an Employer Stock Investment Fund option for
Participants, the Trustee may acquire and hold sufficient Employer
common or preferred stock to comply with Participants' investment
elections of such Fund.
16.7 Voting and Tendering Employer Stock
Each Participant shall be entitled to direct the Trustee to vote or
tender Employer common or preferred stock held on his or her behalf in
the Employer Stock Investment Fund based upon the customary procedure
of the Trustee for the voting and tendering of employer securities it
holds in trust. The Administrator shall instruct the Trustee with
respect to how to vote or tender any shares for which directions are
not received from Participants.
16.8 Registration and Disclosure for Employer Stock
The Administrator shall be responsible for determining the
applicability (and, if applicable, complying with) the requirements of
the Securities Act of 1933, as amended, the California Corporate
Securities Law of 1968, as amended, and any other applicable blue sky
law. The Administrator shall also specify what restrictive legend or
transfer restriction, if any, is required to be set forth on the
certificates for the securities and the procedure to be followed by
the Trustee to effectuate a resale of such securities.
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17 TRUST ADMINISTRATION
17.1 Trustee to Construe Trust
The Trustee shall have the authority to construe those provisions of
this Plan and Trust which relate to the Trustee and to do all things
necessary or convenient to the administration of the Trust, whether or
not such powers are specifically set forth in this Plan and Trust.
Actions taken in good faith by the Trustee shall be conclusive and
binding on all interested parties, and shall be given the maximum
possible deference allowed by law.
17.2 Trustee To Act As Owner of Trust Assets
Subject to the specific conditions and limitations set forth in this
Plan and Trust, the Trustee shall have all the power, authority,
rights and privileges of an absolute owner of the Trust assets and,
not in limitation but in amplification of the foregoing, may:
(a) receive, hold, manage, invest and reinvest, sell, tender,
exchange, dispose of, encumber, hypothecate, pledge, mortgage,
lease, grant options respecting, repair, alter, insure, or
distribute any and all property in the Trust;
(b) borrow money, participate in reorganizations, pay calls and
assessments, vote or execute proxies, exercise subscription or
conversion privileges, exercise options and register any
securities in the Trust in the name of the nominee, in federal
book entry form or in any other form as will permit title thereto
to pass by delivery;
(c) renew, extend the due date, compromise, arbitrate, adjust,
settle, enforce or foreclose, by judicial proceedings or
otherwise, or defend against the same, any obligations or claims
in favor of or against the Trust; and
(d) lend, through a collective investment fund, any securities held
in such collective investment fund to brokers, dealers or other
borrowers and to permit such securities to be transferred into
the name and custody and be voted by the borrower of others.
17.3 United States Indicia of Ownership
The Trustee shall not maintain the indicia or ownership of any Trust
assets outside the jurisdiction of the United States, except as
authorized by ERISA section 404(b).
17.4 Tax Withholding and Payment
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(a) Withholding. The Administrator shall provide the Trustee with a
signed withholding form (which is acceptable to the Trustee) for
any Participant or Beneficiary who is to receive a taxable
distribution from the Trust. The Trustee shall calculate and
withhold federal (and, if agreed to with the Administrator,
state) income taxes as directed on the withholding form.
(b) Taxes Due From Investment Funds. The Trustee shall pay from the
Investment Fund any taxes or assessments imposed by any taxing or
governmental authority on such Fund or its income, including
related interest and penalties.
17.5 Trustee Duties and Limitations
The Trustee's duties shall be confined to receiving funds on behalf of
and making payments from the Trust, safeguarding and valuing Trust
assets, and investing and reinvesting Trust assets in the Investment
Funds as directed by the Administrator or Participants. The Trustee
shall have no duty or authority to ascertain whether Contributions are
in compliance with the Plan, to enforce collection or to compute or
verify the accuracy or adequacy or any amount to be paid to it by the
Employer. The Trustee shall not be liable for the proper application
of any part of the Trust with respect to any disbursement made in
accordance with the written directions of the Administrator.
17.6 Trust Accounting
(a) Annual Report. Within 60 days (or other reasonable period)
following the close of the Plan Year, the Trustee shall provide
the Administrator with an annual accounting of Trust assets and
information to assist the Administrator in meeting ERISA's annual
reporting and audit requirements.
(b) Periodic Reports. The Trustee shall maintain records and provide
sufficient reporting to allow the Administrator to properly
monitor the Trust's assets and activity.
(c) Administrator Approval. Approval of any Trustee accounting will
automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files a
written objection with the Trustee within such time period. Such
approval shall be final as to all matters and transactions stated
or shown therein and binding upon the Administrator.
17.7 Valuation of Certain Assets
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If the Trustee determines the Trust holds any asset which is not
readily tradable and listed on a national securities exchange
registered under the Securities Exchange Act of 1934, as amended, the
Trustee may engage a qualified independent appraiser to determine the
fair market value of such property, and the appraisal fees shall be
paid from the Investment Fund containing the asset.
17.8 Legal Counsel
The Trustee may consult with legal counsel of its choice, including
counsel for the Employer or counsel of the Trustee, upon any question
or matter arising under this Plan and Trust. When relied upon by the
Trustee, the opinion of such counsel shall be evidence that the
Trustee has acted in good faith.
17.9 Fees and Expenses
The Trustee's fees for its services as Trustee shall be such as may be
mutually agreed upon by the Company and the Trustee. Trustee fees and
all reasonable expenses of counsel and advisors retained by the
Trustee may be paid by the Employer. If the Employer chooses not to
pay for these fees and expenses, or if they remain unpaid by the
Employer for a period of 60 days, the Trustee may cause such fees and
expenses to be paid from the Trust.
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18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION
18.1 Plan Does Not Affect Employment Rights
The Plan does not provide any employment rights to any Employee. The
Employer expressly reserves the right to discharge an Employee without
regard to the effect such discharge would have upon the Employee's
interest in the Plan.
18.2 Limited Return of Contributions
Except as provided in this paragraph, (1) Plan assets shall not revert
to the Employer nor be diverted for any purpose other than the
exclusive benefit of Participants or their Beneficiaries; and (2) a
Participant's vested interest shall not be subject to divestment. As
provided in ERISA section 403(c)(2), the actual amount of a
Contribution (or the current value of the Contribution if a net loss
has occurred) may revert to the Employer if such Contribution is:
(a) made by reason of a mistake of fact;
(b) conditioned on the initial qualification of the Plan under Code
section 401(a); or
(c) conditioned upon its deductibility under Code section 404.
The reversion to the Employer must be made within one year of the
mistaken payment of the Contribution, the date of denial of
qualification, or disallowance of deduction, as the case may be. A
Participant shall have no rights under the Plan with respect to any
such reversion.
18.3 Assignment and Alienation
As provided by Code section 401(a)(13), no benefit provided by the
Plan may be anticipated, assigned or alienated, except:
(a) to create, assign or recognize a right to any benefit with
respect to a Participant pursuant to a QDRO, or
(b) to use a Participant's vested Account balance as security for a
loan from the Plan.
18.4 Facility of Payment
If a Plan benefit is due to be paid to a minor or a person who is
unable to care for his or her affairs due to illness or accident, the
Administrator
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may instead direct that the benefit be paid in complete satisfaction
of its obligation, to any person acting as his or her custodian under
the California Uniform Transfers to Minors Act, his or her legal
representative or a near relative, or directly for his or her support,
maintenance or education.
18.5 Reallocation of Lost Participant's Accounts
If the Administrator cannot locate a person entitled to payment of a
Plan benefit after a reasonable search, the Administrator may at any
time thereafter treat such person's Account as it would a forfeiture.
If such person subsequently presents the Administrator with a valid
claim for the benefit, such person shall be paid the amount treated as
forfeited, plus the interest that would have been earned in the Sweep
Account to the date of determination. The Administrator shall direct
the Trustee to pay the amount from the Forfeiture Account or through
an additional Employer Contribution.
18.6 Claims Procedure
(a) Right to Make Claim. An interested party who disagrees with the
Administrator's determination of his or her right to Plan
benefits, must submit a written claim and exhaust this claim
procedure before legal recourse of any type is sought. The claim
must include the important issues the interested party believes
support the claim.
(b) Process for Denying a Claim. The Administrator's partial or
complete denial of an initial claim must include an
understandable, written response covering (1) the specific
reasons why the claim is being denied (with reference to the
pertinent Plan provisions) and (2) the steps necessary to perfect
the claim and obtain a final review.
(c) Appeal of Denial and Final Review. The interested party may make
a written appeal of the Administrator's initial decision, and the
Administrator shall respond in the same manner and form as
prescribed for denying a claim initially.
(d) Time Frame. The initial claim, its review, appeal and final
review shall be made in a timely fashion, subject to the
following time table:
Action Maximum Response Time
------ ---------------------
File initial claim 60 days after benefit determined
Initial claim review 90 days after claim filed
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However, the Administrator may take up to twice the maximum
response time for its initial and final review if it provides an
explanation within the normal period of why an extension is
needed and when its decision will be forthcoming.
18.7 Construction
Headings are included for reading convenience. The text shall control
if any ambiguity or inconsistency exists between the headings and the
text. The singular and plural shall be interchanged wherever
appropriate.
18.8 Jurisdiction and Severability
The Plan and Trust shall be construed, regulated and administered
under ERISA and other applicable federal laws and, where not otherwise
preempted, by the laws of the State of California. If any provision of
this Plan and Trust shall become invalid or unenforceable, that fact
shall not affect and validity or enforceability of any other provision
of this Plan and Trust. All provisions of this Plan and Trust shall be
so construed as to render them valid and enforceable in accordance
with their intent.
18.9 Indemnification by Employer
The Company hereby agrees to indemnify all Plan fiduciaries against
any and all liabilities resulting from any action or inaction, in
relation to the Plan or Trust (1) including (without limitation)
expenses reasonably incurred in the defense of any claim relating to
the Plan or its assets, and amounts paid in any settlement relating to
the Plan or its assets, but (2) excluding actions or inactions made in
bad faith, or resulting from the negligence or breach of fiduciary
duty of the Trustee. The Company shall have the right, but not the
obligation, to conduct the defense of any action to which this
paragraph applies. The fiduciaries are not entitled to indemnity from
the Plan assets relating to any such action.
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19 AMENDMENT, MERGER AND TERMINATION
19.1 Amendment
The Company reserves the right to amend this Plan and Trust at any
time, to any extent and in any manner it may deem necessary or
appropriate. The Company (and not the Trustee) shall be responsible
for adopting any amendments necessary to maintain the qualified status
of this Plan and Trust under Code sections 401(a) and 501(a). The
Administrator shall have the authority to adopt Plan amendments which
have no substantial adverse financial impact upon the Employer or the
Plan. All interested parties shall be bound by any amendment, provided
that no amendment shall:
(a) Become effective until it is accepted in writing by the Trustee;
(b) Make it possible for any portion of the Trust assets to revert to
the Employer or to be used for, or diverted to, any purpose other
than for the exclusive benefit of Participants and Beneficiaries
entitled to Plan benefits;
(c) Decrease the rights of any affected Employee to benefits accrued
to the date on which the amendment is adopted, or if later, the
date upon which the amendment becomes effective; or
(d) Permit an Employee to be paid the balance of his or her Pre-Tax
Account unless the Related Company (or the subsidiary) employing
the Employee (1) terminates its participation in the Plan and
does not maintain another defined contribution plan (other than
an employee stock ownership plan as defined in Code section 4975)
or (2) transfers the Employee to an acquiring company through the
disposition of corporate assets (within the meaning of Code
section 409(d)(2)) as provided for in Code sections 401(k)(2)(B)
and (10).
19.2 Merger
This Plan and Trust may not be merged or consolidated with, nor may
its assets or liabilities transferred to another Plan, unless each
Participant and Beneficiary would receive a benefit just after the
merger, consolidation or transfer which is at least equal to the
benefit which would be received if the Plan had terminated just before
such event.
19.3 Plan Termination
The Company may, at any time and for any reason, terminate the Plan in
full or in part, or completely discontinue contributions. Upon any of
these
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events, the rights of each affected Employee to benefits accrued to
that date shall be fully vested. Distributions or withdrawals will be
made in accordance with the terms of the Plan which are subject to
amendment at the time of the Plan's termination. The Trustee's
authority shall continue beyond the Plan's termination date until all
Trust assets have been liquidated and distributed.
19.4 Termination of Related Company's Participation
Any Related Company may terminate its Plan participation upon written
notice executed by the Related Company and delivered to the Company.
Upon the Related Company's request, the Company may instruct the
Trustee and Administrator to spin off all affected Accounts and
underlying assets into a separate qualified plan under which the
Related Company shall assume the powers and duties of the Company.
Alternatively, the Company may treat the event as a partial
termination described above or continue to maintain the Accounts under
the Plan.
19.5 Replacement of the Trustee
The Trustee may resign as Trustee under this Plan and Trust or may be
removed by the Company at any time upon at least 90 days written
notice (or less if agreed to by both parties). In such event, the
Company shall appoint a successor trustee by the end of the notice
period. The successor trustee shall then succeed to all the powers and
duties of the Trustee under this Plan and Trust. If no successor
trustee has been named by the end of the notice period, the Company's
chief executive officer shall become the trustee, or if he or she
declines, the Trustee may petition the court for the appointment of a
successor trustee.
19.6 Final Settlement and Accounting of Trustee
(a) Final Settlement. As soon as is administratively feasible after
its resignation or removal as Trustee, the Trustee shall transfer
to the successor trustee all property currently held by the
Trust. However, the Trustee is authorized to reserve such sum of
money as it may deem advisable for payment of its accounts and
expenses in connection with the settlement of its accounts or
other fees or expenses payable by the Trust. Any balance
remaining after payment of such fees and expenses shall be paid
to the successor trustee.
(b) Final Accounting. The Trustee shall provide a final accounting to
the Administrator within 90 days of the date Trust assets are
transferred to the successor trustee.
(c) Administrator Approval. Approval of the final accounting will
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automatically occur 90 days after such accounting has been
received by the Administrator, unless the Administrator files a
written objection with the Trustee within such time period. Such
approval shall be final as to all matters and transactions stated
or shown therein and binding upon the Administrator.
50
<PAGE>
APPENDIX A
The Investment Funds offered to Participants and Beneficiaries as of the
Effective Date include this set of monthly valued funds:
Employer's Transition GIC Fund
Asset Allocation Fund
Tilts and Timing Fund
If investment instructions are not received from any Participant, his or her
investment instructions shall be assumed to be a 100% investment in the
Employer's Transition GIC Fund.
51
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
KREG OPERATING CO.
February 21, 1994
Under and in accordance with Section 14(f) of the Delaware General
Corporation Law, we the undersigned being all of the members of the Board of
Directors (the "Board") of KREG OPERATING CO. ("KREG"), a Delaware corporation,
waiving all notice, hereby execute this instrument, or a counterpart hereof, to
evidence their consent to the taking of the actions set forth herein, and in the
adoption of the following resolution without the holding of a meeting:
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its employees;
WHEREAS, KREG is a Non-Affiliated Company as defined in the Plan; and
WHEREAS, the Plan provides that any Related Company or Non-Affiliated
Company may become a participating Employer as defined in the Plan with the
approval of the Company.
RESOLVED, that effective October 1, 1993, KREG hereby adopts the Plan and
Trust which is effective as of July 1, 1989 and thereby elects to
participate as an employer.
IN WITNESS WHEREOF, the undersigned have executed this Action by Unanimous
Written Consent effective as of the date first written above.
/s/
---------------------------------------
Ray Wirta
/s/
---------------------------------------
Raymond J. Pacini
/s/
---------------------------------------
Richard M. Ortwein
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
KREG-LA, INC.
February 21, 1994
Under and in accordance with Section 14(f) of the Delaware General
Corporation Law, we the undersigned being all of the members of the Board of
Directors (the "Board") of KREG-LA, INC. ("KREG"), a Delaware corporation,
waiving all notice, hereby execute this instrument, or a counterpart hereof, to
evidence their consent to the taking of the actions set forth herein, and in the
adoption of the following resolution without the holding of a meeting:
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its employees;
WHEREAS, KREG is a Non-Affiliated Company as defined in the Plan; and
WHEREAS, the Plan provides that any Related Company or Non-Affiliated
Company may become a participating Employer as defined in the Plan with the
approval of the Company.
RESOLVED, that effective October 1, 1993, KREG hereby adopts the Plan and
Trust which is effective as of July 1, 1989 and thereby elects to
participate as an employer.
IN WITNESS WHEREOF, the undersigned have executed this Action by Unanimous
Written Consent effective as of the date first written above.
/s/
---------------------------------------
Ray Wirta
/s/
---------------------------------------
Raymond J. Pacini
/s/
---------------------------------------
Richard M. Ortwein
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
KREG-OC, INC.
February 21, 1994
Under and in accordance with Section 14(f) of the Delaware General
Corporation Law, we the undersigned being all of the members of the Board of
Directors (the "Board") of KREG-OC, INC. ("KREG"), a Delaware corporation,
waiving all notice, hereby execute this instrument, or a counterpart hereof, to
evidence their consent to the taking of the actions set forth herein, and in the
adoption of the following resolution without the holding of a meeting:
WHEREAS, The Koll Company (the "Company" maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its employees;
WHEREAS, KREG is a Non-Affiliated Company as defined in the Plan and;
WHEREAS, the Plan provides that any Related Company or Non-Affiliated
Company may become a participating Employer as defined in the Plan with the
approval of the Company.
RESOLVED, that effective October 1, 1993, KREG hereby adopts the Plan and
Trust which is effective as of July 1, 1989 and thereby elects to
participate as an employer.
IN WITNESS WHEREOF, the undersigned have executed this Action by Unanimous
Written Consent effective as of the date first written above.
/s/
---------------------------------------
Ray Wirta
/s/
---------------------------------------
Raymond J. Pacini
/s/
---------------------------------------
Richard M. Ortwein
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
KREG-SD, INC.
February 21, 1994
Under and in accordance with Section 14(f) of the Delaware General
Corporation Law, we the undersigned being all of the members of the Board of
Directors (the "Board") of KREG-SD, INC. ("KREG"), a Delaware corporation,
waiving all notice, hereby execute this instrument, or a counterpart hereof, to
evidence their consent to the taking of the actions set forth herein, and in the
adoption of the following resolution without the holding of a meeting:
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its employees;
WHEREAS, KREG is a Non-Affiliated Company as defined in the Plan; and
WHEREAS, the Plan provides that any Related Company or Non-Affiliated
Company may become a participating Employer as defined in the Plan with the
approval of the Company.
RESOLVED, that effective October 1, 1993, KREG hereby adopts the Plan and
Trust which is effective as of July 1, 1989 and thereby elects to
participate as an employer.
IN WITNESS WHEREOF, the undersigned have executed this Action by Unanimous
Written Consent effective as of the date first written above.
/s/
---------------------------------------
Ray Wirta
/s/
---------------------------------------
Raymond J. Pacini
/s/
---------------------------------------
Richard M. Ortwein
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
KREG-SW, INC.
February 21, 1994
Under and in accordance with Section 14(f) of the Delaware General
Corporation Law, we the undersigned being all of the members of the Board of
Directors (the "Board") of KREG-SW, INC. ("KREG"), a Delaware corporation,
waiving all notice, hereby execute this instrument, or a counterpart hereof, to
evidence their consent to the taking of the actions set forth herein, and in the
adoption of the following resolution without the holding of a meeting:
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its employees;
WHEREAS, KREG is a Non-Affiliated Company as defined in the Plan; and
WHEREAS, the Plan provides that any Related Company or Non-Affiliated
Company may become a participating Employer as defined in the Plan with the
approval of the Company.
RESOLVED, that effective October 1, 1993, KREG hereby adopts the Plan and
Trust which is effective as of July 1, 1989 and thereby elects to
participate as an employer.
IN WITNESS WHEREOF, the undersigned have executed this Action by Unanimous
Written Consent effective as of the date first written above.
/s/
---------------------------------------
Ray Wirta
/s/
---------------------------------------
Raymond J. Pacini
/s/
---------------------------------------
Richard M. Ortwein
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
KREG-NW, INC.
February 21, 1994
Under and in accordance with Section 14(f) of the Delaware General
Corporation Law, we the undersigned being all of the members of the Board of
Directors (the "Board") of KREG-NW, INC. ("KREG"), a Delaware corporation,
waiving all notice, hereby execute this instrument, or a counterpart hereof, to
evidence their consent to the taking of the actions set forth herein, and in the
adoption of the following resolution without the holding of a meeting:
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its employees;
WHEREAS, KREG is a Non-Affiliated Company as defined in the Plan; and
WHEREAS, the Plan provides that any Related Company or Non-Affiliated
Company may become a participating Employer as defined in the Plan with the
approval of the Company.
RESOLVED, that effective October 1, 1993, KREG hereby adopts the Plan and
Trust which is effective as of July 1, 1989 and thereby elects to
participate as an employer.
IN WITNESS WHEREOF, the undersigned have executed this Action by Unanimous
Written Consent effective as of the date first written above.
/s/
---------------------------------------
Ray Wirta
/s/
---------------------------------------
Raymond J. Pacini
/s/
---------------------------------------
Richard M. Ortwein
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
KREG-NC, INC.
February 21, 1994
Under and in accordance with Section 14(f) of the Delaware General
Corporation Law, we the undersigned being all of the members of the Board of
Directors (the "Board") of KREG-NC, INC. ("KREG"), a Delaware corporation,
waiving all notice, hereby execute this instrument, or a counterpart hereof, to
evidence their consent to the taking of the actions set forth herein, and in the
adoption of the following resolution without the holding of a meeting:
WHEREAS, The Koll Company (the "Company") maintains The Koll Company 401(k)
Plus Plan (the "Plan") and Trust Agreement (the "Trust") for its employees;
WHEREAS, KREG is a Non-Affiliated Company as defined in the Plan; and
WHEREAS, the Plan provides that any Related Company or Non-Affiliated
Company may become a participating Employer as defined in the Plan with the
approval of the Company.
RESOLVED, that effective October 1, 1993, KREG hereby adopts the Plan and
Trust which is effective as of July 1, 1989 and thereby elects to
participate as an employer.
IN WITNESS WHEREOF, the undersigned have executed this Action by Unanimous
Written Consent effective as of the date first written above.
/s/
---------------------------------------
Ray Wirta
/s/
---------------------------------------
Raymond J. Pacini
/s/
---------------------------------------
Richard M. Ortwein
<PAGE>
April 1, 1993
The Bolsa Chica Company
c/o The Koll Company
4343 Von Karman Avenue
Newport Beach, CA 92660
Dear Sirs:
This will confirm our understanding with respect to amendments to the
following agreements among Abex Inc. ("Abex") and The Bolsa Chica Company
("Bolsa Chica") and/or their respective subsidiaries:
1. The Transition Agreement, dated as of July 16, 1992 (the "Transition
Agreement"), among The Henley Group, Inc., Bolsa Chica and Abex.
Section 2.01 of the Transition Agreement is hereby amended to read in
its entirety as follows:
"SECTION 2.01. TRANSITIONAL SERVICES. Abex shall make available
to Bolsa Chica and its subsidiaries such administrative support
services ("Transitional Services") for the period commencing
April 1, 1993 and ending on April 1, 1994 (the "Transition
Period" ) as are reasonably necessary and appropriate to
facilitate the orderly transition of such functions to Bolsa
Chica. Abex shall not be required to provide transitional
services to the extent that doing so would unreasonably interfere
with the performance by any of its employees of services for Abex
or otherwise unreasonably burden Abex or any of its employees in
light of the purposes of this Agreement.
<PAGE>
The Bolsa Chica Company
c/o The Koll Company
April 1, 1993
Page Two
provide and make available the Transition Services for the
Transition Period, Bolsa Chica shall pay Abex a fee of $500,000
on each of June 30, 1993, September 30, 1993, December 31, 1993
and March 31, 1994.
2. The Lease Agreement, dated as of June 15, 1992, between Liberty Lane
Real Estate Inc. and Bolsa Chica, shall terminate as of April 1, 1993.
This will also confirm our agreement regarding the audits of the
consolidated federal income tax returns filed by Bolsa and/or The Henley Group,
Inc. for 1989, 1990, 1991 and 1992 (collectively, the "Audits"). It is agreed
and understood that (i) Abex shall control and direct the day-to-day conduct of
the Audits on behalf of Bolsa and any administrative or judicial appeals
relating thereto, (ii) Bolsa will provide Abex and its counsel with appropriate
powers of attorney or other documents which will enable Abex to exercise such
control and direction, and (iii) Bolsa will provide Abex with such reasonable
assistance as Abex may request with respect to any such proceeding.
Notwithstanding the foregoing, Abex shall not agree to pay, settle, compromise
or concede any claim or issue arising with respect to the Audits or any appeal
without the consent of Bolsa, which shall not be unreasonably withheld PROVIDED
that Bolsa shall be entitled to withhold its consent if Bolsa reasonably
believes that it could achieve a materially more favorable settlement with
respect to any issues for which Bolsa is not being indemnified by Abex. Abex
shall undertake any action which it is permitted to take pursuant to this
paragraph with the same diligence and care as if such action pertained to Abex,
and as if any amount which might be payable by or to Bolsa were payable by or to
Abex. Except as expressly set forth above, the Tax Sharing Agreement dated June
10, 1992 between The Henley Group, Inc. and Abex shall govern the handling of
the Audits subject to such Agreement and any administrative or individual
appeals relating thereto and this letter is not intended to modify the parties'
rights and obligations under that Agreement.
Abex will provide Bolsa with copies of all correspondence, notices and
other documents received by Abex in connection with
<PAGE>
The Bolsa Chica Company
c/o The Koll Company
April 1, 1993
Page Three
the audits, including copies of all Information Document Requests (IDR's), or
appeals and will permit Bolsa to review drafts of any materials to be submitted
in connection with such proceedings prior to such submission, it being
understood that time is of the essence and any such review shall not delay any
submission. Bolsa will promptly advise Abex of those IDR responses it wishes to
review prior to such submission. Abex will consult with Bolsa regarding any
position it intends to take regarding any issue raised during the audit or
appeal and will afford Bolsa the right to participate in any conferences with
tax authorities.
Bolsa shall reimburse Abex for any reasonable out-of-pocket costs
(including accountants and attorney's fees) incurred by Abex in connection with
the conduct of the audit or any related administrative or judicial appeal
(other than with respect to issues described in clauses x and y of Section
7.01(b) of the Tax Sharing Agreement). Any amount payable pursuant to this
required reimbursement shall be payable within 30 days after receipt
by Bolsa of appropriate documentation. Abex shall obtain Bolsa's approval prior
to incurring any expense (or group of related expenses) in excess of $50,000.
Please indicate your agreement with the foregoing by signing in the space
provided below.
Very truly yours,
ABEX INC.
By /s/ Clifford T Dirkes
------------------------------------
Title: V.P.-Tax
Accepted and Agreed to
as of the date first above
written:
THE BOLSA CHICA COMPANY
By /s/
--------------------------
Title: CFO
<PAGE>
EXHIBIT 10.18A
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 (the "Amendment"), dated as of December 29, 1993, is
made and entered into by and between THE KOLL COMPANY, a California corporation
("TKC") and KREG OPERATING CO., a Delaware corporation ("KREG"), for the purpose
of amending that certain Asset Purchase Agreement (the "Agreement") dated as of
September 30, 1993 by and between TKC and KREG.
R E C I T A L S:
WHEREAS, TKC desires to surrender all of its right, title and interest in
certain periodic earnout payments pursuant to the Agreement in exchange for a
lump-sum cash payment; and
WHEREAS, KREG desires to make such cash payment in exchange for the
cancellation and termination of the earnout provisions of the Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. DEFINED TERMS. For purposes of this Amendment, all capitalized terms
used and not otherwise defined herein, shall have the meanings assigned to them
in the Agreement.
2. TERMINATION OF EARNOUT PROVISIONS. Section 2.4 of the Agreement shall
be terminated in its entirety, effective as of the date of the Agreement as if
the terms and provisions of Section 2.4 were not at any time of any force or
effect. From and after the date of this Amendment, Section 2.4 of the Agreement
shall be amended and restated to read in full as follows:
"2.4 [RESERVED]"
3. The provisions of Section 10.3(a)(ii) are hereby amended and restated
to read in full as follows:
"(ii) in the event that an Action is brought against
Parent, the Purchaser or any of their respective Affiliates
or Representatives by a stockholder of Parent alleging
breach of fiduciary duty or other causes of action,
including, without limitation, a derivative action, arising
out of the consummation of the Acquisition or any action
taken pursuant to this Agreement including any amendment
hereto (a "Stockholder Action"), the Seller shall indemnify,
defend and hold harmless Parent, the Purchaser and their
respective Affiliates and Representatives from and against
fifty percent (50%) of all Damages incurred in connection
with, arising out of, resulting from or incident to the
defense and/or settlement of such Stockholder Action;
provided that in no event shall the aggregate liability of
the Seller under this Section 10.3(a)(ii) exceed One Million
Three Hundred Thousand Dollars ($1,300,000)."
4. CONSIDERATION. In consideration of the foregoing, KREG shall deliver
to TKC Four Million Two Hundred Fifty Thousand Dollars ($4,250,000).
<PAGE>
5. NO OTHER AMENDMENT. Except to the extent modified by this Amendment,
all of the terms and provisions of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, KREG and TKC have caused this Amendment to be duly
executed as of the date first written above.
THE KOLL COMPANY
By/s/ RAYMOND E. WIRTA
-------------------------------------------
Raymond E. Wirta
President and Chief Operating Officer
KREG OPERATING CO.
By/s/ RICHARD M. ORTWEIN
-------------------------------------------
Richard M. Ortwein
President
<PAGE>
- -------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and among
LIBRA INVEST & TRADE LTD.
(Buyer),
SIGNAL LANDMARK
(Seller),
KOLL REAL ESTATE GROUP, INC.
(Parent)
and
LAKE SUPERIOR LAND COMPANY
dated December 17, 1993
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Purchase and Sale . . . . . . . . . . . . . . . . . 2
Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Purchase Price . . . . . . . . . . . . . . . . . . 2
Section 1.4 Sale of the KREG Shares . . . . . . . . . . . . . . 3
Section 1.5 Contingent Payments . . . . . . . . . . . . . . . . 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
AND SELLER WITH RESPECT TO THE COMPANY. . . . . . . . . . . . . . . . . 10
Section 2.1 Organization . . . . . . . . . . . . . . . . . . . 11
Section 2.2 Authority, Binding Effect . . . . . . . . . . . . . 11
Section 2.3 Financial Information; Absence of
Material Adverse Changes . . . . . . . . . . . . . 13
Section 2.4 Title . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.5 Franchises, Licenses, Agreements, etc.. . . . . . . 17
Section 2.6 Consents. . . . . . . . . . . . . . . . . . . . . . 17
Section 2.7 Actions Pending . . . . . . . . . . . . . . . . . . 18
Section 2.8 Collective Bargaining Agreements . . . . . . . . . 18
Section 2.9 Employee Benefit Plans; ERISA . . . . . . . . . . . 18
Section 2.10 Environmental Matters . . . . . . . . . . . . . . . 25
Section 2.11 Capitalization . . . . . . . . . . . . . . . . . . 28
Section 2.12 Subsidiaries . . . . . . . . . . . . . . . . . . . 28
Section 2.13 Bank Accounts . . . . . . . . . . . . . . . . . . . 29
Section 2.14 Tax Returns and Payments . . . . . . . . . . . . . 29
Section 2.15 Governmental Approvals . . . . . . . . . . . . . . 30
Section 2.16 Easements . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . 30
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . 31
Section 3.2 Authority, Binding Effect . . . . . . . . . . . . . 31
Section 3.3 Consents . . . . . . . . . . . . . . . . . . . . . 32
Section 3.4 Title . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.5 Investment Representation . . . . . . . . . . . . . 33
Section 3.6 Actions Pending . . . . . . . . . . . . . . . . . . 34
Section 3.7 No Reliance . . . . . . . . . . . . . . . . . . . . 34
Section 3.8 Environmental Matters . . . . . . . . . . . . . . . 35
Section 3.9 Governmental Approvals . . . . . . . . . . . . . . 35
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND
SELLER WITH RESPECT TO SELLER . . . . . . . . . . . . . . . . . . . . . 36
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . 36
Section 4.2 Authority, Binding Effect . . . . . . . . . . . . . 36
Section 4.3 Consents . . . . . . . . . . . . . . . . . . . . . 37
Section 4.4 Title to Shares . . . . . . . . . . . . . . . . . . 38
Section 4.5 Actions Pending . . . . . . . . . . . . . . . . . . 38
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT. . . . . . . . . . . . . . . . 39
Section 5.1 Organization . . . . . . . . . . . . . . . . . . . 39
Section 5.2 Authority, Binding Effect . . . . . . . . . . . . . 39
Section 5.3 Consents . . . . . . . . . . . . . . . . . . . . . 40
Section 5.4 Actions Pending . . . . . . . . . . . . . . . . . . 41
Section 5.5 Fairness Opinion . . . . . . . . . . . . . . . . . 41
ARTICLE VI
COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1 Experts . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.2 Settlement Accounts . . . . . . . . . . . . . . . . 42
Section 6.3 Management Services . . . . . . . . . . . . . . . . 43
ARTICLE VII
DELIVERIES AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.1 Deliveries by Seller . . . . . . . . . . . . . . . 44
Section 7.2 Deliveries by Buyer . . . . . . . . . . . . . . . . 46
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.1 Indemnification . . . . . . . . . . . . . . . . . . 47
Section 8.2 Defense of Claims . . . . . . . . . . . . . . . . . 51
Section 8.3 Letter Agreement Payment . . . . . . . . . . . . . 55
Section 8.4 Tax Returns . . . . . . . . . . . . . . . . . . . . 55
Section 8.5 Tax Refunds . . . . . . . . . . . . . . . . . . . . 57
Section 8.6 Services Indemnity. . . . . . . . . . . . . . . . . 57
Section 8.7 Termination of Tax Sharing Agreements . . . . . . . 58
ii
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS AND AGREEMENTS . . . . . . . . . . . . . . . . 58
Section 9.1 Confidentiality . . . . . . . . . . . . . . . . . . 58
Section 9.2 Expenses . . . . . . . . . . . . . . . . . . . . . 58
Section 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.4 Amendments; Termination . . . . . . . . . . . . . . 61
Section 9.5 Assignment. . . . . . . . . . . . . . . . . . . . . 61
Section 9.6 Entire Agreement . . . . . . . . . . . . . . . . . 61
Section 9.7 Applicable Law . . . . . . . . . . . . . . . . . . 62
Section 9.8 Survival . . . . . . . . . . . . . . . . . . . . . 62
Section 9.9 Further Assurances. . . . . . . . . . . . . . . . . 63
Section 9.10 Brokers . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.11 Provision of Services . . . . . . . . . . . . . . . 64
Section 9.12 Wage Reporting . . . . . . . . . . . . . . . . . . 65
Section 9.13 Unemployment Compensation . . . . . . . . . . . . . 66
iii
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of December 17, 1993 (together with the
annexes, exhibits and schedules hereto, this "Agreement"), among Libra Invest &
Trade Ltd., a corporation organized under the laws of the British Virgin Islands
("Buyer"), Signal Landmark, a California corporation ("Seller"), Koll Real
Estate Group, Inc. (formerly named The Bolsa Chica Company), a Delaware
corporation ("Parent"), and Lake Superior Land Company, a Delaware corporation
(the "Company").
Buyer desires to purchase all of the outstanding shares of common stock of
the Company and Seller desires to sell such shares to Buyer on the terms and
conditions hereinafter set forth.
The definitions of certain initially capitalized terms used herein are set
forth in Annex A hereto.
In consideration of the premises and of the respective covenants and
agreements contained herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions set forth in this Agreement, Seller will sell, transfer and convey to
Buyer, and Buyer will purchase from Seller, 1,000 shares (the "Shares") of
common stock, par value $1.00 per share ("Common Stock"), of the Company,
representing all of the outstanding equity securities of the Company, for the
Purchase Price (as defined in Section 1.3).
Section 1.2 CLOSING. Subject to the conditions set forth herein, the
purchase and sale of the Shares pursuant to this Agreement (the "Closing") will
take place at the offices of Skadden, Arps, Slate, Meagher & Flom, at 7:00 P.M.,
New York time, on the date hereof (the "Closing Date").
Section 1.3 PURCHASE PRICE.
In consideration for the sale, transfer and conveyance of the Shares to
Buyer by Seller, Buyer will deliver to Seller the following (the "Purchase
Price"):
(a) all of Buyer's right, title and interest in and to the Senior
Debentures; and
2
<PAGE>
(b) payment in an amount equal to the net proceeds from the sale by Buyer
of the KREG Shares in accordance with Section 1.4 hereof; and
(c) the Contingent Payments, if any, paid at the times and calculated as
specified in Section 1.5 hereof.
Section 1.4 SALE OF THE KREG SHARES. Buyer will, after the Closing Date,
commence the sale, through orderly open market or private placement
transactions, of 3,395,482 shares (the "KREG Shares") of the Class A common
stock, par value $.05 per share, of Seller ("KREG Common Stock"). On the
Closing Date, Buyer will deposit the KREG Shares with Smith Barney Shearson Inc.
("Smith Barney"), which will execute sales thereof and will distribute the
proceeds of such sales in accordance with the terms of the Custody Agreement in
the form attached hereto as Exhibit A. Parent will cause the sale of all KREG
shares to occur on or before December 17, 1996 and, Parent will at its own
expense in connection with any public sale of the KREG Shares, either register
such KREG Shares for public sale under the Securities Act of 1933, as amended
(the "Act"), and under appropriate state securities laws (the "Blue Sky Laws")
or provide an
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opinion of counsel reasonably acceptable to both Seller and Smith Barney that
such registrations are not required. In connection with any such registrations
or any sale, whether publicly or privately, Parent will indemnify Buyer, any
controlling person of Buyer or any person who is or will be an underwriter as
such term is defined in the Act as provided in Exhibit B. Notwithstanding
anything to the contrary in this Agreement, Parent shall pay and be responsible
for, and indemnify, defend and hold harmless Buyer from and against,
(i) any Taxes asserted against or imposed upon Buyer, and any
Indemnifiable Losses attributable to such Taxes as a result of or in
connection with the sale of the KREG shares described in this Section
1.4; and
(ii) any fees, costs or other expenses, including reasonable
attorneys' fees and expenses, incurred by Buyer or the Company
primarily as a result of Buyer's ownership of the KREG Shares;
provided that Parent and Seller shall in no event be liable for any
fees, costs or other expenses which aggregate in excess of $20,000.
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Section 1.5 CONTINGENT PAYMENTS. (a) In the event that Buyer, at any
time during the 15 year period following the Closing Date, in any transaction or
series of transactions, (i) sells any of the Shares, (ii) permits the Company to
sell all or substantially all of its assets, or (iii) receives cash or assets
from the Company by way of management or consulting fees or overhead allocations
in excess of $350,000 (such amounts up to and including $350,000 per annum,
"Allowable Fees"), in sale/lease-back transactions, financings that are
nonrecourse to Buyer or its Affiliates that are secured by any assets of the
Company, or otherwise (each a "Triggering Event"), then Buyer will pay to Seller
an amount (each a "Contingent Payment") equal to (A) one-half of the difference
between (1) the cumulative total Net Proceeds from all Triggering Events (the
"Buyer Net Proceeds") and (2) the product of (a) $16 million and (b) 1.20 raised
to the power equal to the quotient obtained by dividing (y) the number of days
that have elapsed between the Closing Date and the date of the Triggering Event
by (z) 360, less (B) the cumulative amount of Contingent Payments previously
paid to Seller by Buyer; PROVIDED, HOWEVER, that no Contingent Payment will be
re-
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quired unless the application of the foregoing equation (the "Contingent Payment
Equation") equals an amount greater than zero.
(b) In the event that any Triggering Event occurs during the twelve month
period following the Closing Date with (i) any Affiliate of Buyer or (ii) any
Prior Affiliate of Seller (individually or collectively an "Affiliate
Transaction"), the terms of which (including price) will in all events be at the
sole discretion of Buyer, Buyer will pay to Seller an amount equal to the
greater of (1) $2.5 million or (2) the amount, in the form of consideration
received by Buyer, of the Contingent Payment calculated in accordance with the
Contingent Payment Equation; PROVIDED, HOWEVER, that for purposes of this
Section 1.5(b), Buyer Net Proceeds shall include only Buyer's pro-rata share
(calculated, without double counting, as a percentage equal to Buyer's
percentage ownership interest in all relevant Affiliates or, if Buyer has no
ownership interest in any such Affiliate, calculated, without double counting,
as a percentage equal to such Affiliate's percentage ownership in Buyer) of the
cumulative total Net Proceeds from such Affiliate Transaction.
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(c) In the event that, during the period expiring on the later of (i)
twelve months after the Closing Date or (ii) six months after the latest
Affiliate Transaction occurring during the twelve month period immediately
following the Closing Date, a transaction or series of transactions occurs which
would be a Triggering Event (each a "Subsequent Transaction"), Buyer will pay
Seller an amount equal to the difference between (1) the Contingent Payment
calculated in accordance with the Contingent Payment Equation, except that for
purposes of this Section 1.5(c), the term "Buyer Net Proceeds" as used in the
Contingent Payment Equation shall equal the sum of (A) the cumulative total Net
Proceeds from the intervening Affiliate Transactions, plus (B) Buyer's pro-rata
share (calculated as a percentage equal to Buyer's percentage ownership interest
in all relevant Affiliates or, if Buyer has no ownership interest in any
Affiliate, calculated as a percentage equal to such Affiliate's percentage
ownership interest in Buyer) of the cumulative Net Proceeds to Buyer and its
Affiliates from the Subsequent Transaction and (2) the amount of the Contingent
Payment required pursuant to Section 1.5(b) resulting from the intervening
Affiliate Transactions; PROVIDED,
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HOWEVER, that no payment will be required unless the application of the
foregoing equation equals an amount greater than zero.
(d) In the event the Net Proceeds consist entirely of U.S. legal tender
or U.S. legal tender equivalents (collectively, "Cash Consideration"),
payments made pursuant to this Section 1.5 will be made by or on behalf of Buyer
by wire transfer of immediately available funds to an account designated by
Seller, not later than two Business Days after the Triggering Event, Affiliate
Transaction or Subsequent Transaction, as the case may be.
(e) In the event the Net Proceeds consist, in whole or in part, of
consideration other than Cash Consideration, the following payment procedures
will apply:
(i) Buyer will provide Seller a written statement (the
"Valuation Statement"), no later than ten Business Days after receipt
of the Net Proceeds, setting forth a description of the non-Cash
Consideration portion of the Net Proceeds and specifying the fair
market value attributable thereto. Seller will, within ten Business
Days of receipt of the Valuation
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Statement, deliver to Buyer, in writing, its objections (the "Seller
Objections"), if any, to the Valuation Statement. If Seller timely
delivers the Seller Objections to Buyer, Buyer and Seller will
promptly enter into discussions for the purpose of resolving in good
faith the Seller Objections. In the event that Seller and Buyer are
unable to resolve the Seller Objections on mutually agreeable terms
within fifteen Business Days from the date of delivery of the Seller
Objections to Buyer, all unresolved Seller Objections will be
submitted to Houlihan Lokey Howard & Zukin, or, if such firm is
unavailable, such other firm as the parties hereto may mutually agree
upon in writing (the "Designated Firm"). The Designated Firm will
determine appropriate valuations of any disputed items on the basis of
valuation methods deemed reasonable and appropriate by such Designated
Firm. The costs of the Designated Firm will be borne equally by the
parties.
(ii) The Valuation Statement will be deemed final and binding
upon Buyer and Seller
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upon the earliest to occur of the following (the "Final Valuation
Statement Date"): (1) Seller and Buyer mutually resolve the issues
raised by timely delivered Seller Objections, (2) the issues raised by
the timely delivered Seller Objections are resolved by the Designated
Firm or (3) the close of business on the tenth Business Day following
delivery of the Valuation Statement to Seller if Seller has not, prior
to such time, provided any Seller Objections.
(iii) Within two Business Days of the Final Valuation Statement
Date, Buyer will pay to Seller the Contingent Payment, at Buyer's
option, (1) in the form of consideration of the Net Proceeds, (2) by
wire transfer of immediately available funds to an account designated
by Seller or (3) any combination of (1) or (2).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
AND SELLER WITH RESPECT TO THE COMPANY
Parent and Seller jointly and severally represent and warrant to Buyer
that:
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Section 2.1 ORGANIZATION. The Company is a corporation duly organized
and validly existing in good standing under the laws of the State of Delaware
with the corporate power to own its assets and carry on the business conducted
by it as now conducted. The Company is duly qualified or registered for the
transaction of business and in good standing as a foreign corporation in each
jurisdiction in which such qualification is required, except in any such
jurisdictions in which the failure so to qualify or be registered would not have
a material adverse effect on the business, property or assets, condition or
operations of the Company or on the ability of Parent, Seller or the Company to
perform their respective obligations under this Agreement or the Ancillary
Agreements (a "Material Adverse Effect"). Complete and correct copies of the
Certificate of Incorporation and By-Laws of the Company, as in effect on the
date hereof, have been delivered to Buyer.
Section 2.2 AUTHORITY, BINDING EFFECT. The Company has the corporate power
and authority to execute, deliver and perform this Agreement and the Ancillary
Agreements. Such execution, delivery and performance have been duly authorized
by all necessary action on the
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part of the Company, and do not and will not contravene the Certificate of
Incorporation or By-Laws of the Company or conflict with, result in a breach of,
or entitle any party (with due notice or lapse of time or both) to terminate,
accelerate or call a default with respect to, or result in the creation or
imposition of any Lien upon any of the Shares or any Assets other than, with
respect to the Assets only, Permitted Liens, pursuant to any agreement or
instrument to which the Company is a party or by which the Company or any of its
properties or the Assets are bound. The execution, delivery and performance of
this Agreement and the Ancillary Agreements by the Company will not result in
any violation by the Company of any law, rule or regulation applicable to the
Company or its assets which would have a Material Adverse Effect. The Company
is not a party to, or subject to or bound by, any judgment, injunction or decree
of any court or governmental authority which may restrict or interfere with, in
any material respect, the performance of this Agreement and the Ancillary
Agreements. This Agreement is, and each of the Ancillary Agreements to be
executed by the Company hereunder on or prior to the Closing Date will be, a
valid and binding obligation of the Company
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enforceable in accordance with their respective terms except as such
enforceability may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally or (2) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
Section 2.3 FINANCIAL INFORMATION; ABSENCE OF MATERIAL ADVERSE CHANGES.
The Company has delivered to Buyer its balance sheets as of December 31 for each
of the years 1991 and 1992 and statements of income and cash flows for each of
the years in the two-year period ended December 31, 1992, which audited
financial statements are accompanied by the unqualified opinion of Deloitte and
Touche. Such financial statements, with the notes thereto, are in accordance
with the books and records of the Company, and present fairly the financial
position, results of operations and cash flows of the Company as of the dates
and for the periods indicated, in conformity with GAAP. The Company has
furnished to Buyer true and complete copies of its unaudited balance sheet as at
September 30, 1993 (the "Interim Balance Sheet") and the related statements of
income and cash flows for the nine-
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month period then ended (collectively, the "Unaudited Financial Statements").
The Unaudited Financial Statements fairly present, in all material respects, the
Company's financial position at the date thereof and its income and changes in
financial position or cash flows for the period then ended. Such Unaudited
Financial Statements have been prepared in accordance with GAAP, subject only to
year-end adjustments consistent with prior practice. Except as disclosed in
Schedule 2.3 hereto, there is no material liability or obligation, fixed or
contingent, including, without limitation, any unfunded obligation under any
pension plan, any liability for taxes or any liabilities under any Environmental
Laws, relating to the Company that is not reflected or reserved against in the
Interim Balance Sheet or otherwise disclosed in the notes thereto, other than
liabilities incurred in the ordinary course of business after the date thereof.
Since the date of the Interim Balance Sheet, there has been no material adverse
change in the business, assets, liabilities, obligations, prospects, financial
condition or results of operations of the Company and the business of the
Company has been conducted in the ordinary course consistent with past practice.
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Section 2.4 TITLE. (a) Schedule 2.4 sets forth a complete list of (i) all
land, timber producing real property ("Timberland"), easements and rights of
way, leasehold estates in land and improvements owned by the Company, and (ii)
all leases of real property and mineral rights owned by the Company or to which
the Company is a party (collectively with such other real property and interests
therein, "Real Property"), and (b) the Company owns no Real Property in fee
simple other than such property as is covered in the title insurance policies
attached hereto as Schedule 2.4(a).
Except as disclosed on Schedule 2.4(a) hereto, to Parent and Seller's
Knowledge except for Permitted Liens (a) the Company has good title to all of
its Assets and Real Property, or any interest therein owned, free and clear of
all Liens, except for Permitted Liens, (b) such Real Property is in good
condition and conforms in all material respects with all applicable building,
zoning, land use and other laws, ordinances, codes, orders and regulations, (c)
the use of such Real Property conforms in all material respects with such laws,
ordinances, codes, orders and regulations, and all necessary occupancy and other
certificates and permits for the
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lawful use and occupancy thereof and the equipment thereon have been issued, and
there are no unrecorded interests, rights, options or instruments affecting the
Assets or the Real Property (other than those matters which, individually or in
the aggregate, would not have a Material Adverse Effect), (d) the Company owns
or has a valid, legal right to use all real property and assets sufficient to
carry on the business conducted by it as now conducted (other than those matters
which, individually or in the aggregate, would not have a Material Adverse
Effect), (e) all notices of violations of law, ordinances, codes, orders or
regulations issued by any state, county, municipal or local department having
jurisdiction against or affecting any of the Real Property received by the
Company have been complied with in all material respects, and (f) the Company
has sufficient right of access to the Real Property to carry on the business
conducted by it as now conducted.
Since the effective dates of the Owner's title insurance policies attached
hereto as Schedule 2.4, up to the Closing Date the Real Property has not been
encumbered by any act of the Company, Parent or Seller in any
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manner which would reasonably appear as an exception to the coverage of such
title insurance policies.
Section 2.5 FRANCHISES, LICENSES, AGREEMENTS, ETC. To Parent and
Seller's Knowledge, the Company is in possession of and operating in substantial
compliance with all franchises, grants, authorizations, approvals, licenses,
permits, easements, consents, certificates and orders required to own or lease
its respective properties (including, without limitation, to own the Timberland
and to assume certain liabilities relating to the Timberland and the Assets) and
to permit the conduct of its business, except for those franchises, grants,
authorizations, approvals, licenses, permits, easements, consents, certificates
and orders (collectively, "Permitted Exceptions") (i) which are administrative
in nature and which are expected to be obtained or given in the ordinary course
of business after the Closing Date, or (ii) the failure of which to be obtained
or given would not individually or in the aggregate have a Material Adverse
Effect.
Section 2.6 CONSENTS. No consent, approval or authorization of or
declaration or filing with any Person, other than pursuant to the
Hart-Scott-Rodino Anti-
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trust Improvement Act of 1976, is required for the valid execution, delivery and
performance by the Company of this Agreement or the Ancillary Agreements.
Section 2.7 ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the Parent and Seller's Knowledge, threatened against
the Company or any properties or rights of the Company by or before any court,
arbitrator or administrative or governmental body which questions the validity
of this Agreement or the Ancillary Agreements or any action taken or to be taken
pursuant to this Agreement or the Ancillary Agreements or which would be
reasonably likely to result in a Material Adverse Effect.
Section 2.8 COLLECTIVE BARGAINING AGREEMENTS. The Company is not a party
to or bound by any collective bargaining agreements.
Section 2.9 EMPLOYEE BENEFIT PLANS; ERISA. Notwithstanding anything to
the contrary in this Agreement, all representations and warranties in this
Section 2.9 with respect to (i) an ERISA Affiliate, as defined below, other than
the Company, Seller, or Parent, (ii) a plan sponsored, maintained, contributed
to, or to which such an ERISA Affiliate is or was required to contribute,
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and/or (iii) a multiemployer plan, as defined below, are made to Parent and
Seller's Knowledge.
(a) Schedule 2.9(a) contains a true and complete list of (i) each material
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other material
employee benefit plan, program, agreement or arrangement, sponsored, maintained
or contributed to or required to be contributed to on or prior to the Closing
Date by the Company for the benefit of any employee or former employee of the
Company and (ii) each (1) "pension plan" (as defined in section 3(2) of ERISA)
covered by Title IV of ERISA that provides benefits to any employee or former
employee of an ERISA Affiliate (as defined below) and (2) each material "welfare
benefit plan" (as defined in Section 3(1) of ERISA) that provides benefits
(other than benefits provided pursuant to section 4980B of the Code) to former
employees of an ERISA Affiliate that, in either case, on or prior to the Closing
Date is sponsored, maintained or contributed to or
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<PAGE>
required to be contributed to by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with the Company would be
deemed a "single employer" within the meaning of section 4001 of ERISA (each a
"Plan"). Schedule 2.9(a) identifies each Plan that is an "employee benefit
plan," as that term is defined in section 3(3) of ERISA (the "ERISA Plans").
(b) With respect to each Plan that is not a "multiemployer plan" (as
defined in section 3(37) of ERISA), the Company has heretofore delivered (or
will deliver as soon as practicable after the Closing) to Buyer true and
complete copies of each of the following documents:
(i) if the Plan is in writing, a copy thereof or, if the Plan is
not in writing, a written summary of the material terms thereof;
(ii) a copy of the most recent annual report and actuarial
report, if required under ERISA and the most recent report, if any,
prepared with respect thereto in accordance with Statement of
Financial Accounting Standards No. 87, Employer's Accounting for
Pensions;
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(iii) a copy of the most recent Summary Plan Description if
required under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement and
the latest financial statements thereof; and
(v) the most recent determination letter, if any, received from
the Internal Revenue Service with respect to each Plan intended to
qualify under Section 401 of the Code.
(c) No liability under Title IV of ERISA has been assessed by the Pension
Benefit Guaranty Corporation ("PBGC") or by any Plan that is a "multiemployer
plan" against the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring a material liability under such Title, other
than liability for premiums due the PBGC (which premiums have been paid when
due). To the extent this representation applies to sections 4064, 4069 or 4204
of Title IV of ERISA, it is made not only with
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respect to each ERISA Plan but also with respect to any material employee
benefit plan, program, agreement or arrangement subject to Title IV of ERISA to
which the Company or any ERISA Affiliate made, or was required to make,
contributions during the five (5) year period ending on the Closing Date.
(d) Except as provided on Schedule 2.9(a), with respect to each ERISA Plan
which is subject to Title IV of ERISA, the present value of accrued benefits
under such plan, based upon the actuarial assumptions used for funding purposes
in the most recent actuarial report prepared by such plan's actuary with respect
to such plan did not exceed, as of its latest valuation date, the then current
value of the assets of such plan allocable to such accrued benefits.
(e) Neither the Company nor any ERISA Affiliate, nor any ERISA Plan, nor
any trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any ERISA
Affiliate, any ERISA Plan, any such trust, or any trustee or administrator
thereof, or any party dealing with any ERISA Plan or any such trust could be
subject to either a material civil penalty assessed pursuant
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to section 409 or 502(i) of ERISA or a material tax imposed pursuant to section
4975 or 4976 of the Code.
(f) Except as provided on Schedule 2.9(a), no ERISA Plan or any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of such ERISA Plan
ended prior to the Closing Date; and all contributions required to be made by
the Company or any ERISA Affiliate to any ERISA Plan (whether pursuant to the
terms of such ERISA Plan or otherwise) on or prior to the Closing Date have been
timely made.
(g) Except as provided on Schedule 2.9(a), no ERISA Plan is a
multiemployer pension plan, nor is any ERISA Plan a plan described in Section
4063(a) of ERISA.
(h) Each Plan has been operated and administered in all material respects
in accordance with its terms and applicable law, including but not limited to
ERISA and the Code.
(i) Each ERISA Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has either received a favorable IRS determination
letter as
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to its qualified status or still has a remaining period of time in which to
apply for such a determination letter and to make amendments necessary to obtain
a favorable determination.
(j) Except as provided on Schedule 2.9(a), no Plan provides benefits,
including without limitation death or medical benefits, with respect to current
or former employees of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than (i) coverage mandated by
applicable law or (ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in section 3(2) of ERISA).
(k) Except as provided on Schedule 2.9(a), the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or officer of the Company or any ERISA Affiliate to any material
severance pay, unemployment compensation or any other material payment, except
as expressly provided in this Agreement or (ii) accelerate the time of payment
or vesting of any material compensation due any such employee or officer or
materially increase the amount of compensation due any such employee or
officer.
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(l) Except as provided on Schedule 2.9(a), there are no pending,
threatened or anticipated material claims by or on behalf of any Plan, by any
employee or beneficiary covered under any such Plan, or otherwise involving any
such Plan (other than routine claims for benefits).
(m) Except as provided on Schedule 2.9(a), no Plan could result in the
payment of amounts by the Company that would be nondeductible for federal income
tax purposes under section 280G of the Code, due in whole or in part, to the
consummation of the transaction contemplated by this Agreement.
Section 2.10 ENVIRONMENTAL MATTERS.
(a) To Parent and Seller's Knowledge, except as set forth in Schedule
2.10(a), the Company is in full compliance with all applicable Environmental
Laws, which compliance includes, but is not limited to, the possession by the
Company of all Environmental Operating Permits required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. To
Parent and Seller's Knowledge, except as set forth in Schedule 2.10(a), the
Company has not received any communication (written or oral), whether from a
governmental
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authority, citizens group, employee or otherwise, that alleges that the Company
is not in such full compliance, and, to Parent and Seller's Knowledge, there are
no present circumstances that may prevent or interfere with such full compliance
in the future with existing Environmental Laws as they are presently drafted as
of the date hereof. All Environmental Operating Permits currently held by the
Company pursuant to the Environmental Laws are identified in Schedule 2.10(a).
(b) To Parent and Seller's Knowledge, except as set forth in Schedule
2.10(b), there is no Environmental Claim pending or threatened against the
Company or against any Person whose liability for any Environmental Claim the
Company has or may have retained or assumed either contractually or by operation
of law.
(c) To Parent and Seller's Knowledge, except as set forth in Schedule
2.10(c), there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that could form the basis of any Environmental Claim against the
Company or against any person or entity whose liability for any
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Environmental Claim the Company has or may have retained or assumed either
contractually or by operation of law.
(d) Without in any way limiting the generality of the foregoing, (i) all
on-site and off-site locations where the Company has stored, disposed or
arranged for the disposal of Materials of Environmental Concern are identified
in Schedule 2.10(d), (ii) all underground storage tanks, and the capacity and
contents of such tanks, located on property owned or leased by the Company are
identified in Schedule 2.10(d), (iii) except as set forth in Schedule 2.10(d),
there is no asbestos contained in or forming part of any building, building
component, structure or office space owned or leased by the Company, and (iv)
except as set forth in Schedule 2.10(d), no polychlorinated byphenyls (PCB's)
are used or stored at any property owned or leased by the Company.
(e) Parent and Seller represent and warrant that to Parent and Seller's
Knowledge, the information contained in the Environmental Assessment Report
prepared by Garrity and Miller dated May 28, 1992 (the "Environmental Assessment
Report") is complete and accurate in all material respects and does not omit to
state any
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material fact with respect to any environmental matters relating to the Company.
Section 2.11 CAPITALIZATION. The Shares represent all of the issued and
outstanding equity securities of the Company. The Shares have been duly
authorized by the Company, have been validly issued and are fully paid,
non-assessable and free of preemptive or similar rights, are subject to no Liens
and are owned beneficially and of record by Seller. There is no option,
warrant, call, convertible security, arrangement, agreement or commitment of any
character, whether oral or written, relating to any security of, or phantom
security interest in, the Company (other than the Contingent Payments
contemplated by this Agreement) and there are no voting trusts or other
agreements or understandings with respect to the voting of the capital stock of
the Company.
Section 2.12 SUBSIDIARIES. Other than as set forth on Schedule 2.12, the
Company has no subsidiaries nor owns or controls directly or indirectly, nor
has, at any time since January 1, 1986 owned or controlled, directly or
indirectly, any shares of capital stock or other interest in any other
corporation, partnership,
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joint venture or any other enterprise and has no right or obligation to acquire
any such capital stock or other interest.
Section 2.13 BANK ACCOUNTS. Schedule 2.13 sets forth a true and correct
list of the names of each bank, savings and loan or other financial institution
in which the Company has an account, including cash contribution accounts or
safe deposit boxes and the names of all persons authorized to draw thereon or
have access thereto.
Section 2.14 TAX RETURNS AND PAYMENTS. The Company has duly and timely
filed (or there has been filed on its behalf) all Tax Returns required to be
filed by it as of the date hereof and all such Tax Returns are true, correct and
complete in all material respects. The Company has (or others have on its
behalf) paid all Taxes due or claimed to be due through the date hereof by any
governmental authority levied upon the Company or any of its properties, assets,
businesses, income or franchises. Schedule 2.14 sets forth a true, complete and
correct list of all Tax Returns to which the Company is party which have not
been audited or for which all applicable statutes of limitations have not
expired.
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Section 2.15 GOVERNMENTAL APPROVALS. All filings required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 have been made by Parent,
Seller and Company and the waiting period under such Act has run with respect to
the transactions contemplated by this Agreement.
Section 2.16 EASEMENTS. Parent and Seller will obtain for the benefit of
the Company all easements across real property owned by Parent, Seller or
Calumet as the Company or Buyer may reasonably request providing reasonable
rights of access to the Real Property, as set forth in the form of easement
attached hereto as Schedule 2.16. The Company will obtain for the benefit of
Parent and Seller all easements across the Real Property as Parent and Seller
may reasonably request providing reasonable rights of access to such real
property owned by Calumet.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
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Section 3.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the British Virgin Islands.
Section 3.2 AUTHORITY, BINDING EFFECT. Buyer has the corporate power and
authority to execute, deliver and perform this Agreement and the Ancillary
Agreements to which it is a party. Such execution, delivery and performance
have been duly authorized by all necessary action on the part of the Buyer and
will not contravene the organizational documents of Buyer or conflict with,
result in a breach of, or entitle any party (with due notice or lapse of time or
both) to terminate, accelerate or call a default with respect to, any agreement
or instrument to which Buyer is a party or by which Buyer or its properties or
assets are bound. The execution, delivery and performance of this Agreement and
the Ancillary Agreements by Buyer will not result in any violation by Buyer of
any law, rule or regulation applicable to Buyer other than such violations which
would not, individually or in the aggregate, have a Material Adverse Effect with
respect to Buyer. Buyer is not a party to, nor subject to or bound by, any
judgment, injunction or decree of any court or governmental authority which may
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restrict or interfere with the performance of this Agreement or the Ancillary
Agreements. This Agreement is, and each Ancillary Agreement to be executed by
Buyer on or prior to the Closing Date will be, a valid and binding obligation of
Buyer enforceable against Buyer in accordance with their respective terms except
as such enforceability may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally or (2) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
Section 3.3 CONSENTS. No consent or waiver of any Person is required for
the valid execution, delivery and performance by the Buyer of this Agreement or
the Ancillary Agreements, other than pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and such other consents or waivers the failure of which
to obtain would not, individually or in the aggregate, have a Material Adverse
Effect with respect to Buyer.
Section 3.4 TITLE. Buyer is the sole owner of, and has, and will convey
to Seller at the Closing, good, valid and marketable title to, all of the Senior
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Debentures free and clear of all Liens. Other than as contemplated by this
Agreement and the Ancillary Agreements, Buyer is not party to, or bound by, any
agreement, instrument, proxy or understanding restricting the transfer of the
Senior Debentures.
Section 3.5 INVESTMENT REPRESENTATION. Buyer is acquiring the Shares for
its own account with no present intention of reselling or otherwise distributing
the same or participating in a distribution of same except pursuant to an
offering of Shares duly registered under the Act and applicable state securities
laws, or under other circumstances that, in the opinion of counsel for the Buyer
at the time, would not require registration of the Shares under the Securities
Act. Buyer acknowledges that it has been advised and is aware that (i) Seller
is relying upon an exemption under the Act predicated upon Buyer's
representations and warranties contained in this Section 3.5 in connection with
the offer and sale of the Shares pursuant to this Agreement and (ii) the Shares
in the hands of Buyer will be restricted stock within the meaning of Rule 144
promulgated pursuant to the Act and unless, and until, registered under the Act,
may be subject to limitations upon its resale (in-
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cluding, among others, pertinent requirements of Rule 144 and limitations on the
amount of stock that can be resold and the time of resale) set forth in Rule 144
or in administrative interpretations by the Securities and Exchange Commission,
or in other rules and regulations promulgated thereunder by the Securities and
Exchange Commission, in effect at the time of the proposed sale or other
disposition of the Shares.
Section 3.6. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to Buyer's knowledge after reasonable inquiry, threatened
against Buyer or any of its properties or rights by or before any court,
arbitrator or administrative or governmental body which questions the validity
of this Agreement or the Ancillary Agreements or any action taken or to be taken
pursuant hereto or thereto which could reasonably be expected to have a Material
Adverse Effect with respect to Buyer in connection with the transactions
contemplated herein.
Section 3.7 NO RELIANCE. Buyer possesses the level of sophistication
requisite to its determination to enter into the transactions contemplated
hereby and has based such determination upon its own independent inves-
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tigation as to the financial and other merits of such transactions and not in
reliance upon the accuracy or completeness of any financial information,
documents or other information, written or oral, other than the representations
and warranties contained in Articles II, IV and V hereof, provided to Buyer by
Parent, Company and Seller.
Section 3.8 ENVIRONMENTAL MATTERS. Buyer acknowledges that Seller has
provided Buyer with a copy of the Environmental Assessment Report and that Buyer
has read and is familiar with the findings of such Environmental Assessment
Report.
Section 3.9 GOVERNMENTAL APPROVALS. All required governmental filings
with respect to the transactions contemplated by this Agreement have been made,
all applicable waiting periods including those under the Hart-Scott-Rodino
Antitrust Improvements Act have run, and all requisite governmental approvals
for the consummation of the transactions contemplated hereby have been granted.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND
SELLER WITH RESPECT TO SELLER
Parent, with respect to Seller, and Seller, with respect to itself, hereby,
jointly and severally represent and warrant to Buyer that:
Section 4.1 ORGANIZATION. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of California.
Section 4.2 AUTHORITY, BINDING EFFECT. Seller has the corporate power and
authority to execute, deliver and perform this Agreement and the Ancillary
Agreements to which it is a party. Such execution, delivery and performance
have been duly authorized by all necessary action on the part of Seller and will
not contravene the certificate of incorporation or by-laws of Seller or conflict
with, result in a breach of, or entitle any party (with due notice or lapse of
time or both) to terminate, accelerate or call a default with respect to, any
agreement or instrument to which Seller is a party or by which Seller or its
properties or assets are bound. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements to which it is a party
will not result in any violation by Seller of any law,
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rule or regulation applicable to Seller other than such violations which would
not, individually or in the aggregate, have a Material Adverse Effect. Seller
is not a party to, nor subject to or bound by, any judgment, injunction or
decree of any court or governmental authority which may restrict or interfere
with the performance of this Agreement or the Ancillary Agreements. This
Agreement is, and each of the Ancillary Agreements to be executed by Seller on
or prior to the Closing Date will be, a valid and binding obligation of Seller
enforceable in accordance with their respective terms except as such
enforceability may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally or (2) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
Section 4.3 CONSENTS. No consent or waiver of any Person is required for
the valid execution, delivery and performance of this Agreement and the
Ancillary Agreements other than pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and such other consents or waivers the failure of which
to obtain would
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not, individually or in the aggregate, have a Material Adverse Effect. No
consent or waiver of any party to any Contract to which Seller is a party or by
which it is bound is required for the execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements other than those which
would not, individually or in the aggregate, have a Material Adverse Effect.
Section 4.4 TITLE TO SHARES. Seller is the record and beneficial owner
of, and has, and will convey to Buyer at the Closing, good, valid and marketable
title to, all of the Shares free and clear of all Liens. Other than as
contemplated by this Agreement and the Ancillary Agreements, Seller is not party
to, or bound by, any agreement, instrument, proxy or understanding restricting
the transfer of the Shares.
Section 4.5 ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to Seller's Knowledge, threatened against Seller or any
of its properties or rights by or before any court, arbitrator or administrative
or governmental body which questions the validity of this Agreement or the
Ancillary Agreements or any action taken or to be taken pursuant hereto or
thereto which could reasonably be expected to
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have a Material Adverse Effect or impair or restrict the Seller's ability to
perform its obligations hereunder or thereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Buyer that:
Section 5.1 ORGANIZATION. Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware.
Section 5.2 AUTHORITY, BINDING EFFECT. Parent has the corporate power and
authority to execute, deliver and perform this Agreement and the Ancillary
Agreements to which it is a party. Such execution, delivery and performance
have been duly authorized by all necessary action on the part of Parent and will
not contravene the certificate of incorporation or by-laws of Parent or conflict
with, result in a breach of, or entitle any party (with due notice or lapse of
time or both) to terminate, accelerate or call a default with respect to, any
agreement or instrument to which Parent is a party or by which Parent or its
properties or assets are bound. The execu-
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tion, delivery and performance by Parent of this Agreement and the Ancillary
Agreements to which it is a party will not result in any violation by Parent of
any law, rule or regulation applicable to Parent other than such violations
which would not, individually or in the aggregate, have a Material Adverse
Effect. Parent is not a party to, nor subject to or bound by, any judgment,
injunction or decree of any court or governmental authority which may restrict
or interfere with the performance of this Agreement or the Ancillary Agreements.
This Agreement is, and each of the Ancillary Agreements to be executed by Parent
on or prior to the Closing Date will be, a valid and binding obligation of
Parent enforceable in accordance with their respective terms except as such
enforceability may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally or (2) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
Section 5.3 CONSENTS. No consent or waiver of any Person is required for
the valid execution, delivery and performance of this Agreement and the
Ancillary
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Agreements other than pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and such other consents or waivers the failure of which to obtain
would not, individually or in the aggregate, have a Material Adverse Effect. No
consent or waiver of any party to any Contract, to which Parent is a party or by
which it is bound is required for the execution, delivery and performance by
Parent of this Agreement and the Ancillary Agreements other than those which
would not, individually or in the aggregate, have a Material Adverse Effect.
Section 5.4 ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to Parent's knowledge, threatened against Parent or any
of its properties or rights by or before any court, arbitrator or administrative
or governmental body which questions the validity of this Agreement or the
Ancillary Agreements or any action taken or to be taken pursuant hereto or
thereto which could reasonably be expected to have a Material Adverse Effect.
Section 5.5 FAIRNESS OPINION. Parent has obtained from an investment
banking firm reasonably satisfactory to Parent an opinion (the "Fairness
Opinion") as to the Fairness, from a financial point of view,
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of the terms of the transactions contemplated hereby to Parent, in form and
substance reasonably satisfactory to Parent.
ARTICLE VI
COVENANTS OF BUYER
Buyer will, from and after the Closing Date, do the following:
Section 6.1 EXPERTS. Buyer agrees that, other than as permitted by
Section 1.5(e), for the period commencing as of the date hereof and ending
twelve months after the Closing Date, Buyer will not (without Seller's prior
written consent which will not unreasonably be withheld) solicit or enter into
any formal or informal agreement or understanding with any of William M.
Steigerwaldt, Steigerwaldt Land Services, Inc., or Houlihan Lokey Howard & Zukin
for the purpose of Buyer or any of its Affiliates receiving advice or services
from or the employment of any of them.
Section 6.2 SETTLEMENT ACCOUNTS. Buyer will ensure that the Company pays
to Seller, within five Business Days after its receipt of an itemized invoice
(including supporting documentation) therefor, all reason-
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able charges, costs and expenses (including pension plan fundings) incurred in
the ordinary course of business, consistent with past practice, by Seller or its
Affiliates on the Company's behalf from the Closing Date through December 31,
1993. Buyer will not be liable for any payments to Seller pursuant to this
Section 6.2 which exceed $100,000 in the aggregate.
Section 6.3 MANAGEMENT SERVICES. Buyer will procure for a period of 3
years after the Closing Date the provision to Calumet of the services of the
Company set forth on Schedule 6.3 to the extent of and consistent with prior
practice on such terms and conditions as may be mutually agreed upon by Calumet
and the Company; PROVIDED, HOWEVER, that Buyer's obligation to procure such
services under this Section 6.3 will cease upon the earlier to occur of (i)
the ownership by Parent or its Affiliates, directly or indirectly, of less than
a majority of the common stock of Calumet and (ii) the ownership by Buyer its
Affiliates, directly or indirectly, of less than a majority of the common stock
of the Company. Parent and Seller agree to indemnify and hold the Company and
Buyer harmless from any claims, demands, losses or other liabilities, including
as a result of any Environ-
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mental Claim, arising from or related to the Company's provision of the services
specified in the preceding sentence other than those which result from the
intentional acts or gross negligence of persons controlled by the Company or
Buyer.
ARTICLE VII
DELIVERIES AT CLOSING
At the Closing, the parties will deliver the following documents or such
documents in substitution therefor as are satisfactory to the recipient:
Section 7.1 DELIVERIES BY SELLER. Seller will deliver to Buyer:
(a) Stock certificates representing all of the Shares, accompanied by
stock powers duly executed in blank or duly executed instruments of
transfer with all necessary stock transfer and other documentary stamps
attached, and any other documents that are necessary to transfer to Buyer
good title to all the Shares free and clear of all Liens.
(b) The minute books, stock transfer books and corporate seals of the
Company.
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(c) Certified copies of the resolutions, duly adopted by the
respective Boards of Directors of Parent, Seller and the Company, and the
written consent of Seller as the sole stockholder of the Company, that will
be in full force and effect at the time of delivery, authorizing the
execution, delivery and performance of this Agreement and the Ancillary
Agreements.
(d) The Ancillary Agreements, duly executed by the Seller.
(e) The resignation of (i) each director of the Company and (ii) each
officer of the Company who will not be an officer of Seller or its
Affiliates after the Closing Date.
(f) Owner's title insurance policies issued to the Company as of the
effective date of the title insurance policies attached hereto as Schedule
2.4(a), in the amount of $65,000,000, insuring good title to the Real
Property (other than leases) free and clear of all liens, encumbrances,
restrictions and easements, except the Permitted Liens. If available,
Seller shall fully cooperate with Buyer and the title insurance company
issuing
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the Owner's policies to obtain (on a post-Closing basis) a "non-imputation"
endorsement in favor of the Buyer.
(g) Such other instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to, Buyer.
Section 7.2 DELIVERIES BY BUYER. Buyer will deliver to Seller:
(a) The Senior Debentures accompanied by all bond powers duly
executed in blank, with all necessary bond transfer and other documentary
stamps attached.
(b) Certified copies of resolutions, duly adopted by the Board of
Directors of Buyer that will be in full force and effect at the time of
delivery, authorizing the execution, delivery and performance of this
Agreement and the Ancillary Agreements.
(c) The Ancillary Agreements, duly executed by Buyer.
(d) Such other instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to, Seller.
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ARTICLE VIII
INDEMNIFICATION
Section 8.1 INDEMNIFICATION.
(a) Parent and Seller, jointly and severally, will indemnify, defend and
hold harmless the Buyer, Persons controlling, controlled by, and under common
control with the Buyer, and the respective directors, officers and employees of
each of the foregoing Persons, from and against any and all claims, demands or
suits by any Person, losses, liabilities, damages, obligations, payments, costs
and expenses, paid or incurred, whether or not relating to, resulting from or
arising out of any Third Party Claim (as defined in Section 8.2 hereof)
(including, without limitation, the reasonable costs and expenses of any and all
actions, suits, proceedings, demands, assessments, judgments, settlements and
compromises relating thereto and reasonable attorneys' fees in connection
therewith) (individually and collectively "Indemnifiable Losses") relating to,
resulting from or arising out of:
(i) any breach of any representation or warranty of the Parent or
Seller contained in or made pursuant to this Agreement or any Ancillary
Agree-
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ment or any facts or circumstances constituting such a breach; PROVIDED,
HOWEVER, that, notwithstanding anything to the contrary contained herein,
claims for indemnification, whether pursuant to a Third Party Claim or a
Direct Claim, may be made under this Article VIII for breaches or
inaccuracies of the representations, warranties and statements contained in
Sections 2.4, 2.9, 2.10 and 2.14 without regard to any statement contained
therein limiting such representation, warranty or statement to Parent and
Seller's Knowledge;
(ii) any breach of any covenant or agreement of Parent or Seller
contained in this Agreement;
(iii) any ERISA Plan or any of the Plans, notwithstanding the
disclosure set forth on Schedule 2.3 hereto; PROVIDED; HOWEVER, that this
indemnification shall not apply to any Indemnifiable Losses relating to
coverage provided at Buyer's request under the Seller's ERISA Plans or
Plans on and after the Closing Date;
(iv) (A) any pollution or threat to human health or the environment
that is
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related in any way to the Company or any previous owner's or
operator's management, use, control, ownership or operation
of the Real Property Assets or business including, without
limitation, all on-site and off-site releases of Materials
of Environmental Concern, that occurred, existed, or arise
out of condition or circumstances that occurred or existed,
or were caused, in whole or in part, on or before the
Closing Date, whether or not the pollution or threat to
human health or the environment is described in Schedules
2.10(a), (b), (c), or (d); or
(B) any Environmental Claim for releases of Materials of
Environmental Concern prior to the Closing Date against any
person or entity whose liability for such Environmental
Claim the Company has or may have assumed or retained
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either contractually or by operation of law.
(b) The Buyer will indemnify, defend and hold harmless the Seller and its
Affiliates from and against any and all Indemnifiable Losses relating to,
resulting from or arising out of any breach of any of the representations,
warranties, covenants or agreements of the Buyer contained in this Agreement.
The Company will indemnify and hold harmless the Seller and its Affiliates from
and against any and all Environmental Claims related to the use, control,
ownership or operation of the Real Property or Assets after the Closing Date and
all on-site and off-site releases of materials of Environmental Concern after
the Closing Date.
(c) For purposes of this Agreement, "Indemnity Payment" will mean any
amounts of Indemnifiable Losses required to be paid pursuant to this Section
8.1.
(d) For purposes of this Agreement, "Indemnitee" will mean any Person or
group entitled to indemnification under this Agreement.
(e) For purposes of this Agreement, "Indemnifying Party" will mean any
Person or group required to provide indemnification under this Agreement.
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Section 8.2 DEFENSE OF CLAIMS.
(a) If an Indemnitee receives notice of the assertion of any claim or of
the commencement of any action or proceeding by any Person or group who is not a
party to this Agreement or who is not an Indemnitee hereunder (a "Third Party
Claim") against such Indemnitee, with respect to which any Indemnifying Party is
obligated to provide indemnification under Section 8.1 of this Agreement, the
Indemnitee will give each such Indemnifying Party prompt written notice thereof.
Such notice will describe the Third Party Claim in reasonable detail, and will
indicate the estimated amount, if practicable, of the Indemnifiable Loss that
has been or may be sustained by the Indemnitee. Each Indemnifying Party will
have the right to participate in or, by giving written notice to the Indemnitee,
to elect to assume the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, which counsel
will be reasonably satisfactory to the Indemnitee, and the Indemnitee will, to
the extent requested, cooperate in good faith in such defense; PROVIDED,
HOWEVER, that the Indemnitee may at its own expense retain separate counsel to
participate in such defense.
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(b) If within 10 calendar days after an Indemnitee receives written notice
from an Indemnifying Party that such Indemnifying Party has elected to assume
the defense of any Third Party Claim, the Indemnifying Party will not be liable
for any legal expenses subsequently incurred by the Indemnitee in connection
with the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party
fails to take reasonable steps necessary to defend such Third Party Claim within
30 calendar days after receiving notice from the Indemnitee that the Indemnitee
believes the Indemnifying Party has failed to take such steps, the Indemnitee
may assume its own defense, and the Indemnifying Party will be liable for any
reasonable expenses therefore. Notwithstanding anything contained herein to the
contrary, the Indemnitee will have the right to employ separate counsel at the
Indemnifying Party's expense and to control its own defense of such action or
proceeding if in the reasonable opinion of counsel to the Indemnitee, a conflict
or potential conflict exists between the Indemnifying Party and the Indemnitee
that would make such separate representation advisable.
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Without obtaining a complete and unconditional release of the Indemnitee
from any further liability in respect of such claim, the Indemnifying Party will
not enter into any settlement of any Third Party Claim without the consent of
the Indemnitee, which will not be unreasonably withheld.
In the event that any Indemnifying Party does not elect to assume the
defense of any Third Party Claim in accordance with this Section 8.2, such
Indemnifying Party will be obligated as provided in Section 8.2 for all
costs of defense of the Indemnitee.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss which
does not result from a Third Party claim (a "Direct Claim") will be asserted by
giving each Indemnifying Party prompt written notice thereof, and each
Indemnifying Party will have a period of 30 calendar days within which to
respond to such Direct Claim. If any Indemnifying Party does not so respond
within such 30 calendar day period, such Indemnifying Party will be deemed to
have rejected such claim, in which event the Indemnitee will be free to pursue
such remedies as may be available to the Indemnitee under any applicable laws,
subject to the terms of this Agreement,
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including, without limitation, the enforcement of the Indemnitee's rights under
this Agreement.
(d) A failure to give timely notice as provided in this Section 8.2 will
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, the defense of any claim is
materially and adversely affected or any party which was entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or incurred an obligation or liability which
otherwise would have been avoided.
(e) Upon making any Indemnity Payment, the Indemnifying Party will, to the
extent of such Indemnity Payment, be subrogated to all rights of the Indemnitee
against any third party in respect of the Indemnifiable Loss to which the
Indemnity Payment relates; PROVIDED, HOWEVER, that (i) the Indemnifying Party is
then in compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss, and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party against any
such third party on account of said Indemnity Payment is hereby made expressly
subordinated and sub-
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jected in right of payment to the Indemnitee's rights against such third party.
Without limiting the generality of any other provision hereof, each such
Indemnitee and Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation and
subordination rights.
Section 8.3 LETTER AGREEMENT PAYMENT. Buyer agrees to indemnify and hold
harmless Seller or Parent, for two years from the Closing Date, for any
obligation either of them may have for the $500,000 payment which may become due
under the Letter Agreement, dated September 1, 1993, between the Company and
Robert Grasseschi, attached hereto as Schedule 8.3; PROVIDED, HOWEVER, that
Buyer shall in no event be liable for any payments in connection with such
Letter Agreement which aggregate in excess of $500,000.
Section 8.4 TAX RETURNS. Seller will prepare and file or cause to be
prepared and filed on a timely basis all Tax Returns required to be filed by or
with respect to the Company for all taxable periods ending on or before the
Closing Date and will pay or cause to be paid, and will indemnify and hold Buyer
and the Company harmless from and against (i) all Taxes of or attribut-
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able to the Company for all taxable years or taxable periods or portions thereof
ending on or before the Closing Date which were not paid prior to the Closing
Date; (ii) all Taxes for all taxable years or periods of all members of all
affiliated groups (within the meaning of Section 1504(a) of the Code or similar
provisions of other law) of which the Company is or has ever been a member prior
to the Closing Date; and (iii) all additional Indemnifiable Losses attributable
to the Taxes described in (i) and (ii) of this Section 8.4; PROVIDED, HOWEVER,
that the Company will be responsible for any and all state and local taxes
properly assessed against the Company which have customarily and regularly been
paid by the Company prior to the Closing Date, which taxes may include, but are
not limited to, income, franchise and sales taxes, for the period commencing
January 1, 1993 and ending on or after the Closing Date, and the Company will
promptly reimburse Seller or Parent for any such taxes which are paid by Seller
on behalf of the Company. The Company will be responsible for all Taxes in
respect of the Company for periods commencing after the Closing Date. Seller
and Parent will be responsible for all
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Federal taxes in respect of the Company for periods prior to and including the
Closing Date.
Section 8.5 TAX REFUNDS Any Tax refunds to which the Company is entitled
(together with interest thereon if any) shall be the property of Seller to the
extent Seller is required to bear such taxes pursuant to Section 8.4 and will be
paid to Seller promptly upon receipt thereof by the Company, Buyer or their
respective Affiliates. All other Tax refunds shall be the property of the
Company and the Buyer, as the case may be.
Section 8.6 SERVICES INDEMNITY. Notwithstanding anything to the contrary
contained in this Article VIII or elsewhere in this Agreement, from and after
the Closing Date, Parent and Seller will indemnify, defend and hold harmless
Buyer, the Company and their respective Affiliates from and against any and all
fines, claims, demands or suits by any Person, losses, liabilities, damages,
obligations, payments, costs and expenses, paid or incurred, which relate to the
failure to make any filing with any Person which relates to the Company, the
Assets or the Real Property, and which was required to have been made prior to
the Closing Date.
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Section 8.7 TERMINATION OF TAX SHARING AGREEMENTS. Subject to the
indemnification obligations of Parent and Seller set forth in this Article VIII,
as of the date hereof, all agreements, whether written or oral, express or
implied, between the Company, the Seller and any of the Seller's Affiliates,
relating to the sharing and reimbursement of taxes shall be terminated with no
further amount to or from the Company with respect thereto.
ARTICLE IX
MISCELLANEOUS PROVISIONS AND AGREEMENTS
Section 9.1 CONFIDENTIALITY. After the date hereof and prior to the
Closing, no party to this Agreement will directly or indirectly make or cause to
be made any public announcement or disclosure, or issue any notice with respect
to this Agreement or the transactions contemplated hereby without advising the
other parties hereto and providing such parties with a reasonable opportunity to
comment thereon.
Section 9.2 EXPENSES. Seller will bear its own and the Company's
expenses, including the fees of any attorneys, accountants, investment bankers
or others
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engaged by the Company or the Seller, in connection with this Agreement and the
transactions contemplated hereby, except as otherwise expressly provided herein.
Buyer will bear its own expenses, including the fees of any attorneys,
accountants, investment bankers or others engaged by Buyer in connection with
this Agreement and the transactions contemplated hereby, except as otherwise
expressly provided herein.
Section 9.3 NOTICES. All notices, requests, demands and other
communications made hereunder will be in writing and will be deemed duly given
if delivered or sent by facsimile transmission, telex or registered or certified
mail, postage prepaid, as follows, or to such other address or Person as any
party may designate by notice to the other parties hereunder:
If to Seller:
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Raymond J. Pacini
Telephone: 714-833-3030
Fax: 714-261-6550
with a copy to:
Brobeck, Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attention: Gregory W. Preston, Esq.
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Telephone: 714-752-7535
Fax: 714-752-7522
If to Buyer:
Libra Invest & Trade Ltd.
c/o Alan Lowe & Company
46, Queen Anne Street
London, W1M 9 LA
England
Attention: Alan Lowe, Esq.
Telephone: 011-44-71-486-1935
Fax: 011-44-71-935-2644
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Mark N. Kaplan, Esq.
Telephone: 212-735-3800
Fax: 212-735-2000
If to the Company:
Lake Superior Land Company
101 Red Jacket Road
Calumet, Michigan 49913
Attention: Robert P. Grasseschi
Telephone: 906-337-0202
Fax: 906-337-5467
with copies to:
Brobeck, Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attention: Gregory W. Preston, Esq.
Telephone: 714-752-7535
Fax: 714-752-7522;
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<PAGE>
Libra Invest & Trade Ltd.
c/o Alan Lowe & Company
46, Queen Anne Street
London, W1M 9 LA
England
Attention: Alan Lowe, Esq.
Telephone: 011-44-71-486-1935
Fax: 011-44-71-935-2644; and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Mark N. Kaplan, Esq.
Telephone: 212-735-3800
Fax: 212-735-2000
Section 9.4 AMENDMENTS; TERMINATION. This Agreement cannot be changed or
terminated orally and no waiver of compliance with any provision or condition
hereof and no consent provided for herein will be effective unless evidenced by
an instrument in writing duly executed by the proper party.
Section 9.5 ASSIGNMENT. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors, legal
representatives and assigns, but this Agreement may not be assigned by any party
or assumed by any party's successor in interest without the written consent of
the other parties hereto.
Section 9.6 ENTIRE AGREEMENT. This Agreement and the exhibits attached
hereto, the Schedules delivered
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pursuant hereto and the other writings identified herein or contemplated hereby
contain the entire agreement among the parties hereto with respect to the
transactions contemplated herein and supersede all previous written or oral
negotiations, commitments and writings. The Section headings of this Agreement
are for convenience of reference only and do not form a part hereof and do not
in any way modify, interpret or construe the intentions of the parties. This
Agreement may be executed in two or more counterparts, and all such counterparts
will constitute one and the same instrument.
Section 9.7 APPLICABLE LAW. This Agreement will be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to the conflict of law rules thereof.
Section 9.8 SURVIVAL. The representations, warranties, covenants,
indemnities and agreements contained in or made pursuant to this Agreement or in
any Ancillary Agreement (including any exhibit, certificate, document or
statement delivered pursuant hereto or thereto) will survive the Closing and any
investigation conducted by any party or any information which any party may have
as of the date hereof or from time to time until
62
<PAGE>
the completion by Buyer of its second audit of the Company; PROVIDED, HOWEVER,
that the representations, warranties and agreements contained in (i) Section
2.10 and Article VIII will survive for a period of twenty years, and (ii)
Sections 2.1, 2.2, 2.4, 2.5, 2.6, 2.9, 2.14, 9.2 and in Articles IV and V will
terminate only upon the expiration of all applicable statutes of limitations.
Section 9.9 FURTHER ASSURANCES. Parent, Seller, Buyer and the Company
will use their commercially reasonable efforts to do or cause to be done all
things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Without limiting
the foregoing, Parent, Seller and Buyer will reasonably cooperate, and will
cause their respective Affiliates, officers, employees, agents, auditors and
representatives reasonably to cooperate, in preparing and filing all Tax Returns
(including amended returns and claims for refund), including maintaining and
making available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits with respect to all taxable periods
relating to Taxes.
63
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No sale of KREG Shares will be made within 182 days of the date on which
the shares of Series A Convertible Preferred Stock of Parent ("Preferred Stock")
may be converted into KREG Shares unless Buyer obtains a "no action" letter from
the Staff of the Securities and Exchange Commission to the effect that the
convertability of the Preferred Stock into KREG Shares will not create a
violation of Section 16(b) of the Securities Exchange Act of 1934, Buyer will do
its best promptly to obtain such no action letter, and will promptly notify
Parent when such no action letter is approved or rejected.
Section 9.10 BROKERS. Parent, Seller and the Company will, jointly and
severally, defend, indemnify and hold Buyer harmless against and Buyer will
defend, indemnify and hold Parent, Seller and the Company harmless against any
commissions, finder's fee, consultant's fee or similar claims relating to the
transactions contemplated hereby or by the Ancillary Agreements by any Person or
entity engaged by them respectively.
Section 9.11 PROVISION OF SERVICES. Parent, and Seller will provide the
Company, and the Company will provide Parent and Seller, for a period of one
year after the Closing Date, such services as the parties hereto may
64
<PAGE>
reasonably require upon such terms and conditions as the parties may reasonably
agree.
Section 9.12 WAGE REPORTING. Pursuant to the standard procedure
prescribed by Section 4 of Revenue Procedure 84-77, (i) Seller and the Company
will report on a "predecessor-successor" basis with respect to employees of
Seller who are employed by Buyer after the Closing Date, (ii) Seller will
perform all reporting duties for the wages and other compensation it paid, (iii)
Seller will act as the Company's agent for purposes of reporting the payments of
wages and other compensation made by the Company from the Closing Date until
December 31, 1993 (and Seller will make an adequate disclosure of this
arrangement on the returns that are filed), (iv) the Company will be responsible
for providing all funds that accompany the returns filed by Seller while acting
as the agent for the Company and (v) Seller and the Company will work in good
faith to adopt similar procedures under applicable state or local laws. The
parties shall cooperate with each other in exchanging such information as is
necessary to implement the foregoing and in preparing filings and forms relating
to these procedures.
65
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Section 9.13 UNEMPLOYMENT COMPENSATION. If requested by the Company, the
Company and Seller shall jointly make application to the appropriate state
agencies to transfer to the Company Seller's unemployment compensation
experience rating for all employees of the Company as of the Closing Date.
66
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
KOLL REAL ESTATE GROUP INC.
By: /s/
-----------------------------------
Name: Raymond J. Pacini
Title: Chief Financial Officer
LIBRA INVEST & TRADE LTD.
By: /s/
-----------------------------------
Name: Alan Lowe
Title: Director
SIGNAL PROPERTIES
By: /s/
-----------------------------------
Name: Raymond J. Pacini
Title: Vice President
LAKE SUPERIOR LAND COMPANY
By: /s/
-----------------------------------
Name: Robert P. Grasseschi
Title: President
67
<PAGE>
ANNEX A
DEFINITIONS
"ACT" is defined in Section 1.4.
"AFFILIATE" means with respect to any specified Person, a Person that
directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"ALLOWABLE FEES" is defined in Section 1.5(a).
"ANCILLARY AGREEMENTS" means the Voting Agreement, dated as of the date
hereof, among Buyer, Parent and Gallant Overseas, Inc., the Custody Agreement
and the Easement Agreements.
"ASSETS" means all of the Company's property and assets of every kind,
nature and description, personal or mixed, tangible or intangible and wherever
situated but excluding Real Property.
"BUSINESS DAY" means any day (other than a Saturday or Sunday) on which
banks are permitted to be open and transact business in The City of New York.
"BUYER NET PROCEEDS" is defined in Section 1.5(a).
"CALUMET" means Calumet Real Estate, Inc., a Delaware corporation.
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<PAGE>
"CASH CONSIDERATION" is defined in Section 1.5(d).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" is defined in the recital.
"CONTINGENT PAYMENT" is defined in Section 1.5.
"CONTRACTS" means all agreements or understandings, whether written or
oral, including, without limitation, all mortgages, indentures, notes,
guarantees, leases, purchase agreements and sale agreements.
"EASEMENT AGREEMENT" means (i) the Grant of Easement for Roadway and
Utility Purposes, dated December 17, 1993 between the Company, as Grantor, and
Calumet, as Grantee, and (ii) the Grant of Easement for Roadway and Utility
Purposes, dated December 17, 1993 between the Company, as Grantee, and Calumet,
as Grantor.
"ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of,
69
<PAGE>
based on or resulting from (a) the presence, or release into the environmental,
of any Material of Environmental Concern at any location, whether or not owned
or operated by Seller or (b) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law.
"ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including, without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ENVIRONMENTAL OPERATING PERMITS" means any permit, license, or other
governmental approval required pursuant to the Environmental Laws which
authorizes or regulates the handling, treatment, storage or discharge
70
<PAGE>
of Materials of Environmental Concern to air, surface water, ground water or
land.
"INDEMNIFIABLE LOSSES" is defined in Section 8.1.
"GAAP" means generally accepted accounting principles consistently applied.
"KREG SHARES" is defined in Section 1.5.
"LIENS" means all mortgages, pledges, security interests, liens, charges,
options, conditional sales agreements, claims, restrictions, covenants,
easements, rights of way, title defects or other encumbrances of any nature
whatsoever.
"MACHINERY AND EQUIPMENT" means all machinery and equipment, wherever
located, used or held for use in the conduct of the business of the Company.
"MARKETABLE SECURITIES" means readily marketable investment grade
securities (debt or equity) issued by domestic corporations, partnerships or
other entities.
"MATERIAL ADVERSE EFFECT" is defined in Section 2.1.
"MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products.
71
<PAGE>
"NET PROCEEDS" means the aggregate proceeds of any Triggering Event,
Affiliate Transaction or Subsequent Transaction, as the case may be, received by
Buyer, net of the reasonable costs relating to such Triggering Event, Affiliate
Transaction or Subsequent Transaction, including, without limitation, Allowable
Fees, legal, accounting and investment banking fees, and sales commissions,
transfer or sales taxes paid or payable as a result thereof (but excluding taxes
in respect of income), amounts required to be applied to the repayment of any
indebtedness secured by a Lien on any assets sold pursuant to any such
transaction and any reserve for adjustment in respect of the sale price of any
such assets, but only until such time as any such reserve is released to Buyer
or its Affiliates.
"PARENT'S KNOWLEDGE" means the actual knowledge of Parent's officers and
directors without independent investigation; PROVIDED, HOWEVER that Parent's
knowledge, with respect to the Company shall be limited to the information and
representations set forth in the certificate signed by Robert P. Grasseschi
which Buyer has prepared and received on the Closing Date, and upon which
certificate Parent has relied, with Buyer's consent, for
72
<PAGE>
the purposes of giving the representations and warranties with respect to the
Company that are set forth in this Agreement, PROVIDED that no officer or
director of the Parent has any actual knowledge to the contrary or inconsistent
therewith to any material extent.
"PERMITS" means all permits, filings, licenses, approvals, franchises,
grants, easements, consents, certificates, orders and other authorizations used
or held by the Company.
"PERMITTED EXCEPTIONS" is defined in Section 2.5.
"PERMITTED LIENS" means (i) such defects, claims, liens, encumbrances or
statements of facts as are set forth in the Owner's title insurance policies,
attached hereto as part of Schedule 2.4 of (a) the Associated Peninsula Title &
Abstract Corp., Crystal Falls, Michigan, with respect to the Real Property
located in Wisconsin, issued pursuant to the title insurance commitment of the
Commonwealth Land Title Insurance Company ("Commonwealth"), effective January
26, 1993 and (b) the Copper Range Abstract & Title Co., Houghton, Michigan, with
respect to the Real Property located in Michigan, issued pursuant to the title
insurance commitment of
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<PAGE>
Commonwealth, effective January 26, 1993, (ii) such other defects, claims,
liens, encumbrances or statements of fact existing as of the date hereof which,
individually or in the aggregate, would not have a Material Adverse Effect,
(iii) Liens for water and sewer charges and current taxes not yet due and
payable or being contested in good faith and for which adequate reserves have
been taken, (iv) mechanics', carriers', workers', repairers', materialmens',
warehousemens' and other similar Liens arising or incurred in the ordinary
course of business, (v) any defect, claim, encumbrance or other matter created,
caused or agreed to by Buyer, or which arises after the Closing Date and is not
cause by Seller, (vi) any law, ordinance, statute or governmental regulation
(including, without limitation, building and zoning ordinances) regulating,
restricting or prohibiting the occupancy, use or enjoyment of the Real Property,
(vii) the lien granted to, and any mortgage or other document in favor of
Continental Bank, National Association in connection with the State Treasurer of
the State of Michigan, et al, dated as of January 26, 1993, including, without
limitation, (a) the Mortgage, Security Agreement, Assignment of Rents and
Fixture Filing, dated as of
74
<PAGE>
January 26, 1993, relating to the Real Property located in the state of
Michigan, and (b) the mortgage granted to Continental Bank, National Association
pursuant to the Mortgage, Security Agreement, Assignment of Rents and Fixture
Filing, dated as of January 26, 1993, relating to the Real Property located in
the state of Wisconsin (the sum secured by the Mortgages described in (a) and
(b) herein and all other documents or instruments securing the referenced lien
is in the original principal amount of $45,000,000).
"PERSON" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust or other entity.
"PRIOR AFFILIATE OF SELLER" means (i) any executive Officer or Director of
Seller and their respective Affiliates; (ii) any corporation, partnership or
other entity of which either of them is an officer, director, equity owner, a
partner or an Affiliate; or (iii) the officers, directors, partners or
Affiliates of any such entity.
"PURCHASE PRICE" is defined in Section 1.3.
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<PAGE>
"REAL PROPERTY" is defined in Section 2.4.
"PARENT AND SELLER'S KNOWLEDGE" means Parent's Knowledge and Seller's
Knowledge.
"SELLER'S KNOWLEDGE" means the actual knowledge of the directors and
officers of Seller without independent investigation; PROVIDED, HOWEVER, that
Seller's knowledge, with respect to the Company shall be limited to the
information and representations set forth in the certificate signed by Robert
P. Grasseschi which Buyer has prepared and received on the Closing Date, and
upon which certificate Seller has relied, with Buyer's consent, for the purposes
of giving the representations and warranties with respect to the Company that
are set forth in this Agreement, PROVIDED that no officer or director of Seller
has any actual knowledge to the contrary or inconsistent therewith to any
material extent.
"SENIOR DEBENTURES" means $42,443,523 in aggregate principal amount, as of
September 15, 1993, plus all accrued interest thereon to the Closing Date
(including any such interest paid or payable in the form of additional Senior
Debentures), of 12% Senior Subordinated Pay-In-Kind Debentures due March 15,
2002 of Parent (issued under its former name, The Bolsa Chica Company)
76
<PAGE>
owned by Buyer and issued pursuant to an Indenture between Parent and First
Trust National Association, as Trustee, dated July 15, 1992.
"TAXES" means all taxes, charges, duties, fees, levies or other
assessments, including but not limited to income, excise, property, sales,
franchise, withholding, social security and unemployment taxes, imposed by the
United States, any possession thereof, any state, county, local or foreign
government, or any subdivision or agency of any of the foregoing, and any
interest, penalties or additions to tax relating to such taxes, charges, duties,
fees, levies or other assessments.
"TAX RETURNS" means all returns, reports and declarations relating to Taxes
which are or have been required to be filed by the Company.
"TIMBERLAND" is defined in Section 2.4(b).
"TRIGGERING EVENT" is defined in Section 1.5.
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<PAGE>
ANNEX B
LIST OF SCHEDULES
<TABLE>
<CAPTION>
Schedule Number Title
- --------------- ----
<S> <C>
2.3 Absence of Material Adverse Changes
2.4 Real Property and Title Reports
2.4(a) D&P Title Exceptions
2.9(a) Employee Benefit Plans
2.10(a) Compliance with Environmental Law
2.10(b) Environmental Claims
2.10(c) Material of Environmental Concern
2.10(d) Disposal Locations
2.12 Subsidiaries
2.13 Bank Accounts
2.14 Tax Returns
2.16 Seller Real Property
6.3 Calumet Management Services
8.3 Letter Agreement
</TABLE>
78
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EXHIBIT A
CUSTODY AGREEMENT
A-1
<PAGE>
EXHIBIT B
REGISTRATION INDEMNIFICATION
Parent will indemnify Buyer and hold Buyer harmless and each person, if
any, that controls Buyer within the meaning of Section 15 of the Securities Act
of 1933, as amended or Section 20 of the Securities Exchange Act of 1934, as
amended, and the respective agents, employees, officers and directors of Buyer
or any such controlling person from and against any and all losses, claims,
damages, judgments, liabilities and expenses (including the fees and expenses of
counsel and other expenses in connection with investigating, defending or
settling any such action or claim) as they are incurred arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the KREG
Shares (including any amendments thereof or supplements thereto) or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
B-1
<PAGE>
EXHIBIT 10.19A
PROPOSED FORM OF:
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
This Amendment No. 1 (the "Amendment"), dated as of February 15, 1994, is
made and entered into by and between Libra Invest & Trade, Ltd., a British
Virgin Islands corporation ("Libra"), Signal Landmark, a California
corporation ("Signal") and Koll Real Estate Group, Inc., a Delaware
corporation ("KREG"), a Delaware corporation, for the purpose of amending that
certain Stock Purchase Agreement (the "Agreement") dated as of December 17,
1993 by and between the foregoing parties.
R E C I T A L S:
WHEREAS, Signal desires to surrender all of its right, title and interest
in certain contingent payments pursuant to the Agreement in exchange
for a lump-sum cash payment; and
WHEREAS, Libra desires to make such cash payment in exchange for the
cancellation and termination of the contingent payment provisions of the
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. DEFINED TERMS. For purposes of this Amendment, all capitalized terms
used and not otherwise defined herein, shall have the meanings assigned to them
in the Agreement.
2. TERMINATION OF CONTINGENT PAYMENT. The obligations created under
Sections 1.3(c) and 1.5 of the Agreement shall be terminated in their
entirety, effective as of the date of this Amendment. From and after the date
of this Amendment, Sections 1.3(c) and 1.5 of the Agreement shall be amended
and restated to read in full as follows:
"Section 1.3(c) [RESERVED]"
"Section 1.5 [RESERVED]"
3. SIGNAL CONSIDERATION. In consideration of the foregoing amendments
to Sections 1.3 (c) and 1.5, Libra shall deliver One Million Dollars
($1,000,000) to Signal, via wire transfer in accordance with instructions
received by Libra as of the date hereof.
4. NO OTHER AMENDMENT. Except to the extent modified by this Amendment,
all of the terms and provisions of the Agreement shall remain in full force and
effect.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
LIBRA INVESTMENT & TRADE LTD.
By /s/ ALAN LOWE
-----------------------------
Alan Lowe
Director
SIGNAL LANDMARK
By /s/ RAYMOND J. PACINI
-----------------------------
Raymond J. Pacini
Vice President
KOLL REAL ESTATE GROUP, INC.
By /s/ RAYMOND J. PACINI
------------------------------
Raymond J. Pacini
Chief Financial Officer
<PAGE>
- -------------------------------------------------------------------------------
EXCHANGE AGREEMENT
between
LIBRA INVEST & TRADE LTD.
and
KOLL REAL ESTATE GROUP, INC.
Dated December 17, 1993
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
EXCHANGE OF SHARES FOR JUNIOR DEBENTURES. . . . . . . . . . . . . . . . 2
Section 1.1 Transfer of Exchange Shares . . . . . . . . . . . . 2
Section 1.2 Transfer of Junior Debentures . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF KOLL. . . . . . . . . . . . . . . . . 2
Section 2.1 Organization . . . . . . . . . . . . . . . . . . . 2
Section 2.2 Authority, Binding Effect . . . . . . . . . . . . . 2
Section 2.3 The Exchange Shares . . . . . . . . . . . . . . . . 3
Section 2.4 Absence of Litigation . . . . . . . . . . . . . . . 3
Section 2.5 Governmental Approvals . . . . . . . . . . . . . . 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LIBRA . . . . . . . . . . . . . . . . 4
Section 3.1 Organizations . . . . . . . . . . . . . . . . . . . 4
Section 3.2 Authority, Binding Effect . . . . . . . . . . . . . 4
Section 3.3 Title . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4 No Reliance . . . . . . . . . . . . . . . . . . . . 5
Section 3.5 Absence of Litigation . . . . . . . . . . . . . . . 6
Section 3.6 Governmental Approvals . . . . . . . . . . . . . . 6
ARTICLE IV
DELIVERIES ON EXCHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1 Deliveries by Koll. . . . . . . . . . . . . . . . . 7
Section 4.2 Deliveries by Libra . . . . . . . . . . . . . . . . 8
ARTICLE V
MISCELLANEOUS PROVISIONS AND AGREEMENTS . . . . . . . . . . . . . . . . 9
Section 5.1 Expenses. . . . . . . . . . . . . . . . . . . . . . 9
Section 5.2 Notices . . . . . . . . . . . . . . . . . . . . . . 9
i
<PAGE>
Section 5.3 Amendments; Termination . . . . . . . . . . . . . . 10
Section 5.4 Assignment . . . . . . . . . . . . . . . . . . . . 11
Section 5.5 Headings, Counterparts . . . . . . . . . . . . . . 11
Section 5.6 Applicable Law. . . . . . . . . . . . . . . . . . . 11
Section 5.7 Survival. . . . . . . . . . . . . . . . . . . . . . 11
Section 5.8 Further Assurances. . . . . . . . . . . . . . . . . 12
Section 5.9 Brokers . . . . . . . . . . . . . . . . . . . . . . 12
ii
<PAGE>
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT dated as of December 17, 1993 (including Annex A, this
"Exchange Agreement"), between Libra Invest & Trade Ltd., a corporation
organized under the laws of the British Virgin Islands ("Libra"), and the Koll
Real Estate Group, Inc. (formerly named The Bolsa Chica Company), a Delaware
corporation ("Koll").
Libra and Koll desire to exchange (the "Exchange") all of the Junior
Debentures for 3,395,482 shares (the "Exchange Shares") of Class A Common Stock,
par value $.05 per share, of Koll (the "Common Stock"), on the terms and
conditions hereinafter set forth.
The definitions of certain initially capitalized terms used herein are set
forth in Annex A hereto.
In consideration of the premises and of the respective covenants and
agreements contained herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
EXCHANGE OF SHARES FOR JUNIOR DEBENTURES
Section 1.1 TRANSFER OF EXCHANGE SHARES. Koll hereby issues, sells,
transfers and conveys to Libra the Exchange Shares free and clear of all Liens
in exchange for all of Libra's right, title and interest in and to the Junior
Debentures.
Section 1.2 TRANSFER OF JUNIOR DEBENTURES. Libra hereby transfers to Koll
all of Libra's right, title and interest in and to the Junior Debentures free
and clear of all Liens in exchange for all of Koll's right, title and interest
in and to the Exchange Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF KOLL
Koll represents and warrants to Libra that:
Section 2.1 ORGANIZATION. Koll is a corporation duly organized, validly
existing and in good standing under the laws of Delaware.
Section 2.2 AUTHORITY, BINDING EFFECT. Koll has the corporate power and
authority to execute, deliver and perform this Exchange Agreement. The
execution, delivery and performance of this Exchange Agreement and
2
<PAGE>
the issuance and sale of the Exchange Shares have been duly authorized by all
necessary action on the part of Koll and will not contravene the certificate of
incorporation or by-laws of Koll. This Exchange Agreement is a valid and
binding obligation of Koll enforceable against Koll in accordance with its terms
except as such enforceability may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally or (2) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
Section 2.3 THE EXCHANGE SHARES. The Exchange Shares have been validly
authorized by Koll and are validly issued and outstanding, fully paid and
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof; and none of the Exchange Shares are subject
to any Lien or any other claim of any third party. No vote of the stockholders
of Koll is required to authorize or validly issue the Exchange Shares.
Section 2.4 ABSENCE OF LITIGATION. There is no suit, action or other
proceeding pending or threatened
3
<PAGE>
against Koll before any court or before or by any governmental agency which
would result in the restraint, prohibition, set aside or invalidation of the
consummation of this Exchange Agreement or the transactions contemplated hereby
or would result in substantial damages in connection therewith.
Section 2.5 GOVERNMENTAL APPROVALS. All required governmental filings
have been made, all applicable waiting periods have run, and all requisite
governmental approvals and consents of any Person necessary for the consummation
of the transactions contemplated hereby have been granted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LIBRA
Libra hereby represents and warrants to Koll that:
Section 3.1 ORGANIZATION. Libra is a corporation duly incorporated,
validly existing and in good standing under the laws of the British Virgin
Islands.
Section 3.2 AUTHORITY, BINDING EFFECT. Libra has the corporate power and
authority to execute, deliver and perform this Exchange Agreement. Such
execution,
4
<PAGE>
delivery and performance have been duly authorized by all necessary action on
the part of Libra and will not contravene or conflict with the organizational
documents of Libra. This Exchange Agreement is a valid and binding obligation
of Libra enforceable in accordance with its terms, except as such enforceability
may be limited by (1) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally or (2) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
Section 3.3 TITLE. Libra is the sole owner of, and has, and hereby
conveys to Koll, good title to, all of the Junior Debentures free and clear of
all Liens. Other than as contemplated by this Exchange Agreement, Libra is not
party to, or bound by, any agreement, instrument, proxy requiring prior consent
or understanding restricting the transfer of the Junior Debentures.
Section 3.4 NO RELIANCE. Libra possesses the level of sophistication
requisite to its determination to enter into the Exchange and has based such
determination upon its own independent investigation as to the financial and
other merits of the Exchange and not in reliance
5
<PAGE>
upon the accuracy or completeness of any financial information, documents or
other information, written or oral, other than the representations and
warranties contained in Article II hereof, provided to Libra by Koll.
Section 3.5 ABSENCE OF LITIGATION. There is no suit, action or other
proceeding pending or threatened against Libra before any court or before or by
any governmental agency which would result in the restraint, prohibition, set
aside or invalidation of the consummation of this Exchange Agreement or the
transactions contemplated hereby or would result in substantial damages in
connection therewith.
Section 3.6 GOVERNMENTAL APPROVALS. All required governmental filings
have been made, all applicable waiting periods have run and all requisite
governmental approvals and consents of any Person necessary for the consummation
of the transactions contemplated hereby have been granted.
6
<PAGE>
ARTICLE IV
DELIVERIES ON EXCHANGE
Contemporaneously with the execution of this Exchange Agreement, the
parties will deliver the following documents or such documents in substitution
therefor as are satisfactory to the recipient; the Exchange will not be deemed
to have occurred until the receipt (or waiver thereof) of all such documents by
the party entitled thereto:
Section 4.1 DELIVERIES BY KOLL. Koll will deliver to Libra:
(a) Stock certificates representing all of the Exchange Shares,
accompanied by stock powers duly executed in blank or duly executed
instruments of transfer with all necessary stock transfer and other
documentary stamps attached, and any other documents that are necessary to
transfer to Libra good title to all the Exchange Shares free and clear of
all Liens.
(b) Certified copies of the resolutions, duly adopted by the Board of
Directors of Koll, that will be in full force and effect at the time of
delivery,
7
<PAGE>
authorizing the execution, delivery and performance of this Exchange
Agreement.
(c) Such other instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to, Libra.
Section 4.2 DELIVERIES BY LIBRA. Libra will deliver to Koll:
(a) The Junior Debentures accompanied by all bond powers duly
executed in blank, with all necessary bond transfer and other documentary
stamps attached, and any other documents that are necessary to transfer to
Koll good title to all the Junior Debentures free and clear of all Liens.
(b) Certified copies of resolutions, duly adopted by the Board of
Directors of Libra that will be in full force and effect at the time of
delivery, authorizing the execution, delivery and performance of this
Exchange Agreement.
(c) Such other instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to, Koll.
8
<PAGE>
ARTICLE V
MISCELLANEOUS PROVISIONS AND AGREEMENTS
Section 5.1 EXPENSES. Libra and Koll will each bear its own expenses,
including the fees of any attorneys, accountants, investment bankers or others
engaged by it in connection with this Exchange Agreement and the transactions
contemplated hereby, except as otherwise expressly provided herein.
Section 5.2 NOTICES. All notices, requests, demands and other
communications made hereunder will be in writing and will be deemed duly given
if delivered or sent by facsimile transmission, telex or registered or certified
mail, postage prepaid, as follows, or to such other address or Person as any
party may designate by notice to the other parties hereunder:
If to Koll:
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Raymond J. Pacini
Telephone: 714-833-3030
Fax: 714-261-6550
9
<PAGE>
with a copy to:
Brobeck, Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660
Attention: Gregory W. Preston, Esq.
Telephone: 714-752-7535
Fax: 714-752-7522
If to Libra:
Libra Invest & Trade Ltd.
c/o Alan Lowe & Company
46 Queen Anne Street
London W1M 9 LA
England
Attention: Alan Lowe
Telephone: 011-44-71-486-1069
Fax: 011-44-71-935-5758
With copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Mark N. Kaplan, Esq.
Telephone: 212-735-3800
Fax: 212-735-2000
Section 5.3 AMENDMENTS; TERMINATION. This Exchange Agreement cannot be
changed or terminated orally and no waiver of compliance with any provision or
condition hereof and no consent provided for herein will be effective unless
evidenced by an instrument in writing duly executed by the proper party.
10
<PAGE>
Section 5.4 ASSIGNMENT. This Exchange Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors,
legal representatives and assigns, but this Exchange Agreement may not be
assigned by any party without the written consent of the other parties.
Section 5.5 HEADINGS, COUNTERPARTS. The Section headings of this Exchange
Agreement are for convenience of reference only and do not form a part hereof
and do not in any way modify, interpret or construe the intentions of the
parties. This Exchange Agreement may be executed in two or more counterparts,
and all such counterparts will constitute one and the same instrument.
Section 5.6 APPLICABLE LAW. This Exchange Agreement will be governed by
and construed and enforced in accordance with the laws of the State of Delaware,
without regard to the conflicts of law rules thereof.
Section 5.7 SURVIVAL. All representations, warranties, covenants,
indemnities and agreements contained in or made pursuant to this Exchange
Agreement (including any exhibit, certificate, document or statement delivered
pursuant hereto) will continue and survive after the date hereof and any
investigation conducted by
11
<PAGE>
any party or any information which any party may have from time to time, subject
only to applicable statutes of limitations.
Section 5.8 FURTHER ASSURANCES. Koll and Libra will use their
commercially reasonable efforts to do or cause to be done all things necessary,
proper or advisable to consummate the transactions contemplated by this Exchange
Agreement.
Section 5.9 BROKERS. Koll will defend, indemnify and hold Libra harmless
against and Libra will defend, indemnify and hold Koll harmless against any
commissions, finder's fee, consultant's fee or similar claims relating to the
transactions contemplated hereby by any Person or entity engaged by them
respectively.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement
to be duly executed as of the day and year first above written.
KOLL REAL ESTATE GROUP, INC.
By: /s/
-----------------------------------
Name: Raymond J. Pacini
Title: Chief Financial Officer
LIBRA INVEST & TRADE LTD.
By: /s/
-----------------------------------
Name: Alan Lowe
Title: Director
13
<PAGE>
ANNEX A
DEFINITIONS
"AFFILIATE" means with respect to any specified Person, a Person that
directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"JUNIOR DEBENTURES" means the $10,610,881 in aggregate principal amount, as
of September 15, 1993, plus all accrued interest thereon on the date of their
exchange pursuant to the Exchange (including any such interest paid or payable
in the form of additional Junior Debentures) of 12% Subordinated Pay-In-Kind
Debentures due March 15, 2002 of Koll (issued under its former name, The Bolsa
Chica Company) owned by Libra and issued pursuant to an Indenture between Koll
and The Bank of New York, as Trustee, dated July 15, 1992.
"LIENS" means all mortgages, pledges, security interests, liens, charges,
options, conditional sales agreements, claims, restrictions, covenants,
easements, rights of way, title defects or other encumbrances of any nature
whatsoever.
"PERSON" means any corporation, individual, joint stock company, joint
venture, partnership, unin-
14
<PAGE>
corporated association, governmental regulatory entity, country, state or
political subdivision thereof, trust or other entity.
15
<PAGE>
FINANCING AND ACCOUNTING SERVICES AGREEMENT
This Financing and Accounting Services Agreement (the "Agreement") is
entered into as of September 30, 1993 by and between KREG OPERATING CO., a
Delaware corporation (the "Company"), and THE KOLL COMPANY, a California
corporation ("TKC").
RECITALS:
A. The Company has agreed to purchase certain assets of TKC pursuant to
that certain Asset Purchase Agreement dated as of September 30, 1993 between the
Company and TKC (the "Purchase Agreement").
B. It is a condition precedent to the consummation of the transactions
contemplated by the Purchase Agreement that the Company enter into this
Agreement to provide certain financing services to TKC as set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. SERVICES TO BE PROVIDED. During the term of this Agreement, the
Company may provide to TKC such financing and accounting services as may be
reasonably requested by TKC from time to time, including, without limitation,
assistance and advice regarding financing sources and terms, refinancings,
negotiation of new, or renegotiation of existing, financing facilities,
financial analysis, recordkeeping, accounting, billing, collections and other
related services (collectively, the "Contract Services"). Throughout the term
hereof, the Contract Services provided to TKC hereunder shall be at no less than
the level and quality of similar services being provided to the Company for its
own account from time to time.
2. AMOUNT OF FEE AND PAYMENT TERMS. In consideration of the provision of
the Contract Services, TKC shall pay the Company fees (the "Contract Fees") as
set forth on SCHEDULE A attached hereto, subject to such changes thereto as may
be agreed from time to time.
3. TERM. This Agreement shall continue in effect until thirty (30) days
after the date of delivery of notice by either party hereto to the other party
of its intention to terminate all Contract Services hereunder.
4. PRESERVATION AND TITLE TO STORED DATA. All data created by the
Company after the date hereof pursuant to the Agreement and relating to TKC's
business ("TKC Data") stored on any media whatsoever shall be the sole and
exclusive property of TKC. All TKC Data
<PAGE>
shall, at the expiration of the term of this Agreement, be delivered on computer
disks, tapes or such other media as TKC shall reasonably request to the location
TKC shall reasonably direct at the Company's expense. Back-up data files of TKC
Data shall be produced and stored off-site, if and to the extent consistent with
the practices of the Company with respect to its own information and data.
5. CONFIDENTIALITY. Each party shall treat as confidential all
financial, accounting and other proprietary information of the other that may
come into such party's possession during the course of and pursuant to the
performance of this Agreement, and each party shall take adequate measures
protecting the same to the same extent each party protects against disclosure or
destruction of its own financial, accounting and other proprietary information.
The parties shall communicate to their respective agents and employees the
confidentiality requirements of this Agreement and take whatever measures may be
reasonably necessary to protect and enforce such confidentiality.
6. NO PARTNERSHIP. The parties agree that nothing contained in this
Agreement shall be construed as creating any relationship of principal and agent
or any partnership or joint venture between the parties. Neither party shall
take any action or make any implied or express representation to any third party
that such party is an agent or partner of the other, or otherwise purport to
bind or commit the other to any third party in any way.
7. MISCELLANEOUS.
(a) ASSIGNABILITY. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective affiliates,
successors and permitted assigns. No party to this Agreement shall have
the right to assign its rights and obligations hereunder in whole or in
part to any person or party without the express prior written consent of
the other.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes any prior or contemporaneous agreements or understandings
related to the subject matter hereof.
(c) HEADINGS. The headings of the Articles and Paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
(d) SEVERABILITY. The provisions of this Agreement are severable.
The invalidity, in whole or in part, of any provision of this Agreement
shall not affect the validity or enforceability of any other of its
provisions. If one or more provisions hereof shall be so declared invalid
or unenforceable, the remaining provisions shall remain in full force and
effect and shall be construed in the broadest possible manner to effectuate
the purposes hereof. The parties further agree to replace such void or
unenforceable provisions with provisions which will achieve, to the extent
possible, the economic, business and other purposes of the void or
unenforceable provisions.
-2-
<PAGE>
(e) MODIFICATION AND WAIVER. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding
unless the same shall be in writing and duly executed by each of the
parties hereto, except that any of the terms or provisions of this
Agreement may be waived in writing at any time by the party which is
entitled to the benefits of such waived terms or provisions. No waiver of
any of the provisions of this Agreement shall be effective unless in
writing and duly executed by the waiving party. No waiver shall be deemed
to or shall constitute a waiver of any other provision hereof (whether or
not similar). No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof.
(f) ATTORNEYS' FEES. In any judicial action or proceeding or any
arbitration proceeding between the parties to enforce any of the provisions
of this Agreement, to seek damages on account of the breach hereof, to seek
injunctive relief to prevent the breach hereof, to seek a judicial
determination of the rights or obligations of any party hereto, or in any
judicial action or proceeding or any arbitration proceeding between the
parties in which this Agreement is raised as a defense, regardless of
whether the action or proceeding is prosecuted to judgment, and in addition
to any other remedy, the unsuccessful party shall pay the successful party
all costs and expenses, including reasonable attorneys' fees, incurred by
the successful party.
(g) NOTICES. All notices, requests and other communications under
this Agreement shall be delivered in the manner and to the addresses set
forth in the Purchase Agreement.
(h) GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
California without giving effect to conflicts of laws principles.
-3-
<PAGE>
[SIGNATURE PAGE TO FINANCING AND ACCOUNTING SERVICES AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"COMPANY" KREG OPERATING CO., a Delaware corporation
By: /s/
----------------------------------------
Raymond J. Pacini
Chief Financial Officer
"TKC" THE KOLL COMPANY, a California corporation
By: /s/
----------------------------------------
Raymond E. Wirta
President and Chief Operating Officer
-4-
<PAGE>
KREG - TKC SERVICE AGREEMENT
SCHEDULE OF FEES
<TABLE>
<CAPTION>
TKC
ANNUAL TIME ANNUAL MONTHLY FRINGE OH MONTHLY
SALARY ALLOCATION RATE RATE @ .25 @ .50 TOTAL
------ ---------- ------ ------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ORTWEIN / BUSH 241,350 15% 36,203 3,017 754 1,508 5,280
SHEPHARD / FINNELLY 232,880 10% 23,288 1,941 485 970 3,396
VAN AMBURGH / RUE 228,100 10% 22,810 1,901 475 950 3,326
KRUPOFF / URAM 179,600 50% 89,800 7,483 1,871 3,742 13,096
STAN'S GROUP 169,000 50% 84,500 7,042 1,760 3,521 12,323
KATE'S GROUP 120,900 50% 60,450 5,038 1,259 2,519 8,816
--------- ------- ------- ------- ------- -------
1,171,830 317,051 26,421 6,605 13,210 46,237
========= ======= ======= ======= ======= =======
ANNUAL FEE 554,838
=======
</TABLE>
<PAGE>
MANAGEMENT INFORMATION SYSTEMS AND
HUMAN RESOURCE SERVICES AGREEMENT
This Management Information Systems and Human Resources Services Agreement
(the "Agreement") is entered into as of September 30, 1993 by and between KOLL
REAL ESTATE GROUP, INC., a Delaware corporation (the "Company"), and KOLL
MANAGEMENT SERVICES, INC., a Delaware corporation ("KMS").
RECITALS:
A. The Company has agreed to purchase certain assets of The Koll Company,
a California corporation ("TKC"), pursuant to that certain Asset Purchase
Agreement dated as of September 30, 1993 between the Company and TKC (the
"Purchase Agreement").
B. It is a condition precedent to the consummation of the transactions
contemplated by the Purchase Agreement that TKC or an Affiliate (as defined
below), which has been identified as KMS, enter into this Agreement to provide
certain management information systems and human resource services to the
Company and its Affiliates as set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. SERVICES TO BE PROVIDED. During the term of this Agreement, KMS may
provide to the Company and its Affiliates such management information systems
and human resource services as may be reasonably requested by the Company or any
Affiliate from time to time, including, without limitation, computer
programming, data organization and retention, recordkeeping, payroll, and other
related services (collectively, the "Contract Services"). Throughout the term
hereof, the Contract Services provided to the Company or any Affiliate hereunder
shall be at no less than the level and quality of similar services being
provided to KMS for its own account from time to time.
2. AMOUNT OF FEE AND PAYMENT TERMS. In consideration of the provision of
the Contract Services, the Company and each Affiliate shall pay KMS fees (the
"Contract Fees") as set forth in SCHEDULE A attached hereto, subject to such
changes thereto as may be agreed from time to time.
<PAGE>
3. TERM. This Agreement shall continue in effect until thirty (30) days
after the date of delivery of notice by either party hereto to the other party
of its intention to terminate all Contract Services hereunder.
4. PRESERVATION AND TITLE TO STORED DATA. All data created by KMS after
the date hereof pursuant to the Agreement and relating to the Company's or any
Affiliate's business ("Company Data") stored on any media whatsoever shall be
the sole and exclusive property of the Company or such Affiliate. All Company
Data shall, at the expiration of the term of this Agreement, be delivered on
computer disks, tapes or such other media as the Company or such Affiliate shall
reasonably request to the location the Company or such Affiliate shall
reasonably direct at KMS's expense. Back-up data files of the Company Data
shall be produced and stored off-site, if and to the extent consistent with the
practices of KMS with respect to its own information and data.
5. CONFIDENTIALITY. Each party (including, without limitation, each
Affiliate of the Company) shall treat as confidential all financial, accounting,
personnel and other proprietary information of the other that may come into such
party's possession during the course of and pursuant to the performance of this
Agreement, and each party shall take adequate measures protecting the same to
the same extent each party protects against disclosure or destruction of its own
financial, accounting, personnel and other proprietary information. The parties
shall communicate to their respective agents and employees the confidentiality
requirements of this Agreement and take whatever measures may be reasonably
necessary to protect and enforce such confidentiality.
6. NO PARTNERSHIP. The parties agree that nothing contained in this
Agreement shall be construed as creating any relationship of principal and agent
or any partnership or joint venture between the parties. Neither party shall
take any action or make any implied or express representation to any third party
that such party is an agent or partner of the other, or otherwise purport to
bind or commit the other to any third party in any way.
7. MISCELLANEOUS.
(a) ASSIGNABILITY. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective Affiliates,
successors and permitted assigns. No party to this Agreement shall have
the right to assign its rights and obligations hereunder in whole or in
part to any person or party other than an Affiliate of such party without
the express prior written consent of the other.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes any prior or contemporaneous agreements or understandings
relating to the subject matter hereof.
(c) HEADINGS. The headings of the Articles and Paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
-2-
<PAGE>
(d) SEVERABILITY. The provisions of this Agreement are severable.
The invalidity, in whole or in part, of any provision of this Agreement
shall not affect the validity or enforceability of any other of its
provisions. If one or more provisions hereof shall be so declared invalid
or unenforceable, the remaining provisions shall remain in full force and
effect and shall be construed in the broadest possible manner to effectuate
the purposes hereof. The parties further agree to replace such void or
unenforceable provisions with provisions which will achieve, to the extent
possible, the economic, business and other purposes of the void or
unenforceable provisions.
(e) MODIFICATION AND WAIVER. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding
unless the same shall be in writing and duly executed by each of the
parties hereto, except that any of the terms or provisions of this
Agreement may be waived in writing at any time by the party which is
entitled to the benefits of such waived terms or provisions. No waiver of
any of the provisions of this Agreement shall be effective unless in
writing and duly executed by the waiving party. No waiver shall be deemed
to or shall constitute a waiver of any other provision hereof (whether or
not similar). No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof.
(f) ATTORNEYS' FEES. In any judicial action or proceeding or any
arbitration proceeding between the parties to enforce any of the provisions
of this Agreement, to seek damages on account of the breach hereof, to seek
injunctive relief to prevent the breach hereof, to seek a judicial
determination of the rights or obligations of any party hereto, or in any
judicial action or proceeding or any arbitration proceeding between the
parties in which this Agreement is raised as a defense, regardless of
whether the action or proceeding is prosecuted to judgment, and in addition
to any other remedy, the unsuccessful party shall pay the successful party
all costs and expenses, including reasonable attorneys' fees, incurred by
the successful party.
(g) NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to be duly given on the
date of delivery if delivered personally and on the date of receipt or
refusal indicated on the return receipt if mailed by first class mail,
certified or registered, postage prepaid, return receipt requested, and in
each case addressed as follows:
-3-
<PAGE>
If to KMS: Koll Management Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: President
With a copy to Allen, Matkins, Leck, Gamble & Mallory
(which shall not 18400 Von Karman Avenue, 4th Floor
constitute notice): Irvine, California 92715
Attention: Thomas C. Foster, Esq.
If to the Company Koll Real Estate Group, Inc.
or any Affiliate: 4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Raymond J. Pacini,
Chief Financial Officer
With a copy to Brobeck, Phleger & Harrison
(which shall not 4675 MacArthur Court, Suite 1000
constitute notice): Newport Beach, California 92660
Attention: Gregory W. Preston, Esq.
or to such other place and with such other copies as any party may
designate as to itself by written notice to the others in accordance with
the provisions of this Section 7(g).
(h) GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
California without giving effect to conflicts of laws principles.
(i) DEFINITION OF AFFILIATE. For purposes of this Agreement,
"AFFILIATE" shall mean any person, corporation, partnership or other entity
that, directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, the specified entity or
person. The term "control" as used herein (including the terms "controlled
by" and "under common control with") means the possession, direct or
indirect, of the power to vote fifty percent (50%) or more of the
outstanding voting securities or interests of such person or entity.
-4-
<PAGE>
[SIGNATURE PAGE TO MANAGEMENT INFORMATION SYSTEMS
AND HUMAN RESOURCE SERVICES AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"COMPANY" KOLL REAL ESTATE GROUP, INC., a Delaware
corporation
By: /s/
-----------------------------------
Raymond J. Pacini
Chief Financial Officer
"KMS" KOLL MANAGEMENT SERVICES, INC., a
Delaware corporation
By: /s/
-----------------------------------
William S. Rothe
President
-5-
<PAGE>
SUPPORT AGREEMENT CERTIFICATION
I hereby certify that the terms set forth in the Support Agreements between Koll
Management Services and Koll Real Estate Group, Inc. and its affiliates, are no
less favorable than the terms charged for similar services provided to
affiliated Koll Companies, including The Koll Company, Koll Construction
Company, and Koll International.
/s/
---------------------------------------
Raymond E. Wirta, President
<PAGE>
MANAGEMENT INFORMATION SYSTEMS AND
HUMAN RESOURCE SERVICES AGREEMENT
SCHEDULE OF FEES
HUMAN RESOURCE SERVICES
$125 per month for each KREG employee.
MANAGEMENT INFORMATION SERVICES
$2,000 per month for the use and utilization of the AS 400 Operating System,
plus $100 per hour for special use programming or systems modification
assistance specific to KREG.
<PAGE>
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease") is made this 30th day of September, 1993 by
and between THE KOLL COMPANY, a California corporation hereinafter called
"Sublessor" and KOLL REAL ESTATE GROUP, INC., a Delaware corporation and its
Affiliates (as defined below) hereinafter collectively, called "Sublessee."
RECITALS
A. Koll Corporate Associates, a California general partnership ("Landlord"),
and The Koll Company, a California corporation, as Tenant, heretofore entered
in to a certain office lease for the office building (the "Building") at 4343
VonKarman Avenue, Newport Beach (the "Master Lease") dated September 1, 1992.
B. Sublessor desires to sublease to Sublessee a portion of the Building
located on the east wing of the second floor, and a portion of the third floor
of the Building, as indicated by the cross-hatched area on the attached space
diagram (Exhibit "A") (the "Premises") and Sublessee desires to sublease such
Premises from Sublessor. All additional space on the second and third floors of
the Building ("Retained Space"), as indicated by the non-cross-hatched area on
Exhibit "A", is to remain the responsibility of the Sublessor.
C. Sublessee is entitled to make reasonable use of common area facilities.
D. Sublessor shall provide surface parking for all Sublessee's employees, five
(5) underground parking stalls, utilities, janitorial and security. Telephone,
postage and copying charges shall be separately billed and paid for by
Sublessee. Sublessor shall provide reception services during ordinary business
hours to include answering of all incoming lines.
E. For purposes of this Sublease the term "Affiliates" shall mean any person,
corporation, partnership or other entity that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the specified entity or person. The term "control" as used herein
(including the terms "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to vote fifty percent (50%) or more
of the outstanding voting securities or interests of such person or entity.
THEREFORE, Sublessor and Sublessee agree as follows:
1. MASTER LEASE. Except as otherwise provided hereunder, Sublessee hereby
expressly assumes and agrees to perform all obligations and covenants of the
Master Lease to the extent they apply to the Premises and are not otherwise
intended to be satisfied by Sublessee's performance under this Sublease.
-1-
<PAGE>
2. MONTHLY ESTIMATED BASE RENT. Sublessee shall pay to Sublessor as
estimated rent for the Premises, in advance on the first day of each calendar
month of the term of this Sublease, and without deduction, offset, prior notice
or demand, in lawful money of the United States, the sum of Twenty-Eight
Thousand Eight Hundred Sixty-Two Dollars and Forty Cents ($28,862.40) ("Monthly
Estimated Base Rent").
The Monthly Estimated Base Rent is based on the total rent and estimated
occupancy costs of $2.89 per square foot (as itemized below) and 9,987 square
feet of Premises.
Rent: $1.83 per sq.ft.
Estimated Occupancy Costs:
Utilities .29
Taxes .23
Maintenance .23
Parking .15
CAM .08
Janitorial .06
Insurance .03
-----
Total Monthly Estimated Base Rent $2.89
-----
-----
Within sixty (60) days of the end of each calendar year (or of any
termination of this Sublease), Sublessor shall send a reconciliation statement
to Sublessee setting forth the actual occupancy costs incurred and reasonably
allocated for Sublessee's occupancy of the Premises for the preceding calendar
year ("Actual Occupancy Costs") (in addition to any bills and invoices
reasonably requested by Sublessee to evidence the Actual Occupancy Costs). To
the extent the Estimated Occupancy Costs paid by Sublessee are less than the
Actual Occupancy Costs incurred for the same period, Sublessee agrees to pay the
difference within thirty (30) days. To the extent that the Actual Operating
Costs incurred are less than the Estimated Occupancy Costs paid by Sublessee for
the same period, the difference shall be credited to Sublessee's next Monthly
Estimated Base Rent obligation (or paid to Sublessee within thirty (30) days of
termination of the Sublease). If the size of the Premises which Sublessee
occupies either increases or decreases, the Monthly Estimated Base Rent shall be
adjusted proportionately to reflect the square footage actually occupied.
Sublessor shall also have the right, upon thirty (30) days prior written notice
to Sublessee, to adjust the Estimated Occupancy Costs and, consequently, the
Monthly Estimated Base Rent to reflect changes in the occupancy costs.
3. TERM. The term of this Sublease shall be month to month. Either
Sublessor or Sublessee may terminate this Sublease upon thirty (30) days prior
written notice to the other party.
-2-
<PAGE>
4. USE. Sublessee shall use the Premises for business offices and for no
other purpose without the prior written consent of the Sublessor and Landlord.
5. NO RELEASE OF SUBLESSOR. This Sublease agreement shall in no way
release Sublessor from any obligation or covenant of the Master Lease between
Landlord and Tenant.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease
Agreement as of the date first written above.
SUBLESSOR: THE KOLL COMPANY,
a California corporation
By: /s/ Ray Wirta
---------------------------
Ray Wirta, President
SUBLESSEE: KOLL REAL ESTATE GROUP, INC.
a Delaware corporation
By: /s/ Raymond J. Pacini
---------------------------
Raymond J. Pacini,
Chief Financial Officer
The undersigned Landlord under the Master Lease hereby consents to the
subletting of the Premises described therein on the terms and conditions
contained in the Sublease. This consent shall apply only to this Sublease and
shall not be deemed to be a consent to any other Sublease.
Dated: September 30, 1993
------------------------
Landlord: Koll Corporate Associates
By: The Koll Company, general partner
By: /s/ Ray Wirta
---------------------------
Ray Wirta, President
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<PAGE>
EXHIBIT A
KOLL REAL ESTATE GROUP, INC.
WORLDWIDE SUBSIDIARY LIST
<TABLE>
<CAPTION>
Percentage State/Country of
Ownership Incorporation
---------- ----------------
<S> <C> <C>
Hengro Fifteen Inc. 100 Delaware
Henley Disc Media, Inc. 100 Delaware
Henley Facilities, Inc. 100 Delaware
Henley Group, Inc., The 100 Delaware
New Henley Holdings Inc. 100 Delaware
Air Correction International, Inc. 100 Delaware
GCC Patents Holding Company Inc. 100 Delaware
Hengro Fourteen Inc. 100 Delaware
Hengro Ten Inc. 100 Delaware
Hengro Thirteen Inc. 100 Delaware
Henley Deltec Holdings Inc. 100 Delaware
Henley Deltec Corporation 100 Delaware
Henley Investments, Inc. Two 100 Delaware
IRE Corporation 100 Indiana
H I Industries Corporation 100 Florida
LJC Investments, Inc. 100 Delaware
Moore International Inc. 80 Delaware
Newco A.C. Corporation 100 Delaware
Nichols Engineering & Research Corporation 100 Delaware
Procon International Inc. 100 Delaware
Procon Incorporated 100 Delaware
Procofrance, S.A. 100 France
Procon (Great Britain) Limited 100 United Kingdom
Pullman Environmental Services Inc. 100 Delaware
Pullman Passenger Car Company Inc. 100 Delaware
Pullman Swindell Ltd. 100 United Kingdom
Trailmobile International Ltd. 100 Delaware
Pullman Trailmobile de Mexico S.A. de C.V. 100 Mexico
Trailmobile Leasing Corp. 100 Delaware
W.O.L. Corporation 100 Delaware
W: W. C. Corporation 100 Delaware
Wheelabrator Export Corporation 100 Delaware
Henley Holdings Two Inc. 100 Delaware
Signal Landmark Holdings Inc. 100 Delaware
Signal Landmark 100 California
Calumet Real Estate Inc. 100 Delaware
Newport Realty Corp. 100 California
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
Signal Bolsa Corporation 100 California
Signal Hawaii, Inc. 100 Hawaii
Signal Puako Corporation 100 Hawaii
Eagle Crest Country Club, Inc. 100 California
Glenwood Properties 50 California
Signal Development Corporation 100 California
Henley/KNO Holding Inc. 100 Delaware
KREG Holdings Inc. 100 Delaware
KREG Operating Co. 100 Delaware
KREG - LA, Inc. 51 Delaware
KREG - NC, Inc. 51 Delaware
KREG - NW, Inc. 51 Delaware
KREG - OC, Inc. 51 Delaware
KREG - SD, Inc. 51 Delaware
KREG - SW, Inc. 51 Delaware
NC Holding Company 100 Delaware
Wentworth By The Sea, Inc. * 50 Delaware
Newco A. D. Corporation 100 South Carolina
Twenty Newco Inc. 100 Delaware
Wentworth Holdings Inc. 100 Delaware
Wentworth By The Sea, Inc. * 50 Delaware
WESI Maryland Inc. 100 Delaware
WT/HRC Corporation 100 Illinois
Heat Research Corporation 100 Delaware
<FN>
(*) Together NC Holding Company and Wentworth Holdings Inc. own 100% of
Wentworth By The Sea, Inc.
</TABLE>
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