<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1997
REGISTRATION NO. 333-22121
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
KOLL REAL ESTATE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6749 02-0426634
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
4343 VON KARMAN AVENUE, NEWPORT BEACH, CALIFORNIA 92660
(714) 833-3030
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
RAYMOND J. PACINI
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Koll Real Estate Group, Inc.
4343 Von Karman
Newport Beach, CA 92660
714-833-3030
(Name and address, including zip code, of agent for service)
------------------------------
COPIES TO:
GREGORY W. PRESTON, ESQ.
ROBERT I. NEWTON, ESQ.
McDermott, Will & Emery
1301 Dove Street
Newport Beach, CA 92660-2444
telephone (714) 851-0633
facsimile (714) 851-9348
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: SECURITIES
WILL BE DISTRIBUTED TO EXCHANGING DEBENTUREHOLDERS, HOLDERS OF CERTAIN
CONTRACTUAL CLAIMS, COMMON AND PREFERRED STOCKHOLDERS OF KOLL REAL ESTATE GROUP,
INC. (THE "COMPANY") AND TO CERTAIN FINANCIAL ADVISORS UPON COMPLETION OF THE
EXCHANGE OFFER AND CAPITAL STOCK COMBINATION TRANSACTIONS DESCRIBED IN THIS
REGISTRATION STATEMENT.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT OFFERING PRICE
<S> <C> <C> <C>
Common Stock, par value $0.05 per share ("Common Stock") to be
offered in exchange for 12% Senior Subordinated Pay-In-Kind
Debentures due March 15, 2002 ("Senior Debentures") and
liquidated non-Contingent Claims (as defined herein)........... 9,643,240 (2) (2)
Common Stock to be offered in exchange for 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002 ("Subordinated
Debentures")................................................... 1,169,901 (3) (3)
Common Stock to be issued in the Capital Stock Combination
described in this Registration Statement upon the
reclassification and consolidation of outstanding shares of
Series A Convertible Redeemable Preferred Stock ("Preferred
Stock")........................................................ 680,516(4) (5) (5)
Common Stock to be issued in the Capital Stock Combination
described in this Registration Statement upon the
reclassification and consolidation of outstanding shares of
Class A Common Stock........................................... 489,385(4) (6) (6)
Warrants to acquire Common Stock and the shares of Common Stock
to be issued upon exercise thereof which warrants and shares
are being registered for resale by certain financial
advisors....................................................... (7) (7) (7)
Common Stock to be issued in settlement of certain contractual
claims, which shares are being registered for resale by the
holders of such claims......................................... 221,760 (8) (8)
Total shares of Common Stock to be issued or sold under this
Registration Statement excluding warrants and underlying shares
of Common Stock................................................ 12,204,802(9)
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, par value $0.05 per share ("Common Stock") to be
offered in exchange for 12% Senior Subordinated Pay-In-Kind
Debentures due March 15, 2002 ("Senior Debentures") and
liquidated non-Contingent Claims (as defined herein)........... (2)
Common Stock to be offered in exchange for 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002 ("Subordinated
Debentures")................................................... (3)
Common Stock to be issued in the Capital Stock Combination
described in this Registration Statement upon the
reclassification and consolidation of outstanding shares of
Series A Convertible Redeemable Preferred Stock ("Preferred
Stock")........................................................ (5)
Common Stock to be issued in the Capital Stock Combination
described in this Registration Statement upon the
reclassification and consolidation of outstanding shares of
Class A Common Stock........................................... (6)
Warrants to acquire Common Stock and the shares of Common Stock
to be issued upon exercise thereof which warrants and shares
are being registered for resale by certain financial
advisors....................................................... (7)
Common Stock to be issued in settlement of certain contractual
claims, which shares are being registered for resale by the
holders of such claims......................................... (8)
Total shares of Common Stock to be issued or sold under this
Registration Statement excluding warrants and underlying shares
of Common Stock................................................ $41,821(10)
</TABLE>
----------------------------------
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- --------------------------------------------------------------------------------
<PAGE>
(1) The shares of Common Stock offered hereby are on a post-Capital Stock
Combination and post-Reverse Stock Split basis as described in this
Registration Statement.
(2) For the purpose of calculating the registration fee in connection with the
Common Stock offered hereby in exchange for Senior Debentures and liquidated
non-Contingent Claims, the aggregate value of the shares of Common Stock has
been computed in accordance with Rule 457(f) by calculating the aggregate
value of the Senior Debentures and liquidated non-Contingent Claims, on the
basis of the average of the bid and asked price of the Senior Debentures
($.645 per $1.00 face amount) in the over-the-counter market on February 12,
1997. The resulting aggregate value of $102,248,929 was then multiplied by
1/33 of one percent to arrive at a registration fee for the shares of Common
Stock offered in exchange for the Senior Debentures and liquidated
non-Contingent Claims equal to $30,985.
(3) For the purpose of calculating the registration fee in connection with the
Common Stock offered hereby in exchange for Subordinated Debentures, the
aggregate value of the shares of Common Stock has been computed in
accordance with Rule 457(f) by calculating the aggregate value of the
Subordinated Debentures, on the basis of the average of the bid and asked
price of the Subordinated Debentures ($.325 per $1.00 face amount) in the
over-the-counter market on February 18, 1997. The resulting aggregate value
of $12,612,962 was then multiplied by 1/33 of one percent to arrive at a
registration fee for the shares of Common Stock offered in exchange for the
Subordinated Debentures equal to $3,822.
(4) Includes shares of Common Stock which may be sold by the Exchange Agent in
payment of fractional shares in connection with the Capital Stock
Combination and Reverse Stock Split described in the Registration Statement.
The registration fee in connection with such shares was calculated in
accordance with Rule 457(o) and is included within the registration fees
determined pursuant to footnotes (5) and (6) below.
(5) For the purpose of calculating the registration fee in connection with the
Common Stock to be issued hereby upon the reclassification of all
outstanding shares of Preferred Stock pursuant to the Capital Stock
Combination and Reverse Stock Split described in this Registration
Statement, the aggregate value of the shares of Common Stock has been
computed in accordance with Rule 457(f) by calculating the aggregate value
of the currently outstanding shares of Preferred Stock, on the basis of the
average of the high and low prices per share of the Preferred Stock
($.265625) as reported on NASDAQ-NM on February 18, 1997. The resulting
aggregate value of $10,329,260 was then multiplied by 1/33 of one percent to
arrive at a registration fee for the shares of Common Stock deemed to be
issued with respect to the outstanding shares of Preferred Stock pursuant to
the Capital Stock Combination equal to $3,130.
(6) For the purpose of calculating the registration fee in connection with the
Common Stock to be issued hereby upon the reclassification of all
outstanding shares of Class A Common Stock pursuant to the Capital Stock
Combination and Reverse Stock Split described in this Registration
Statement, the aggregate value of the shares of Common Stock has been
computed in accordance with Rule 457(f) by calculating the aggregate value
of the currently outstanding shares of Class A Common Stock, on the basis of
the average of the high and low prices per share of the Class A Common Stock
($.171876) as reported on NASDAQ-NM on February 18, 1997. The resulting
aggregate value of $8,411,312 was then multiplied by 1/33 of one percent to
arrive at a registration fee for the shares of Common Stock deemed to be
issued with respect to the outstanding shares of Class A Common Stock
pursuant to the Capital Stock Combination equal to $2,549.
(7) The warrants and underlying shares of Common Stock are being registered for
resale by certain financial advisors. The underlying number of new shares
are currently estimated to equal approximately 150,000, on a post Capital
Stock Combination and Reverse Stock Split basis. The warrants described in
this Registration Statement are being issued in payment of financial
advisory services in connection with the Recapitalization described in this
Registration Statement. See "Shares Subject to Resale by Financial
Advisors." Such warrants and/or the underlying shares are expected to be
resold by the financial advisors within the next two (2) years pursuant to
Rule 415. The exact number of shares issuable upon exercise of such warrants
will be equal to that number of shares which have an aggregate market value
equal to $1,850,000 based upon the 20-day average trading price immediately
following the completion of the Recapitalization described in this
Registration Statement. Such shares include 33,955 shares of Common Stock
which will be held of record by Libra Investment & Trade Ltd. ("Libra") for
the benefit of the Company upon completion of the Recapitalization pursuant
to a custody agreement between Libra and the Company and such number of
newly issued shares of Common Stock necessary to satisfy the terms of the
warrants. The registration fee applicable to such warrants and underlying
shares of Common Stock was computed in accordance with Rule 457(o) as
described in footnote (8) below.
(8) For purposes of calculating the registration fee in connection with the
resale of 221,760 shares of Common Stock by the holders of certain
contractual claims against the Company who are to be issued such shares
pursuant to mutual settlement and release agreements (see "Shares Subject to
Resale by Certain Contractual Claimants"), the registration fee has been
computed in accordance with Rule 457(o) based on the maximum aggregate
offering price of $2,554,200. This amount was then multiplied by 1/33 of one
percent to arrive at the applicable registration fee of $774.
(9) For the purpose of calculating the registration fee in connection with the
registration of the resale of the warrants and underlying shares of Common
Stock, the registration fee has been computed in accordance with Rule 457(o)
based on the maximum aggregate offering price of such warrants or shares as
described in such warrants which is $1,850,000. $1,850,000 was then
multiplied by 1/33 of one percent to arrive at the applicable registration
fee equal to $561.
(10) $40,411 of the aggregate $41,821 registration fee was previously paid. The
additional $1,410 of registration fees is submitted herewith. The aggregate
registration fee of $41,821 was calculated by adding the registration fees
calculated pursuant to notes (2), (3), (4), (5), (6), (7), (8) and (9)
above.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION IN
FORM S-4 ITEM NO. AND CAPTION PROXY STATEMENT/PROSPECTUS
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<C> <C> <S> <C>
A. Information About the Transaction
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................... Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ AVAILABLE INFORMATION; TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................. SUMMARY; INTRODUCTION; RISK FACTORS
4. Terms of the Transaction............................ SUMMARY--The Recapitalization;
SUMMARY--The Exchange Offers and Related Consent
Solicitations;
SUMMARY--The Prepackaged Plan; THE COMPANY
RECAPITALIZATION; THE EXCHANGE OFFERS; THE
PREPACKAGED PLAN; SHARES SUBJECT TO RESALE BY
FINANCIAL ADVISORS; DESCRIPTION OF THE COMMON
STOCK; POSSIBLE ACCOUNTING TREATMENTS
5. Pro Forma Financial Information..................... SUMMARY--Selected Historical and Pro Forma Financial
Data; UNAUDITED HISTORIC AND PRO FORMA CONSOLI-
DATED FINANCIAL STATEMENTS
6. Material Contacts with the Company Being Acquired... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters..... SHARES SUBJECT TO RESALE BY FINANCIAL ADVISORS;
SHARES SUBJECT TO RESALE BY CERTAIN CONTRACTUAL
CLAIMANTS
8. Interests of Named Experts and Counsel.............. Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... Not Applicable
B. Information About the Registrant
10. Information with Respect to S-3 Registrants......... Not Applicable
11. Incorporation of Certain Information by Reference... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants....................................... Not Applicable
13. Incorporation of Certain Information by Reference... Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................ SUMMARY--The Company; BUSINESS AND PROPERTIES OF THE
COMPANY; LEGAL PROCEEDINGS; MARKET PRICE AND
DIVIDENDS ON THE COMPANY'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS;
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN
FORM S-4 ITEM NO. AND CAPTION PROXY STATEMENT/PROSPECTUS
- -------------------------------------------------------------------------- ----------------------------------------------------
<C> <C> <S> <C>
SELECTED FINANCIAL DATA; MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS; BUSINESS AND PROPERTIES OF THE
COMPANY--Principal Properties; INDEX TO FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies........... Not Applicable
16. Information with Respect to S-2 or S-3 Companies.... Not Applicable
17. Information with Respect to Companies Other Than S-3
or S-2 Companies.................................. Not Applicable
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations
are to be Solicited
(1) Date, Time and Place Information................ Cover Page of Prospectus; INTRODUCTION; THE COMPANY
ANNUAL MEETING; PLAN SOLICITATION-VOTING PROCE-
DURES
(2) Revocability of Proxy........................... THE COMPANY ANNUAL MEETING-Proxy Solicitation; PLAN
SOLICITATION--VOTING PROCEDURES-Withdrawal of
Ballots; Revocation
(3) Dissenters' Rights of Appraisal................. Not Applicable
(4) Persons Making the Solicitation................. THE COMPANY ANNUAL MEETING-- Proxy Solicitation
(5) (i) Interest of Certain Persons in Matters to be
Acted Upon.................................. SUMMARY--Interests of Management; EXECUTIVE OFFICERS
AND DIRECTORS OF THE COMPANY; EXECUTIVE
COMPENSATION; PROPOSAL NO. 6 ELECT SLATE OF
DIRECTORS TO RECONSTITUTE THE BOARD OF DIRECTORS
(ii) Voting Securities and Principal Holders
Thereof........................................ SECURITY OWNERSHIP OF CERTAIN BENEFICIAL INTEREST
HOLDERS AND MANAGEMENT
(6) Vote Required for Approval...................... THE COMPANY ANNUAL MEETING
(7) (i) Directors and Executive Officers............ EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS;
EXECUTIVE COMPENSATION
(ii) Executive Compensation......................... EXECUTIVE COMPENSATION
(iii) Certain Relationships and Related
Transactions.................................. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
</TABLE>
<PAGE>
KOLL REAL ESTATE GROUP, INC.
4343 VON KARMAN AVENUE
NEWPORT BEACH, CALIFORNIA 92660
May , 1997
Dear Security holders:
The enclosed Proxy Statement/Prospectus and Disclosure Statement provides a
detailed description of the proposed recapitalization of Koll Real Estate Group,
Inc. (the "Company"). The Company intends to complete the recapitalization
through the Exchange Offers and is hereby soliciting its Debentureholders to
tender a minimum of 90% of the aggregate face amount of outstanding 12% Senior
Subordinated Pay-In-Kind Debentures due March 15, 2002 ("Senior Debentures") and
12% Subordinated Pay-In-Kind Debentures due March 15, 2002 ("Subordinated
Debentures"). The Exchange Offers provide that Senior Debentureholders and
Subordinated Debentureholders will receive 56 shares and 28 shares,
respectively, for each $1,000 principal amount outstanding as of March 15, 1997,
which would result in approximately 80% and 10% of the Company's newly issued
common stock being held by the Senior Debentureholders and Subordinated
Debentureholders, respectively, if 100% of the Debentures are tendered.
Concurrently, the Company is seeking the approval of its common and
preferred stockholders to ratify the Exchange Offers and related proposals,
which would result in approximately 4.2% and 5.8% of the Company's newly issued
common stock being held by current common and preferred stockholders,
respectively.
In the event that the 90% minimum tender condition is not satisfied, the
Company intends to file a Prepackaged Plan of Reorganization to complete the
recapitalization, provided that the Company has received the approval of 2/3 in
amount and greater than 50% in number of Senior Debentureholders actually voting
on the Prepackaged Plan. Therefore, the Company is also soliciting its
Debentureholders and stockholders for their acceptance of the Prepackaged Plan
described herein.
The only significant differences between completing the recapitalization
through the Exchange Offers and related transactions as compared with through
the Prepackaged Plan are (i) the Company would be required to adopt "Fresh Start
Accounting" under the Prepackaged Plan, which would result in a $68.5 million
write-down of the Bolsa Chica property to an estimated fair value of $130
million as of December 31, 1996; (ii) the Company's ability to utilize net
operating loss carryforwards ("NOLs") would be substantially restricted under
the Exchange Offers as further described in the Proxy Statement/Prospectus, and
(iii) up to 10% of the Debentures may remain outstanding under the Exchange
Offers, whereas all of the Debentures would be converted to equity under the
Prepackaged Plan. However, the Company believes that the economic benefits to be
derived by preserving the NOLs and converting 100% of the Debentures under the
Prepackaged Plan would be offset by the loss of business opportunities and
goodwill which may result from a Prepackaged bankruptcy.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the proposed Exchanged Offers and related transactions. The Board
believes that the Exchange Offers are fair to and in the best interest of Koll
Real Estate Group, Inc. and all of its stockholders, and unanimously recommends
that stockholders vote to ratify the Exchange Offers and approve the other
proposals described in the Proxy Statement/Prospectus.
The accompanying Proxy Statement/Prospectus provides a detailed description
of the Exchange Offers and the transactions contemplated thereby and the other
matters to be considered at the Annual Meeting. Please give this information
your careful attention.
Whether or not you are personally able to attend the Annual Meeting, please
complete, sign, date and return the enclosed proxy card and ballots as soon as
possible.
Sincerely,
[LOGO]
Donald M. Koll
Chairman and Chief Executive Officer
<PAGE>
KOLL REAL ESTATE GROUP, INC.
4343 VON KARMAN AVENUE
NEWPORT BEACH, CALIFORNIA 92660
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE , 1997
The annual meeting of stockholders (the "Annual Meeting") of Koll Real
Estate Group, Inc., a Delaware corporation (the "Company"), will be held at the
Mellon Bank Building, 8 Loockerman Street, Dover, Delaware, on June , 1997,
commencing at 9:30 a.m., Eastern Daylight Time, to consider and act upon the
following proposals relating to a proposed recapitalization (the
"Recapitalization") of the Company:
(1) To consider and act upon a proposal (the "Exchange Offers Proposal")
to ratify the terms of the offers to exchange all outstanding 12% Senior
Subordinated Pay-In-Kind Debentures due March 15, 2002 and all outstanding
12% Subordinated Pay-In-Kind Debentures due March 15, 2002 for shares of
Common Stock, as defined below, (collectively, the "Exchange Offers");
(2) To consider and act upon a proposal (the "Capital Stock Combination
Proposal") to amend Articles Fourth, Fifth and Sixth of the Company's
Restated Certificate of Incorporation ("Restated Certificate"), subject to
the completion of the Recapitalization, to provide for a combination of the
Company's Class A Common Stock ("Class A Common Stock"), Class B Common
Stock and Series A Convertible Preferred Stock ("Preferred Stock") into one
class series of stock to be designated "Common Stock," whereby each
outstanding share of Preferred Stock will be reclassified to constitute one
and three quarter (1:75) shares of Common Stock and each outstanding share
of Class A Common Stock will be reclassified to be one (1) share of Common
Stock, and to provide for the elimination of the Board's authority to issue
classes or series of stock with preferences over the combined Common Stock
(the "Capital Stock Combination");
(3) To consider and act upon a proposal (the "Reverse Split Proposal")
to amend Article Fifth of the Restated Certificate, subject to the
completion of the Recapitalization, to provide for a one for one hundred
(1:100) reverse stock split of each outstanding share of the Company's
capital stock (the "Reverse Stock Split");
(4) To consider and act upon a proposal to amend Article Fourth of the
Restated Certificate, subject to the completion of the Recapitalization and
the approval and implementation of both the Capital Stock Combination and
Reverse Stock Split, to reduce the authorized capital stock to 18 million
shares of the combined Common Stock (the "Authorized Capital Proposal");
(5) To consider and act upon a proposal to amend the Restated
Certificate and the Company's Restated Bylaws (the "Bylaws"), subject to the
completion of the Recapitalization, to delete provisions of Articles Eighth
and Thirteenth of the Restated Certificate and Articles III and XI of the
Bylaws currently providing for (i) the Board to be classified into three
classes with staggered terms,(ii) an 80% supermajority vote of the shares of
outstanding capital stock of the Company entitled to vote in elections of
directors in order to change the authorized number of directors by vote of
stockholders,(iii) a similar 80% supermajority vote in order to remove any
director for cause, and (iv) a similar 80% supermajority vote in order to
amend or repeal any of the above described provisions of the Restated
Certificate or Bylaws; and to increase the size of the Board from seven (7)
to ten (10) members, subject to the completion of the Recapitalization (the
"Board Proposal");
(6) To consider and act upon a proposal to amend the Restated
Certificate and Bylaws, subject to the completion of the Recapitalization,
to delete provisions of Articles Ninth and Thirteenth of the Restated
Certificate and Article XI of the Bylaws which currently provide that an 80%
supermajority vote of the shares of the outstanding capital stock of the
Company entitled to vote in elections of directors is required to amend or
repeal any provisions of Article Ninth of the Restated Certificate or
Article II, Section 3 of the Bylaws applicable to special meetings of the
stockholders of the Company and to amend Article Ninth of the Restated
Certificate and Article II, Section 3 of the Bylaws to permit stockholders
representing at least ten percent (10%) of outstanding shares of capital
stock of
<PAGE>
the Company entitled to vote in the election of directors to call a special
meeting of the Company's stockholders (the "Special Meetings Proposal");
(7) To consider and act upon a proposal to amend the Restated
Certificate, subject to the completion of the Recapitalization, to delete
provisions of Article Tenth of the Restated Certificate which currently
prohibit stockholders of the Company from acting by written consent and
which require an 80% supermajority vote of the shares of the outstanding
capital stock of the Company entitled to vote in elections of directors to
amend or repeal such provisions (the "Written Consent Proposal");
(8) To consider and act upon a proposal to elect a slate of director
nominees in the event the Recapitalization is completed to reconstitute the
declassified Board or, if the Board is not declassified then to reconstitute
the classified Board, or in the event the Recapitalization is not completed,
to elect incumbent directors otherwise up for election to serve until the
expiration of the terms of their respective classes and until their
respective successors are elected and qualified (the "Board Election
Proposal");
(9) To ratify the Company's selection of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 1997
(the "Auditor Proposal"); and
(10) Such other business as may properly come before the meeting or any
adjournment or postponement thereof (collectively, the "Annual Meeting
Proposals").
Stockholders of record holding shares of Preferred Stock or Class A Common
Stock of the Company at the close of business on April 24, 1997 will be entitled
to receive notice of, and to vote at, the meeting or any adjournment or
postponement thereof.
Stockholder approval of the various proposals is required as follows: (i)
the Capital Stock Combination Proposal, Reverse Split Proposal, Authorized
Capital Proposal and the Auditor Proposal at the Annual Meeting will each
require the affirmative vote of the holders of at least a majority of the
outstanding shares of Class A Common Stock and Preferred Stock entitled to vote,
voting as separate classes, present (in person or by proxy) at the Annual
Meeting, in order to be approved; (ii) the Board Proposal, the Special Meetings
Proposal and the Written Consent Proposal at the Annual Meeting will require the
affirmative vote of the holders of at least 80% of the outstanding shares of
Class A Common Stock entitled to vote, whether or not present (in person or by
proxy) at the Annual Meeting, in order to be approved; and (iii) the Board
Election Proposal will require the affirmative vote of the holders of at least a
plurality of the outstanding shares of Class A Common Stock entitled to vote,
present (in person or by proxy) at the Annual Meeting, voted for each director
nominee in order for each such nominee to be elected. The Company is also
seeking ratification of the Exchange Offers Proposal by the holders of a
majority of the outstanding shares of Class A Common Stock and Preferred Stock.
HOWEVER, PURSUANT TO THE DELAWARE GENERAL CORPORATION LAW AND THE COMPANY'S
RESTATED CERTIFICATE AND BYLAWS, SUCH RATIFICATION IS NOT REQUIRED FOR THE
COMPANY TO CONSUMMATE THE EXCHANGE OFFERS. IF SUCH RATIFICATION IS NOT OBTAINED
AT THE ANNUAL MEETING, THE COMPANY IN ITS REASONABLE DISCRETION MAY STILL
CONSUMMATE THE EXCHANGE OFFERS.
<TABLE>
<S> <C> <C>
By Order of the Board of Directors,
Raymond J. Pacini
Newport Beach, California Executive Vice President, Chief
May , 1997 Financial Officer and Secretary
</TABLE>
THE BOARD OF DIRECTORS OF KOLL REAL ESTATE GROUP, INC. RECOMMENDS THAT YOU
VOTE FOR THE ANNUAL MEETING PROPOSALS.
YOUR VOTE IS IMPORTANT. PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY, IF YOU WISH, REVOKE
YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
STOCKHOLDERS WITH INQUIRIES RELATED TO THE ANNUAL MEETING PROPOSALS SHOULD
CONTACT GEORGESON & COMPANY INC. (800) 223-2064.
<PAGE>
PROXY STATEMENT/PROSPECTUS
AND DISCLOSURE STATEMENT
KOLL REAL ESTATE GROUP, INC.
THIS PROXY STATEMENT, PROSPECTUS AND DISCLOSURE STATEMENT (COLLECTIVELY
REFERRED TO HEREIN AS THE "PROSPECTUS") RELATES TO THE SOLICITATION OF SECURITY
HOLDERS AND IMPAIRED CREDITORS OF KOLL REAL ESTATE GROUP, INC., A DELAWARE
CORPORATION (THE "COMPANY") TO ACCEPT, CONSENT TO AND APPROVE VARIOUS
TRANSACTIONS WHICH COLLECTIVELY MAKEUP A PROPOSED RECAPITALIZATION (THE
"RECAPITALIZATION") OF THE COMPANY, TO BE COMPLETED EITHER (I) THROUGH THE
PROPOSED EXCHANGE OFFERS, THE CAPITAL STOCK COMBINATION, THE REVERSE STOCK SPLIT
(AS THESE TERMS ARE DEFINED BELOW) AND CERTAIN RELATED TRANSACTIONS DESCRIBED IN
THIS PROSPECTUS; OR (II) THROUGH OBTAINING AN ORDER OF A FEDERAL BANKRUPTCY
COURT CONFIRMING THE PREPACKAGED PLAN OF REORGANIZATION OF THE COMPANY (THE
"PREPACKAGED PLAN") WHICH CONTAINS, GENERALLY, THE SAME ELEMENTS AS THE
FOREGOING EXCHANGE OFFERS, CAPITAL STOCK COMBINATION, REVERSE STOCK SPLIT AND
RELATED TRANSACTIONS (AS DESCRIBED BELOW).
--------------------------
I. OFFER TO EXCHANGE ALL OUTSTANDING 12% SENIOR SUBORDINATED PAY-IN-KIND
DEBENTURES DUE MARCH 15, 2002
("SENIOR DEBENTURES") FOR UP TO A MAXIMUM OF 9,217,320 SHARES OF COMMON STOCK,
PAR VALUE $0.05 PER SHARE
("COMMON STOCK"); AND OFFER TO EXCHANGE ALL OUTSTANDING 12% SUBORDINATED
PAY-IN-KIND DEBENTURES
DUE MARCH 15, 2002 ("SUBORDINATED DEBENTURES" AND COLLECTIVELY WITH THE
SENIOR DEBENTURES, THE "OUTSTANDING DEBENTURES") FOR UP TO A MAXIMUM OF
1,151,864 SHARES OF COMMON STOCK
(COLLECTIVELY THE "EXCHANGE OFFERS")
The Exchange Offers are conditioned upon the acceptance and tender of at
least 90% of the aggregate principal amount of Outstanding Debentures (the "90%
Requisite Exchange Acceptance"). If the 90% Requisite Exchange Acceptance is not
obtained, the Company intends to effect the Recapitalization by seeking a Court
order confirming the Prepackaged Plan. Representatives of the members of a
committee of 12 institutional investors have recently informed the Company that
the members hold, in the aggregate, approximately 50.5% of the Outstanding
Debentures (the "Debentures Holders' Committee"), and have indicated to the
Company that the members intend to accept the Exchange Offers.
--------------------------
II. SOLICITATION OF CONSENTS OF HOLDERS OF OUTSTANDING DEBENTURES
Concurrently with the Exchange Offers, the Company is soliciting the
consents of holders of the Outstanding Debentures (the "Consent Solicitations")
to certain amendments to the respective indentures (the "Indentures") to remove
certain restrictive covenants which (i) prohibit certain payments and
distributions by the Company to any debt subordinated to the Outstanding
Debentures and to equity holders of the Company and (ii) prohibit non-arm's
length transactions between the Company and its non-subsidiary affiliates
(collectively, the "Proposed Amendments"). See "Proposed Amendments." Holders of
the Outstanding Debentures who accept the Exchange Offers must consent to the
Proposed Amendments which, if effected, will be binding upon all holders
retaining Outstanding Debentures, whether or not such holders consented to the
adoption of such amendments. Written Consents to the Proposed Amendments will be
solicited as part of the Consents and Letters of Transmittal to be delivered to
holders of Outstanding Debentures in connection with the Exchange Offers. In
order to approve the Proposed Amendments, the consent of the record holders of
at least a majority of the aggregate principal amount of the outstanding Senior
Debentures and Subordinated Debentures, respectively, is required.
Representatives of the members of the Debenture Holders' Committee, have
recently informed the Company that the members hold approximately 50.5% of the
Outstanding Debentures entitled to vote have indicated to the Company that the
members intend to consent to the Proposed Amendments. For additional information
regarding the Consent Solicitations, see "Proposed Amendments to Indentures."
--------------------------
III. SOLICITATION OF PROXIES FOR THE ANNUAL MEETING OF STOCKHOLDERS (THE
"ANNUAL MEETING") OF KOLL REAL ESTATE GROUP, INC.
TO BE HELD ON JUNE , 1997 TO:
(I) ratify the Exchange Offers; (II) approve an amendment to the Company's
Restated Certificate of Incorporation (the "Restated Certificate"), which would
become effective upon completion of the Recapitalization, and would cause a
reclassification and combination of the Company's Series A Convertible Preferred
Stock ("Preferred Stock"), Class A Common Stock ("Class A Common Stock") and
Class B Common Stock into one class and series of stock to be designated "Common
Stock," whereby each outstanding share of Preferred Stock will be reclassified
to constitute one and three quarter (1.75) shares of Common Stock and each
outstanding share of Class A Common Stock will be reclassified to constitute one
(1) share of Common Stock, and the elimination of the Board's ability to issue
preferred stock without stockholders approval (collectively, the "Capital Stock
Combination"); (III) approve an amendment to the Restated Certificate, which
would become effective upon completion of the Recapitalization, and would cause
a one for one hundred (1:100) reverse stock split (the "Reverse Stock Split") of
each outstanding share of Preferred Stock and Class A Common Stock; (IV) approve
a reduction of the Company's authorized capital to 18 million shares of Common
Stock which would become effective upon completion of the Recapitalization and
approval of proposals (i), (ii) and (iii); (V) approve amendments to the
Restated Certificate and to the Company's Amended Bylaws (the "Bylaws"), which
would become effective upon completion of the Recapitalization, and would cause
the elimination of the provisions providing for the Company's Board of Directors
(the "Board") to be classified into three classes and to remove all
supermajority voting provisions and certain other anti-takeover provisions as
described in this Prospectus; (VI) elect a slate of ten (10) directors made up
of certain incumbent directors and new director nominees to reconstitute the
Board if the Recapitalization is completed and to elect a slate of only
incumbent directors otherwise up for re-election in the event the
Recapitalization is not completed; (VII) ratify the appointment of Deloitte &
Touche LLP as independent auditors; and (VIII) transact such other business as
may properly come before the Annual Meeting. The affirmative vote of the holders
of a majority of the outstanding shares of Class A Common Stock and Preferred
Stock, voting as separate classes, present in person or by proxy at a meeting
where a quorum is present, will be required to approve the proposals described
in (i), (ii), (iii) and (iv) above; the affirmative vote of the holders of 80%
of the outstanding shares of Class A Common Stock will be required to approve
the proposals described in (v) above; and the affirmative vote of a majority of
the outstanding shares of Class A Common Stock present in person or by proxy at
a meeting where a quorum is present will be required to approve the proposals
described in (vi) and (vii) above. Representatives of the members of the
Debenture Holders' Committee have recently informed the Company that the members
hold approximately 33% and 13%, respectively, of the Preferred Stock and Class A
Common Stock, and have indicated that the members intend to vote in favor of
each of the above described proposals. In addition, the Holder of approximately
30.5% and 11.5%, respectively, of the Preferred Stock and Class A Common Stock
has indicated to the Company that it intends to vote in favor of each of the
above described proposals.
--------------------------
(COVER CONTINUED ON THE FOLLOWING PAGES)
The date of this Proxy Statement/Prospectus and Disclosure Statement is May ,
1997.
<PAGE>
(COVER PAGE CONTINUED)
IV. SOLICITATION OF ACCEPTANCES OF PREPACKAGED PLAN IN ORDER TO EFFECT THE
RECAPITALIZATION PURSUANT TO THE PREPACKAGED PLAN, INCLUDING THE EXCHANGE OF ALL
OUTSTANDING DEBENTURES FOR COMMON STOCK, THE CAPITAL STOCK COMBINATION AND
REVERSE STOCK SPLIT
Pursuant to Chapter 11, Title 11 of the United States Code (the "Bankruptcy
Code"), upon confirmation by a United States Bankruptcy Court (the "Bankruptcy
Court"), the Prepackaged Plan would substantially give effect to the Exchange
Offers and the Annual Meeting Proposals. In order to be confirmed by the
Bankruptcy Court, among certain other requirements, the Prepackaged Plan must be
approved by at least two-thirds in amount and more than one-half in number of
holders, who have voted to accept or reject the Prepackaged Plan, of Impaired
Classes of Claims (which generally include the holders of Senior Debentures and
other liquidated non-Contingent Claims, as a separate class of claims, and the
holders of Subordinated Debentures, as a separate class of claims), and by at
least two-thirds in amount of holders, who have voted to accept or reject the
Prepackaged Plan, of impaired interests (which includes the holders of Preferred
Stock and Class A Common Stock, as separate classes of interests).
Alternatively, under the terms of the Prepackaged Plan, the Company intends to
have the Prepackaged Plan confirmed by the Bankruptcy Court pursuant to
"cram-down" provisions of the Bankruptcy Code, if all classes of Impaired Claims
and Interests do not vote to accept the Prepackaged Plan; provided, that the
class of Claims comprising the Senior Debentures and liquidated non-Contingent
Claims have voted to accept the Prepackaged Plan. Under the Prepackaged Plan,
such non-accepting Class of Claims and/or Interests would have their respective
claims/interests cancelled and would receive no consideration provided the
Bankruptcy Court determines as to each non-accepting class, the Prepackaged Plan
"does not discriminate unfairly" and is "fair and equitable" as to such
non-accepting class. See "Summary--The Prepackaged Plan" and "The Prepackaged
Plan" for a more detailed discussion. The Company is soliciting acceptances of
the Prepackaged Plan by means of Ballots and Master Ballots (as defined in
"Summary--Prepackaged Plan--Voting Procedures") and will not hold meetings to
vote on the Prepackaged Plan. Representatives of the members of the Debenture
Holders' Committee, which members hold approximately 70%, 30% and 13%,
respectively, of the Outstanding Debentures, the Preferred Stock and the Class A
Common Stock and a holder of approximately 30.5% and 11.5%, respectively, of the
Preferred Stock and Class A Common Stock have indicated that the members and
such holders intend to vote in favor of the Prepackaged Plan.
--------------------------
THE EXCHANGE OFFERS, ALL WITHDRAWAL RIGHTS WITH RESPECT THERETO, AND THE
CONSENT SOLICITATIONS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME ON
JUNE , 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED, CONSENTS MAY BE REVOKED
AT ANY TIME PRIOR TO (BUT NOT AFTER) THE EXPIRATION DATE.
THE SOLICITATION OF APPROVAL OF THE PREPACKAGED PLAN WILL EXPIRE AT 12:00
MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE, UNLESS EXTENDED. A
HOLDER OF SENIOR DEBENTURES, SUBORDINATED DEBENTURES, PREFERRED STOCK, CLASS A
COMMON STOCK OR LIQUIDATED NON-CONTINGENT CLAIMS IS ENTITLED TO VOTE ON THE
PREPACKAGED PLAN, REGARDLESS OF WHETHER SUCH HOLDER TENDERS IN AN EXCHANGE OFFER
OR APPROVES THE ANNUAL MEETING PROPOSALS, AND SUCH HOLDER OR A HOLDER OF OTHER
CLAIMS AGAINST OR EQUITY INTERESTS IN THE COMPANY IMPAIRED UNDER THE PREPACKAGED
PLAN MAY REVOKE ITS ACCEPTANCE OF THE PREPACKAGED PLAN AT ANY TIME PRIOR TO THE
COMMENCEMENT BY THE COMPANY OF JUDICIAL PROCEEDINGS TO CONFIRM THE PREPACKAGED
PLAN. THE COMPANY'S BOARD OF DIRECTORS HAS NOT, AT THIS TIME, APPROVED
COMMENCEMENT OF SUCH JUDICIAL PROCEEDINGS.
CERTAIN CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE AND AN INDEX OF
CERTAIN DEFINED TERMS IS SET FORTH ON PAGES XVIII-XIX HERETO.
ii
<PAGE>
(COVER PAGE CONTINUED)
Set forth below are charts which reflect the issuance/exchange of securities
of the Company pursuant to the Recapitalization:
In the Exchange Offers or Prepackaged Plan:
[GRAPHIC]
In the Capital Stock Combination and Reverse Stock Split:
[GRAPHIC]
Set forth below are charts which reflect the voting power of the Company,
assuming a 100% acceptance rate for the Exchange Offers and the approval of the
Capital Stock Combination and Reverse Stock Split. The charts do not adjust for
fractional shares of Common Stock which will be bundled and sold by the Exchange
Agent as described in this Prospectus and do not give effect to the exercise of
warrants and stock options that will be outstanding upon completion of the
Recapitalization. (See "The Prepackaged Plan," "The Company
Recapitalization--Description of the Recapitalization--Amendment to Stock Option
Plan," "Shares Subject to Resale by Financial Advisors," "Shares Subject to
Resale by Certain Contractual Claimants " and "The Exchange Offers--Treatment of
Fractional Shares").
iii
<PAGE>
(COVER PAGE CONTINUED)
Prior to Recapitalization:
[GRAPHIC]
After Recapitalization Pursuant to the Exchange Offers:
[GRAPHIC]
iv
<PAGE>
(COVER PAGE CONTINUED)
After Recapitalization Pursuant to the Prepackaged Plan:
[GRAPHIC]
v
<PAGE>
(COVER PAGE CONTINUED)
COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION
The following is a brief tabular comparison of certain elements of, and
differences between, the Recapitalization (i) proposed to be effected pursuant
to the Exchange Offers, the Proposed Amendments, the Capital Stock Combination,
the Reverse Stock Split and related transactions and alternatively, (ii)
proposed to be effected pursuant to the Prepackaged Plan. Please refer to the
discussions of these transactions within this Prospectus for more detailed and
complete descriptions.
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Key Transactions........... Exchange of at least 90%, and up to 100%, Exchange 100% of the Outstanding
of the Outstanding Debentures for Common Debentures for Common Stock; combine all
Stock; amendment to Indentures pursuant to outstanding capital stock into one class
the Proposed Amendments to delete certain and series designated "Common Stock" where
payment distribution and affiliated each outstanding Share of Preferred Stock
transactions restrictive covenants in the is reclassified to be one and three
event 100% of the Outstanding Debentures quarter (1.75) shares of "Common Stock"
are not tendered; combine all outstanding and each outstanding share of Class A
capital stock into one class and series Common Stock is reclassified to be one (1)
designated "Common Stock" where each share of Common Stock; reverse split all
outstanding Share of Preferred Stock is outstanding shares of capital stock on a
reclassified to be one and three quarter one for one hundred (1:100) basis; delete
(1.75) shares of "Common Stock" and each the classified Board and reconstitute the
outstanding share of Class A Common Stock Board with an expanded ten (10) member
is reclassified to be one (1) share of Board consisting of four (4) incumbent
Common Stock; reverse split all directors and six (6) new director
outstanding shares of capital stock on a nominees each to serve for one (1) year
one for one hundred (1:100) basis; delete terms; amend the Company's charter docu-
the classified Board and reconstitute the ments to delete various takeover pro-
Board with an expanded ten (10) member tective provisions, including all
Board consisting of four (4) incumbent supermajority voting requirements and
directors and six (6) new director restrictions on stockholders' ability to
nominees each to serve for one (1) year call special meetings and act by written
terms; amend the Company's charter consent; and amend the 1993 Stock Option
documents to delete various takeover Plan to reduce the aggregate number of
protective provisions, including all shares available thereunder from
supermajority voting requirements and approximately 15% to 6% of the post
restrictions on stockholders' ability to Recapitalization fully diluted equity. The
call special meetings and act by written executive officers of the Company will
consent; and amend the 1993 Stock Option continue to serve the Company in the same
Plan to reduce the aggregate number of capacities as they did prior to the
shares available thereunder from Recapitalization. Approximately $4.7
approximately 15% to 6% of the post million in liquidated non-Contingent
Recapitalization fully diluted equity. The Claims will be exchanged for Common Stock.
executive officers of the Company will
continue to serve the Company in the same
capacities as they did prior to the
Recapitalization. Approximately $4.0
million in liquidated non-Contingent
Claims will be exchanged for Common Stock
pursuant to mutual settlement and release
agreements with certain contractual claim-
ants.
</TABLE>
vi
<PAGE>
(COVER PAGE CONTINUED)
COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Material Differences....... Recapitalization may be completed with All Outstanding Debentures will be
only 90% exchange of Outstanding exchanged for Common Stock and the
Debentures; the Company's ability to Proposed Amendments will be irrelevant;
utilize its net operating losses will be the Company may preserve and be able to
substantially limited such that the utilize up to $223 million of net
Company will only be able to utilize operating losses (less any net operating
approximately $1.0 million of net oper- losses disallowed as a result of the
ating losses per year (plus recognized ongoing IRS examinations) which would be
built-in gains) to offset taxable income; limited outside of bankruptcy; and
approximately $.7 million in liquidated approximately $.7 million in liquidated
non-Contingent Claims that would be non-Contingent Claims which would remain
exchanged for Common Stock under the outstanding pursuant to the
Prepackaged Plan will remain outstanding Recapitalization outside of bankruptcy
under the Exchange Offers; the would be exchanged for Common Stock under
Recapitalization pursuant to the Exchange the Prepackaged Plan. The Prepackaged Plan
Offers does not contain any "cram-down" also provides that the Company will seek
procedures and, as such, no holders will to confirm the Prepackaged Plan pursuant
have their claims or interests cancelled to "cramdown" provisions of the Bankruptcy
without consideration. Code, if all classes of Impaired Claims
and Interests do not vote to accept the
Prepackaged Plan, provided however, that
the class of Claims comprised of Senior
Debentures and liquidated non-Contingent
Claims vote to accept the Prepackaged
Plan. If the "cram-down" provisions are
invoked, such non-accepting Class of
Claims and/or Interests would receive no
distribution under the Prepackaged Plan on
account of their respective claim or
interest provided the Bankruptcy Court
determined, as to such non-accepting
Class, the Prepackaged Plan "does not
unfairly discriminate" and is "fair and
equitable". Consequently, if holders of
the Subordinated Debentures, Preferred
Stock or Common Stock, as separate
classes, do not vote to accept the
Prepackaged Plan, such non-accepting
holders could receive nothing.
</TABLE>
vii
<PAGE>
(COVER PAGE CONTINUED)
COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Mechanics of
Participation............ Holders of Outstanding Debentures may Holders of impaired claims (including
accept the Exchange Offers and may consent holders of Outstanding Debentures and
to the Proposed Amendments by executing, holders of liquidated non-Contingent
completing and delivering the Consent and Claims) and interests (including holders
Letter of Transmittal provided herewith as of Preferred Stock and Class A Common
described therein; and holders of Pre- Stock) who desire to vote on the
ferred Stock and Class A Common Stock may Prepackaged Plan must properly complete a
vote to approve the Annual Meeting Ballot or Master Ballot, as applicable,
Proposals, including proposals to effect and deliver it to the Exchange Agent in
the Exchange Offers, the Capital Stock accordance with the voting instructions
Combination, the Reverse Stock Split and contained therein. The Company will not
the related Annual Meeting Proposals, as hold a meeting to solicit acceptances of
applicable, by executing and delivering the Prepackaged Plan.
the applicable proxy card enclosed here-
with to the Exchange Agent as described
herein or by attending and voting at the
Annual Meeting of Stockholders.
</TABLE>
viii
<PAGE>
(COVER PAGE CONTINUED)
COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Acceptances, Consents
and Votes Needed to
Consummate the
Recapitalization......... Holders of at least (i) 90% of the prin- In order for the Prepackaged Plan to be
cipal amount of Outstanding Debentures confirmed and implemented by the
must accept the Exchange Offers, (ii) a Bankruptcy Court, the Prepackaged Plan
majority of the outstanding principal must be accepted by holders of at least
amount of Outstanding Debentures must (i) two-thirds in amount and more than one
consent to the Proposed Amendments and half in number, that have voted to accept
(iii) a majority of the outstanding shares or reject the Prepackaged Plan, of each
of Preferred Stock and Class A Common impaired class of claims (which generally
Stock, voting as separate classes, which include the holders of Senior Debentures
are present in person or by proxy at the and other liquidated non-Contingent
Annual Meeting with a quorum present, must creditors, as a separate class of claims,
approve the Capital Stock Combination and and the holders of Subordinated
the Reverse Stock Split. Debentures, as a separate class of claims)
and (ii) two-thirds in amount that have
voted to accept or reject the Prepackaged
Plan of each impaired class of interests
(which include the holders of Preferred
Stock and Class A Common Stock, as sepa-
rate classes of interests). Alternatively,
if the Prepackaged Plan is not so
accepted, the Company will attempt to
confirm the Prepackaged Plan pursuant to
the "cram-down" provisions of the
Bankruptcy Code described above.
Company's Intention
to Pursue................ The Company currently intends to pursue The Company currently intends to file a
the Recapitalization without the voluntary petition for relief pursuant to
Prepackaged Plan, if it receives (i) Chapter 11 of the Bankruptcy Code seeking
tenders of at least 90% of the out- to confirm and implement the Prepackaged
standing principal amount of Outstanding Plan if it does not receive the 90%
Debentures, (ii) consents to the Proposed Requisite Exchange Acceptance, the
Amendments from the holders of a majority Requisite Consents and approval of the
of the Outstanding principal amount of Capital Stock Combination and Reverse
Outstanding Debentures and (iii) approval Split Proposals at the Annual Meeting as
of the Capital Stock Combination and described herein, provided, however, it
Reverse Split Proposals at the Annual does receive the requisite acceptances of
Meeting by the holders of Preferred Stock the Prepackaged Plan necessary to confirm
and Class A Common Stock as described the Prepackaged Plan as described above.
above.
</TABLE>
ix
<PAGE>
(COVER PAGE CONTINUED)
The applicable record date (the "Record Date") for purposes of determining
the holders of Outstanding Debentures entitled to vote in the Consent
Solicitations and the holders of (i) Outstanding Debentures, (ii) Preferred
Stock, (iii) Class A Common Stock, and (iv) liquidated non-Contingent Claims
entitled to vote on the Prepackaged Plan is April 24, 1997. The record date for
purposes of determining the holders of Preferred Stock and Class A Common Stock
entitled to vote at the Annual Meeting is April 24, 1997 (the "Annual Meeting
Record Date").
It is important that the holders of the Company's outstanding debt and
equity securities (other than unexercised warrants) and the holders of other
impaired claims against the Company read and carefully consider the matters
described in this Prospectus, including, without limitation, all of the factors
set forth under the heading "Risk Factors," and that such holders respond
promptly.
This Prospectus relates to an aggregate of approximately 11,802,845 shares
of Common Stock on a post-Capital Stock Combination and Reverse Stock Split
basis which consist of (i) an estimated maximum of 9,481,080 shares of Common
Stock issuable to the tendering holders of Senior Debentures and liquidated
non-Contigent Claims; (ii) an estimated maximum of 1,151,864 shares of Common
Stock issuable to the tendering holders of Subordinated Debentures; (iii) an
estimated additional 680,516 shares of Common Stock issuable to holders of
Preferred Stock pursuant to the Capital Stock Combination and the Reverse Stock
Split; (iv) an estimated additional 489,385 shares of Common Stock issuable to
holders of Class A Common Stock pursuant to the Capital Stock Combination and
the Reverse Stock Split; (v) the Advisor Warrants and an indeterminate number of
Warrant Shares which are being registered for resale by certain financial
advisors currently estimated to be approximately 150,000 shares of Common Stock
as described in this Prospectus under the heading "Shares Subject to Resale by
Financial Advisors;" and (vi) 221,760 shares of Common Stock which are being
registered for resale by the holders of certain contractual claims against the
Company who are to be issued Common Stock pursuant to the mutual settlement and
release agreements described in this Prospectus under the heading "Shares
Subject to Resale by Certain Contractual Claimants."
The Board has determined that the Recapitalization is in the best interest
of the Company and its security holders and recommends that (i) the holders of
the Outstanding Debentures accept the Exchange Offers and grant the consents to
the Proposed Amendments; (ii) the holders of the Preferred Stock and Class A
Common Stock approve the proposed Recapitalization transactions and the other
matters being considered at the Annual Meeting upon which they are entitled to
vote; and (iii) the holders of the Outstanding Debentures, holders of the
Preferred Stock, holders of the Class A Common Stock and holders of liquidated
non-Contingent Claims vote to accept the Prepackaged Plan.
THE EXCHANGE OFFERS, CONSENT SOLICITATIONS, CAPITAL STOCK COMBINATION,
REVERSE STOCK SPLIT, PREPACKAGED PLAN SOLICITATION, PROXY SOLICITATION AND OTHER
OFFERS BEING MADE HEREBY ARE NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
VOTES OR TENDERS FROM, HOLDERS IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFERS,
CONSENT SOLICITATIONS, CAPITAL STOCK COMBINATION, REVERSE STOCK SPLIT,
PREPACKAGED PLAN SOLICITATION, PROXY SOLICITATION AND SUCH OTHER OFFERS WOULD
NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFERS, CONSENT SOLICITATIONS,
CAPITAL STOCK COMBINATION, PREPACKAGED PLAN SOLICITATION, PROXY SOLICITATION AND
OTHER OFFERS BEING MADE HEREBY OTHER THAN THOSE CONTAINED HEREIN. IF GIVEN OR
MADE, ANY SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY.
x
<PAGE>
(COVER PAGE CONTINUED)
EACH HOLDER OF OUTSTANDING DEBENTURES, PREFERRED STOCK AND COMMON STOCK AND
EACH OTHER HOLDER OF CLAIMS OR EQUITY INTERESTS UNDER THE PREPACKAGED PLAN
SHOULD CONSULT WITH ITS OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS AS TO
ANY MATTERS CONCERNING THE EXCHANGE OFFERS, THE CONSENT SOLICITATIONS, THE
CAPITAL STOCK COMBINATION, THE REVERSE STOCK SPLIT, THE PROXY SOLICITATION, THE
PREPACKAGED PLAN SOLICITATION AND THE RECAPITALIZATION TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
------------------------
SINCE NO JUDICIAL PROCESS HAS BEEN COMMENCED, THIS PROSPECTUS HAS NOT BEEN
APPROVED BY ANY COURT WITH RESPECT TO ADEQUACY OF INFORMATION. HOWEVER, IF A
JUDICIAL PROCESS IS SUBSEQUENTLY COMMENCED AND AN ORDER FOR RELIEF IS ENTERED,
THE COMPANY WILL PROMPTLY SEEK AN ORDER OF SUCH COURT THAT THE SOLICITATION OF
CONSENTS TO THE PREPACKAGED PLAN BY MEANS OF THIS PROSPECTUS WAS IN COMPLIANCE
WITH APPLICABLE LAW.
------------------------
The Company's Class A Common Stock and Preferred Stock is listed on the
National Association of Securities Dealers, Inc. Automatic Quotation National
Market-SM- ("NASDAQ-NM"). The Company has been notified by The Nasdaq Stock
Market, Inc. ("NASDAQ") that its securities will continue to be listed during
the pendency of the Exchange Offers; however, they will become subject to
immediate delisting if the Exchange Offers have not been successfully completed
by July 8, 1997. There can be no assurance that the Exchange Offers will be
successfully completed within this time frame. See "RISK FACTORS-- Potential
NASDAQ Delisting." The Company has also filed an application for the inclusion
on NASDAQ-NM of the shares of Common Stock to be issued pursuant to this
Prospectus. The Company expects that, after the completion of the Exchange
Offers, the trading market for any Outstanding Debentures not tendered will be
extremely limited, if any market exists for the trading thereof. See "Risk
Factors--Certain Consequences to Non-Tendering Holders of Outstanding
Debentures" and "The Exchange Offers-- Effects of Completion of Exchange Offers
on Non-Tendering Holders of Outstanding Debentures." However, the Company
expects that the liquidity of the Common Stock will be enhanced following
completion of the Recapitalization.
Neither the delivery of this Prospectus nor any sale hereunder shall, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof, or that there has been no change
in the affairs of the Company as of such date.
------------------------
THIS PROSPECTUS IS FIRST BEING SENT TO THE HOLDERS OF THE COMPANY'S
OUTSTANDING DEBENTURES, PREFERRED STOCK AND CLASS A COMMON STOCK ON MAY ,
1997.
EXCHANGE AGENT AND INFORMATION AGENT
ChaseMellon Shareholder Services, Inc. will act as Exchange Agent for the
Exchange Offers (the "Exchange Agent") and as ballot agent for the Prepackaged
Plan Solicitation with respect to the holders of Outstanding Debentures, the
Preferred Stock, the Common Stock, and the holders of claims and interests under
the Prepackaged Plan. All correspondence in connection with the Exchange Offers,
Consent Solicitations or Prepackaged Plan Solicitation, including the Consent
and Letter of Transmittal ("Consent and Letter of Transmittal") and Prepackaged
Plan Master Ballots, should be addressed to the Exchange Agent as set forth on
the back cover page hereof. The Exchange Agent will also serve as proxy agent
with respect to the Annual Meeting.
Georgeson & Company Inc. has been appointed as Information Agent for the
Exchange Offers, Consent Solicitations, the Annual Meeting and the Prepackaged
Plan Solicitation (the "Information
xi
<PAGE>
(COVER PAGE CONTINUED)
Agent"). All inquiries relating to the Exchange Offers, Consent Solicitation,
the Annual Meeting and the Prepackaged Plan Solicitation should be directed to
the Information Agent at the address and telephone number set forth on the back
cover page hereof.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004
and at the following Regional Offices of the Commission: Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621-2511; and New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material may also be obtained at prescribed
rates from the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004
or from the Commission's Website at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a complete description of the matter involved, and each such statement is
qualified in its entirety by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected and copied at the
principal offices of the Commission in Washington, D.C. without charge, and
copies of the material contained therein may be obtained from the Commission
upon payment of prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering will be deemed to be incorporated by reference in
and will be a part of this Prospectus from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference into this Prospectus will be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference into this Prospectus modifies or
supersedes such statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE RELATING TO THE COMPANY
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF
THIS PROSPECTUS IS DELIVERED, UPON THE REQUEST OF SUCH PERSON, A COPY OF ANY OR
ALL OF THE DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS,
OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
xii
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(COVER PAGE CONTINUED)
THESE TRANSACTIONS AND THE SECURITIES OFFERED HEREBY ARE SUBJECT TO CERTAIN
MATERIAL RISKS DESCRIBED HEREIN. SEE "RISK
FACTORS" BEGINNING ON PAGE 25 OF THIS PROSPECTUS.
------------------------
NEITHER THESE TRANSACTIONS NOR THESE SECURITIES HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THESE TRANSACTIONS OR THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
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TABLE OF CONTENTS
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EXCHANGE AGENT AND INFORMATION AGENT........................................................................ xi
AVAILABLE INFORMATION....................................................................................... xii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................. xii
INDEX OF CERTAIN DEFINED TERMS.............................................................................. xviii
SUMMARY..................................................................................................... 1
The Company............................................................................................... 1
The Recapitalization...................................................................................... 1
The Company Annual Meeting................................................................................ 6
The Exchange Offers and Related Consent Solicitations..................................................... 7
Tendering and Consenting Procedures for Exchange Offers and Consent Solicitations......................... 8
The Prepackaged Plan...................................................................................... 10
Other Significant Provisions in the Prepackaged Plan...................................................... 16
Appraisal Rights.......................................................................................... 20
Risk Factors.............................................................................................. 20
Summary Selected Historical and Pro Forma Financial Data.................................................. 22
Market Prices of the Company's Common Stock and Dividends Paid............................................ 24
Comparative Historical and Pro Forma Per Share Data....................................................... 24
RISK FACTORS................................................................................................ 25
THE COMPANY RECAPITALIZATION................................................................................ 36
Background of the Recapitalization........................................................................ 36
Description of the Recapitalization....................................................................... 37
Purposes and Certain Results of Recapitalization.......................................................... 39
Operations After the Recapitalization..................................................................... 39
Determinations and Recommendations of the Board of Directors.............................................. 39
Determinations and Recommendations of Members of the Debenture Holders' Committee......................... 40
THE EXCHANGE OFFERS......................................................................................... 41
General................................................................................................... 41
Expiration Date; Extensions; Amendments................................................................... 41
Proposed Amendments....................................................................................... 42
Procedure for Tendering Outstanding Debentures and Giving Consents........................................ 43
Book-Entry Transfer Procedures............................................................................ 46
Guaranteed Delivery Procedures............................................................................ 46
Acceptance of Outstanding Debentures, Delivery of Common Stock............................................ 47
Treatment of Fractional Shares............................................................................ 47
Withdrawal Rights......................................................................................... 47
Revocation of Consents; Defective Tenders................................................................. 48
No Payments on Tendered Debentures........................................................................ 48
Conditions of the Exchange Offers......................................................................... 48
Exchange Agent............................................................................................ 50
Information Agent......................................................................................... 50
Effects of Completion of Exchange Offers on Non-Tendering Holders of Outstanding Debentures............... 50
PROPOSED AMENDMENTS TO INDENTURES........................................................................... 50
Proposed Amendments to Outstanding Debentures............................................................. 51
THE COMPANY ANNUAL MEETING.................................................................................. 52
Proxy Solicitation........................................................................................ 53
PROPOSAL NO. 1 APPROVAL OF EXCHANGE OFFERS (INCLUDING THE ISSUANCE OF SHARES OF COMMON STOCK)............... 56
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PROPOSAL NO. 2 AMENDMENT OF ARTICLES FOURTH, FIFTH AND SIXTH OF RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A COMBINATION OF THE CLASS A COMMON STOCK AND PREFERRED STOCK...................................... 57
PROPOSAL NO. 3 AMENDMENT OF ARTICLES FIFTH OF RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A ONE FOR ONE
HUNDRED (1:100) REVERSE STOCK SPLIT OF THE OUTSTANDING CAPITAL STOCK...................................... 59
PROPOSAL NO. 4 AMENDMENT OF ARTICLES FOURTH OF RESTATED CERTIFICATE OF INCORPORATION TO AMEND THE COMPANY'S
AUTHORIZED CAPITAL........................................................................................ 60
PROPOSAL NO. 5 AMENDMENT OF ARTICLES EIGHTH AND THIRTEENTH OF THE RESTATED CERTIFICATE AND ARTICLES III AND
XI OF THE BYLAWS TO DELETE CLASSIFIED BOARD AND SUPERMAJORITY VOTING PROVISIONS........................... 60
PROPOSAL NO. 6 AMENDMENT OF ARTICLES NINTH AND THIRTEENTH OF THE RESTATED CERTIFICATE AND ARTICLES II AND XI
OF THE BYLAWS TO DELETE SUPERMAJORITY VOTING PROVISIONS APPLICABLE TO SPECIAL MEETINGS AND TO PERMIT
STOCKHOLDERS TO CALL SPECIAL MEETINGS OF STOCKHOLDERS..................................................... 63
PROPOSAL NO. 7 AMENDMENT OF ARTICLE TENTH OF THE RESTATED CERTIFICATE TO DELETE PROHIBITION OF STOCKHOLDER
ACTION BY WRITTEN CONSENT AND SUPERMAJORITY VOTING PROVISIONS APPLICABLE THERETO.......................... 64
PROPOSAL NO. 8 ELECT SLATE OF DIRECTORS TO RECONSTITUTE THE BOARD OF DIRECTORS.............................. 64
PROPOSAL NO. 9 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS............................................ 65
OTHER MATTERS............................................................................................... 66
THE PREPACKAGED PLAN........................................................................................ 66
Brief Explanation of Reorganization under the Bankruptcy Code............................................. 66
Treatment of Unclassified Claims.......................................................................... 69
Classification and Treatment of Claims and Interests Under the Prepackaged Plan........................... 69
Means for Implementation of the Prepackaged Plan.......................................................... 73
Distributions Under the Prepackaged Plan.................................................................. 74
Effects of Prepackaged Plan Consummation.................................................................. 76
Control/Management of Reorganized Debtor.................................................................. 77
Summary of Other Provisions of the Prepackaged Plan....................................................... 78
Intended Actions During the Chapter 11 Case............................................................... 79
Confirmation Standards.................................................................................... 80
Confirmation of the Prepackaged Plan Without Acceptance by All Voting Classes............................. 82
Alternatives to Confirmation and Consummation of the Prepackaged Plan..................................... 83
PREPACKAGED PLAN SOLICITATION--VOTING PROCEDURES............................................................ 84
General................................................................................................... 84
Record Date............................................................................................... 84
Voting Expiration Date; Extensions; Amendments............................................................ 84
Voting Procedures and Other Requirements.................................................................. 85
Beneficial Interest Holders............................................................................... 86
Agreements Upon Furnishing Ballots........................................................................ 89
Method of Delivery of Ballots............................................................................. 89
Withdrawal of Ballots; Revocation......................................................................... 89
Waivers of Defects, Irregularities, Etc................................................................... 90
SHARES SUBJECT TO RESALE BY FINANCIAL ADVISORS.............................................................. 91
SHARES SUBJECT TO RESALE BY CERTAIN CONTRACTUAL CLAIMANTS................................................... 91
</TABLE>
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HISTORIC AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS................................................................................................ 92
SELECTED FINANCIAL DATA..................................................................................... 98
PROJECTIONS OF CERTAIN FINANCIAL DATA OF THE COMPANY........................................................ 100
PROJECTED FINANCIAL DATA--THE EXCHANGE OFFERS............................................................. 101
PROJECTED FINANCIAL DATA--THE PREPACKAGED PLAN............................................................ 104
POSSIBLE ACCOUNTING TREATMENTS.............................................................................. 107
LIQUIDATION ANALYSIS........................................................................................ 107
DESCRIPTION OF THE COMMON STOCK............................................................................. 115
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS................. 115
DESCRIPTION OF OUTSTANDING DEBENTURES....................................................................... 116
Terms..................................................................................................... 116
Optional Redemption....................................................................................... 117
Change of Control......................................................................................... 117
Subordination............................................................................................. 117
Certain Covenants......................................................................................... 118
Successor Company......................................................................................... 119
Defaults and Certain Rights on Default.................................................................... 119
Amendment, Supplement, Waiver............................................................................. 120
Transfer.................................................................................................. 121
Defeasance................................................................................................ 121
Concerning the Trustees................................................................................... 121
Governing Law............................................................................................. 122
Certain Definitions....................................................................................... 122
BUSINESS AND PROPERTIES OF THE COMPANY...................................................................... 125
Business.................................................................................................. 125
Principal Properties...................................................................................... 125
Environmental and Regulatory Matters...................................................................... 128
Corporate Indemnification Matters......................................................................... 128
Employees................................................................................................. 129
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995.......................... 129
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 130
General................................................................................................... 130
Liquidity and Capital Resources........................................................................... 131
Financial Condition....................................................................................... 132
Results of Operations..................................................................................... 133
LEGAL PROCEEDINGS........................................................................................... 135
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY............................................................. 137
EXECUTIVE COMPENSATION...................................................................................... 140
Summary Compensation Table................................................................................ 140
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Value.................. 141
Executive Retirement and Savings Program.................................................................. 141
Compensation of Directors................................................................................. 142
Employment and Consulting Agreements...................................................................... 145
Committee Interlocks and Insider Participation............................................................ 145
Report of the Compensation Committee...................................................................... 146
Stock Price Performance Comparison........................................................................ 148
</TABLE>
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL INTEREST HOLDERS AND MANAGEMENT.................................... 149
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................................................. 150
License and Non-Competition Agreements.................................................................... 150
Construction Management Agreements........................................................................ 151
Service Agreements........................................................................................ 151
Sublease Agreements....................................................................................... 151
Development Fees.......................................................................................... 151
Joint Business Opportunity Agreement...................................................................... 152
Director Resignation and Termination of Stock Pledge...................................................... 152
Note Receivable........................................................................................... 152
Other Transactions........................................................................................ 152
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................................................................... 153
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS AND THE PREPACKAGED PLAN TO HOLDERS OF OUTSTANDING
SECURITIES................................................................................................ 153
Federal Income Tax Consequences of the Exchange Offers or the Prepackaged Plan to Holders of Outstanding
Debentures.............................................................................................. 153
Federal Income Tax Consequences of the Exchange Offers or the Prepackaged Plan to Holders of Preferred
Stock................................................................................................... 155
Federal Income Tax Consequences of the Exchange Offers or the Prepackaged Plan to Holders of Class A
Common Stock............................................................................................ 155
Backup Withholding and Information Reporting.............................................................. 155
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS AND THE PREPACKAGED PLAN TO THE COMPANY.............. 155
LEGAL MATTERS............................................................................................... 157
EXPERTS..................................................................................................... 157
INDEX TO AUDITED HISTORIC FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................... F-1
APPENDIX A--PREPACKAGED PLAN OF REORGANIZATION.............................................................. A-1
</TABLE>
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<PAGE>
INDEX OF CERTAIN DEFINED TERMS
Set forth below are certain defined terms used in this Prospectus the
definitions for which are indicated herein and in Appendix A hereto.
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Administrative Claim.................................................................................. 69
Advisor Warrants...................................................................................... 91
Affiliate............................................................................................. 112; A-3
Allowed Administrative Claim.......................................................................... A-3
Allowed Claim......................................................................................... A-3
Allowed Interest...................................................................................... A-3
Amended Indentures.................................................................................... 31
Annual Meeting........................................................................................ i
Annual Meeting Proposals.............................................................................. 6
Annual Meeting Record Date............................................................................ x
Auditor Proposal...................................................................................... 53
Authorized Capital Proposal........................................................................... 52
Ballot................................................................................................ 19
Bankruptcy Code....................................................................................... ii; A-4
Bankruptcy Court...................................................................................... ii; A-4
Bankruptcy Rules...................................................................................... 10;A-4
Beneficial Interest Holder............................................................................ 84
Best Interests Test................................................................................... 80
Board................................................................................................. i
Board Election Proposal............................................................................... 53
Board Proposal........................................................................................ 53
Book-Entry Transfer................................................................................... 46
Book-Entry Transfer Facility.......................................................................... 46
Bylaws................................................................................................ i
Capital Stock Combination............................................................................. i; A-4
Capital Stock Combination Proposal.................................................................... 52
Cash.................................................................................................. A-4
Chapter 11 Case....................................................................................... 10
Claim................................................................................................. A-4
Class................................................................................................. A-4
Class A Common Stock.................................................................................. i
Commencement Date..................................................................................... 8
Commission............................................................................................ xii
Common Stock.......................................................................................... i; A-4
Company............................................................................................... i
Confirmation Date..................................................................................... A-4
Confirmation Order.................................................................................... A-4
Consent and Letter of Transmittal..................................................................... x
Consent Solicitations................................................................................. i
Contested Claim or Interest........................................................................... A-4
Contingent............................................................................................ A-5
Creditor.............................................................................................. A-5
Debenture Holders' Committee.......................................................................... i
Distribution Record Date.............................................................................. 75; A-5
Effective Date........................................................................................ A-5
Eligible Institution.................................................................................. 44
Equity Holder......................................................................................... A-5
Exchange Act.......................................................................................... xii
Exchange Agent........................................................................................ xi
Exchange Offers....................................................................................... i
Exchange Offers Proposal.............................................................................. 52
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Expiration Date....................................................................................... ii
Future Shares......................................................................................... 27
HLHZ.................................................................................................. 1
Impaired.............................................................................................. A-5
Impaired Securities................................................................................... 74
Indentures............................................................................................ i
Information Agent..................................................................................... xi
Interest.............................................................................................. A-5
IRS................................................................................................... 30
LCP................................................................................................... 126
Liquidation........................................................................................... 107
Liquidation Period.................................................................................... 109
Master Ballot......................................................................................... 19
Merger................................................................................................ 36
MWE................................................................................................... 1
NASD.................................................................................................. 44
NASDAQ-NM............................................................................................. xi
Notice of Guaranteed Delivery......................................................................... 46
Outstanding Debentures................................................................................ i; A-5
Prepackaged Plan...................................................................................... i
Prepackaged Plan Solicitation......................................................................... 4
Prepackaged Plan Solicitation Materials............................................................... 19
Preferred Stock....................................................................................... i
Project Debt.......................................................................................... 6
Projections........................................................................................... 34
Proposed Amendments................................................................................... i
Prospectus............................................................................................ i
Proxy................................................................................................. 7
Recapitalization...................................................................................... i; A-6
Record Date........................................................................................... x
Record Holder......................................................................................... 8
Registration Statement................................................................................ xii
Requisite Acceptance Condition........................................................................ 47
90% Requisite Exchange Acceptances.................................................................... i
Requisite Claims Acceptances.......................................................................... 17
Requisite Consents.................................................................................... 7
Requisite Interest Acceptances........................................................................ 17
Requisite Prepackaged Plan Acceptances................................................................ 17
Restated Certificate.................................................................................. i
Reverse Split Proposal................................................................................ 52
Reverse Stock Split................................................................................... i
Rothschild............................................................................................ 1
Securities Act........................................................................................ xii
Senior Debentures..................................................................................... i
Special Meetings Proposal............................................................................. 53
Staff................................................................................................. 34
Subordinated Debentures............................................................................... i
Tax Claim............................................................................................. 69; A-6
Trustees.............................................................................................. 116
Unimpaired............................................................................................ A-6
Unliquidated.......................................................................................... A-6
Voting Expiration Date................................................................................ 84
Warrant Shares........................................................................................ 91
WGM................................................................................................... 1
Written Consent Proposal.............................................................................. 53
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SUMMARY
THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY THE MORE DETAILED INFORMATION, THE FINANCIAL STATEMENTS, INCLUDING
THE NOTES THERETO AND THE PRO FORMA INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS, THE APPENDICES HERETO, AND THE OTHER DOCUMENTS REFERENCED HEREIN.
CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS
PROSPECTUS, AND AN INDEX OF SUCH DEFINED TERMS IS SET FORTH ON PAGE XVIII
HERETO.
THE COMPANY
Koll Real Estate Group, Inc. is a real estate holding company with
properties principally in Southern California. The principal activities of the
Company and its consolidated subsidiaries include: (i) obtaining zoning and
other entitlements for land it owns and improving the land for residential
development; (ii) single and multi-family residential construction in Southern
California; and (iii) 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 and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes.
The Company's executive offices are located at 4343 Von Karman Avenue,
Newport Beach, California 92660; telephone number (714) 833-3030.
THE RECAPITALIZATION
DESCRIPTION OF DEBENTURE HOLDERS' COMMITTEE PROCESS. In February 1996, the
Company engaged Houlihan Lokey Howard & Zukin ("HLHZ") and McDermott, Will &
Emery ("MWE") to act as its financial and legal advisors, respectively. In
August 1996, in order to pursue the Company's stated strategic objective to
evaluate alternatives to deleverage the Company's capital structure, the Company
commenced negotiations with representatives of members of the Debenture Holders'
Committee. The representatives of the members of the Debenture Holders'
Committee have recently informed the Company that the members hold, in the
aggregate, approximately 50.5% of the Outstanding Debentures as follows:
approximately $87.7 million (53%) of the outstanding face amount of the Senior
Debentures, and approximately $16.1 million (39%) of the outstanding face amount
of the Subordinated Debentures. The Company has not received any information
from the members of the Debenture Holders' Committee with respect to their
individual holdings of these various securities. In May 1996, the members of the
Debenture Holders' Committee retained Rothschild, Inc. ("Rothschild") and Weil,
Gotshal & Manges LLP ("WGM") as its financial and legal advisors, respectively.
The Company has agreed to pay all of the legal expenses of WGM and $50,000 of
the financial advisor fees of Rothschild in cash and the $750,000 balance of the
financial advisor fees of Rothschild through the issuance of an Advisor Warrant
exercisable for shares of Common Stock. See "Shares Subject to Resale by
Financial Advisors." The Company has paid approximately $208,000 to WGM through
April 25, 1997 and estimates that it may pay up to an additional $50,000 prior
to any potential filing of a Chapter 11 Case. Neither the Company nor WGM can
estimate the fees the Company may pay WGM for legal services in connection with
a Chapter 11 Case because it is uncertain whether any official committee would
retain WGM and events which may occur in any Chapter 11 Case cannot be predicted
with any degree of certainty. The interest of the holders of Preferred Stock and
Class A Common Stock were represented by HLHZ, MWE and management of the
Company. The proposed Recapitalization is the result of extensive negotiations
and is supported by the representatives of the members of the Debenture Holders'
Committee who have indicated the intention of the members to accept the Exchange
Offers and to vote in favor of the Prepackaged Plan. The representatives of the
Debenture Holders' Committee are: BankofAmerica Investment Corp.; Continental
Casualty
1
<PAGE>
Company; CS First Boston Corporation; ING Barings (U.S.) Capital Corp.; Merrill,
Lynch, Pierce, Fenner & Smith Incorporated; and Wheelabrator Technologies, Inc.
Unless exchanged for Common Stock, the aggregate principal amount of the
Outstanding Debentures will increase through continuing "in-kind" interest
payments from approximately $206 million as of March 31, 1997, to approximately
$368 million on the March 15, 2002 maturity date. As of April 15, 1997, there
were 6,643 registered holders of the Senior Debentures and 1,752 registered
holders of the Subordinated Debentures. The Company's financial advisors have
assisted the Company in preparing an analysis which indicates that the Company
would need to earn a compounded return of greater than 30% per annum on the free
cashflow generated by the Company's assets between 1997 and 2002 in order to
fully pay the face amount of the Senior Debentures and Subordinated Debentures
at maturity in 2002. See "Liquidation Analysis." The Company believes that it is
unlikely that it could achieve this 30% return over the next five (5) years or
that other capital resources would be available to repay the Outstanding
Debentures at maturity; nor does the Company believe, in view of its current and
prospective capital structure if the Recapitalization is not effected, that this
payment could be made in shares of its Class A Common Stock because of the
substantial unlikelihood that the trading price requirement of greater than $.50
per share would be met. Therefore, as an alternative to waiting until the 2002
maturity date, the Company has engaged in extensive negotiations with the
members of the Debenture Holders' Committee and its financial advisors in order
to develop a proposal to currently exchange the Outstanding Debentures for
Common Stock. The Company believes that the Recapitalization represents the only
viable alternative to the substantial risks of payment default that would exist
in 2002. Based on the current valuation prepared by the Company with the
assistance of HLHZ, which is subject to the assumptions detailed in this
Prospectus, holders of Senior Debentures who tender would receive Common Stock
worth between approximately $0.50 and $0.53 per $1.00 of principal amount
outstanding on March 15, 1997 and holders of Subordinated Debentures who tender
would receive Common Stock worth between approximately $0.25 and $0.265 per
$1.00 of principal amount outstanding on March 15, 1997 depending upon whether
90% or up to 100% of the holders of Outstanidng Debentures accept the Exchange
Offers. If the 90% Requisite Exchange Acceptance is not obtained, the Company
intends to effect the Recapitalization by seeking a Court order confirming the
Prepackaged Plan. The representatives of the members of the Debenture Holders'
Committee have recently informed the Company that the members hold in the
aggregate approximately 50.5% of the Outstanding Debentures and approximately
33% and 13%, respectively, of the Preferred Stock and Class A Common Stock, and
have indicated that the members intend to support the Exchange Offers and the
Prepackaged Plan. In addition, the holder of 30.5% and 11.5%, respectively, of
the Preferred Stock and Class A Common Stock has indicated to the Company that
it intends to approve the Prepackaged Plan. Officers, directors and affiliates
of the Company control less than 1% of the Preferred Stock and Class A Common
Stock; however, they have indicated their intention to vote such controlled
shares in favor of all aspects of the Recapitalization.
Without the Recapitalization, concerns about the Company's financial
strength will continue to adversely affect the Company's commercial and
residential development business opportunities. Of particular concern to the
Company's current and prospective client base, is the consistent reporting of
quarterly losses and impending negative net worth which are primarily a result
of the interest expense associated with the Outstanding Debentures. In addition
to lost commercial and residential development opportunities, the Company has
experienced problems with its ability to attract and retain key commercial and
residential development team personnel due to the negative impact on competing
for new business which has resulted from the Company's continued reporting of
losses. Therefore, the Company believes that the Recapitalization will
substantially enhance its current and prospective business opportunities by
eliminating the financial concern that the Outstanding Debentures have caused.
DESCRIPTION OF RECAPITALIZATION. The proposed Recapitalization consists of
the major elements summarized below. The Company is seeking to effect the
Recapitalization through either (i) the completion of the Exchange Offers, the
Capital Stock Combination and the Reverse Stock Split; or alternatively, through
2
<PAGE>
(ii) the confirmation of the Prepackaged Plan, which generally gives effect to
the same transactions as contemplated under (i) above, pursuant to chapter 11 of
the Bankruptcy Code. The term "Recapitalization" as used throughout this
Prospectus means the financial restructuring of the Company pursuant to either
(i) or (ii) above. See "Comparison of Exchange Offer Recapitalization and
Prepackaged Plan Recapitalization" on the cover page of this Prospectus.
If 90% of holders of Outstanding Debentures do not consent to the Exchange
Offers, but the Company receives sufficient acceptances of the Prepackaged Plan
to seek confirmation thereof by the Bankruptcy Court, the Company plans to
continue to operate in the ordinary course of business and intends to seek
relief under chapter 11 of the Bankruptcy Code and to attempt to use such
acceptances to obtain confirmation of the Prepackaged Plan. There is no
assurance that the Bankruptcy Court will confirm the Prepackaged Plan even if
the Company receives the necessary acceptances from the holders of impaired
claims and interests, although the Company believes that the Bankruptcy Court
will confirm the Prepackaged Plan. See "Risks Factors--Considerations Relating
to the Filing of a Chapter 11 Case."
The Recapitalization and the securities offered hereby are subject to
certain material risks and other factors which should be considered in
connection therewith. See "Risk Factors."
EXCHANGE OFFERS FOR THE OUTSTANDING DEBENTURES AND RELATED CONSENT
SOLICITATIONS. Pursuant to the Exchange Offers being made hereby, as more fully
described herein under "The Exchange Offers," the Company is offering to
exchange (i) 56 shares of Common Stock, on a post-Capital Stock Combination and
a post-Reverse Stock Split basis, for each $1,000 in principal amount of the
Senior Debentures outstanding as of March 15, 1997, without subsequent accrued
and unpaid interest; and (ii) 28 shares of Common Stock, on a post-Capital Stock
Combination and a post-Reverse Stock Split basis, for each $1,000 in principal
amount of Subordinated Debentures outstanding as of March 15, 1997, without
subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and waive all rights and claims to,
accrued and unpaid interest on the Outstanding Debentures tendered for exchange.
No fractional shares of Common Stock will be issued in the Exchange Offers.
Instead, whenever a fraction of a share of Common Stock would otherwise be
issuable to an exchanging holder of Outstanding Debentures, the Exchange Agent
will aggregate all such fractional shares of Common Stock that would otherwise
result from the Exchange Offers and will sell such aggregated fractional shares
of Common Stock, rounded to the nearest whole share, as whole shares in an
orderly manner. Upon completion of such sales, exchanging holders will receive
in lieu of such fractional shares, the relative cash proceeds from such sales
(without interest) in amounts proportionate to the fractional shares of Common
Stock which such exchanging holders would have otherwise received. See "The
Exchange Offers-- Treatment of Fractional Shares." Concurrently with the
Exchange Offers, the Company is soliciting the consent of the holders of the
Outstanding Debentures to certain amendments to the Indentures (the "Proposed
Amendments"). See "Proposed Amendments to Indentures."
If the Company does not receive valid tenders of at least the 90% Requisite
Exchange Acceptance, the Company intends to pursue the Recapitalization through
the Prepackaged Plan if the Company receives the Requisite Prepackaged Plan
Acceptances. If the Recapitalization is not completed either through the
Exchange Offers and related transactions or through the Prepackaged Plan, the
Company currently intends to consider a variety of alternatives, including, but
not limited to (i) securing financing from new equity or debt sources, (ii)
forming joint ventures with other homebuilders in exchange for equity or debt
capital, (iii) selling options to other homebuilders to acquire land parcels at
Bolsa Chica currently owned by the Company, or (iv) pursuing other alternative
strategic transactions. Any of the above alternatives may result in a lower
recovery of asset values by the Company and its current security holders than is
likely to occur if the Recapitalization is completed.
The Recapitalization will result in substantial dilution to the holders of
the Preferred Stock and Class A Common Stock. Pursuant to the terms of the
Exchange Offers or the Prepackaged Plan, the holders of Class A Common Stock
would receive, in the aggregate, approximately 4.1% of the Common
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Stock outstanding thereafter, and the holders of Preferred Stock would receive,
in the aggregate, approximately 5.8% of the Common Stock. However, such holders
would be subject to substantially greater dilution if the Outstanding Debentures
were paid at maturity in shares of Common Stock trading below $.50 per share.
Given the Company's current and prospective capital structure if the
Recapitalization is not completed, it is unlikely that the Class A Common Stock
would trade at prices per share in excess of $.50. Shares of Class A Common
Stock were authorized and approved for future issuance without restriction by
the holders of the Company's securities entitled to vote in connection with such
holders' approval of the Company's merger with The Henley Group, Inc. in 1992.
These additional shares are sufficient in number to repay the Outstanding
Debentures at maturity at the $.50 per share minimum trading price. The Company
currently estimates that its cash costs to be incurred in connection with the
Recapitalization will be approximately $4 million if the 90% Requisite Exchange
Acceptances are received and approximately $4.5 million if the Recapitalization
is effected through the Prepackaged Plan.
Completion of the Exchange Offers is subject to certain conditions which may
be waived or amended by the Company in whole or in part at any time and from
time to time in the Company's reasonable discretion. See "The Exchange
Offers--Conditions of the Exchange Offers."
The Company reserves the right to amend, modify or supplement the Exchange
Offers, the Consent Solicitations and the solicitation of acceptances of the
Prepackaged Plan (the "Prepackaged Plan Solicitation") prior to their respective
expiration dates. The Company also reserves the right to cancel the Exchange
Offers, the Consent Solicitations and the Prepackaged Plan Solicitation at any
time prior to their respective expiration dates. The Company will give the
holders of Outstanding Debentures, Preferred Stock and Common Stock and holders
of other Impaired Claims and Interests under the Prepackaged Plan notice of any
amendments, modifications or supplements as may be required by applicable law.
See "The Exchange Offers General--Expiration Date; Extensions; Amendments" and
"The Prepackaged Plan." Neither the holders of the Company's debt securities nor
the holders of the Company's equity securities will have appraisal rights in
connection with the Recapitalization or the Prepackaged Plan, including the
Exchange Offers or the Capital Stock Combination.
CONSENT SOLICITATION WITH RESPECT TO THE OUTSTANDING
DEBENTURES. Concurrently with the making of the Exchange Offers, the Company is
soliciting from the holders of the Outstanding Debentures their consents to the
Proposed Amendments to remove certain restrictive covenants under the Indentures
in the event all Outstanding Debentures are not exchanged pursuant to the
Exchange Offers. The Proposed Amendments, if implemented, would remove
restrictive covenants from the Indentures which currently prohibit the Company
from making payments or distributions to debt subordinated to the Outstanding
Debentures or to equity holders prior to repayment of the Outstanding Debentures
and which prohibit the Company from entering into non-arms length transactions
with non-subsidiary affiliates.
CAPITAL STOCK COMBINATION AND REVERSE STOCK SPLIT. As part of the
Recapitalization, the Company is recommending to the holders of Class A Common
and Preferred Stock that they approve proposals at the Annual Meeting, which
among other things, approve amendments to the Restated Certificate in order to
effect the Capital Stock Combination and to effect the Reverse Stock Split.
Pursuant to the Capital Stock Combination, all classes and series of capital
stock will be reclassified and combined into one class of capital stock
designated "Common Stock." Each outstanding share of Preferred Stock will be
reclassified to be one and three quarter (1.75) shares of Common Stock and each
outstanding share of Class A Common Stock will be reclassified to be one (1)
share of Common Stock. After the Capital Stock Combination, the Common Stock
will have the same rights, preferences and privileges that the Class A Common
Stock had prior to the Capital Stock Combination. As part of the Capital Stock
Combination the ability of the Board to issue preference shares of Capital Stock
will be eliminated. Pursuant to the Reverse Stock Split each outstanding share
of capital stock will be reverse split on a one for one hundred (1:100) basis.
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Representatives of the members of the Debenture Holders' Committee recently
informed the Company that the members hold approximately 33% and 13%,
respectively, of the Preferred Stock and Class A Common Stock, and have
indicated to the Company that the members intend to approve the Capital Stock
Combination and the Reverse Stock Split. In addition, the holder of 30.5% and
11.5%, respectively, of the Preferred Stock and Class A Common Stock has
indicated to the Company that it intends to approve the Capital Stock
Combination and the Reverse Stock Split. Therefore, in the aggregate,
approximately 63.5% and 24.5% of the holders of Preferred Stock and Class A
Common Stock, respectively, have indicated their intent to approve the Capital
Stock Combination and Reverse Stock Split. No fractional shares of Common Stock
will be issued pursuant to the Capital Stock Combination and/or Reverse Stock
Split. See "The Company Annual Meeting--Proposal No. 2."
OTHER CHARTER AMENDMENTS AND BOARD DECLASSIFICATION AND RECONSTITUTION. As
part of the Recapitalization, various amendments to the Company's charter
documents and related actions are being proposed to be implemented either
pursuant to the Annual Meeting or under the Prepackaged Plan. See "The Company
Annual Meeting" and "The Prepackaged Plan." The charter amendments are intended
to delete the classified Board and to remove all anti-takeover provisions,
including all supermajority voting provisions, restrictions on stockholders'
ability to call special meetings and restrictions on stockholders' ability to
act by written consent. The Company is also proposing to reconstitute and expand
the Board in connection with the Recapitalization to include four (4) incumbent
directors and six (6) new director nominees each to serve for one (1) year
terms.
AMENDMENT OF STOCK OPTION PLAN. As part of the Recapitalization, the
Company's 1993 Stock Option/Stock Issuance Plan (the "1993 Stock Option Plan")
will be amended effective upon the completion of the Recapitalization to reduce
the aggregate number of shares of Common Stock that may be issued under the 1993
Stock Option Plan, on a post-Capital Stock Combination and post-Reverse Stock
Split basis, to approximately 779,030 shares of Common Stock, representing 6% of
the Company's fully diluted equity. The holders of all outstanding options
previously issued under the 1993 Stock Option Plan have agreed to the
cancellation of such options upon completion of the Recapitalization. See "The
Company Recapitalization--Description of the Recapitalization--Amendment of
Stock Option Plan."
INTERESTS OF MANAGEMENT. Certain executive officers and directors of the
Company have entered into three (3) year employment contracts and another
director has entered into a consulting agreement with the Company. Upon
completion of the Recapitalization, these officers and directors will receive
stock options equivalent to an aggregate of 6% of the Company's fully diluted
equity with exercise prices determined by the 20-day average closing price
following the Recapitalization. In addition, these officers and directors will
receive bonuses of $750,000 in the aggregate upon completion of the
Recapitalization. Therefore, such officers and directors have a personal
interest in the successful completion of the Recapitalization and approval of
the Annual Meeting Proposals; however, the Recapitalization and the foregoing
benefits to these officers and directors were approved by the Board including
the unanimous approval of the Company's independent directors. See "Executive
Compensation--Employment and Consulting Agreements" and "--Report of the
Compensation Committee."
PURPOSES OF THE RECAPITALIZATION. The proposed Recapitalization, whether
achieved pursuant to the Exchange Offers and the Annual Meeting Proposals or
pursuant to the Prepackaged Plan, is primarily intended to deleverage the
Company's capital structure in order to maximize realization of the Company's
asset values and the growth of its business. As an alternative to waiting until
the Debentures maturity date in 2002, the Company engaged in extensive
negotiations with representatives of the members of the Debenture Holders'
Committee and its financial advisors in order to develop a proposal to exchange
the Outstanding Debentures for Common Stock. Based on the current valuation
prepared by the Company with the assistance of HLHZ, which is subject to the
assumptions detailed in this Prospectus, holders of Senior Debentures would
receive Common Stock worth between approximately $0.50 and $0.53 per $1.00 of
principal amount outstanding on March 15, 1997 and holders of Subordinated
Debentures would
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receive Common Stock worth between approximately $0.25 and $0.265 per $1.00 of
principal amount outstanding on March 15, 1997 depending upon whether 90% or up
to 100% of the holders of Outstanding Debentures accept the Exchange Offers. If
the 90% Requisite Exchange Acceptance is not obtained, the Company intends to
seek a Bankruptcy Court order confirming the Prepackaged Plan. Representatives
of the members of the Debenture Holders' Committee have recently informed the
Company that the members hold in the aggregate approximately 50.5% of the
Outstanding Debentures and approximately 33% and 13%, respectively, of the
Preferred Stock and Class A Common Stock, and have indicated that the members
intend to support the Prepackaged Plan. In addition, the holder of 30.5% and
11.5%, respectively, of the Preferred Stock and Class A Common Stock has
indicated to the Company that it intends to approve the Prepackaged Plan. The
interests of the holders of Preferred Stock and Class A Common Stock were
represented by HLHZ, MWE and management of the Company. The Company believes
that such deleveraging will permit it to obtain financing on more favorable
terms, which financing would facilitate the growth of the Company's business,
including, but not limited to, the commercial and residential real estate
development business and the development of its Bolsa Chica project. This new
financing is not expected to exceed $30 million, exclusive of project debt
facilities ("Project Debt") currently providing lines of credit up to
approximately $117 million obtained by certain of the Company's subsidiaries in
connection with build-to-suits and other development of pre-leased projects, as
well as speculative development where market conditions warrant, which credit
lines carried outstanding balances aggregating approximately $21.5 million as of
March 31, 1997. If the Recapitalization is not completed, either through the
Exchange Offers or through the Prepackaged Plan, the Company believes that its
current leveraged capital structure will cause the Company to incur
substantially higher costs with respect to any such necessary financing, which
will negatively impact the realization of asset values and will limit the
Company's growth. In addition, concern about the Company's continued reporting
of operating losses and impending negative net worth is of particular concern to
the Company's current and prospective client base and will continue to adversely
affect the Company's commercial and residential development business
opportunities. The quarterly losses and impending negative net worth are
primarily a result of the "in-kind" interest expense associated with the
Outstanding Debentures. In addition to lost commercial development
opportunities, the Company has experienced problems with its ability to attract
and retain key commercial and residential development team personnel due to
their concern as to the ability of the Company to compete for new business.
Therefore, the Company believes that the Recapitalization will substantially
enhance its current and prospective business opportunities by eliminating the
financial concern and confusion that the Outstanding Debentures have caused. See
"The Company Recapitalization--Purposes of the Recapitalization." The
Recapitalization will have an important impact on the Company and on the current
holders of the Preferred Stock, Common Stock and Outstanding Debentures,
including a significant dilution of the beneficial ownership interests and
voting power of current holders of the Preferred Stock and Common Stock. See
"Risk Factors--Dilution; Shares Eligible for Future Sales."
THE COMPANY ANNUAL MEETING
DATE, TIME AND PLACE OF ANNUAL MEETING. The Annual Meeting of Stockholders
will be held at 9:30 a.m. Eastern Daylight time, on June , 1997 at the Mellon
Bank Building, 8 Loockerman Street, Dover, Delaware, unless postponed or
adjourned. Only holders of record of the Class A Common Stock and Preferred
Stock at the close of business on the Annual Meeting Record Date are entitled to
notice of, and to vote at, the Annual Meeting.
PURPOSE OF THE ANNUAL MEETING. The purpose of the Annual Meeting is to
consider and vote upon the following proposals: (i) ratification of the Exchange
Offers, (ii) amendments to the Restated Certificate to effect the Capital Stock
Combination and the Reverse Stock Split, (iii) amendments to the Restated
Certificate and the Bylaws to eliminate the provisions providing for the Board
to be classified into three classes and to remove all supermajority voting
provisions and certain other restrictive provisions contained in the Restated
Certificate and Bylaws, (iv) election of directors to reconstitute the
declassified Board; (v) ratification of the selection of Deloitte & Touche LLP
as the Company's independent auditors; and
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(vi) approval of such other matters as may properly come before the Annual
Meeting, including to adjourn the Annual Meeting under certain circumstances
(collectively, the "Annual Meeting Proposals"). The current directors, executive
officers and their respective Affiliates own less than one percent (1%) of the
outstanding Class A Common Stock and less than one percent (1%) of the
outstanding Preferred Stock, respectively, as of the Annual Meeting Record Date.
Representatives of the members of the Debenture Holders' Committee have recently
informed the Company that the members hold in the aggregate approximately 33%
and 13%, respectively, of the Preferred Stock and Class A Common Stock and have
indicated to the Company that the members intend to approve each of the
proposals. In addition, the holder of 30.5% and 11.5%, respectively, of the
Preferred Stock and Class A Common Stock has indicated to the Company that it
intends to approve the foregoing proposals. Therefore, in the aggregate,
approximately 63.5% and 24.5% of the holders of Preferred Stock and Class A
Common Stock, respectively, have indicated their intent to approve the Capital
Stock Combination and Reverse Stock Split. For more information regarding the
votes needed to approve each of the Annual Meeting Proposals, see "The Company
Annual Meeting Proxy Solicitation."
THE SOLICITATION OF ACCEPTANCES OF THE PREPACKAGED PLAN FROM THE HOLDERS OF
PREFERRED STOCK AND CLASS A COMMON STOCK IS BEING CONDUCTED PURSUANT TO SEPARATE
BALLOTS AND IS DESCRIBED UNDER "THE PREPACKAGED PLAN--PREPACKAGED PLAN
SOLICITATION--VOTING PROCEDURES." THE PREPACKAGED PLAN DOES NOT HAVE A QUORUM
REQUIREMENT. AS A RESULT, APPROVAL OF THE PREPACKAGED PLAN IS NOT BEING
CONSIDERED AT THE ANNUAL MEETING.
HOW TO VOTE FOR THE ANNUAL MEETING PROPOSALS. A holder of Class A Common
Stock or Preferred Stock wishing to vote for the Annual Meeting Proposals upon
which such holder is entitled to vote should either (i) complete and sign the
enclosed proxy (the "Proxy") and mail or deliver such Proxy to the Exchange
Agent at the address set forth on the back cover of this Prospectus; or (ii)
request its broker, dealer, commercial bank, trust company or other nominee to
vote on its behalf. Holders may also vote their shares of Class A Common Stock
or Preferred Stock in person at the Annual Meeting. Stockholders who have
executed and returned a Proxy may revoke it at any time before it is voted by
returning a Proxy bearing a later date, by giving written notice of revocation
to the Secretary of the Company or by attending the Annual Meeting and voting in
person. See "The Company Annual Meeting--Proxy Solicitation."
THE EXCHANGE OFFERS AND RELATED CONSENT SOLICITATIONS
GENERAL. Pursuant to the Exchange Offers, the Company is offering to
exchange (i) 56 shares of Common Stock, on a post-Capital Stock Combination and
a post-Reverse Stock Split basis, for each $1,000 principal amount of Senior
Debentures, outstanding as of March 15, 1997, without subsequent accrued and
unpaid interest and 28 shares of Common Stock, on a post-Capital Stock
Combination and a post-Reverse Stock Split basis, for each $1,000 principal
amount of Subordinated Debentures, outstanding as of March 15, 1997, without
subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and waive all rights and claims to,
accrued and unpaid interest on all Outstanding Debentures tendered for exchange.
See "The Exchange Offers--Payments on Outstanding Debentures."
CERTAIN CONDITIONS TO EXCHANGE OFFERS. The Exchange Offers are conditioned
on, among other things, the 90% Requisite Exchange Acceptances and receipt by
the Company of consents to the Proposed Amendments representing more than 50% of
the outstanding principal amount of each of the Senior Debentures and the
Subordinated Debentures (the "Requisite Consents"). The Exchange Offers are also
conditioned on approval of the Prepackaged Plan and the Annual Meeting Proposals
described below and upon the Company's final determination to accept any
tendered Outstanding Debentures pursuant to the Exchange Offers and its
determination not to pursue the Recapitalization by seeking confirmation of the
Prepackaged Plan. The Company may waive certain of the conditions to the
Exchange Offers, in whole or in part, at any time and from time to time in its
reasonable discretion. See "The Exchange Offers-- Conditions of the Exchange
Offers."
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EFFECTS OF COMPLETION OF EXCHANGE OFFERS ON NON-TENDERING HOLDERS OF
OUTSTANDING DEBENTURES. The successful completion of the Exchange Offers will
have certain adverse consequences to holders of Outstanding Debentures who do
not tender in the Exchange Offers. See "Risk Factors--Certain Consequences to
Non-Tendering Holders of Outstanding Debentures." IN ORDER FOR THE
RECAPITALIZATION TO BE COMPLETED WITHOUT RESORT TO THE PREPACKAGED PLAN, HOLDERS
OF AT LEAST 90% OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE OUTSTANDING
DEBENTURES MUST TENDER IN THE EXCHANGE OFFERS. If the Company does not receive
the 90% Requisite Exchange Acceptances, but does receive the Requisite
Prepackaged Plan Acceptances, the Company intends to effect the Recapitalization
by seeking a judicial confirmation of the Prepackaged Plan. See "Risk
Factors--Certain Consequences to Non-Tendering Holders of Outstanding
Debentures." See also "The Exchange Offers--Effects of Completion of Exchange
Offers on Non-Tendering Holders of Outstanding Debentures" and "Proposed
Amendments to Outstanding Debentures of the Company."
The Company is soliciting the Requisite Consents to the Proposed Amendments
which, if obtained, will eliminate certain of the restrictive covenants
contained in the Indentures. The provisions to be eliminated include the
restrictive covenants prohibiting the Company from paying cash dividends on its
capital stock or purchasing or redeeming capital stock or certain subordinated
obligations for consideration other than capital stock, and restrictive
covenants prohibiting the Company from entering into certain transactions with
related entities.
CONSENTS REQUIRED TO ADOPT THE PROPOSED AMENDMENTS. In order for the
Proposed Amendments to be effective, the Company must receive the Requisite
Consents from holders of at least a majority in outstanding principal amount of
the Senior Debentures and Subordinated Debentures, respectively, held by persons
other than the Company or its Affiliates. As of the Record Date, approximately
$165 million aggregate principal amount of the Senior Debentures and
approximately $41 million aggregate principal amount of the Subordinated
Debentures, respectively, were outstanding and not owned by the Company or its
Affiliates. The Exchange Offers are conditioned on the Company receiving the
Requisite Consents. Notwithstanding the foregoing, if the Requisite Consents are
not received by the Company, but 90% Requisite Exchange Acceptances are
received, the Company reserves the right to waive this condition and accept all
Outstanding Debentures tendered in the Exchange Offers even if the holders
thereof did not grant consents to the Proposed Amendments, and such holders will
receive the same consideration as if they had granted such consents.
TENDERING AND CONSENTING PROCEDURES FOR EXCHANGE OFFERS AND CONSENT
SOLICITATIONS
COMMENCEMENT AND EXPIRATION DATES. Holders of Outstanding Debentures who
wish to tender in the Exchange Offers, may do so beginning on May , 1997 (the
"Commencement Date"). The Expiration Date for the Exchange Offers and the
Consent Solicitations is 12:00 midnight, Eastern Daylight time, June , 1997
subject to extension by the Company in its sole discretion. If the period for
the Exchange Offers or the Consent Solicitations is extended, the Expiration
Date with respect to that specific offer or solicitation shall be the last date
to which that specific offer or solicitation has been extended. The Company may
extend one or more of such offers and solicitations independently of the other
offers and solicitations, subject to certain limitations. See "The Exchange
Offers--Expiration Date; Extensions; Amendments." With respect to tendering
Outstanding Debentures and voting on the Consent Solicitations, the term "Record
Holder" means any person in whose name the Outstanding Debentures were
registered on the books of the Company on the Record Date.
HOW TO TENDER, CONSENT AND APPROVE. Holders wishing to tender Outstanding
Debentures in the Exchange Offers and to consent to the Proposed Amendments
should either (i) complete and sign the applicable Consent and Letter of
Transmittal or a copy thereof, and have the signature thereon guaranteed if
required by the instructions thereto and mail or deliver such Consent and Letter
of Transmittal, together with certificates representing the Outstanding
Debentures and any other required documents, to the Exchange Agent at its
address set forth on the back cover page of this Prospectus; or (ii) request its
broker,
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<PAGE>
dealer, commercial bank, trust company or other nominee to effect the
transaction for it. A holder of Outstanding Debentures who wishes to vote on the
Prepackaged Plan should follow the instructions for voting on the Prepackaged
Plan. See "The Exchange Offers--Procedure for Tendering Outstanding Debentures
and Giving Consents." The tendering of Outstanding Debentures pursuant to the
Exchange Offers will not constitute an acceptance or rejection of the
Prepackaged Plan. Holders of Outstanding Debentures, Preferred Stock and Class A
Common Stock wishing to vote to approve the Prepackaged Plan should follow the
procedures described in "Prepackaged Plan Solicitation--Voting Procedures."
Holders of Outstanding Debentures will not be obligated to pay any brokerage
commissions or solicitation fees in connection with the Exchange Offers.
WITHDRAWAL RIGHTS AND REVOCATION. Tenders of Outstanding Debentures may be
withdrawn (i) at any time until 12:00 midnight, Eastern Daylight time, on the
Expiration Date, and (ii) for any period of time required by applicable law
following the public announcement of a waiver of a Requisite Acceptance
Condition with respect to the Exchange Offers. Outstanding Debentures which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof promptly after withdrawal, rejection of tender or termination of
the Exchange Offers. A Record Holder who has delivered a consent to the Proposed
Amendments may effectively revoke such consent by filing written notice with the
Exchange Agent at any time prior to (but not after) the date and time of
delivery of Requisite Consents effecting the Proposed Amendments. See "The
Exchange Offers--Withdrawal Rights," "The Exchange Offers--Revocation of
Consents."
ACCEPTANCE OF OUTSTANDING DEBENTURES AND DELIVERY OF COMMON STOCK. Subject
to the satisfaction or waiver of all conditions of the Exchange Offers and to
any extension or termination of the Exchange Offers, the Company will accept on
or promptly after the Expiration Date all Outstanding Debentures validly
tendered (and not withdrawn) on or prior to 12:00 midnight, Eastern Daylight
time, on the Expiration Date. Shares of Common Stock will be issued, in exchange
for the Outstanding Debentures accepted in the Exchange Offers, promptly after
acceptance of such Outstanding Debentures. See "The Exchange Offers--General."
SPECIAL PROCEDURE FOR BENEFICIAL OWNERS AND GUARANTEED DELIVERY
PROCEDURES. Any beneficial owner whose Outstanding Debentures are registered or
held of record in the name of its broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender in the Exchange Offers or consent to
the Proposed Amendments should (i) contact such registered holder promptly and
instruct such holder to tender on its behalf, (ii) obtain and include with the
Consent and Letter of Transmittal the Outstanding Debentures properly endorsed
for transfer by the Record Holder or accompanied by a properly completed bond
power from the holder of record, together with a properly completed irrevocable
proxy that authorizes such person to consent to the Proposed Amendments on
behalf of such Record Holder, with signatures on the endorsement or bond power
guaranteed by an Eligible Institution, or (iii) effect a record transfer of such
Outstanding Debentures from the Record Holder to such beneficial owner and
comply with the requirements applicable to Record Holders for tendering
Outstanding Debentures and delivering Consents prior to 12:00 midnight, Eastern
Daylight Time, on the Expiration Date, as the case may be. The transfer of
record ownership of Outstanding Debentures may take considerable time and,
depending on when such transfer is requested, may not be accomplished prior to
the Expiration Date.
Holders of Outstanding Debentures who wish to tender their Outstanding
Debentures and (i) whose Outstanding Debentures are not immediately available,
or (ii) who cannot deliver their Outstanding Debentures and Consent and Letter
of Transmittal to the Exchange Agent on or prior to the Expiration Date, must
tender their Outstanding Debentures according to the guaranteed delivery
procedures set forth in "The Exchange Offers--Guaranteed Delivery Procedures."
Financial institutions which are participants in certain book-entry transfer
facility systems may effect delivery of Outstanding Debentures to the
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Exchange Agent by book-entry transfer according to the procedures set forth in
"The Exchange Offers-- Book-Entry Transfer Procedures."
THE PREPACKAGED PLAN
If the 90% Requisite Exchange Acceptances are not obtained, the Company
intends to commence a Chapter 11 Case ("Chapter 11 Case") by filing a voluntary
petition for relief under chapter 11, of the Bankruptcy Code, provided that the
Company receives the Requisite Prepackaged Plan Acceptances. In connection
therewith, section 1126(b) of the Bankruptcy Code and Rule 3018(b) of the
Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") allows the
Company to solicit votes for the Prepackaged Plan prior to actual commencement
of the Chapter 11 Case. Under Section 1126(b) of the Bankruptcy Code, a holder
of a claim or equity interest that has accepted or rejected a plan of
reorganization before the commencement of a Chapter 11 Case will be deemed to
have accepted or rejected the plan for purposes of confirmation of such plan
under chapter 11 of the Bankruptcy Code if the solicitation of such acceptance
or rejection was in compliance with any applicable non-bankruptcy law, rule or
regulation governing the adequacy of disclosure in connection with such
solicitation, or if there is not any such law, rule or regulation, if such
acceptance or rejection was solicited after disclosure to such holder of
adequate information as defined in section 1125(a) of the Bankruptcy Code.
Section 1125(a) defines adequate information as information of a kind and in
sufficient detail that would enable a hypothetical reasonable investor typical
of holders of claims and interests to make an informed judgment about a plan of
reorganization. The Company believes that this Prospectus complies with the
requirements of section 1126(b) (including compliance with the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, and any rules
or regulations promulgated thereunder) for purposes of solicitation of
acceptances, although there can be no assurance that the Bankruptcy Court will
reach the same conclusion. See "Risk Factors." For instructions on how to vote
on the Prepackaged Plan see "Prepackaged Plan Solicitation--Voting Procedures."
The Prepackaged Plan would generally give effect to the same transactions
contemplated by the Recapitalization pursuant to the Exchange Offers and related
transactions. This Prepackaged Plan Solicitation is being conducted at this time
to obtain the Requisite Prepackaged Plan Acceptances. In the event the 90%
Requisite Exchange Acceptance is not obtained and the Requisite Prepackaged Plan
Acceptances are obtained, the Company intends to seek relief under chapter 11 of
the Bankruptcy Code and to use such Requisite Prepackaged Plan Acceptances to
obtain confirmation of the Prepackaged Plan as promptly as practicable. If the
Company commences a Chapter 11 Case and files the Prepackaged Plan with the
Bankruptcy Court, the Company will promptly seek to obtain an order of the Court
finding that the Prepackaged Plan Solicitation was in compliance with applicable
non-bankruptcy laws, rules or regulations governing the adequacy of disclosure,
including the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, and any rules or regulations promulgated thereunder, and
otherwise contains "adequate information," and therefore, that holders of
Impaired Claims and Interests (as defined in the Prepackaged Plan) that have
accepted or rejected the Prepackaged Plan pursuant to this Prepackaged Plan
Solicitation are deemed to have accepted or rejected the Prepackaged Plan for
purposes of confirmation of the Prepackaged Plan under chapter 11 of the
Bankruptcy Code.
The Company believes that it will have the best opportunity to complete the
Recapitalization and to confirm the Prepackaged Plan if the Requisite
Prepackaged Plan Acceptances are obtained prior to the commencement of a Chapter
11 Case. In addition, the Company believes that the prior acceptance of the
Prepackaged Plan would minimize disputes during a Chapter 11 Case concerning the
reorganization of the Company and would therefore shorten the time required to
complete the Recapitalization, reduce the expenses of the proceedings and
minimize the disruption of the Company's business that would likely result from
a protracted and contested Chapter 11 Case. If the Company was forced to
commence a Chapter 11 Case without prior receipt of the Requisite Prepackaged
Plan Acceptances, the Company
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<PAGE>
believes that there is a substantial risk that the Recapitalization would not be
accomplished and that such Chapter 11 Case would be protracted, costly and
disruptive to the operations of the Company's business.
The Prepackaged Plan defines two significant dates--the Confirmation Date
and the Effective Date. The Confirmation Date is the date on which the Court
enters the Confirmation Order on its docket, within the meaning of Bankruptcy
Rules 5003 and 9021. The Effective Date (I.E., the date on which the Prepackaged
Plan will be consummated) is the date selected by the Company that will not be
more than ten Business Days following the date in which the conditions specified
in Section 8.2 of the Prepackaged Plan have been satisfied or waived.
The Prepackaged Plan designates nine (9) separate Classes of Claims and
Interests, one of which contains the Net Claims of Affiliate Companies (as
defined in the Prepackaged Plan). The following table summarizes the
classification and treatment of the various Classes of Claims and Interests
under the Prepackaged Plan. The following description is qualified in its
entirety by reference to the detailed provisions of the Prepackaged Plan set
forth in Appendix A to the Prospectus. Also, see "The Prepackaged Plan" for a
more detailed summary of the Prepackaged Plan.
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Unclassified Administrative Claims Unimpaired; deemed to have Other than with respect to the payment of the
accepted the Prepackaged fees for services rendered by professionals
Plan that are retained in the course of the
Chapter 11 Case, the Company does not
presently anticipate that there will be any
Administrative Claims on the Effective Date
that would not otherwise be paid in the
ordinary course of business. To the extent
there are any holders of such Claims, such
holders will be paid in full in Cash on the
Effective Date (as defined in the Prepackaged
Plan) or upon such other terms as may be
agreed upon by the holder and the Company or
upon order of the Bankruptcy Court; provided
that if the Claim is incurred in the ordinary
course of business, such Administrative
Claims will be paid or performed when due in
accordance with the terms and conditions of
the particular agreements governing them.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Unclassified Priority Tax Claims Unimpaired; deemed to have The Company is not aware of any Priority Tax
accepted the Prepackaged Claims except those which may result from the
Plan IRS dispute described below. To the extent
there are any such Claims, such holders will
be paid in Cash on the Effective Date (or
such later date on which such Claim becomes
an Allowed Claim), or the Company may elect
to pay holders of an Allowed Tax Claim
deferred cash payments in equal quarterly
installments, with interest, over a period
not to exceed six years after the date of
assessment of such Tax Claim, of a value, as
of the Effective Date, equal to the Allowed
amount of such Tax Claim, or holders will
retain unaltered their legal, equitable and
contractual rights; provided that such
Priority Tax Claims arise out of the IRS
dispute described in "Risk Factors--Federal
Income Tax Audit of the Company."
Class 1 Priority Claims Unimpaired; deemed to have The Company anticipates that the only
accepted the Prepackaged Priority Claims will be those relating to
Plan salaries, health benefits and accrued
vacation for its employees. The Company,
contemporaneously with the filing of the
Chapter 11 Case, will file an application
with the Bankruptcy Court requesting approval
to allow it to pay its employees'
pre-Petition Date wages and related benefits
up to $4,000 per employee. Assuming the
Bankruptcy Court approves the application and
to the extent that Claims remain outstanding,
holders will be paid in full in Cash to the
extent such Claims are due on the Effective
Date unless the holder and the Company agree
to a different treatment. Any such Claims not
due and owing on the Effective Date will be
paid in full in Cash when due.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Class 2 Secured Claims Unimpaired; deemed to have The Company is not aware of any holders of
accepted the Prepackaged Secured Claims. Holders will retain unaltered
Plan their legal, equitable and contractual
rights, or, at the option of the Company,
such Claims will be treated in any other
manner so that they will otherwise be
rendered Unimpaired. To the extent not
previously paid, any accrued and unpaid
interest due on the Secured Claims will be
paid in Cash on the Effective Date.
Class 3 Unliquidated or Unimpaired; deemed to have Due to the nature of such Claims, the actual
Contingent Claims accepted the Prepackaged number of holders and the aggregate amount of
Plan the Claims cannot be determined or
approximated with any reasonable degree of
accuracy; however the Company is a defendant
in a number of lawsuits, and may become
subject to future litigation, including but
not limited to certain environmental and
asbestos related indemnity claims. See "Legal
Proceedings." The Company is contesting its
claimed liability and is vigorously pursuing
all available defenses. For purposes of the
Liquidation Analysis, the Company has
estimated the range of its financial exposure
for such Claims to be from $0.00 to
approximately $20 million. Holders will
retain unaltered their legal, equitable and
contractual rights. The rights of a holder of
a Class 3 Claim, including payment, if any,
will be determined in the manner in which the
amount of such Claim and the rights of the
holder of such Claim would have been resolved
or adjudicated if a Case had not been
commenced.
Class 4 Affiliates' Claims Impaired; while deemed to The Company anticipates that the aggregate
have rejected the value of Affiliated Claims will be
Prepackaged Plan, this approximately $73.7 million as of the filing
Class is expected to vote of the Chapter 11 Case. Holders will receive
in favor of the Prepackaged no distributions and retain no property under
Plan the Prepackaged Plan.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Class 5 General Unsecured Claims, Impaired; entitled to vote The aggregate value of Class 5 claims
including liquidated non- approximates $169.3 million, of which holders
Contingent Claims and of approximately $87.7 million have indicated
Claims of Holders of their intent to approve the Prepackaged Plan.
Senior Debentures Approximately $164.6 million of the aggregate
Class 5 Claims relate to claims held by
holders of Senior Debentures and
approximately $4.7 million relate to the
claims of three holders of liquidated
non-Contingent Claims. Provided that holders
of Claims in Class 6 and holders of Interests
in Classes 7 and 8 vote to accept the
Prepackaged Plan, holders of Senior
Debentures will receive 56 shares of Common
Stock on a post-Capital Stock Combination and
post-Reverses Stock Split basis for each
$1,000 principal amount of Senior Debentures
they possess and holders of liquidated non-
Contingent Claims will receive 56 shares of
Common Stock on a post-Capital Stock
Combination and post-Reverses Stock Split
basis for each $1,000 principal amount of
Allowed Claim. Collectively, holders of Class
5 Claims will hold approximately 80.3% of the
outstanding shares of the Common Stock of the
Company on the Effective Date. If Class 6, 7,
or 8 fail to accept the Prepackaged Plan, the
subordination provisions in the Senior
Debenture Indenture will be enforced and any
distribution due such rejecting Class of
Claims or Interests under the Prepackaged
Plan will be distributed pro rata to the
holders of Class 5 Claims.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Class 6 Claims of Holders Impaired; entitled to vote The aggregate value of Class 6 Claims
of Subordinated approximates $41.1 million, of which holders
Debentures of approximately $16.1 million have indicated
their intent to approve the Prepackaged Plan.
Provided holders of Class 6 Claims accept the
Prepackaged Plan, such holders will receive
28 shares of Common Stock on a post-Capital
Stock Combination and post-Reverses Stock
Split basis for each $1,000 principal amount
of Subordinated Debenture they possess.
Collectively, holders of Class 6 Claims will
hold approximately 9.8% of the outstanding
shares of the Common Stock of the Company on
the Effective Date. If holders of Class 6
Claims fail to accept the Prepackaged Plan,
such holders will receive no distributions
nor will they retain any property under the
Prepackaged Plan. The distributions which
would otherwise be made to holders of Allowed
Class 6 Claims will be made to the holders of
Allowed Claims in Class 5.
Class 7 Interests of Holders Impaired; entitled to vote As of April 15, 1997, there were 38,886,626
of Preferred Stock shares of Preferred Stock outstanding held by
13,750 record holders. Provided that holders
of Class 7 Interests vote to accept the
Prepackaged Plan, and after giving effect to
the Capital Stock Combination and the Reverse
Stock Split, holders will be deemed to hold
on a one and three quarter for one (1.75:1)
basis Common Stock. After the dilutive effect
of the distribution of Common Stock as
provided under the Prepackaged Plan,
collectively holders of Preferred Stock will
hold approximately 5.8% of the outstanding
shares of the Common Stock of the Company on
the Effective Date. If holders of Class 7
Interests fail to accept the Prepackaged
Plan, such holders will receive no
distributions nor will they retain any
property under the Prepackaged Plan. The
distributions which would otherwise be made
to holders of Allowed Class 7 Interests will
be made to the holders of Allowed Claims in
Class 5.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Class 8 Interests of Holders Impaired; entitled to vote As of April 15, 1997, there were 48,938,543
of Class A Common Stock shares of Class A Common Stock outstanding
held by 24,887 record holders. Provided that
holders of Class 8 Interests vote to accept
the Prepackaged Plan, and after giving effect
to the Capital Stock Combination and the
Reverse Stock Split, holders of will be
deemed to hold on a one for one (1:1) basis
Common Stock. After the dilutive effect of
the distribution of Common Stock as provided
under the Prepackaged Plan, collectively
holders of Allowed Class 8 Interests will
hold approximately 4.1% of the outstanding
shares of the Common Stock of the Company on
the Effective Date. If holders of Class 8
Interests fail to accept the Prepackaged
Plan, such holders will receive no
distributions nor will they retain any
property under the Prepackaged Plan. The
distributions which would otherwise be made
to the holders of Allowed Class 8 Interests
will be made to the holders of Allowed Claims
in Class 5.
Class 9 Interests of Holders Impaired; deemed to have Holders will receive no distributions and
of Warrants rejected the Prepackaged retain no property under the Prepackaged
Plan Plan.
</TABLE>
MEANS OF IMPLEMENTATION OF THE PREPACKAGED PLAN. The Prepackaged Plan
provides that certain transactions must occur on the Effective Date, or as soon
as practicable thereafter, including (i) the adoption and filing of amendments
to the Company's Restated Certificate, (ii) the adoption of amendments to the
Company's Restated Bylaws, (iii) the effectuation of the Capital Stock
Combination, (iv) the effectuation of the Reverse Stock Split, (vi) the issuance
of authorized Common Stock, and (vii) the implementation of the amended 1993
Stock Option Plan.
OTHER SIGNIFICANT PROVISIONS IN THE PREPACKAGED PLAN
- Distributions of Common Stock to holders of Outstanding Debentures will be
based upon the principal amount of Outstanding Debentures as of March 15,
1997.
- Except as otherwise expressly provided, the Prepackaged Plan provides for
a discharge and broad release of the Company from all Claims and causes of
action which are held by holders of Impaired Claims against and Impaired
Interests in the Company.
- The Prepackaged Plan provides for the release by the Company of the
present and former directors and officers of the Company for certain
claims related to their respective employment or service with the Company.
- The Prepackaged Plan provides for the assumption of all executory
contracts and unexpired leases of the Company, except for those expressly
rejected by the Company.
16
<PAGE>
- The Prepackaged Plan provides that fractional shares of Common Stock that
would be distributable on the basis of the Capital Stock Combination and
Reverse Stock Split or distributions of the Common Stock on account of
Allowed Claims will not be issued or distributed. Instead all such
fractional shares will be aggregated and after the Effective Date, the
shares will be sold in the market by the Exchange Agent and the net
proceeds thereof disbursed prorata to such holders based on the fraction
of shares such holders would have been entitled to receive or deemed to
have held had the Company authorized the issuance of such fractional
shares.
- The Prepackaged Plan provides for the amendment or modification of the
Prepackaged Plan under certain circumstances, and the right to withdraw
the Prepackaged Plan anytime prior to the entry of the Court order
confirming the Prepackaged Plan.
PREPACKAGED PLAN ACCEPTANCE. All holders of Claims in an Unimpaired Class
are conclusively presumed under the Bankruptcy Code to have accepted the
Prepackaged Plan. All holders (as of the Record Date) of Claims in an Impaired
Class (except Classes 4 and 9) are entitled to vote on the Prepackaged Plan. A
Class of Claims will be found to have accepted the Prepackaged Plan if votes to
accept are cast by the holders of at least two-thirds in amount and more than
one-half in number of Claims of such Class that vote on the Prepackaged Plan
(the "Requisite Claims Acceptances"). Holders of Impaired Interests will be
found to have accepted the Prepackaged Plan if votes to accept are cast by the
holders of at least two-thirds in amount of outstanding Preferred Stock and
Class A Common Stock that vote on the Prepackaged Plan (the "Requisite Interest
Acceptances," and together with the Requisite Claims Acceptances, the "Requisite
Prepackaged Plan Acceptances"). Representatives of the members of the Debenture
Holders' Committee recently informed the Company that the members hold in the
aggregate approximately 50.5% of the Outstanding Debentures and approximately
33% and 13%, respectively of the Preferred Stock and Class A Common Stock, and
have indicated that the members of the Debenture Holders' Committee intend to
support the Prepackaged Plan. In addition, the holder of 30.5% and 11.5%,
respectively, of the Preferred Stock and Class A Common Stock has indicated to
the Company that it intends to approve the Prepackaged Plan. Therefore, holders
aggregating approximately 63.5% and 24.5%, respectively, of the Preferred Stock
and Class A Common Stock have indicated to the Company that they intend to
approve the Prepackaged Plan. Any Class (other than Class 4 but including Class
9) not receiving or retaining anything under the Prepackaged Plan will be deemed
to have rejected the Prepackaged Plan. Because only votes for or against the
Prepackaged Plan are counted, an abstention or a failure to vote will not be
counted for purposes of determining acceptance or rejection of the Prepackaged
Plan by any Class of Claims or Interests. Therefore, the Prepackaged Plan could
be approved by any Class of Claims by holders with significantly less than
two-thirds in amount and one-half in number of Claims in such Class and by any
Class of Interests by holders with significantly less than two-thirds in amount
of Interests in such Class. ACCORDINGLY, IT IS IMPORTANT THAT ALL HOLDERS OF
IMPAIRED CLAIMS AND IMPAIRED INTERESTS, INCLUDING HOLDERS OF OUTSTANDING
DEBENTURES, PREFERRED STOCK AND CLASS A COMMON STOCK, VOTE ON THE PREPACKAGED
PLAN. A VALID TENDER PURSUANT TO AN EXCHANGE OFFER WILL NOT CONSTITUTE
ACCEPTANCE OF THE PREPACKAGED PLAN.
Even if all Classes of Impaired Claims and Impaired Interests vote to accept
the Prepackaged Plan, the Prepackaged Plan might not be confirmed by the Court.
See "Risk Factors--Considerations Relating to the Filing of the Case--Risk of
Non-Confirmation of the Prepackaged Plan."
CONFIRMATION OF THE PREPACKAGED PLAN. If the Company seeks to implement the
Prepackaged Plan by commencing a Chapter 11 Case under the Bankruptcy Code, the
Company will promptly request that the Bankruptcy Court hold a confirmation
hearing as promptly as practicable (including a determination that the
Prepackaged Plan Solicitation was in compliance with section 1126(b) of the
Bankruptcy Code), upon such notice to parties in interest as is required by the
Bankruptcy Code and the Bankruptcy Court. Parties in interest, including all
holders of Impaired Claims and Interests, will receive notice of the date and
time fixed by the Court for the Confirmation Hearing. Section 1128(b) of the
Bankruptcy Code provides that any party in interest may object to confirmation
of the Prepackaged Plan. The Bankruptcy Court will also
17
<PAGE>
establish procedures for the filing and service of objections to confirmation of
the Prepackaged Plan. See "The Prepackaged Plan--Confirmation Standards."
BINDING EFFECT. If the Prepackaged Plan is confirmed by the Bankruptcy
Court, each holder of a Claim or Interest in an Impaired Class will receive the
same consideration as other holders of Claims or Interests in such Impaired
Class, whether or not such holder voted to accept the Prepackaged Plan.
Moreover, upon confirmation, the Prepackaged Plan will be binding upon all
holders regardless of whether or not such holders voted to accept the
Prepackaged Plan. For example, if the Prepackaged Plan is confirmed, 100% of
each issue of Outstanding Debentures will be exchanged for shares of Common
Stock.
LIQUIDATION ANALYSIS/FEASIBILITY. The Company believes that the Prepackaged
Plan has been proposed in good faith and contains the relevant information
required under the Bankruptcy Code. The Company believes the Prepackaged Plan is
feasible and is not likely to be followed by a liquidation or further
reorganization of the Company. Further, the Company believes that holders of
Impaired Claims and Interests will receive more under the Prepackaged Plan than
they would if the Company was liquidated under Chapter 7 of the Bankruptcy Code
and the proceeds distributed.
Set forth below is a summary of proposed distributions to Impaired Claims
and Interests pursuant to the Prepackaged Plan verses estimated recoveries under
a Chapter 7 liquidation of the Company:
<TABLE>
<CAPTION>
NET PRESENT VALUE
OF CHAPTER 7 PREPACKAGED PLAN
ESTIMATED LIQUIDATION ESTIMATED PERCENTAGE
DESCRIPTION PERCENTAGE RECOVERY(A) RECOVERY(B)
- ------------------------------------------------------------------- ----------------------- ---------------------
<S> <C> <C>
Class 5--Senior Subordinated Debentures............................ 45.9%(c) 63.4%
Class 5--Liquidated non-Contingent Claims.......................... 36.7%(c) 63.4%
Class 5--Other General Unsecured Claims............................ 36.7%(c) NA
Class 6--Subordinated Debentures................................... 0.0% greater than 0%(d )
Class 7--Preferred Stock........................................... 0.0% greater than 0%(d )
Class 8--Class A Common Stock...................................... 0.0% greater than 0%(d )
Class 9--Warrants.................................................. 0.0% 0.0%
</TABLE>
- ------------------------
(a) Cash amount in aggregate after the application of a present value discount.
Percentage shown in the table as Net Present Value of Chapter 7 Estimated
Liquidation Percentage Recovery is the quotient of the present value of the
available liquidation proceeds divided by the estimated amount of claims in
such class. The resulting percentage has been discounted back to its net
present value as of January 1, 1997 (the date on which the Liquidation
period is assumed to begin) from January 1, 1999 (the assumed Liquidation
Distribution Date) applying a discount rate of 6.5%.
(b) Amount shown in the table as Prepackaged Plan Estimated Percentage Recovery
is the assumed value of the equity securities to be distributed to all
holders of claims in such class under the Prepackaged Plan divided by the
estimated amount of claims. It should be noted that depending on general
market conditions and other factors prevailing at the relevant times the
equity securities may trade at a price other than that which was assumed for
purposes of this analysis. Accordingly, no representation can be, or is
being, made with respect to whether the percentage recoveries shown in the
table above will actually be realized by the holder of claims in any
particular class under the Prepackaged Plan.
(c) In a liquidation, the holders of the Senior Debentures receive a higher
estimated recovery percentage than other General Unsecured Claims because of
the assumed enforcement of the subordination language in the Senior
Debenture Indenture. However, this amount is potentially subject to further
dilution in the event that certain additional disputed claims are allowed or
given priority in a Chapter 7 liquidation.
(d) Assuming acceptance of the Prepackaged Plan by each Impaired Class and
Interest entitled to vote thereon, under the Prepackaged Plan, these Holders
will receive New Common Stock.
18
<PAGE>
VOTING PROCEDURES. The Company will not hold a meeting to vote on the
Prepackaged Plan. Rather, except for holders of Affiliates' Claims which the
Company will cause to support the Prepackaged Plan, the Company is soliciting
acceptances of the Prepackaged Plan by means of "Ballots" and "Master Ballots."
Holders of Outstanding Debentures, Preferred Stock, Class A Common Stock and
liquidated non-Contingent Claims should read this Prospectus, with the
Prepackaged Plan, the form of Ballot and or Master Ballot, as applicable
(collectively the "Prepackaged Plan Solicitation Materials"), in their entirety
before voting on the Prepackaged Plan. Any holder of Impaired Claims or Impaired
Interests who wishes to vote with respect to the Prepackaged Plan should
complete, sign and return the applicable Ballot or Master Ballot and check the
box entitled "To Accept the Prepackaged Plan" or "To Reject the Prepackaged
Plan," as appropriate. Except as provided on the applicable Ballot or Master
Ballot, the applicable duly completed Ballot or Master Ballot must be mailed or
delivered to the Exchange Agent at the address listed on the back cover of this
Prospectus. Unless extended by the Company, Ballots and Master Ballots must be
received no later than 12:00 midnight, Eastern Daylight Time, on June , 1997.
Any beneficial owner whose securities were registered or held of record in the
name of his broker, dealer, commercial bank, trust company, savings and loan or
other nominee and who wishes to vote on the Prepackaged Plan, but who does not
have a Ballot, should contact such nominee and request a Ballot from such
nominee and return a completed Ballot to such nominee. In the event that the
Court determines that the Prepackaged Plan Solicitation Materials were not
transmitted to substantially all Impaired Creditors and holders of Preferred
Stock and Class A Common Stock, the Bankruptcy Court could void the Prepackaged
Plan Solicitation or require further solicitation or resolicitation. For more
detail instructions on how to vote on the Prepackaged Plan see "Prepackaged Plan
Solicitation--Voting Procedures."
Under appropriate written notice, votes on the Prepackaged Plan may be
revoked as described herein at any time prior to the earlier of (i) the
commencement by the Company of the Chapter 11 Case, and (ii) the Record Date, as
well as in certain other circumstances. See "Prepackaged Plan Solicitation
Voting--Procedures--Withdrawal of Ballots and Revocation."
DETERMINATIONS AND RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF THE
COMPANY. The Board has determined that (i) the Recapitalization is in the best
interests of the Company and its security holders; (ii) it is in the best
interests of the Company and its security holders to solicit acceptances of the
Prepackaged Plan to be implemented if and at such time as the Board deems it may
be in the best interests of the Company and its security holders and other
holders of claims against or interests in the Company to commence a judicial
process to effect the Prepackaged Plan, including in the event that the
Recapitalization is not completed through the Exchange Offers and the Annual
Meeting Proposals; and (iii) it is in the best interests of the Company and its
security holders that the Annual Meeting Proposals be approved. The Board also
recommends that (i) the holders of the Outstanding Debentures accept the
Exchange Offers; (ii) the holders of the Outstanding Debentures grant the
consents to the Proposed Amendments; (iii) the holders of the Outstanding
Debentures, the Preferred Stock and Class A Common Stock and holders of other
Impaired Claims and Interests approve the Prepackaged Plan; and (iv) the holders
of the Preferred Stock and Class A Common Stock approve the Annual Meeting
Proposals.
DETERMINATIONS AND RECOMMENDATION OF THE MEMBERS OF THE DEBENTURE HOLDERS'
COMMITTEE. Representatives of the members of the Debenture Holders' Committee
have recently informed the Company that the members hold in the aggregate
approximately 50.5% of the Outstanding Debentures and approximately 33% and 13%,
respectively, of the Preferred Stock and Class A Common Stock, and have
indicated to the Company that the members intend to support the
Recapitalization. The representatives of the Debenture Holders' Committee
negotiated on their own behalf in connection with their interests as holders of
Outstanding Debentures and not with a view toward the circumstances of any other
holder. The Company has been informed by the representatives of the members of
the Debenture Holders' Committee that their decision to support the
Recapitalization was based upon, among other things, their determination that
(i) the consideration to be received by the holders of Outstanding Debentures
will provide such holders with a significant equity interest in the Company,
(ii) the value of the Company will be enhanced
19
<PAGE>
by the Recapitalization, and (iii) the Company will have greater opportunities
in the event the Company is deleveraged as a result of the Recapitalization.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES. The federal income tax
consequences to the Company and holders of the Company's securities as a result
of the transactions occurring as part of and in connection with the Exchange
Offers or the Prepackaged Plan may be material. The tax consequences to holders
of the Company's securities depend on the type of security held and the
resolution of various uncertain issues. See "Material Federal Income Tax
Consequences" and "Risk Factors--Tax Matters."
APPRAISAL RIGHTS
No appraisal rights are available to holders of the Company's Outstanding
Debentures, Preferred Stock or Class A Common Stock in connection with the
Exchange Offers or the Capital Stock Combination or Reverse Stock Split.
RISK FACTORS
The Recapitalization and an investment in the Common Stock offered hereby
involves certain risks. The "Risk Factors" section of this Prospectus contains a
discussion of certain factors which should be carefully considered before
tendering Outstanding Debentures, consenting to the Proposed Amendments, voting
on the Annual Meeting Proposals or voting on the Prepackaged Plan. The following
is a brief summary of certain of these risk factors, but does not purport to
summarize or to be a complete discussion of all relevant risk factors. Please
refer to the "Risk Factors" section for a more complete discussion of the risk
factors that should be carefully considered.
- The risk that after the Recapitalization the Company will not be
profitable and may not realize its full asset values as a consequence of
possible liquidity problems, the Company's use of debt financing,
potential rising interest rates, possible delays in obtaining regulatory
approvals, uncertainty in California's real estate market, potential
claims against the Company and its subsidiaries for environmental
violations, the Company's holding company structure, possible negative
impact of a Chapter 11 Case on the operations of the Company, potential
unfavorable outcome of certain IRS disputes, and the uncertainty of
projections made by the Company in connection with the Recapitalization.
In addition, following the occurrence of certain events after the
Recapitalization, Donald M. Koll, the Chairman of the Board and Chief
Executive Officer of the Company could be released from certain
non-competition agreements, and the Company could lose the ability to
continue to use the "Koll" name.
- The risk that the issuance of Common Stock in connection with the
Recapitalization will cause significant dilution of the beneficial
ownership interests and voting power of the current holders of Preferred
Stock and Class A Common Stock.
- The risk that the market prices of the Company's securities in the future
may be effected by factors not within the control of the Company. The
Company also anticipates that it will not pay dividends to its
stockholders in the foreseeable future.
- The risk that the Company could be subject to takeover threats after the
Recapitalization as a result of the removal of takeover protective
provisions which could effect the stability and continuity of the
management of the Company.
- The risk that a security holder could recognize gain or loss on its
participation in the Recapitalization for federal income tax purposes.
- The risk that non-tendering holders of Outstanding Debentures will lose
the protections of certain restrictive covenants currently contained in
the Indentures upon completion of the Recapitalization.
20
<PAGE>
- The risk that if the Company fails to effect the Recapitalization it may
not be able to realize its full asset values and may not have sufficient
proceeds for the payment of its Outstanding Debentures on their maturity
date in 2002.
- The following risks would exist in the event that the Company commences a
Chapter 11 Case:
- The Bankruptcy Court may not confirm the Prepackaged Plan even if the
Requisite Plan Acceptances are obtained which could prevent the Company
from realizing its full asset values and may result in the Company
defaulting on its Outstanding Debentures in 2002.
- The Impaired Classes of Claims and Interests may not accept the
Prepackaged Plan resulting in either the implementation of the
"cram-down" provisions of the Bankruptcy Code or non-confirmation of the
Prepackaged Plan.
- The Bankruptcy Court could invalidate the solicitation of acceptances to
the Prepackaged Plan causing delay, additional expense and further risk
of nonacceptance or nonconfirmation of the Prepackaged Plan.
- The Bankruptcy Court could find that a different classification of Claims
and Interests is required which could affect the confirmation of the
Prepackaged Plan or result in a reclassification which could adversely
affect the Class in which a Creditor or Equity Holder was initially a
member and which could require a resolicitation of acceptances of the
Prepackaged Plan causing delays, additional expense and further risk of
nonacceptance or nonconfirmation of the Prepackaged Plan.
- After a confirmation of the Prepackaged Plan holders of Outstanding
Debentures or liquidated non-Contingent Claims would become equity
holders and in any subsequent bankruptcy case which may occur, however
unlikely, such holders' interests would have a lower priority than
holders of claims.
21
<PAGE>
SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
Set forth below is selected financial data of the Company and its
consolidated subsidiaries. The following information should be read in
conjunction with (i) the Company's financial statements and notes thereto
contained in this Prospectus commencing on Page F-1; and (ii) the Unaudited pro
forma consolidated financial information contained in this Prospectus under the
heading "The Company Recapitalization--Unaudited Pro Forma Consolidated
Financial Information."
SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
EXCHANGE THE PRE-
1992 1993 1994 1995 1996 OFFERS(H) PACKAGED PLAN(I)
--------- --------- --------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments (a)..... $ 41.6 $ 43.5 $ 13.0 $ 4.9 $ 2.1 $ 16.0 $ 16.0
Total assets (a)................. 486.1 436.0 414.0 272.4 272.2 261.1 205.1
Senior bank debt (b)............. 65.4 7.0 -- 16.6 7.1 -- --
Project debt..................... -- -- -- -- 12.5 12.5 12.5
Subordinated debentures (b)...... 165.1 134.9 152.9 173.2 195.9 19.6 --
Total stockholders' equity (c)... $ 149.6 $ 163.5 $ 145.5 $ 29.6 $ 1.1 $ 160.1 $ 141.0
Fully diluted shares outstanding
at end of period (g)........... 86.4 91.4 102.5 102.4 102.4 11.6 12.7
Book value per fully diluted
share.......................... $ 1.73 $ 1.79 $ 1.42 $ .29 $ .01 $ 13.80 $ 11.10
STATEMENT OF OPERATIONS DATA:
Revenues (d),(e)................. $ 28.3 $ 16.7 $ 21.4 $ 34.0 $ 44.8 $ 44.8 $ 44.8
Loss from continuing operations
(e),(f)........................ (41.9) (20.1) (18.7) (116.9) (28.9) (8.5) (73.8)
Net income (loss) (f)............ (38.4) 14.3 (18.0) (116.9) (28.9)
Per common share:
Loss from continuing operations
(c),(e),(f).................... (1.44) (.24) (.43) (2.48) (.60) $ (.80) $ (6.36)
Net income (loss) (f),(g)........ $ (1.32) $ .17 $ (.41) $ (2.48) $ (.60)
Weighted average shares outstanding
(g)............................... 29.0 83.0 43.8 47.1 48.3 10.6 11.6
</TABLE>
- ------------------------
(a) 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 ("Lake Superior"). The decrease
in total assets and cash, cash equivalents and short-term investments at
December 31, 1994 is primarily attributable to the funding of project
development costs and general and administrative expenses, as well as funds
deposited into a restricted cash account to secure a $25 million letter of
credit facility related to the Abex litigation. The decreases in cash, cash
equivalents and short term investments at December 31, 1995 and 1996 are
primarily attributable to the funding of project development and
infrastructure costs and general and administrative expenses, partially
offset by sales of real estate held for development or sale. The decrease in
total assets at December 31, 1995 is primarily due to the asset revaluation
of Bolsa Chica and the decrease in cash described above.
22
<PAGE>
(b) The decrease in debt at December 31, 1993 reflects principal repayments on
senior bank debt and the exchange of subordinated debentures in connection
with the sale of Lake Superior and the issuance of 3.4 million shares of
Class A Common Stock of the Company to Libra. The increase in debt at
December 31, 1995 reflects borrowings under new credit agreements to settle
the Abex litigation and construct infrastructure improvements at Rancho San
Pasqual. The decrease in senior bank debt at December 31, 1996 reflects
principal repayments in excess of borrowings for construction of
infrastructure improvements at Rancho San Pasqual. The increase in project
debt at December 31, 1996 reflects borrowings from banks for build-to-suit
projects.
(c) The increase in equity at December 31, 1993 primarily reflects net income
for the year then ended. The decrease in equity at December 31, 1995
reflects the net loss for the year then ended, including the asset
revaluation of Bolsa Chica. The decrease in equity at December 31, 1996
reflects the net loss for the year then ended, primarily due to interest
expense on subordinated debentures.
(d) The decrease in 1993 revenues is principally due to a decrease in land sales
and the absence of revenues from a hotel disposed of in 1992, partially
offset by revenues from the Eagle Crest Golf Course which opened in May
1993, and development fees generated by the business acquired from The Koll
Company in September 1993. The increase in 1995 revenues is due to an
increase in land sales and Wentworth By The Sea residential and marina
sales. The increase in 1996 revenues reflects the sale of residential lots
and the Eagle Crest Golf Course at Rancho San Pasqual, the formation of the
Fairbanks Highlands joint venture and the sale of resort/residential lots in
Michigan.
(e) Amounts have been reclassified to present Lake Superior and Deltec as
discontinued operations.
(f) The loss from continuing operations for the year ended December 31, 1993
reflects lower interest expense related to lower debt outstanding, as well
as nonrecurring income of $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 and Deltec
and an extraordinary gain on debt extinguishment. The loss from continuing
operations, net loss and loss per common share for the year ended December
31, 1995 reflect approximately $121.1 million of charges related to
write-downs of real estate properties, including Bolsa Chica. The loss from
continuing operations, net loss and loss per common share for the year ended
December 31, 1996 is primarily the result of noncash interest charged on the
subordinated debentures.
(g) In July 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 of a subsidiary of Henley Properties with and into the
Henley Group. The Preferred Stock is not included in the loss per share
calculations except for 1993 since the effect is antidilutive. In December
1993, the Company issued 3.4 million shares of its 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. The
1993 earnings per share calculation includes these newly issued shares,
along with the Preferred Stock and stock options outstanding. In November
1994, the Company issued 2.0 million shares (along with warrants for the
purchase of an additional 2.0 million shares) of its Class A Common Stock in
connection with the acquisition of the Kathryn G. Thompson Company. The
1994, 1995 and 1996 amounts reflect conversion of 1.2 million, an additional
1.0 million and an additional 1.4 million shares, respectively of Preferred
Stock to Class A Common Stock.
(h) The Pro Forma--Exchange Offers amounts reflect December 31, 1996 historical
amounts, giving effect to (i) the February 14, 1997 sale of the Bolsa Chica
lowlands, (ii) the issuance of Common Stock to holders of Senior
Subordinated and Subordinated Debentures pursuant to the Exchange Offers
(assuming only the minimum 90% are tendered), including the resulting
extraordinary gain on extinguishment of debt of approximately $57.7 million,
net of income taxes (See "Historic and Unaudited Pro Forma Consolidated
Financial Statements--The Exchange Offers") and (iii) the Capital Stock
Combination and Reverse Stock Split described in this Prospectus.
23
<PAGE>
(i) The Pro-Forma--The Prepackaged Plan amounts reflect December 31, 1996
historical amounts, giving effect to (i) the February 1997 sale of the Bolsa
Chica lowlands, (ii) the issuance of Common Stock to holders of Senior
Debentures and Subordinated Debentures pursuant to the Prepackaged Plan,
including the resulting extraordinary gain on extinguishment of debt of
approximately $83.3 million and the write-down of Bolsa Chica to fair value
under Fresh Start Accounting (see "Historic and Unaudited Pro Forma
Consolidated Financial Statements--The Prepackaged Plan"), and (iii) the
Capital Stock Combination and Reverse Stock Split described in this
Prospectus.
MARKET PRICES OF THE COMPANY'S COMMON STOCK AND DIVIDENDS PAID
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>
1997
First Quarter................................................................ $ .188 $ .125
1996
First Quarter................................................................ $ .531 $ .250
Second Quarter............................................................... .313 .156
Third Quarter................................................................ .250 .156
Fourth Quarter............................................................... .250 .125
1995
First Quarter................................................................ $ .500 $ .344
Second Quarter............................................................... .469 .313
Third Quarter................................................................ .594 .344
Fourth Quarter............................................................... .469 .250
1994
First Quarter................................................................ $ .531 $ .250
Second Quarter............................................................... .406 .125
Third Quarter................................................................ .344 .188
Fourth Quarter............................................................... .625 .281
</TABLE>
The number of holders of record of the Company's Class A Common Stock as of
April 15, 1997 was approximately 25,000. 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.
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
<TABLE>
<CAPTION>
PRO FORMA
YEARS ENDED DECEMBER 31, --------------------------
----------------------------------------------------- EXCHANGE THE PRE-
1992 1993 1994 1995 1996 OFFERS PACKAGED PLAN
--------- --------- --------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Book value per fully diluted share..... $ 1.73 $ 1.79 $ 1.42 $ .29 $ .01 $ 13.80 $ 11.10
Cash dividends per share............... -- -- -- -- -- -- --
Net income (loss) per share............ $ (1.32) $ .17 $ (.41) $ (2.48) $ (.60)
</TABLE>
See footnotes to "Selected Financial Data" on pages 22 and 23.
24
<PAGE>
RISK FACTORS
RETENTION OF OUTSTANDING DEBENTURES (UPON COMPLETION OF THE EXCHANGE OFFERS)
AND ACQUISITION OF THE COMMON STOCK (BY TENDERING IN THE EXCHANGE OFFERS OR
APPROVING THE CAPITAL STOCK COMBINATION) ARE SUBJECT TO A NUMBER OF MATERIAL
RISKS INCLUDING THOSE ENUMERATED BELOW, EACH OF WHICH SHOULD BE CAREFULLY
CONSIDERED BY HOLDERS OF THE OUTSTANDING DEBENTURES, PREFERRED STOCK AND CLASS A
COMMON STOCK. HOLDERS OF OUTSTANDING DEBENTURES AND HOLDERS OF PREFERRED STOCK
AND CLASS A COMMON STOCK SHOULD CAREFULLY CONSIDER, AMONG OTHER MATTERS
DISCUSSED IN THIS PROSPECTUS, THE FOLLOWING INFORMATION AND CONSIDERATIONS PRIOR
TO DETERMINING WHETHER TO TENDER OUTSTANDING DEBENTURES, GRANT CONSENTS AND/OR
APPROVE THE PREPACKAGED PLAN AND/OR APPROVE THE CAPITAL STOCK COMBINATION. IN
ADDITION, HOLDERS OF IMPAIRED CLAIMS AND INTERESTS SHOULD CAREFULLY CONSIDER,
AMONG OTHER MATTERS DISCUSSED IN THIS PROSPECTUS, THE FOLLOWING INFORMATION AND
CONSIDERATIONS PRIOR TO VOTING ON THE PREPACKAGED PLAN, AND HOLDERS OF THE
COMPANY'S VOTING SECURITIES SHOULD ALSO CAREFULLY CONSIDER, AMONG OTHER MATTERS
DISCUSSED IN THIS PROSPECTUS, SUCH CONSIDERATIONS PRIOR TO VOTING ON THE
PREPACKAGED PLAN, VOTING AT THE ANNUAL MEETING PROPOSALS OR GRANTING A PROXY
WITH RESPECT THERETO.
RISK FACTORS APPLICABLE TO HOLDERS OF OUTSTANDING DEBENTURES, PREFERRED STOCK
AND/OR COMMON STOCK.
FINANCIAL CONDITION OF THE COMPANY. As described below under the headings
"The Company Recapitalization--Background of the Recapitalization--Purposes and
Certain Results of the Recapitalization," the Company's capital structure is
currently highly leveraged primarily due to the $205.7 million aggregate
outstanding principal amounts of the Outstanding Debentures as of March 15,
1997. If the Outstanding Debentures remain outstanding until their respective
March 15, 2002 maturity dates, the Company will incur approximately $162.8
million in additional debt with respect to the Outstanding Debentures, resulting
in approximately $368.5 million in outstanding principal amount at maturity.
The Company reported losses of $18 million, $116.9 million and $28.9 million
during the years ended December 31, 1994, 1995 and 1996, respectively, primarily
reflecting non-cash interest on the Outstanding Debentures in all three years,
along with writedowns of real estate properties of $121.1 million in 1995. As a
result of such losses, the Company's stockholders' equity was reduced to $1.1
million as of December 31, 1996. The Company has not been able to generate
significant gross operating margins or cash flows from its operating activities
due to the high level of pre-development costs associated with its principal
assets. The substantial majority of the Company's assets are parcels of
residential land under varying stages of development which have required
significant capital expenditures prior to the time the land can be fully
developed, sold to homebuilders or developed in joint ventures. In addition, the
relatively high book value of these assets has resulted in sales at
approximately break-even prices. While future land sales are also expected to
approximate, or only modestly exceed, break-even, the net cash flow to be
generated by the Company's residential land development and sales is expected to
exceed $200 million in the aggregate over the next three to five years. Absent a
write-down of Bolsa Chica (which would reduce future cost of sales) under Fresh
Start Accounting in the event the Recapitalization is implemented through the
Prepackaged Plan, the Company does not expect to be profitable until 1999 when
it anticipates generating additional income by reinvesting proceeds from the
Bolsa Chica project in other real estate development activities. Upon completion
of the sale of the Bolsa Chica lowlands in February of 1997, the Company's
working capital approximated $15 million as of March 31, 1997.
FAILURE TO RECEIVE 90% REQUISITE EXCHANGE ACCEPTANCES; FAILURE TO CONSUMMATE
THE RECAPITALIZATION. In order to effect the Recapitalization, other than
through the filing and confirmation of the Prepackaged Plan, it is necessary for
the Company to receive the 90% Requisite Exchange Acceptances and the Requisite
Consents. These percentages may not be attained and, therefore, the Company may
not be able to effectuate the Recapitalization. The Company's financial advisors
have assisted the Company in preparing an analysis which indicates that the
Company would need to earn a compounded return of greater than 30% per annum on
the free cashflow generated by the Company's assets between 1997 and 2002 in
order to fully satisfy the face amount of the Senior Debentures and Subordinated
Debentures at maturity in 2002. As an alternative to waiting until the 2002
maturity, the Company has engaged in extensive negotiations with representatives
of the members of the Debenture Holders' Committee and its
25
<PAGE>
advisors in order to effect a current exchange of the Outstanding Debentures for
Common Stock. The representatives of the members of the Debenture Holders'
Committee retained Rothschild and WGM as its financial and legal advisors,
respectively. The Company has agreed to pay all of the legal expenses of WGM and
$50,000 of the financial advisor fees of Rothschild in cash and the $750,000
balance of the financial advisor fees of Rothschild through the issuance of an
Advisor Warrant exercisable for shares of Common Stock. See "Shares Subject to
Resale by Financial Advisors." The Company has paid approximately $208,000 to
WGM through April 25, 1997 and estimates that it may pay up to an additional
$50,000 prior to any potential filing of a Chapter 11 Case. Neither the Company
nor WGM can estimate the fees the Company may pay WGM for legal services in
connection with a Chapter 11 Case because it is uncertain whether any official
committee would retain WGM and events which may occur in any Chapter 11 Case
cannot be predicted with any degree of certainty. The representatives of the
Debenture Holders' Committee negotiated on their own behalf in connection with
their interests as holders of Outstanding Debentures and not with a view toward
the circumstances of any other holder. The interests of the holders of Preferred
Stock and Class A Common Stock were represented by HLHZ, MWE and management of
the Company. Inherent conflicts of interest exist between the holders of the
Outstanding Debentures and the holders of the Class A Common Stock and Preferred
Stock. Management of the Company holds stock and options in substantially equal
amounts of the Class A Common Stock and Preferred Stock, and believes that its
interests are wholly neutral as between the two classes of stock; however, such
interests are clearly aligned towards maximizing the returns for the holders of
its equity as opposed to its debt securities. Based on the current valuation
prepared by the Company with the assistance of HLHZ, which is subject to the
assumptions detailed in this Prospectus, holders of Senior Debentures who tender
would receive Common Stock worth between approximately $0.50 and $0.53 per $1.00
of principal amount outstanding on March 15, 1997 and holders of Subordinated
Debentures who tender would receive Common Stock worth between approximately
$0.25 and $0.265 per $1.00 of principal amount outstanding on March 15, 1997
depending upon whether 90% or up to 100% of the holders of Outstanding
Debentures accept the Exchange Offers. If the 90% Requisite Exchange Acceptance
is not obtained, the Company will consider effecting the Recapitalization by
seeking a Court order confirming the Prepackaged Plan. Under such circumstances,
if the holders of Preferred Stock as a class, holders of Class A Common Stock as
a class or holders of Subordinated Debentures as a class, as the case may be,
have not approved the Prepackaged Plan, then under the terms of the Prepackaged
Plan, such respective holders of the disapproving class will have such
respective claims or interests cancelled and they will receive no property or
distributions in exchange. See "Risk Factors--Additional Risks to Holders of
Outstanding Debentures--Possible Effect of Non-Acceptance of Recapitalization on
Holders of Subordinated Debentures," "Risk Factors--Additional Risk Factors
Applicable to Holders of Preferred and Class A Common Stock--Possible Effect of
Non-Approval of Capital Stock Combination, Reverse Stock Split and the
Prepackaged Plan by Holders of Preferred Stock and Class A Common Stock," "Risk
Factors--Considerations Relating to Filing a Case--Non-Acceptance of the
Prepackaged Plan" and "The Prepackaged Plan--Confirmation of the Prepackaged
Plan Without Acceptance by All Voting Classes." Representatives of the members
of the Debenture Holders' Committee have recently informed the Company that the
members hold in the aggregate approximately 50.5% of the Outstanding Debentures
and approximately 33% and 13%, respectively, of the Preferred Stock and Class A
Common Stock, and have indicated that the members intend to support the
Prepackaged Plan. In addition, the holder of 30.5% and 11.5%, respectively, of
the Preferred Stock and Class A Common Stock has indicated to the Company that
it intends to approve the Prepackaged Plan. If the Recapitalization is not
completed, the Company believes its highly leveraged capital structure may
prevent it from obtaining financing on favorable terms, which financing is
necessary for the Company to maximize the realization of asset values and to
grow its business, including, but not limited to, the commercial real estate
development business and the development of its Bolsa Chica project. Such new
financing is currently expected not to exceed $30 million (exclusive of Project
Debt). While the Company believes the Recapitalization will allow the Company to
obtain the necessary financing on more favorable terms, the Company does not
currently have any commitments to provide such financing in the event the
Recapitalization is effected. The Company has
26
<PAGE>
commenced discussions with several commercial banks who have expressed an
interest in providing such financing subject to completion of the
Recapitalization and certain other conditions. However, there can be no
assurance that such financing will be available to the Company. The Company will
also continue to experience the negative effect on its development business
caused by the continued reporting of operating losses which are primarily a
result of interest expense associated with the Outstanding Debentures, and
continue to experience problems in attracting and retaining key commercial and
residential development team personnel due to concerns as to the ability of the
Company to compete for new business. Accordingly, the Company may pursue
alternative restructuring transactions which may be less favorable to the
Company's current security holders than the Recapitalization.
POSSIBLE LOSS OF ALL STOCK VALUE UPON FAILURE TO APPROVE THE CAPITAL STOCK
COMBINATION, REVERSE STOCK SPLIT AND THE PREPACKAGED PLAN BY HOLDERS OF
PREFERRED STOCK AND CLASS A COMMON STOCK. Under certain circumstances the
holders of shares of Preferred Stock and Class A Common Stock could have their
shares cancelled in the Recapitalization and receive no consideration. This
could occur if the holders of Preferred Stock and Class A Common Stock voting as
separate classes do not approve the Capital Stock Combination and Reverse Stock
Split or the 90% Requisite Exchange Acceptances are not received and the holders
of shares of Preferred Stock and Class A Common Stock do not accept the
Prepackaged Plan. Under such circumstances, if the holders of Class 5 Claims
have accepted the Prepackaged Plan the Company intends to proceed with filing
its Chapter 11 Case and to seek Bankruptcy Court confirmation of the Prepackaged
Plan. If the holders of Preferred Stock or Class A Common Stock have not
approved the Prepackaged Plan, under such circumstances, then the Prepackaged
Plan would be deemed automatically amended to provide that the distributions
which would otherwise have been made to holders of Preferred Stock and Class A
Common Stock would be made to holders of Allowed Claims in Class 5 if the
Prepackaged Plan is confirmed by the Bankruptcy Court. Moreover, the holders of
Preferred Stock and Class A Common Stock would receive no distributions nor
retain any property under the Prepackaged Plan. The Bankruptcy Code provides a
procedure by which the Prepackaged Plan may be confirmed despite the
non-acceptance of the Prepackaged Plan by the holders of the Preferred Stock and
Class A Common Stock. The procedure is known as a "cram down." The Company
believes that the Prepackaged Plan does "not discriminate unfairly" and is "fair
and equitable" with respect to the rejecting classes of holders of Preferred
Stock and Class A Common Stock. See "Risk Factors--Confirmation of the
Prepackaged Plan Without Acceptance by All Voting Classes." If the
Recapitalization is completed, the holders of Preferred Stock and Common Stock
will incur substantial dilution to their holdings and will remain subject to the
further risks of loss of value in their shares as described below.
OWNERSHIP INTERESTS, ABILITY TO ELECT DIRECTORS, AND BENEFITS TO CERTAIN
PARTIES. After the various issuances of Common Stock as part of the
Recapitalization, assuming a 100% acceptance of the Exchange Offers, the current
holders of Outstanding Debentures and liquidated non-Contingent Claims, will
have aggregate ownership of approximately 90.1% of the Common Stock and voting
power of the Company. In addition, current holders of Preferred Stock will have
ownership of approximately 5.8% of the Common Stock and of the then combined
voting power of the Company, and the current holders of Class A Common Stock
will own the remaining approximately 4.1% of the Common Stock and voting power.
Because the Company's Restated Certificate does not provide for cumulative
voting in the election of directors, the current holders of Outstanding
Debentures will be in a position, if acting together, effectively to elect all
of the Company's directors. See "The Company Recapitalization--Purposes and
Certain Results of Recapitalization."
DILUTION; SHARES ELIGIBLE FOR FUTURE SALES. The issuance of the Common
Stock as part of the Recapitalization will result in significant dilution of the
beneficial ownership interests and voting power of the current holders of the
Company's Preferred and Class A Common Stock. As of the date of this Prospectus,
approximately 38.9 million shares of the Company's Preferred Stock and 48.9
million shares of the Company's Class A Common Stock were outstanding (excluding
1.4 million shares held in treasury). A substantial number of shares of Common
Stock could potentially be offered for sale in the public market in
27
<PAGE>
the future (the "Future Shares"). The Future Shares consist of shares of Common
Stock that may be offered for sale pursuant to (i) registration statements
prepared by the Company, (ii) Rule 144 under the Securities Act or other
applicable exemptions, (iii) shares subject to issuance upon the exercise of
stock options, and (iv) the Warrant Shares subject to issuance and resale by the
financial advisors. See "Shares Subject to Future Sale by Financial Advisors."
There is no way of knowing with any certainty what number, if any, of Future
Shares will be actually offered for sale in the public market in the future.
Sales of substantial amounts of Future Shares in the public market, and the
perception by investors, investment professionals and others of the possibility
that such sales may occur, could adversely affect the market price of the Common
Stock (as well as the ability of the Company to raise capital in the public
markets at times and at prices favorable to the Company). There is a risk that
if substantial amounts of Future Shares are offered for sale and there is an
insufficient number of buyers willing to purchase such shares, the market price
of the Common Stock may decrease.
POSSIBLE TERMINATION OF KOLL LICENSE AND NON-COMPETE PROVISIONS. A
wholly-owned subsidiary of the Company has amended certain agreements with
Donald M. Koll, the Chairman of the Board and Chief Executive Officer of the
Company, which amendments modify an existing license to use the "Koll" name and
certain non-compete provisions upon the occurrence of certain conditions
following the Recapitalization. Pursuant to such amendments, upon completion of
the Recapitalization and the occurrence of certain specified events thereafter,
Mr. Koll would be released from currently existing covenants not to compete with
the Company and its subsidiaries and upon such release, the Company and its
subsidiaries would be obligated to change their respective names to delete all
usage of the name "Koll." These agreements have been amended (i) in order to
delete an event of default which would occur under the License Agreement if a
Chapter 11 Case is commenced, and (ii) in order to retain Mr. Koll following the
Recapitalization in light of the changed circumstances with respect to corporate
goverance and control of the Company which will result from the completion of
the Recapitalization, which circumstances did not exist at the time these
agreements were originally negotiated and executed. See "Certain Relationships
and Related Transactions."
OPERATIONS AFTER THE RECAPITALIZATION. While the proposed Recapitalization
is expected to reduce financial leverage, there can be no assurance that
liquidity problems will not occur sometime in the future. In addition, no
assurances can be given that operations of the Company following completion of
the Recapitalization necessarily will be profitable. See "Risk Factors--Real
Estate Industry and Development Activities." In addition, the market prices of
the Company's securities in the future may be affected by factors not within the
control of the Company, including, without limitation, public statements from
securities analysts and others concerning the Company's operations and
prospects.
USE OF DEBT FINANCING. The Company is currently subject to the risks
normally associated with debt financing, including the risk that the Company
will have insufficient cash available to meet required payments of principal and
interest. If the Recapitalization is effected, these risks will remain, although
to a significantly lesser extent, because the Company intends to pursue
additional debt financing, currently expected not to exceed $30 million
(exclusive of Project Debt), in order to obtain funds necessary to develop Bolsa
Chica and continue its business. As a result of the Company's use of
indebtedness and leverage, including the potential use of debt to finance
development and acquisitions and the use of variable rate financing, the
cumulative effect of the risks associated with borrowing is greater than that of
each of these risks considered individually. In addition, if properties are
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments or if certain other events of default occur, such properties
could be foreclosed upon by, or otherwise transferred to, the mortgagee with a
consequent loss of income and asset value to the Company.
RISK OF RISING INTEREST RATES. The Company has incurred and expects in the
future to incur variable rate indebtedness in connection with its operations. An
increase in interest rates would increase the interest on variable rate
indebtedness, and could have an adverse effect on net income and funds available
for distribution to stockholders. Additionally, rising interest rates could have
an adverse impact on the
28
<PAGE>
trading price of the Company's outstanding capital stock as potential purchasers
may demand a higher annual yield from an investment in response to such higher
rates.
REAL ESTATE INDUSTRY AND DEVELOPMENT ACTIVITIES. While the Company believes
that its properties have significant potential future value, its business is
subject to a number of factors which could adversely affect such values. These
factors include the availability of adequate financing on commercially
reasonable terms and cash flow from operations, delays in obtaining zoning and
regulatory approvals, and litigation or appeals of regulatory approvals. 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 residential lots and housing generally and the supply of competitive
products. Real estate properties and real estate joint venture interests do not
constitute liquid assets and, at any given time, it may be difficult to sell a
particular property or interest for an appropriate price. The depressed
condition of the California's economy in the first half of this decade 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. This economic trend and
the substantial costs and delays in developing the Company's Bolsa Chica project
contributed significantly to the Company's need to currently effect the
Recapitalization. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." There can be no assurance that future
negative economic trends or the costs or delays of future development projects
will not cause the Company to again become substantially overleveraged following
the Recapitalization.
REGULATORY APPROVAL. 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, grading, architecture and environmental matters. The 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
delayed by litigation and appeals challenging development rights previously
granted to the Company. 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. After the
Recapitalization, including if implemented through the Prepackaged Plan, the
Company will continue to be subject to such appeals processes, including the
litigation challenging the approved development plans with respect to its
principal asset, the Bolsa Chica property, a large undeveloped coastal property
approximately 35 miles south of downtown Los Angeles. See "Business and
Properties of the Company--Legal Proceedings."
ENVIRONMENTAL MATTERS. The Company's business activities and properties are
subject to a variety of environmental regulations under federal, state and local
laws. While the Company believes that it conducts its businesses in an
environmentally acceptable manner and that it is in compliance with applicable
laws and regulations, claims against the Company have been made in the past and
may be made against the Company in the future seeking to impose liability for
alleged environmental violations. Adverse judgements with respect to
environmental claims could adversely affect the Company's cash flow and, in
turn, its business operations.
HOLDING COMPANY STRUCTURE. The Company is a holding company. Claims of
creditors, including trade creditors, of the subsidiaries will generally have
priority as to the assets of such subsidiaries over the claims of the Company
and its security holders. In addition, substantially all of the Company's
operating income and cash flow will be generated by its subsidiaries. In order
to make cash payments on its direct liabilities the Company will have to rely on
dividends or loans from its subsidiaries to generate the funds for such
payments. The ability of such subsidiaries to pay such dividends is subject to
applicable state laws and may be subject to senior debt or Project Debt
contractual restrictions.
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ABSENCE OF DIVIDENDS. The Company does not anticipate paying cash dividends
to its stockholders after the Recapitalization or in the foreseeable future. To
the extent that contractual provisions permit the payment of dividends at some
future date, the Company's dividend policy will be reviewed from time to time by
the Board in light of the Company's earnings and financial position and such
other business considerations as the Board considers relevant. In this regard,
because the Company is a holding company, it will have to rely on dividends from
its subsidiaries to generate the funds for any payment of dividends on the
capital stock of the Company. The ability of such subsidiaries to pay dividends
is subject to applicable state laws and may be subject to contractual
restrictions.
CERTAIN ANTI-TAKEOVER EFFECTS. Certain provisions of the Restated
Certificate and the Bylaws will not continue if the Annual Meeting Proposals
with respect thereto are approved or the Prepackaged Plan is effected. These
provisions include classification of the Board, limitations on stockholders'
ability to call special meetings, prohibition on stockholder action by written
consent and requirements that the affirmative vote of at least 80% of the
Company's outstanding voting stock approve certain actions, including an
increase in the size of the Board, the removal of directors for cause or the
amendment of any such anti-takeover provisions. These provisions were intended
to provide stability and continuity for the Company and if removed, may have the
effect of increasing the risk of an acquisition of control of the Company in a
transaction not approved by the Board. However, these risks may be decreased by
the capital structure resulting from the Recapitalization due to the resulting
deleveraging and greater concentration of ownership.
POTENTIAL NASDAQ DELISTING. The Class A Common Stock and Preferred Stock
are currently listed on NASDAQ-NM. The Company has been notified by NASDAQ that
the Class A Common Stock and the Preferred Stock will continue to be listed on
the NASDAQ-NM during the pendency of the Exchange Offers; however, they will
become subject to immediate delisting if the Exchange Offers have not been
successfully completed by July 8, 1997. There can be no assurance that the
Company will be successful in completing the Exchange Offers within this time
frame. The Company has applied for listing the Common Stock to be issued in
connection with the Recapitalization on the NASDAQ-NM, which will become
effective following completion of the Recapitalization. If Nasdaq does not
continue to list the Company's securities after July 8, 1997 and during the
pendency of the remaining time needed to complete the Recapitalization process,
the Class A Common Stock and the Preferred Stock would continue to be traded on
the Nasdaq OTC Bulletin Board or on the National Quotation Bureau's Pink Sheets.
However, delisting from the NASDAQ-NM could reduce the liquidity of and the
market for the Company's common and preferred stock. Any Nasdaq action to delist
the Company's securities would not have any impact on the continued operations
or financial condition of the Company or on its ability to continue to pursue
the Recapitalization.
TAX CONSEQUENCES OF THE RECAPITALIZATION. The federal income tax
consequences to the Company and holders of its securities as a result of the
transactions occurring as part of and in connection with the Recapitalization
may be material. Although a securityholder generally will not recognize gain or
loss on its participation in the Recapitalization, a securityholder may
recognize ordinary income to the extent it receives Common Stock in exchange for
accrued interest or original issue discount. Although the Company intends to
take the position that the Common Stock will be allocated first to the stated
amount of the Outstanding Debentures, with only the excess over such principal
amount applied to accrued interest (or original issue discount), there can be no
assurance that the Internal Revenue Service ("IRS") will respect this
allocation. See "Material Federal Income Tax Consequences."
FEDERAL INCOME TAX AUDIT OF THE COMPANY. The IRS has completed its
examinations of the tax returns of the Company and its consolidated
subsidiaries, including formerly affiliated entities, for the years ended
December 31, 1989, 1990 and 1991. With respect to each examination, the IRS has
proposed material audit adjustments. The Company disagrees with the positions
taken by the IRS and has filed a protest with the IRS to vigorously contest the
proposed adjustments. After review of the IRS's proposed adjustments, the
Company estimates that, if upheld, the adjustments could result in Federal tax
liability, before interest, of
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approximately $17 million (net of amounts which may be payable by former
affiliates pursuant to tax sharing agreements). The IRS proposed adjustments, if
upheld, could also result in a disallowance of up to $147 million of available
net operating loss carryforwards, of which none are recognized, after
consideration of the valuation allowance, as of December 31, 1996. The Company
has not determined the extent of potential accompanying state tax liability
adjustments should the proposed IRS adjustments be upheld. The Company's protest
was filed in August 1995 and is still being considered by the IRS Appeals
Division. Management currently believes that the IRS's positions will not
ultimately result in any material adjustments to the Company's financial
statements. The Company is prepared to pursue all available administrative and
judicial appeal procedures with regard to this matter and the Company is advised
that its dispute with the IRS could take up to five years to resolve.
ADDITIONAL RISK FACTORS APPLICABLE TO HOLDERS OF OUTSTANDING DEBENTURES
CERTAIN CONSEQUENCES TO NON-TENDERING HOLDERS OF OUTSTANDING DEBENTURES. If
the Recapitalization is completed without the Prepackaged Plan, any holders of
remaining Outstanding Debentures who do not accept the Exchange Offers may lose
the benefit of certain restrictive provisions in the Indentures that are
intended to provide protection to the holders thereof. See "Proposed Amendments
to the Indentures."If the Proposed Amendments are approved and these restrictive
covenants are eliminated, the Company and its subsidiaries will be permitted to
make the payments or distributions and take the actions with respect to the
Company's outstanding capital stock and subordinated debt obligations (as
described above in the restrictive covenants) prior to repayment of the
Outstanding Debentures, regardless of the total amount of any such payments or
distributions. Accordingly, elimination of such restrictive covenants could lead
to a reduction in the amount of cash that the Company has available to make any
required payments on the Outstanding Debentures and could increase the risk of a
Company default on the payment of the Outstanding Debentures. The Company would
also no longer be obligated to set forth the terms of all transactions with
affiliates of the Company in writing and would no longer be subject to the
requirements set forth above that all such transactions be arm's-length
transactions. Accordingly, elimination of these restrictive covenants will
increase the risk to non-tendering holders of Outstanding Debentures that the
Company could engage in non-arm's-length transactions with its affiliates, which
transactions could reduce the financial strength of the Company and increase the
risk of a default by the Company on the Outstanding Debentures. These risks also
will only apply to holders of Outstanding Debentures which do not tender all of
their Outstanding Debentures in the Exchange Offers. In addition, because the
number of holders of Outstanding Debentures and the outstanding principal amount
of the Outstanding Debentures after the completion of the Recapitalization will
be substantially reduced, the trading market will likely become even more
limited. These events are likely to have a material adverse effect on the
liquidity and market price of any remaining Outstanding Debentures following
completion of the Recapitalization.
EFFECT OF DELAY IN COMPLETION OF THE EXCHANGE OFFERS ON OUTSTANDING
DEBENTURES. The Company will execute amended Indentures (the "Amended
Indentures") effectuating the Proposed Amendments after receipt of the Requisite
Consents from the Outstanding Debentures. Although the Amended Indentures will
not become operative until completion of the Exchange Offers, after execution of
the Amended Indentures, the Requisite Consents will be irrevocable. While the
period of time between execution of the Amended Indentures and the completion of
all of the Exchange Offers may be short, it is possible that such time period
could be substantial due to the conditions that must be satisfied prior to
completion of the Exchange Offers. See "The Exchange Offers--Conditions to the
Exchange Offers."
POSSIBLE EFFECT OF NON-ACCEPTANCES OF RECAPITALIZATION ON HOLDERS OF
SUBORDINATED DEBENTURES. Under certain circumstances the holders of Subordinated
Debentures could have their interests cancelled in the Recapitalization and
receive no consideration. This could occur if insufficient Outstanding
Debentures are tendered to the Company pursuant to the Exchange Offers such that
the 90% Requisite Acceptances are not received by the Company. As a result, the
Company could elect to proceed with a Case and seek judicial confirmation of the
Prepackaged Plan. Under such circumstances, if the holders of Subordinated
Debentures have not approved the Prepackaged Plan as a class, the Prepackaged
Plan
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provides that the Subordinated Debentures will be cancelled and the holders of
Subordinated Debentures will receive no property or distributions in exchange.
See "Risk Factors--Considerations Relating to the Filing of a Case," and "The
Prepackaged Plan--Confirmation of the Prepackaged Plan Without Acceptance by All
Voting Classes."
CONSIDERATIONS RELATING TO THE FILING OF A CHAPTER 11 CASE.
CONSIDERATIONS RELATING TO ANY FUTURE BANKRUPTCY OF THE COMPANY. Completion
of the Recapitalization through the Prepackaged Plan may have significant
consequences in the event of a subsequent bankruptcy for holders of Outstanding
Debentures and liquidated non-Contingent Claims. Since holders of Outstanding
Debentures and liquidated non-Contingent Claims will receive Common Stock under
the Prepackaged Plan, such holders will have only an equity interest in the
Company. Consequently, in any subsequent bankruptcy case, such holders'
Interests would rank in priority below all holders of Claims.
EFFECT ON OPERATIONS. The Company's operations are conducted through its
subsidiaries. Since the subsidiaries are not parties to the Prepackaged Plan and
will not file Chapter 11 Cases in connection with the Prepackaged Plan, the
Company believes that the Prepackaged Plan Solicitation and the subsequent
commencement of a Chapter 11 Case will not materially adversely affect the
subsidiaries' relationships with customers, employees and suppliers, given that
the subsidiaries can demonstrate sufficient liquidity to continue to operate
their businesses and provided that the Company can demonstrate a likelihood of
success for the Recapitalization in a reasonably short time frame. The Company
believes that Prepackaged Plan Solicitation offers the most expeditious means to
complete the Recapitalization.
It is possible that, despite the belief and intent of the Company, the
Prepackaged Plan Solicitation or any subsequent commencement of the Chapter 11
Case could adversely affect the relationships between the subsidiaries and their
customers, employees and suppliers. There is a risk that, due to uncertainty
about the Company's future, (i) employees may be distracted from performance of
their duties or more easily attracted to competitors or other career
opportunities; (ii) customers may seek alternative sources of supply or require
financial assurances of future performance; and (iii) suppliers may restrict
ordinary credit terms and require financial assurances of performance.
POSSIBLE INVALIDATION OF THE SOLICITATION BY THE BANKRUPTCY COURT. Section
1126(b) of the Bankruptcy Code provides that the holder of a claim or equity
interest who accepts or rejects a plan of reorganization before the commencement
of a Chapter 11 Case is deemed to have accepted or rejected such plan under the
Bankruptcy Code so long as the solicitation of such acceptance was made in
accordance with applicable law governing the adequacy of disclosure in
connection with such solicitation, or, if such law does not apply, such
acceptance was solicited after disclosure of "adequate information" as defined
in section 1125(a)(1) of the Bankruptcy Code. This Prospectus is being presented
to all holders of Impaired Claims against and Interests in the Company, except
for the holders of Affiliates' Claims in order to satisfy the requirements of
section 1126(b) of the Bankruptcy Code.
Even if the Requisite Prepackaged Plan Acceptances are received from each
Impaired Class, the Bankruptcy Court may find that the holders of Claims and
Interests in Impaired Classes have not validly accepted the Prepackaged Plan if
the Bankruptcy Court determines that the Prepackaged Plan Solicitation did not
comply with the requirements of section 1126(b) of the Bankruptcy Code and the
applicable Rules. In such an event, the Company may seek to resolicit votes on
the Prepackaged Plan, but confirmation of the Prepackaged Plan could be delayed
and possibly jeopardized. The Company believes (i) that the Prepackaged Plan
Solicitation is being conducted in accordance with applicable law and section
1125(a)(1) of the Bankruptcy Code and therefore complies with the requirements
of section 1126(b) of the Bankruptcy Code and applicable Bankruptcy Rules, and
(ii) that each duly executed Ballot and Master Ballot will be in compliance with
applicable provisions of the Bankruptcy Code and Bankruptcy Rules. However,
there can be no assurance that the Bankruptcy Court will reach the same
conclusions. See "The Prepackaged Plan--Confirmation of the Prepackaged Plan."
CLASSIFICATION IN TREATMENT OF CLAIMS AND INTERESTS. Section 1122 of the
Bankruptcy Code requires that the Prepackaged Plan classify the Claims of the
Company's Creditors and the Interests of its Equity
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Holders. The Code also provides that, except for certain Claims classified for
administrative convenience, the Prepackaged Plan may place a Claim or Interest
of a Creditor or Equity Holder in a particular Class only if such Claim or
Interest is substantially similar to the other Claims or Interests of such
class. The Company believes that all Claims and Interests have been
appropriately classified in the Prepackaged Plan. The Company believes separate
classification of the unsecured claims of holders of Unliquidated or Contingent
Claims, General Unsecured Claims and Subordinated Debentures is appropriate. The
separate classification for Unliquidated or Contingent Claims is necessary
because of the nature of such claims. Specifically, such classification will
allow for the Recapitalization of the Company in the quickest and least costly
manner. Moreover, the separate classification recognizes the prospect of
contractual subordination to which the holders of Senior Debentures and
Subordinated Debentures are subject. To the extent that the Bankruptcy Court
finds that a different classification is required for the Prepackaged Plan to be
confirmed, the Company presently anticipates that it would seek (i) to modify
the Prepackaged Plan to provide for whatever reasonable classification might be
required for confirmation, and (ii) to use the acceptances received from any
Creditor or Equity Holder pursuant to the solicitation for the purposes of
obtaining the approval of the Class or Classes for which such Creditor or Equity
Holder ultimately is deemed to be a member. Any such reclassification of
Creditors or Equity Holders, although subject to notice and hearing requirements
in the Bankruptcy Code, could adversely affect the Class in which such Creditor
or Equity Holder was initially a member, or any other Class under the
Prepackaged Plan, by changing the composition of such Class and a vote required
for approval of the Prepackaged Plan. There can be no assurance that the
Bankruptcy Court, after finding that a classification was inappropriate and in
requiring a reclassification, would approve the Prepackaged Plan based on such
reclassification. Except to the extent that modification of classification in
the Prepackaged Plan adversely affects the treatment of a Creditor or Equity
Holder and requires resolicitation, the Company will, in accordance with the
Bankruptcy Code and the Rules, seek a determination by the Bankruptcy Court that
acceptance by any Creditor or Equity Holder of the Prepackaged Plan pursuant to
the solicitation will constitute a consent to the Prepackaged Plans' treatment
of such Creditor or Equity Holder regardless of the Class as to which such
Creditor or Equity Holder is ultimately deemed to be a member.
The Bankruptcy Code also requires that the Prepackaged Plan provide the same
treatment for each claim or interest of a particular class unless the holder of
the particular claim or interest agrees to a less favorable treatment of its
claim or interest. The Company believes it has complied with requirements of
equal treatment. To the extent that the Bankruptcy Court finds that the
Prepackaged Plan does not satisfy such requirements the Bankruptcy Court could
deny confirmation of the Prepackaged Plan if the creditors or equity holders
affected do not otherwise consent to the treatment afforded to them under the
Prepackaged Plan.
Issues or disputes relating to classification and/or treatment could result
in a delay in the confirmation and consummation of the Prepackaged Plan and
could increase the risk that the Prepackaged Plan will not be consummated.
RISK OF NON-CONFIRMATION OF THE PREPACKAGED PLAN. Section 1129 of the
Bankruptcy Code, which sets forth the requirements for confirmation of a plan of
reorganization, requires, among other things, a finding by a Bankruptcy Court
that the confirmation of a plan is not likely to be followed by the need for
further financial reorganization, that all claims and interests have been
classified in compliance with the provisions of section 1122 of the Bankruptcy
Code and that under the plan, holders of claims and equity interests within
impaired classes receive or retain cash or property of a value, as of the date
the plan becomes effective, that is not less than the value such holders would
receive or retain if the debtor were liquidated under the Bankruptcy Code. See
"The Prepackaged Plan--Confirmation of the Prepackaged Plan."
There can be no assurance that the Bankruptcy Court will conclude that these
tests and other requirements of section 1129 of the Bankruptcy Code have been
met with respect to the Prepackaged Plan. If the Prepackaged Plan is filed,
there can be no assurance that modifications thereof would not be required for
confirmation, or that such modifications would not require a resolicitation of
votes on the Prepackaged Plan. The Company believes that if the Prepackaged Plan
is confirmed, it would not be
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followed by an immediate need for further financial reorganization and that
holders of Claims and Interests in any Impaired Class will receive or retain
value that is significantly greater than the value such holders would receive or
retain if the Company were liquidated under the Bankruptcy Code. See "The
Prepackaged Plan--Confirmation of the Prepackaged Plan." However, there can be
no assurance that the Court will reach the same conclusions.
Confirmation and effectiveness of the Prepackaged Plan is also subject to
certain conditions being satisfied on or prior to the Effective Date. No
assurances can be given that these conditions will be satisfied or waived or
that any necessary consent, including the Requisite Prepackaged Plan Acceptances
from each Impaired Class, will be obtained.
NONACCEPTANCE OF THE PREPACKAGED PLAN--CONFIRMATION UNDER SECTION 1129(B) OF
THE BANKRUPTCY CODE. In the event any Impaired Class of Claims or Interests
rejects the Prepackaged Plan, the Bankruptcy Court, pursuant to section 1129(b)
of the Bankruptcy Code, may nevertheless confirm the Prepackaged Plan at the
Company's request if at least one Impaired Class of Claims or Interests has
accepted the Prepackaged Plan (with such acceptance being determined without
including the acceptance of any "insider" in such Class) and, as to each
Impaired Class which has not accepted the Prepackaged Plan, the Bankruptcy Court
determines that the Prepackaged Plan "does not discriminate unfairly" and is
"fair and equitable" with respect to such Impaired Class. In the event Classes
6, 7 or 8 do not vote to accept the Prepackaged Plan, the Company intends (and
the Prepackaged Plan so provides) to seek confirmation of the Prepackaged Plan
under section 1129(b) provisions with respect to such rejecting Class or
Classes. Under such circumstances, the subordination provisions of the Senior
Debenture Indenture will be strictly construed and the holders of such rejecting
Class or Classes will retain no property nor receive any distributions under the
Prepackaged Plan. Any distributions otherwise due such rejecting Class or
Classes will be given to the holders of Class 5 Claims. See "The Prepackaged
Plan--Confirmation Without Acceptance of All Impaired Classes."
RISK ASSOCIATED WITH THE RELEASES UNDER THE PREPACKAGED PLAN. The staff of
the Division of Corporation Finance of the Commission (the "Staff") has
indicated to the Company that it is the Staff's view that the releases of the
Company by claimants and interest holders exceeds the scope of the discharge set
forth in Sections 524 and 1141 of the Bankruptcy Code. Accordingly, it is the
Staff's view that the release provision may render the Prepackaged Plan
non-confirmable under Section 1129 of the Bankruptcy Code. As a result, the SEC
(or a creditor or interest holder) may file an objection to the Prepackaged Plan
based on the foregoing.
It is the Company's position, however, that the release provision does not
render the Prepackaged Plan non-confirmable. The Company believes that Section
524 of the Bankruptcy Code describes the effects of the discharge of a debt and
does not prohibit the inclusion in a plan of reorganization of release
provisions that are separate and apart from the discharge provisions. The
Company believes that case law will support the inclusion of the releases
because the Company believes that they would advance the completion of the
Recapitalization and would benefit the bankruptcy estate. For example, in the
case of IN RE THE DREXEL BURNHAM LAMBERT GROUP, INC., 130 Bankr. 910 (S.D.N.Y.
1991), the release and injunction provisions, which also covered non-debtor
third parties and were included as part of a settlement of existing litigation,
did not prevent confirmation of a plan of reorganization because they advanced
the completion of a plan of reorganization and benefited the bankruptcy estate.
The Company believes that the Drexel rationale is applicable even though the
releases included in the Prepackaged Plan are not part of the settlement of
existing litigation. As of the date of this Prospectus, however, the Company is
not aware of any existing or threatened litigation to which the release
provision would apply. There can be no assurance, however, that the Bankruptcy
Court will agree with the Company's position.
The Company believes that it will meet the requirements of section 1129(b)
of the Code with respect to the Prepackaged Plan; however, there can be no
assurance that the Court will reach the same conclusion.
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PROJECTIONS INHERENTLY UNCERTAIN. The "Projections of Certain Financial
Data of the Company" set forth below (the "Projections"), were developed by the
Company and its financial advisors in connection with the planning and
development of the Recapitalization and the development of the Prepackaged Plan
and illustrate the estimated effects of the Prepackaged Plan and certain related
transactions on the results of operations and financial position of the Company
and its subsidiaries for the periods indicated. The Projections are qualified by
the introductory paragraphs thereto and the accompanying assumptions and must be
read in conjunction with such introductory paragraphs and assumptions which
constitute an integral part of the Projections. The Projections assume that all
aspects of the Prepackaged Plan will be successfully implemented on the terms
outlined in this Prospectus. The Projections were not prepared with a view
towards public disclosure or compliance with the published guidelines of the
American Institute of Certified Public Accountants regarding financial
projections, nor have they been presented in lieu of pro forma historical
financial information and, accordingly, are not intended to comply with Rule
11-03 of Regulation S-X. Neither the independent auditors for the Company nor
any other independent auditors have examined, reviewed, compiled or performed
any procedures with respect to these projections and, accordingly, do not
express an opinion or any other form of assurance on them and assume no
responsibility for them. These Projections are based upon a variety of
assumptions and the Company's future operating results are subject to and likely
to be affected by a number of factors, including significant economic,
regulatory and competitive uncertainties and the availability of financing, all
which are beyond the control of the Company. There can be no assurance that the
Projections (which are only estimates) will be realized and actual results may
vary materially from those shown. Because the Projections are subject to
significant uncertainties and are based upon assumptions that may not prove to
be correct, holders of Impaired Claims and Interests are cautioned not to place
undue reliance on these Projections. The Projections should not be relied on for
any purpose other than in considering whether to vote to accept or reject the
Prepackaged Plan. See "Projections of Certain Financial Data of the Company" and
"The Prepackaged Plan--Feasibility" for certain additional considerations
regarding the Projections.
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THE COMPANY RECAPITALIZATION
BACKGROUND OF THE RECAPITALIZATION. The Company originally issued the
Outstanding Debentures in 1989 to its affiliate, The Henley Group, Inc. ("Henley
Group"). The Outstanding Debentures were then publicly distributed to Henley
Group stockholders in 1992 prior to a merger (the "Merger") by and among the
Company (then originally known as Henley Properties, Inc.), HP Merger Co. and
Henley Group pursuant to which Henley Group became a wholly owned subsidiary of
the Company. The Outstanding Debentures were distributed in 1992 in the
respective principal amounts of $127.52 million of Senior Debentures and $31.8
million of Subordinated Debentures. Interest on the Outstanding Debentures is
currently payable, and historically has been paid, "in kind" through the
issuance of additional Senior and Subordinated Debentures, respectively. As of
March 15, 1997, there was an aggregate of $205.7 million in principal amount of
the Outstanding Debentures of which amount $164.6 million and $41.1 million,
respectively, was attributable to the Senior Debentures and Subordinated
Debentures. If the Outstanding Debentures remain outstanding until their March
15, 2002 maturity date, the Company will incur approximately $162.8 million in
additional debt with respect to the Outstanding Debentures, resulting in
approximately $368.5 million in outstanding principal amount of the Outstanding
Debentures at maturity. Upon maturity, the Outstanding Debentures are payable in
shares of Common Stock, valued at the fair market value based on a 20-day
average closing price, provided that such price is not less than $0.50 per
share. The Company's financial advisors have assisted the Company in preparing
an analysis which indicates that the Company would need to earn a compounded
return of greater than 30% per annum on the free cashflow generated by the
Company's assets between 1997 and 2002 in order to fully pay the face amount of
the Senior Debentures and Subordinated Debentures at maturity in 2002. As an
alternative to waiting until the 2002 maturity date, the Company engaged in
extensive negotiations with representatives of the members of the Debenture
Holders' Committee in order to develop a proposal to exchange the Outstanding
Debentures for Common Stock. Based on the current valuation prepared by the
Company with the assistance of HLHZ, which is subject to the assumptions
detailed in this Prospectus, holders of Senior Debentures would receive Common
Stock worth between approximately $0.50 and $0.53 per $1.00 of principal amount
outstanding on March 15, 1997 and holders of Subordinated Debentures would
receive Common Stock worth between approximately $0.25 and $0.265 per $1.00 of
principal amount outstanding on March 15, 1997 depending upon whether 90% or up
to 100% of the holders of Outstanding Debentures accept the Exchange Offers. If
the 90% Requisite Exchange Acceptance is not obtained, the Company intends to
effect the Recapitalization by seeking a Court order confirming the Prepackaged
Plan. Representatives of the members of the Debenture Holders' Committee have
recently informed the Company that the members hold in the aggregate
approximately 70% of the Outstanding Debentures, and have indicated to the
Company that they intend to support the Exchange Offers and the Prepackaged Plan
if the 90% Requisite Exchange Acceptance are not obtained.
As discussed below, the Outstanding Debentures have created a highly
leveraged capital structure which is restricting the Company's ability to obtain
financing on favorable terms, which financing is necessary for the Company to
maximize the growth of its business, including, but not limited to, its
commercial and residential real estate development business and development of
its Bolsa Chica project. Such new financing currently is not expected to exceed
$30 million (exclusive of Project Debt). In addition, concern about the
Company's financial strength has adversely affected the Company's commercial
development business opportunities. Of particular concern to the Company's
current and prospective client base, has been the consistent reporting of
quarterly losses and the impending negative net worth which are primarily a
result of the "in-kind" interest expense associated with the Outstanding
Debentures. In addition to lost commercial development opportunities, the
Company has experienced problems with its ability to attract and retain key
commercial and residential development team personnel due to their concern as to
the ability of the Company to compete for new business. Therefore, the Company
believes that the Recapitalization will substantially enhance its current and
prospective business opportunities by eliminating the financial concern that the
Outstanding Debentures have caused. Commencing in August 1996, in order to
pursue the Company's stated strategic objective to evaluate alternatives to
deleverage the Company's capital structure in order to address the above
described concerns, the
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Company began negotiations with representatives of the members of the Debenture
Holders' Committee. The proposed Recapitalization is the result of those
negotiations and is supported by the Company and the representatives of the
members of the Debenture Holders' Committee and their financial advisors who
urge all holders of Outstanding Debentures to tender their Outstanding
Debentures pursuant to the Exchange Offers and to vote in favor of the
Prepackaged Plan. The representatives of the Debenture Holders' Committee
negotiated on their own behalf in connection with their interests as holders of
Outstanding Debentures and not with a view toward the circumstances of any other
holder. The representatives of the Debenture Holders' Committee are:
BankofAmerica Investment Corp.; Continental Casualty Company; CS First Boston
Corporation; ING Barings (U.S.) Capital Corp.; Merrill, Lynch, Pierce, Fenner &
Smith Incorporated; and Wheelabrator Technologies, Inc.
DESCRIPTION OF THE RECAPITALIZATION. The proposed Recapitalization consists
of the major elements summarized below. The Company is seeking to exchange all
of the Outstanding Debentures for Common Stock pursuant to the Exchange Offers
and is seeking acceptances of the Prepackaged Plan from the holders of the
Outstanding Debentures, Preferred Stock, Common Stock and the holders of other
Impaired Claims and Interests. If the Company does not receive the 90% Requisite
Exchange Acceptances but does receive the Requisite Prepackaged Plan Acceptances
(as described below in "Summary-- Prepackaged Plan--Prepackaged Plan
Acceptances"), the Company intends to seek judicial relief and use such
acceptances to obtain confirmation of the Prepackaged Plan. See "Summary--The
Prepackaged Plan" and "The Prepackaged Plan."
EXCHANGE OFFERS FOR THE OUTSTANDING DEBENTURES. As of the date of this
Prospectus, $162.8 million and $41.1 million in principal amount of the Senior
Debentures and Subordinated Debentures, respectively, were outstanding. As of
April 15, 1997, there were 6,643 registered holders of the Senior Debentures and
1,752 registered holders of the Subordinated Debentures. Pursuant to the
Exchange Offers, the Company is offering to exchange (i) 56 shares of Common
Stock, on a post-Capital Stock Combination and a post-Reverse Stock Split basis,
for each $1,000 principal amount of Senior Debentures, outstanding, without
subsequent accrued and unpaid interest, and (ii) 28 shares of Common Stock, on a
post-Capital Stock Combination and a post-Reverse Stock Split basis, for each
$1,000 principal amount of Subordinated Debentures, outstanding, without
subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and will waive all rights and claims to,
accrued and unpaid interest on all Outstanding Debentures tendered for exchange.
See "The Exchange Offers." See "The Exchange Offers--Treatment of Fractional
Shares."
CONSENT SOLICITATION WITH RESPECT TO THE OUTSTANDING
DEBENTURES. Concurrently with the making of the Exchange Offers, the Company is
soliciting from the holders of the Outstanding Debentures their consents to the
Proposed Amendments to remove certain restrictive covenants under the Indentures
in the event all Outstanding Debentures are not exchanged in the
Recapitalization. See "Proposed Amendments to Indentures." The Proposed
Amendments, if implemented, would remove restrictive covenants from the
Indentures which currently prohibit the Company from making payments or
distributions to debt subordinated to the Outstanding Debentures or to equity
holders prior to repayment of the Outstanding Debentures and which prohibit the
Company from entering into non-arms length transactions with non-subsidiary
affiliates.
CAPITAL STOCK COMBINATION AND REVERSE STOCK SPLIT. As part of the
Recapitalization, the Company is recommending to the holders of Class A Common
and Preferred Stock that they approve proposals at the Annual Meeting, which
among other things, approve amendments to the Restated Certificate in order to
effect the Capital Stock Combination and to effect the Reverse Stock Split.
Pursuant to the Capital Stock Combination, all classes and series of capital
stock would be reclassified and combined into one class of capital stock
designated "Common Stock." Each outstanding share of Preferred Stock will be
reclassified to be one and three quarter (1.75) shares of Common Stock and each
outstanding share of Class A Common Stock will be reclassified to be one (1)
share of Common Stock. After the Capital Stock Combination, the Common Stock
will have the same rights, preferences and privileges that the Class A
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Common Stock had prior to the Capital Stock Combination. As part of the Capital
Stock Combination the ability of the Board to issue preference shares of capital
stock without stockholder approval will be eliminated. Pursuant to the Reverse
Stock Split each outstanding share of capital stock will be reverse split on a
one for one hundred (1:100) basis. Representatives of members of the the
Debenture Holders' Committee have recently informed the Company that the members
hold in the aggregate approximately 33% and 13%, respectively, of the Preferred
Stock and Class A Common Stock, and have indicated to the Company that the
members intend to approve the Capital Stock Combination and the Reverse Stock
Split. In addition, the holder of 30.5% and 11.5%, respectively, of the
Preferred Stock and Class A Common Stock has indicated to the Company that it
intends to approve the Capital Stock Combination and the Reverse Stock Split. No
fractional shares of Common Stock will be issued pursuant to the Capital Stock
Combination and/or Reverse Stock Split. See "The Company Annual
Meeting--Proposal No. 2."
OTHER CHARTER AMENDMENTS AND BOARD DECLASSIFICATION AND RECONSTITUTION. As
part of the Recapitalization, various amendments to the Company's charter
documents and related actions are being proposed to be implemented either
pursuant to the Annual Meeting or under the Prepackaged Plan. See "The Company
Annual Meeting" and "The Prepackaged Plan." The charter amendments are intended
to delete the classified Board and to remove all anti-takeover provisions,
including all supermajority voting provisions, restrictions on stockholders'
ability to call special meetings and restrictions on stockholders' ability to
act by written consent. The Company is also proposing to reconstitute and expand
the Board in connection with the Recapitalization to include four (4) incumbent
directors and six (6) new director nominees each to serve one (1) year terms.
AMENDMENT OF 1993 STOCK OPTION PLAN. In connection with the
Recapitalization, the Company will amend the 1993 Stock Option Plan to (i)
provide that only shares of the Company's Common Stock, rather than both Common
Stock and Preferred Stock (which are being converted into Common Stock upon
completion of the Capital Stock Combination) shall be issuable under the 1993
Stock Option Plan, and (ii) reduce the aggregate number of shares that may be
issued under the 1993 Stock Option Plan from 7,500,000 shares of the Company's
Preferred Stock and 7,500,000 shares of the Company's Common Stock (as
determined on a pre-Capital Stock Combination and pre-Reverse Stock Split basis)
to 751,449 shares of the Company's Common Stock (as determined on a post-Capital
Stock Combination and post-Reverse Stock Split basis) which would represent 6%
of the Company's equity on a fully diluted basis. Except for such amendments,
the 1993 Stock Option Plan will continue to function in the same manner as prior
to the Recapitalization, except that appropriate adjustments will be made to the
1993 Stock Option Plan to reflect the changes in the Company's capital structure
upon completion of the Recapitalization.
In addition, and in connection with such amendments to the 1993 Stock Option
Plan, each of the current holders of outstanding options granted under the 1993
Stock Option Plan have agreed to cancel their existing outstanding options to
purchase an aggregate of (i) 6,275,000 shares of the Company's Common Stock, and
(ii) 6,275,000 shares of the Company's Preferred Stock as determined on a pre-
Capital Stock Combination and pre-Reverse Stock Split basis, which would
approximate 12% of the Company's equity on a fully diluted basis. The Company
currently intends to grant new options to purchase an aggregate of 751,449
shares of the Company's Common Stock, as determined on a post-Capital Stock
combination and post-Reverse Stock Split basis. The exercise price per share of
the Company's Common Stock for each such newly granted option will be equal to
the average of the per share trading price of the Company' Common Stock on
NASDAQ for the first 20 trading day period commencing immediately following the
completion of the Recapitalization. Such newly granted options will vest,
subject to the 1993 Stock Option Plan's existing option vesting provisions, over
a three year period with 40%, 30% and 30% vesting on each of the first, second
and third anniversaries, respectively, of the completion of the
Recapitalization. Upon completion of the Recapitalization, the shares issuable
under such newly granted options will represent 6% of the Company's fully
diluted equity.
THE PREPACKAGED PLAN. As described above, if the Company does not receive
the 90% Requisite Exchange Acceptance but does receive the Requisite Prepackaged
Plan Acceptances, the Company intends
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to effect the Recapitalization by seeking a judicial confirmation of the
Prepackaged Plan. See "Summary The Prepackaged Plan" and "The Prepackaged Plan."
PURPOSES AND CERTAIN RESULTS OF RECAPITALIZATION. The proposed
Recapitalization, whether achieved pursuant to the Exchange Offers and the
Annual Meeting Proposals or pursuant to the Prepackaged Plan, is intended to
deleverage the Company's capital structure for the reasons described above.
The following table sets forth the beneficial ownership of the Common Stock
which management estimates will be held by classes of current creditors and
security holders of the Company upon the effectiveness of the Recapitalization
pursuant to either the Exchange Offers, assuming acceptance by 100% of the
holders of Outstanding Debentures, or pursuant to the Prepackaged Plan.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
FOLLOWING FOLLOWING
RECAPITALIZATION RECAPITALIZATION PERCENT OF CLASS PURSUANT
PURSUANT TO PURSUANT TO TO EXCHANGE OFFERS OR
CLASS OF CURRENT SECURITY EXCHANGE OFFERS PREPACKAGED PLAN PREPACKAGED PLAN
- -------------------------------- ------------------------ ------------------------ -------------------------
<S> <C> <C> <C>
Senior Debentures and liquidated
non-Contingent Claims.......... 9,439,080 9,481,080 80.3%
Subordinated Debentures......... 1,151,864 1,151,864 9.8%
Preferred Stock................. 680,516 680,516 5.8%
Common Stock.................... 489,385 489,385 4.1%
</TABLE>
OPERATIONS AFTER THE RECAPITALIZATION. If the Recapitalization is
completed, the Company currently anticipates that it will continue to pursue its
operations and strategic goals, including to (i) obtain new financing for
development of the Bolsa Chica mesa; (ii) successfully defend against litigation
challenging Coastal Commission approval of the Bolsa Chica project; (iii)
complete the secondary permitting for development of the Bolsa Chica mesa; (iv)
commence infrastructure construction on the Bolsa Chica mesa in the fourth
quarter of 1997; and (v) continue the growth of its commercial development
business on a national and international basis. There can be no assurance that
the Company will accomplish, in whole or in part, all or any of these strategic
goals.
DETERMINATIONS AND RECOMMENDATIONS OF THE BOARD OF DIRECTORS. The Board has
determined that (i) the Recapitalization is in the best interests of the Company
and its security holders, (ii) it is in the best interests of the Company and
its security holders to solicit pre-petition acceptances of the Prepackaged
Plan, to be implemented in the event that the Recapitalization is not completed,
provided that at such time the Board deems it in the best interests of the
Company and its security holders to file a petition, and (iii) it is in the best
interests of the Company and its security holders that the Annual Meeting
Proposals be approved. The Board also recommends that (i) the holders of the
Outstanding Debentures accept the Exchange Offers, and grant consents to the
Proposed Amendments, (ii) the holders of the Outstanding Debentures, Preferred
Stock and Class A Common Stock and holders of other claims or equity interests
Impaired under the Prepackaged Plan approve the Prepackaged Plan, and (iii) the
holders of the Common Stock and the Preferred Stock entitled to vote approve the
Annual Meeting Proposals. In arriving at its decision, the Board considered,
among other things, the following factors:
1. The Board's familiarity with the Company's business, operations and
financial condition and its future prospects, including the current cost and
availability of capital as a result of its leveraged capital structure, the
continued reporting of operating losses and the resulting loss of business
opportunities;
2. The fact that completion of the Recapitalization would substantially
deleverage the Company's capital structure which the Board believes would
allow the Company to obtain financing on more favorable terms which is
necessary for the Company to maximize realization of asset values and the
growth of its business, including, but not limited to, its commercial and
residential real estate development business and the development of the
Bolsa Chica property;
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<PAGE>
3. The fact that confirmation of the Prepackaged Plan, if necessary and
approved by the Board, would generally give effect to the same transactions
as the Recapitalization through a judicial proceeding; and
4. Presentations by the Company's management and its financial and
legal advisors.
Based on the foregoing, the Board determined that the Recapitalization was
in the best interests of the Company and its security holders and decided to
recommend approval of all elements of the Recapitalization. Each of the
foregoing factors supported the Board's determination, and the Board did not
assign relative weight to any of the foregoing factors.
DETERMINATIONS AND RECOMMENDATIONS OF THE MEMBERS OF THE DEBENTURE HOLDERS'
COMMITTEE. The representatives of the members of the Debenture Holders'
Committee have indicated to the Company that the members support the
Recapitalization and intend to vote in favor of it. The representatives of the
members of the Debenture Holders' Committee recommend that all holders of
Outstanding Debentures vote to accept the Recapitalization. The members of the
Debenture Holders' Committee's decision to support the Recapitalization and to
recommend that all holders of Outstanding Debentures vote to accept the
Recapitalization was based upon, among other things, its determination that (i)
the consideration to be received by the holders of Outstanding Debentures will
provide such holders with a significant equity interest in the Company, (ii) the
value of the Company will be significantly enhanced by the Recapitalization, and
(iii) the Company will have substantially greater financing and development
opportunities in the event the Company is deleveraged.
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THE EXCHANGE OFFERS
GENERAL. As of the date of this Prospectus, $164.6 million and $41.1
million in principal amount of Senior Debentures and Subordinated Debentures,
respectively, were outstanding. As of April 15, 1997, there were 6,643
registered holders of the Senior Debentures and 1,752 registered holders of the
Subordinated Debentures. Upon the terms and subject to the conditions of the
Exchange Offers, the Company is offering to exchange (i) 56 shares of Common
Stock, on a post-Capital Stock Combination and a post-Reverse Stock Split basis,
for each $1,000 principal amount of Senior Debentures, outstanding, without
subsequent accrued and unpaid interest, and (ii) 28 shares of Common Stock, on a
post-Capital Stock Combination and a post-Reverse Stock Split basis, for each
$1,000 principal amount of Subordinated Debentures, outstanding, without
subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and waive all rights and claims to,
accrued and unpaid interest on all Outstanding Debentures tendered for exchange.
No fractional shares of Common Stock will be issued in the Exchange Offers. See
"The Exchange Offers--Treatment of Fractional Shares." Copies of this Prospectus
and the Consent and Letter of Transmittal are being sent to the Record Holders
and to all known beneficial holders of the Outstanding Debentures. If all of the
Outstanding Debentures are exchanged pursuant to the Exchange Offers, the
Company will be required to issue a total of approximately 10,369,184 shares of
Common Stock in payment for the tendered Outstanding Debentures.
The Company shall be deemed to have accepted validly tendered Outstanding
Debentures in the Exchange Offers and validly delivered consents in the Consent
Solicitations when, as and if, the Company has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders of Outstanding Debentures for the purposes of receiving the
shares of Common Stock from the Company. Subject to the satisfaction of the
conditions set forth below under "Conditions of the Exchange Offers," the
Company will accept on or promptly after the Expiration Date, all Outstanding
Debentures validly tendered (and not withdrawn) on or prior to 12:00 midnight,
Eastern Daylight Time, on the Expiration Date. The shares of Common Stock will
be delivered in exchange for the Outstanding Debentures accepted in the Exchange
Offers promptly after acceptance.
Holders of Outstanding Debentures who tender in the Exchange Offers will not
be required to pay brokerage commissions or fees, or, subject to the
instructions in the Consent and Letter of Transmittal, transfer taxes with
respect to the exchange of Outstanding Debentures pursuant to Exchange Offers.
The Company will pay all charges and expenses, other than any applicable
income/capital gains taxes, in connection with the Exchange Offers.
The background and purpose of the Exchange Offers are discussed under "The
Company Recapitalization--Background of the Recapitalization" and "Purposes and
Certain Results of the Recapitalization."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS. The Expiration Date is 12:00
midnight, Eastern Daylight Time on June , 1997, unless the Company, in its
sole discretion (as limited by applicable law), extends the Exchange Offers or
Consent Solicitations, in which case the Expiration Date shall be the latest
date to which the Exchange Offers or the Consent Solicitation is extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m. Eastern Daylight Time, on the next
business day after the previously scheduled Expiration Date. Such announcement
may state that the Company is extending the Exchange Offers or Consent
Solicitations, as the case may be, for a specified period of time or on a daily
basis until 12:00 midnight, Eastern Daylight Time, on the date on which the
Requisite Consents have been received or on which a specified percentage of
Outstanding Debentures has been tendered, as applicable. Any such notice shall
also include disclosure of the approximate principal amount of Outstanding
Debentures theretofore validly tendered pursuant to the Exchange Offers and not
properly withdrawn. If the Exchange Offers are extended, the Company may, but
shall not be required to, postpone or adjourn the Annual Meeting. See "The
Company Annual Meeting-- Proxy Solicitation."
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The Company expressly reserves the right to (i) delay accepting any consents
or Outstanding Debentures, to extend the Exchange Offers or Consent
Solicitation, or to terminate the Exchange Offers or Consent Solicitations and
not accept consents or Outstanding Debentures not previously accepted if any of
the conditions set forth herein under "Conditions of the Exchange Offers" shall
not have been satisfied and shall not have been waived by the Company, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, (ii) amend at any time, or from time to time, the terms of any of the
Exchange Offers or Consent Solicitations in any manner, and (iii) modify the
form or amount of the consideration to be paid pursuant to the Exchange Offers,
provided that any such modified consideration will be provided to all tendering
holders of Outstanding Debentures, even if they tendered their Outstanding
Debentures in the Exchange Offers prior to the modification, and provided
further that no increase or decrease in the amount of Outstanding Debentures
being sought or in the consideration offered in the Exchange Offers will be
made, unless such Exchange Offers will remain open for at least ten (10)
business days from the date that notice of such increase or decrease is first
publicized, sent or given to the holders of Outstanding Debentures. Any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by public announcement thereof. If the terms of any of
the Exchange Offers are amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose any such
amendment in a manner reasonably calculated to inform the holders of Outstanding
Debentures of such amendment and the Company will extend the Exchange Offers or
Consent Solicitations, as the case may be, for a period which the Company in its
discretion deems appropriate, depending upon the significance of the amendment
and the manner of disclosure to holders of the Outstanding Debentures, if the
Exchange Offers or Consent Solicitation would otherwise expire during such
period. During any such delay or extension, all Outstanding Debentures
previously tendered and not accepted for exchange or withdrawn will remain
subject to the Exchange Offers (including the right to withdraw tendered
Outstanding Debentures as set forth under "Withdrawal Rights" below) and may be
accepted for exchange by the Company. The rights reserved by the Company in this
paragraph are in addition to its rights set forth under "Conditions of the
Exchange Offers."
Without limiting the manner in which the Company may choose to make a public
announcement of any extension, amendment or termination of the Exchange Offers
or Consent Solicitations, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement.
PROPOSED AMENDMENTS. In order to effect a valid tender of the Outstanding
Debentures, tendering holders of Outstanding Debentures are required to consent
to the Proposed Amendments in respect of the Senior Debentures or Subordinated
Debentures, as applicable. The Exchange Offers are conditioned upon the Company
obtaining the Requisite Consents. The Company may, in its sole discretion, waive
this condition and reserves the right to accept Outstanding Debentures tendered
in the Exchange Offers even if the Requisite Consents are not obtained,
provided, if such condition is waived, holders of Outstanding Debentures
tendered in the Exchange Offers will receive the same consideration whether or
not they granted consents to the Proposed Amendments.
For the Proposed Amendments to become effective with respect to the
Outstanding Debentures, holders (other than the Company and its affiliates) of
not less than a majority of the aggregate principal amount of the Senior
Debentures and Subordinated Debentures, respectively, must grant Consents with
respect thereto and such valid and unrevoked consents must have been delivered
to the Exchange Agent. As of March 15, 1997, $164.6 million aggregate principal
amount of Senior Debentures and $41.1 million aggregate principal amount of
Subordinated Debentures, respectively, was outstanding and owned by persons
other than the Company and its affiliates. Subject to the conditions set forth
in the Indentures, upon the Company's receipt of the Requisite Consents to the
Proposed Amendments, the Company will cause such consents to be delivered to the
appropriate persons as promptly as possible and the Amended Indentures will be
executed and delivered immediately thereafter, provided, however, that the
provisions of the Amended Indentures will not become operative until the
Exchange Offers are completed.
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<PAGE>
Only a Record Holder of the Outstanding Debentures can effectively consent
to the Proposed Amendments. See "Procedure for Tendering Outstanding Debentures
and Giving Consents" for information concerning tendering procedures for persons
who are not Record Holders. No transfer of Outstanding Debentures on the
register for such Outstanding Debentures prior to the Expiration Date therefore
will have the effect of revoking any consent theretofore given by the Record
Holder of such Outstanding Debentures, and such consent will remain valid unless
revoked by the person in whose name the Outstanding Debentures are then
registered on the register for the Outstanding Debentures. Such revocation will
become effective only if the Exchange Agent receives the notice of revocation
before the Expiration Date. See "Revocation of Consents; Defective Tenders"
below. As set forth below under "Withdrawal Rights," the withdrawal of
Outstanding Debentures in accordance with the procedures set forth thereunder
will not effect revocation of a Consent.
PROCEDURE FOR TENDERING OUTSTANDING DEBENTURES AND GIVING CONSENTS. The
acceptance by a holder of Outstanding Debentures of an Exchange Offer pursuant
to one of the procedures set forth below will constitute an agreement between
the holder and the Company in accordance with the terms and subject to the
conditions set forth in this Prospectus and in the Consent and Letter of
Transmittal.
A holder of Outstanding Debentures electing to tender Outstanding Debentures
in the Exchange Offers and, with respect to Outstanding Debentures, to consent
to the Proposed Amendments should either (i) complete and sign the Consent and
Letter of Transmittal or a facsimile thereof, and have the signature thereon
guaranteed if required by the instructions thereof and mail or otherwise deliver
such Consent and Letter of Transmittal, or such facsimile, together with
certificates representing the Outstanding Debentures and any other required
documents, to the Exchange Agent at its address set forth on the back cover of
the Prospectus, or (ii) request its broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for it. A holder of
Outstanding Debentures who wishes to vote on the Prepackaged Plan should follow
the instructions for voting on the Prepackaged Plan. For the additional
procedures necessary to vote on the Prepackaged Plan, see "Prepackaged Plan
Solicitation--Voting Procedures."
NO CONSENTS AND LETTERS OF TRANSMITTAL AND NO OUTSTANDING DEBENTURES SHOULD
BE SENT TO THE COMPANY OR TO THE TRUSTEE UNDER EITHER OF THE INDENTURES.
All signatures on a Consent and Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by an Eligible Institution
(as defined below) unless the Outstanding Debentures tendered pursuant thereto
are tendered (i) by a Record Holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
relevant Consent and Letter of Transmittal, or (ii) for the account of an
Eligible Institution (as defined below). If Outstanding Debentures are
registered in the name of a person other than the signer of a Consent and Letter
of Transmittal or a notice of withdrawal, as the case may be, then the
Outstanding Debentures must be endorsed by the registered holder. Holders who
are the registered holders of Outstanding Debentures and who seek to tender
Outstanding Debentures, but who were not the Record Holders of such Outstanding
Debentures on the Record Date, should obtain and include with the Consent and
Letter of Transmittal a properly completed proxy from the Record Holder, with
signatures on the proxy guaranteed by an Eligible Institution. Any beneficial
owner whose Outstanding Debentures are registered or held of record in the name
of its broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender its Outstanding Debentures in the Exchange Offers and, with
respect to Outstanding Debentures, to grant its consent in the Consent
Solicitation should (i) contact such registered holder promptly and instruct
such holder to tender on its behalf, (ii) obtain and include with the Consent
and Letter of Transmittal the Outstanding Debentures properly endorsed for
transfer by the Record Holder or accompanied by a properly completed bond power
from the holder of record, together with a properly completed irrevocable proxy
that authorizes such person to consent to the Proposed Amendments on behalf of
such Record Holder, with signatures on the endorsement or bond power guaranteed
by an Eligible Institution, or
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<PAGE>
(iii) effect a record transfer of such Outstanding Debentures from the Record
Holder to such beneficial owner and comply with the requirements applicable to
Record Holders for tendering Outstanding Debentures and delivering Consents
prior to 12:00 midnight, Eastern Daylight Time, on the Expiration Date, as the
case may be. The transfer of record ownership of Outstanding Debentures may take
considerable time and, depending on when such transfer is requested, may not be
accomplished prior to the Expiration Date. If signatures on a Consent and Letter
of Transmittal are required to be guaranteed, such guarantees must be by a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. ("NASD"), or by a commercial
bank, trust company, credit union or savings association having an office in the
United States (each of which is an "Eligible Institution").
THE METHOD OF DELIVERY OF THE OUTSTANDING DEBENTURES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER OF THE
OUTSTANDING DEBENTURES, BUT, IF SUCH DELIVERY IS EFFECTED BY MAIL, IT IS
RECOMMENDED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE AS TO ASSURE DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE.
Unless the Outstanding Debentures being tendered are deposited with the
Exchange Agent prior to the Expiration Date (accompanied by a properly completed
Consent and Letter of Transmittal and any other documents required by the
Consent and Letter of Transmittal), or tendered pursuant to the guaranteed
delivery procedures or book-entry transfer procedures set forth below, the
Company may, at its option, reject such tender. In addition, if the Company
receives the 90% Requisite Exchange Acceptances, then the Company reserves the
right to accept all properly tendered Outstanding Debentures whether or not,
with respect to Outstanding Debentures, the holder thereof has granted the
applicable Consent. Issuance of shares of Common Stock in exchange for
Outstanding Debentures will be made only against deposit of the tendered
Outstanding Debentures. If less than the entire principal amount of any
Outstanding Debentures evidenced by a submitted certificate is tendered, the
tendering holder should fill in the principal amount tendered in the appropriate
box on the Consent and Letter of Transmittal with respect to the deposit being
made, but only to the extent of the principal amount of Outstanding Debentures
being tendered. The Exchange Agent will then return to the tendering holder
(unless otherwise requested by the holder under "Special Delivery Instructions"
in the relevant Consent and Letter of Transmittal), as promptly as practicable
following the Expiration Date, Outstanding Debentures in principal amount equal
to the portion of such delivered Outstanding Debentures not tendered. The entire
principal amount of Outstanding Debentures deposited with the Exchange Agent
will be deemed to have been tendered, unless otherwise indicated.
Holders of Outstanding Debentures who do not tender their Outstanding
Debentures and who wish to vote on the Prepackaged Plan and/or who wish to
consent to the Proposed Amendments with respect to Outstanding Debentures should
complete the Consent and Letter of Transmittal (which will serve as the form of
consent and/or ballot) in accordance with the instructions thereto and return it
promptly to the Exchange Agent, who will transmit it to the Company.
If a holder of Outstanding Debentures desires to tender Outstanding
Debentures pursuant to an Exchange Offer, but is unable to locate the
Outstanding Debentures to be tendered, such holder may tender such lost
Outstanding Debentures by executing a Consent and Letter of Transmittal and the
Affidavit of Loss set forth therein.
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Each tendering holder of Outstanding Debentures must complete the Substitute
Form W-9 provided in the Consent and Letter of Transmittal and either (i)
provide his correct taxpayer identification number (social security number, for
individuals) and certify that the taxpayer identification number provided is
correct (or that such holder is awaiting a taxpayer identification number) and
that (A) the holder of Outstanding Debentures has not been notified by the IRS
that he is subject to backup withholding as a result of failure to report all
interest or dividends or (B) the IRS has notified the holder that he is no
longer subject to backup withholding, or (ii) provide an adequate basis for
exemption from backup withholding. Holders of Outstanding Debentures who do not
satisfy these conditions may be subject to a $50 (or greater) penalty imposed by
the IRS and may be subject to backup withholding (as discussed below). Exempt
holders of Outstanding Debentures (including, among others, corporations and
certain foreign individuals) are not subject to these requirements if they
satisfactorily establish their status as such. Certain foreign holders of
Outstanding Debentures may be required to provide a Form W-8, Form 1001 or Form
4224 in order to avoid or reduce withholding tax.
By tendering Outstanding Debentures pursuant to the Exchange Offers, a
holder of Outstanding Debentures that does not comply with the conditions
described in the preceding paragraph authorizes the Exchange Agent, the Company
or its paying agents, as the case may be, to sell shares of Common Stock
withheld in an amount sufficient to enable it to satisfy its backup or other
withholding obligations.
Pursuant to the backup withholding provisions of federal income tax law,
unless the conditions described above are satisfied, the Exchange Agent, the
Company or their paying agents, as the case may be, will withhold a number of
shares of Common Stock otherwise to be delivered to a tendering holder of
Outstanding Debentures pursuant to the Exchange Offers such that the proceeds
from the sale of the shares so withheld will enable the Exchange Agent or the
Company, as the case may be, after selling such shares so withheld, to remit the
appropriate amount of backup withholding due to the IRS. Upon any such sale, the
Exchange Agent or the Company, as the case may be, will be entitled to seek
reimbursement for the costs, fees or expenses of such sale incurred by it.
Alternatively, the Exchange Agent or the Company, as the case may be, may
require such a holder of Outstanding Debentures to remit a payment (in cash or
certified check) sufficient to cover the holder's backup withholding tax
liability prior to the release of any shares of Common Stock withheld from such
holder. Any shares of Common Stock sold pursuant to this paragraph shall be
treated for tax reporting purposes as if they were delivered to the exchanging
holder of Outstanding Debentures and sold on its behalf. Backup withholding is
applied at a 31% rate. Amounts paid as backup withholding do not constitute an
additional tax and generally will be credited against the holder's federal
income tax liabilities. Different withholding rates and rules may apply in the
case of certain foreign holders of Outstanding Debentures.
All questions as to the form of all documents and the validity (including
time or receipt), eligibility, acceptance and withdrawal of tendered Outstanding
Debentures will be determined by the Company, in its reasonable discretion,
which determination shall be final and binding. The Company reserves the
absolute right to reject any and all tenders not in proper form or the
acceptance of which would, in the opinion of the Company's counsel, be unlawful.
The Company also reserves the absolute right, subject to applicable law, to
waive any of the conditions of the Exchange Offers (other than the condition
that all applicable requirements of the Trust Indenture Act of 1939, as amended,
have been satisfied and that the Registration Statement shall be effective and
no stop order shall be issued by the Commission with respect thereto, which
conditions may not be waived by the Company) or any defect or irregularity in
the tender of any of the Outstanding Debentures; provided that the Company will
not waive the Requisite Acceptance Condition with respect to the Exchange Offers
without making a public announcement thereof and permitting the withdrawal of
Outstanding Debentures tendered pursuant to the Exchange Offers to the extent
required by applicable law. Neither the Company, the Exchange Agent, the
Information Agent nor any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification. Any Outstanding Debentures
received by the Exchange Agent that are not properly tendered and as to which
irregularities have not been cured or
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waived will be returned by the Exchange Agent to the appropriate tendering
holder of Outstanding Debentures as soon as practicable. The Company's
interpretation of the terms and conditions of the Exchange Offers (including the
Consent and Letter of Transmittal and the instructions thereto) will be final
and binding on all parties.
BOOK-ENTRY TRANSFER PROCEDURES. The Exchange Agent will establish an
account with respect to the Senior Debentures and an account with respect to the
Subordinated Debentures at each of The Depository Trust Company (the "Book-Entry
Transfer Facility") within two business days after the commencement date of the
Exchange Offers. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of
Outstanding Debentures into the Exchange Agent's account at the Book-Entry
Transfer Facility. However, although delivery of Outstanding Debentures may be
effected through a timely confirmation of book-entry transfer at the Book-Entry
Transfer Facility ("Book-Entry Transfer"), together with the receipt by the
Exchange Agent of an agent's message (the "Agent's Message") stating that the
Book-Entry Transfer Facility has received an express acceptance from each Record
Holder identified in the Agent's message that each such Record Holder has
received a Consent and Letter of Transmittal and has agreed to be bound by the
terms and conditions thereof. The Consent and Letter of Transmittal or facsimile
thereof with any required signature guarantees and any other required documents,
must be transmitted to and received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES. If a holder of Outstanding Debentures
desires to tender Outstanding Debentures and the holder's Outstanding Debentures
are not immediately available or time will not permit the holder's Outstanding
Debentures or other required documents to reach the Exchange Agent before the
Expiration Date, or a holder cannot complete a Book-Entry Transfer before the
Expiration Date, a tender may be effected if:
(a) the tender is made by or through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed notice of guaranteed delivery (by
telegram, facsimile transmission, mail or hand delivery) substantially in
the form provided by the Company which (i) includes the duly executed
Consent of the Record Holder of tendered Outstanding Debentures or is
accompanied by such a Consent with respect to Outstanding Debentures (unless
in either case the Company has otherwise received the 90% Requisite Exchange
Acceptances), and (ii) sets forth the name and address of the holder and the
amount and type of Outstanding Debentures tendered, states that the tender
is being made thereby and guarantees that within three (3) business days
after the execution date of the notice of guaranteed delivery, all tendered
Outstanding Debentures, in proper form for transfer (or a Book-Entry
Transfer confirmation) together with the Consent and Letter of Transmittal
(or facsimile thereof) and any other documents required by such Consent and
Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent, or in the case of a Book-Entry Transfer by the
Book-Entry Transfer Facility with an appropriate Agent's message with
respect thereto (collectively, the "Notice of Guaranteed Delivery"); and
(c) all tendered Outstanding Debentures, as well as all other documents
required by the Consent and Letter of Transmittal, shall be received by the
Exchange Agent, or in the case of a Book-Entry Transfer received by the
Book-Entry Transfer Facility with an appropriate Agent's Message with
respect thereto, within three (3) business days days after the execution of
the Notice of Guaranteed Delivery.
A consent to the Proposed Amendments with respect to Outstanding Debentures
delivered in connection with a Notice of Guaranteed Delivery will be effective
upon receipt thereof by the Exchange Agent, or in the case of a Book-Entry
Transfer, upon the receipt of an appropriate Agent's Message with
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respect thereto, regardless of whether or when the certificates for the tendered
Outstanding Debentures, an executed Consent and Letter of Transmittal and the
other required documents are received.
ACCEPTANCE OF OUTSTANDING DEBENTURES, DELIVERY OF COMMON STOCK. The
acceptance for exchange and payment of Outstanding Debentures validly tendered
and not withdrawn and the delivery of shares of Common Stock will be made as
promptly as practicable after the Expiration Date. The Company, however,
expressly reserves the right to delay acceptance of any of the Outstanding
Debentures or terminate the Exchange Offers and not accept for exchange any
Outstanding Debentures not theretofore accepted if any of the conditions set
forth under "Conditions of the Exchange Offers" shall not have been satisfied or
waived by the Company. For purposes of the Exchange Offers, the Company will be
deemed to have accepted for exchange validly tendered Outstanding Debentures if,
as and when the Company gives oral or written notice thereof to the Exchange
Agent. Subject to the terms and conditions of the Exchange Offers, the delivery
of shares of Common Stock for Outstanding Debentures accepted pursuant to an
Exchange Offer, will be made by the Exchange Agent as soon as practicable after
receipt of such notice. The Exchange Agent will act as agent for the tendering
holders of Outstanding Debentures for the purposes of receiving shares of Common
Stock from the Company and transmitting such shares to the tendering holders.
Tendered Outstanding Debentures not accepted for exchange by the Company, if
any, will be returned without expense to the tendering holder as promptly as
practicable following the Expiration Date.
All tendering holders of Outstanding Debentures, by execution of the Consent
and Letter of Transmittal (or facsimile thereof), waive any right to receive
notice of acceptance of the Outstanding Debentures for exchange.
TREATMENT OF FRACTIONAL SHARES. No fractional shares of Common Stock will
be issued to tendering holders of Outstanding Debentures in the Exchange Offers.
Instead, whenever a fraction of a share of Common Stock would otherwise be
issuable to an exchanging holder of Outstanding Debentures, the Exchange Agent
will aggregate all such fractional shares of Common Stock that would otherwise
result from the Exchange Offers and will sell such aggregated fractional shares
of Common Stock, rounded to the nearest whole share, as whole shares in an
orderly manner. Upon completion of such sales, exchanging holders will receive
in lieu of such fractional shares, the relative cash proceeds from such sales
(without interest) in amounts proportionate to the fractional shares of Common
Stock which such exchanging holders would have otherwise received.
WITHDRAWAL RIGHTS. Tenders of Outstanding Debentures are irrevocable,
except that tendered Outstanding Debentures may be withdrawn (a) at any time
prior to 12:00 midnight, Eastern Daylight Time on the Expiration Date, and (b)
for any period of time required by applicable laws following public announcement
of a waiver of the Requisite Acceptance Condition (as defined under "Conditions
of the Exchange Offers") in respect of the Exchange Offers. Holders of
Outstanding Debentures who wish to exercise their right of withdrawal must give
notice of withdrawal in writing or by telegram, telex or facsimile transmission,
which notice must be timely received by the Exchange Agent at its address set
forth on the back cover page of this Prospectus. Any such notice of withdrawal
must specify the name of the person who tendered the Outstanding Debentures to
be withdrawn and the principal amount of Outstanding Debentures to be withdrawn.
If Outstanding Debentures have been delivered to the Exchange Agent identified
in another manner, the name of the registered holder and the serial numbers of
the particular Outstanding Debentures to be so withdrawn must also be furnished
to the Exchange Agent prior to the physical release of the withdrawn Outstanding
Debentures. If Outstanding Debentures have been tendered pursuant to the
procedures for Book-Entry Transfer, any notice of withdrawal must specify the
name and number of the account at the appropriate Book-Entry Transfer Facility
to be credited with the withdrawn Outstanding Debentures. Any notice of
withdrawal must be signed by the registered holder of Outstanding Debentures in
the same manner as the original signature on the Consent and Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the ownership of the Outstanding Debentures.
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Any permitted withdrawals of tenders of Outstanding Debentures may not be
rescinded, and any Outstanding Debentures withdrawn will thereafter be deemed
not validly tendered for purposes of the Exchange Offers; however, withdrawn
Outstanding Debentures may be re-tendered by following one of the procedures
described herein at any time on or prior to the Expiration Date. Withdrawal of
Outstanding Debentures will not effect a revocation of a consent. See
"Revocation of Consents; Defective Tenders" below.
All questions as to validity, form and eligibility (including time of
receipt) of the notice of withdrawal will be determined by the Company in its
sole discretion, which determination will be final and binding. None of the
Company, the Exchange Agent, the Information Agent, or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or will incur any liability for failure to give any such
notification.
REVOCATION OF CONSENTS; DEFECTIVE TENDERS. Any Record Holder of Outstanding
Debentures who has delivered a consent to the Proposed Amendments may
effectively revoke such consent by filing written notice with the Exchange Agent
at any time prior to (but not after) the date and time of delivery of Requisite
Consents effecting the Proposed Amendments with respect to the Outstanding
Debentures. The Company reserves the right to contest the validity of any such
revocations. A purported notice of revocation which is not received by the
Exchange Agent in a timely fashion will not be effective to revoke a consent
previously given.
NO PAYMENTS ON TENDERED DEBENTURES. Tendering holders of Outstanding
Debentures will not receive payment of principal due or accrued but unpaid
interest on such tendered Outstanding Debentures and will waive their right to
receive such payments.
CONDITIONS OF THE EXCHANGE OFFERS. Notwithstanding any other provisions of
the Exchange Offers, the Company will not be required to accept any Outstanding
Debentures tendered for exchange and may terminate or amend the Exchange Offers
as provided herein if any of the following conditions shall not be satisfied:
(a) Holders of at least 90% in aggregate principal amount of the
Outstanding Debentures shall have validly tendered and not withdrawn such
Outstanding Debentures pursuant to the Exchange Offers prior to the
Expiration Date and the holders of more than 50% in aggregate principal
amount of the Outstanding Debentures shall have given and not revoked their
consents to the Proposed Amendments (the "Requisite Acceptance Condition");
(b) Prior to the Expiration Date, (i) the holders of at least a majority
of the combined voting power of the Class A Common Stock and Preferred Stock
entitled to vote with respect to the Exchange Offers present (in person or
by proxy) at the Annual Meeting, shall have approved the Capital Stock
Combination and the Reverse Stock Split;
(c) There shall not have been instituted or threatened before any Court
or governmental agency, authority or body or any arbitrator any action or
proceeding (i) challenging the exchange of Outstanding Debentures or the
issuance of shares of Common Stock in exchange therefor pursuant to the
Exchange Offers, or (ii) in the sole judgment of the Company, otherwise
materially adversely affecting the transactions contemplated by the
Recapitalization or the contemplated benefits of the Recapitalization to the
Company;
(d) There shall not have been proposed or enacted any statute or other
legislation, rule or regulation, and no action shall have been taken by any
governmental authority, which would or might, in the reasonable judgment of
the Company, prohibit, restrict or delay completion of the Recapitalization
or materially impair the contemplated benefits of the Recapitalization to
the Company;
(e) There shall not exist, in the reasonable judgment of the Company,
any other actual or threatened legal impediment to the exchange by the
Company of the Outstanding Debentures or to
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the issuance of the shares of Common Stock in exchange therefor pursuant to
the Exchange Offers or any other circumstances that would materially
adversely affect the transactions contemplated by the Exchange Offers or the
contemplated benefits of the Exchange Offers to the Company;
(f) There shall not have occurred, in the reasonable judgment of the
Company, (i) any general suspension of trading in, or limitation on prices
for, securities listed on NASDAQ NMS; or (ii) a declaration of a banking
moratorium or any suspension of payments in respect of the banks in the
United States (whether or not mandatory); or (iii) a commencement of a war,
armed hostilities or other international or national emergency directly or
indirectly involving the United States; or (iv) any significant change in
the United States or any other currency exchange rates or a suspension of,
or limitation on, the markets therefor (whether or not mandatory); or (v)
any limitation (whether or not mandatory) by any governmental authority on,
or any other event having reasonable likelihood of affecting, the extension
of credit by banks or other lending institutions in the United States; or
(vi) in the sole judgment of the Company, a material acceleration or
worsening of any of the foregoing;
(g) All applicable requirements of the Trust Indenture Act of 1939, as
amended, shall have been satisfied;
(h) The Common Stock to be issued shall have been registered under the
Securities Act, there shall not be issued and in effect a stop order issued
by the Commission with respect to the Registration Statement and issuance of
the foregoing;
(i) There shall not have occurred or be likely to occur an event
affecting the business or financial affairs of the Company and its
subsidiaries or the Exchange Offers which, in the sole judgment of the
Company, would or might prohibit, restrict or delay the completion of the
Exchange Offers or materially impair the contemplated benefits of the
Exchange Offers to the Company or otherwise result in completion of the
Exchange Offers not being in the best interests of the Company; and
(j) The Company shall have reached a final determination to accept the
tendered Outstanding Debentures pursuant to the Exchange Offers and not to
pursue the Recapitalization by seeking confirmation of the Prepackaged Plan.
If any of the foregoing conditions shall not be satisfied, the Company may
(i) terminate the Exchange Offers and return all Outstanding Debentures tendered
pursuant to such terminated Exchange Offers to exchanging holders of Outstanding
Debentures, (ii) extend the Exchange Offers and retain all tendered Outstanding
Debentures until the final Expiration Date for the extended Exchange Offers, or
(iii) waive the unsatisfied conditions with respect to the Exchange Offers,
other than the conditions referred to in paragraphs (b)(ii), (g) and (h) above,
which may not be waived by the Company with respect to the Exchange Offers, and
provided that the Company will not waive the condition referred to in paragraph
(a) above with respect to the Exchange Offers without making a public
announcement thereof and permitting the withdrawal of Outstanding Debentures
tendered pursuant to the Exchange Offers to the extent required by applicable
law.
All the foregoing conditions, except for the conditions in paragraphs
(b)(ii), (g) and (h) above, are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
conditions and may be waived by the Company (other than as stated in the
preceding paragraph), in whole or in part, at any time and from time to time, in
the sole discretion of the Company. The failure by the Company at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
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EXCHANGE AGENT. ChaseMellon Shareholder Services, L.L.C. will act as
Exchange Agent for the Exchange Offers. All correspondence in connection with
the Exchange Offers and the Consent and Letter of Transmittal should be
addressed to the Exchange Agent as follows:
<TABLE>
<S> <C>
By Hand or Overnight Courier: By Facsimile: (201) 329-8936
120 BROADWAY Telephone: (201) 296-4860
13TH FLOOR
NEW YORK, NEW YORK 10271
ATTN: REORGANIZATION DEPT.
By Mail:
P.O. BOX 3301
SOUTH HACKENSACK, NJ 07606
ATTN: REORGANIZATION DEPT.
</TABLE>
INFORMATION AGENT. Georgeson & Company Inc. will act as Information Agent
for the Exchange Offers. All inquiries relating to the Exchange Offers should be
directed to the Information Agent at the address and telephone number set forth
below.
<TABLE>
<S> <C>
By Mail, Hand or Telephone: (800) 223-2064
Overnight Courier: Banks and Brokers call collect:
(212) 440-9800
GEORGESON & COMPANY INC.
WALL STREET PLAZA
88 PINE STREET, 30TH FLOOR
NEW YORK, NY 10005
</TABLE>
EFFECTS OF COMPLETION OF EXCHANGE OFFERS ON NON-TENDERING HOLDERS OF
OUTSTANDING DEBENTURES. The completion of the Exchange Offers may have
significant adverse consequences for the holders of untendered Outstanding
Debentures. Generally, a security with a smaller outstanding principal amount
available for trading may command a lower price than that of a comparable
security with a greater outstanding principal amount, and thus as a result of
the Exchange Offers the price which may be commanded for the untendered
Outstanding Debentures could be adversely affected. In addition, because the
number of holders of Outstanding Debentures after completion of the
Recapitalization will be extremely limited, it is unlikely that there will be
any active trading in the untendered Outstanding Debentures. Moreover, upon
effectiveness of the Proposed Amendments numerous provisions that were intended
to provide protection to the holders of the Outstanding Debentures will be
deleted. As a result, the adoption of the Proposed Amendments may have a
material adverse effect on the value of the Outstanding Debentures. See
"Proposed Amendments to Indentures."
NO APPRAISAL RIGHTS ARE AVAILABLE TO HOLDERS OF THE COMPANY'S OUTSTANDING
DEBENTURES, PREFERRED STOCK OR CLASS A COMMON STOCK IN CONNECTION WITH THE
EXCHANGE OFFERS.
PROPOSED AMENDMENTS TO INDENTURES
The Company is soliciting consents to the Proposed Amendments from holders
of Outstanding Debentures whether or not they desire to tender their Outstanding
Debentures pursuant to the Exchange Offers. In order to approve the Proposed
Amendments to the respective Indentures described below, the consent of the
Record Holders of at least a majority of the aggregate principal amount of the
then outstanding Senior Debentures and Subordinated Debentures, respectively,
which are not owned by the Company or its affiliates, is required. As of the
date hereof, $165 million aggregate principal amount of Senior Debentures and
$41 million aggregate principal amount of Subordinated Debentures, respectively,
are issued and outstanding and owned by persons other than the Company and its
affiliates. Only Record
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Holders of the Outstanding Debentures may consent to the Proposed Amendments.
The Proposed Amendments will become operative when the Exchange Offers are
completed, and thereupon any non-tendering holders of Outstanding Debentures
will be bound by the Proposed Amendments regardless of whether they consented to
the Proposed Amendments. See "The Exchange Offers--Effects of Completion of
Exchange Offers on Non-Tendering Holders of Outstanding Debentures."
All holders of Outstanding Debentures should carefully consider the effects
of the Proposed Amendments before determining whether to consent or to withhold
consent to the Proposed Amendments and whether or not to tender into the
Exchange Offer. The Company is seeking elimination of certain restrictive
covenants in the Indentures through the adoption of the Proposed Amendments. A
discussion of the effects on the holders of Outstanding Debentures if each of
these provisions is eliminated is set forth below.
PROPOSED AMENDMENTS TO OUTSTANDING DEBENTURES. The discussion below is
qualified in its entirety by reference to the Indentures relating to the Senior
Debentures and the Subordinated Debentures. Capitalized terms used and not
otherwise defined herein have the meanings given to them in the respective
Indentures.
If the Requisite Consents are received by the Company, the Proposed
Amendments to Indentures will be implemented by the execution of the Amended
Senior Indenture and the Amended Subordinated Indenture upon certification to
the respective Indenture trustees that the Company has obtained Requisite
Consents of holders of the Senior Debentures and/or Subordinated Debentures, but
will not become effective until completion of the applicable Exchange Offer.
ELIMINATION OF RESTRICTIVE COVENANTS. The Proposed Amendments include the
elimination of certain restrictive covenants found in the Indentures under the
captions "Limitation on Restricted Payments" (Section 4.03) and "Limitation on
Transactions with Affiliates" (Section 4.06 of the Senior Debenture Indenture
and Section 4.07 of the Subordinated Debenture Indenture). The first Proposed
Amendments would delete the provisions of Section 4.03 in each of the
Indentures, which currently provide as follows:
"The Corporation shall not, and shall not permit any Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on its Capital Stock or to the Holders of its Capital Stock
(except dividends or distributions payable to the Corporation or a wholly
owned Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Corporation, or (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of acquisition). Notwithstanding the foregoing, the
Corporation may purchase or redeem shares of any class of Capital Stock or
any Debt of the Corporation by exchange for, or out of the proceeds of the
substantially concurrent sale of, shares of its Capital Stock."
If the above described Proposed Amendments are approved and these covenants
are eliminated, the Company and its subsidiaries will be permitted to make the
payments or distributions and take the actions with respect to the Company's
outstanding capital stock and subordinated debt obligations (as described above
in the restrictive covenants) prior to repayment of the Outstanding Debentures,
regardless of the total amount of any such payments or distributions.
Accordingly, elimination of such restrictive covenants could lead to a reduction
in the amount of cash that the Company has available to make any required
payments on the Outstanding Debentures and could increase the risk of a Company
default on the payment of the Outstanding Debentures. These risks will only
apply to holders of Outstanding Debentures which do not tender all of their
Outstanding Debentures in the Exchange Offers.
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The next Proposed Amendments would delete in their entirety the respective
provisions of Section 4.06 of the Senior Debenture Indenture and Section 4.07 of
the Subordinated Debenture Indenture each of which currently provide as follows:
"The Corporation shall not, and shall not permit any Subsidiary to,
conduct any business or enter into any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate (other than a
wholly owned Subsidiary) unless the terms of such business, transaction or
series of transactions are (i) set forth in writing, and (ii) as favorable
to the Corporation or such Subsidiary as terms that would be obtainable at
the time for a comparable transaction or series of similar transactions in
arm's-length dealings with an unrelated third person. This Section shall not
be construed to prohibit payment by the Corporation or a Subsidiary of
compensation to officers, directors or employees of the Corporation or such
Subsidiary for services rendered in such capacity."
If the above described Proposed Amendments are approved and these covenants
are eliminated, the Company will no longer be obligated to set forth the terms
of all transactions with affiliates of the Company in writing and will no longer
be subject to the requirements set forth above that all such transactions be
arm's-length transactions. Accordingly, elimination of these restrictive
covenants will increase the risk to non-tendering holders of Outstanding
Debentures that the Company could engage in non-arm's-length transactions with
its affiliates, which transactions could reduce the financial strength of the
Company and increase the risk of a default by the Company on the Outstanding
Debentures. These risks also will only apply to holders of Outstanding
Debentures which do not tender all of their Outstanding Debentures in the
Exchange Offers.
THE COMPANY ANNUAL MEETING
An Annual Meeting of Stockholders of the Company will be held at the Mellon
Bank Building, 8 Loockerman Street, Dover, Delaware on June , 1997 at 9:30
a.m. Eastern Daylight Time, for the following purposes:
1. To consider and act upon a proposal to ratify the terms of the
Exchange Offers, including the issuance of shares of Common Stock pursuant
to the Exchange Offers, (the "Exchange Offers Proposal");
2. To consider and act upon a proposal to amend Articles Fourth, Fifth
and Sixth of the Restated Certificate, subject to the completion of the
Recapitalization, to provide for a combination of the Class A Common Stock
and Preferred Stock and to provide for the elimination of the Board's
authority to issue classes or series of stock with preferences over the
combined Common Stock (the "Capital Stock Combination Proposal");
3. To consider and act upon a proposal to amend Article Fifth of the
Restated Certificate to provide for a one for one hundred (1:100) reverse
stock split of each outstanding share of the Company's capital stock (the
"Reverse Split Proposal");
4. To consider and act upon a proposal to amend Article Fourth of the
Restated Certificate, subject to the completion of the Recapitalization and
the approval and implementation of both the Capital Stock Combination and
Reverse Stock Split, to reduce the authorized capital stock to 18 million
shares of the combined Common Stock (the "Authorized Capital Proposal");
5. To consider and act upon a proposal to amend the Restated
Certificate and Bylaws, subject to the completion of the Recapitalization,
to delete provisions of Articles Eighth and Thirteenth of the Restated
Certificate and Articles III and XI of the Bylaws currently providing for
(i) the Board to be classified into three classes with staggered terms, (ii)
an 80% supermajority vote of the shares of outstanding capital stock of the
Company entitled to vote in elections of directors in order to change the
authorized number of directors by vote of stockholders, (iii) a similar 80%
supermajority vote in order to remove any director for cause, and (iv) a
similar 80% supermajority vote in order to amend
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or repeal any of the above described provisions of the Restated Certificate
or Bylaws; and to increase the size of the Board from seven (7) to ten (10)
members, subject to the completion of the Recapitalization (the "Board
Proposal");
6. To consider and act upon a proposal to amend the Restated
Certificate and Bylaws, subject to the completion of the Recapitalization,
to delete provisions of Articles Ninth and Thirteenth of the Restated
Certificate and Article XI of the Bylaws which currently provide that an 80%
supermajority vote of the shares of the outstanding capital stock of the
Company entitled to vote in elections of directors is required to amend or
repeal any provisions of Article Ninth of the Restated Certificate or
Article II, Section 3 of the Bylaws applicable to special meetings of the
stockholders of the Company and to amend Article Ninth of the Restated
Certificate and Article II, Section 3 of the Bylaws to permit stockholders
representing at least ten percent (10%) of outstanding shares of capital
stock of the Company entitled to vote in the election of directors to call a
special meeting of the Company's stockholders (the "Special Meetings
Proposal");
7. To consider and act upon a proposal to amend the Restated
Certificate, subject to the completion of the Recapitalization, to delete
provisions of Article Tenth of the Restated Certificate which currently
prohibit stockholders of the Company from acting by written consent and
which require an 80% supermajority vote of the shares of the outstanding
capital stock of the Company entitled to vote in elections of directors to
amend or repeal such provisions (the "Written Consent Proposal");
8. To consider and act upon a proposal to elect a slate of director
nominees in the event the Recapitalization is completed to reconstitute the
declassified Board or, if the Board is not declassified then to reconstitute
the classified Board, or in the event the Recapitalization is not completed,
to elect incumbent directors to serve until the expiration of the terms of
their respective classes and until their respective successors are elected
and qualified (the "Board Election Proposal");
9. To ratify the Company's selection of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 1997
(the "Auditor Proposal"); and
10. To transact such other business as may properly come before the
Annual Meeting or any postponements or adjournments thereof.
PROXY SOLICITATION.
GENERAL. This Prospectus is furnished to stockholders of the Company's
Class A Common Stock and Preferred Stock in connection with the solicitation of
proxies by and on behalf of the Board for use at the Annual Meeting, and at any
postponements or adjournments thereof. The approximate date on which this
Prospectus and accompanying form of Proxy is first being mailed to stockholders
is May , 1997.
A holder of Class A Common Stock or Preferred Stock wishing to vote for the
Annual Meeting Proposals upon which such holder is entitled to vote should
either (i) complete and sign the enclosed Proxy and mail or deliver such Proxy
to the Exchange Agent at one of the addresses set forth on the back cover of
this Prospectus; or (ii) request its broker, dealer, commercial bank, trust
company or other nominee to vote on its behalf. Holders may also vote their
shares of Class A Common Stock or Preferred Stock in person at the Annual
Meeting. Holders of such Class A Common Stock or Preferred Stock of record whose
purchase is registered after the Annual Meeting Record Date and who wish to vote
on the Annual Meeting Proposals must arrange with their seller to receive a
proxy from the holder of such Class A Common Stock or Preferred Stock of record
on the Annual Meeting Record Date.
Proxies, in the form attached, are being solicited by the Board for use at
the Annual Meeting. The persons named as proxies were selected by the Board and
are officers of the Company. Proxies may be revoked by a stockholder prior to
exercise by filing with the Secretary of the Company a written instrument
revoking the same or a duly executed proxy bearing a later date. In addition, a
stockholder who attends the
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Annual Meeting may vote shares personally and thereby revoke any prior proxy at
that time. All shares represented by valid proxies received pursuant to this
solicitation, and not subsequently revoked, will be voted as provided in the
proxy.
If immediately prior to the commencement of the Annual Meeting (or any
adjourned session thereof) it appears that all of the conditions to completion
of the Exchange Offers (other than those conditions to be satisfied at the
Annual Meeting) have not been or will not be satisfied or waived, or if the
Exchange Offers or Consent Solicitations are extended as a result of material
amendments thereto, the Board of Directors may postpone or the officers named as
proxies may vote to adjourn the Annual Meeting until such time as the conditions
are satisfied or waived, or until just prior to any extended Expiration Date of
the Exchange Offers and Consent Solicitations, as the case may be. The Company's
Bylaws permit the Annual Meeting to be adjourned by the vote of a majority of
the shares represented either in person or by proxy at the Annual Meeting,
whether or not a quorum is present.
The expense of preparing, printing and mailing this Prospectus and the
proxies solicited hereby will be borne by the Company. In addition to the use of
the mails, proxies may be solicited by officers, directors and regular employees
of the Company, without extra remuneration, in person, by telephone, telegraph
or otherwise. The Company will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares held of record and will reimburse such persons for their reasonable
out-of-pocket expenses in connection therewith. The Company has engaged
Georgeson & Company Inc. to serve as "Information Agent" for the
Recapitalization. In connection with such arrangement, Georgeson & Company Inc.
will also solicit proxies on behalf of the Company. See "The Exchange
Offers--Information Agent" herein. The Company estimates that the total cost to
the Company in connection with such proxy solicitation will be approximately
$300,000.
THE HOLDERS OF PREFERRED STOCK AND/OR CLASS A COMMON STOCK ARE NOT ENTITLED
TO ANY APPRAISAL RIGHTS IN CONNECTION WITH THE MATTERS SUBMITTED FOR THEIR
APPROVAL.
STOCKHOLDER PROPOSALS. It is presently contemplated that the next annual
meeting of stockholders will be held in May, 1998. Stockholders may submit
proposals on matters appropriate for stockholder action at the Company's annual
meetings consistent with regulations adopted by the Securities and Exchange
Commission and the Bylaws. Proposals to be considered for inclusion in the
Company's proxy statement relating to the 1998 annual meeting must be received
by the Company at its principal executive offices not later than December 16,
1997. Proposals should be directed to the attention of the Secretary, Koll Real
Estate Group, Inc., 4343 Von Karman Avenue, Newport Beach, California 92660.
VOTE REQUIRED FOR APPROVAL. The Recapitalization must be completed in order
for the following Annual Meeting Proposals to become effective: Capital Stock
Combination Proposal, Reverse Split Proposal, Authorized Capital Proposal, Board
Proposal, Special Meetings Proposal, Written Consent Proposal, and the election
of the new director nominees in the Board Election Proposal as described below.
Stockholder approval of the various proposals is required as follows: (i) the
Exchange Offers Proposal, the Capital Stock Combination Proposal, Reverse Split
Proposal, Authorized Capital Proposal and the Auditor Proposal at the Annual
Meeting will each require the affirmative vote of the holders of at least a
majority of the outstanding shares of Class A Common Stock and Preferred Stock
entitled to vote, voting as separate classes, present (in person or by proxy) at
the Annual Meeting with a quorum present; (ii) the Board Proposal, the Special
Meetings Proposal and the Written Consent Proposal at the Annual Meeting will
require the affirmative vote of the holders of at least 80% of the outstanding
shares of Class A Common Stock entitled to vote, whether or not present (in
person or by proxy) at the Annual Meeting; and (iii) the Board Election Proposal
will require the affirmative vote of the holders of at least a plurality of the
outstanding shares of Class A Common Stock entitled to vote, present (in person
or by proxy) at the Annual Meeting with a quorum present, voted for each
director nominee in order for each such nominee to be elected, provided,
however, that unless and until the Recapitalization is completed, the current
Board will remain in place, notwithstanding the election of certain new director
nominees whose
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elections will be effective only upon the completion of the Recapitalization,
and subject only to the election of those incumbent directors who are otherwise
up for, and nominated for, re-election in the event the Recapitalization is not
completed. Representatives of the members of the Debenture Holders' Committee
have recently informed the Company that the members hold in the aggregate
approximately 33% and 13%, respectively, of the Preferred Stock and Class A
Common Stock, and have indicated to the Company that they intend to approve the
foregoing proposals. In addition the holder of 30.5% and 11.5%, respectively, of
the Preferred Stock and Class A Common Stock has indicated to the Company that
it intends to approve the foregoing proposals.
The Company is seeking ratification of the Exchange Offers Proposal from the
holders of a majority of the outstanding shares of Class A Common Stock, present
(in person or by proxy) at the Annual Meeting, and voting separately as a class,
and from the holders of a majority of the outstanding shares of Preferred Stock,
present (in person or by proxy) at the Annual Meeting, and voting separately as
a class. HOWEVER, PURSUANT TO THE DELAWARE GENERAL CORPORATION LAW AND THE
COMPANY'S RESTATED CERTIFICATE AND BYLAWS, SUCH RATIFICATION IS NOT REQUIRED FOR
THE COMPANY TO CONSUMMATE THE EXCHANGE OFFERS. IF SUCH APPROVALS ARE NOT
OBTAINED AT THE ANNUAL MEETING, THE COMPANY IN ITS REASONABLE DISCRETION MAY
STILL CONSUMMATE THE EXCHANGE OFFERS.
The presence, in person or by proxy, of a majority of the outstanding shares
of the Company's Class A Common Stock entitled to vote is necessary to
constitute a quorum to transact business at the Annual Meeting with respect to
the Board Election Proposal and the Auditors Proposal. The presence, in person
or by proxy, of a majority of the outstanding shares of Class A Common Stock and
Preferred Stock, respectively, is necessary to transact business at the Annual
Meeting with respect to the Capital Stock Combination Proposal, Reverse Split
Proposal, Authorized Capital Proposal and the Exchange Offers Proposal. In
addition,the presence (in person or by proxy) of the holders of at least 80% of
the outstanding shares of Class A Common Stock will be necessary to transact
business at the Annual Meeting with respect to the Board Proposal, the Special
Meetings Proposal and the Written Consent Proposal, however, in the event only
80% of such shares are present (in person or by proxy) at the Annual Meeting,
the affirmative vote of 100% of such shares which are present would then be
required to approve the Board Proposal, the Special Meetings Proposal and the
Written Consent Proposal. Those shares present (in person or by proxy),
including shares as to which authority to vote on an Annual Meeting Proposal is
withheld, shares abstaining as to any Annual Meeting Proposal and broker
non-votes (where a broker submits a proxy but does not have authority to vote a
customer's shares on one or more matters) on any Annual Meeting Proposal, will
be considered present at the Annual Meeting for purposes of establishing a
quorum.
With respect to each of the Annual Meeting Proposals, neither shares as to
which authority to vote has been withheld (to the extent withheld) nor broker
non-votes will be considered affirmative votes. With respect to each of the
Annual Meeting Proposals, (i) abstentions on any Annual Meeting Proposal,
pursuant to Delaware law, will be considered present and entitled to vote and
thus will have the effect of a vote against such Annual Meeting Proposal, and
(ii) broker non-votes will be considered not entitled to vote on such Annual
Meeting Proposal and thus will not be counted in determining whether such Annual
Meeting Proposal has received the requisite votes.
PERSONS ENTITLED TO VOTE AT THE ANNUAL MEETING. The Board has fixed the
close of business on April , 1997 as the Annual Meeting Record Date for the
determination of stockholders entitled to receive notice of and to vote at the
Annual Meeting. Only holders of record of the Company's Class A Common Stock and
Preferred Stock, at the close of business on the Annual Meeting Record Date,
will be entitled to notice of, and to vote at, the Annual Meeting. At the close
of business on the Annual Meeting Record Date, the Company had outstanding
48,938,543 shares of Class A Common Stock and 38,886,626 shares of Preferred
Stock, respectively, not including 1,425,833 shares of Class A Common Stock held
by the Company as treasury stock. Each share of Class A Common Stock is entitled
to one (1) vote on all matters which may come before the Annual Meeting for
which shares of Class A Common Stock are entitled to vote and each
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share of Preferred Stock is entitled to one (1) vote on all matters which may
come before the Annual Meeting for which shares of Preferred Stock are entitled
to vote.
ACTION TO BE TAKEN UNDER PROXY. All proxies in the accompanying form that
are properly executed and returned will be voted at the Annual Meeting and any
postponements or adjournments thereof in accordance with the specifications
thereon or, if no specifications are made, will be voted:
(i) For approval of the terms of the Exchange Offer Proposal;
(ii) For approval of the Capital Stock Combination Proposal;
(iii) For approval of the Reverse Split Proposal;
(iv) For approval of the Authorized Capital Proposal;
(v) For approval of the Board Proposal;
(vi) For approval of the Special Meetings Proposal;
(vii) For approval of the Written Consent Proposal;
(viii) For approval of each of the director nominees as described in the
Board Election Proposal; and
(ix) For approval of the Auditor Proposal.
The Board of Directors knows of no matters, other than those stated above,
to be presented and considered at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting, or any postponements or
adjournments thereof, it is the intention of the persons named in the enclosed
proxy to vote such proxy in accordance with their judgment on such matters. The
persons named in the enclosed proxy may also vote such proxy to adjourn the
Annual Meeting.
PROPOSAL NO. 1
APPROVAL OF EXCHANGE OFFERS (INCLUDING THE
ISSUANCE OF SHARES OF COMMON STOCK)
The Board has adopted a resolution approving the Exchange Offers pursuant to
which the Company is offering to exchange Common Stock for Outstanding
Debentures. See "The Company Recapitalization" and "The Exchange Offers."
Pursuant to the Exchange Offers, the Company is offering to exchange each $1,000
principal amount of Senior Debentures for 56 shares of the Company's post
Capital Stock Combination and post Reverse Stock Split Common Stock and to
exchange each $1,000 principal amount of Subordinated Debentures for 28 shares
of such Common Stock. The Exchange Offers are conditioned upon, among certain
other conditions, the valid tender of at least 90% of the Outstanding
Debentures. If the Exchange Offers are completed and 100% of the Outstanding
Debentures are exchanged for Common Stock (assuming the conversion of all
outstanding shares of Preferred Stock pursuant to the Capital Stock Combination
proposed below), the holders of Outstanding Debentures will hold 90% of the
voting power of the Company's outstanding capital stock and, if acting together,
will be able to control all matters put before the Company's stockholders for a
vote, including the election of directors. Also, under such circumstances, the
Preferred Stock and Class A Common Stock will be diluted to an aggregate of 10%
of the voting capital stock of the Company (prior to adjustments for fractional
shares and without consideration of unexercised options and warrants). See,
"Risk Factors--Ownership Interests, Ability to Elect Directors, and Benefits to
Certain Parties--Dilution; Shares Eligible for Future Sale."
The purpose of the Exchange Offers is to deleverage the Company's capital
structure in order to maximize realization of the Company's asset values and
growth of its business. The exchange of the Outstanding Debentures would
eliminate the "in-kind" interest expense associated with the Outstanding
Debentures, which has substantially contributed to the Company's historic
reporting of losses. The
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Company believes the deleveraging resulting from the exchanges would also allow
the Company to obtain financing (currently expected not to exceed $30 million
dollars exclusive of Project Debt) on terms more favorable to the Company, which
financing would facilitate the growth of the Company's business, including, but
not limited to, the development of the Bolsa Chica property and other commercial
real estate development business. While the Company does not currently have any
commitments to provide the necessary financing in the event the Exchange Offers
are completed, the Company believes the resulting deleveraged capital structure
will put the Company in a stronger position to obtain such favorable terms
financing. Failure to consummate the Exchange Offers, however, will continue the
Company's leveraged financial condition and increase the Company's debt by
approximately $162.8 million by the maturity date of the Outstanding Debentures
on March 15, 2002, resulting in approximately $368.5 million in outstanding
principal amount of the Outstanding Debentures at maturity. Under such
circumstances, the Company believes it will incur substantially higher costs
with respect to any such financing, which will negatively impact realization of
asset values and the Company's growth. If the 90% Requisite Exchanges are not
received by the Company, but the Company does receive acceptance of the
Prepackaged Plan by at least the holders of Class 5 Claims, the Company
currently intends to pursue the exchange of the Outstanding Debentures by
seeking confirmation of the Prepackaged Plan.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1
PROPOSAL NO. 2
AMENDMENT OF ARTICLES FOURTH, FIFTH AND SIXTH OF
RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A COMBINATION OF
THE CLASS A COMMON STOCK AND PREFERRED STOCK
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Capital Stock Combination Proposal, which proposes
amendments to Articles Fourth, Fifth and Sixth of the Restated Certificate to
effect a combination of the Class A Common Stock and Preferred Stock and to
delete the authority of the Board to issue any class or series of stock other
than the Combined Common Stock. Pursuant to the Capital Stock Combination, each
outstanding share of Preferred Stock will be automatically reclassified to be
1.75 shares of Common Stock and each outstanding share of Class A Common Stock
will be automatically reclassified to be one share of Common Stock.
If the Capital Stock Combination Proposal is approved, no fractional shares
of Common Stock will be issued as a result of the Capital Stock Combination.
Instead, the Exchange Agent will aggregate all such fractional shares of Common
Stock that would otherwise result from the Capital Stock Combination and will
sell such aggregated fractional shares of Common Stock, rounded to the nearest
whole share, as whole shares, in an orderly manner. Upon completion of such
sales, stockholders who would otherwise have held such fractional shares of
Common Stock as a result of the Capital Stock Combination, will receive in lieu
thereof, the cash proceeds from such sales (without interest) in amounts
proportionate to the fractional shares of Common Stock which such stockholders
would otherwise have held.
The Capital Stock Combination Proposal is intended to adjust the Company's
capital structure in response to negotiations with representatives of the
members of the Debenture Holders' Committee to permit the Company to
successfully induce the holders of the Outstanding Debentures to accept the
Exchange Offers by eliminating the preferences currently held by the Preferred
Stock over the Class A Common Stock and by eliminating the Board's authority to
issue any classes or series of the Company's capital stock preferences over the
Common Stock. If the Capital Stock Combination Amendment is approved and filed,
the recapitalized Preferred Stock will no longer be entitled to the rights,
preferences and privileges provided in Article Sixth of the Restated
Certificate, including any dividend preference which would result if the
"Conversion Rate" defined in Article Sixth, Section (b) (vi) of the Restated
Certificate were to be adjusted pursuant to the Restated Certificate to provide
for a Conversion Rate greater than a one (1) share of Class A Common Stock for
one (1) Share of Preferred Stock (the Conversion Rate is currently on a one (1)
for one (1) basis) and the "Liquidation Preference" defined in
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Article Sixth, Section (b)(iii), which currently provides for a $.75 per share
of Series A Preferred Stock Liquidation Preference. However, if the Capital
Stock Combination is effected, the recapitalized Preferred Stock will receive
the right to vote in all matters put before the Company's stockholders for a
vote, including the election of directors. The Preferred Stock currently is not
entitled to vote on any matters, except those required by law.
If the Capital Stock Combination Proposal is implemented, the Company will
also no longer have the takeover defense provided by authorizing the Board to
issue additional classes or series of stock with preferences over the
outstanding capital stock. However, the Company believes that given the
concentration of ownership which will result upon completion of the
Recapitalization such defense will no longer be necessary because the Company
will be unlikely to be subject to coercive takeover tactics.
If the Capital Stock Combination Proposal is approved and the
Recapitalization is completed, the Restated Certificate will be amended to
provide that the text of Article Fourth, Article Fifth and of Article Sixth of
the Restated Certificate will be deleted in their respective entireties and
replaced with the following language:
Article Fourth "FOURTH: The Corporation shall have the authority to issue
one class of stock. The total number of shares of stock which the
Corporation shall have the authority to issue is 900 million shares of
Common Stock, par value $0.05 per share (the "Common Stock")."
Article Fifth "(a) Intentionally Omitted."
Article Fifth "(b) Effective upon the filing of this amendment to the
Restated Certificate of Incorporation, the Class A Common Stock, Class B
Common Stock and Series A Convertible Preferred Stock shall be
reclassified and combined to create one class and series of stock
designated "Common Stock." Effective immediately upon the filing of this
amendment to the Restated Certificate of Incorporation, each outstanding
share of Class A Common Stock shall be automatically reclassified to be
one (1) share of Common Stock and each outstanding share of Series A
Convertible Preferred Stock shall be automatically reclassified to be one
and three quarter (1.75) shares of Common Stock. The Company shall not
issue, and no stockholder of the Company shall be deemed to hold,
fractional shares of Common Stock as a result of the above described
capital stock combination. Instead, the Corporation's agent will
aggregate all such fractional shares of Common Stock that would otherwise
result from the above described capital stock combination and sell such
aggregated shares of Common stock, rounded to the nearest whole share, as
whole shares, in an orderly manner. Upon completion of such sales,
stockholders who would otherwise have held such fractional shares of
Common Stock, will receive in lieu thereof, the cash proceeds from such
sales (without interest) in amounts proportionate to the fractional
shares of Common Stock which such stockholders would otherwise have held.
The designations and the powers, preferences and rights, and
qualifications, limitations or restrictions thereof, of each share of
Common Stock shall be governed by the following:
(i) Identical Rights. All shares of Common Stock shall be identical and
shall entitle the holders thereof to the same rights and privileges.
(ii) Voting Rights. On all matters submitted to the Corporation's
stockholders, the holders of Common Stock shall be entitled to one
vote per share.
(iii) Dividend Rights. When and as dividends or other distributions are
declared, whether in cash, in property or in securities of the
Corporation, the holders of shares of Common Stock shall be
entitled to share equally, share for share, in such dividends or
distributions.
(iv) Stock Splits. If the Corporation shall in any manner subdivide,
split or combine the outstanding shares of Common Stock, each share
of outstanding Common Stock shall be proportionately subdivided,
split or combined.
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(v) No Charge. The issuance of certificates representing shares of
Common Stock in exchange for outstanding certificates of Class A
Common Stock or Series A Preferred Stock shall be made without
charge to the holders of such certificates, PROVIDED that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involving the issuance and
delivery of any certificate in a name other than that of the holder
of record of such shares of Class A Common Stock or Series A
Preferred Stock exchanged."
Article Sixth "SIXTH: Intentionally Omitted."
FAILURE TO COMPLETE THE RECAPITALIZATION. If the Recapitalization is not
completed for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Bankruptcy Court in the event of a
Chapter 11 Case), the Capital Stock Combination shall not be deemed to have been
approved and the foregoing amendments to the Restated Certificate will NOT
become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2
PROPOSAL NO. 3
AMENDMENT OF ARTICLE FIFTH OF RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT A ONE FOR ONE HUNDRED (1:100) REVERSE STOCK SPLIT
OF THE OUTSTANDING CAPITAL STOCK
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Reverse Split Proposal, which proposes amendments to
Articles Fifth and Sixth of the Restated Certificate to effect a one for one
hundred (1:100) reverse stock split of all of the outstanding shares of capital
stock of the Company.
If the Reverse Split Proposal is approved, no fractional shares of stock
will be issued as a result of the Reverse Stock Split. Instead, the Exchange
Agent will aggregate all such fractional shares of stock that would otherwise
result from the Reverse Stock Split and will sell such aggregated fractional
shares of stock, rounded to the nearest whole share, as whole shares, in an
orderly manner. Upon completion of such sales, stockholders who would otherwise
have held such fractional shares of stock as a result of the Reverse Stock
Split, will receive in lieu thereof, the cash proceeds from such sales (without
interest) in amounts proportionate to the fractional shares of stock which such
stockholders would otherwise have held.
The Reverse Split Proposal is intended to adjust the Company's capital
structure to permit the Company to issue shares of stock to the holders of the
Outstanding Debentures pursuant to the Exchange Offers without dramatically
increasing the number of shares of the Company's capital stock outstanding. In
order to successfully induce the holders of the Outstanding Debentures to accept
the Exchange Offers, the number of outstanding shares of the Company's capital
stock must be reduced to establish a higher price per share and to create
greater liquidity for the Company's capital stock.
If the Reverse Split Proposal is approved, the Restated Certificate will be
amended to provide that the text of Article Fifth of the Restated Certificate
will be amended to add the following additional language:
Article Fifth "(c) Effective upon the filing of this amendment to the
Restated Certificate of Incorporation, each outstanding share of the
Corporation's capital stock shall be reverse split so that each 100
shares of such outstanding stock shall be automatically reclassified into
one share of stock. The Company shall not issue, and no stockholder of
the Company shall be deemed to hold, fractional shares of the
Corporation's capital stock as a result of the above described reverse
stock split. Instead, the Corporation's agent will aggregate all such
fractional shares of stock that would otherwise result from the above
described reverse stock split and sell such aggregated shares of stock,
rounded to the nearest whole share, as whole shares, in an orderly
manner. Upon completion of such sales, stockholders who would otherwise
have held such fractional shares, will receive in lieu thereof, the cash
proceeds from such sales (without interest) in amounts proportionate to
the fractional shares of stock which such stockholders would otherwise
have held.
FAILURE TO COMPLETE THE RECAPITALIZATION. If the Recapitalization is not
completed for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Bankruptcy Court in the event of a Chapter 11 Case), the Reverse
Stock Split shall not be deemed to have been approved and the foregoing
amendment to the Restated Certificate will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3
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PROPOSAL NO. 4
AMENDMENT OF ARTICLE FOURTH OF RESTATED CERTIFICATE OF
INCORPORATION TO AMEND THE COMPANY'S AUTHORIZED CAPITAL
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Authorized Capital Proposal, which proposes an amendment to
Article Fourth of the Restated Certificate to provide for total authorized
capital of 18 million shares of Common Stock, par value $0.05 per share, to be
effective only upon approval by the Company's stockholders of both the Capital
Stock Combination Proposal and the Reverse Split Proposal.
In response to negotiations with representatives of the members of the
Debenture Holders' Committee, the Company agreed to propose a reduction to its
authorized capital to eliminate the Company's ability to significantly dilute
the stockholder's ownership following the Recapitalization without stockholder
approval.
If the Authorized Capital Proposal is approved and the Recapitalization is
completed following the approval and implementation of both the Capital Stock
Combination Proposal and Reverse Stock Split Proposal, the Restated Certificate
will be amended to provide that the text of Article Fourth of the Restated
Certificate will be deleted in its entirety and replaced with the following
language:
Article Fourth "FOURTH: The Corporation shall have the authority to issue
one class and series of stock. The total number of shares of stock which
the Corporation shall have the authority to issue is 18 million shares of
Common Stock, par value $0.05 per share (the "Common Stock")."
FAILURE TO COMPLETE THE RECAPITALIZATION. If the Recapitalization is not
completed for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Bankruptcy Court in the event of a Chapter 11 Case) or if both
the Capital Stock Combination and Reverse Split Proposals are not approved and
implemented, the Authorized Capital Proposal shall not be deemed to have been
approved and the foregoing amendment to the Restated Certificate will NOT become
effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4
PROPOSAL NO. 5
AMENDMENT OF ARTICLES EIGHTH AND THIRTEENTH
OF THE RESTATED CERTIFICATE AND ARTICLES III AND XI OF THE BYLAWS
TO DELETE CLASSIFIED BOARD AND SUPERMAJORITY VOTING PROVISIONS
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Board Proposal, which proposes amendments to the Restated
Certificate and Bylaws to delete the certain provisions in Article Eighth and
Article Thirteenth of the Restated Certificate and Articles III and XI of the
Bylaws which currently provide for (i) the Board to be classified into three
classes with staggered terms, (ii) an 80% supermajority vote of the shares of
outstanding capital stock of the Company entitled to vote in elections of
directors in order to change the authorized number of directors by vote of the
Company's stockholders, (iii) a similar 80% supermajority vote in order to
remove any director for cause, and (iv) a similar 80% supermajority vote in
order to amend any of the above described provisions of the Restated Certificate
or Bylaws.
GENERAL. The Company currently has a classified Board of Directors. The
Company's directors serve in three separate classes, each such class being
elected for alternating three-year terms. The Bylaws currently authorize the
Company to have a Board of Directors with a maximum of fifteen (15) directors
and a minimum of five (5) directors among its three classes, and provide that
the authorized number of directors may be fixed from time to time by duly
adopted resolution of the Board or the stockholders. The size of the Board is
currently fixed at seven (7) directors. There are currently six (6) directors
and one (1) vacancy on the Board. The vacancy resulted from the resignation of
Ms. Thompson. Messrs. Koll and Hegness have terms which expired in 1996, Messrs.
Wirta and Ellis have terms expiring at the Annual
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Meeting, and Messrs. Talbot and Vitulli have terms expiring at the annual
meeting of stockholders in 1998. See "Executive Officer and Directors of the
Company" for information concerning the Company's current directors.
PRINCIPAL EFFECT. The principal effect of the Board Proposal will be as
follows:
(i) Each director of the Company will serve for only a one-year term,
rather than a three-year term. As a result, at each annual meeting of
stockholders beginning with the June 1997 annual meeting, the Company's
stockholders will be asked to elect (or re-elect, as the case may be) a full
slate of directors to the Board;
(ii) The number of directors will be fixed at ten (10) and may be
changed from time to time by a resolution of the Board or by the vote of a
majority of shares of capital stock of the Company entitled to vote (rather
than 80%);
(iii) Any director may be removed, with or without cause, by the vote of
a majority of shares of capital stock of the Company entitled to vote
(rather than only for cause by 80%); and
(iv) The provisions of Articles Eighth and Thirteenth of the Restated
Certificate and Articles III and XI of the Bylaws may be amended by the vote
of the holders of a majority (rather than 80%) of the Company's capital
stock entitled to vote.
In connection with the Company's negotiations with representatives of the
members of the Debenture Holder's Committee, the Company agreed to propose
elimination of the classified Board of Directors and related supermajority
voting provisions described above in light of the anticipated ownership
structure of the Company following completion of the Recapitalization. Because
of the concentration of such ownership, the Company believes the classified
Board provisions and supermajority voting provisions will be unnecessary and may
inadvertently work against the best interests of the Company and its
stockholders in the event the Recapitalization is completed. The Company adopted
the classified Board and supermajority voting provisions under circumstances
materially different from those which will face the Company upon completion of
the Recapitalization. The classified Board structure was intended to increase
the likelihood of continuity and experience among Board members and to make the
Company less likely to face coercive takeover tactics which the Company is not
likely to face after the Recapitalization because of its changed ownership
structure. However, it should be noted that the removal of the supermajority
voting provisions will allow the holders of only a majority of the combined
voting power with respect to all of the Company's outstanding voting securities
subsequently to adopt amendments to the Restated Certificate which would alter,
amend or repeal the provisions of Article Eighth of the Restated Certificate and
Article III of the Bylaws. Under Delaware law, any such amendments would first
have to be approved by the Board.
The Board Proposal is not the result of, or in response to, any specific
effort to accumulate the Company's securities or to obtain control of the
Company by means of a merger, tender offer, solicitation in opposition to
management or otherwise.
IMPLEMENTATION. If the Board Proposal is approved and the Recapitalization
is completed, the Restated Certificate and Bylaws will be amended to provide
that the text of Article Eighth, Sections (a), (b), (c), and (d) of the Restated
Certificate and of Article III, Sections 2 and 10 of the Bylaws will be deleted
in their respective entireties and replaced with the following language:
Restated Certificate Article Eighth "(a) The number of directors of the
Corporation shall be determined from time to time in the manner described in
the Bylaws. Each director shall serve for a term ending on the next annual
meeting following the meeting at which such director was elected, or on such
later date as such director's successor shall have been elected and
qualified."
Restated Certificate Article Eighth "(b) Newly created directorship
resulting from any increase in the number of directors and any vacancies on
the Board of Directors resulting from death, resignation, disqualification,
removal or other cause shall be filled by the affirmative vote of a majority
of the
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remaining directors then in office, even if less than a quorum of the Board
of Directors, or by a sole remaining director. Any director elected in
accordance with the preceding sentence shall hold office until the next
annual meeting of stockholders and until such director's successor shall
have been duly elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director."
Restated Certificate Article Eighth "(c) Any director may be removed from
office, with or without cause, by the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors
(the "Voting Stock"), voting together as a single class."
Restated Certificate Article Eighth "(d) Intentionally Omitted."
Bylaws Article III "Section 2. NUMBER, ELECTION AND TERMS. The authorized
number of directors may be determined from time to time by a vote of a
majority of the then authorized number of directors or by the affirmative
vote of a majority of the voting power of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class; provided, however, that
such number initially shall be ten (10). Except as otherwise provided in the
Certificate of Incorporation, newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then
in office, even if less than a quorum of the Board, or by a sole remaining
director. Any director elected in accordance with the preceding sentence
shall hold office until the next Annual Meeting and until such director's
successor shall have been duly elected and qualified. No decrease in the
number of directors constituting the Board shall shorten the term of any
incumbent director."
Bylaws Article III "Section 10. REMOVAL OF DIRECTORS. Subject to the rights
of any series or class of Common Stock or Preferred Stock, any director may
be removed from office, with or without cause, by the affirmative vote of a
majority of the voting power of all shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class."
In addition to the above deleted and replaced language, if the Board
Proposal is approved, Article Thirteenth of the Restated Certificate will be
amended to delete the following language:
"...Notwithstanding the foregoing and anything contained in this Restated
Certificate of Incorporation to the contrary, Section 3 ("Special Meetings")
of Article II ("Meetings of Stockholders") of the Bylaws, Section 2
("Number, Election and Terms") or Section 10 ("Removal of Directors") of
Article III ("Directors") of the Bylaws, or the final sentence of Article XI
("Amendments") of the Bylaws shall not be amended or repealed, and no
provision inconsistent with any thereof shall be adopted, without the
affirmative vote of the holders of at least 80% of the voting power of the
Voting Stock, voting together as a single class. Notwithstanding anything
contained in this Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80% of the voting power of the
Voting Stock, voting together as a single class, shall be required to amend
or repeal, or adopt any provision inconsistent with, any provision of this
Article Twelfth."
and Article XI of the Bylaws will be amended to delete the following language:
"...Notwithstanding the preceding sentence, the affirmative vote of holders
of at least 80% of the voting power of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class, shall be required to amend
or repeal, or adopt any provisions inconsistent with, Section 3 of Article
II of these By-laws, Section 2 or Section 10 of Article III of these
By-laws, or this sentence."
FAILURE TO COMPLETE THE RECAPITALIZATION. If the Recapitalization is not
completed for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a Chapter 11
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Case), the Board Proposal shall not be deemed to have been approved and the
Board will not be reconstituted as set forth in Proposal No. 6 below and the
foregoing amendments to the Restated Certificate and Bylaws will NOT become
effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 5
PROPOSAL NO. 6
AMENDMENT OF ARTICLES NINTH AND THIRTEENTH OF THE RESTATED
CERTIFICATE AND ARTICLES II AND XI OF THE BYLAWS TO DELETE SUPERMAJORITY
VOTING PROVISIONS APPLICABLE TO SPECIAL MEETINGS AND TO
PERMIT STOCKHOLDERS TO CALL SPECIAL MEETINGS OF STOCKHOLDERS
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Special Meetings Proposal, which proposes amendments to
delete the provisions of Articles Ninth and Thirteenth of the Restated
Certificate and Article XI of the Bylaws which currently provide that an 80%
supermajority vote of the shares of the outstanding capital stock of the Company
entitled to vote in elections of directors is required to amend or repeal any
provisions of Article Ninth of the Restated Certificate or Article II, Section 3
of the Bylaws, which provisions also generally provide that special meetings of
the Company's stockholders, except as otherwise required by law, can only be
called by the Board or by the Company's Chief Executive Officer pursuant to
resolutions approved by the Board. The Special Meetings Proposal also proposes
to amend Article Ninth of the Restated Certificate and Article II, Section 3 of
the Bylaws, to permit the holders of capital stock of the Company representing
at least ten percent (10%) of the outstanding shares of capital stock of the
Company entitled to vote in the election of directors to call a special meeting
of the Company's stockholders.
As discussed above, in connection with the Company's negotiations with
representatives of the members of the Debenture Holder's Committee the Company
agreed to propose elimination of the above described provisions in light of the
changed ownership structure of the Company following completion of the
Recapitalization. Because of such concentration of ownership following the
Recapitalization the Company believes such supermajority voting provisions
applicable to amendments of the special meeting provisions contained in the
Restated Certificate and Bylaws will become unnecessary, may inadvertently work
against the best interests of the Company and its stockholders and deletion of
such provisions following completion of the Recapitalization should not
materially affect the Company's vulnerability to coercive takeover tactics.
If the Special Meetings Proposal is approved, the Restated Certificate will
be amended to provide that the text of Article Ninth of the Restated Certificate
be deleted in its entirety and replaced with the following language:
Restated Certificate Article "Ninth: Special meetings of stockholders may be
called either (i) by the Board of Directors or by the Chief Executive
Officer, pursuant to a resolution approved by a majority of the then
authorized number of directors of the Corporation (as determined in
accordance with the Bylaws), or (ii) by holders of capital stock of the
Company representing at least ten percent (10%) of the outstanding shares of
capital stock of the Company entitled to vote in the election of directors."
and the Bylaws will be amended to provide that the text of Article II,
Section 3 of the Bylaws will be deleted in its entirety and replaced with the
following language:
"Special meetings of stockholders, unless otherwise provided by law, may be
called at any time by the Board pursuant to a resolution adopted by a
majority of the then authorized number of directors (as determined in
accordance with Section 2 of Article III of these By-laws), by the Chief
Executive Officer or by holders of capital stock of the Company representing
at least ten percent (10%) of the outstanding shares of capital stock of the
Company entitled to vote in the election of directors. Any
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such call must specify the matter or matters to be acted upon at such
meeting and only such matter or matters shall be acted upon thereat."
In addition to the above deleted and replaced language as part of the
Special Meetings Proposal, Article Thirteenth of the Restated Certificate will
also be amended to delete the following language:
"...Section 3 ("Special Meetings") of Article II of the Bylaws..."
and Article XI of the Bylaws will be amended to delete the following language:
"...Section 3 of Article II of these Bylaws..."
FAILURE TO COMPLETE THE RECAPITALIZATION. If the Recapitalization is not
completed for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a Chapter 11 Case), the Special Meeting
Proposal shall not be deemed to have been approved and the foregoing amendments
to the Restated Certificate will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 6
PROPOSAL NO. 7
AMENDMENT OF ARTICLE TENTH OF THE RESTATED CERTIFICATE TO DELETE
PROHIBITION OF STOCKHOLDER ACTION BY WRITTEN CONSENT AND SUPERMAJORITY
VOTING PROVISIONS APPLICABLE THERETO
The Board has adopted a resolution setting forth, and declaring the
advisability of the Written Consent Proposal, which proposes an amendment to
delete the provisions of Article Tenth of the Restated Certificate which
currently prohibit the stockholders from acting by written consent without a
meeting and require an 80% supermajority vote of the shares of outstanding
capital stock of the Company entitled to vote in elections of directors in order
to amend or repeal the provisions of Article Tenth.
As discussed above, in connection with the Company's negotiations with the
representatives of members of the Debenture Holder's Committee the Company
agreed to propose elimination of the above described provisions in light of the
changed ownership structure of the Company following completion of the
Recapitalization. Because of such concentration of ownership following the
Recapitalization the Company believes the provisions of Article Tenth of the
Restated Certificate will be unnecessary, may inadvertently work against the
best interests of the Company and its stockholders and the deletion of such
provisions following completion of the Recapitalization should not materially
affect the Company's vulnerability to coercive takeover tactics.
If the Written Consent Proposal is approved, the Restated Certificate will
be amended to provide for the text of Article Tenth is to be deleted in its
entirety and replaced with the following language: "Tenth: Intentionally
Omitted."
FAILURE TO COMPLETE THE RECAPITALIZATION. If the Recapitalization is not
completed for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a Chapter 11 Case), the Written Consent
Proposal shall not be deemed to have been approved and the foregoing amendments
to the Restated Certificate and Bylaws will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 7
PROPOSAL NO. 8
ELECT SLATE OF DIRECTORS TO
RECONSTITUTE THE BOARD OF DIRECTORS
The Board currently consists of Donald M. Koll (Chairman), Harold A. Ellis,
Jr., Paul C. Hegness, J. Thomas Talbot, Marco Vitulli and Ray Wirta. Under the
Restated Certificate and Bylaws, the Board is divided into three classes with
each class having a term of three years.
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If the Recapitalization is completed and the Board Proposal is approved and
implemented, the Company is seeking to reconstitute its Board pursuant to the
Board Election Proposal and to elect an expanded ten (10) member Board with each
director serving for one year terms. Upon recommendation of the Nominating
Committee, the Board has nominated incumbent Directors, Messrs. Koll, Talbot,
Vitulli, Wirta, and as new directors, Phillip R. Burnaman II, James J. Gaffney,
Robert J. Gagalis, Thomas W. Sabin, Jr., P. John Wickser II and Paul M. Zeller,
each to serve until the next Annual Meeting of Stockholders and until their
successors are elected and qualified. If any nominee should be unavailable for
election at the Annual Meeting, the proxies will be voted for the election of
such other person as may be recommended by the Board.
The Board has also adopted a resolution which provides that in the event the
Recapitalization is completed, but the Board Proposal is not approved, and,
therefore, the classified Board continues, the Board shall be expanded to ten
(10) members pursuant to the powers of the Board provided in the Bylaws to
increase the size of the Board. In such event, the Company is seeking to elect,
and the Board has nominated, in place of the nominations described above, Mr.
Gagalis to serve for a term expiring at the annual meeting of stockholders in
1998, Messrs. Koll, Sabin and Wickser to serve for terms expiring at the annual
meeting of stockholders in 1999 and Messrs. Wirta, Gaffney, Burnaman and Zeller
for terms expiring at the annual meeting of stockholders in 2000. Incumbent
directors Messrs. Talbot and Vitulli would continue to serve their current
terms, expiring at the annual meeting of stockholders in 1998.
If the Recapitalization is not completed, the Board Proposal will be deemed
not to have been approved or implemented regardless of the approval by the
stockholders, and, therefore, the classified Board will continue. In such event,
the Company is seeking to elect, and the Board has nominated, in place of the
nominations described above, Messrs. Koll and Hegness to serve for terms
expiring at the annual meeting of stockholders in 1999 and Messrs. Wirta and
Ellis for terms expiring at the annual meeting of stockholders in 2000.
Incumbent directors Messrs. Talbot and Vitulli would continue to serve their
current terms expiring at the annual meeting of stockholders in 1998.
Information about the nominees for election as directors and incumbent
directors, including biographical and employment information is set forth in
this Prospectus under the headings "Executive Officers and Directors of the
Company," "Executive Compensation" and "Security Ownership of Certain Beneficial
Owners and Management." Those incumbent directors whose terms as directors have
not otherwise expired have agreed to resign from the Board effective upon the
election of the director nominees.
FAILURE TO COMPLETE THE RECAPITALIZATION. If the Recapitalization is not
completed for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a judicial filing) the foregoing expansion
and reconstitution of the Board will NOT occur pursuant to the Board Election
Proposal and only the incumbent directors referred to above will be deemed
nominated or elected.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR NOMINEES
DESCRIBED IN PROPOSAL NO. 8
PROPOSAL NO. 9
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The stockholders of the Company are being asked to consider a proposal to
ratify the selection of Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year ending December 31, 1997. Deloitte & Touche LLP
served as the Company's auditors for the fiscal years ended December 31, 1992
through December 31, 1996. Representatives of Deloitte & Touche LLP are not
expected to attend the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 9
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OTHER MATTERS
The Board of Directors is not aware of any other matter that may properly
come before the Annual Meeting. If any other matter not mentioned in this
Prospectus is properly brought before the Annual Meeting, the persons named in
the enclosed form of proxy will have discretionary authority to vote all proxies
with respect thereto in accordance with their judgment and applicable law.
STOCKHOLDERS ARE URGED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
THE PREPACKAGED PLAN
BRIEF EXPLANATION OF REORGANIZATION UNDER THE BANKRUPTCY CODE. Chapter 11
is the principal business reorganization chapter of the Bankruptcy Code.
Pursuant to chapter 11, a debtor attempts to reorganize its business for the
benefit of its creditors, stockholders, and other parties-in-interest. In
furtherance of this goal, the Bankruptcy Code provides that a debtor may
continue to operate its business and remain in possession of its property as a
"debtor in possession" unless the Bankruptcy Court orders the appointment of a
trustee. Also, upon the filing of a petition for reorganization under chapter
11, section 362 of the Bankruptcy Code generally provides, among other things,
for an automatic stay of all attempts to collect pre-petition claims from the
debtor or otherwise interfere with its property or business. Except as otherwise
ordered by the Court, the automatic stay remains in full force and effect until
confirmation of a plan of reorganization.
Upon the filing of a petition under Chapter 11 of the Bankruptcy Code, all
creditors and equity interest holders have standing to be heard in the Chapter
11 proceedings pursuant to Section 1109(b) of the Bankruptcy Code. If
appropriate, the United States Trustee Office will establish an official
committee of unsecured creditors, bondholders, and/or equity interest holders,
the powers and duties of which are governed by Section 1103 of the Bankruptcy
Code. Pursuant to Section 1103, among other things, an official committee may
consult with the debtor concerning the administration of a Chapter 11 case,
investigate the acts, conduct, assets, liabilities and financial condition of
the debtor, the operation of the debtor's business, and any other matter
relevant to the case. The representatives of the members of the Debenture
Holders' Committee may serve as the official committee.
Section 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018(b) allows
the Company to solicit votes for the Prepackaged Plan prior to actual
commencement of the Chapter 11 Case. Under Section 1126(b) of the Bankruptcy
Code, a holder of a claim or equity interest that has accepted or rejected a
plan of reorganization before the commencement of a Chapter 11 Case will be
deemed to have accepted or rejected the plan for purposes of confirmation of
such plan under chapter 11 of the Bankruptcy Code if the solicitation of such
acceptance or rejection was in compliance with any applicable non-bankruptcy
law, rule or regulation governing the adequacy of disclosure in connection with
such solicitations, or if there is not any such law, rule or regulation, if such
acceptance or rejection was solicited after disclosure to such holder of
adequate information as defined in section 1125(a) of the Bankruptcy Code.
Section 1125(a) defines adequate information as information of a kind and in
suffficient detail that would enable a hypothetical reasonable investor typical
of holders of claims and interests to make an informed judgment about a plan of
reorganization. The Company believes that this Prospectus complies with the
requirements of sections 1125(a) and 1126(b) (including compliance with the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the applicable rules or regulations promulgated thereunder) for
purposes of solicitation of acceptances, although there can be no assurance that
the Bankruptcy Court will reach the same conclusion. See "Risk Factors--Possible
Invalidation of the Solicitation by the Bankruptcy Court."
In order for Creditors and Interest holders to receive distributions under
the Prepackaged Plan, the Prepackaged Plan must be confirmed by the Bankruptcy
Court, which means that all of the applicable
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requirements of Section 1129 of the Bankruptcy Code must be satisfied. Section
1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to
hold a hearing on confirmation of the Prepackaged Plan (the "Confirmation
Hearing"). The Confirmation Hearing may be postponed from time to time by the
Bankruptcy Court without further notice, except for an announcement of the
postponement made at the Confirmation Hearing. Section 1128(b) of the Bankruptcy
Code provides that any party in interest may object to confirmation of the
Prepackaged Plan. Objections must be made in writing, specifying in detail the
name and address of the person or entity objecting, the grounds for the
objection and the nature and amount of the Claim held by the objector, and
otherwise complying with the requirements of the Bankruptcy Rules and the local
Bankruptcy Rules.
At the Confirmation Hearing, the Bankruptcy Court determines, among other
things, whether the following confirmation requirements specified in Section
1129 of the Bankruptcy Code have been satisfied:
a. The Prepackaged Plan complies with the applicable provisions of the
Bankruptcy Code.
b. The Company has complied with the applicable provisions of the
Bankruptcy Code.
c. The Prepackaged Plan has been proposed in good faith and not by any
means prohibited by law.
d. Any payment made or to be made by the Company for services or for
costs and expenses in, or in connection with, the Chapter 11 Case, or in
connection with the Prepackaged Plan and incident to the Chapter 11 Case,
has been disclosed to the Bankruptcy Court, and any such payment made before
the confirmation of the Prepackaged Plan is reasonable or, if such payment
is to be fixed after the confirmation of the Prepackaged Plan, such payment
is subject to the approval of the Bankruptcy Court as reasonable.
e. The Company has disclosed the identity and affiliations of any
individual proposed to serve, after confirmation of the Prepackaged Plan, as
a director or officer of the Company, and the appointment to, or continuance
in, such office of such individual is consistent with the interests of
Creditors and with public policy, and the Company has disclosed the identity
of any insider who will be employed or retained by the Company and the
nature of any compensation for such insider.
f. Each holder of an Impaired Claim has either accepted the Prepackaged
Plan or will receive or retain under the Prepackaged Plan on account of such
holder's Claim, property of a value, as of the Effective Date, that is not
less than the amount that such entity would receive or retain if the Company
was liquidated on such date under Chapter 7 of the Bankruptcy Code. This is
commonly referred to as the "best interests test." See "The Prepackaged
Plan--Confirmation Standards--Best Interests Test" and "Liquidation
Analysis."
g. Each Class of Claims or Interests has either accepted the
Prepackaged Plan or is not Impaired under the Prepackaged Plan. If a Class
of Impaired Claims votes to reject the Prepackaged Plan, then the
Prepackaged Plan can be confirmed only if it is "fair and equitable" and
does not "unfairly discriminate." See "The Prepackaged Plan--Confirmation of
the Plan Without Accepances by All Voting Classes."
h. Except to the extent that the holder of a particular Claim has
agreed to a different treatment of such Claim, the Prepackaged Plan provides
that Administrative Claims and other Priority Claims will be paid in full on
the Effective Date and that Priority Tax Claims will receive on account of
such Claims either payment in full on the Effective date or deferred cash
payments, over a period not exceeding six years after the date of assessment
of such Claims, of a value as of the Effective Date equal to the allowed
amount of such Claims.
i. At least one class of Claims has accepted the Prepackaged Plan,
determined without including an acceptance of the Prepackaged Plan by any
insider holding a Claim in such class.
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j. Confirmation of the Prepackaged Plan is not likely to be followed by
the liquidation, or the need for further financial reorganization, of the
Company or any successor to the Company under the Prepackaged Plan, unless
such liquidation or reorganization is proposed in the Prepackaged Plan.
The Company believes that, upon acceptance of the Prepackaged Plan by each
of the voting classes, the Prepackaged Plan will satisfy all the statutory
requirements of Chapter 11 of the Bankruptcy Code, that the Company has complied
or will have complied with all of the requirements of Chapter 11 prior to
Confirmation, and that the Prepackaged Plan is being proposed and will be
submitted to the Bankruptcy Court in good faith.
The consummation of a plan of reorganization is the principal objective of a
chapter 11 reorganization case. The plan sets forth the means for satisfying the
holders of claims against and interests in the debtor. Confirmation of a plan of
reorganization by the Bankruptcy Court makes the plan binding upon the debtor,
any issuer of securities under the plan, any person acquiring property under the
plan, and any creditor, equity security holder or general partner of the debtor.
Subject to certain limited exceptions, the confirmation order discharges the
debtor from any debt that arose prior to the date of confirmation of the plan
and substitutes therefor the obligations specified under the confirmed plan.
The Prepackaged Plan provides specified distributions to the various Classes
of holders of Claims against and Interests in the Company. The Company believes
the Prepackaged Plan provides consideration to all Classes of Creditors and
Equity Holders that reflects an appropriate resolution of their Claims against
and Interests in the Company taking into account the differing nature and
priority (including applicable contractual subordination) of such Claims and
Interests.
THE FOLLOWING IS A SUMMARY OF CERTAIN OF THE MORE SIGNIFICANT MATTERS TO
OCCUR EITHER PURSUANT TO OR IN CONNECTION WITH CONFIRMATION OF THE PREPACKAGED
PLAN, A COPY OF WHICH ACCOMPANIES THIS PROSPECTUS AS APPENDIX A AND TO WHICH
REFERENCE SHOULD BE MADE FOR A FULL STATEMENT OF ITS TERMS. THIS SUMMARY ONLY
HIGHLIGHTS CERTAIN SUBSTANTIVE PROVISIONS OF THE PREPACKAGED PLAN AND IS NOT,
NOR IS IT INTENDED TO BE, A COMPLETE DESCRIPTION OF, OR A SUBSTITUTE FOR, A FULL
AND COMPLETE READING OF THE PREPACKAGED PLAN, WHICH ALL HOLDERS OF CLAIMS AND
INTERESTS ARE URGED TO REVIEW CAREFULLY. THE PREPACKAGED PLAN, IF CONFIRMED,
WILL BE BINDING UPON THE COMPANY AND ALL HOLDERS OF CLAIMS AND INTERESTS. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PREPACKAGED PLAN. IN
ADDITION, THE COMPANY WAS RECENTLY INFORMED THAT THE HOLDERS OF AN AGGREGATE OF
APPROXIMATELY 50.5% OF THE OUTSTANDING DEBENTURES, 63.5% OF THE PREFERRED STOCK
AND 24.5% OF THE CLASS A COMMON STOCK HAVE EXPRESSED THEIR INTENT TO VOTE IN
FAVOR OF THE EXCHANGE OFFER AND THE PREPACKAGED PLAN. SEE "SUMMARY--THE
RECAPITALIZATION--DESCRIPTION OF DEBENTURE HOLDERS' COMMITTEE PROCESS."
For a discussion of certain risks associated with the Prepackaged Plan and
the transactions contemplated thereunder, see the section titled "Risk Factors."
You are also urged to consult your counsel about the Prepackaged Plan and its
effect on your legal rights before voting. IN THE OPINION OF THE COMPANY, THE
TREATMENT OF CREDITORS AND EQUITY HOLDERS UNDER THE PREPACKAGED PLAN
CONTEMPLATES A GREATER RECOVERY THAN THAT WHICH IS LIKELY TO BE ACHIEVED UNDER
THE LIQUIDATION OF THE COMPANY UNDER THE BANKRUPTCY CODE. ACCORDINGLY, THE
COMPANY BELIEVES THAT CONFIRMATION OF THE PREPACKAGED PLAN WOULD BE IN THE BEST
INTERESTS OF ALL CREDITORS AND EQUITY HOLDERS AND RECOMMENDS THAT YOU VOTE TO
ACCEPT THE PREPACKAGED PLAN.
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TREATMENT OF UNCLASSIFIED CLAIMS. The Bankruptcy Code does not require
classification of certain priority claims against a debtor. In this case, these
unclassified claims include Administrative Claims and Tax Claims.
1. ADMINISTRATIVE CLAIMS. An "Administrative Claim" is any actual and
necessary cost or expense incurred during the pendency of the Company's Chapter
11 Case. These Claims include, without limitation, (a) any actual and necessary
costs and expenses of (i) preserving the estate, (ii) operating the business
during the Chapter 11 Case, (iii) managing, preserving or selling of assets
during the Chapter 11 Case, and (iv) administering, prosecuting or defending
claims by or against the Company and for making distributions under the
Prepackaged Plan; (b) any indebtedness or obligations incurred or assumed by the
Company as a debtor in possession in connection with the conduct of its business
or for the acquisition or lease of property or for the rendition of services;
(c) any allowances of compensation or reimbursement of expenses of professionals
retained by the Company to the extent allowed by a Final Order; and (d) any fees
or charges assessed against the estate under Chapter 123 of Title 28 of the
United States Code. Pursuant to the Prepackaged Plan, each holder of an
Administrative Claim that is an Allowed Claim will receive cash equal to the
unpaid portion of such Allowed Administrative Claim on the Effective Date (or
such later date on which such Claim becomes an Allowed Claim). However, any
Administrative Claim representing a liability incurred in the ordinary course of
business by the Company during the Chapter 11 Case, including in its capacity as
a debtor in possession, will be paid by the Company in the ordinary course of
business and in accordance with the terms and conditions of the particular
transaction and any agreements relating thereto.
2. TAX CLAIMS. A "Tax Claim" is that portion of any Claim for unpaid taxes
which is entitled to priority in right of payment under section 507(a)(7) of the
Code. The Company anticipates that it will be current on its tax obligations at
the time it commences its Chapter 11 Case. In the event, however, that there are
tax obligations as of the Petition Date, each holder of a Tax Claim that holds
an Allowed Claim will receive cash equal to the unpaid portion of such Allowed
Tax Claim on the Effective Date (or such later date on which such Claim becomes
an Allowed Claim), except that the Company may elect to pay such holder of an
Allowed Tax Claim deferred cash payments in equal quarterly installments, with
interest, over a period in each case not to exceed six years after the date of
assessment of such Tax Claim, of a value, as of the Effective Date, equal to the
allowed amount of such Tax Claim.
Notwithstanding the above treatment of Allowed Tax Claims, the Company is
appealing to the IRS regarding material audit adjustments proposed by the IRS
for the tax years ended December 31, 1989, 1990 and 1991. The Company is
prepared to pursue all available administrative and judicial appeal procedures
with regard to this matter. The Company has been advised that resolution of this
dispute with the IRS could take up to five years. Under the Prepackaged Plan,
the rights of the IRS and the amount of any such Claim will be resolved or
adjudicated as if the Chapter 11 Case had not been commenced. Any Claim in
connection therewith will survive the Effective Date and the Consummation of the
Prepackaged Plan as if the Chapter 11 Case had not been commenced, and will not
be discharged pursuant to Section 9.1 of the Prepackaged Plan and section 1141
of the Bankruptcy Code.
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PREPACKAGED
PLAN. Section 1122 of the Bankruptcy Code requires that the Prepackaged Plan
classify the Claims of the Company's Creditors and the Interests of its Equity
Holders. The Bankruptcy Code also provides that the Prepackaged Plan may place a
Claim or Interest of a Creditor or Equity Holder in a particular Class only if
such Claim or Interest is substantially similar to the other Claims or Interests
of such Class. The Company believes that its Claims and Interests have been
appropriately classified in the Prepackaged Plan. The Company believes separate
classification of the unsecured Claims of the holders of Unliquidated or
Contingent Claims, General Unsecured Claims and Subordinated Debentures is
appropriate. The separate classification for Unliquidated or Contingent Claims
is necessary because of the nature of such Claims. This will allow for the
recapitalization of the Company in the quickest and least costly manner.
Moreover, the separate classification recognizes the potential for contractual
subordination to which the holders of Senior Debentures and
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Subordinated Debentures are subject. To the extent that the Bankruptcy Court
finds a different classification is required for the Prepackaged Plan to be
confirmed, the Company would seek (i) to modify the Prepackaged Plan to provide
for whatever reasonable classification might be required for confirmation, and
(ii) to use the acceptances received from any Creditor or Equity Holder pursuant
to this solicitation for the purpose of obtaining the approval of the Class or
Classes of which such Creditor or Equity Holder ultimately is deemed to be a
member. Any such reclassification of Creditors or Equity Holders, although
subject to the notice and hearing requirements of the Bankruptcy Code, could
adversely affect the Class in which such Creditor or Equity Holder was initially
a member, or any other Class under the Prepackaged Plan, by changing the
composition of such Class and the vote required for approval of the Prepackaged
Plan. There can be no assurance that the Bankruptcy Court, after finding that a
classification was inappropriate and requiring a reclassification, would approve
the Prepackaged Plan based upon such reclassification. Except to the extent that
modification of classification in the Prepackaged Plan adversely affects the
treatment of a Creditor or Equity Holder and requires resolicitation, the
Company will, in accordance with the Bankruptcy Code and the Bankruptcy Rules,
seek a determination by the Bankruptcy Court that acceptance by any Creditor or
an Equity Holder of the Prepackaged Plan pursuant to this solicitation will
constitute a consent to the Prepackaged Plan's treatment of such Creditor or
Equity Holder regardless of the Class to which such Creditor or Equity Holder is
ultimately deemed to be a member. See Risk Factors--Classification of Claims and
Interests.
The Bankruptcy Code also requires that the Prepackaged Plan provide the same
treatment for each Claim or Interest of a particular Class unless the holder of
a particular Claim or Interest agrees to a less favorable treatment of its Claim
or Interest. The Company believes it has complied with the requirements of equal
treatment. To the extent that the Bankruptcy Court finds that the Prepackaged
Plan does not satisfy such requirements, the Bankruptcy Court could deny
Confirmation of the Prepackaged Plan if the Creditors or Equity Holders affected
do not otherwise consent to the treatment afforded them under the Prepackaged
Plan.
Classes that are Impaired under the Prepackaged Plan are entitled to vote to
accept or reject the Prepackaged Plan. As a general matter, a Class of Claims or
Interests is considered to be "unimpaired" under a plan of reorganization if (i)
the plan does not alter the legal, equitable and contractual rights of the
holders of such Claims or Interests, or (ii) the plan provides for full cash
satisfaction of such Claims or Interests. Under the Bankruptcy Code, holders of
Claims in the Unimpaired Classes are conclusively presumed to have accepted the
Prepackaged Plan. Holders of Claims or Interests which do not receive or retain
anything under the Prepackaged Plan are deemed to have rejected the Prepackaged
Plan requiring Confirmation pursuant to Section 1129(b) of the Bankruptcy Code.
The following Classes of Claims are Unimpaired under the Prepackaged Plan
and, therefore, the holders of such Claims are not entitled to vote on the
Prepackaged Plan:
Administrative Claims and Tax Claims (see "Treatment of Administrative and
Priority Claims")
Class 1--Priority Claims
Class 2--Secured Claims
Class 3--Unliquidated or Contingent Claims
The following Classes of Claims and Interests are Impaired under the
Prepackaged Plan and, therefore, the holders of such Claims and Interests are
entitled to vote on the Prepackaged Plan:
Class 5--General Unsecured Claims
Class 6--Claims of Holders of Subordinated Debentures
Class 7--Interests of Holders of Preferred Stock
Class 8--Interests of Holders of Class A Common Stock
The holders of Affiliates' Claims do not receive or retain anything under
the Prepackaged Plan and although they are deemed to reject the Prepackaged
Plan, the Company will cause the holders of such
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Claims to support the Prepackaged Plan. The holders of warrants will not receive
or retain anything under the Prepackaged Plan and are deemed to reject the
Prepackaged Plan.
Subsequent to the filing by the Company of its Chapter 11 Case, the
Bankruptcy Court will determine whether sufficient votes to accept the
Prepackaged Plan have been obtained from the holders of Claims and Interests in
each Impaired Class. An Impaired Class of Claims will be determined to have
accepted the Prepackaged Plan if votes to accept the Prepackaged Plan are cast
by the holders of at least two-thirds of the dollar amount and more than
one-half in number of Claims in such Class that have voted on the Prepackaged
Plan. An Impaired Class of Interests will be determined to have accepted the
Prepackaged Plan if votes to accept the Prepackaged Plan are cast by the holders
of at least two-thirds in amount of Interests in such Class that have voted on
the Prepackaged Plan.
The Prepackaged Plan divides Claims against the Company into six classes and
puts Interests in the Company into three Classes. Distributions will be made to
persons holding Claims and Interests in various Classes as described below.
CLASS 1--PRIORITY CLAIMS. Class 1 consists of all Priority Claims excluding
Tax Claims. The Company anticipates that the only Priority Claims will be those
relating to salaries, health benefits and accrued vacation for its employees.
The Company, contemporaneously with the filing of the Chapter 11 Case, will file
an application with the Bankruptcy Court requesting approval to allow it to pay
its employees' pre-Petition Date wages and related benefits up to $4,000 per
employee. Assuming the Bankruptcy Court approves the application and to the
extent that Claims remain outstanding, holders will be paid in full in Cash on
the Effective Date unless the holder of such Claims and the Company agree to a
different treatment. Any Allowed Priority Claims not due on the Effective Date
will be paid in full in Cash when such Claims become due. Class 1 Claims are
Unimpaired and holders of Class 1 Claims are not entitled to vote on the
Prepackaged Plan.
CLASS 2--SECURED CLAIMS. Class 2 consists of each Claim secured by a
security interest in or lien upon property of the Company, including, but not
limited to, other Claims secured by (i) mortgages or trust deeds on real
property, (ii) mechanics' or materialmen's liens, (iii) security deposits, or
(iv) liens on miscellaneous personal property such as office furniture,
telephone systems, copiers and mailing equipment. Each Class 2 Secured Claim
will be treated for all purposes of the Prepackaged Plan and under the Code as a
separate Subclass of Class 2. Unless otherwise agreed to by the parties, either
(a) the legal, equitable and contractual rights of each holder of an Allowed
Claim in any Subclass of Class 2 will be unaltered by the Prepackaged Plan, or
(b) at the option of the Company, any Allowed Claim in any Subclass of Class 2
will be treated in any other manner that will result in such Allowed Claim being
deemed Unimpaired. To the extent not previously paid, any accrued and unpaid
interest due on the Secured Claims will be paid in cash on the Effective Date.
The Company is not aware of any holders of Secured Claims. Class 2 Claims are
Unimpaired and holders of such Class 2 Claims are not entitled to vote on the
Prepackaged Plan.
CLASS 3--UNLIQUIDATED OR CONTINGENT CLAIMS. Class 3 consists of all Claims
of holders of Unliquidated or Contingent Claims, including but not limited to,
Litigation Claims. The legal, equitable and contractual rights of the holders of
Class 3 Claims will not be affected by the Prepackaged Plan. Class 3 Claims will
survive the discharge provided for in Section 9.1 of the Prepackaged Plan and
section 1141 of the Code and the rights of a holder of such Claim, including
payment, if any, will be determined in the manner in which the amount of such
Claim and the rights of the holder of such Claim would have been resolved or
adjudicated if the Chapter 11 Case had not been commenced. Due to the nature of
such Claims, the actual number of holders and the aggregate amount of the Claims
cannot be determined or approximated with any reasonable degree of accuracy;
however the Company is a defendant in a number of lawsuits, and may become
subject to future litigation regarding certain environmental and asbestos
related indemnity claims. See "Legal Proceedings." The Company is contesting its
claimed any liability and is vigorously pursuing all available defenses. For
purposes of the Liquidation Analysis, the Company has estimated the range of its
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financial exposure for such Claims to be from $0.00 to approximately $20
million. Class 3 Claims are Unimpaired and holders of Class 3 Claims are not
entitled to vote on the Prepackaged Plan.
CLASS 4--AFFILIATES CLAIMS. Class 4 consists of all Net Claims of
Affiliates. The aggregate value of Affiliated Claims was approximately $73.7
million as of March 31, 1997. The holders of Allowed Net Claims in Class 4 will
receive no distributions nor retain any property under the Prepackaged Plan on
account of their Allowed Net Claims. Although, such holders are deemed to have
rejected the Prepackaged Plan, the Company will cause such holders to accept the
Prepackaged Plan.
CLASS 5--GENERAL UNSECURED CLAIMS. Class 5 consists of all general
unsecured Claims of Creditors against the Company, however arising, and not
included in any other Class in the Prepackaged Plan or otherwise provided for in
the Prepackaged Plan, including, but not limited to, liquidated non-Contingent
Claims, Senior Debentures, and Claims for damages resulting from the rejection
of leases or executory contracts. On the Effective Date, the Company anticipates
that Allowed Class 5 Claims will aggregate approximately $169.3 million, of
which $164.6 million relate to the Claims of holders of the Senior Debentures.
The balance of approximately $4.7 million relates to the claims of the holders
of liquidated non-Contingent Claims. Provided Classes 6, 7 and 8 accept the
Prepackaged Plan, holders of Senior Debentures will receive 56 shares of Common
Stock on a post-Capital Stock Combination and post-Reverse Stock Split basis for
each $1,000 principal amount of Senior Debentures they possess and holders of
liquidated non-Contingent Claims will receive 56 shares of Common Stock on a
post-Capital Stock Combination and post-Reverse Stock Split basis for each
$1,000 principal amount of Allowed Claim. Collectively, holders of Class 5
Claims will hold approximately 80.3% of the outstanding shares of the Common
Stock of the Company on the Effective Date. If Class 6, 7, or 8 fail to accept
the Prepackaged Plan, the Prepackaged Plan will be automatically amended
pursuant to Article V of the Prepackaged Plan. As a result, the holders of the
Senior Debentures will enforce the subordination provisions of the Senior
Debenture Indenture with respect to such rejecting Class of Claims and/or
Interests and any distribution due such rejecting Class of Claims or Interests
under the Prepackaged Plan will be given to the holders of Class 5 Claims. Class
5 Claims are Impaired; consequently, such holders are entitled to vote on the
Prepackaged Plan.
CLASS 6--CLAIMS OF HOLDERS OF SUBORDINATED DEBENTURES. Class 6 consists of
all Claims of holders of Subordinated Debentures. On the Effective Date, the
Company anticipates that Allowed Class 6 Claims will aggregate approximately
$41.1 million. Provided that holders of Subordinated Debentures vote to accept
the Prepackaged Plan, such holders will receive 28 shares of Common Stock on a
post-Capital Stock Combination and post-Reverses Stock Split basis for each
$1,000 principal amount of Subordinated Debenture they possess. Collectively,
holders of Class 6 Claims will hold approximately 9.8% of the outstanding shares
of the Common Stock of the Company on the Effective Date. If holders of Class 6
Claims fail to accept the Prepackaged Plan, the holders of Allowed Claims in
Class 6 will receive no distributions nor will they retain any property under
the Prepackaged Plan. The distributions which would otherwise have been made to
holders of Allowed Class 6 Claims will be made to holders of Allowed Claims in
Class 5. Class 6 Claims are Impaired; consequently, such holders are entitled to
vote on the Prepackaged Plan.
CLASS 7--INTERESTS OF HOLDERS OF PREFERRED STOCK. Class 7 consists of all
Interests of holders of Preferred Stock. As of April 15, 1997, there were
38,886,626 shares of Preferred Stock outstanding held by 13,750 record holders.
Provided that holders of Class 7 Interests vote to accept the Prepackaged Plan,
after giving effect to the Capital Stock Combination and the Reverse Stock
Split, each holder of an Allowed Interest in Class 7 will be deemed to hold on a
one and three quarter for one (1.75:1) basis Common Stock. After the dilutive
effect of the distribution of Common Stock under the Prepackaged Plan,
collectively holders of Allowed Class 7 Interests will hold 5.8% of the
outstanding shares of the Common Stock of the Company on the Effective Date. If
holders of Class 7 Interests fail to accept the Prepackaged Plan, such holders
will receive no distributions nor will they retain any property under the
Prepackaged Plan. The distributions
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which would otherwise have been made to the holders of Allowed Class 7 Interests
will be made to the holders of Allowed Claims in Class 5. Class 7 Interests are
Impaired; consequently, such holders are entitled to vote on the Prepackaged
Plan.
CLASS 8--INTERESTS OF HOLDERS OF CLASS A COMMON STOCK. Class 8 consists of
all Interests of holders of Class A Common Stock. As of April 15, 1997, there
were 48,938,543 shares of Class A Common Stock outstanding held by 24,887 record
holders. Provided that holders of Class 8 Interests vote to accept the
Prepackaged Plan, after giving effect to the Capital Stock Combination and the
Reverse Stock Split, each holder of an Allowed Interest in Class 8 will be
deemed to hold on a one for one (1:1) basis Common Stock. After the dilutive
effect of the distribution of Common Stock under the Prepackaged Plan,
collectively holders of Allowed Class 8 Interests will hold 4.1% of the
outstanding shares of the Common Stock of the Company on the Effective Date. If
holders of Class 8 Interests fail to accept the Prepackaged Plan, such holders
will receive no distributions nor will they retain any property under the
Prepackaged Plan. The distributions which would otherwise have been made to
holders of Allowed Class 8 Interests will be made to holders of Allowed Claims
in Class 5. Class 8 Interests are Impaired; consequently, such holders are
entitled to vote on the Prepackaged Plan.
CLASS 9--INTERESTS OF HOLDERS OF WARRANTS. Class 9 consists of all
Interests of Holders of warrants. The warrants have an exercise price of $.25
per share, and are exercisable over a ten year period ending in 2004, vesting in
equal installments over five years. After giving effect to the Reverse Stock
Split, the exercise price would be $25.00. Consequently, the warrants have no
economic value and, consequently, will be cancelled on the Effective Date. Class
9 Interests are Impaired. Because holders of Class 9 Interests will receive no
distributions and will retain no property under the Prepackaged Plan, such
holders are deemed to have rejected the Prepackaged Plan and are not entitled to
vote on the Prepackaged Plan.
Distributions of Common Stock to holders of Outstanding Debentures will be
based upon the principal amount of the Outstanding Debentures as of March 15,
1997.
MEANS FOR IMPLEMENTATION OF THE PREPACKAGED PLAN. On or prior to the
Effective Date (except as otherwise indicated), the following actions will be
effectuated:
AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS. The Bankruptcy Code
requires that upon the confirmation of a plan of reorganization a debtor's
charter documents must contain certain provisions including a provision
prohibiting the issuance of non-voting equity securities. To comply with this
requirement and to effect certain other changes, including the Capital Stock
Combination and the Reverse Stock Split and the authorization of 18 million
shares of Common Stock, the Prepackaged Plan provides that the Company will file
its Restated and Amended Certificate of Incorporation with the office of the
Secretary of State of the State of Delaware in the form of Exhibit 1 attached to
the Prepackaged Plan. The Prepackaged Plan also provides for the adoption of the
Amended and Restated By-Laws in the form of Exhibit 2 attached to the
Prepackaged Plan.
CAPITAL STOCK COMBINATION. To the extent necessary to effectuate the
Prepackaged Plan, the Company will effect the Capital Stock Combination whereby
the Class A Common Stock, Class B Common Stock (none of which is outstanding),
and Preferred Stock will be combined into one (1) class and series designated
"Common Stock." Pursuant to the Capital Stock Combination each share of
outstanding Preferred Stock will be reclassified to be one and three quarter
(1.75) shares of Common Stock and each outstanding share of Class A Common Stock
will be reclassified to be one share of Common Stock. The Common Stock will have
the same rights as the Class A Common Stock had prior to the Capital Stock
Combination.
REVERSE STOCK SPLIT. To the extent necessary to effectuate the Prepackaged
Plan, the Company will effect a one for one hundred (1:100) reverse stock split
of the outstanding Common Stock immediately following the Capital Stock
Combination.
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CANCELLATION OF SECURITIES AND AGREEMENTS. The Company will cancel all the
Outstanding Debentures, the Class A Common Stock, the Class B Common Stock (none
of which is outstanding), the Preferred Stock and the warrants. In addition, the
Senior Debenture Indenture and the Subordinated Debenture Indenture will be
cancelled and will have no further force and effect.
ISSUANCE OF NEW SECURITIES. The Company will issue up to approximately
11,802,845 shares of Common Stock.
SUBORDINATION. Provided that Classes 6, 7 and 8 vote to accept the
Prepackaged Plan, the classification and manner of satisfying all Claims and
Interests and the respective distributions and treatments under the Prepackaged
Plan do not give effect to the contractual, legal and equitable subordination
rights of the holders of Senior Debentures; however, such rights have been
agreed to be settled, compromised and released under the Prepackaged Plan.
Accordingly, without limitation, the distributions to the holders of Claims in
Class 6 and the Interests in Classes 7 and 8 will not be subject to levy,
garnishment, attachment or other legal process by the holders of Senior
Debentures. The Confirmation Order will permanently enjoin, effective as of the
Effective Date, all persons and entities from enforcing or attempting to enforce
any such contractual, legal and equitable subordination rights compromised and
settled under the Prepackaged Plan. For a description of the contractual
subordination provisions of the Senior Debentures and the Subordinated
Debentures, see "Description of Outstanding Debentures."
DISTRIBUTIONS UNDER THE PREPACKAGED PLAN. The Prepackaged Plan provides
that the Company may designate an entity or entities to serve as the Exchange
Agent to distribute all the property to be distributed under the Prepackaged
Plan.
GENERAL. Distributions to holders of Allowed Claims will be made at the
addresses set forth on the respective proofs of claim filed by such holders or,
if no such proof of claim has been required to be filed, at the address of the
holder of such Claim as indicated on the records of the Company. Distributions
on account of Claims that are Allowed as of the Effective Date and are entitled
to receive distributions under the Prepackaged Plan will be made on the
Effective Date. Distributions to holders of Senior Debentures will be made on
the Effective Date or as soon as practicable thereafter. Provided holders of
Subordinated Debentures vote to accept the Prepackaged Plan, distributions to
such holders will be made on the Effective Date or as soon as practicable
thereafter. Provided that holders of Preferred Stock and Class A Common Stock
vote to accept the Prepackaged Plan, distributions will be made upon presentment
to the Exchange Agent of certificates evidencing such Preferred Stock and Class
A Common Stock.
CASH PAYMENTS ON THE EFFECTIVE DATE. Other than with respect to the payment
of fees for services rendered by professionals that are retained in the course
of the Chapter 11 Case, the Company does not presently anticipate that there
will be any Administrative Claims on the Effective Date that would not otherwise
be paid in the ordinary course of business. The Company presently intends to
seek the approval of the Bankruptcy Court to pay the Priority Claims consisting
of those Claims relating to salaries, health benefits and accrued vacations for
its employees prior to the Effective Date. See "The Prepackaged Plan-- Intended
actions During the Chapter 11 Case--Provisions for Employees." The Company is
not aware of any Priority Tax Claims (other than any which may result from the
IRS dispute described in "Risk Factors" under the heading "Federal Income Tax
Audit of the Company") or unpaid interest due holders of Class 2 Claims on the
Effective Date. Holders of Class 3 Claims will be paid in the ordinary course of
the Company's business. The Company is not aware of any Class 3 Claims that will
be due and owing on the Effective Date.
DISTRIBUTION RECORD DATE. As of the close of business on June , 1997 (the
"Distribution Record Date"), the respective transfer registers for the Senior
Debentures, Subordinated Debentures, Preferred Stock and Class A Common Stock
(collectively, "Impaired Securities") as maintained by the Company, the
respective Indenture Trustees, or their respective agents, will be closed and
the transfers of the Outstanding Debentures, or any interest therein, will be
prohibited. The Exchange Agent will have no obligation to
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recognize the transfer of any Outstanding Debentures occurring after the
Distribution Record Date and will be entitled to recognize and deal only with
those holders of record as of the close of business on the Distribution Record
Date.
SURRENDER OF INSTRUMENTS--DEBENTURE HOLDERS. As a condition to
participation under the Prepackaged Plan, each holder of Senior Debentures and
Subordinated Debentures, provided that Class 6 voted to accept the Prepackaged
Plan, that desires to receive the Common Stock to be distributed on account of
an Allowed Claim based on such debenture will have to surrender its Outstanding
Debentures to the Company, or its designee, and execute and deliver such other
documents as are necessary. If a holder does not surrender the Outstanding
Debentures or provide an affidavit that such debenture was lost, in a form
acceptable to the Company, within one year of the Effective Date, then no
distribution will be made to such holder whose Allowed Claim is based on such
Outstanding Debentures. Such holder will be deemed to forfeit all rights under
the Prepackaged Plan.
UNCLAIMED DISTRIBUTIONS. If any Allowed Claim holders' distribution is
returned to the Exchange Agent as undeliverable, no further distributions will
be made to that holder unless and until the Exchange Agent is notified in
writing of the holder's then-current address. Undeliverable distributions will
remain in the possession of the Exchange Agent. If the person is located within
one year of the Effective Date, then the securities will be distributed to such
person; otherwise, the securities will become the property of and will be
released to the Company.
FRACTIONAL SHARES. Fractional shares of Common Stock resulting from the
Capital Stock Combination or Reverse Stock Split and the exchange of Outstanding
Debentures and liquidated and non-Contingent Claims for Common Stock will be
dealt with as follows:
CAPITAL STOCK COMBINATION AND REVERSE STOCK SPLIT. If the Capital Stock
Combination or Reverse Stock Split creates a fraction of a share of
Common Stock, holders of an Allowed Class 7 or 8 Interest, respectively,
will not receive or be deemed to hold any fractional shares. All
fractional shares which would otherwise have been created by the Capital
Stock Combination and Reverse Stock Split will be aggregated and after
the Effective Date, the shares will be sold in the market by the Exchange
Agent and the net proceeds thereof disbursed pro rata to the holders of
Allowed Class 7 and 8 Interests based upon the fraction of the shares
each holder would have been entitled to receive or would have been deemed
to hold had the Company authorized the issuance of fractional shares.
DEBENTURE/CLAIM EXCHANGE. Whenever any distribution of a fraction of a
share of Common Stock to any holder of an Allowed Class 5 or Class 6
Claim would otherwise result from the exchanges, all such fractional
shares will be aggregated and after the Effective Date, the shares will
be sold in the market by the Exchange Agent and the net proceeds thereof
disbursed prorata to the holders of Allowed Class 5 and Class 6 Claims
based upon the fraction of the shares each such holder would have been
entitled to receive or deemed to hold had the Company authorized the
issuance of fractional shares.
DISTRIBUTION WITH RESPECT TO OTHER CLASS 5 CLAIMS. Liquidated
non-Contingent Claims are being included in Class 5 for voting and distribution
purposes aggregating approximately $4.7 million. The Company reserves the right,
however, to object to the Claims in accordance with paragraph 10.1 of the
Prepackaged Plan. In the event an objection is filed with the Bankruptcy Court
by the Company, the Exchange Agent, in accordance with paragraph 10.3 of the
Prepackaged Plan, will reserve sufficient shares of Common Stock to satisfy the
full amount to which the holder of such Contested Claim would be entitled to
under the Prepackaged Plan. Upon any such Contested Claim becoming an Allowed
Claim, in full, or in a settled amount, the Exchange Agent will promptly deliver
the number of shares of Common Stock then due such Creditor in respect of its
Allowed Claim.
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MISCELLANEOUS DISTRIBUTION PROVISIONS. In connection with the Prepackaged
Plan, to the extent applicable, the Exchange Agent will comply with all tax
withholding and reporting requirements imposed on it by any governmental unit,
and all distributions pursuant to the Prepackaged Plan will be subject to such
withholding and reporting requirements.
EFFECTS OF PREPACKAGED PLAN CONSUMMATION
LIMITED RELEASE OF DIRECTORS, OFFICERS AND EMPLOYEES. The Prepackaged Plan
provides for the release by the Company of the present and former directors and
officers of the Company from certain claims related to their respective
employment or service with the Company. The releases extend to claims by or
through the Company other than (i) in respect to any loan, advance or similar
payment of the Company to any such person; (ii) in respect of any contractual
obligation owed by such person to the Company; or (iii) to the extent based upon
or attributable to such person gaining a personal profit to which such person
was not legally entitled, including, without limitation, profits made from the
purchase or sale of equity securities of the Company which are recoverable by
the Company pursuant to section 16(b) of the Exchange Act. The Company does not
believe that there are circumstances which would give rise to valid claims
against such officers or directors. However, the Company's bankruptcy estate
would benefit from the release of any such claims which might exist against
former officers and directors because the Company would not have to incur the
costs associated with the investigation and the defense of such claims. In
addition, the release of any such claims would comport with the "fresh start"
doctrine embodied in the Bankruptcy Code.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Prepackaged Plan
provides that the obligations of the Company to indemnify any person serving at
any time on or prior to the Effective Date as one of its directors, officers or
employees by reason of such person's service in such capacity, to the extent
provided in the Company's constituent documents or by written agreement or
Delaware law, will be treated as executory contracts that are assumed by the
Company as of the Effective Date. Accordingly, such indemnification obligations
will survive unimpaired and unaffected by entry of the Confirmation Order,
irrespective of whether the indemnification is owed for an act or event
occurring before or after the filing of the Chapter 11 Case. The Company is
unaware of any pending claims that may have to be indemnified.
RELEASES OF CLAIMS. The Prepackaged Plan provides that on the Effective
Date, in consideration for the treatment accorded to the holders of Impaired
Claims and Interests under the Prepackaged Plan, each holder of such Impaired
Claim or Interest will be deemed to have released the Company from any and all
causes of action and claims relating to or in connection with the Company, the
Outstanding Debentures, the Preferred Stock, the Class A Common Stock or any
Company warrants, whether based on tort, fraud or contract, which they
individually or collectively possess as of the date of the filing of the Chapter
11 Case. The Company believes that the foregoing release provision is an
integral part of the overall resolution of issues in the Company's Chapter 11
Case involving the affected parties, in particular the resolution of Claims
against the bankruptcy estate, and is appropriate as a part of the Prepackaged
Plan. Although questions may exist regarding the enforceability of this
provision against a party who successfully objects to the application of the
releases, the Company believes that each party in interest in the Company's
Chapter 11 Case will be bound by this provision. IF A PARTY IN INTEREST HAS A
QUESTION REGARDING THE ENFORCEABILITY AND EFFECT OF THIS PROVISION, SUCH PARTY
SHOULD SEEK THE ADVICE OF COUNSEL. The process for filing objections to the
Prepackaged Plan are set forth above and will be supplemented by the information
contained in the order setting the Confirmation Hearing. The Staff has indicated
to the Company that it is the Staff's view that the releases in the Prepackaged
Plan exceed the scope of the discharge set forth in Section 524 and 1141 of the
Bankruptcy Code, and, therefore, are not authorized by the Bankruptcy Code and
would render the Prepackaged Plan non-confirmable under Section 1129 of the
Bankruptcy Code. However, the Company believes that the releases do not render
the Prepackaged Plan non-confirmable, because the Company believes the releases
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are an integral part of the settlement of all Claims of the affected parties and
are supported by applicable case law. See "Risk Factors--Risk Associated with
the Releases under the Prepackaged Plan."
TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided in the Prepackaged
Plan, all injunctions or stays provided for in the Chapter 11 Case pursuant to
section 105 or 362 of the Bankruptcy Code or otherwise in effect on the
Confirmation Date will remain in full force and effect until the Effective Date.
EXCULPATION. Neither the Company or any of its respective officers,
directors, employees, advisors, agents or representatives will have or incur any
liability to any holder of a Claim or Interest for any act or omission in
connection with or arising out of their solicitation of votes on or their
administration of the Prepackaged Plan or the property to be distributed under
the Prepackaged Plan except for any liabilities which may arise under the
statutes or regulations administered by the Commission or from willful
misconduct or gross negligence, and, in all respects, will be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Prepackaged Plan.
DISCHARGE. Except as specifically provided for in the Prepackaged Plan, the
Company will, upon Consummation, be discharged from all Impaired Claims and
Impaired Interests arising prior to the Confirmation Date of the Prepackaged
Plan. The effect of discharging an Impaired Claim or Impaired Interest is to
release the Company in full from any obligations to make payments with respect
to such Impaired Claim or Impaired Interest, other than those specifically
provided by the Prepackaged Plan, and to prohibit any collection efforts by the
holder of the Impaired Claim or Impaired Interest.
BINDING EFFECT. The provisions of the Prepackaged Plan, if confirmed, will
bind all Creditors and Equity Holders regardless of whether they accept the
Prepackaged Plan. The distributions provided for in the Prepackaged Plan will be
in exchange for and in complete satisfaction, discharge and release of all
Impaired Claims against and Impaired Interests in the Company or any of its
assets or properties, including any Impaired Claim or Impaired Interest accruing
after the Petition Date and prior to the Confirmation Date. All holders of
Impaired Claims and Interests will be precluded from asserting any Claim against
the Company or its assets or properties or other interests in the Company based
on any transaction or other activity of any kind that occurred prior to the
Confirmation Date, except to the extent such Claim is Unimpaired and reinstated
pursuant to the Prepackaged Plan or as otherwise provided in the Prepackaged
Plan.
CONTROL/MANAGEMENT OF REORGANIZED DEBTOR
DIRECTORS. From and after the Effective Date of the Prepackaged Plan, the
Company's Board of Directors will be comprised of ten (10) directors, four (4)
of whom are present directors of the Company and six (6) of whom have been
designated by the members of the Debenture Holders' Committee in consultation
with the Company. All such directors will be deemed elected, and those directors
not continuing in office will be deemed removed, effective on the Effective
Date, pursuant to the Confirmation Order, such directors' tenure and the manner
of selection of new directors will be as provided in the Amended and Restated
Certificate and the Amended and Restated Bylaws. The names and a brief
autobiography of the ten directors is set forth in the section "Executive
Officers and Directors of the Company."
OFFICERS. On the Effective Date, the existing officers will remain as
officers and will continue to serve in such capacity until such time as they may
resign, be removed or be replaced. All such remaining officers will be deemed
reelected pursuant to the Confirmation Order.
EMPLOYMENT AND CONSULTING AGREEMENTS. The Company has entered into
employment agreements with each of Messrs. Koll, Ortwein, and Pacini with
respect to an employment term commencing upon the closing of the
Recapitalization and ending three (3) years thereafter. The Company has also
entered into a Consulting agreement with Mr. Wirta. The Company intends to seek
approval of these employment and consulting agreements pursuant to Section 365
of the Bankruptcy Code. See discussion of the terms and conditions of the
employment and consulting agreements in this Prospectus under the heading
entitled
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"Employment and Consulting Agreements". In addition, from and after the
Effective Date, the Company may enter into employment contracts with any other
officer, director, or employee.
SUMMARY OF OTHER PROVISIONS OF THE PREPACKAGED PLAN.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Under the Bankruptcy Code, the
Company may assume or reject executory contracts and unexpired leases. As a
general matter, an "executory contract" has been determined to be a contract
under which material performance (other than solely the payment of money)
remains to be made by each party. On the Effective Date, all executory contracts
and unexpired leases of the Company will be deemed assumed in accordance with
the provisions and requirements of section 365 and 1123 of the Bankruptcy Code,
except those executory contracts and unexpired leases that (i) have been
rejected by order of the Bankruptcy Court, (ii) are the subject of a motion to
reject pending on the Effective Date, (iii) are identified on a list to be filed
with the Bankruptcy Court on or before the Confirmation Date, as to be rejected,
or (iv) are rejected pursuant to the terms of the Prepackaged Plan. All proofs
of claims with respect to Claims arising from rejection must be filed with the
Bankruptcy Court within the time set by any Final Order rejecting an executory
contract or unexpired lease or thirty (30) days after the Confirmation Date. Any
Claims not filed within such time will be forever barred from being asserted
against the Company. All such Claims will be treated as General Unsecured Claims
in Class 5.
Contracts or leases entered into after the Petition Date will be performed
by the Company in the ordinary course of business. Without limiting the
generality of the foregoing, the agreements set forth on Exhibit 4 of the
Prepackaged Plan will be deemed assumed immediately prior to the Effective Date.
RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT. Under the terms of the
Prepackaged Plan, the Court will retain jurisdiction in the following instances
notwithstanding entry of the Confirmation Order or the occurrence of the
Effective Date. The Bankruptcy Court will retain exclusive jurisdiction over the
reorganization proceedings relating to the Company for the purposes of making
determinations of (i) allowance, disallowance, determination, liquidation,
classification, estimation, establishment of priority or status of any Claim,
including Administrative Claims, and the resolution of objections to the
allowance of Claims; (ii) all matters related to the assumption, assignment and
assumption or rejection of any executory contract or unexpired lease to which
the Company is a party or to which the Company may be liable; (iii) payments due
under the Prepackaged Plan and performance of the provisions of the Prepackaged
Plan; (iv) all pending applications, motions, adversary proceedings and
contested or litigated matters; (v) such orders as may be necessary or
appropriate to implement or consummate the provisions of the Prepackaged Plan
and all agreements or documents created in connection with the Prepackaged Plan
or this Prospectus; (vi) all controversies arising in connection with the
Prepackaged Plan and other matters provided for in the Confirmation Order; (vii)
any injunctions or orders necessary or appropriate to restrain interference by
any entity with Consummation or enforcement of the Prepackaged Plan; (viii) such
orders as may be appropriate in the event the Confirmation Order is stayed,
revised, revoked, modified or vacated: (ix) any other matter that may arise in
connection with or relate to the Prepackaged Plan, this Prospectus, the
Confirmation Order or any document created in connection with the Prepackaged
Plan or Prospectus; and (x) all other matters not inconsistent with the
Bankruptcy Code.
RESOLUTION OF CONTESTED CLAIMS AND INTERESTS. With respect to holders of
Unimpaired Claims, their legal, equitable and contractual rights will be
unaltered by the Prepackaged Plan. Consequently, it is anticipated that any
disputes with respect to such Claims will be resolved outside of the Chapter 11
Case. Nothing under the Prepackaged Plan will affect the Company's rights,
including, but not limited to, all rights in respect of legal and equitable
defenses to or setoffs or recoupments against such Unimpaired Claims, except as
expressly provided in the Prepackaged Plan.
After the Confirmation Date, only the Company will have the authority to
file objections to Claims and Interests or settle, compromise, withdraw or
litigate to judgment objections to Claims and Interests. As of the Confirmation
Date, the Company can settle or compromise Contested Claims and Contested
Interests without Bankruptcy Court approval. The Company reserves the right to
ask the Bankruptcy
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Court to estimate any contingent Contested Claim or Interest. The estimated
amount will be either the allowed amount or a maximum limitation on such Claim
or Interest, as determined by the Bankruptcy Court. If the estimated amount
constitutes a maximum limitation, the Company can pursue a supplemental
proceeding to object to the payment of such Claim or Interest.
MODIFICATION OF THE PREPACKAGED PLAN. Amendments to the Prepackaged Plan
may be made by the Company either before or after the Petition Date. Any
amendments or modifications to the Prepackaged Plan made after the Petition Date
and before or after the Confirmation Date shall be made in accordance with the
provisions of section 1127 of the Bankruptcy Code and the Bankruptcy Rules.
At all times, but except as otherwise discussed herein in the event of a
cram down, the Company reserves the right in its sole discretion not to file the
Prepackaged Plan, or, if it files the Prepackaged Plan, to withdraw the
Prepackaged Plan at any time prior to confirmation, in which case the
Prepackaged Plan will be deemed to be null and void. In such an event, nothing
contained in the Prepackaged Plan will be deemed to constitute a waiver or
release of any claims by or against the Company or any other person or to
prejudice in any manner the rights of the Company or any other person.
ANALYSIS OF AVOIDANCE ACTIONS. The Company is unaware of any material
transactions which prior to the filing the Chapter 11 Case may constitute
voidable or fraudulent conveyances. The Company has not analyzed possible
preference payments.
INTENDED ACTIONS DURING THE CHAPTER 11 CASE. In addition to seeking
Confirmation of the Prpackaged Plan, during the pendency of the Chapter 11 Case,
the Company intends to seek relief from the Bankruptcy Court as to various
matters, certain of which are described below. While the Company believes each
of the requests, if granted, would facilitate its Chapter 11 Case, there can be
no assurance that the Bankruptcy Court will grant any such relief.
PROVISIONS FOR EMPLOYEES. The Company believes that salaries or wages, as
the case may be, accrued vacation, health benefits, severance benefits and
similar employee benefits should be unaffected by the filing of the Chapter 11
Case. The Company intends to seek the approval of the Court, immediately upon
commencement of the Chapter 11 Case, to honor payroll checks outstanding as of
the Petition Date, to permit employees to utilize their paid vacation time which
was accrued prior to the filing and to continue paying medical benefits under
the applicable health plans. There can be no assurance, however, that any
necessary approval will be obtained. Employee claims and benefits not paid or
honored, as the case may be, prior to the Consummation of the Prepackaged Plan,
will be paid or honored upon Consummation or as soon thereafter as such payment
or other obligation becomes due or payable. Employee benefit claims that accrue
prior to the Petition Date will receive unimpaired treatment under the terms of
the Prepackaged Plan. The Company also intends to leave unaltered all other
legal, equitable and contractual rights of employees under its employment and
severance policies and agreements, compensation and benefit plans and all other
agreements, contracts and programs applicable to its employees.
CASH MANAGEMENT. The Company believes it would be disruptive to the
operations of its subsidiaries if it were forced to significantly change or
uncouple its cash management system upon the commencement of the Chapter 11
Case. The Company intends to seek the approval of the Bankruptcy Court
immediately upon commencement of the Chapter 11 Case to maintain its cash
management system. The relief the Company intends to seek from the Bankruptcy
Court will provide that the subsidiaries of the Company would be granted Allowed
Administrative Claims equal to the net cash upstreamed to the Company, if any,
by such subsidiaries through the cash management system during the Chapter 11
Case.
RETENTION OF PROFESSIONALS. The Company intends to seek Bankruptcy Court
approval for the retention of certain "Professionals" to represent or assist the
Company in the Chapter 11 Case. With the Bankruptcy Court's approval, the
Company will employ McDermott, Will & Emery and Morris, Nichols, Arsht & Tunnell
as its attorneys, and Deloitte & Touche LLP as its independent auditors. The
Company
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will also pay for the legal services rendered on behalf of the representatives
of any official committee. To the extent applicable, the Company will seek
approval pursuant to Section 1129(a)(4) of the Bankruptcy Code for the payment
of any such legal expenses incurred by the Company for legal services rendered
on behalf of the Debenture Holders' Committee or any official committee.
INSURANCE PROGRAMS. The Company intends to seek the authority to maintain
and continue its insurance programs, including workers' compensation, as such
programs are presently administered.
OTHER FIRST DAY ORDERS. In addition to orders relating to the payment of
pre-petition claims of employees, the Company intends to seek certain other
first day orders, including the following: an order authorizing the retention of
professionals in connection with the Company's Chapter 11 Case, an order
authorizing the retention of ordinary course professionals without the filing of
individual retention applications and affidavits; an order authorizing the
Company to continue their current cash management system, to maintain its
pre-petition bank accounts to continue use of existing business forms and
existing books and records; an order authorizing the Company to vary the United
States Trustee Operating Guidelines and Reporting Requirements to the extent
such Guidelines are inconsistent with other requested relief; an order
authorizing the Company to continue their current investment guidelines and
invest their available cash in their customary manner, an order fixing the dates
for the hearings on confirmation of the Prepackaged Plan (including the approval
of the Prospectus and the Prepackaged Plan Solicitation); and such other orders
that are typical in chapter 11 cases or that may be necessary or advisable for
the preservation of the Company's assets or for confirmation of the Prepackaged
Plan. The foregoing list is subject to change depending upon the needs of the
Company in connection with its operations prior to and during its Chapter 11
Case.
THE SUBSIDIARIES OF KOLL REAL ESTATE GROUP, INC. ARE NOT PARTIES TO THE
PREPACKAGED PLAN AND WILL NOT FILE A CHAPTER 11 CASE AS PART OF THE PREPACKAGED
PLAN. ACCORDINGLY, THE SUBSIDIARIES INTEND TO CONTINUE TO OPERATE THEIR
BUSINESSES IN THE ORDINARY COURSE AND PAY THEIR TRADE AND OTHER CREDITORS IN
FULL.
CONFIRMATION STANDARDS. Section 1129 of the Bankruptcy Code requires that a
plan of reorganization be proposed in good faith and disclose certain relevant
information regarding payments due and the nature of compensation to insiders.
Further, the Bankruptcy Court must determine that the solicitation period was
adequate and that the Prospectus and Prepackaged Plan were transmitted to
substantially all Impaired Creditors and equityholders pursuant to Bankruptcy
Rule 3018(b). See "Risk Factors--Possible Invalidation of the Solicitation by
the Court." The Company believes it has satisfied these requirements and will
seek a ruling to that effect from the Bankruptcy Court in connection with
Confirmation of the Prepackaged Plan.
BEST INTERESTS TEST. Section 1129(a)(7) of the Bankruptcy Code requires
that even if the Prepackaged Plan is accepted by each Impaired Class of Claims
and Interests, in order to confirm the Prepackaged Plan, the Court must
independently determine that either each member of an Impaired Class of Claims
or Interests has accepted the Prepackaged Plan or that the Prepackaged Plan will
provide such non-accepting member a recovery that has a value at least equal to
the value of the distribution that each such member would receive if the Company
was liquidated under chapter 7 of the Bankruptcy Code (the "Best Interests
Test"). If all members of an Impaired Class of Claims or Interests accept the
Prepackaged Plan, the Best Interests Test would not apply with respect to that
Class. Based on the foregoing, the Best Interests Test will be applicable only
to the holders of Impaired Claims against and Interests in the Company of
Classes which do not accept the Prepackaged Plan.
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To determine what holders of each Impaired Class of Claims and Interests
would receive if the Company was liquidated, the Bankruptcy Court must determine
the dollar amount that would be generated from a liquidation of the Company's
assets and properties in the context of a chapter 7 liquidation case. Secured
Claims and the costs and expenses of a liquidation case or resulting from an
original Chapter 11 Case would be paid in full from the liquidation proceeds
before the balance of those proceeds would be made available to pay pre-petition
unsecured Claims and Interests.
Under chapter 7, absent subordination in accordance with Section 510 of the
Bankruptcy Code, the rule of absolute priority of distributions would apply.
Under that rule, no junior creditor would receive any distribution until the
Allowed Claims of all senior creditors are paid in full, and no holder of an
Interest would receive any distribution until the Allowed Claims of all
creditors are paid in full.
After consideration of the effect that chapter 7 liquidation proceedings
would have on the ultimate proceeds available for distribution to the holders of
Impaired Claims and Interests, including (i) the increased costs and expenses of
liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy
and professional advisors to such trustee, (ii) the erosion in value of assets
in the context of the expeditious liquidation required under chapter 7 and the
"forced sale" atmosphere that would prevail, (iii) the adverse effects on the
salability of business segments that could result from the probable departure of
key employees and the loss of customers, (iv) the costs attributable to the time
value of money resulting from what is likely to be a more protracted proceeding
than if the Prepackaged Plan is confirmed (because of the time required to
liquidate the assets of the Company, resolve claims and related litigation and
prepare for distributions), and (v) the application of the rule of absolute
priority (as described in the immediately preceding paragraph), the Company has
determined that confirmation of the Prepackaged Plan will provide each holder of
a Claim or Interest in an Impaired Class with a substantially greater recovery
than such holder would receive pursuant to a liquidation of the assets of the
Company and its subsidiaries under chapter 7 of the Bankruptcy Code.
The "Liquidation Analysis" for the Company is set forth below. The Company
substantially completed the Liquidation Analysis by April 28, 1997, and the
Company is not aware of any events subsequent to such date which would
materially impact the Liquidation Analysis.
The Company's estimate of the liquidation value of the assets of the Company
and its subsidiaries that is set forth in the Liquidation Analysis for the
purpose of providing the Company's Creditors and Equity Holders with an estimate
of the amount of the net liquidation proceeds that would result upon the
hypothetical liquidation of the Company. HLHZ was selected by the Company to
assist the Company in preparing the Liquidation Analysis because of its
experience in valuing businesses in connection with various types of
transactions. A description of the procedures followed and the material
assumptions and qualifications made in connection with the analysis are set
forth under the headings "Projected Financial Data--The Prepackaged Plan" and
"The Liquidation Analysis" of this Prospectus. There can be no assurance,
however, that such assumptions will be accepted by the Bankruptcy Court.
FEASIBILITY. The Court must also determine that the Prepackaged Plan is
feasible and is not likely to be followed by liquidation or further
reorganization of the Company. To determine whether the Prepackaged Plan meets
this requirement, the Company has analyzed its ability to meet its obligations
under the Prepackaged Plan. This analysis includes a forecast of financial
performance of the reorganized Company. Such forecast, together with the
underlying assumptions, is set forth in this Prospectus under the heading
entitled "Projections of Certain Financial Data of the Company." Based upon such
forecast, the Company believes that it will have the financial capability to
satisfy its obligations following the Effective Date. Accordingly, the Company
will seek a ruling to that effect in connection with the Confirmation of the
Prepackaged Plan.
PREPACKAGED PLAN ACCEPTANCE. The Bankruptcy Code requires, subject to
certain exceptions, that the Prepackaged Plan be accepted by all Impaired
Classes of holders of Claims and Interests. The Company may, however, request
Confirmation of the Prepackaged Plan even though some Impaired Classes have not
accepted the Prepackaged Plan. See "Confirmation of the Prepackaged Plan Without
Acceptance by All Voting Classes."
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The Bankruptcy Code provides that acceptances obtained prior to the filing
of a petition will be effective in a Chapter 11 Case only if the pre-petition
solicitation of the acceptances complied with applicable non-bankruptcy law
governing the adequacy of disclosure or, if there is no such applicable non-
bankruptcy law, "adequate information" as defined under the Bankruptcy Code.
This Prospectus is furnished in connection with the solicitation. The Company
intends to use the ballots received pursuant to this solicitation to confirm the
Prepackaged Plan once it has filed its Chapter 11 Case. The Company believes
that this solicitation complies with such applicable non-bankruptcy law,
including the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, and any rules or regulations promulgated thereunder and
otherwise contains "adequate information" and will seek appropriate findings
from the Bankruptcy Court in this regard.
CONFIRMATION OF THE PREPACKAGED PLAN WITHOUT ACCEPTANCE BY ALL VOTING
CLASSES. The requirements for acceptance of the Prepackaged Plan by Impaired
Classes are described under "Classification and Treatment of Claims and
Interests under the Prepackaged Plan." The Bankruptcy Code also provides a
procedure by which the Prepackaged Plan may be confirmed despite the
non-acceptance of one or more Impaired Classes. This procedure is known as a
"cram down." If less than all of the Impaired Classes accept the Prepackaged
Plan, the Prepackaged Plan may nevertheless be confirmed by the Bankruptcy Court
under section 1129(b) of the Bankruptcy Code, so long as at least one Impaired
Class has affirmatively voted to accept the Prepackaged Plan, ignoring for this
purpose any acceptance by insiders of the debtor as defined under the Bankruptcy
Code. To obtain Confirmation pursuant to section 1129(b) of the Code, the
Company must demonstrate to the Bankruptcy Court that, as to each non-accepting
Class, the Prepackaged Plan "does not discriminate unfairly" and is "fair and
equitable" with respect to that Class. In general, it would be determined that
the Prepackaged Plan did not discriminate unfairly if, among other things, a
dissenting Class is treated substantially equally with respect to other Classes
of equal rank, taking into account for this purpose the effect of applicable
subordination rights. The Company believes that the Prepackaged Plan does not
discriminate unfairly against any Class. The Bankruptcy Code establishes
different "fair and equitable" tests for Secured Creditors, Unsecured Creditors
and Equity Holders as follows:
1. SECURED CREDITORS. A secured creditor in a dissenting class of
secured claims must retain the lien(s) securing its claim and receive under
the plan cash payments that have a present value at least equal to such
creditor's allowed secured claim, or otherwise receive the "indubitable
equivalent" of the value of the interest in property upon which it holds a
lien.
2. UNSECURED CREDITORS. An unsecured creditor in a dissenting class of
unsecured claims must receive or retain under the plan (i) property of a
value at least equal to the amount of its allowed claim, or (ii) the holders
of the claims or equity interests junior to the claims of the dissenting
class of unsecured creditors must neither receive nor retain any property
under the plan on account of such junior claim or interest.
3. EQUITY HOLDERS. An equity holder must receive and retain under the
plan, property of a value equal to (i) the greatest of the allowed amount of
any fixed liquidation preference to which such holder is entitled, any fixed
redemption price to which such holder is entitled, or the value of such
interest, or (ii) the holder of any interest that is junior to the interests
of such class must neither receive nor retain any property under the plan on
account of such junior interest.
The Company intends to seek Confirmation of the Prepackaged Plan under
section 1129(b) of the Code, to the extent applicable, in view of the deemed
rejection by Class 9. In the event that Class 6, Class 7 or Class 8 do not vote
to accept the Prepackaged Plan, the Prepackaged Plan will be automatically
amended as set forth in Article V therein, and the Company intends to seek
Confirmation of the Prepackaged Plan, as amended, under section 1129(b) of the
Bankruptcy Code. Furthermore, the Company reserves the right to modify the
Prepackaged Plan in accordance with Section 13.4 of the Prepackaged Plan.
There can be no assurance that any Class of Creditors or Equity Holders will
accept the Prepackaged Plan or that, in the absence of such acceptance, the
Company would be able to use the provisions of
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section 1129(b) of the Bankruptcy Code to confirm the Prepackaged Plan. The
Company believes that the Prepackaged Plan meets the standards of section
1129(b) with respect to the deemed rejection of Class 9. In the event that
Classes 6, 7 or 8 do not vote to accept the Prepackaged Plan, the Company
intends (and the Prepackaged Plan so provides) to seek confirmation of the
Prepackaged Plan under the section 1129(b) provisions with respect to such
rejecting Class or Classes. Under such circumstances, the subordination
provisions of the Senior Debenture Indenture will be strictly construed and the
holders of such rejecting Class or Classes will retain no property nor receive
any distributions under the Prepackaged Plan. Any distributions otherwise due
such rejecting Class will be given to the holders of Class 5 Claims. The Company
believes that the Prepackaged Plan meets the requirements of section 1129(b)
with respect to Classes 6, 7 and 8, if such procedure becomes necessary.
However, the use of the section 1129(b) provisions by the Company on any of the
Impaired Classes, other than Class 9, could result in litigation which could
delay the Confirmation of the Prepackaged Plan.
ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PREPACKAGED PLAN.
If the Company commences the Chapter 11 Case and the Prepackaged Plan is not
subsequently confirmed by the Bankruptcy Court and consummated, the alternatives
include (i) confirmation of an alternative plan of reorganization under chapter
11 of the Bankruptcy Code, or (ii) liquidation of the Company under chapter 7 of
the Code.
ALTERNATIVE PLANS OF REORGANIZATION. If the Prepackaged Plan is not
confirmed, the Company (or, if the Company's exclusive period in which to file a
plan of reorganization has expired or is terminated by the Bankruptcy Court, any
other party in interest) could attempt to formulate a different plan of
reorganization. The Company has not currently formulated any such alternative
plan. However, such a plan might involve either a reorganization and
continuation of the Company's business or an orderly liquidation of its assets.
In either scenario, creditors or other parties in interest could have an
enhanced opportunity to influence the course of the proceeding and the structure
and substance of the Company's ultimate reorganization or liquidation.
With respect to an alternative plan, the Company and its financial advisors
have explored a liquidation under chapter 11, the Company's assets could be sold
in an orderly fashion over a more extended period of time than in a liquidation
under chapter 7, potentially resulting in somewhat greater (but indeterminate)
recoveries. Although preferable to a chapter 7 liquidation, the Company believes
that any alternative under chapter 11 is a much less attractive alternative to
Creditors and holders of Preferred Stock and Class A Common Stock than the
Prepackaged Plan because of the greater recovery provided for by the Prepackaged
Plan.
LIQUIDATION UNDER CHAPTER 7. If no plan of reorganization is confirmed (and
in certain other circumstances), the Company's Chapter 11 Case may be converted
to a case under chapter 7 of the Bankruptcy Code, pursuant to which a trustee
would be elected or appointed to liquidate the assets of the Company for
distribution to Creditors in accordance with the priorities established by the
Bankruptcy Code. A discussion of the potential effects that a chapter 7
liquidation would have on the recovery of holders of Claims and Interests is set
forth under "Liquidation Analysis." In a liquidation, the assets of the Company
would be sold in exchange for cash, securities or other property, which would
then be distributed to Creditors. In contrast to the Prepackaged Plan (or an
alternative reorganization under chapter 11 of the Bankruptcy Code) in which
Creditors would receive equity securities of the Company and would be subject to
the risks associated with holding such securities, in a liquidation Creditors
might receive cash or other assets which are not subject to those risks. See
"Risk Factors." However, the Company believes that liquidation under chapter 7
would result in significantly smaller distributions (and, as to certain Classes,
no distributions) as compared to those provided for in the Prepackaged Plan. In
addition, a chapter 7 liquidation is likely to result in substantial litigation
and delays in ultimate distributions to Creditors. In the event of a chapter 7
liquidation, the Company believes that there would not be sufficient assets to
make any distribution to the holders of the Subordinated Debentures, the
Preferred Stock and the Class A Common Stock. See "Liquidation Analysis" and
"Confirmation Standards Best Interest Tests."
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PREPACKAGED PLAN SOLICITATION--VOTING PROCEDURES
GENERAL
The Company upon the terms and subject to the conditions set forth herein,
is soliciting an acceptance of the Prepackaged Plan from each holder that was a
beneficial owner as of the Record Date of: Senior Debentures, Subordinated
Debentures, liquidated non-Contingent Claims, Preferred Stock and Class A Common
Stock. This Prospectus together with the accompanying forms of Ballot and Master
Ballot, pre-addressed postage-paid envelope and other materials are being
furnished to (i) registered holders of Senior Debentures and Subordinated
Debentures (I.E., holders whose respective names (or the names of whose
nominees) appear as of the Record Date on the securityholder lists maintained by
the applicable registrar pursuant to the applicable Indenture or, if applicable,
who are listed as participants in a clearing agency's security position
listing); (ii) record holders of Preferred Stock and Class A Common Stock (I.E.,
holders whose respective names (or the names of whose nominees) appear as of the
Record Date on the Company's securityholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing); and
(iii) holders of liquidated non-Contingent Claims. Registered or record holders
may include brokerage firms, commercial banks, trust companies or other
nominees. IF SUCH PERSONS OR ENTITIES DO NOT HOLD FOR THEIR OWN ACCOUNT, THEY
SHOULD PROVIDE COPIES OF THIS PROSPECTUS AND THE APPROPRIATE PREPACKAGED PLAN
SOLICITATION MATERIALS TO THEIR CUSTOMERS AND TO BENEFICIAL INTEREST HOLDERS FOR
WHOSE ACCOUNT THEY HOLD. A "Beneficial Interest Holder" is a holder of a
beneficial interest in a Claim, Preferred Stock or Class A Common Stock which
entitles such holder to rights or benefits of ownership even though such holder
may not be the holder of record at the Record Date. Securities owned
beneficially would include not only securities held by such Beneficial Interest
Holder for its own benefit in its own name, but would also include securities
held by others for such Beneficial Interest Holder's benefit, such as securities
held by banks or other custodians, brokers (whether in such Beneficial Interest
Holder's name, the nominee's name or "street name"), executors, administrators
or trustees, guardians, attorneys-in-fact, officers of a corporation, general
partners of a partnership or other persons acting in a fiduciary or
representative capacity. ANY BENEFICIAL INTEREST HOLDER WHO HAS NOT RECEIVED
THIS PROSPECTUS AND A BALLOT SHOULD CONTACT HIS, HER OR ITS BROKERAGE FIRM OR
NOMINEE, OR THE INFORMATION AGENT AT THE ADDRESS AND/OR TELEPHONE NUMBER SET
FORTH ON THE BACK COVER OF THIS PROSPECTUS. IN THE EVENT THAT THE COURT
DETERMINES THAT THE PREPACKAGED PLAN SOLICITATION MATERIALS WERE NOT TRANSMITTED
TO SUBSTANTIALLY ALL IMPAIRED CREDITORS AND IMPAIRED EQUITY HOLDERS, THE COURT
COULD VOID THE PREPACKAGED PLAN SOLICITATION OR REQUIRE A FURTHER PREPACKAGED
PLAN SOLICITATION OR RESOLICITATION.
RECORD DATE
Consistent with the provisions of Rule 3018, the Company has fixed 9:00
a.m., Eastern Daylight Time, on April 24, 1997 as the time and date for
determining which holders of Claims and Interests are eligible to vote on the
Prepackaged Plan pursuant to the procedures set forth herein.
VOTING EXPIRATION DATE; EXTENSIONS; AMENDMENTS
THE PREPACKAGED PLAN SOLICITATION PURSUANT TO THIS PROSPECTUS WILL EXPIRE ON
JUNE , 1997. TO BE COUNTED, BALLOTS AND, WHEN APPROPRIATE, MASTER BALLOTS MUST
BE RECEIVED BY 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE , 1997 (THE
"VOTING EXPIRATION DATE"), UNLESS THE COMPANY, IN ITS SOLE DISCRETION, EXTENDS
OR WAIVES THE PERIOD DURING WHICH BALLOTS AND MASTER BALLOTS WILL BE ACCEPTED BY
THE COMPANY, IN WHICH CASE THE TERM "VOTING EXPIRATION DATE" FOR SUCH
PREPACKAGED PLAN SOLICITATION SHALL MEAN THE LAST TIME AND DATE TO WHICH SUCH
PREPACKAGED PLAN SOLICITATION IS EXTENDED. IN THE EVENT THAT THE COURT
DETERMINES THAT THE PERIOD OF THE PREPACKAGED PLAN SOLICITATION WAS NOT LONG
ENOUGH FOR BENEFICIAL INTEREST HOLDERS TO CONSIDER THE SOLICITATION MATERIALS,
THE COURT COULD VOID
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THE PREPACKAGED PLAN SOLICITATION OR REQUIRE A FURTHER PREPACKAGED PLAN
SOLICITATION OR RESOLICITATION.
Except to the extent the Company so determines or as permitted by the Court,
Ballots and Master Ballots received after the Voting Expiration Date will not be
accepted or counted by the Company in connection with the Company's request for
Confirmation of the Prepackaged Plan.
The Company expressly reserves the right, at any time or from time to time,
to extend the period during which the Prepackaged Plan Solicitation is open.
During any extension of the Prepackaged Plan Solicitation, all Ballots and
Master Ballots previously given will remain subject to all the terms and
conditions of the Prepackaged Plan Solicitation, including the revocation rights
specified herein. To extend the Voting Expiration Date, the Company will notify
the Exchange Agent of any extension by oral or written notice and will make a
public announcement thereof, each at any time prior to a.m. Eastern
Daylight Time, on the next Business Day after the previously scheduled Voting
Expiration Date. Without limiting the means by which the Company may choose to
make any public announcement, the Company will not have any obligation, unless
otherwise required by law, to publish, advertise or otherwise communicate any
such public announcement other than by issuing a news release through the Dow
Jones News Service. There can be no assurance that the Company will exercise its
right to extend the Prepackaged Plan Solicitation period for the receipt of
Ballots and Master Ballots.
The Company expressly reserves the right to amend, at any time and from the
time to time, the terms of the Prepackaged Plan Solicitation or the Prepackaged
Plan (subject to compliance with the requirements of section 1127 of the
Bankruptcy Code and the Bankruptcy Rules). If the Company makes a material
change in the terms of the Prepackaged Plan Solicitation or the Prepackaged
Plan, or if it waives a material conditions, the Company will disseminate
additional solicitation materials and will extend the Prepackaged Plan
Solicitation, in each case to the extent required by law.
VOTING PROCEDURES AND OTHER REQUIREMENTS
PERSONS ENTITLED TO VOTE. The following Classes of Claims and Interests are
Impaired under the Prepackaged Plan and all holders of such Claims or Interests
in such Classes as of the Record Date are entitled to vote to accept or reject
the Prepackaged Plan upon the terms and subject to the conditions set forth
herein and in the Prepackaged Plan:
Class 5--General Unsecured Claims
Class 6--Claims of Holders of Subordinated Debentures
Class 7--Interests of Holders of Preferred Stock
Class 8--Interests of Holders of Class A Common Stock
To be entitled to vote to accept or reject the Prepackaged Plan, a holder of
Senior Debentures, Subordinated Debentures, liquidated non-Contingent Claims,
Preferred Stock or Class A Common Stock must be the Beneficial Interest Holder
of such security or other Claims on the Record Date, regardless of whether such
Claims, Preferred Stock or Class A Common Stock are held of record on the Record
Date in such holder's name or in the name of such holder's broker, dealer,
commercial bank, trust company or other nominee. For purposes of determining
whether the requisite number of acceptances is received to approve the
Prepackaged Plan, only votes which are cast at the direction of Beneficial
Interest Holders in accordance with the procedures set forth herein may be
counted.
As described below, the Company is soliciting both Ballots and Master
Ballots. Ballots are to be used by the beneficial owners of the Company's debt,
equity securities, and liquidated non-Contingent Claims (the "Beneficial
Interest Holders"), regardless of whether such Beneficial Interest Holders are
also record holders or hold through record holders. Master Ballots are to be
used by holders of record of Senior Debentures, Subordinated Debentures,
Preferred Stock, or Class A Common Stock that are not Beneficial Interest
Holders. A record holder which holds Senior Debentures, Subordinated Debentures,
Preferred
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<PAGE>
Stock, or Class A Common Stock on behalf of one or more Beneficial Interest
Holders should collect completed Ballots from such Beneficial Interest Holders
and should complete a Master Ballot reflecting the votes of such Beneficial
Interest Holders, as indicated on their respective Ballots.
VOTING PROCEDURES. Holders of Senior Debentures, liquidated non-Contingent
Claims, Subordinated Debentures, Preferred Stock, or Class A Common Stock are
requested to complete an appropriate Ballot and, when appropriate, Master
Ballot, in accordance with the instructions set forth thereon and the procedures
set forth below and in the Prepackaged Plan.
BENEFICIAL INTEREST HOLDERS
Any Beneficial Interest Holder of Claims or Interests can vote on the
Prepackaged Plan through a nominee by following these instructions:
1. Provide all the applicable information on the Ballot in accordance
with the instructions set forth thereon.
2. Indicate acceptance or rejection of the Prepackaged Plan by checking
either the box entitled "Accepts the Prepackaged Plan" or "Rejects the
Prepackaged Plan" set forth on the Ballot.
3. Sign and date the Ballot and provide your name and mailing address
if different from the printed address which appears on the Ballot or if no
preprinted address appears on the Ballot. If you are completing the Ballot
on behalf of another entity, indicate the name of such entity, your
relationship with such entity and/or the capacity in which you are signing.
4. (a) If you hold Senior Debentures, Subordinated Debentures,
Preferred Stock, or Class A Common Stock in "street name" through a
brokerage firm, bank, trust company or other source, return the Ballot to
the nominee as promptly as possible so that the nominee may complete and
submit a Master Ballot prior to the Voting Expiration Date. If no
pre-addressed, postage-paid envelope was enclosed, contact the Information
Agent for instructions.
(b) If you are both the Beneficial Interest Holder and the record
holder of Claims or Interests, return the Ballot directly to the Exchange
Agent in the enclosed pre-addressed envelope so that it will be received
prior to the Voting Expiration Date.
BROKERAGE FIRMS, BANKS AND OTHER NOMINEES. A brokerage firm which is the
registered or record holder of Senior Debentures, Subordinated Debentures,
Preferred Stock, or Class A Common Stock for a Beneficial Interest Holder can
vote on behalf of such Beneficial Interest Holder by (i) distributing a copy of
this Prospectus, all appropriate Ballots and other Prepackaged Plan Solicitation
Materials to such Beneficial Interest Holder for execution; (ii) collecting all
such completed and executed Ballots; (iii) completing a Master Ballot compiling
the votes and other information from the Ballots collected; and (iv)
transmitting such Master Ballot to the Exchange Agent on or before the Voting
Expiration Date. A proxy intermediary acting on behalf of a brokerage firm or
bank may follow the procedures outlined in the preceding sentence to vote on
behalf of such Beneficial Interest Holder.
Each brokerage firm, bank, or other nominee which submits a Master Ballot
must retain all Ballots submitted to it by Beneficial Interest Holders for
disclosure to the Court, if so ordered.
Any Ballot submitted to a brokerage firm, proxy intermediary or other
nominee will not be counted until such nominee properly completes and delivers
to the Exchange Agent a corresponding Master Ballot that reflects such
Beneficial Interest Holder's vote. Any record holder which is also a Beneficial
Interest Holder of Senior Debentures, liquidated non-Contingent Claims,
Subordinated Debentures, Preferred Stock, and Class A Common Stock should, with
respect to such security, either (i) return a Ballot to the Exchange Agent, or
(ii) prepare and retain a Ballot and include the information from such Ballot on
the Master Ballot submitted to the Exchange Agent.
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<PAGE>
HOLDERS MAY RECEIVE MULTIPLE MAILINGS CONTAINING BALLOT(S), ESPECIALLY IF
HOLDERS OWN SENIOR DEBENTURES, SUBORDINATED DEBENTURES, PREFERRED STOCK, OR
CLASS A COMMON STOCK IN STREET NAME THROUGH MORE THAN ONE BROKER, BANK OR OTHER
NOMINEE. A BENEFICIAL INTEREST HOLDER WHO HOLDS (I) SENIOR DEBENTURES, (II)
SUBORDINATED DEBENTURES, (III) PREFERRED STOCK, OR (IV) CLASS A COMMON STOCK
THROUGH MORE THAN ONE BROKER, BANK OR OTHER NOMINEE MUST SO DISCLOSE ON EACH
BALLOT SUCH HOLDER COMPLETES AND MUST CAST THE SAME VOTE ON THE PREPACKAGED PLAN
ON EACH BALLOT SUCH HOLDER COMPLETES. A BENEFICIAL INTEREST HOLDER'S VOTE EITHER
TO ACCEPT OR TO REJECT THE PREPACKAGED PLAN WILL BE COUNTED ONLY ONCE FOR EACH
CLASS OF CLAIMS HELD BY THE HOLDER, REGARDLESS OF THE NUMBER OF RECORD HOLDERS
THROUGH WHICH SUCH CLAIMS ARE HELD. BY EXECUTING A BALLOT A HOLDER CERTIFIES,
AMONG OTHER THINGS, THAT, TO THE EXTENT APPLICABLE, SUCH HOLDER HAS DISCLOSED
ANY BIFURCATION OF BENEFICIAL OWNERSHIP OF SENIOR DEBENTURES, SUBORDINATED
DEBENTURES, PREFERRED STOCK, AND CLASS A COMMON STOCK AND THAT SUCH HOLDER HAS
CAST THE SAME VOTE ON ANY MULTIPLE BALLOTS FOR HOLDINGS IN A SINGLE CLASS OF
CLAIMS OR CLASS OF INTERESTS. THE NAMES OF ALL BROKER-DEALERS OR OTHER
INTERMEDIARIES OR PERSONS WHO HOLD SENIOR DEBENTURES, SUBORDINATED DEBENTURES,
PREFERRED STOCK, OR CLASS A COMMON STOCK FOR A BENEFICIAL INTEREST HOLDER SHOULD
BE INDICATED ON THE BALLOTS. AUTHORIZED SIGNATORIES (OTHER THAN BROKERAGE FIRMS
AND OTHER PARTICIPANTS) SHOULD SUBMIT SEPARATE BALLOTS FOR EACH BENEFICIAL
INTEREST HOLDER FOR WHOM THEY ARE VOTING.
OTHER. If a Ballot is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, such persons should indicate such capacity
when signing in accordance with the procedures set forth under "Certifications"
below and, unless otherwise determined by the Company, must submit proper
evidence satisfactory to the Company of authority to so act on behalf of a
Beneficial Interest Holder.
The Company, in its sole discretion, may waive any defect in any Ballot or
Master Ballot at any time, either before or after the close of voting, and
without notice. Except as provided below, unless the Ballot or Master Ballot
being furnished is timely submitted to the Exchange Agent on or prior to the
Voting Expiration Date together with any other documents required by such Ballot
or Master Ballot, as the case may be, the Company may, in its sole discretion,
reject such Ballot or Master Ballot as invalid and, therefore, decline to
utilize it in connection with seeking Confirmation of the Prepackaged Plan by
the Court.
In the event a Claim or Interest is disputed or designated under section
1126(e) of the Bankruptcy Code, any vote to accept or reject the Prepackaged
Plan cast with respect to such Claim or Interest will not be counted for
purposes of determining whether the Prepackaged Plan has been accepted or
rejected, the Court orders otherwise.
CERTIFICATIONS. FOR PURPOSES OF DETERMINING WHETHER THE REQUISITE NUMBER OF
ACCEPTANCES IS RECEIVED TO APPROVE THE PREPACKAGED PLAN, ONLY VOTES WHICH ARE
CAST BY OR AT THE DIRECTION OF BENEFICIAL INTEREST HOLDERS OF SENIOR DEBENTURES,
LIQUIDATED NON-CONTINGENT CLAIMS, SUBORDINATED DEBENTURES, PREFERRED STOCK, AND
CLASS A COMMON STOCK MAY BE COUNTED. By executing and returning a Ballot, a
person or entity (i) will certify to the Court and the Company that either (a)
such person or entity is the Beneficial Interest Holder of the Claims or
securities being voted or (b) such person or entity is an authorized signatory
for someone or some entity who or which is a Beneficial Interest Holder of the
Claims or securities being voted; (ii) will certify to the Court and the Company
that such person or entity (or in the case of an authorized signatory, the
Beneficial Interest Holder) has received a copy of this Prospectus and
Prepackaged Plan Solicitation Materials and will acknowledge that the
Prepackaged Plan Solicitation is being made pursuant to the terms and conditions
set forth therein; (iii) will certify to the record holder, the Court and the
Company (or in the case of an authorized signatory, such authorized signatory)
that either (a) such person or entity has not submitted any other Ballots for
such Class of Claims, as the case may be, held in other accounts or other
registered names or (b) such person or entity has disclosed on each Ballot
completed by such person or entity the existence of Claims in the same Class
held in other accounts, or
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<PAGE>
other registered names and the submission of other Ballots for such Claims; (iv)
will certify to the record holder, the Court and the Company that such person or
entity has cast the same vote on every multiple Ballot completed by such person
or entity with respect to holdings in a single Class of Claims; and (v) will
request that such person or entity (or in the case of an authorized signatory,
the Beneficial Interest Holder) be treated as the record holder of such
securities for purposes of voting on the Prepackaged Plan.
A brokerage firm or other nominee which is a registered holder will prepare,
execute and deliver a Master Ballot to the Exchange Agent to reflect the votes
of the Beneficial Interest Holders it represents. By executing and returning a
Master Ballot, such nominee (i) will certify to the Court and the Company that
(a) such nominee has received a copy of this Prospectus, Ballot and other
Prepackaged Plan Solicitation Materials and has delivered the same to the
Beneficial Interest Holders listed thereon by such nominee, (b) such nominee has
received a completed and signed Ballot from each such Beneficial Interest
Holder, (c) such nominee is the registered holder of the securities being voted,
(d) such nominee has been authorized by each such Beneficial Interest Holder to
vote on the Prepackaged Plan, and (e) the Beneficial Interest Holder has
certified to such nominee that such Beneficial Interest Holder has not submitted
any other Ballots for such Class of Claims held in other accounts or other
registered names, or, if held in other accounts or registered names, that the
Beneficial Interest Holder has certified to such nominee that such Beneficial
Interest Holder has cast the same vote for such Class of Claims, and such
nominee will disclose such other accounts or registered holders and such other
Ballots; (ii) will request that such nominee be treated as the Beneficial
Interest Holder of the securities for purposes of voting on the Prepackaged
Plan, unless otherwise authorized by the Court; (iii) will disclose (a) the
number of such Beneficial Interest Holders, (b) the respective principal amounts
of Senior Debentures and/or Subordinated Debentures owned, or the number of
shares held, as the case may be, by each such Beneficial Interest Holder, (c)
each Beneficial Interest Holder's respective vote concerning the Prepackaged
Plan, (d) the customer account or other identification number for each such
Beneficial Interest Holder; and (iv) will agree to maintain Ballots returned by
Beneficial Interest Holders (whether properly completed or defective) for
disclosure to the Court if so ordered.
BALLOTS. A separate form of Ballot and, when applicable, Master Ballot, is
to be used for each Class of Impaired Claims and Equity Interests. The Ballots
are color-coded as follows:
<TABLE>
<CAPTION>
BALLOT
COLOR
CLASS DESCRIPTION STRIPE
- --------- -------------------------------------------------------------------------- ---------
<S> <C> <C>
Class 5: Senior Debentures......................................................... Green
Class 5: All general Unsecured Claims, other than Senior Debentures................ Pink
Class 6: Subordinated Debentures................................................... Yellow
Class 7: Preferred Stock........................................................... Blue
Class 8: Common Stock.............................................................. White
</TABLE>
Holders of Claims and Interests should take care to use the correct
Ballot(s) in voting on the Prepackaged Plan. See "Incomplete Ballots." If any
Ballots are damaged or lost, or if a holder has any questions concerning the
voting instructions, it may contact the Information Agent at the address or
telephone number listed on the back cover of this Prospectus.
VOTING MULTIPLE CLAIMS AND EQUITY INTERESTS. EACH BENEFICIAL INTEREST
HOLDER WHICH HOLDS CLAIMS OR INTERESTS IN MORE THAN ONE CLASS IS REQUIRED TO
VOTE SEPARATELY WITH RESPECT TO EACH CLASS IN WHICH SUCH BENEFICIAL INTEREST
HOLDER HOLDS CLAIMS OR INTERESTS.
A separate ballot of the appropriate form should be used to vote on the
Prepackaged Plan with respect to each Impaired Class of Claims or Interests.
Votes must be made on the appropriate Ballot in order to be counted. A
Beneficial Interest Holder's vote on the Prepackaged Plan will be counted only
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<PAGE>
once for each Class of Claims or Interests held by the holder, regardless of the
number of ballots submitted for such class.
A holder may not split its vote within a Class of Impaired Claims or
Interests. If a holder of Claims or Interests in more than one Class executes
one or more Ballots for only one such Class, such holder's vote will count as a
vote only once with respect to such Class and will not count as a vote with
respect to any Claims or Interests in other Classes held by such holder.
INCOMPLETE BALLOTS. It is important that all holders of Impaired Claims and
Interests vote to accept or reject the Prepackaged Plan, because under the Code,
for purposes of determining whether the requisite acceptances have been received
by an Impaired Class of Claims or Interests, the vote will be tabulated based on
the ratio of accepting holders of Impaired Claims and/or Interests to all voting
holders of Impaired Claims and/or Interests. Therefore, it is possible that the
Prepackaged Plan could be approved by any Impaired Class of Claims with the
affirmative vote of significantly less than two-thirds in amount and one-half in
number of the entire Class of Claims, or by holders of Interests with the
affirmative vote of significantly less than two-thirds in amount of the shares
of Preferred Stock and Common Stock. Failure by a holder of an Impaired Claim or
Interest to submit a properly executed Ballot or Master Ballot (as appropriate)
or to indicate acceptance or rejection of the Prepackaged Plan in accordance
with the instructions set forth thereon and the procedures set forth herein
shall be deemed to constitute an abstention by such holder with respect to a
vote regarding the Prepackaged Plan, unless cured or waived. Abstentions as a
result of failing to submit a properly executed Ballot or Master Ballot (when
appropriate) or failing to indicate a vote either for acceptance or rejection of
the Prepackaged Plan will not be counted as votes for or against the Prepackaged
Plan. The Company, in its sole discretion, may waive any defect in any Ballot or
Master Ballot at any time, either before or after the close of voting, and
without notice. No assurance can be given, however, that the Court will
recognize any such wavier.
AGREEMENTS UPON FURNISHING BALLOTS
The delivery of a Ballot or Master Ballot indicating a vote to accept the
Prepackaged Plan by a holder of an Impaired Claim or Interest pursuant to the
procedures set forth above will constitute an agreement between such holder and
the Company to accept (i) all the terms of, and conditions to, this Prepackaged
Plan Solicitation, and (ii) all the terms of the Prepackaged Plan.
METHOD OF DELIVERY OF BALLOTS
The method of delivery of Ballots and Master Ballots to be delivered to the
Exchange Agent is at the election and risk of each holder of Claims and/or
Interests. Except as otherwise provided herein, such delivery will be deemed
made only when actually received by the Exchange Agent. Instead of effecting
delivery by mail, it is recommended that such holders use an overnight or hand
delivery service or telecopy promptly followed by overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Ballots or Master Ballots should be sent to the Company, any
indenture trustee, or the Company's financial or legal advisors.
WITHDRAWAL OF BALLOTS; REVOCATION
Any holder of Senior Debentures, liquidated non-Contingent Claims,
Subordinated Debentures, Preferred Stock, and Class A Common Stock who has
delivered a valid Ballot or Master Ballot, as appropriate, voting on the
Prepackaged Plan may withdraw such vote by delivery of a written notice of
withdrawal to the Exchange Agent at any time prior to the earlier of (i) the
commencement by the Company of the Chapter 11 Case, or (ii) the Voting
Expiration Date. Thereafter, Ballots or Master Ballots may be revoked only with
the approval of the Bankruptcy Court. Votes cast pursuant to a Master Ballot may
be withdrawn or modified on an individual Beneficial Interest Holder basis. In
the case where more than one timely, properly completed Ballot or Master Ballot
relating to a particular Class of Claims or
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Interests held by a particular holder is received, only the Ballot or Master
Ballot, as the case may be, which bears the latest date will be counted for
purposes of determining the vote.
A notice of withdrawal, to be valid, must (i) contain the description of the
Claim or Interest to which it relates and the aggregate principal amount or
number of shares, as the case may be, represented by such Claim or Interest,
(ii) be signed by the holder of such Claim or Interest in the same manner as the
original Ballot or Master Ballot, (iii) contain a certification that the
withdrawing party was the Beneficial Interest Holder of the Claim and/or
Interest on the Record Date and possesses the right to withdraw the vote sought
to be withdrawn, and (iv) be received by the Exchange Agent in a timely manner
as described above. Prior to the filing of the Prepackaged Plan, the Company
intends to consult with the Exchange Agent to determine whether any withdrawals
of Ballots were received. The Company expressly reserves the absolute right to
contest the validity of any such withdrawals of Ballots. See "Waivers of
Defects, Irregularities, Etc."
Unless otherwise determined by the Company or directed by the Court, a
purported notice of withdrawal of a Ballot or Master Ballot which is not
received in a timely manner by the Exchange Agent will not be effective to
withdraw a previously furnished Ballot or Master Ballot.
THE COMPANY WILL PAY ALL REASONABLE AND CUSTOMARY COSTS, FEES AND EXPENSES
RELATING TO THE PREPACKAGED PLAN SOLICITATION, INCLUDING WITHOUT LIMITATION,
MAILING AND HANDLING COSTS OF BROKERS, DEALERS, COMMERCIAL BANKS, TRUSTEES,
INDENTURE TRUSTEES AND OTHER NOMINEES. THE COMPANY WILL NOT PAY ANY INCENTIVE OR
ACCEPTANCE FEES IN CONNECTION WITH THE PREPACKAGED PLAN SOLICITATION.
REQUESTS FOR INFORMATION OR ADDITIONAL COPIES OF THIS PROSPECTUS, BALLOTS OR
MASTER BALLOTS SHOULD BE DIRECTED TO THE INFORMATION AGENT.
WAIVERS OF DEFECTS, IRREGULARITIES, ETC.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance and
revocation or withdrawal of Ballots or Master Ballots will be determined by the
Company in its sole discretion, which determination shall be final and binding.
The Company reserves the absolute right to reject any and all Ballots or Master
Ballots not in proper form, the acceptance of which, in the opinion of the
Company or its counsel, would not be in accordance with the provisions of the
Bankruptcy Code. The Company further reserves the right to waive any defects or
irregularities or conditions of delivery as to any particular Ballot, unless
otherwise directed by the Court. The Company's interpretation of the terms and
conditions of the Prepackaged Plan (including the Ballot or Master Ballot and
the respective voting instructions thereto), unless otherwise directed by the
Bankruptcy Court, shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with deliveries of Ballots or Master
Ballots must be cured within such time as the Company (or the Bankruptcy Court)
determines. Neither the Company nor any other person or entity will be under any
duty to provide notification of defects or irregularities with respect to
deliveries of Ballots or Master Ballots nor will any of them incur any
liabilities for failure to provide such notification. Unless otherwise directed
by the Bankruptcy Court, delivery of such Ballots or Master Ballots will not be
deemed to have been made until such irregularities have been cured or waived.
Ballots or Master Ballots previously furnished (and as to which any
irregularities have not theretofore been cured or waived) will not be counted.
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SHARES SUBJECT TO RESALE BY FINANCIAL ADVISORS
The Company has agreed to issue warrants (the "Advisor Warrants") in payment
of financial advisory fees due to HLHZ and Rothschild for services provided in
connection with the Recapitalization. The issuance of the Advisor Warrants is
contingent upon the completion of the Recapitalization. When issued, the Advisor
Warrants will be charged as an expense in the Company's Statement of Operations.
The Advisor Warrants and the underlying shares of Common Stock to be issued upon
exercise thereof (the "Warrant Shares") are being registered for resale by HLHZ
and Rothschild as part of the Recapitalization. The Advisor Warrants will be
exercisable for no additional consideration for a period of two (2) years
following their issuance. When issued, the Advisor Warrants will be exercisable
for that number of shares of Common Stock which has a market value equal to
$1,100,000 in the case of HLHZ and $750,000 in the case of Rothschild as
determined by the 20-day average per share closing price of the Common Stock
immediately following completion of the Recapitalization. It is currently
expected that the Advisor Warrants will be exercised by HLHZ and Rothschild and
the Warrant Shares so acquired will be sold for the accounts of such financial
advisors within two (2) years of the effective date of the registration
statement filed with the Commission in connection with the Recapitalization of
which this Prospectus is a part. Neither HLHZ nor Rothschild is currently a
record or beneficial owner of any shares of the Company's capital stock.
The Warrant Shares issuable upon exercise of the Advisor Warrants shall
consist of (i) 33,955 shares of Common Stock, on a post-Capital Stock
Combination and post-Reverse Stock Split basis, currently held of record by
Libra Invest & Trade Ltd. ("Libra") for the benefit of the Company pursuant to a
custody agreement between Libra and the Company; and (ii) such currently
indeterminate number of newly issued shares of Common Stock as is necessary to
satisfy the exercise of the Advisor Warrants pursuant to the terms thereof. The
Company believes that Libra is not currently, and after the completion of the
Recapitalization, will not be a record or beneficial owner of any shares of the
Company's capital stock other than those described above.
SHARES SUBJECT TO RESALE BY CERTAIN CONTRACTUAL CLAIMANTS
The Company has entered into mutual settlement and release agreements with
two contractual claimants, Allied Signal Inc. ("Allied") and General Chemical
Group Inc. ("General Chemical"), which, among other things, provide for the
issuance of 168,000 and 53,760 shares of Common Stock in settlement of
$3,000,000 and $960,000 of contractual claims held by Allied and General
Chemical, respectively. It is currently expected that these contractual
claimants will sell all of these shares within two (2) years following their
issuance in connection with the completion of the Recapitalization. Neither
Allied nor General Chemical is currently a record or beneficial owner of any
shares of the Company's capital stock.
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HISTORIC AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma financial statements set forth below as of and for the year
ended December 31, 1996 give effect to the Recapitalization pursuant to (i) the
Exchange Offers or (ii) the Prepackaged Plan as if it had occurred at the
beginning of the period. The pro forma adjustments are based upon currently
available information and certain assumptions that management of the Company
believes are reasonable under current circumstances. The accompanying historic
and unaudited pro forma statements of operations do not reflect the
extraordinary gain on extinguishment of debt resulting from (i) the Exchange
Offers or (ii) the Prepackaged Plan.
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA BALANCE SHEET -- THE EXCHANGE OFFERS
DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------
BOLSA
LOWLAND STOCK EXCHANGE
HISTORICAL SALE(A) CONVERSION(B) OFFER(C) PRO FORMA
----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents........................... $ 2.1 $ 13.9 $ -- $ -- $ 16.0
Restricted cash..................................... .2 -- -- -- .2
Real estate held for development or sale............ 25.2 -- -- -- 25.2
Land held for development........................... 223.5 (25.0) -- -- 198.5
Other assets........................................ 21.2 -- -- -- 21.2
----------- ----------- ----- ----------- -----------
$ 272.2 $ (11.1) $ -- $ -- $ 261.1
----------- ----------- ----- ----------- -----------
----------- ----------- ----- ----------- -----------
Accounts payable and accrued liabilities............ $ 11.7 $ (4.0) $ -- $ -- $ 7.7
Senior bank debt.................................... 7.1 (7.1) -- -- --
Project debt........................................ 12.5 -- -- -- 12.5
Subordinated debentures............................. 195.9 -- -- (176.3) 19.6
Other liabilities................................... 43.9 -- 17.3 61.2
----------- ----------- ----- ----------- -----------
Total liabilities............................. 271.1 (11.1) -- (159.0) 101.0
----------- ----------- ----- ----------- -----------
Stockholders' equity:...............................
Series A Preferred Stock.......................... .4 -- (.4) -- --
Class A Common Stock.............................. 2.4 -- (2.4) -- --
Common Stock...................................... .1 .4 .5
Capital in excess of par value.................... 229.2 -- 2.7 100.9 332.8
Deferred proceeds from stock issuance............. (.4) -- -- -- (.4)
Minimum pension liability......................... (.6) -- -- -- (.6)
Accumulated deficit............................... (229.9) -- -- 57.7 (172.2)
----------- ----------- ----- ----------- -----------
Total stockholders' equity.......................... 1.1 -- -- 159.0 160.1
----------- ----------- ----- ----------- -----------
$ 272.2 $ (11.1) $ -- $ -- $ 261.1
----------- ----------- ----- ----------- -----------
----------- ----------- ----- ----------- -----------
</TABLE>
- ------------------------
(a) To reflect the sale of the Bolsa Chica lowlands, at net book value, which
occurred on February 14, 1997, and the subsequent payment of senior bank
debt and certain liabilities.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for $176.3 million of
Outstanding Debentures (assuming only the minimum 90% are tendered) and the
resulting extraordinary gain on extinguishment of debt, net of the related
write-off of deferred tax assets due to limitations on utilization of net
operating losses. The extraordinary gain reflected above is based on the
recent market value of the Outstanding Debentures, whereas the actual
extraordinary gain will be based on the fair value of the Common Stock upon
issuance.
92
<PAGE>
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA STATEMENT OF OPERATIONS --
THE EXCHANGE OFFERS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------
PRO FORMA ADJUSTMENTS
HISTORICAL EXCHANGE OFFER(A) PRO FORMA
----------- ----------------------- -----------
<S> <C> <C> <C>
Revenues:
Asset Sales............................................... $ 33.6 $ 33.6
Operations................................................ 11.2 11.2
----------- -----
44.8 44.8
----------- -----
Costs of:
Asset Sales............................................... 30.2 30.2
Operations................................................ 10.0 10.0
----------- -----
40.2 40.2
----------- -----
Gross operating margin.................................... 4.6 4.6
General and administrative expenses (b)..................... 9.6 9.6
Interest expense............................................ 24.9 $ (20.4)(a) 4.5
Other expense (income), net (b)............................. (1.1) (1.1)
----------- ------ -----
Income (loss) from continuing operations before income
taxes..................................................... (28.8) 20.4 (8.4)
Income tax expense (benefit)................................ .1 -- .1
----------- ------ -----
Loss from continuing operations............................. $ (28.9) $ 20.4 $ (8.5)
----------- ------ -----
----------- ------ -----
</TABLE>
- ------------------------
(a) To reflect the reduction of interest expense resulting from the Exchange
Offers (assuming only the minimum 90% of Outstanding Debentures are
tendered).
(b) Pro forma adjustments do not reflect any eliminations of non-recurring
general and administrative expenses and non-recurring other expense of $2.5
million and $1.5 million, respectively, related to the Bolsa Chica lowland
sale and the Exchange Offers. The pro forma adjustments also do not reflect
the $1.9 million expense for the Advisor Warrants to be issued upon
completion of the Exchange Offers because the expense is non-recurring.
93
<PAGE>
HISTORIC AND UNAUDITED PRO FORMA CAPITALIZATION
OF THE COMPANY -- THE EXCHANGE OFFERS
The table below sets forth the capitalization of the Company and its
subsidiaries as of December 31, 1996. The Pro Forma financial information set
forth below gives effect to the Exchange Offers as of December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-----------------------------------------
BOLSA
LOWLAND STOCK EXCHANGE
HISTORICAL SALE(A) CONVERSION(B) OFFER(C) PRO FORMA
----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Senior bank debt (d)................................. $ 7.1 $ (7.1) $ -- $ -- $ --
Project debt (d)..................................... 12.5 -- -- 12.5
Outstanding Debentures (d)........................... 195.9 -- -- (176.3) 19.6
Stockholders' equity (e):
Series A (convertible redeemable nonvoting)
Preferred Stock, $.01 par value, 42,505,504 shares
authorized, 38,886,626 (historical) and no (pro
forma) shares outstanding.......................... 0.4 -- (.4) -- --
Class A Common Stock, $.05 par value, 625,000,000
shares authorized, 48,938,543 (historical) and no
(pro forma) shares outstanding..................... 2.4 -- (2.4) -- --
Class B (convertible nonvoting) Common Stock, $.05
par value, 25,000,000 shares authorized, no shares
outstanding........................................ -- -- -- -- --
Common Stock, $.05 par value, 18,000,000 shares
authorized, no (historical) and 10,609,823 (pro
forma) shares outstanding.......................... -- -- .1 .4 .5
Capital in excess of par value....................... 229.2 -- 2.7 100.9 332.8
Deferred proceeds from stock issuance................ (.4) -- -- -- (.4)
Minimum pension liability............................ (.6) -- -- -- (.6)
Accumulated deficit.................................. (229.9) -- -- 57.7 (172.2)
----------- ----- ----- ----------- -----------
Total Stockholders' Equity......................... 1.1 -- -- 159.0 160.1
----------- ----- ----- ----------- -----------
Total capitalization................................. $ 216.6 $ (7.1) $ -- $ (17.3) $ 192.2
----------- ----- ----- ----------- -----------
----------- ----- ----- ----------- -----------
</TABLE>
- ------------------------
(a) To reflect repayment of senior bank debt following the sale of the Bolsa
Chica lowlands, at net book value, in February 1997.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for $176.3 million of
Outstanding Debentures (assuming only the minimum 90% are tendered) and the
resulting extraordinary gain on extinguishment of debt, net of the related
write-off of deferred taxes. The extraordinary gain reflected above is based
on the recent market value of the Outstanding Debentures, whereas the actual
extraordinary gain will be based on the fair value of the Common Stock upon
issuance.
(d) See Note 6 of Notes to Audited Historic Financial Statements.
(e) See Note 12 of Notes to Audited Historic Financial Statements.
94
<PAGE>
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA BALANCE SHEET -- THE PREPACKAGED PLAN
DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------
BOLSA
LOWLAND STOCK PREPACKAGED FRESH START
HISTORICAL SALE(A) CONVERSION(B) PLAN(C) ACCOUNTING(D) PRO FORMA
----------- ----------- --------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents......... $ 2.1 $ 13.9 $ -- $ -- $ -- $ 16.0
Restricted cash................... .2 -- -- -- -- .2
Real estate held for development
or sale......................... 25.2 -- -- -- -- 25.2
Land held for development......... 223.5 (25.0) -- -- (68.5) 130.0
Other assets...................... 21.2 -- -- -- 12.5 33.7
----------- ----------- ----- ------------ ------ -----------
$ 272.2 $ (11.1) $ -- $ -- $ (67.6) $ 205.1
----------- ----------- ----- ------------ ------ -----------
----------- ----------- ----- ------------ ------ -----------
Accounts payable and accrued
liabilities..................... $ 11.7 $ (4.0) $ -- $ -- $ -- $ 7.7
Senior bank debt.................. 7.1 (7.1) -- -- -- --
Project debt...................... 12.5 -- -- -- -- 12.5
Subordinated debentures........... 195.9 -- -- (195.9) -- --
Other liabilities................. 43.9 -- -- -- 43.9
----------- ----------- ----- ------------ ------ -----------
Total liabilities........... 271.1 (11.1) -- (195.9) 64.1
----------- ----------- ----- ------------ ------ -----------
Stockholders' equity:
Series A Preferred Stock........ .4 -- (.4) -- -- --
Class A Common Stock............ 2.4 -- (2.4) -- -- --
Common Stock.................... -- -- .1 .5 -- .6
Capital in excess of par
value......................... 229.2 -- 2.7 112.1 -- 344.0
Deferred proceeds from stock
issuance...................... (.4) -- -- -- -- (.4)
Minimum pension liability....... (.6) -- -- -- -- (.6)
Accumulated deficit............. (229.9) -- -- 83.3 (56.0) (202.6)
----------- ----------- ----- ------------ ------ -----------
Total stockholders' equity........ 1.1 -- -- 195.9 (56.0) 141.0
----------- ----------- ----- ------------ ------ -----------
$ 272.2 $ (11.1) $ -- $ -- $ (56.0) $ 205.1
----------- ----------- ----- ------------ ------ -----------
----------- ----------- ----- ------------ ------ -----------
</TABLE>
- ------------------------
(a) To reflect the sale of the Bolsa Chica lowlands, at net book value, which
occurred on February 14, 1997, and the subsequent payment of senior bank
debt and certain liabilities.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for all Outstanding
Debentures and the resulting extraordinary gain on extinguishment of debt.
The extraordinary gain reflected above is based on the recent market value
of the Outstanding Debentures, whereas the actual extraordinary gain will be
based on the fair value of the Common Stock upon issuance.
(d) To reflect the write-down of Bolsa Chica to fair value of $130 million and
the adjustment of the goodwill associated with the Commercial Development
Business and the Company's interest in the Fairbanks Highlands LLC to fair
value under "Fresh Start Accounting" as required in utilizing the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code."
95
<PAGE>
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS -- THE PRE-PACKAGED PLAN
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------
PRO FORMA ADJUSTMENTS
-----------------------------
PREPACKAGED FRESH START ADJUSTED
HISTORICAL PLAN(A) ACCOUNTING(B) PRO FORMA
----------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Asset Sales.......................................... $ 33.6 $ 33.6
Operations........................................... 11.2 11.2
----------- -----------
44.8 44.8
----------- -----------
Costs of:
Asset Sales.......................................... 30.2 30.2
Operations........................................... 10.0 10.0
----------- -----------
40.2 40.2
----------- -----------
Gross operating margin............................... 4.6 4.6
General and administrative expenses (c)................ 9.6 9.6
Interest expense....................................... 24.9 $ (22.7) 2.2
Write-down of real estate properties, net.............. -- $ 67.6 67.6
Other expense (income), net (c)........................ (1.1) (11.6) (12.7)
----------- ------ ------ -----------
Income (loss) from continuing operations before income
taxes................................................ (28.8) 22.7 (56.0) (62.1)
Income tax expense (benefit)........................... .1 -- -- .1
----------- ------ ------ -----------
Loss from continuing operations........................ $ (28.9) $ 22.7 $ (56.0) $ (62.2)
----------- ------ ------ -----------
----------- ------ ------ -----------
</TABLE>
- ------------------------
(a) To reflect the reduction of interest expense resulting from the
Recapitalization pursuant to the Prepackaged Plan.
(b) To reflect the write-down of Bolsa Chica to fair value of $130 million and
the adjustment of the goodwill associated with the Commercial Development
Business and the Company's interest in the Fairbanks Highlands LLC to fair
value under "Fresh Start Accounting" as required in utilizing the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code."
(c) Pro forma adjustments do not reflect any eliminations of non-recurring
general and administrative expenses and non-recurring other expense of $2.5
million and $1.5 million, respectively, related to the Bolsa Chica lowland
sale and the Prepackaged Plan. The pro forma adjustments also do not reflect
the $1.9 million expense for Advisor Warrants to be issued upon completion
of the Exchange Offers because the expense is non-recurring.
96
<PAGE>
HISTORIC AND UNAUDITED PRO FORMA CAPITALIZATION
OF THE COMPANY -- THE PREPACKAGED PLAN
The table below sets forth the capitalization of the Company and its
subsidiaries as of December 31, 1996. The Pro Forma financial information set
forth below gives effect to the Prepackaged Plan as of December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-----------------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
---------------------------------------------------------
BOLSA
LOWLAND STOCK PREPACKAGED FRESH START
HISTORICAL SALE(A) CONVERSION(B) PLAN(C) ACCOUNTING(D) PRO FORMA
----------- ----------- --------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Senior bank debt (e).......................... $ 7.1 $ (7.1) $ -- $ -- $ -- $ --
Project debt (e).............................. 12.5 -- -- -- -- 12.5
Outstanding Debentures (e).................... 195.9 -- -- (195.9) -- --
Stockholders' equity (f):
Series A (convertible redeemable nonvoting)
Preferred Stock, $.01 par value, 42,505,504
shares authorized, 38,886,626 (historical)
and no (pro forma) shares outstanding....... 0.4 -- (.4) -- -- --
Class A Common Stock, $.05 par value,
625,000,000 shares authorized, 48,938,543
(historical) and no (pro forma) shares
outstanding................................. 2.4 -- (2.4) -- -- --
Class B (convertible nonvoting) Common Stock,
$.05 par value, 25,000,000 shares
authorized, no shares outstanding........... -- -- -- -- -- --
Common Stock, $.05 par value, 18,000,000
shares authorized, no (historical) and
11,646,743 (pro forma) shares outstanding... -- -- .1 .5 -- .6
Capital in excess of par value................ 229.2 -- 2.7 112.1 -- 344.0
Deferred proceeds from stock issuance......... (.4) -- -- -- -- (.4)
Minimum pension liability..................... (.6) -- -- -- -- (.6)
Accumulated deficit........................... (229.9) -- -- 83.3 (56.0) (202.6)
----------- ----- ----- ------------ ------ -----------
Total Stockholders' Equity.................. 1.1 -- -- 195.9 (56.0) 141.0
----------- ----- ----- ------------ ------ -----------
Total capitalization.......................... $ 216.6 $ (7.1) $ -- $ -- $ (56.0) $ 153.5
----------- ----- ----- ------------ ------ -----------
----------- ----- ----- ------------ ------ -----------
</TABLE>
- ------------------------
(a) To reflect repayment of senior bank debt following the sale of the Bolsa
Chica lowlands, at net book value, in February 1997.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for all Outstanding
Debentures and the resulting extraordinary gain on extinguishment of debt.
The extraordinary gain reflected above is based on the recent market value
of the Outstanding Debentures, whereas the actual extraordinary gain will be
based on the fair value of the Common Stock upon issuance.
(d) To reflect the write-down of Bolsa Chica to fair value of $130 million and
the adjustment of the goodwill associated with the Commercial Development
Business and the Company's interest in the Fairbanks Highlands LLC to fair
value under "Fresh Start Accounting" as required in utilizing the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code."
(e) See Note 6 of Notes to Audited Historic Financial Statements.
(f) See Note 12 of Notes to Audited Historic Financial Statements.
97
<PAGE>
SELECTED FINANCIAL DATA
Set forth below is selected financial data of the Company and its
consolidated subsidiaries. The following information should be read in
conjunction with the financial statements contained in the Company's Annual
Report for the year ended December 31, 1996 and notes thereto (which are
included herein by reference) and in conjunction with the Unaudited pro forma
consolidated financial information contained in this Prospectus. See "The
Company Recapitalization--Unaudited Pro Forma Condensed Consolidated Financial
Information."
<TABLE>
<CAPTION>
PRO FORMA
YEARS ENDED DECEMBER 31, ------------------------------
----------------------------------------------------- EXCHANGE THE PRE-
1992 1993 1994 1995 1996 OFFERS(H) PACKAGED PLAN(I)
--------- --------- --------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments (a)...... $ 41.6 $ 43.5 $ 13.0 $ 4.9 $ 2.1 $ 16.0 $ 16.0
Total assets (a).................. 486.1 436.0 414.0 272.4 272.2 261.1 205.1
Senior bank debt (b).............. 65.4 7.0 -- 16.6 7.1 -- --
Project debt...................... -- -- -- -- 12.5 12.5 12.5
Subordinated debentures (b)....... 165.1 134.9 152.9 173.2 195.9 19.6 --
Total stockholders' equity (c).... $ 149.6 $ 163.5 $ 145.5 $ 29.6 $ 1.1 $ 160.1 $ 141.0
Fully diluted shares outstanding
at end of period (g)............ 86.4 91.4 102.5 102.4 102.4 11.6 12.7
Book value per fully diluted
share........................... $ 1.73 $ 1.79 $ 1.42 $ .29 $ .01 $ 13.80 $ 11.10
STATEMENT OF OPERATIONS DATA:
Revenues (d),(e).................. $ 28.3 $ 16.7 $ 21.4 $ 34.0 $ 44.8 $ 44.8 $ 44.8
Loss from continuing operations
(e),(f)......................... (41.9) (20.1) (18.7) (116.9) (28.9) (8.5) (73.8)
Net income (loss) (f)............. (38.4) 14.3 (18.0) (116.9) (28.9)
Per common share:
Loss from continuing operations
(c),(e),(f)..................... (1.44) (.24) (.43) (2.48) (.60) $ (.78) $ (6.20)
Net income (loss) (f),(g)......... $ (1.32) $ .17 $ (.41) $ (2.48) $ (.60)
Weighted average shares
outstanding (g)................. 29.0 83.0 43.8 47.1 48.3 10.9 11.9
</TABLE>
- ------------------------
(a) 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 ("Lake Superior"). The decrease
in total assets and cash, cash equivalents and short-term investments at
December 31, 1994 is primarily attributable to the funding of project
development costs and general and administrative expenses, as well as funds
deposited into a restricted cash account to secure a $25 million letter of
credit facility related to the Abex litigation. The decreases in cash, cash
equivalents and short term investments at December 31, 1995 and 1996 are
primarily attributable to the funding of project development and
infrastructure costs and general and administrative expenses, partially
offset by sales of real estate held for development or sale. The decrease in
total assets at December 31, 1995 is primarily due to the asset revaluation
of Bolsa Chica and the decrease in cash described above.
(b) The decrease in debt at December 31, 1993 reflects principal repayments on
senior bank debt and the exchange of subordinated debentures in connection
with the sale of Lake Superior and the issuance of 3.4 million shares of
Class A Common Stock of the Company to Libra. The increase in debt at
December 31, 1995 reflects borrowings under new credit agreements to settle
the Abex litigation and construct infrastructure improvements at Rancho San
Pasqual. The decrease in senior bank debt at
98
<PAGE>
December 31, 1996 reflects principal repayments in excess of borrowings for
construction of infrastructure improvements at Rancho San Pasqual. The
increase in project debt at December 31, 1996 reflects borrowings from banks
for build-to-suit projects.
(c) The increase in equity at December 31, 1993 primarily reflects net income
for the year then ended. The decrease in equity at December 31, 1995
reflects the net loss for the year then ended, including the asset
revaluation of Bolsa Chica. The decrease in equity at December 31, 1996
reflects the net loss for the year then ended, primarily due to interest
expense on subordinated debentures.
(d) The decrease in 1993 revenues is principally due to a decrease in land sales
and the absence of revenues from a hotel disposed of in 1992, partially
offset by revenues from the Eagle Crest Golf Course which opened in May
1993, and development fees generated by the business acquired from The Koll
Company in September 1993. The increase in 1995 revenues is due to an
increase in land sales and Wentworth By The Sea residential and marina
sales. The increase in 1996 revenues reflects the sale of residential lots
and the Eagle Crest Golf Course at Rancho San Pasqual, the formation of the
Fairbanks Highlands joint venture and the sale of resort/residential lots in
Michigan.
(e) Amounts have been reclassified to present Lake Superior and Deltec as
discontinued operations.
(f) The loss from continuing operations for the year ended December 31, 1993
reflects lower interest expense related to lower debt outstanding, as well
as nonrecurring income of $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 and Deltec
and an extraordinary gain on debt extinguishment. The loss from continuing
operations, net loss and loss per common share for the year ended December
31, 1995 reflect approximately $121.1 million of charges related to
write-downs of real estate properties, including Bolsa Chica. The loss from
continuing operations, net loss and loss per common share for the year ended
December 31, 1996 is primarily the result of noncash interest charged on the
subordinated debentures.
(g) In July 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 of a subsidiary of Henley Properties with and into the
Henley Group. The Preferred Stock is not included in the loss per share
calculations except for 1993 since the effect is antidilutive. In December
1993, the Company issued 3.4 million shares of its 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. The
1993 earnings per share calculation includes these newly issued shares,
along with the Preferred Stock and stock options outstanding. In November
1994, the Company issued 2.0 million shares (along with warrants for the
purchase of an additional 2.0 million shares) of its Common Stock in
connection with the acquisition of the Kathryn G. Thompson Company. The
1994, 1995 and 1996 amounts reflect conversion of 1.2 million, an additional
1.0 million and an additional 1.4 million shares, respectively of Preferred
Stock to Common Stock.
(h) The Pro Forma--Exchange Offers amounts reflect December 31, 1996 historical
amounts, giving effect to (i) the February 1997 sale of the Bolsa Chica
lowlands, (ii) the issuance of Common Stock to holders of Senior
Subordinated and Subordinated Debentures pursuant to the Exchange Offers
(assuming only the minimum 90% are tendered), including the resulting
extraordinary gain on extinguishment of debt of approximately $57.7 million,
net of income taxes (see "Historic and Unaudited Pro Forma Consolidated
Financial Statements--The Exchange Offers"), and (iii) the Capital Stock
Combination and Reverse Stock Split described in this Prospectus.
(i) The Pro-Forma--The Prepackaged Plan amounts reflect December 31, 1996
historical amounts, giving effect to (i) the February 1997 sale of the Bolsa
Chica lowlands, (ii) the issuance of Common Stock to holders of Senior
Debentures and Subordinated Debentures pursuant to the Prepackaged Plan,
including the resulting extraordinary gain on extinguishment of debt of
approximately $83.3 million and the write-down of Bolsa Chica and the
adjustment of the goodwill associated with the Commercial Development
Business to fair value under Fresh Start Accounting (see "Historic and
Unaudited Pro Forma Consolidated Financial Statements--The Prepackaged
Plan"), and (iii) the Capital Stock Combination and Reverse Stock Split
described in this Prospectus.
99
<PAGE>
PROJECTIONS OF CERTAIN FINANCIAL DATA OF THE COMPANY
Set forth below are projections of certain financial data that illustrate
the estimated effects of the Recapitalization and certain related transactions,
as effected pursuant to (i) the Exchange Offers and related transactions, or
(ii) the Prepackaged Plan, on the consolidated results of operations and
financial position of the Company and subsidiaries for the periods indicated.
The Projections are presented for the effectuation of the Recapitalization
pursuant to the Exchange Offers or pursuant to the Prepackaged Plan. For
purposes of these projections, the Recapitalization and certain related
transactions are assumed to be effective as of June 30, 1997 pursuant to (i) the
Exchange Offers and related transactions, and (ii) the Prepackaged Plan. The
projections set forth below were developed by the Company and its financial
advisors in June 1996 in connection with the planning, development and
negotiation of its proposed Recapitalization. The material assumptions
underlying the projections which constitute an integral part of the projections
are set forth immediately following such projections and should be carefully
reviewed along with the information set forth under "Risk Factors" with an
understanding that these risks and uncertainties include, but are not limited
to, litigation or appeals of regulatory approvals (including pending litigation
challenging the California Coastal Commission's approval of the Company's Bolsa
Chica project), and availability of adequate capital, financing and cash flow.
In addition, future values may be adversely affected by increases in property
taxes, increases in the costs of labor and materials and other development 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
projections also should be read in conjunction with the Audited Historical
Financial Statements and Unaudited Pro Forma Consolidated Financial Statements
of the Company and subsidiaries included elsewhere in this Prospectus. See
"Index to Financial Statements and Supplementary Data" and "Unaudited Pro Forma
Consolidated Financial Statements."
The following projected financial information was not prepared with a view
towards public disclosure or compliance with the published guidelines of the
American Institute of Certified Public Accountants regarding financial
projections, nor have they been presented in lieu of pro forma historical
financial information and, accordingly, are not intended to comply with Rule
11-03 of Regulation S-X. Neither the independent accountants for the Company nor
any other independent auditors have examined, reviewed, compiled or performed
any procedures with respect to these projections and, accordingly, do not
express an opinion or any other form of assurance on them and assume no
responsibility for them. The projected information necessarily makes numerous
assumptions as set forth below and the Company's future operating results are
subject to and likely to be affected by a number of factors, including timely
resolution of the pending Bolsa Chica litigation, industry performance, general
business and economic conditions, taxes, and other matters, many of which are
beyond the Company's control. The Company believes that while all of its
assumptions are reasonable, such projected information and assumptions are not
necessarily indicative of current values or future performance, which may be
significantly less favorable or more favorable than as reflected in the
projected information and assumed by the Company in its preparation of such
information. Although the projected information represents the best estimate of
the Company (for which the Company believes it has a reasonable basis as of the
time of the preparation thereof) of the results of operations of the Company, it
represents only an estimate, and actual results may vary considerably from the
projected information included herein. Consequently, the inclusion of the
projections herein is not a representation by the Company or its financial
advisors that the projections will be realized. Because the projections are
subject to significant uncertainties and are based upon assumptions that may not
prove to be correct, holders of Impaired Claims and Interests are cautioned not
to place undue reliance on these projections. The projections should not be
relied on for any purpose other than in considering whether to vote to accept or
reject the Prepackaged Plan. The Company does not intend to update or otherwise
revise these projections to reflect circumstances existing after the date of
this Prospectus or to reflect the occurrence of any other events, even in the
event that the assumptions underlying the projections are shown to be in error
(including if the projections become false by reason of
100
<PAGE>
subsequent events), except as may be required by applicable law prior to the
Confirmation Date of the Prepackaged Plan.
KOLL REAL ESTATE GROUP, INC.
PROJECTED FINANCIAL DATA--THE EXCHANGE OFFERS(A)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
HISTORIC PROJECTED
----------- ------------------------------------------
1996 1997 1998 1999 2000
----------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and investments (a)..................... $ 2.1 $ 7.4 $ 53.7 $ 131.7 $ 186.7
Total assets (b)............................................... 272.2 283.9 235.4 219.1 215.1
Senior bank debt (b)........................................... 7.1 -- -- -- --
Project debt................................................... 12.5 47.0 -- -- --
Subordinated debentures........................................ 195.9 22.0 24.9 28.1 31.7
Total stockholders' equity (c)................................. 1.1 153.9 150.6 151.9 160.8
Fully diluted shares outstanding at end of year................ 102.4 11.6 11.6 11.6 11.6
Book value per fully diluted share............................. .01 13.27 12.98 13.09 13.86
Statement of Operations Data:
Revenues (a)(d)................................................ 44.8 80.8 179.3 112.2 111.5
Costs of sale.................................................. 40.2 77.5 172.3 99.5 85.6
Income (loss) from continuing operations....................... (28.9) (16.2) (3.3) 1.3 8.9
Extraordinary Gain on extinguishment of debt................... -- 67.7 -- -- --
Net income (loss) (c).......................................... (28.9) 51.5 (3.3) 1.3 8.9
Per common share:
Income (loss) from continuing operations....................... (.60) (.54) (.30) .12 .82
Net income (loss).............................................. (.60) 1.72 (.30) .12 .82
Weighted average shares outstanding.............................. 48.3 29.9 10.9 10.9 10.9
</TABLE>
- ------------------------
(a) The above financial projections are based on the assumption that the
Recapitalization and certain related transactions are effective as of June
30, 1997 pursuant to the Exchange Offers and related transactions and not
pursuant to the Prepackaged Plan. The Company has prepared the Financial
Projections based on generally accepted accounting principles. In addition,
the Company has assumed in the above financial projections that cash flow
generated by its current assets is reinvested in new projects that earn a
15% annual rate of return.
(b) The Bolsa Chica lowlands were sold for $25 million in February 1997, with a
portion of the proceeds utilized to repay remaining senior bank debt and
certain liabilities.
(c) The net income (loss), net income (loss) per share and total stockholders'
equity reflect the projected gain on the retirement of the Outstanding
Debentures, net of taxes of $17.8 million (due to limitations on utilization
of net operating losses).
(d) Projected revenues for the years ended December 31, 1997 and 1998 include
approximately $31.1 million and $91.3 million, respectively from sales of
build-to-suit projects.
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<PAGE>
ASSUMPTIONS
BOLSA CHICA--Infrastructure construction on the Bolsa Chica mesa is assumed
to begin during the fourth quarter of 1997, assuming timely resolution of
outstanding litigation, which management believes will not have a significant
financial impact on the project.
Absorption of approximately 1,835 Mesa lots over a four year period
(1998-2001) as follows:
<TABLE>
<CAPTION>
1998 1999 2000 2001
- --------------------------- ----- ----- -----
<S> <C> <C> <C>
500 606 593 136
</TABLE>
Range of initial home prices (including premiums) and sizes as follows:
<TABLE>
<CAPTION>
PRICE/
SQ. FT. PRICE SQ. FT.
----------- ---------- -----------
<S> <C> <C> <C>
High............................................................ 3,200 $ 595,000 $ 186
Low............................................................. 1,100 $ 179,000 $ 163
Average......................................................... 1,700 $ 286,000 $ 168
</TABLE>
The associated lot price, including view premium, for the high and low
initial home price is $257,000 and $56,000, respectively.
Inflation assumed as follows:
<TABLE>
<CAPTION>
1998 &
1996 1997 THEREAFTER
--------- --------- -----------
<S> <C> <C> <C>
Home prices..................................................... 0.0% 3.0% 7.0%
Lot prices...................................................... 0.0% 4.5% 10.5%
Costs........................................................... 2.0% 3.0% 3.5%
</TABLE>
The Company is assumed to capture 25% of the projected home builder profit,
estimated at 8.0% of the initial home price, through joint ventures or in-house
home building.
Sales revenues and costs of sales, including participation in home builder
profits are projected as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales..................................................... -- 25.0 67.0 85.7 70.0
Costs of Sales............................................ -- 25.0 67.0 85.7 70.0
--- --- --- --- ---
-- -- -- -- --
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
RANCHO SAN PASQUAL--Residential lots at Rancho San Pasqual are projected to
be sold on a timely basis to homebuilders which have rolling options, or in
comparable transactions. Historic and projected sales revenues for 1996, 1997
and 1998 amount to $10.1 million, $8.7 million and $3.9 million, respectively.
COMMERCIAL DEVELOPMENT BUSINESS--The commercial development business is
assumed to achieve 10% fee revenue growth and 4% annual expense growth in years
after 1997.
GENERAL AND ADMINISTRATIVE EXPENSES--Recurring general and administrative
expenses are projected to grow at a 5% annual rate from 1997 through 2000 and
held constant thereafter.
OTHER LIABILITIES--Payments on other liabilities are assumed to be $6.2
million, $1.2 million, $1.2 million, and $1.2 million respectively for the years
of 1997, 1998, 1999 and 2000. Projected payments do not
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<PAGE>
include amounts for claims which cannot be determined or approximated with any
reasonable degree of accuracy, such as claims for which the Company is
contesting liability.
TAX ATTRIBUTES--Utilization of net operating losses and certain other tax
attributes is assumed to be limited under Section 382 of the Code as a result of
the Recapitalization pursuant to the Exchange Offers. The annual limitation
calculation assumes a value of the old loss corporation of approximately $15.0
million (the approximate recent stock market value) times the long-term
tax-exempt bond rate of 5.50% (for April 1997), for an annual limitation of $.8
million per annum. Net income and stockholders' equity reflect the write-off of
$17.8 million of deferred tax assets as a result of the limitations. See
"Federal Income Tax Consequences of the Exchange Offers and the Prepackaged Plan
to the Company--Limitation on Net Operating Losses."
See "Risk Factors--Tax Matters" for a discussion of a pending dispute
between the Company and the IRS which, if decided adversely to the Company,
could affect the Company's tax attributes under the Recapitalization.
103
<PAGE>
KOLL REAL ESTATE GROUP, INC.
PROJECTED FINANCIAL DATA--THE PREPACKAGED PLAN(A)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
PRECONFIRMATION
--------------- PROJECTED
HISTORIC ------------------------------------------
1996 1997 1998 1999 2000
--------------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and investments (a)....................... $ 2.1 $ 7.9 $ 54.0 $ 141.0 $ 209.5
Total assets (b)................................................. 272.2 227.8 196.3 211.7 239.9
Senior bank debt (b)............................................. 7.1 -- -- -- --
Project debt..................................................... 12.5 47.0 -- -- --
Subordinated debentures.......................................... 195.9 -- -- -- --
Total stockholders' equity (c)................................... 1.1 136.2 152.1 175.1 212.2
Fully diluted shares outstanding at end of year.................. 102.4 12.7 12.7 12.7 12.7
Book value per fully diluted share............................... .01 10.72 11.98 13.79 16.71
Statement of Operations Data:
Revenues (a)(d).................................................. 44.8 80.8 179.3 112.3 113.0
Costs of sale (e)................................................ 40.2 77.5 154.5 76.1 66.4
Income (loss) from continuing operations......................... (28.9) (72.5) 15.9 23.0 37.1
Extraordinary gain on extinguishment of debt..................... -- 95.0 -- -- --
Net income (loss) (c)............................................ (28.9) 22.5 15.9 23.0 37.1
Per common share:
Income (loss) from continuing operations......................... (.60) (2.39) 1.34 1.93 3.12
Net income (loss) (c)............................................ (.60) .74 1.34 1.93 3.12
Weighted average shares outstanding................................ 48.3 30.3 11.9 11.9 11.9
</TABLE>
- ------------------------
(a) The above financial projections are based on the assumption that the
Recapitalization and certain related transactions are effective as of June
30, 1997 pursuant to the Prepackaged Plan. The Company based the above
projections on its financial position as of December 31, 1996, adjusted to
take into account the effects of the Prepackaged Plan and certain related
transactions assumed to close as of June 30, 1997. The above projections
have been prepared using the principles required by the American Institute
of Certified Public Accountants' Statement of Position 90-7, FINANCIAL
REPORTING BY ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE ("FRESH
START ACCOUNTING"). The Company has prepared the Financial Projections based
on generally accepted accounting principles as such rules and practices are
applied to the real estate industry. In addition, the Company has assumed in
the above financial projections that cash flow generated by its current
assets is reinvested in new projects that earn a 15% annual rate of return.
(b) The Bolsa Chica lowlands were sold for $25 million in February 1997, with a
portion of the proceeds utilized to repay remaining senior bank debt and
certain liabilities. The decrease in total assets at December 31, 1997
reflects the write-down of land held for development pursuant to the
application of fresh start accounting.
(c) The Net income (loss), net income (loss) per share and total stockholders
equity reflect the projected gain on the retirement of the Outstanding
Debentures.
(d) Projected revenues for the years ended December 31, 1997 and 1998 include
approximately $31.1 million and $91.3 million, respectively from sales of
build-to-suit projects.
(e) Costs of sale for the years ended December 31, 1998 through 2000 reflect the
reduced land basis resulting from the write-down of land held for
development in 1997 upon confirmation of the Prepackaged Plan pursuant to
the application of fresh start accounting.
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<PAGE>
ASSUMPTIONS
BOLSA CHICA--Infrastructure construction on the Bolsa Chica mesa is assumed
to begin during the fourth quarter of 1997, assuming timely resolution of
outstanding litigation, which management believes will not have a significant
financial impact on the project.
Absorption of approximately 1,835 Mesa lots over a four year period
(1998-2001) as follows:
<TABLE>
<CAPTION>
1998 1999 2000 2001
- --------------------------- ----- ----- -----
<S> <C> <C> <C>
500 606 593 136
</TABLE>
Range of initial home prices (including premiums) and sizes as follows:
<TABLE>
<CAPTION>
PRICE/
SQ. FT. PRICE SQ. FT.
----------- ---------- -----------
<S> <C> <C> <C>
High............................................................ 3,200 $ 595,000 $ 186
Low............................................................. 1,100 $ 179,000 $ 163
Average......................................................... 1,700 $ 286,000 $ 168
</TABLE>
The associated lot price, including view premium, for the high and low
initial home price is $257,000 and $56,000, respectively.
Inflation assumed as follows:
<TABLE>
<CAPTION>
1998 &
1996 1997 THEREAFTER
--------- --------- -----------
<S> <C> <C> <C>
Home prices..................................................... 0.0% 3.0% 7.0%
Lot prices...................................................... 0.0% 4.5% 10.5%
Costs........................................................... 2.0% 3.0% 3.5%
</TABLE>
The Company is assumed to capture 25% of the projected home builder profit,
estimated at 8.0% of the initial home price, through joint ventures or in-house
home building.
Sales revenues and costs of sales, including participation in home builder
profits are projected as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales..................................................... -- 25.0 67.0 85.7 70.0
Costs of Sales............................................ -- 25.0 49.0 62.0 50.2
--- --- --- --- ---
-- -- 18.0 23.7 19.8
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
RANCHO SAN PASQUAL--Residential lots at Rancho San Pasqual are projected to
be sold on a timely basis to homebuilders which have rolling options, or in
comparable transactions. Historic and projected sales revenues for 1996, 1997
and 1998 amount to $10.1 million, $8.7 million and $3.9 million, respectively.
COMMERCIAL DEVELOPMENT BUSINESS--The commercial development business is
assumed to achieve 10% fee revenue growth and 4% annual expense growth in years
after 1997.
GENERAL AND ADMINISTRATIVE EXPENSES--Recurring general and administrative
expenses are projected to grow at a 5% annual rate from 1997 through 2000 and
held constant thereafter.
OTHER LIABILITIES--Payments on other liabilities are assumed to be $5.4
million, $1.2 million, $1.2 million, and $1.2 million respectively for the years
of 1997, 1998, 1999 and 2000. Projected payments do not
105
<PAGE>
include amounts for claims which cannot be determined or approximated with any
reasonable degree of accuracy, such as claims for which the Company is
contesting liability.
TAX ATTRIBUTES--Unless the Company elects out, Section 382 of the Code may
provide for certain reductions of tax attributes for a corporation which
undergoes an ownership change in connection with a Chapter 11 Case. See "Federal
Income Tax Consequences of the Exchange Offers and the Prepackaged Plan to the
Company--Limitation on Net Operating Losses."
See "Risk Factors--Tax Matters" for a discussion of a pending dispute
between the Company and the IRS which, if decided adversely to the Company,
could affect the Company's tax attributes under the Prepackaged Plan.
106
<PAGE>
POSSIBLE ACCOUNTING TREATMENTS
The Company proposes to account for the Recapitalization, assuming holders
of the Senior Debentures and Subordinated Debentures exchange 90% or more of the
Outstanding Debentures and related accrued interest, by recording the shares of
Common Stock issued at fair value at the time the Outstanding Debentures are
tendered; any difference between the value of such shares issued and the related
outstanding debt balance will result in the recognition of an extraordinary gain
on extinguishment of debt. The Company will continue to report its historical
Accumulated Deficit balance (net of the extraordinary gain referred to above) in
stockholders' equity. As discussed in "Material Federal Income Tax Consequences
of the Exchange Offers; Cancellation of Indebtedness--Income Limitation on Net
Operating Losses" herein, certain net operating loss carryforwards ("NOLS") will
become unusable as a result of the Recapitalization through the Exchange Offers,
resulting in the write-off of the related deferred tax assets. With the
completion of the Recapitalization through the Exchange Offers, no adjustment to
the net realizable values of assets and liabilities, other than to the deferred
tax assets discussed above, is required.
In the event that the Company seeks judicial confirmation of the Prepackaged
Plan, the Company proposes to account for the exchange of shares of Common Stock
for Outstanding Debentures using the principles of fresh start accounting
pursuant to Statement of Position 90-7 ("FINANCIAL REPORTING BY ENTITIES IN
REORGANIZATION UNDER THE BANKRUPTCY CODE"). Pursuant to such principles, in
general, the Corporation's assets (principally the Bolsa Chica property) and
liabilities will be revalued to their fair market values. The aggregation of any
adjustments to the asset and liability accounts will be recorded as adjustments
to results of operations. Additionally, the difference between the value of
shares issued and the related outstanding debt balance will result in the
recognition of an extraordinary gain on extinguishment of debt. The Company will
recast its balance sheet based on the aforementioned revalued assets and
liabilities, and restate retained earnings to zero. As discussed below in
"Federal Income Tax Consequences of Prepackaged Plan," under judicial
confirmation of the Prepackaged Plan there will be no loss of available NOLS.
LIQUIDATION ANALYSIS
Pursuant to the Best Interests Test, the Bankruptcy Court must determine
that each nonaccepting Holder of an Impaired Claim or Impaired Interest will
receive or retain property of a value as of the Effective Date of the
Prepackaged Plan at least equal to the amount such Holder would receive or
retain on account of such Claim or Interest if the Company were liquidated under
chapter 7 of the Bankruptcy Code (a "Liquidation"). In applying the Best
Interests Test, the Bankruptcy Court will ascertain the hypothetical
distributions in a Liquidation to Secured Creditors, holders of priority Claims,
general unsecured Creditors and Equity Interest Holders. In such analysis, the
Court will take into account applicable structural and contractual subordination
rights among Creditors, as well as give effect to valid liens and security
interests held by certain Creditors. Hypothetical distributions to Creditors and
Equity Holders would then be determined based upon rules of "absolute priority"
established by the Bankruptcy Code as more fully described below. The Court will
compare these hypothetical chapter 7 liquidation distributions with the
distributions offered to each class of Impaired Claims or Impaired Interests
under the Prepackaged Plan to determine if the Prepackaged Plan satisfies the
Best Interests Test set forth in section 1129(a)(7) of the Bankruptcy Code.
The Company believes that the value of the property to be distributed or
retained by each holder of an Impaired Claim and Impaired Interest under the
Prepackaged Plan exceeds the value, if any, the Holder would receive in a
Liquidation and thus believes that the requirements of the best interest test
are satisfied. In order to arrive at that judgment, the Company, with the
assistance of Houlihan Lokey which relied on Company projections, estimated and
compared the theoretical returns to each holder of an Impaired Claim and
Impaired Interest under a hypothetical Liquidation with those under the
Prepackaged Plan. The results of such analysis are set forth below.
107
<PAGE>
It should be noted that underlying this analysis are a number of estimates
and assumptions which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control or otherwise not accurately
predictable by the Company. Moreover, there can be no assurance that the values
assumed in the following analysis would be realized if in fact the Company was
liquidated. Accordingly, while the analysis that follows is necessarily
presented with numerical specificity, if the Company's assets were in fact
liquidated, the actual liquidation proceeds would likely vary from the amounts
set forth below and no representation or warranty can be, or is being made with
respect to the proceeds that could be received in an actual chapter 7
liquidation of the Company. The Liquidation valuations have been prepared solely
for purposes of permitting the comparison required by section 1129(a)(7) of the
Bankruptcy Code and do not represent a value that may be appropriate for any
other purpose. Nothing contained in these valuations is intended to be or
constitutes a concession or admission of the Company for any other purpose.
LIQUIDATION ANALYSIS
The following principal assumptions and considerations were used to prepare
the liquidation analysis:
ESTIMATED LIQUIDATION PROCEEDS. The Company is a real estate development
company with properties, located principally in Southern California, in various
stages of development. The business of the Company is conducted through
subsidiaries. The principal assets of the Company consist of the stock of the
subsidiaries. For purposes of the liquidation analysis, it is assumed that the
properties owned by the Company, which are held in the Company's subsidiaries,
would be sold on a going concern basis, and that the other assets of the
Company, which are not material in aggregate, would be sold in a liquidation
sale over the period described below. It is believed that the sales of
subsidiaries assets would result in greater proceeds to the Company than
liquidating the stock of the individual subsidiaries. There can be no assurance,
however, that any asset sales could be completed. Further, the Company did not
solicit inquiries with respect to an acquisition of the Company or any of its
businesses or assets. The following information and factors, not listed in order
of importance, were, among others, considered by the Company in estimating the
proceeds which might be received from the sale of the properties owned, or
businesses being operated, by the Company:
(a) The Company's historical financial statements, relevant historical
operating information and projected financial and operating performance,
including financial information for the twelve-month period ended
December 31, 1996 and projections through December 31, 2003 (the
"Projections").
(b) Valuations of properties comparable to those held by the Company and
market valuations of public companies in similar businesses as the
Company.
(c) Bids received by the Company for certain of the Company's properties.
(d) The primary characteristics of the properties owned by the Company, as
well as the Company's development expertise, operating advantages and
disadvantages, and other relevant aspects of their business.
(e) The limited base of potential "bulk-sale"/"as is" buyers for the
Company's primary asset, 310 acres of undeveloped land known as Bolsa
Chica.
(f) The potential impact of a chapter 7 proceeding upon potential buyers'
pricing strategies.
(g) The relative timing of potential sales of the Company's assets.
(h) The liabilities and obligations of the Company's subsidiaries.
In estimating the liquidation proceeds and applying the foregoing factors
and considerations to make such estimates, both the general economic and real
estate environment in Southern California and the
108
<PAGE>
current status of the Company's assets were considered. As has been described in
detail in this Prospectus, the Company has been adversely impacted by a
prolonged downturn in the California real estate markets, delays in receiving
the entitlements necessary to develop the Bolsa Chica property and litigation
challenging such entitlements. These factors have had a significant adverse
affect upon the Company's revenues and operating income. These factors would
also likely adversely affect the price which could be realized in a near-term
disposition of the Company's assets. In addition, this analysis includes
estimates related to the acceleration of certain unliquidated and contingent
claims that might be triggered by a chapter 7 liquidation.
IMPACT OF CHAPTER 7 UPON SUBSIDIARY OPERATIONS AND VALUES. A decision to
liquidate the Company under chapter 7 could cause the withdrawal of, or delay in
receiving, development capital for certain of the Company's properties held in
various subsidiaries. In addition, in the event of a chapter 7 proceeding by the
Company, as a result of the co-obligation of certain of the subsidiaries on a
portion of the Company's indebtedness and other factors, it is likely that some
or all of the subsidiaries would be required to commence cases under the
Bankruptcy Code. Any such filings would further result in substantial
uncertainty and in disruption of the operating businesses, including a potential
loss of management. A potential lack of liquidity, combined with poor industry
conditions and the adverse effect of the commencement of bankruptcy cases by the
subsidiaries, could lead to further reductions in operating performance and,
subsequently, less realizable value to creditors and stockholders of the Company
from the ultimate disposition of such subsidiaries. The following analysis
considers such effects through the assumption that potential acquirors of the
Company's assets would require higher rates of return as a result of such
factors.
NATURE AND TIMING OF THE LIQUIDATION PROCESS. Under section 704 of the
Bankruptcy Code, a chapter 7 trustee must, among other duties, collect and
convert the property of the debtor's estate to cash and close the estate as
expeditiously as is compatible with the best interests of the parties in
interest. Solely for purposes of preparing this liquidation analysis, (a) the
liquidation was assumed to commence in January 1997, (b) the Company's assets
were assumed to be sold during the 12-month period ending in January 1998 (the
"Liquidation Period") and (c) distributions from the liquidations were assumed
to be made in their entirety in January 1999 (the "Liquidation Distribution
Date"). Depending upon actual circumstances, the 12-month Liquidation Period or
24 month Liquidation Distribution Date could be significantly longer or, while
the Company believes it unlikely, shorter. In this connection, it should be
noted that bankruptcy proceedings involving the subsidiaries, the necessity for
the determination and satisfaction of claims at the subsidiary level prior to
any distribution of liquidation proceeds to the Company, the potential for
inter-company and inter-creditor claims disputes and the likelihood of
significant contingent and other claims and related litigation could
substantially delay both the sale of some or all subsidiaries and the ultimate
distribution of the proceeds of asset liquidations to the Company's Creditors
and Interest Holders.
While for purposes of this analysis the Liquidation Period is assumed to
begin approximately six months before the Effective Date of the Prepackaged
Plan, the Company does not expect any material events to occur over this time
frame that will significantly impact this analysis, with the exception of the
sale of the Lowlands. This analysis has been adjusted to reflect the sale of the
Lowlands, which occurred in February 1997, and is discussed in more detail
below.
LIQUIDATION TAX LIABILITIES. As members of the consolidated tax group, each
subsidiary of the Company is jointly liable with the Company for federal tax
liabilities, including liabilities that arise from the disposition of the
subsidiaries themselves. As such, the proceeds available for distribution to
holders of Claims against and Interests in the Company are assumed to be reduced
by the tax obligations expected to be triggered by the sale of the subsidiaries
in the liquidation whether such obligations are triggered at the Company or
subsidiary level. After considering the tax basis of each asset and the
application of $282 million of available net operating loss carryforwards
(assuming $147 million of such net operating loss
109
<PAGE>
carryforwards are disallowed as a result of the ongoing Internal Revenue Service
audit for the Company's 1989 through 1991 tax years), the Company estimates no
tax liability as a result of the disposition of the assets of the subsidiaries.
DISTRIBUTION; ABSOLUTE PRIORITY. Prior to distribution of any proceeds to
creditors at the Company level, claims and obligations of the subsidiaries, to
the extent not assumed in the particular subsidiary sale transactions
themselves, would have to be paid. For purposes of this liquidation analysis it
has been assumed that no Claims will be assumed by the buyers of the Company's
respective subsidiaries and thus will be paid at the subsidiary level out of the
proceeds of subsidiary sales and prior to any distribution to the Creditors of
the Company. Under a chapter 7 liquidation, all Secured Claims would be
satisfied from the proceeds of the collateral securing such Claims before any
such proceeds would be distributed to the Holders of Unsecured Claims. To the
extent that proceeds remain after satisfaction of all Secured Claims,
Administrative Claims and Priority Claims, the following analysis assumes the
application of the rule of absolute priority of distributions with respect to
the remaining proceeds of the Company. Under that rule, no junior Creditor
receives any distribution until all senior Creditors are paid in full. As such,
and as a result of applicable contractual subordination provisions, no
distributions would be made to holders of the Subordinated Debentures until all
"senior indebtedness" (as defined in the applicable indenture), including the
Senior Debentures, were paid in full.
PRIMARY ASSUMPTIONS USED TO VALUE THE COMPANY'S PRINCIPAL ASSETS UNDER A
PREPACKAGED PLAN AND A HYPOTHETICAL LIQUIDATION.
The following section details, on an asset by asset basis, the major
assumptions that were used to value the Company's principal assets under the
Prepackaged Plan and Liquidation scenarios.
BOLSA CHICA--MESA.
In a Prepackaged Plan, it is assumed that outstanding litigation is resolved
in a timely manner and infrastructure construction on the Bolsa Chica mesa (the
"Mesa") begins during the fourth quarter of 1997. The present value of the Mesa
in a Prepackaged Plan is equal to the Company's projected cash flows from this
project, discounted at a 15% rate.
Based on conversations with local real estate experts, and after considering
various factors such as the additional government approvals that are required
before the Mesa can be developed and the prospect of continued litigation
related to, or appeals of, regulatory approvals (e.g., the pending litigation
challenging the California Coastal Commission's approval of the Company's Bolsa
Chica project), the estimated present value of the proceeds to be received for
the Mesa in a Liquidation scenario (discounted at 40%) is equal to approximately
54% of the estimated present value of the property in a Prepackaged Plan
(discounted at 15%).
BOLSA CHICA--LOWLANDS.
In February 1997, the Company sold approximately 880 lowland acres (the
"Lowlands") to the California State Lands Commission for $25 million. The
proceeds from the Lowlands sale were used to repay the $6.6 million balance on
the Nomura Loan and reduce other outstanding liabilities by approximately $4.0
million. The remaining portion of the proceeds is currently held in various
subsidiary cash accounts.
RANCHO SAN PASQUAL.
In a Prepackaged Plan, the estimated value of Rancho San Pasqual is based on
management's estimate of the cash flows that will be generated by the sale of
residential lots which are projected to be sold on a timely basis to
homebuilders with rolling options, or in comparable transactions, discounted at
a 15% rate.
110
<PAGE>
The accelerated time frame under Chapter 7 for disposition may have an
adverse effect on realized value in a Liquidation. Consequently, in a
Liquidation scenario, it is estimated that the Company realizes a present value
equal to its projected cash flows from Rancho San Pasqual, discounted at a 25%
rate.
FAIRBANKS
A subsidiary of the Company recently formed a joint venture with a prominent
Southern California homebuilder through which Fairbanks, a 390 acre residential
property in North San Diego County, California, will be developed. The estimated
value of Fairbanks in a Prepackaged Plan scenario is based on the approximately
$7.2 million in cash flows projected to be received by the Company as a result
of the development of the project in 1998 through 2000, discounted at 15%.
The decision to liquidate the Company's interest in Fairbanks under chapter
7 of the Bankruptcy Code would likely result in the Company selling its rights
to certain future cash flows generated by the joint venture. In a Liquidation
scenario, it is estimated that the Company realizes a present value equal to its
projected cash flows from Fairbanks, discounted at a 25% rate.
THE COMMERCIAL DEVELOPMENT BUSINESS
In a Prepackaged Plan, the Commercial Development Business is assumed to
achieve 10% annual revenue growth and 4% annual expense growth in years after
1997. The estimated value of the Commercial Development Business in a
Prepackaged Plan was derived through the utilization of both comparable company
and discounted cash flow valuation approaches.
In a Liquidation scenario, the Commercial Development Business is estimated
to have no value as it is assumed that the Commercial Development Business could
not be sold in an expedited time frame due to the sensitivity of this business
to (1) access to capital to finance new projects and (2) the business
relationships of the personnel employed in the Commercial Development Business,
whom would likely choose to terminate their employment in a Liquidation
scenario.
GENERAL AND ADMINISTRATIVE EXPENSES
In a Prepackaged Plan scenario, recurring general and administrative
expenses ("G&A Expenses") are projected to grow at a 5% annual rate from 1997
through 2000 and held constant thereafter. The estimated G&A Expenses necessary
to manage the Company's current asset base is equal to approximately four times
the Company's actual recurring G&A expenses in fiscal year 1996.
In a Liquidation scenario, it is assumed that the Company does not retain
any full-time general and administrative-related personnel. As a result,
additional general unsecured claims related to employee severance packages would
result from a chapter 7 liquidation. Employee severance packages are estimated
to approximate $1.5 million based on contractual obligations.
LIQUIDATION-RELATED EXPENSES
In the Liquidation scenario, it is assumed that asset disposition fees and
expenses would aggregate approximately 3% of estimated gross liquidation
proceeds.
BASIC ADMINISTRATION EXPENSES
In both the Prepackaged Plan and Liquidation scenarios, the proceeds that
would be available to the holders of the Claims and Interests would be reduced
by administrative expenses. Administrative expenses in a Prepackaged Plan
scenario would include expenses related to counsel, financial advisors,
accountants and other professionals. Administrative expenses in a Liquidation
scenario would include similar expenses, as well as expenses related to a
trustee (including financial advisors and accountants retained by the
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trustee). Administrative expenses are estimated to aggregate $3.0 million in the
Prepackaged Plan and $7.0 million in the Liquidation scenario (including
liquidation-related asset disposition fees).
The following table details the computation of liquidation proceeds:
LIQUIDATION PROCEEDS COMPUTATION
($ IN 000S)
<TABLE>
<S> <C>
Hypothetical gross liquidation proceeds(a)........................ $ 100,841
LESS: Chapter 7 basic administration costs (b).................... 7,000
LESS: Payment of taxes............................................ 0
---------
Liquidation value available for distribution to creditors and
equity interest holders of the Company.......................... $ 93,841
---------
---------
</TABLE>
(a) Hypothetical net liquidation proceeds, as estimated by the Company. The
hypothetical net liquidation proceeds include interest on cash balances
during the Liquidation Period at an assumed pretax rate of 5% per annum and
reflect the estimated value of the assets available to creditors and equity
interest holders of the Company after the payment of specific claims at each
of the Company's individual Subsidiaries, including: (i) any
disposition-related taxes, (ii) severance payments, and (iii) liabilities at
each subsidiary.
(b) Includes estimated asset disposition fee expenses of 3% of estimated gross
liquidation proceeds.
COMPARISON OF ESTIMATED DISTRIBUTION
The table below sets forth a comparison of the estimated distributions to
Holders of Impaired Claims and Equity Interests under the Prepackaged Plan with
the estimated recoveries of such Holders in a chapter 7 liquidation of the
Company after giving effect to all contractual subordination provisions and the
corporate structure of the Corporation and its Subsidiaries. The comparison
should be read in conjunction with all other information set forth under
"Liquidation Analysis."
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COMPARISON OF ESTIMATED DISTRIBUTION
($ IN 000S)
<TABLE>
<CAPTION>
CASH
AVAILABLE FOR NET PRESENT VALUE
DISTRIBUTION OF CHAPTER 7 ESTIMATED
DESCRIPTION OF CLAIMS/EQUITY APPROXIMATE IN LIQUIDATION PERCENTAGE PREPACKAGED PLAN ESTIMATED
INTERESTS(A) CLAIM AMOUNT CHAPTER 7(B) RECOVERY(B) PERCENTAGE RECOVERY(C)
- --------------------------------- ------------ -------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Liquidation proceeds available
for distribution............... $ 93,841
Unclassified--Priority Tax
Claims......................... $ 3,913 $ 3,913 100.0% Unimpaired
Class 5--Senior Subordinated
Debentures..................... $ 164,592 $ 85,687 45.9%(d) 63.4%
Class 5--Liquidated, non-
Contingent Claims (e).......... 4,710 1,962 36.7% 63.4%
Class 5--Other General Unsecured
Claims (f)..................... 5,472 2,279 36.7% NA
Class 6--Subordinated
Debentures..................... $ 41,138 $ 0 0.0% 31.7%
Class 7--Preferred Stock......... NA $ 0 0.0% greater than 0%(g)
Class 8--Class A Common Stock.... NA $ 0 0.0% greater than 0%(g)
Class 9--Warrants(h)............. NA $ 0 0.0% 0.0%
</TABLE>
- ------------------------
(a) For purposes of the liquidation analysis, claims and interests have been
grouped together in accordance with rules of absolute priority under the
Bankruptcy Code which the Company believes would be applied in a
Liquidation. For this purpose, the Company has assumed that, except for the
contractual subordination provisions applicable to the Subordinated
Debentures, no claims would be subject to subordination at the Company
level.
(b) Cash amount in aggregate before the application of a present value discount.
Percentage shown in the table as Net Present Value of Chapter 7 Estimated
Liquidation Percentage Recovery is the quotient of the present value of the
available liquidation proceeds divided by the estimated amount of claims in
such class. The cash amount has been discounted back to its net present
value as of January 1, 1997 (the date on which the Liquidation Period is
assumed to begin) from January 1, 1999 (the assumed Liquidation Distribution
Date) applying a discount rate of 6.5%.
(c) Amount shown in the table as Prepackaged Plan Estimated Percentage Recovery
is the quotient of the cash plus the assumed value of the equity securities
to be distributed to all holders of claims in such class under the
Prepackaged Plan divided by the estimated amount of claims. It should be
noted that depending on general market conditions and other factors
prevailing at the relevant times the equity securities may trade at a price
other than that which was assumed for purposes of this analysis.
Accordingly, no representation can be, or is being, made with respect to
whether the percentage recoveries shown in the table above will actually be
realized by the holder of claims in any particular class under the
Prepackaged Plan.
(d) In a liquidation, the holders of the Senior Debentures receive a higher
estimated recovery percentage than other General Unsecured Claims because of
the assumed enforcement of the subordination language in the Senior
Debenture Indenture. However, this amount is subject to further dilution in
the event that certain additional disputed claims are allowed or given
priority in a Chapter 7 liquidation.
(e) Liquidated non-Contingent Claims are classified as General Unsecured Claims.
In a Prepackaged Plan, holders of these claims would receive Common Stock
worth approximately $0.636 per $1.00 of claim.
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<PAGE>
(f) In a liquidation scenario, claims related to certain unliquidated,
contingent liabilities (which are disputed by the Company), have
conservatively been excluded from the class of General Unsecured Claims. In
a Prepackaged Plan, these liabilities are assumed to be satisfied in the
ordinary course of business. It should be noted that the $5.5 million of
other General Unsecured Claims shown above is based on a number of estimates
and assumptions which are inherently subject to significant uncertainties
and contingencies, many of which are beyond the control or otherwise not
accurately predictable by the Company. The estimated $5.5 million of such
claims reflects: (1) the book value of accrued pensions and benefits and (2)
$1.5 million of estimated severance benefits. It should be noted that if any
of the unliquidated, contingent claims are determined to be Senior Debt, as
such term is defined in the Senior Debenture Indenture, these claims would
have to be paid in full before those General Unsecured Claims subject to
subordination and would dilute the distribution available to those members
of the class of General Unsecured Claims subject to subordination. Moreover,
should the unliquidated or contingent claims be higher than estimated, the
recoveries available to General Unsecured Claims would be lower than those
shown above.
(g) Assuming acceptance of the Prepackaged Plan by each Impaired Class and
Interest entitled to vote thereon, under the Prepackaged Plan, these Holders
will receive New Common Stock.
(h) The Warrants are deemed to have no economic value and, consequently, will be
canceled on the Effective Date. Class 9 Interests are impaired; because
holders of Class 9 Interests will receive no distributions and will retain
no property under the Prepackaged Plan, such holders are deemed to have
rejected the Prepackaged Plan and are not entitled to vote on the
Prepackaged Plan.
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<PAGE>
DESCRIPTION OF THE COMMON STOCK
Subject to the prior rights of the holders of any Preferred Stock which may
be issued and outstanding from time to time, the holders of Common Stock will be
entitled to receive dividends from funds of the Company legally available
therefor, when, as and if declared by the Board and will be entitled to share
ratably in all of the assets of the Company available for distribution to
holders of Common Stock upon the liquidation, dissolution, or winding up of the
affairs of the Company. Holders of the Common Stock will not have any
preemptive, subscription, redemption or conversion rights. Holders of the Common
Stock will be entitled to one vote per share on all matters which they will be
entitled to vote upon at meetings of stockholders or upon actions taken by
written consent pursuant to Delaware law. The holders of Common Stock will not
have cumulative voting rights, which means that the holders of more than 50% of
such outstanding shares can elect all of the directors of the Company. All of
the shares of Common Stock to be issued upon the completion of the
Recapitalization will be fully paid and nonassessable. No dividends have been
paid to holders of the capital stock of the Company since the inception of the
Company, and no dividends are anticipated to be declared or paid in the
foreseeable future. The Exchange Agent for the Common Stock will be ChaseMellon
Shareholder Services, P.O. Box 3301, South Hackensack, NJ 07606, Attn:
Reorganization Department.
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S
COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The following tables set forth information with respect to bid quotations
for the 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>
1997
First Quarter............................................ $ .188 $ .125
1996
First Quarter............................................ $ .531 $ .250
Second Quarter........................................... .313 .156
Third Quarter............................................ .250 .156
Fourth Quarter........................................... .250 .125
1995
First Quarter............................................ $ .500 $ .344
Second Quarter........................................... .469 .313
Third Quarter............................................ .594 .344
Fourth Quarter........................................... .469 .250
1994
First Quarter............................................ $ .531 $ .250
Second Quarter........................................... .406 .125
Third Quarter............................................ .344 .188
Fourth Quarter........................................... .625 .281
</TABLE>
The number of holders of record of the Company's Common Stock as of April
15, 1997 was approximately 25,000. The Company has not paid any cash dividends
on its Common Stock to date, nor does the Company currently intend to pay
regular cash dividends on the 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.
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<PAGE>
DESCRIPTION OF OUTSTANDING DEBENTURES
The Senior Debentures were issued under the Senior Indenture between the
Company and First Trust National Association, as trustee (the "Senior Trustee"),
which is incorporated by reference as an exhibit to the Registration Statement
which this prospectus is a part, to which exhibit reference is hereby made. The
Subordinated Debentures were issued under the Subordinated Indenture between the
Company and The Bank of New York, as trustee (the "Subordinated Trustee" and,
together with the Senior Trustee, the "Trustees"), which is incorporated by
reference as an exhibit to the Registration Statement which this prospectus is a
part, to which exhibit reference is hereby made. The Indentures were qualified
under the Trust Indenture Act of 1939. The following summaries of certain
provisions of the Indentures and the Outstanding Debentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the Indentures and the Outstanding Debentures, including the definitions
therein of terms not defined herein. Certain terms used in this section are
defined at the end of this section under the heading "Certain Definitions."
TERMS. The Outstanding Debentures bear interest at 12% per annum from March
15, 1992, payable semiannually in arrears on March 15 and September 15 of each
year, commencing September 15, 1992, to the persons who are registered holders
thereof at the close of business on the March 1 or September 1 immediately
preceding such Interest payment Date. The Outstanding Debentures mature on March
15, 2002.
Subject to the conditions set forth below, the Company at any time, at its
option and in its sole discretion, in lieu of paying some or all of any payment
of interest on the Senior Debentures or the Subordinated Debentures, as the case
may be, in cash: (a) issue additional Senior Debentures (the "Secondary Senior
Debentures") or Subordinated Debentures (the "Secondary Subordinated
Debentures"), as the case may be, in an aggregate principal amount equal to the
amount of cash interest not paid on the last day of the Interest Period; (b)
issue shares of Common Stock having a Fair Market Value on the date of such
issuance equal to the amount of cash interest not paid on the last day of the
Interest Period; or (c) issue a combination of Secondary Senior Debentures or
Secondary Subordinated Debentures, as the case may be, and Common Stock having a
combined aggregate principal amount (in the case of the Secondary Senior
Debentures or Secondary Subordinated Debentures) and Fair Market Value on the
date of such issuance (in the case of the Common Stock) equal to the amount of
cash interest not paid on the last day of the Interest Period. In the event of
any such issuance of Secondary Senior Debentures, Secondary Subordinated
Debentures and/or shares of Common Stock in lieu of cash interest, the Company
may at its option pay cash in lieu of issuing Secondary Senior Debentures or
Secondary Subordinated Debentures in any denomination of less than $100 and/or
in lieu of issuing fractional shares of Common Stock. Notwithstanding the
foregoing, the Company may not issue any shares of Common Stock in lieu of cash
interest at any time unless (i) no Default under the Indenture pursuant to which
such interest is being paid shall have occurred and then be continuing, and (ii)
the Fair Market Value of the Common Stock on the date of such issuance exceeds
$.50 per share.
If, but only if, (i) no Default under the Indenture pursuant to which such
principal is being paid shall have occurred and then be continuing, and (ii) the
Fair Market Value of the Common Stock on the date of issuance exceeds $.50 per
share and, then the Company may, but only at the final maturity of the
respective Outstanding Debentures, pay some or all of the principal amount of
such Outstanding Debentures by issuing shares of Common Stock having a Fair
Market Value on the date of such issuance equal to the amount of principal not
paid in cash.
Interest on the Outstanding Debentures will be computed on the basis of a
360-day year of twelve 30-day months. Principal and interest is payable at the
offices of the respective Trustees, but, at the option of the Company, interest
may be paid by check (or, at the Company's option, additional debentures or
stock) mailed to the registered holders at their registered addresses. The
Outstanding Debentures are transferable and exchangeable at the offices of their
respective Trustees and were issued in fully registered
116
<PAGE>
form, without coupons, in denominations of $1,000 and any integral multiple
thereof, and in denominations of $100 and integral multiples thereof less than
$1,000, except for additional Outstanding Debentures issued in lieu of cash
payments of interest, which have been issued in smaller denominations. However
Outstanding Debentures issued upon any transfer or exchange are issued in (i)
the same denomination as the Outstanding Debentures transferred or exchanged,
(ii) denominations of $1,000 or integral multiples of $1,000, with a single
Outstanding Debenture in an amount less than $1,000 if necessary to effectuate
the transfer or exchange, or (iii) such other denominations as may be authorized
by the Company for purposes of transfer or exchange.
OPTIONAL REDEMPTION. The Company may redeem all or any of the Outstanding
Debentures for cash at any time at 100% of the aggregate principal amount of the
Outstanding Debentures outstanding plus accrued interest to but excluding the
redemption date upon 30 days' prior written notice to all holders thereof.
CHANGE OF CONTROL. If a majority of the board of directors of the Company
were to be comprised of individuals other than Continuing Directors (such event
being referred to herein as a "Change of Control" and the date on which any such
event occurs being referred to herein as the "Change of Control Date"), then the
Company would be required to notify the holders of Outstanding Debentures in
writing of such occurrence and will be required to make an offer to redeem (the
"Change of Control Offer") such securities on the last day of its fiscal quarter
following the change of Control Date (the "Change of Control Payment Date") for
cash at 101% of the principal amount of Outstanding Debentures then outstanding
plus accrued interest to but excluding the Change of Control Payment Date.
SUBORDINATION. All indebtedness evidenced by the Outstanding Debentures is
subordinated in right of payment, as set forth in the respective Indentures, to
the prior payment in full of all Senior Debt of the Company.
"Senior Debt" is defined for purposes of each of the Indentures to include
as (i) any and all amounts payable by the Company or any Subsidiary under or in
respect of (1) with respect to the Subordinated Debentures, the Senior
Debentures, (2) indebtedness of the Company for money borrowed, (3) express
written guaranties of the Company of Debt (as defined on page 111 below) of any
other person, and (4) indebtedness evidenced by notes, debentures, bonds or
other instruments of indebtedness for the payment of which the Company is
responsible or liable, by guaranties or otherwise, in each of cases (1), (2),
(3) or (4) whether now or hereafter existing; and (ii) modifications, renewals,
extensions, refinancings, replacements and fundings of any such amounts,
indebtedness, obligations or guaranties; unless, in any of clauses (i) or (ii)
above, in the instrument creating or evidencing such indebtedness or pursuant to
which the same is outstanding it is provided that such amounts, indebtedness,
obligations or guaranties, or such modifications, renewals, extensions or
refundings thereof, are not superior in right of payment to the Outstanding
Debentures. Notwithstanding anything to the contrary in the foregoing, Senior
Debt does not include (a) the Senior Debentures (provided, however, that for
purposes of the Subordinated Debentures, the Senior Debentures are included in
the definition of Senior Debt), (b) the Subordinated Debentures, (c) any
accounts payable or other Debt of the Company or any Subsidiary to trade
creditors created, incurred, assumed or guaranteed by the Company in the
ordinary course of business in connection with obtaining goods, materials or
services, (d) amounts payable on any indebtedness or other obligations to any
employee or Affiliate of the Company or any Subsidiary (except for any Debt
evidenced by any debt securities of the Company purchased by such an employee or
Affiliate after such debt securities have been registered and sold under the
Securities Act of 1933, as amended, to a Person who is not an Affiliate of the
Company or any Subsidiary, provided that such debt securities rank senior in
right of payment to the Outstanding Debentures and the issuance of such debt
securities was permitted to be incurred under the Indentures), (i) any liability
for federal, state, local or other taxes owed or owing by The Company, or (f)
any indebtedness or other obligations created incurred, assumed or guaranteed by
the Company which by the terms of the document or instrument by which it is
created provides that it is subordinate in right of
117
<PAGE>
payment, with respect to the Senior Debentures, to any other indebtedness or
other obligation of the company or any Subsidiary or, with respect to the
Subordinated Debentures, to the Senior Debentures.
Only indebtedness of the Company which is Senior Debt (as defined in each
Indenture) ranks senior to the securities issued under such Indenture in
accordance with the provisions of such Indenture.
The Company may not pay principal of, premium, if any, or interest on the
Outstanding Debentures, other than in additional debentures or in shares of
Common Stock, and may not repurchase, redeem or otherwise retire any Outstanding
Debentures (collectively, "pay the Outstanding Debentures") if (i) any Senior
Debt is not paid when due, or (ii) any other default on Senior Debt occurs and
is continuing that then permits holders of such Senior Debt to accelerate its
maturity in accordance with its terms unless, in either case, the default has
been cured or waived or such Senior Debt has been paid in full.
The holders of Senior Debt may (a) renew, compromise, extend, accelerate or
otherwise change the time of payment, or any other terms, of any existing or
future Senior Debt, (b) increase or decease the rate of interest payable thereon
or on any part thereof, (c) exchange, enforce, waive or release any security
therefor, (d) apply such security and direct the order or manner of sale thereof
in such manner such holders may at their discretion determine, (e) release the
Company or any guarantor of such Senior Debt from liability, and (f) make
optional future advances of Senior Debt to the Company, all without the consent
of or notice to, and without affecting the liabilities and obligations of, the
parties to the Indentures or the holders of Outstanding Debentures.
Upon any distribution or payment to creditors of the Company in a
liquidation, dissolution, winding up or reorganization of the Company of any
kind or character and whether voluntary or involuntary or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company, to its property or to its creditors as such or in an assignment for the
benefit of creditors or any marshalling of assets and liabilities of the
Company, the holders of Senior Debt will be entitled to receive payment in full
before the holders of the Outstanding Debentures being subordinated thereto are
entitled to receive any payment. Upon an event of default under either Indenture
(other than any event of default as a result of the bankruptcy of the Company),
the respective Trustee thereunder or the holders of the securities seeking to
accelerate such Outstanding Debentures must give the Representative of the
holders of the Senior Debt 10 days' prior written notice before accelerating
such Outstanding Debentures.
By reason of such subordination provisions contained in the Indentures, in
the event of insolvency, creditors of the Company who are holders of Senior Debt
may recover more, ratably, than the holders of Outstanding Debentures being
subordinated thereto and creditors of the Company who are not holders of Senior
Debt or the Outstanding Debentures being subordinated thereto may recover less,
ratably, than holders of Senior Debt and may recover more, ratably, than the
holders of Outstanding Debentures. In addition, in the event of insolvency,
holders of Senior Debentures may recover more, ratably, than the holders of
Subordinated Debentures. During the Company's negotiation of the terms of the
Recapitalization and as of the date of this Prospectus, no issues or challenges
were raised by the Debenture Holders' Committee with respect to the validity of
the foregoing subordination provisions.
CERTAIN COVENANTS.
LIMITATION ON RESTRICTED PAYMENTS. The Company may not, and may not permit
any Subsidiary to, directly or indirectly, (i) declare or pay any dividend or
make any distribution on its Capital Stock or to the holders of its Capital
Stock (except dividends or distributions payable to the Company or a wholly
owned Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company, or (iii) purchase, repurchase, redeem,
decease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any Subordinated
Obligations (other than the acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition).
Notwithstanding the foregoing, the Company may purchase or redeem shares of any
class
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of Capital Stock or any Debt of the Company by exchange for, or out of the
proceeds of the substantially concurrent sale of, shares of its Capital Stock.
LIMITATION ON ISSUANCE OF CERTAIN SUBORDINATED DEBT. The Subordinated
Indenture provides that the Company may not issue, assume, guarantee, incur or
otherwise become liable, directly or indirectly, for any Debt subordinate or
junior in ranking in any respect to the Senior Debentures but senior in ranking
to the Subordinated Debentures.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indentures currently
provide that the Company may not, and may not permit any Subsidiary to, conduct
any business or enter into any transaction or series of similar transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate (other than a wholly owned
Subsidiary) unless the terms of such business, transaction or series of
transactions are (i) set forth in writing, and (ii) as favorable to the Company
or such Subsidiary as terms that would be obtainable at the time for a
comparable transaction or series of similar transactions in arm's-length
dealings with an unrelated third person. The Indentures further provide,
however, that this restriction shall not be construed to prohibit payment by the
Company or a Subsidiary of compensation to officers, directors or employees of
the Company or such Subsidiary for services rendered in such capacity.
SUCCESSOR COMPANY. The Company may not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all its assets to,
another Person unless (i) the resulting, surviving or transferee Person is a
Person organized and existing under the laws of the United States, any state
thereof or the District of Columbia and such entity assumes by supplemental
indenture all the obligations of the Company under the Outstanding Debentures
and the Indentures, (ii) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture comply with the Indentures,
(ii) the resulting, surviving or transferee Person shall have Consolidated Net
Worth after giving effect to such transaction which is not less than the
Consolidated Net Worth of the Company prior to such transaction, and (iv)
immediately after giving effect to such transaction, no Default has occurred and
is continuing.
DEFAULTS AND CERTAIN RIGHTS ON DEFAULT. An "Event of Default" occurs under
each Indenture if: (a) the Company fails to make any payment of principal or
premium, if any, when due thereunder upon stated maturity, upon redemption, upon
declaration or otherwise; (b) the Company fails to make any payment of interest
(in cash or, as otherwise permitted thereunder) when due, or fails to make
payment of any other amount thereunder when due, and such default continues for
a period of 30 days; (c) the Company or any Subsidiary thereof fails to comply
with any other term, condition, provision, covenant or obligation contained
therein or required thereunder, or contained in or required under the securities
issued thereunder or any other instrument or agreement required thereunder, and
such failure continues for a period of 30 days after (i) its occurrence, in the
event the President, any Managing Director or any Vice President of the Company
or any Subsidiary thereof knew or had reason to know of such failure, or (ii)
notice to the Company from the Trustee or the Required Holders; (d) the Company
or any Subsidiary thereof or any Joint Venture (i) applies for or consents to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) admits in writing its inability to pay its debts as such debts become due,
(iii) makes a general assignment for the benefit of its creditors, (iv)
commences or consents to proceedings under the federal Bankruptcy Code (as now
or thereafter in effect), (v) files a petition to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debtors, (vi) fails to controvert in a timely
manner, or acquiesces in writing to, any action filed against the Company or any
Subsidiary thereof or any Joint Venture in an involuntary case under such
Bankruptcy Code, (vii) fails to pay its debts generally as they come due, or
(viii) takes any corporate action for the purpose of effecting any of the
foregoing; (e) a proceeding or case is commenced, without the application or
consent of the Company or any Subsidiary thereof or any Joint Venture in any
Court of competent jurisdiction,
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seeking (i) the liquidation, reorganization, dissolution, winding-up or
composition or readjustment of debts of the Company or any Subsidiary thereof or
any Joint Venture, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like for the Company or any Subsidiary thereof or any Joint
Venture or of all or any substantial part of its respective assets, or any
substantial part of its respective assets, or (iii) similar relief in respect of
the Company or any Subsidiary thereof or any Joint Venture under any law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts and any such case or proceedings shall not be dismissed or
withdrawn or released, vacated or fully bonded within 60 days thereafter; (f)
such of the property of the Company or any Subsidiary thereof or any Joint
Venture shall have been condemned, seized or appropriated as shall, in the
opinion of the Required Holders, have a material adverse effect on the ability
of the Company to pay its obligations under the securities issued thereunder;
(g) any final action is taken by any governmental or other regulatory authority
having jurisdiction over the Company or any Subsidiary thereof or any Joint
Venture which will have a material adverse effect on the ability of the Company
to repay its obligations under the securities issued thereunder; (h) any breach,
default or event of default shall occur under any other indenture, credit or
loan agreement or other agreement or instrument under which indebtedness for
borrowed money of the Company or any Subsidiary thereof or any Joint Venture (or
any obligation of the Company or any Subsidiary thereof or any Joint Venture
under any agreement for the issuance of a letter or letters of credit) shall
have occurred, and shall (i) relate to the failure to pay principal within any
applicable grace period after final maturity, or (ii) result in the acceleration
of Debt of the Company or any Subsidiary thereof or any Joint Venture, if the
total amount of such Debt unpaid or accelerated exceeds $10,000,000 in aggregate
amounts.
If an Event of Default (other than certain events of bankruptcy, insolvency
or reorganization) occurs and is continuing with respect to the Senior Indenture
or the Subordinated Indenture, the relevant Trustee or the holders of 25% in
principal amount of the outstanding Senior Debentures or Subordinated
Debentures, respectively, may declare the principal and the accrued but unpaid
interest on all such Senior Debentures or Subordinated Debentures, as the case
may be, to be due and payable. Notwithstanding the foregoing, upon an Event of
Default (other than certain events of bankruptcy, insolvency or reorganization)
of the Company, the applicable Trustee or the holders electing to accelerate
must give the Representative of the holders of the Senior Debt 10 days' prior
written notice before acceleration. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Outstanding Debentures will
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustees or any holders of the securities. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Senior Debentures or Subordinated Debentures may rescind any such
acceleration with respect to such series of securities and its consequences.
Subject to the provisions of each Indenture relating to the duties of the
Trustee in case of an Event of Default thereunder should occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the relevant Indenture at the request or direction of any
of the holders of the applicable securities unless such holders have offered to
the Trustee reasonable indemnity or security against any loss or expense.
Subject to such provisions for security or indemnification and certain
limitations contained in each Indenture, the holders of a majority in principal
amount of the applicable securities at the time outstanding have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the relevant Trustee or exercising any trust or power conferred on
such Trustee.
AMENDMENT, SUPPLEMENT, WAIVER. Subject to certain exceptions, each
Indenture may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the relevant Senior Debentures or
Subordinated Debentures then outstanding thereunder, and any past default or
compliance with any provision may be waived with the consent of the holders of
at least a majority in principal amount of the relevant Senior Debentures or
Subordinated Debentures then outstanding.
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However, without the consent of each holder of an Outstanding Debenture affected
thereby, no amendment may, among other things: (i) reduce the amount of
Outstanding Debentures whose holders must consent to any amendment; (ii) reduce
the rate of or extent the time for payment of interest on any Outstanding
Debenture; (iii) reduce the principal of or extend the fixed maturity of any
Outstanding Debenture; (iv) reduce the premium payable upon redemption of any
Outstanding Debenture; (v) change the currency or consideration for payment of
any Outstanding Debenture; (vi) change the subordination provisions of the
relevant Indenture in any manner which adversely affects the rights of any
holder of Outstanding Debentures; or (vii) amend the sections of the relevant
Indenture relating to waiver of past defaults, rights of holders to receive
payment and amendments of such Indenture. Without the consent of any holder of
the Outstanding Debentures, the Company and the relevant Trustee may amend or
supplement the relevant Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the relevant Indenture, to provide for
uncertificated Outstanding Debentures in addition to or in place of certificated
Outstanding Debentures so long as such uncertificated Outstanding Debentures are
in registered form for purposes of the Code, to add guarantees with respect to
the Outstanding Debentures or to reflect the release of guarantees in accordance
with the terms of the Indentures, to add to the covenants of the Company for the
benefit of the holders of Outstanding Debentures or to surrender any right or
power herein conferred upon the Company to make any change that does not
adversely affect the rights of any holder of the Outstanding Debentures or to
comply with any requirement of the SEC in connection with the qualification of
the Indentures under the TIA. No amendment may be made to the subordination
provisions of either Indenture that adversely affects the rights of any holder
of Senior Debt then outstanding unless the holders of such Senior Debt (as
required pursuant to the terms of such Senior Debt) consent to such change.
TRANSFER. The Outstanding Debentures were issued in registered form and are
transferable only upon the surrender of such securities being transferred for
registration of transfer.
DEFEASANCE. The Indentures provide that the Company at any time may
terminate all of its obligations under the Outstanding Debentures and the
Indentures ("legal defeasance"), except for certain obligations, including ones
respecting the defeasance trust and obligations to register the transfer or
exchange of the Outstanding Debentures, to replace mutilated, destroyed, lost or
stolen Outstanding Debentures and to maintain agencies in respect of the
Outstanding Debentures. Subject to the conditions described below, the Company
at any time may terminate its obligations under the covenants described under
"Description of the Outstanding Debentures--Certain Covenants" ("covenant
defeasance"). Legal defeasance and/or covenant defeasance may be made with
respect to one series of the Outstanding Debentures and not the other.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the series of Outstanding Debentures with
respect to which such defeasance was made may not be accelerated because of an
Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the series of Outstanding Debentures with respect
to which such defeasance was made may not be accelerated by reference to the
covenants described under "Description of the Outstanding Debentures--Certain
Covenants."
In order to exercise either defeasance option under either Indenture, the
Company must irrevocably deposit in trust (the "defeasance trust") with the
Trustee under the respective Indenture money of U.S. Government Obligations for
the payment of principal and interest on the respective Outstanding Debentures
to redemption or maturity, as the case may be, and must comply with certain
other conditions.
CONCERNING THE TRUSTEES. First Trust National Association is to be the
Trustee under the Senior Indenture and was appointed by the Company as Registrar
and Paying Agent with regard to the Senior
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Debentures. The Bank of New York is the Trustee under the Subordinated Indenture
and was appointed by the Company as Registrar and Paying Agent with regard to
the Subordinated Debentures.
GOVERNING LAW. Each Indenture provides that it will be governed by the laws
of the State of New York.
CERTAIN DEFINITIONS. The following definitions apply to the foregoing
description of the Outstanding Debentures:
"Affiliate" of any Person means (i) any Person which, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (ii) any Person who is a director or officer (A) of such Person
or (B) of any Person described in clause (i) above who is in control of such
Person. For purposes of this definition, control of a Person means the power,
direct or indirect, to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Without limiting the generality of the foregoing, beneficial ownership of 20% or
more of the voting common equity (on a fully diluted basis) or warrants to
purchase such equity (whether or not currently exercisable) of a Person shall in
any event be deemed to be control of such Person.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles, and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any preferred stock.
"Closing Date" means the date of the issuance of the Outstanding Debentures
to the initial holders thereof.
"Consolidated Net Worth" means at any time, for any specified Person or
Persons, on a consolidated basis, that amount by which total assets, excluding
goodwill and other intangible assets, exceeds total liabilities, on a
consolidated basis, all determined in accordance with generally accepted
accounting principles.
"Continuing Directors" means the numbers of the Company's Board as of March
15, 1992 and any other director of the Company whose nomination or election to
the Board was approved by a majority of the Continuing Directors then in office.
"Debt" means with respect to any Person, without duplication: (i) all
obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (iii)
all Capital Lease Obligations of such Person; (iv) all obligations of such
Person issued or assumed as the deferred purchase price of property, any
conditional sale obligation and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (v) all obligations of such Person issued or contracted for as
payment in consideration of the purchase by such Person of the stock or
substantially all of the assets of other Persons or a merger or consolidation to
which such Person was a party; (vi) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or a
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in clause (i),
(ii), (iii), (iv), or (v) of this definition) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for
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reimbursement following payment on the letter of credit); (vii) all obligations
of the type referred to in clauses (i) through (vi) of this definition of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable as obligor, guarantor or otherwise;
or (xiii) all obligations of the type referred to in clauses (i) through (vii)
of this definition of other Persons secured by any lien on any property or asset
of such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligations so secured.
"Default" means any event which is, or after notice or passage of time or
both would be, an event of default under the respective Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Common Stock on any date means the average
of the daily closing prices per share of Common Stock for the 20 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date (appropriately adjusted to reflect any stock split, stock dividend,
subdivision, combination, reclassification or other extraordinary dividend or
distribution with respect to the Common Stock having a record date or effective
date on or after the commencement of such 20-Trading Day period and prior to the
close of business on the date of determination of such Fair Market Value). The
closing price for each day shall be the last sale price, regular way, as
reported in the principal national securities exchange on which the Common Stock
is listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use. The term "Trading Day" shall mean a day on which at least 10,000 shares
of Common Stock were traded on any national securities exchanges or in the
over-the-counter market. Notwithstanding the foregoing, the Fair Market Value of
the Common Stock shall be deemed to be less than $.50 per share in the event
that either (i) on the date of determination of Fair Market Value, the Common
Stock is not listed or admitted to trading on any national securities exchange
or reported by NASDAQ or such other system then in use, or (ii) there are fewer
than 20 Trading Days within the 40 Business Days, or fewer than five (5) Trading
Days within the 10 Business Days, immediately preceding the date of
determination of Fair Market Value.
"Interest Payment Dates" means the dates on which interest payments on the
Outstanding Debentures are due, as set forth therein.
"Interest Period" means each six-month period ending on an Interest Payment
Date.
"Joint Venture" means any partnership, joint venture or similar entity in
which the Company or any of its Subsidiaries owns or controls any interest.
"Legal Holiday" is a Saturday, Sunday or a day on which banking institutions
are not required to be open in the States of New York and Connecticut. If a
payment date with respect to the Outstanding Debentures is a Legal Holiday,
payment is made on the next succeeding day that is not a Legal Holiday, and no
interest accrues for the intervening period. If a regular record date with
respect to the Outstanding Debentures is a Legal Holiday, the record dates
affected.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the relevant Trustee. The counsel may be an employee of or counsel
to the Company or the Trustee.
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"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Representative" means the bank agent, indenture trustee or other trustee,
or other agent or representative for the holders of Senior Debt.
"Required Holders" means, under each Indenture, holders of at least 51% in
aggregate principal amount of the then outstanding securities issued thereunder.
"Subordinated Obligations" means (i) any Debt of the Company (other than the
Outstanding Debentures) which is not Senior Debt of the Company, and (ii) any
preferred stock of the Company.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
capital stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, or (ii) one or more Subsidiaries;
PROVIDED, HOWEVER, that the term "Subsidiary" shall not include Henley Holdings
Two, Inc. or any corporation that has no assets as determined in accordance with
generally accepted accounting principles consistently applied, and PROVIDED,
FURTHER, that a Joint Venture shall constitute a Subsidiary if such Joint
Venture is required to be treated as a Subsidiary pursuant to the definition
herein.
"Trustee" means the party named as such in the respective Indenture until a
successor replaced it and, thereafter, means the successor.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged, or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clause (i) or (ii) are not callable or redeemable at the option of the issuer
thereof.
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BUSINESS AND PROPERTIES OF THE COMPANY
BUSINESS. The Company is a real estate development company with properties
principally in Southern California. The principal activities of the Company and
its consolidated subsidiaries include: (i) obtaining zoning and other
entitlements for land it owns and improving the land for residential
development; (ii) single and multi-family residential construction in Southern
California; and (iii) 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 and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes. The Company
intends to consider additional real estate acquisition and joint venture
opportunities; however, the Company's immediate strategic goals are to (i)
obtain new financing for development of the Bolsa Chica mesa; (ii) successfully
defend against the litigation challenging the California Coastal Commission's
approval of the Bolsa Chica project; (iii) complete the secondary permitting for
development of the Bolsa Chica mesa; (iv) commence infrastructure construction
on the Bolsa Chica mesa in the fourth quarter of 1997; (v) continue the growth
of the Company's commercial development business on a national and international
basis; and (vi) complete the Recapitalization to deleverage the Company's
capital structure. There can be no assurance that the Company will accomplish,
in whole or in part, all or any of these strategic goals.
The Company's executive offices are located at 4343 Von Karman Avenue,
Newport Beach, California 92660 (telephone: (714) 833-3030).
PRINCIPAL 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.
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 310 Oceanfront residential community
Rancho San Pasqual Escondido, CA [650] Residential community
Fairbanks Highlands** San Diego, CA 390 Residential community
Aliso Viejo** Aliso Viejo, CA 230 Residential community
Michigan Land Upper Peninsula, MI 1,100 Resort/residential lots
Signal Hill Signal Hill, CA 2 Commercial/industrial land
PetsMart Phoenix, AZ 20 Corporate headquarters
EDS*** Allen, TX 14 Office/distribution center
Nokia**** Irving-Las Colinas, TX 11 Office building
</TABLE>
- ------------------------
*Leased
**Minority interest in partnership or limited liability company
***Majority interest in partnership
****50% interest in partnership
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The following sections describe the Company's principal properties.
BOLSA CHICA. The Bolsa Chica property is the principal property in the
Company's portfolio. Following completion of the Company's recent sale of
approximately 880 lowland acres of its Bolsa Chica property to the State of
California on February 14, 1997, as described below, the Company owns
approximately 310 acres of the 1,600 acres of undeveloped Bolsa Chica land,
approximately 1,200 acres of which will be devoted to the restoration, creation
and preservation of wetlands, open space, parks and trails. Bolsa Chica is
located adjacent to 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, and is located
approximately 35 miles south of downtown Los Angeles.
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 December 1994, the Orange County Board of Supervisors
unanimously approved a Local Coastal Program ("LCP") for up to 3,300 units of
residential development and a wetlands restoration plan for this property. The
3,300-unit LCP provides for development of up to 2,500 homes on the Mesa (high
ground) portion of the property and up to 900 homes on the lowland portion of
the property, not to exceed 3,300 homes in the aggregate. The related
Development Agreement was unanimously approved by the Orange County Board of
Supervisors in April 1995. The California Coastal Commission approved the LCP in
January 1996 subject to suggested modifications. These suggested modifications
were approved by the Orange County Board of Supervisors in June 1996, and on
July 11, 1996 the California Coastal Commission certified the LCP for the
Company's Bolsa Chica property.
On February 14, 1997, the Company completed the sale of approximately 880
lowland acres owned by the Company at Bolsa Chica to the California State Lands
Commission for $25 million, and will, therefore, forego opportunities to develop
up to 900 homes in the lowland. Under an interagency agreement among various
state and federal agencies, these agencies have agreed to restore the Bolsa
Chica lowlands utilizing escrowed funds from the Ports of Los Angeles and Long
Beach. A reserve of $1.5 million has been included in the Company's Balance
Sheet as of December 31, 1996, with respect to potential costs payable by the
Company under agreements negotiated with the State Lands Commission and certain
oil field operators regarding environmental clean-up at the Bolsa Chica
lowlands. See Note 5 to "Audited Historic Financial Statements." In connection
with the lowlands sale, the Company paid $833,333 of these costs at closing,
leaving a reserve balance of $700,000 on its financial statements for potential
additional clean-up costs.
The Company is now pursuing the secondary permitting process for the Mesa
through the County of Orange in order to implement the approved development plan
for up to 2,500 homes. This process is currently expected to be completed in the
fourth quarter of 1997. The Company expects, subject to its ability to obtain
financing on a commercially reasonable and timely basis, and subject to
obtaining the secondary permits, to commence infrastructure construction on the
Mesa in the fourth quarter of 1997. However, due to certain 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 start of construction could be delayed. In this regard,
on March 6, 1996 and March 11, 1996, two lawsuits were filed against the Coastal
Commission, the Company and other Bolsa Chica landowners as real parties in
interest, alleging that the Coastal Commission's approval of the LCP is not in
compliance with the Coastal Act and other statutory requirements. These lawsuits
seek to set aside the approval of the Bolsa Chica project and are currently
scheduled to be tried on May 27, 1997. Given the recent sale of the Bolsa Chica
lowlands described above, the primary issues which were the subject of this
litigation have been eliminated. Furthermore, the plaintiffs in one of these
lawsuits have informed the Company that given the sale of the lowlands, they
will work with the Company in an effort to resolve the remaining issues of their
lawsuit. The Company believes that the remaining litigation issues which
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challenge development of the Bolsa Chica Mesa are without merit. Furthermore,
the Company does not believe that these lawsuits will be successful in
permanently preventing the Company from completing the Bolsa Chica project,
however, there can be no assurance in this regard or that these suits will not
result in delays.
Realization of the Company's investment in Bolsa Chica will 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. See Notes 2 and 5 to "Audited Historic Financial
Statements."
RANCHO SAN PASQUAL (FORMERLY EAGLE CREST). In the City of Escondido in San
Diego County, approximately 30 miles north of downtown San Diego, the Company is
developing an 850-acre, gated community consisting of 580 residential lots
surrounding an 18-hole championship golf course which the Company operated from
May 1993 to June 1996. The Company sold its Eagle Crest Golf Course at Rancho
San Pasqual in June 1996, to a nationally recognized owner/operator of high-end
daily fee golf courses and private country clubs for $6.1 million. On-going
infrastructure construction was partially financed in 1995 and 1996 with a major
financial institution which provided a total of $10 million in construction
loans for the project. During the year ended December 31, 1996, the Company
completed sales of 218 residential lots at Rancho San Pasqual to four
homebuilders for gross proceeds aggregating approximately $10.1 million. These
four homebuilders have rolling options which if exercised would result in the
sale of an additional 230 lots over the next eighteen (18) months for aggregate
gross proceeds approximating $10.4 million. Under loan agreements with Nomura
Asset Capital Corporation, the Company utilized 90% of such sales proceeds and
proceeds from formation of the Fairbanks Highlands joint venture described
below, along with 50% of the net proceeds from Rancho San Pasqual assessment
district reimbursements, to prepay approximately $18.2 million of outstanding
senior bank debt during the year ended December 31, 1996. As of December 31,
1996, the Company had fully utilized its availability under the construction
loan.
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. In December 1995 the Company received approval of a
vesting tentative map from the City of San Diego's City Council. The approved
plan includes 93 single-family residential lots averaging 1.34 acres each and
approximately 215 acres of open space. In December 1996, the Company formed a
joint venture with a major homebuilder to develop this property. Under the terms
of the joint venture agreement, the Company contributed its land to the venture
at market value of $7.6 million in exchange for an initial cash payment of $4
million, a preferred return on its $3.6 million capital contribution and a
continuing partnership interest in the venture. The Company's partner will
manage the day-to-day operations of the venture, provide all construction
financing and expects to build the majority of the homes at the site.
ALISO VIEJO. Through a subsidiary, the Company owns a 49% general
partnership interest in a 230-acre project, planned for approximately 1,200
single family residential units in southern Orange County. The property is well
located, within close proximity to transportation infrastructure, employment
centers and other attractions, including the Orange County (John Wayne) Airport
(approximately 15 miles), the San Joaquin Hills Transportation Corridor (a
quarter mile) and Laguna Beach (approximately 10 minutes). Homes are now offered
for sale at seven of twelve planned communities, and a total of 254 homes have
been sold and 58 homes were in escrow as of February 9, 1997. However, due to a
significant shortfall in sales during 1995 versus forecast, the financial
structure of the partnership and the significant amount of participating
mortgages with preference to the Company's equity interest, the Company does not
expect to receive a financial return from this partnership and established a
reserve in 1995 as discussed below in Note 3 to "Audited Historic Financial
Statements."
OTHER PROPERTIES. The Company owns land zoned for commercial/industrial use
in Signal Hill, California, and resort/residential property in Michigan. These
properties are currently held for sale, subject
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to market conditions. A portion of the Signal Hill property has been improved
with a 45,000 square foot distribution building, which was sold during March
1997. In addition, during 1996, the Company acquired property in Phoenix,
Arizona and Allen, Texas and is constructing a corporate headquarters facility
and office/distribution center, respectively, on a build-to-suit basis. The
Company has contracted for the sale of each of these buildings, which sales are
expected to close in the third quarter of 1997.
PROPERTY DISPOSITIONS. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a description of the
Company's property dispositions during 1994, 1995 and 1996.
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 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 litigation challenging recently obtained governmental
approvals.
As more fully described above, in July 1996, the California Coastal
Commission certified Orange County's residential development plan for Bolsa
Chica. The Company now has the necessary primary approvals to proceed with
development of up to 2,500 homes on the Bolsa Chica Mesa. Secondary approvals of
the details of the development plan, such as tentative tract maps and grading
approvals from the County of Orange's planning staff, as well as a master
coastal development permit from the County of Orange, must still be obtained.
Nevertheless, the approval process for the Bolsa Chica property remains subject
to the litigation described above, and there can be no assurance that such
litigation will not result in delays.
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, financial condition or results of
operations, including the potential remediation expenditures proposed 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
may have retained liabilities relating to certain of these assets and
businesses, including certain tax liabilities. See Note 8 to "Audited Historic
Financial Statements." Many of such liabilities are supported by insurance or by
indemnities from certain of the Company's predecessors and currently or
previously affiliated companies. The Company believes its balance sheet reflects
adequate reserves for these matters.
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
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against the Company for all claims that may be asserted against UOP by EPA or
other parties with respect to the site. EPA has proposed a clean-up 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 $6.2 million. EPA estimates
that it has spent approximately $3.9 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. In June 1995, EPA
proposed a CERCLA settlement pursuant to which UOP would pay between $2.6 and
$3.3 million in exchange for a limited covenant by EPA not to sue UOP in the
future. The Company, without admission of any obligation to UOP, has determined
to vigorously defend UOP's position that the EPA's proposed cleanup plan is
unnecessary and inconsistent with the requirements of CERCLA given that the
EPA's own Site Assessment and Record of Decision found no immediate threat to
human health. In the Company's view the proposed remediation costs would be in
excess of any resulting benefits.
EMPLOYEES. As of December 31, 1996 the Company and its subsidiaries had
approximately 125 employees.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Certain of the foregoing information as well as certain information set
forth in "Legal Proceedings" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is forward looking in nature and
involves risks and uncertainties that could significantly impact the ability of
the Company to achieve its currently anticipated goals and objectives. These
risks and uncertainties include, but are not limited to, litigation or appeals
of regulatory approvals (including pending litigation challenging the California
Coastal Commission's approval of the Bolsa Chica project) and availability of
adequate capital, financing and cash flow. In addition, future values may be
adversely affected by 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL. The principal activities of the Company include: (i) obtaining
zoning and other entitlements for land it owns and improving the land for
residential development; (ii) single and multi-family residential construction
in Southern California; and (iii) 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 and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes. The Company
intends to consider additional real estate acquisition and joint venture
opportunities; however, the Company's immediate strategic goals are to (i)
obtain new financing for development of the Bolsa Chica Mesa; (ii) successfully
defend against the litigation challenging the California Coastal Commission's
approval of the Bolsa Chica project; (iii) complete the secondary permitting for
development of the Bolsa Chica Mesa; (iv) commence infrastructure construction
on the Bolsa Chica Mesa in the fourth quarter of 1997; (v) continue the growth
of the Company's commercial development business on a national and international
basis; and (vi) complete the Exchange Offer to deleverage the Company's capital
structure. There can be no assurance that the Company will accomplish, in whole
or in part, all or any of these strategic goals.
The Company has been over-leveraged since its December 1989 spin-off from
The Henley Group, Inc. when it had $290 million of debt (including $144 million
of subordinated debt due to The Henley Group, Inc.) and $268 million of accounts
payable and other liabilities against $707 million of assets and stockholders
equity of $149 million. This excessive leverage was exacerbated by continual
delays between 1990 and 1996 in obtaining the governmental approvals necessary
to develop the Company's principal asset, the Bolsa Chica property. At the time
of the 1989 spin-off from The Henley Group, Inc., the Company expected that the
Bolsa Chica property would be fully entitled and under construction as early as
1991. During the last seven years, the Company has generated approximately $300
million in cash from asset sales. The Company has utilized the majority of the
proceeds of such asset sales to repay approximately $131 million of senior debt,
to pay various liabilities, and to fund project development and infrastructure
costs for its principal residential development projects, including Bolsa Chica.
With the California Coastal Commission's approval of the LCP for Bolsa Chica in
1996 and the sale of the Bolsa Chica lowlands in February 1997 to the California
State Lands Commission, the Company is proceeding with residential development
on the Bolsa Chica Mesa and expects to commence infrastructure construction in
the fourth quarter of 1997. While litigation challenging the Coastal
Commission's approval of Bolsa Chica remains outstanding, the Company does not
expect such litigation to delay the start of infrastructure construction.
The Company has not been able to generate significant gross operating
margins or cash flows from operating activities due to the nature of its
principal assets. The substantial majority of the Company's assets are
residential land which has required significant investments before the land
could be sold to homebuilders or developed in joint ventures. In addition, the
relatively high book value of these assets has resulted in sales approximating
break-even. While future land sales are also expected to approximate, or only
modestly exceed, break-even, the net cash flow to be generated by residential
land development and sales is expected to exceed $200 million in the aggregate
over the next three to five years. In addition, the continuing real estate
recovery has increased the demand for the Company's commercial real estate
development services. Accordingly, the Company expects that these operations
will make a greater contribution to gross operating margins over the next
several years. Despite the expected greater contribution from commercial
development services, total gross margins in 1997 are expected to be less than
1996 due to lower margins on asset sales. Absent a write-down of Bolsa Chica
(which would reduce
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future cost of sales) under Fresh Start Accounting in the event the
Recapitalization is implemented through the Prepackaged Plan, the Company does
not expect to be profitable until 1999 when it expects to generate income by
reinvesting cash to be generated by the Bolsa Chica project in other development
activities.
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 based on undiscounted cash flows. 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 litigation or appeals of regulatory
approvals and availability of adequate capital, financing and cash flow. In
addition, future values may be adversely affected by 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 California's economy
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. However, over the past year, the number of potential purchasers and
capital sources interested in Southern California residential properties appears
to have increased.
LIQUIDITY AND CAPITAL RESOURCES. The principal assets 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.
During the year ended December 31, 1996, the Company borrowed $8.7 million
under its construction loan agreement with Nomura Asset Capital Corporation
("Nomura") to fund infrastructure improvements at its Rancho San Pasqual golf
and residential community in San Diego county. During the year ended December
31, 1996, the Company also completed sales of 218 residential lots at Rancho San
Pasqual to four homebuilders for gross proceeds aggregating approximately $10.1
million. These four homebuilders have rolling options which if exercised would
result in the sale of an additional 230 lots over the next eighteen (18) months
for aggregate gross proceeds approximating $10.4 million. In June 1996, the
Company sold its Eagle Crest Golf Course at Rancho San Pasqual to a nationally
recognized owner/ operator of high-end daily fee golf courses and private
country clubs for $6.1 million. After paying termination related costs to the
operator of the golf course and closing costs, the Company realized net proceeds
of approximately $5 million. During 1996, the Company also formed a joint
venture to develop the Fairbanks Highlands property. Under the terms of the
joint venture agreement, the Company contributed its land to the venture at
market value of $7.6 million in exchange for an initial cash payment of $4
million, a preferred return on its $3.6 million capital contribution and a
continuing partnership interest in the venture. The Company's partner will
manage the day-to-day operations of the venture, provide all construction
financing and expects to build the majority of the homes at the site. Under loan
agreements with Nomura, the Company utilized 90% of such sales and joint venture
proceeds, along with 50% of the net proceeds from Rancho San Pasqual assessment
district reimbursements, to prepay approximately $18.2 million of outstanding
senior bank debt during the year ended December 31, 1996. As of December 31,
1996, the Company had fully utilized its availability under the construction
loan. On February 18, 1997, the Company repaid the remaining balance of its
senior bank debt with a portion of the proceeds from the sale of the Bolsa Chica
lowlands and the Nomura credit facility was terminated.
Historically, sources of capital have included bank lines of credit,
specific property financings, asset sales and available internal funds. The
Company has reported losses since 1991, with the exception of 1993 results which
included gains on dispositions and extinguishment of debt, and expects to report
losses in the foreseeable future. However, a significant portion of such losses
is attributable to non-cash asset revaluations and non-cash interest expense on
the Company's subordinated debentures. The Company will
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continue to be dependent primarily on real estate asset sales, and cash and cash
equivalents on-hand to fund project development costs for Bolsa Chica and
general and administrative expenses during 1997. Following completion of the
sale of the Bolsa Chica lowlands in February 1997 and utilization of $6.6
million to repay Nomura, the Company's cash balance exceeded $15 million. The
Company is also seeking new financing for development of Bolsa Chica and
implementing the Recapitalization to deleverage the Company's capital structure.
If the Recapitalization is not completed, the Company will continue to incur
in excess of $20 million of interest expense on the Debentures per year.
However, since the Debentures do not mature until March 2002, it is possible
that the Company could continue to operate without facing a liquidity problem
until 2002. Nevertheless, the Company believes the current capital structure
restricts its ability to maximize asset values and grow its business. If the
Company does not receive valid tenders of at least the 90% Requisite Exchange
Acceptance, the Company intends to pursue the Recapitalization through the
Prepackaged Plan.
FINANCIAL CONDITION.
DECEMBER 31, 1996 COMPARED WITH DECEMBER 31, 1995. The $2.8 million
decrease in cash and cash equivalents primarily reflects spending for Bolsa
Chica project development costs, and general and administrative expenses,
partially offset by approximately $3.6 million in proceeds from land sales at
the Company's resort/residential property in Michigan during the year ended
December 31, 1996, as well as other activity presented in the Statement of Cash
Flows. Restricted cash of $.2 million at December 31, 1996 reflects funds
remaining in escrow accounts for funding certain infrastructure costs at Rancho
San Pasqual.
The $2.9 million decrease in real estate held for development or sale
primarily reflect the sales of residential lots at Rancho San Pasqual, formation
of the Fairbanks Highlands joint venture and the disposition of Oceanside Hills,
partially offset by construction costs for build-to-suit projects in Signal
Hill, California, Phoenix, Arizona and Allen, Texas. The Company has contracted
for these buildings to be sold upon completion of construction in the first
quarter, third quarter and third quarter, respectively, of 1997.
The $4.8 million decrease in operating properties reflects the June 1996
sale of the Eagle Crest Golf Course at Rancho San Pasqual.
The $4.3 million increase in other assets primarily reflects the Company's
$3.6 million joint venture interest in Fairbanks Highlands.
The $6.8 million increase in accounts payable and accrued liabilities
primarily reflects accruals related to the sale of the Bolsa Chica lowlands and
the Recapitalization, along with contractor payments on build-to-suit projects.
The $9.5 million decrease in senior bank debt reflects net prepayments on
the Nomura loans, resulting primarily from sales of 218 residential lots and the
Eagle Crest Golf Course at Rancho San Pasqual and formation of the Fairbanks
Highlands joint venture, partially offset by construction borrowings during the
year ended December 31, 1996.
The $12.5 million increase in project debt reflects borrowings from banks
for the three build-to-suit projects discussed above by subsidiaries of the
Company. The Company has entered into purchase and sale agreements for the sale
of each building upon completion.
The $9.0 million decrease in other liabilities primarily reflects a $4.3
million decrease in accrued pensions and benefits and a $4.2 million decrease
related to the disposition of the Company's interest in the Oceanside Hills
partnership. See Note 7 to "Audited Historic Financial Statements."
DECEMBER 31, 1995 COMPARED WITH DECEMBER 31, 1994. Cash and cash
equivalents aggregated $4.9 million at December 31, 1995 compared with $13.0
million at December 31, 1994. The decrease in cash and cash equivalents
primarily reflects continued investments in Bolsa Chica and Rancho San Pasqual
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along with general and administrative expenses, partially offset by proceeds
from asset sales, as well as other activity presented in the Statements of Cash
Flows. Restricted cash of $2.5 million at December 31, 1995 reflects funds
deposited into escrow accounts for funding infrastructure costs at Rancho San
Pasqual. Restricted cash of $7.5 million at December 31, 1994 reflects funds on
deposit to secure a $25 million letter of credit facility arranged to finance
the settlement of the Abex litigation described above. See Notes 6 and 8 to
"Audited Historic Financial Statements."
The $5.6 million decrease in real estate held for development or sale is
primarily due to the sale of all residential property at Wentworth, offset by
investments in Rancho San Pasqual infrastructure. The $4.5 million decrease in
operating properties, net is primarily due to the sale of the Wentworth marina
in December 1995.
The $105.8 million decrease in land held for development reflects the
revaluation of the Bolsa Chica property resulting primarily from management's
decision in the fourth quarter of 1995 (following approval of additional funding
by the Ports) to make completing the sale of the lowlands to a public agency a
strategic goal of the Company, along with updated estimates of future cash flows
for the mesa portion of the project reflecting recent market conditions.
The $6.9 million decrease in other assets primarily reflects the March 1995
collection of a note receivable from AV Partnership, the reclassification of a
note receivable to real estate held for development or sale upon acquisition of
title to industrial property in Ontario, California and the refund of a deposit
upon termination of a purchase contract for property adjacent to the Bolsa Chica
site.
The $23.2 million decrease in accounts payable and accrued liabilities
primarily reflects the $22 million settlement of the Abex litigation in February
1995. See Notes 6 and 8 to "Audited Historic Financial Statements."
The $16.6 million increase in senior bank debt reflects the borrowing of
$15.5 million to fund the Abex settlement and $1.1 million of net borrowings to
fund infrastructure construction at Rancho San Pasqual. See Note 8 to "Audited
Historic Financial Statements."
The $39.4 million decrease in other liabilities primarily reflects the
recognition of $25.4 million of deferred tax benefits and a reduction of $10.0
million of other tax liabilities during 1995.
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.
1996 COMPARED WITH 1995. The $10.1 million increase in asset sales revenues
from $23.5 million in 1995 to $33.6 million in 1996 and the related $8.6 million
increase in costs of asset sales from $21.6 million in 1995 to $30.2 million in
1996 primarily reflect the sale of the residential lots and Eagle Crest Golf
Course at Rancho San Pasqual, formation of the Fairbanks Highlands joint venture
and sales of resort/ residential lots in Michigan during the year ended December
31, 1996. These increases were partially offset by the absence in 1996 of
Wentworth residential sales as a result of the sale of the entire Wentworth
project in the fourth quarter of 1995. The $1.5 million improvement in gross
margin on asset sales primarily reflects gains on sales of Michigan lots,
partially offset by the absence in 1996 of the gains on sales of the Coronado
wharfage rights and leasehold interest in 1995.
The $.7 million and $1.0 million increases in revenues and gross margin,
respectively, from operations primarily reflect higher revenues in the Company's
commercial development business during the year ended December 31, 1996,
partially offset by the absence of Wentworth marina revenues throughout 1996 and
the sale of the Eagle Crest Golf Course in June 1996.
The $1.9 million increase in general and administrative expenses primarily
reflects costs incurred in connection with the Recapitalization and the sale of
the Bolsa Chica lowlands.
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The $2.3 million increase in interest expense from $22.6 million in 1995 to
$24.9 million in 1996 principally reflects compounded noncash interest on the
Company's Senior Debentures and Subordinated Debentures.
The $4.2 million decrease in other expense, net primarily reflects the
absence in 1996 of a $3.0 million reserve recorded in 1995 related to the
Company's investment in AV Partnership, and a decrease in accrued pensions and
benefits approximating $4.3 million, primarily due to termination of certain
group annuity contracts for the pension plan of a discontinued operation,
partially offset by a $1.5 million reserve for environmental clean up costs for
the Bolsa Chica lowlands.
The benefit for income taxes for the year ended December 31, 1996 has been
offset by a corresponding valuation allowance.
1995 COMPARED WITH 1994. The $12.6 million increase in revenues from $21.4
in 1994 to $34.0 in 1995 and the increase in cost of sales from $20.2 million in
1994 to $31.9 million in 1995 was primarily due to the sale of residential
property and the marina at Wentworth, along with the sale of industrial property
in Murietta, California, and the sale of wharfage rights in Coronado,
California.
The write-down of real estate properties of $121.1 million in 1995 reflects
the valuation adjustments recorded to reflect current estimates of net
realizable value for the Company's Bolsa Chica property as well as the Wentworth
project and the golf course at Rancho San Pasqual. See Note 5 to "Audited
Historic Financial Statements."
The change in other expense (income), net from $2.1 million of expense in
1994 to $3.1 million of expense for 1995 primarily reflects a loss reserve of
approximately $3 million related to the Company's investment in AV Partnership.
See Note 3 to "Audited Historic Financial Statements."
The improvement in provision (benefit) for income taxes of $25.2 million
primarily reflects the benefit related to the write-down of real estate
properties. See Note 8 to "Audited Historic Financial Statements."
1994 COMPARED WITH 1993. The $4.7 million increase in revenues from $16.7
million in 1993 to $21.4 million in 1994 and the increase in cost of sales from
$16.3 million in 1993 to $20.2 million in 1994 were both principally related to
operations of the domestic real estate development business acquired from The
Koll Company in September 1993, as well as residential home sales and the golf
course sale at the Company's Wentworth By The Sea project during 1994, offset by
the absence in 1994 of the Company's November 1993 sale of two office buildings
in La Jolla, California.
The decrease in interest expense from $24.4 million in 1993 to $19.4 million
in 1994 reflects both the reductions in outstanding subordinated debt in
connection with the Libra transaction in December 1993 and prepayments of senior
bank debt principally during 1993. See Note 6 to "Audited Historic Financial
Statements."
The change in other expense (income), net from $2.4 million of income in
1993 to $2.1 million of expense for 1994 primarily reflects nonrecurring income
of $3.0 million received in August 1993 in connection with the termination of a
put option agreement with Abex a former subsidiary of The Henley Group, Inc.,
and a $2.0 million insurance reimbursement received in February 1993, offset by
$.7 million of carrying costs related to the two La Jolla office buildings sold
in November 1993.
The gain on disposition of discontinued operations, net of income taxes in
1994 reflects the receipt of cash for the February 1994 termination of the
contingent payment provision of a December 1993 agreement with Libra whereby the
Company exchanged its Lake Superior Land Company subsidiary for approximately
$42.4 million face amount of the Company's Senior Debentures held by Libra and
other consideration. See Note 3 to "Audited Historic Financial Statements."
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Certain of the foregoing information is forward looking in nature and
involves risks and uncertainties that could
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significantly impact the ability of the Company to achieve its currently
anticipated goals and objectives. These risks and uncertainties include, but are
not limited to, litigation or appeals of regulatory approvals (including pending
litigation challenging the California Coastal Commission's approval of the Bolsa
Chica project) and availability of adequate capital, financing and cash flow. In
addition, future values may be adversely affected by increases in property
taxes, increases in the costs of labor and materials and other development 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.
LEGAL PROCEEDINGS
On January 13, 1995, the Hungtington Beach City School District and the
Huntington Beach Union High School District (collectively, the "School
Districts") and the Bolsa Chica Land Trust, et al. each filed a lawsuit naming
the County of Orange as defendant, with the Company as real party in interest,
(the "School Districts Action" and the "Environmental Action," respectively) in
Orange County Superior Court (the "Superior Court") challenging the Orange
County Board of Supervisors' approval of the Bolsa Chica project, which lawsuits
generally alleged, among other things, violations of the California
Environmental Quality Act and violations of the California Government Code
planning and zoning laws. The plaintiffs in the School Districts Action sought
monetary damages. The School Districts Action has been settled with an agreement
regarding school fees to be paid by the Company to the plaintiff districts. The
plaintiffs in the "Environmental Action" did not seek monetary damages, but
instead asked the Superior Court to set aside the approval of the Bolsa Chica
project. In February 1996, the Superior Court ruled on the Environmental
Action," rejecting all but one of the arguments, and requiring an additional
45-day public review and comment period regarding the tidal inlet portion of the
wetlands restoration plan, which was completed in the second quarter of 1996.
The County reapproved the plan without change in June 1996 and the Superior
Court approved a judgment dismissing the lawsuit on January 24, 1997.
On March 6, 1996 and March 11, 1996 two lawsuits were filed in the San
Francisco County Superior Court by the Bolsa Chica Land Trust, et al. and the
League for Coastal Protection et al., respectively, against the Coastal
Commission, the Company and other Bolsa Chica landowners as real parties in
interest, alleging that the Coastal Commission's approval of the 3,300-unit LCP
is not in compliance with the Coastal Act and other statutory requirements.
These lawsuits, which have subsequently been transferred to, and are currently
pending in, the San Diego County Superior Court, seek to set aside the approval
of the Bolsa Chica project. These lawsuits are currently scheduled to be tried
on May 27, 1997. Given the recent sale of the Bolsa Chica lowlands described
above, the primary issues which were the subject of this litigation have been
eliminated. Furthermore, the plaintiffs in one of these lawsuits have informed
the Company that given the sale of the lowlands, they will work with the Company
in an effort to resolve the remaining issues of their lawsuit. The Company
believes that there is no factual basis to support the remaining litigation
issues which challenge development of the Bolsa Chica mesa. Furthermore, the
Company does not believe that these lawsuits will be successful in permanently
preventing the Company from completing the Bolsa Chica project, however, there
can be no assurance in this regard or that these suits will not result in
delays. See also "Business and Properties of the Company--Environmental and
Regulatory Matters, and--Corporate Indemnification Matters."
On March 31, 1994, Svedala Industries, Inc. ("Svedala") filed a lawsuit
naming Nichols Engineering & Research Corporation ("Nichols"), as well as
several other unrelated companies, as defendants in New Jersey Superior Court in
Morris County, New Jersey. Svedala filed a Second Amended Complaint on August
16, 1994. The lawsuit seeks recovery of the costs of clean-up of a property in
Mt. Olive, New Jersey (the "Property"). Svedala has asserted that the clean-up
costs total approximately $10 million. The lawsuit alleges that Nichols, which
is a wholly-owned subsidiary of New Henley Holdings Inc., which is a direct
wholly-owned subsidiary of the Company, is responsible, in whole or in part, for
contaminating the Property with hazardous substances during Nichols' operations
there from the 1940's to the 1970's. Nichols
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has not engaged in business operations since approximately 1983. New Henley
Holdings Inc. acquired the stock of Nichols in 1989, after Nichols was no longer
operational. On February 9, 1995, Nichols filed for Chapter 7 bankruptcy
protection. On July 19, 1995, the Nichols' bankruptcy plan was approved and the
case was closed. On or about October 11, 1995, Svedala served a Third Amended
Complaint on The Henley Group, Inc., which was the parent company of New Henley
Holdings Inc. and was a direct wholly-owned subsidiary of the Company, alleging
that they are liable for the purported acts of Nichols that allegedly resulted,
in whole or in part, in Svedala's cleanup costs. Neither the Company, The Henley
Group, Inc. nor New Henley Holdings Inc. (collectively, "Henley") has been
ordered by any federal, state or local agency to undertake any remediation at
the Property. On December 15, 1995, Henley moved to dismiss Svedala's action for
lack of jurisdiction and on the basis that Henley is not liable as a successor
for Nichols' liability. The Superior Court denied the motion without prejudice
and ordered discovery on these defenses. Subsequent thereto The Henley Group,
Inc. was merged into the Company. Pursuant to the Superior Court's most recent
decision on these issues, discovery will run until August 15, 1997. The Company
anticipates renewing the motions on the issues of personal jurisdiction and
successor liability before August 15, 1997. As the action is still in the early
stages, it is difficult to predict the outcome of the anticipated motion and the
case.
On March 25, 1997, Whiting Corporation, a Delaware corporation, filed a
lawsuit in the Circuit Court of Cook County, Illinois, Chancery Division,
naming, among others, WT/HRC Corporation and KREG-OC, Inc., which are direct and
indirect subsidiaries of the Company, as defendants in a complaint for
declaratory judgment and breach of contract and indemnification. The complaint
seeks indemnification for approximately 70 asbestos cases pending in New York
and Michigan and two cases pending in Pennsylvania as well as for any similar
asbestos claims which may be filed in the future. The complaint states no
specified amount of damages. The lawsuit alleges that, pursuant to an Asset
Purchase Agreement dated December 30, 1983, the seller, Whiting-Illinois, sold
certain assets, properties and businesses of its "Whiting Engineered Products
Group" to the plaintiff's predecessor-in-interest, Gask Corporation. Under the
Asset Purchase Agreement, the plaintiff contends that seller agreed to indemnify
it for personal injury, sickness, death or property damage claims which arise
from occurrences prior to the closing date (December 30, 1983). The complaint
further alleges that WT/HRC Corporation and KREG-OC, Inc. are the successors-
in-interest to and/or the owners of Whiting-Illinois, the seller. The Company's
subsidiaries deny any and all liability and will vigorously defend the action.
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EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
Certain of the executive officers of the Company are also executive officers
of The Koll Company 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, director and director
nominee of the Company.
<TABLE>
<CAPTION>
NAME AND TITLE AGE* BUSINESS EXPERIENCE
- -------------------------------------- ----------- -----------------------------------------------------------------
<S> <C> <C>
Donald M. Koll ....................... 64 Chairman of the Board of the Company since March 1993 and Chief
Chairman of the Board Executive Officer since October 1996. Managing
and Chief Executive Officer Director--President and Director of the Company prior to July of
1992. Chairman of the Board and Chief Executive Officer of Koll
(general contracting and international real estate development
since prior to 1992) and Chairman of the Board of Koll Management
Services, Inc., also known as Koll Real Estate Services ("KRES")
(real estate management) since prior to 1992. Also a Director of
Fidelity National Financial, Inc. since March 1995. Mr. Koll's
director class will be up for election in connection with the
Company's 1997 Annual Meeting.
Ray Wirta ............................ 53 Director of the Company since March 1993. Chief Executive Officer
Director of the Company from March 1993 until October 1996. President and
Chief Operating Officer of Koll since prior to 1992. Vice
Chairman of the Board and Chief Executive Officer of KRES since
prior to 1992. Mr. Wirta's director class will be up for election
in connection with the Company's 1997 Annual Meeting.
Harold A. Ellis ...................... 65 Director of the Company since August 1993. Managing Partner of
Director Ellis Partners, Inc., a real estate asset management and
consulting firm since 1992. Chairman and Chief Executive Officer
of Grubb & Ellis Company, a diversified real estate service
company prior to 1992. Mr. Ellis's director class will be up for
election in connection with the Company's 1997 Annual Meeting.
Paul C. Hegness ...................... 50 Director of the Company since March 1993. Partner in the law firm
Director of Good, Wildman, Hegness & Walley since prior to 1992. Also a
Director of Walter Foster Publishing, a publisher and marketer of
art instructional materials. Mr. Hegness's director class will be
up for election in connection with the Company's 1997 Annual
Meeting.
J. Thomas Talbot ..................... 61 Director of the Company since August 1993. Owner of The Talbot
Director Company, an investment and asset management company since prior
to 1992. Chief Executive Officer of HAL, Inc., the parent company
of Hawaiian Airlines prior to 1992. Also a Director of The
Hallwood Group, Inc., a corporate rescue firm; and Fidelity
National Financial, Inc., a title company. Mr. Talbot's term
expires in 1998.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND TITLE AGE* BUSINESS EXPERIENCE
- -------------------------------------- ----------- -----------------------------------------------------------------
<S> <C> <C>
Marco F. Vitulli ..................... 62 Director of the Company since March 1993. President of Vitulli
Director Ventures, Ltd., a real estate development, investment management
and consulting services company since prior to 1992. Also,
Chairman of Elk River Enterprises, a lumber company, and Director
of Pope Resources, a land, timber, mineral and recreational
properties company. Mr. Vitulli's term expires in 1998.
Richard M. Ortwein ................... 55 President of the Company since October 1993. President, Southern
President California Division of Koll from prior to 1992. Executive Vice
President of KRES from prior to 1992, and Director of KRES from
1992 to March 1994.
Raymond J. Pacini .................... 41 Executive Vice President and Secretary of the Company since 1993;
Executive Vice President, Chief Chief Financial Officer and Treasurer of the Company since June
Financial Officer, Treasurer and of 1992. Managing Director of the Company prior to June of 1992.
Secretary Executive Vice President and Chief Financial Officer of KRES from
March to November 1993.
Philip R. Burnaman II ................ 37 A Managing Director and head of New York Proprietary Trading Desk
Director Nominee of ING Barings (U.S.) Capital Corp., which is a subsidiary of the
ING Group, an Amsterdam-based banking, investment banking and
insurance institution since 1994. Whole loan commercial mortgage
trader of Citicorp Securities prior to 1992 until 1994.
James J. Gaffney ..................... 56 President and Chief Executive Officer of General Aquatics, Inc.
Director Nominee (formerly known as KDI Corp.). Director of Insilco Corp. and C.R.
Anthony. Former Chief Executive Officer or Chairman of the
following: International Tropic-Cal, Brown Jordan Company,
Meyercord Company and Washington Industries. Also, former Vice
President of a subsidiary of Unocal, and former Executive Vice
President of Finance of General Refractories Company.
Robert J. Gagalis .................... 42 Chief Financial Officer and Treasurer of Wheelabrator
Director Nominee Technologies, Inc., an environmental services company since
January 1997. Formerly served Wheelabrator Technologies as
Vice-President Finance, Director of Corporate Development and
Staff Vice President of Corporate Development.
Thomas W. Sabin, Jr. ................. 39 President of Thomas Sabin, Inc. Manager and Vice President of
Director Nominee BGFRTS, a limited liability partnership. From 1992 until 1996,
formed and operated GSSW, L.P., a limited partnership, the
purpose of which was to acquire real estate assets from the
Resolution Trust Corporation. Former President of Southmark
Equities Corporation.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE AGE* BUSINESS EXPERIENCE
- -------------------------------------- ----------- -----------------------------------------------------------------
<S> <C> <C>
P. John Wickser II ................... 43 Managing Director of ING Barings--ING Real Estate Finance, Inc.,
Director Nominee which is a subsidiary of the ING Group, an Armsterdam-based
banking, investment banking and insurance institution, since
1993. Real estate investment banker at Citicorp based in London,
England from prior to 1992 until 1993.
Paul M. Zeller ....................... 47 President of Zeller Realty Corporation since 1988. Former General
Director Nominee Partner of The Buck Company, a commercial real estate development
firm. Founding stockholder and former Director of Buck Investment
Company. In 1988, founded Asian Capital Corporation, a merchant
banking and investment firm specializing in real property secured
debt and equity placements and merchant banking, which maintains
offices in Chicago, New York and Tokyo.
</TABLE>
- ------------------------
* As of March 31, 1997
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table summarizes the compensation
paid during the previous three fiscal years to the Chief Executive Officer and
the Company's other executive officers whose salary and bonus during 1996
exceeded $100,000 (the "Named Executives") for services in all capacities to the
Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------------------------
------------------------------------- 1993
OTHER RESTRICTED PLAN ALL
ANNUAL STOCK OPTIONS OTHER
SALARY BONUS COMPENSATION AWARD (# OF COMPENSATION
NAME AND PRINCIPAL POSITION ($)(1) ($) ($) ($) SHARES) ($)
- ------------------------------------- ------------ ------------ -------------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald M. Koll ...................... 1996 330,200 275,000(3) -- -- -- --
Chairman of the Board and 1995 325,000 -- -- -- -- --
Chief Executive Officer 1994 325,000 -- -- -- -- --
Ray Wirta ........................... 1996 103,750(2) 125,000(3) -- -- -- --
Former Chief Executive 1995 225,000 -- -- -- -- --
Officer 1994 225,000 -- -- -- -- --
Richard Ortwein ..................... 1996 359,600 250,000(3) 13,841(5) -- -- --
President 1995 359,858 -- -- -- -- --
1994 274,197 18,500 -- -- -- --
--
Raymond J. Pacini ................... 1996 268,000 100,000(3) -- -- -- 76,725(6)
Executive Vice President 1995 268,000 200,000(4) -- -- -- --
and Chief Financial 1994 268,000 150,000 -- -- -- --
Officer
</TABLE>
- ------------------------
(1) Includes auto allowance and amounts electively deferred by each Named
Executive under the Company's 401(k) Savings and Profit Sharing Plan. Mr.
Koll and Mr. Wirta are also executive officers of The Koll Company and its
affiliates and accordingly devote less than all of their working time to the
Company's business matters.
(2) Reduced to $95,000 per year effective April 1, 1996 and to $0 effective
October 1, 1996 to reflect a reduction in his day-to-day involvement with
the Company in view of his commitment to devote a greater percentage of his
time to the business of an affiliate of the Company. Effective October 1,
1996, Mr. Wirta receives a consulting fee equivalent to $50,000 per year.
(3) Bonuses for 1996 were paid following the closing of the Bolsa Chica lowlands
sale in February 1997.
(4) In the first quarter of 1996, Mr. Pacini voluntarily elected to defer
consideration of his 1995 bonus given the Company's liquidity situation. In
September 1996, the Compensation Committee of the Company's Board of
Directors approved Mr. Pacini's bonus for accomplishments during 1995, which
was paid following the closing of the Bolsa Chica lowlands sale in February
1997.
(5) Partnership distributions.
(6) Reflects a one-time payment representing Mr. Pacini's pro-rata share of
assets distributed from a trust in connection with termination of the
Company's Executive Retirement and Savings Program.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUE. The following table sets forth information for each Named
Executive with regard to the aggregate stock options exercised during the 1996
fiscal year, and stock options held as of December 31, 1996. On December 31,
1996, options exercisable by the Named Executives were for 2,400,000 shares,
2,000,000 shares, 2,400,000 shares and 2,200,000 shares under options granted to
Messrs. Koll, Wirta, Ortwein and Pacini, respectively. No stock appreciation
rights were exercised by the Named Executives during the 1996 fiscal year, nor
did such individuals hold any stock appreciation rights at the end of such
fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
VALUE UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED REALIZED OPTIONS/SARS OPTIONS/SARS
NAME ON EXERCISE (#) ($)(1) AT FY-END AT FY-END ($)(2)
- ------------------------------------ --------------- ------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Donald M. Koll...................... -- -- 2,400,000 --
Ray Wirta........................... -- -- 2,000,000 --
Richard Ortwein..................... -- -- 2,400,000 --
Raymond J. Pacini................... -- -- 2,200,000 $ 27,490
</TABLE>
- ------------------------
(1) Market value of underlying securities on exercise date, minus the exercise
price.
(2) Based upon market value of $.1250 for the Class A Common Stock and $.28125
for the Preferred Stock as of December 31, 1996 less the aggregate exercise
price payable for such shares. Includes the value of the 2,400,000 shares,
2,000,000 shares, 2,400,000 shares and 2,200,000 shares subject to currently
exercisable options by Messrs. Koll, Wirta, Ortwein and Pacini,
respectively.
EXECUTIVE RETIREMENT AND SAVINGS PROGRAM
The Company maintains two retirement benefit programs, one of which was
terminated in 1996: a tax-qualified defined benefit pension plan which was
available generally to all employees (the "Pension Plan") and the Retirement and
Savings Program, a non-qualified supplemental benefit plan pursuant to which
retirement benefits were provided to executive officers and other eligible key
management employees who were designated by the Compensation Committee, which
determined the service recognized under the program in calculating a
participant's vested interest and retirement income (the "Supplemental Plan"
and, together with the Pension Plan the "Retirement Program"). As of December
31, 1993, all benefits under the Pension Plan were frozen, and no further
compensation or years of service will be taken into account for additional
benefit accrual purposes, under the Pension Plan. The Supplemental Plan was
terminated effective November 15, 1996 through the distribution of assets held
in trust to the beneficiaries of the Supplemental Plan in exchange for the
beneficiaries release of all claims to any future benefits under the
Supplemental Plan.
The following table shows as of the date the Pension Plan was frozen the
total estimated annual benefits payable under the Retirement Program in the form
of a 50% joint and survivor annuity to hypothetical participants upon retirement
at normal retirement age, in the compensation and years-of-service categories
indicated in the table.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS
ANNUALIZED -----------------------------------------------
AVERAGE 10 YEARS 20 YEARS 30 YEARS 40 YEARS
EARNINGS OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 100,000 $ 15,000 $ 30,000 $ 45,000 $ 60,000
200,000 30,000 60,000 90,000 120,000
400,000 60,000 120,000 180,000 240,000
</TABLE>
The years of service recognized under the Retirement Program generally
included all service with the Company and its subsidiaries and their
predecessors. The only credited years of service to the Named Executives as of
the date the Pension Plan was frozen were seven years to Mr. Pacini.
Compensation
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recognized under the Retirement Program generally included a participant's base
salary (including any portion deferred) and annual bonus compensation.
COMPENSATION OF DIRECTORS. The non-employee directors of the Company are
entitled to receive cash compensation and compensation pursuant to the plans
described below.
CASH COMPENSATION. Non-employee directors of the Company receive
compensation of $30,000 per year, with no additional fees for attendance at
Board or committee meetings. Messrs. Ellis, Hegness and Vitulli were paid an
additional $10,000, $20,000 and $7,000, respectively, for consulting services
rendered during 1996. Employee directors are not paid any fees or additional
compensation for service as members of the Board or any of its committees. All
directors are reimbursed for expenses incurred in attending Board and committee
meetings. Pursuant to the Deferred Compensation Plan for Non-Employee Directors,
a non-employee director may elect, generally prior to the commencement of any
calendar year, to have all or any portion of the director's compensation for
such calendar year credited to a deferred compensation account. Amounts credited
to the director's account will accrue interest based upon the average quoted
rate for ten-year U.S. Treasury Notes. Deferred amounts will be paid in a lump
sum or in installments commencing on the first business day of the calendar year
following the year in which the director ceases to serve on the Board, or of a
later calendar year specified by the director.
1993 STOCK OPTION/STOCK ISSUANCE PLAN. The Company's 1993 Stock
Option/Stock Issuance Plan (the "1993 Stock Option Plan") contains three
separate equity incentive programs in which members of the Board may be eligible
to participate: (i) a Discretionary Option Grant Program, under which eligible
non-employee members of the Board, along with officers, key employees and
consultants, may be granted options to purchase shares of Preferred Stock and
Class A Common Stock, (ii) a Director Fee Program, under which each non-employee
member of the Board may elect to apply all or any portion of his or her annual
retainer fee (currently $30,000) to the acquisition of unvested shares of
Preferred Stock or Class A Common Stock, and (iii) an Automatic Option Grant
Program, under which option grants will be made to non-employee members of the
Board.
Options granted under the Discretionary Option Grant Program may be either
incentive stock options designed to meet the requirements of Section 422 of the
Internal Revenue Code or non-statutory options not intended to satisfy such
requirements. All grants under the Automatic Option Grant Program will be
non-statutory options.
No individual participating in the 1993 Stock Option Plan may be granted
stock options or separately exercisable stock appreciation rights for more than
5,000,000 shares of Class A Common Stock and Preferred Stock in the aggregate
over the term of the 1993 Stock Option Plan.
PLAN ADMINISTRATION. The Discretionary Option Grant Program is administered
by the Compensation Committee of the Board, which is comprised of two or more
non-employee Board members appointed by the Board. The Compensation Committee,
as "Plan Administrator," has complete discretion (subject to the express
provisions of the 1993 Stock Option Plan) to authorize stock option grants. All
grants under the Automatic Option Grant and Director Fee Programs are made in
strict compliance with the express provisions of those programs, and no
administrative discretion is exercised by the Plan Administrator with respect to
the grants or stock issuances made under those programs.
DISCRETIONARY OPTION GRANT PROGRAM. The principal features of the
Discretionary Option Grant Program may be summarized as follows:
The exercise price per share of the Preferred Stock or Class A Common Stock
subject to a stock option will not be less than 100% of the fair market value
per share of that security on the grant date. No option will have a maximum term
in excess of ten years measured from the grant date. The Plan Administrator has
complete discretion to grant options (i) which are immediately exercisable for
vested shares, (ii) which are immediately exercisable for unvested shares
subject to the Company's repurchase
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<PAGE>
rights, or (iii) which become exercisable in installments for vested shares over
the optionee's period of service. Non-employee members of the Board who serve as
Plan Administrator are not eligible to participate in the Discretionary Option
Grant Program.
The exercise price may be paid in cash or in shares of Preferred Stock or
Class A Common Stock valued at fair market value on the exercise date. The
option may also be exercised for vested shares through a same-day sale program
pursuant to which the purchased shares are to be sold immediately and a portion
of the sale proceeds applied to the payment of the exercise price for those
shares on the settlement date.
Any option held by the optionee at the time of cessation of service will
normally not remain exercisable beyond the limited period designated by the Plan
Administrator (not to exceed 36 months) at the time of the option grant. During
that period, the option will generally be exercisable only for the number of
shares in which the optionee is vested at the time of cessation of service. For
purposes of the 1993 Stock Option Plan, an individual will be deemed to continue
in service for so long as that person performs services on a periodic basis for
the Company or any parent or subsidiary corporations, whether as an employee, a
non-employee member of the Board or an independent consultant or advisor.
The Plan Administrator has complete discretion to extend the period
following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability of
such options in whole or in part. Such discretion may be exercised at any time
while the options remain outstanding, whether before or after the optionee's
actual cessation of service.
Any unvested shares of Preferred Stock and Class A Common Stock are subject
to repurchase by the Company, at the original exercise price paid per share,
upon the optionee's cessation of service prior to vesting in those shares. The
Plan Administrator has complete discretion in establishing the vesting schedule
for any such unvested shares and has full authority to cancel the Company's
outstanding repurchase rights with respect to those shares in whole or in part
at any time.
The optionee is not to have any stockholder rights with respect to the
option shares until the option is exercised and the exercise price is paid for
the purchased shares. Options are not assignable or transferable other than by
will or by the laws of inheritance following the optionee's death, and the
option may, during the optionee's lifetime, be exercised only by the optionee.
The Plan Administrator may grant options with stock appreciation rights.
Stock appreciation rights provide the holders with the right to surrender their
options for an appreciation distribution from the Company equal in amount to the
excess of (i) the fair market value of the vested shares of Preferred Stock or
Class A Common Stock subject to the surrendered option over (ii) the aggregate
exercise price payable for such vested shares. Such appreciation distribution
may, in the discretion of the Plan Administrator, be made in cash or in shares
of the Preferred Stock or Class A Common Stock.
DIRECTOR FEE PROGRAM. Under the Director Fee Program, each individual
serving as a non-employee Board member is eligible to elect to apply all or any
portion of the annual retainer fee otherwise payable in cash to such individual
(currently $30,000) to the acquisition of unvested shares of Preferred Stock
and/or Class A Common Stock. The non-employee Board member must make the stock
election prior to the start of the calendar year for which the election is to be
in effect. On the first trading day in January of the calendar year for which
the election is in effect, the portion of the retainer fee subject to such
election will be applied to the acquisition of the selected shares of Preferred
Stock and/or Class A Common Stock by dividing the elected dollar amount by the
closing selling price per share of Preferred Stock or Class A Common Stock (as
the case may be) on that trading day. The issued shares will be held in escrow
by the Company until the individual vests in those shares. The non-employee
Board member will have full stockholder rights, including voting and dividend
rights, with respect to all issued shares held in escrow on his or her behalf.
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<PAGE>
Upon completion of each calendar quarter of Board service during the year
for which the election is in effect, the non-employee Board member will vest in
one-fourth of the issued shares, and the stock certificate for those shares will
be released from escrow. Immediate vesting in all the issued shares will occur
in the event the individual dies or becomes disabled during his or her period of
Board service or certain changes in control or ownership of the Company are
effected during such period. Should the Board member cease service prior to
vesting in one or more quarterly installments of the issued shares, then those
installments will be forfeited, and the individual will not be entitled to any
cash payment from the Company with respect to the forfeited shares.
In 1996 no shares were received in lieu of the cash retainer fee.
AUTOMATIC OPTION GRANT PROGRAM. Under the Automatic Option Grant Program
which will be terminated if the Recapitalization is completed, each individual
who was serving as a non-employee Board member on November 29, 1993 (the "Grant
Effective Date") was automatically granted a non-statutory option to purchase
125,000 shares of Preferred Stock and a non-statutory option to purchase 125,000
shares of Class A Common Stock. In addition, each individual who first becomes a
non-employee Board member on or after the Grant Effective Date, whether through
election by the Company's stockholders or appointment by the Board, will be
automatically granted at the time of such election or appointment a
non-statutory option to purchase 125,000 shares of Preferred Stock and a
non-statutory option to purchase 125,000 shares of Common Stock. However, no
non-employee Board member who has previously been in the employ of the Company
or any parent or subsidiary corporation will be eligible to receive these
automatic stock option grants.
Each option granted under the Automatic Option Grant Program is subject to
the following terms and conditions:
(1) The exercise price per share of the Preferred Stock or Class A
Common Stock subject to an automatic option grant will be equal to 100% of
the fair market value per share of that security on the automatic option
grant date.
(2) Each option will have a maximum term of ten years measured from the
grant date.
(3) Each option will be immediately exercisable for all the option
shares, but any purchased shares will be subject to repurchase by the
Company at the exercise price paid per share. Each option will vest, and the
Company's repurchase right will lapse as to (i) 40% of the option shares
upon the optionee's completion of one year of Board service measured from
the automatic grant date, and (ii) the remaining option shares in two equal
and successive annual installments over the optionee's period of continued
Board service, with the first such installment to vest two years after the
automatic option grant date.
(4) The option will remain exercisable for a six-month period following
the optionee's cessation of Board service for any reason other than death or
permanent disability. Should the optionee die while holding an automatic
option grant, then such option will remain exercisable for a twelve-month
period following the optionee's death and may be exercised by the personal
representative of the optionee's estate or the person to whom the grant is
transferred by the optionee's will or the laws of inheritance. In no event,
however, may the option be exercised after the expiration date of the option
term. During the applicable exercise period, the option may not be exercised
for more than the number of shares (if any) in which the optionee is vested
at the time of cessation of Board service.
(5) Should the optionee die or become permanently disabled while serving
as a Board member, then the shares of the Preferred Stock and Class A Common
Stock subject to any automatic option grant held by that optionee will
immediately vest in full, and those vested shares may be purchased at any
time within the twelve-month period following the date of the optionee's
cessation of Board service.
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<PAGE>
(6) The shares subject to each automatic option grant will vest in full
upon the occurrence of certain changes in control or ownership of the
Company, as explained in more detail below in the subsection entitled
Option/Vesting Acceleration.
(7) Upon the successful completion of a hostile tender offer for
securities possessing more than 50% of the combined voting power of the
Company's outstanding securities, each automatic option grant which has been
outstanding for at least six months may be surrendered to the Company for a
cash distribution per surrendered option share in an amount equal to the
excess of (i) the highest price per share of the Preferred Stock or Class A
Common Stock paid in such tender offer over (ii) the exercise price payable
for such share.
(8) The remaining terms and conditions of the option will in general
conform to the terms described above for option grants made under the
Discretionary Option Grant Program and will be incorporated into the option
agreement evidencing the automatic option grant.
FINANCIAL ASSISTANCE. The Plan Administrator may institute a loan program
in order to assist one or more optionees in financing their exercise of
outstanding options under the Discretionary Option Grant Program. The form in
which such assistance is to be made available (including loans or installment
payments) and the terms upon which such assistance is to be provided will be
determined by the Plan Administrator. However, the maximum amount of financing
provided any individual may not exceed the amount of cash consideration payable
for the issued shares plus all applicable Federal, state and local income and
employment taxes incurred in connection with the acquisition of the shares. Any
such financing may be subject to forgiveness in whole or in part, at the
discretion of the Plan Administrator, over the individual's period of service.
EMPLOYMENT AND CONSULTING AGREEMENTS. The Company has entered into
employment agreements with each of Messrs. Koll, Ortwein and Pacini with respect
to an employment term commencing upon the closing of the Recapitalization and
ending three (3) years thereafter. The Company also entered into a consulting
agreement with Mr. Wirta. Under the employment agreements each of Messrs. Koll,
Ortwein and Pacini has agreed to serve in their current capacities as the
Company's Chief Executive Officer, President and Chief Financial Officer,
respectively, at their current base salaries. The employment agreements provide
that if an officer is terminated without cause (as defined) during such three
(3) year period, the officer shall receive a severance payment equal to his
current annual salary for twelve (12) months plus the amount of his most recent
annual bonus for the prior fiscal year, and any unvested stock options shall
immediately become 100% vested. The employment agreements also provide for
bonuses payable upon completion of the Recapitalization. The consulting
agreement with Mr. Wirta calls for him to provide services for an annual fee of
$50,000. The consulting agreement is subject to termination upon 30 days' prior
notice. If the agreement is terminated without cause (as defined), Mr. Wirta is
entitled to a $50,000 severance payment and immediate vesting of any unvested
stock options. Given the significance to the Company of completing the
Recapitalization, the Compensation Committee has approved bonuses of $275,000,
$125,000, $100,000, and $250,000 payable upon completion of the Recapitalization
to Messrs. Koll, Wirta, Ortwein and Pacini, respectively. These bonuses are
intended to (i) retain these individuals during the pendency of the
Recapitalization; (ii) incentivize the completion of the Recapitalization on a
timely basis; and (iii) to reward these individuals for their substantial
efforts during the past several years, which efforts have been necessary
prerequisites to completing the Recapitalization. In the event the Company
pursues the Prepackaged Plan, as part of the Prepackaged Plan confirmation
process, the Company intends to seek approval of these employment and consulting
agreements and the bonuses pursuant to Section 365 of the Bankruptcy Code. To
the extent applicable, the Company will also seek approval of the bonuses
pursuant to Section 1129(a)(4) of the Bankruptcy Code.
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Compensation Committee,
and its members are named below. No member of the Compensation Committee was at
any time during the 1996 fiscal year or at any other time an officer or employee
of the Company. No executive officer of the Company serves as a
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<PAGE>
member of the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee. Good, Wildman, Hegness & Walley, a law firm
with which Mr. Hegness is a senior partner, provides legal services to the
Company.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND STOCK PRICE
PERFORMANCE COMPARISON GRAPH SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL AND
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, AND SHALL
NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
REPORT OF THE COMPENSATION COMMITTEE. The overall objectives of the Company
compensation program are to attract and retain the best possible executive
talent, to motivate these executives to achieve the goals inherent in the
Company's business strategy, to maximize the link between executive and
stockholder interests through an equity based plan and to recognize individual
contributions as well as overall business results.
The key elements of the Company's executive compensation program consist of
fixed compensation in the form of base salary, and variable compensation in the
forms of annual incentive compensation and stock options. An executive officer's
annual base salary represents the fixed component of his total compensation;
however, variable compensation is intended to comprise a substantial portion of
an executive's total annual compensation. The Compensation Committee also takes
into account the fact that executives may also provide services to, and receive
compensation from, other entities. In addition, while the elements of
compensation described below are considered separately, the Compensation
Committee takes into account the full compensation package afforded by the
Company to the individual, including any pension benefits, supplemental
retirement benefits, insurance and other benefits, as well as the programs
described below.
BASE SALARIES. Base salaries for executive officers are determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executive talent
including, where appropriate, a comparison to base salaries for comparable
positions at other companies, and to historical levels of salary paid by the
Company and its predecessors. Current base salaries for the Company's executive
officers are at or below the 75th percentile of the compensation data surveyed
during the first quarter of 1994. Since then, the only executive officer salary
increase granted was to Mr. Ortwein in order to bring his salary closer to
comparable levels.
Salary adjustments are based on a periodic evaluation of the performance of
the Company and of each executive officer, and also take into account new
responsibilities as well as changes in the competitive market place. The
Compensation Committee, where appropriate, also considers non-financial
performance measures.
ANNUAL INCENTIVE COMPENSATION AWARDS. The variable compensation payable
annually to executive officers is intended to consist principally of annual
incentive compensation awards, based on various factors, including both
corporate and individual performance, established by the Compensation Committee
each fiscal year. The executive officer bonuses for 1996 were paid upon
completion of the Bolsa Chica lowlands sale in February 1997 in recognition of
such officers' accomplishments during 1996, particularly with respect to
obtaining the California Coastal Commission's approval of the Bolsa Chica
project and progress made towards the ultimate sale of the lowlands.
OTHER INCENTIVE COMPENSATION. Participation of executives in equity-based
compensation programs is reviewed annually, and awards under such programs,
primarily in the form of stock option grants under the Company's 1993 Stock
Option Plan, are made periodically to the executives. Each option grant is
designed to align the interests of the executive with those of the stockholders
and provide each individual with a significant incentive to manage the Company
from the perspective of an owner with an equity stake in the business. The
number of shares subject to each option grant is based upon the executive's
tenure, level of
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responsibility and relative position in the Company. The Compensation Committee
has established certain general guidelines in making option grants to the
executives in an attempt to target a fixed number of option shares based upon
the individual's position with the Company and his existing holdings of options.
However, the Company does not adhere strictly to these guidelines and will vary
the size of the option grant made to each executive officer as it feels the
circumstances warrant. In connection with the Recapitalization, the Compensation
Committee approved the grant of options effective upon the completion of the
Recapitalization equivalent to 2.5%, .5%, 1.5% and 1.5% of the Company's fully
diluted equity to Messrs. Koll, Wirta, Ortwein and Pacini, respectively. The
price of such options will be determined by the 20-day average closing price
following completion of the Recapitalization. Each grant allows the executive to
acquire shares of the Company's stock at a fixed price per share (the market
price on the grant date) over a specified period of time (up to 10 years). The
options vest in periodic installments over a three-year period, generally
contingent upon the executive officer's continued employment with the Company,
provided, that if the executive is terminated without cause, such options shall
immediately become 100% vested. Accordingly, the option will generally provide a
return to the executive only if he remains in the Company's employ and the
market price of the Common Stock and Preferred Stock appreciates over the option
term.
CEO COMPENSATION. The base salary established for the Company's current and
former Chief Executive Officer, Messrs. Koll and Wirta, respectively, reflects
the Committee's policy to maintain a relative level of stability and certainty
with respect to the CEO's base salary from year to year. In setting the CEO's
base salary, the Committee sought to accomplish three objectives: provide a
level of base salary competitive to that paid to other chief executive officers
in the industry (recognizing that Messrs. Koll and Wirta are each an executive
officer of affiliate companies and accordingly devote less than all of their
working time to the Company's business matters), maintain internal comparability
and have their base salary play a less central role in their overall
compensation package by reason of the option grants made to them in lieu of a
more substantial increase in their level of base salary. The CEO's current base
salary is below the average of the surveyed compensation data for similarly
situated chief executive officers in the industry. The CEO's bonus for 1996 was
paid upon completion of the Bolsa Chica lowlands sale in February 1997 in
recognition of such officer's accomplishments during 1996, particularly with
respect to obtaining the California Coastal Commission's approval of the Bolsa
Chica project and progress made towards the ultimate sale of the lowlands.
TAX LIMITATION. The cash compensation to be paid to each of the Company's
executive officers for the 1995 fiscal year is not expected to exceed the
$1,000,000 limit on the tax deductibility of such compensation imposed under
federal tax legislation enacted in 1993. In addition, the Company's 1993 Stock
Option Plan imposes a limit on the maximum number of shares of the Company's
common and preferred stock for which any one participant may be granted stock
options over the remaining term of the plan. Any compensation deemed paid to an
executive officer upon the exercise of an outstanding option under the 1993
Stock Option Plan will qualify as performance-based compensation which will not
be subject to the $1,000,000 limitation. No other changes to the Company's
executive compensation programs will be made as a result of the new limitation
until final Treasury Regulations are issued with respect to such limitation.
The Compensation Committee
of the Board of Directors:
J. Thomas Talbot, Chairman
Harold A. Ellis, Jr.
Paul C. Hegness
Marco F. Vitulli
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STOCK PRICE PERFORMANCE COMPARISON. The following graph illustrates the
return during the past five years that would have been realized on December 31
of each year (assuming reinvestment of dividends) by an investor who invested
$100 on December 31, 1991 in each of (i) the Company's Class A Common Stock,
(ii) the Media General Composite Market Value Index ("Media General Index"), and
(iii) the Wilshire Real Estate Securities Index of Real Estate Operating
Companies ("Real Estate Index") which consists of 12 real estate operating and
development companies.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
THE COMPANY, REAL ESTATE INDEX AND MEDIA GENERAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE COMPANY REAL ESTATE INDEX MEDIA GENERAL INDEX
<S> <C> <C> <C>
12/31/1991 $100.00 $100.00 $100.00
12/31/1992 $36.36 $90.61 $104.00
12/31/1993 $63.64 $108.18 $119.39
12/31/1994 $68.19 $102.10 $118.39
12/31/1995 $45.45 $125.34 $153.50
12/31/1996 $18.18 $171.55 $185.38
</TABLE>
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL INTEREST HOLDERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, the name and address
of each person believed to be a beneficial interest holder of more than 5% of
the Common Stock, the number of shares beneficially owned and the percentage so
owned. Except as set forth below, management knows of no person who, as of March
31, 1997, owned beneficially more than 5% of the Company's outstanding Class A
Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL INTEREST HOLDER BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------- -------------------------------------- ----------------------- -------------
<S> <C> <C> <C>
Class A Common Stock................. Bridge Partners, L.P. 17,518,200 shares(2) 28.8(2)
115 East Putnam Avenue
Greenwich, CT 06830
Class A Common Stock................. Wheelabrator Technologies Inc. 5,097,207 shares(3) 9.8(3)
Liberty Lane
Hampton, NH 03842
Class A Common Stock................. Asher B. Edelman 3,477,700 shares(4) 6.6(4)
717 Fifth Avenue
New York, NY 10022
Class A Common Stock................. Merrill Lynch & Co., Inc. 2,851,692 shares(5) 5.6(5)
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281
</TABLE>
- ------------------------
(1) These percentages are calculated assuming the conversion of all securities
convertible within 60 days into the Company's Class A Common Stock which are
held by the individual beneficial interest holder of more than 5% listed in
the table above, but not those held by others.
(2) According to Schedule 13D dated July 14, 1995 filed jointly with the
Securities and Exchange Commission (the "SEC") by Mr. John W. Gildea
("Gildea"), Carson Street Partners, Inc. ("Carson"), and Bridge Partners,
L.P. ("Bridge"). Carson is the sole general partner of Bridge and has the
power to vote and dispose of shares. Gildea is the Chairman of the Board of
Directors, Chief Executive Officer, President and controlling stockholder of
Carson. As a result, Gildea and Carson may be deemed to be the indirect
beneficial interest holders of the shares held by Bridge, a partnership
whose general partner is controlled by Gildea. Gildea disclosed that through
Bridge and Carson, as of that date, he was the beneficial interest holder of
17,518,200 shares of Class A Common Stock, as to which he had sole voting
and dispositive power. This number includes 11,878,800 shares of Preferred
Stock which shares are generally nonvoting and are currently convertible
into shares of the Class A Common Stock on a share-for-share basis.
(3) According to the Company's records, including shares held by wholly-owned
subsidiaries. This number includes 3,339,198 shares of Preferred Stock which
shares are generally nonvoting and are currently convertible into shares of
the Class A Common Stock on a share-for-share basis.
(4) According to Schedule 13D (Amendment No. 1) dated December 5, 1996 filed
jointly with the SEC by Mr. Asher B. Edelman; Edelman Value Partners, L.P.;
Edelman Value Fund, Ltd.; and A.B. Edelman Management Company, Inc.
(collectively, "Edelman"). Edelman is the beneficial owner of 3,477,700
shares of Preferred Stock which shares are generally non-voting and are
currently convertible into shares of the Class A Common Stock on a
share-for-share basis.
(5) According to Schedule 13G dated February 11, 1994 filed jointly with the SEC
by Merrill Lynch & Co., Inc. and Merrill Lynch Pierce, Fenner & Smith
Incorporated (collectively "Merrill"). Merrill
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beneficially owns an aggregate of 2,851,692 shares, including 957,246 shares
of Class A Common Stock and 1,894,446 shares of Preferred stock which shares
are generally non-voting and are currently convertible into shares of the
Class A Common Stock on a share-for-share basis.
Information about the beneficial ownership of the Common Stock as of
December 1, 1996 by each nominee, director, executive officer named in the
Summary Compensation Table, and all directors and executive officers of the
Company as a group is set forth below:
<TABLE>
<CAPTION>
SHARES OF CLASS A PERCENT OF
NAME OF BENEFICIAL INTEREST HOLDER COMMON STOCK(1) CLASS(2)
- --------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Donald M. Koll(3).............................................. 2,436,701 4.7
Ray Wirta(4)................................................... 2,040,000 4.0
Harold A. Ellis, Jr.(5)........................................ 293,263 *
Paul C. Hegness(5)............................................. 360,571 *
J. Thomas Talbot(5)............................................ 252,000 *
Marco F. Vitulli(5)............................................ 371,000 *
Richard Ortwein(3)............................................. 2,407,340 4.7
Raymond J. Pacini(6)........................................... 2,223,434 4.3
Directors and Executive Officers as a group (8 persons
including the above named).................................... 10,384,309 17.6
</TABLE>
- ------------------------
(1) Except as otherwise indicated in the notes below, the persons indicated have
sole voting and investment power with respect to shares listed. In addition
to the specific shares indicated in the following footnotes, this column
includes shares held directly and shares subject to stock options which are
currently exercisable.
(2) These percentages are calculated assuming the conversion of all securities
convertible within 60 days into Class A Common Stock, which are held by the
executive officer or director listed above but not those held by others.
Asterisks indicate beneficial ownership of 1% or less of the class.
(3) Includes vested options to purchase 1,200,000 shares each of Class A Common
Stock and Series A Convertible Preferred Stock granted pursuant to the
Company's 1993 Stock Option/Stock Issuance Plan and which options are
subject to certain restrictions on disposition.
(4) Includes vested options to purchase 1,000,000 shares each of Class A Common
Stock and Preferred Stock granted pursuant to the Company's 1993 Stock
Option/Stock Issuance Plan and which options are subject to certain
restrictions on disposition.
(5) Includes 2,000 shares of Common Stock granted pursuant to the Company's
Restricted Stock Plan for Non-Employee Directors, and vested options to
purchase 125,000 shares each of Class A Common Stock and Preferred Stock
granted pursuant to the Company's Automatic Option Grant Program which
shares and options are subject to certain restrictions on disposition.
(6) Includes vested options to purchase 1,100,000 shares each of Class A Common
Stock and Series A Convertible Preferred Stock granted pursuant to the
Company's 1993 Stock Option/Stock Issuance Plan which options are subject to
certain restrictions on disposition.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LICENSE AND NON-COMPETITION AGREEMENTS. A wholly-owned subsidiary of the
Company has amended certain agreements with Donald M. Koll, the Chairman of the
Board and Chief Executive Officer of the Company, which agreements include a
license to use the "Koll" name and which contain certain non-compete provisions.
Pursuant to such amendments, upon completion of the Recapitalization, and the
occurrence of any one of the following (i) the resignation of Mr. Koll as an
officer and director of the Company after the first anniversary of the
Recapitalization, (ii) the resignation of Mr. Koll as an officer and director of
the Company at any time following the completion of the Recapitalization in the
event the
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Board duly resolves to authorize any sale of all or substantially all of the
properties or interests in the properties of the Company, any merger or
consolidation of the Company with any other entity, other than a merger or
consolidation in which the Company will control the merged or consolidated
entity, any dissolution of the Company, any cessation of a present operation of
the Company or any other extraordinary corporate transaction involving
properties or interests in property of the Company, (iii) the removal of Mr.
Koll from his positions as an officer or director of the Company, or (iv) the
failure to elect Mr. Koll to such offices at any future meeting of stockholders
held after completion of the Recapitalization, Mr. Koll will be released from
currently existing covenants not to compete with the Company, the Company and
its subsidiaries will be obligated to change their respective names to delete
all usage of the name "Koll". These agreements have been amended (i) in order to
delete an event of default which would occur under the License Agreement if a
Chapter 11 Case is commended, and (ii) in order to retain Mr. Koll following the
Recapitalization in light of the changed circumstances with respect to corporate
goverance and control of the Company which will result from the completion of
the Recapitalization, which circumstances did not exist at the time these
agreements were originally negotiated and executed.
CONSTRUCTION MANAGEMENT AGREEMENTS. In 1993, the Company entered into a
construction management agreement with Koll Construction, a wholly owned
subsidiary of The Koll Company, for demolition of bunkers at Bolsa Chica. In
1995, the Company also entered into a construction management agreement with
Koll Construction for infrastructure construction at Rancho San Pasqual. In
1996, the Company entered into a general contractor agreement with Koll
Construction in conjunction with a build-to-suit project for a third party
corporate office building in Nevada. During 1994, 1995 and 1996, the Company
incurred fees aggregating approximately $100,000, $500,000 and $1.7 million,
respectively, to Koll Construction in consideration for these services and
related reimbursements.
SERVICE AGREEMENTS. In September 1993, the Company entered into a Financing
and Accounting Services Agreement to provide The Koll Company 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 years ended December 31, 1994, 1995 and 1996 were approximately
$400,000, $100,000 and $100,000, respectively.
The Company also entered into a Management Information Systems and Human
Resources Services Agreement in September 1993 with Koll Management Services,
Inc., also known as Koll Real Estate Services ("KRES"), a company approximately
14% owned by a subsidiary of The Koll Company. Under this agreement, KRES
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 incurred were approximately $200,000 for each of the years ended
December 31, 1994, 1995 and 1996.
SUBLEASE AGREEMENTS. In September 1993, the Company entered into an annual
Sublease Agreement with The Koll Company to sublease a portion of The Koll
Company affiliate's office building located in Newport Beach, California. The
Company also entered into lease agreements on a month-to-month basis, which were
terminated in 1996, for office space in Northern California and San Diego,
California with KRES. Combined lease costs on these leases were approximately
$400,000 for each of the years ended December 31, 1994, 1995 and 1996.
DEVELOPMENT FEES. For the years ended December 31, 1994, 1995 and 1996, the
Company earned fees of approximately $3.5 million, $2.7 million and $1.9
million, respectively, for real estate development and disposition services
provided to partnerships in which The Koll Company and certain directors and
officers of the Company have an ownership interest. In addition, the Company
paid $300,000 to, and received $100,000 from Koll Construction for services
provided to each other in conjunction with two separate development service
transactions for the year ended December 31, 1994. The Company paid $100,000 and
$400,000 to Koll Construction for construction services in the years ended
December 31, 1995 and 1996, respectively.
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JOINT BUSINESS OPPORTUNITY AGREEMENT. The Company and The Koll Company
entered into an agreement to jointly develop business opportunities in the
Pacific Rim effective February 1, 1994. Effective February 1, 1995 The Koll
Company assigned its interests under this agreement to KRES. Under the terms of
the agreement, the Company and KRES share on a 50% - 50% basis all costs and
expenses incurred in connection with identifying and obtaining business
opportunities and will share in all revenues generated from any such
opportunities on a 50% - 50% basis. The Company's share of net loss was
$200,000, $300,000 and $100,000 for the years ended December 31, 1994, 1995 and
1996, respectively. Service contracts entered into under this agreement in 1995
included construction services from Koll Construction, for which the venture
paid $100,000 to Koll Construction for services rendered for each of the years
ended December 31, 1995 and 1996. In February 1997, KRES notified the Company
that it plans to terminate the venture effective March 5, 1997, and its interest
will be adjusted accordingly.
In March 1995, the Company and The Koll Company entered into an agreement to
jointly develop commercial development business opportunities in Mexico. Under
the terms of the agreement, the Company and The Koll Company share on a 50% -
50% basis all costs and expenses incurred in connection with identifying and
obtaining business opportunities and will share in all revenues generated from
such opportunities on a 50% - 50% basis. The Company's share of such net costs
and expenses was approximately $300,000 and $100,000 for the ten months ended
December 31, 1995 and for the year ended December 31, 1996, respectively. During
the first quarter of 1996, the Company determined that, given current economic
conditions in Mexico, it could more efficiently service opportunities in Mexico
from its offices in California and Dallas and closed its Mexico City office. The
Koll Company informed the Company that effective March 1, 1996 it would no
longer fund costs and expenses related to the pursuit of commercial development
opportunities in Mexico, and The Koll Company's interest was diluted
accordingly.
Effective April 1, 1994, the Company and KRES entered into an agreement to
combine operations in the Northwest Region in order to become a full service
real estate company in that region. This agreement was terminated effective June
30, 1996. Operating profits and losses were split on a 50% - 50% basis at the
end of each calendar year or portion thereof. The Company's share of profits was
approximately $500,000, $600,000 and $200,000 for the nine months ended December
31, 1994, the year ended December 31, 1995, and the six months ended June 30,
1996, respectively.
DIRECTOR RESIGNATION AND TERMINATION OF STOCK PLEDGE. In December of 1995,
the Company accepted pledges of all of the Common Stock and warrants convertible
into the Common Stock of the Company owned by Ms. Kathryn G. Thompson as
security against any potential construction liability which could be asserted
against the Company as a result of the 1994 acquisition by the Company of
Kathryn G. Thompson Company and in exchange for the Company releasing Ms.
Thompson from a covenant to maintain insurance with respect to such potential
liability. Ms. Thompson resigned as a director of the Company, and as an officer
of certain wholly-owned subsidiaries of the Company effective November 1, 1996.
Ms. Thompson received compensation of $300,000 during each of the years ended
December 31, 1995 and 1996, for her services rendered as an officer of these
subsidiaries. In connection with her resignation, Ms. Thompson received a
release from certain non-competition covenants and the stock pledge agreement
described above.
NOTE RECEIVABLE. In December 1994, the Company entered into a promissory
note agreement to lend up to $6 million to AV Partnership (See Note 3 to the
Audited Historic Financial Statements). The note, secured principally by an
interest in AV Partnership, bore interest on the outstanding balance at 12% per
annum. The note balance of $2 million as of December 31, 1994 was included in
other assets and was repaid along with additional advances on March 15, 1995,
the maturity date.
OTHER TRANSACTIONS. See Notes 3, 8 and 9 of the Audited Historic Financial
Statements for descriptions of other transactions and agreements with Koll,
Libra, Abex and WTI.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion addressing all of the anticipated
material federal income tax consequences of the Exchange Offers and the
Prepackaged Plan. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change, potentially
with retroactive effect. This discussion does not address the foreign, state or
local tax consequences of the transactions to be accomplished pursuant to the
Exchange Offers or Prepackaged Plan, nor does it address the tax consequences to
taxpayers subject to special treatment under the federal income tax laws
(including dealers in securities, foreign persons, life insurance companies,
tax-exempt organizations, financial institutions and taxpayers subject to the
alternative minimum tax). The discussion below is limited to the Company and
those persons who hold the Outstanding Debentures, Preferred and Common Stock as
capital assets within the meaning of Section 1221 of the Code and who also will
hold the newly issued or reclassified/combined Common Stock as capital assets.
Security holders should note that no rulings have been or will be sought from
the IRS with respect to any of the federal income tax consequences discussed
below, and no assurance can be given that the IRS will not take contrary
positions.
DUE TO THE UNCERTAINTY CONCERNING CERTAIN OF THE TAX CONSEQUENCES OF THE
TRANSACTIONS TO BE ACCOMPLISHED PURSUANT TO THE EXCHANGE OFFERS OR THE
PREPACKAGED PLAN, AND THE POSSIBLE EFFECT A SECURITY HOLDER'S PARTICULAR
SITUATION MAY HAVE ON SUCH TAX CONSEQUENCES, HOLDERS OF OUTSTANDING DEBENTURES,
SERIES A PREFERRED STOCK, CLASS A COMMON STOCK AND ALL OTHER CLASSES OF CLAIMS
OR INTERESTS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION IN THE
EXCHANGE OFFERS OR THE PREPACKAGED PLAN.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS
AND THE PREPACKAGED PLAN TO HOLDERS OF OUTSTANDING SECURITIES
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS OR THE PREPACKAGED
PLAN TO HOLDERS OF OUTSTANDING DEBENTURES.
GENERAL. In the opinion of McDermott, Will & Emery, counsel to the Company
("Tax Counsel"), the exchange of Outstanding Debentures for Common Stock will
constitute a recapitalization. Except as discussed below under "Accrued Interest
and Discount on Outstanding Debentures," a holder generally will not be allowed
to recognize any gain or loss it may realize on the exchange. A holder's tax
basis in the Common Stock received in the exchange will, immediately after the
exchange, equal the holder's aggregate tax basis in the Outstanding Debentures
exchanged therefor (less any portion of such tax basis which is attributable to
previously unpaid interest or original issue discount ("OID") on the Outstanding
Debentures). The holding period for the Common Stock received in the exchange
will generally include the period during which the Outstanding Debentures were
held.
ACCRUED INTEREST AND ORIGINAL ISSUE DISCOUNT ON OUTSTANDING
DEBENTURES. Under Section 354(a)(2)(B) of the Code, the general rule regarding
nonrecognition of gain or loss in a recapitalization will not apply to the
portion, if any, of the Common Stock deemed to be received in exchange for
previously unpaid interest (including OID) on the Outstanding Debentures which
has accrued after the holder acquired the Outstanding Debentures. If a portion
of the Common Stock is deemed to be received in payment of accrued interest (or
OID), the amount of such interest payment should be equal to the fair market
value of such portion of the Common Stock.
The IRS, in a recent Technical Advice Memorandum, has privately ruled that a
holder of indebtedness is not entitled to recognize a loss to the extent the
amount of accrued but unpaid OID exceeds the amount of OID deemed paid in a
recapitalization. Although this ruling is not binding, it represents the
position the Internal Revenue Service would be expected to take in any audit
involving an analogous transaction.
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As no Treasury regulation or other relevant guidance has been issued under
Section 354(a)(2)(B), it is unclear whether or to what extent the Common Stock
will be considered to be issued in payment of previously accrued but unpaid
interest (or OID) on the Outstanding Debentures. The legislative history of
Section 354(a)(2)(B) indicates, however, that if the Prepackaged Plan explicitly
allocates the value of the Common Stock between the principal amount of the
Outstanding Debentures and accrued interest (or OID) on the Outstanding
Debentures, both the Company and the holders should utilize that allocation for
federal income tax purposes. The Prepackaged Plan provides that the Common Stock
generally will be applied first to the stated amount of the Outstanding
Debentures, with only the excess over such principal amount applied to accrued
interest (or OID). However, there can be no assurance that the Internal Revenue
Service will agree with this allocation. Consequently, holders should consult
their own tax advisors on this issue. Moreover, holders should be aware that the
resolution of this issue will affect the determination of a holder's tax basis
and holding period for the Common Stock.
SALE OR EXCHANGE OF COMMON STOCK. Generally, if Common Stock is sold or
exchanged (including in a redemption or retirement), the disposing holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale or exchange and the holder's tax basis in the Common Stock.
Except as provided in the recapture or market discount rules (each discussed
below), any gain or loss on the sale or exchange of Common Stock will be capital
gain or loss, provided the Common Stock is held as a capital asset. Any capital
gain or loss recognized on the sale or exchange of Common Stock will be
long-term gain or loss if the Common Stock was held for more than one year
(including the period during which the holder held Outstanding Debentures if the
Common Stock is not treated as received in payment of accrued interest or OID)
as of the time of its disposition.
In the opinion of Tax Counsel, Common Stock received in exchange for
Outstanding Debentures will be subject to the recapture rules of Section
108(e)(7) of the Code. Under this provision, when Common Stock is sold or
exchanged (including in certain nonrecognition transactions), a portion of the
gain recognized (if any) will be treated as depreciation recapture and taxed to
the holder at the rates applicable to ordinary income.
MARKET DISCOUNT. Any gain realized on the exchange of Outstanding
Debentures, and any gain realized upon the sale or redemption of Common Stock,
may be affected by the "market discount" provisions of the Code. Market discount
is defined as the excess of a bond's "stated redemption price at maturity" over
the holder's tax basis in such bond immediately after its acquisition. The
market discount provisions generally require a holder of a bond acquired at a
market discount to recognize as ordinary interest income any gain realized on
the disposition of such bond to the extent of the "accrued market discount" on
such bond at the time of disposition. In addition, if a holder of a bond
acquired at a market discount receives a partial principal payment prior to
maturity, that payment may be treated as ordinary income to the extent of the
accrued market discount on the bond at the time the payment is received. These
rules will not apply to the extent the holder has made an election to include
market discount in income as it accrues.
The Code provides that "under regulations" (which have not yet been issued),
accrued market discount on a market discount bond is not recognized as ordinary
income at the time of the bond's disposition if the disposition occurs in a
"nonrecognition transaction," including a recapitalization. Instead, accrued
market discount on a market discount bond disposed of in a nonrecognition
transaction is converted into accrued market discount on the property received
in the transaction if that property qualifies as a market discount bond. If the
property received is not a market discount bond, accrued market discount on the
old market discount bond is treated as ordinary income on the disposition of the
property received in exchange therefor.
Under the market discount rules, holders of Outstanding Debentures with
accrued market discount may have been required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to purchase
or carry their Outstanding Debentures. Any interest expense which has been
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deferred by holders of Outstanding Debentures who participate in the exchange
may be claimed to the extent such holders recognize gain (including accrued
interest income or OID) in the exchange. The balance of such deferred deductions
will be deductible on disposition of the Common Stock received in the exchange.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS OR THE PREPACKAGED
PLAN TO HOLDERS OF PREFERRED STOCK. In the opinion of Tax Counsel, the exchange
of Preferred Stock for Common Stock will constitute a nontaxable
recapitalization. As such, holders of Preferred Stock will not be allowed to
recognize any gain or loss they may realize on the exchange. A holder's tax
basis in the Common Stock received in the exchange will equal its basis in the
Preferred Stock surrendered in exchange therefor. The holding period for the
Common Stock received in the exchange will include the period during which the
holder held the Preferred Stock surrendered in the exchange.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS OR THE PREPACKAGED
PLAN TO HOLDERS OF CLASS A COMMON STOCK. In the opinion of Tax Counsel, holders
of Class A Common Stock immediately prior to the Exchange Offers or the
Prepackaged Plan will not recognize any income, gain or loss for federal income
tax purposes as a result of the Exchange Offers or the Prepackaged Plan.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under the "backup
withholding" provisions of federal income tax law, unless the conditions
described in the next sentence are satisfied and except in the case of certain
foreign persons, the Exchange Agent, the Company or their paying agents, as the
case may be, will be required to withhold (i) a number of shares of Common Stock
having a fair market value equal to 31 percent of the amount deemed to be
received by a tendering holder of Outstanding Debentures in exchange for accrued
interest (or OID) on the Outstanding Debentures, (ii) 31 percent of any
dividends paid on the Common Stock and, under certain circumstances, (iii) 31
percent of any proceeds realized on any redemption or retirement of the Common
Stock. Backup withholding will not apply to a payment if the payee either (i)
provides his taxpayer identification number to the payor and certifies under
penalties of perjury that such number is correct (or that he is awaiting a
taxpayer identification number) and that (A) the payee has not yet been notified
by the Internal Revenue Service that he is subject to backup withholding as a
result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the payee that he is no longer subject to backup
withholding, or (ii) provides an adequate basis for an exemption. Therefore,
unless an exemption exists and is proved in a satisfactory manner, (i) each
tendering holder should complete and sign the Substitute Form W-9 provided in
the applicable Consent and Letter of Transmittal, and (ii) each holder of Common
Stock should, when requested, provide the Exchange Agent, the Company or their
paying agents, as the case may be, with a Form W-9 to provide the information
and certification necessary to prevent backup withholding. Backup withholding is
not an additional tax. Rather, any amount paid as backup withholding will be
creditable against the holder's income tax liability.
The Company will, where required, report to the holders of the Common Stock
and to the Internal Revenue Service the amount of any dividends paid on the
Common Stock in each calendar year and the amounts of tax withheld, if any, with
respect to such payments.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS
AND THE PREPACKAGED PLAN TO THE COMPANY
CANCELLATION OF INDEBTEDNESS INCOME. Completion of the Exchange Offers or
the Prepackaged Plan will reduce the amount of the Company's outstanding
indebtedness. A debtor generally realizes income for federal income tax purposes
when his debt is canceled in exchange for an amount less than its adjusted issue
price. Therefore, if the aggregate fair market value of the Common Stock
distributed to tendering holders of the Outstanding Debentures is less than the
adjusted issue price of such Outstanding Debentures, the Company would generally
recognize cancellation of indebtedness income. Under the Code, however, income
will not be recognized as a result of a cancellation of indebtedness if the
debtor is in
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bankruptcy or to the extent the amount of debt canceled does not exceed the
amount by which the debtor is insolvent. Insolvency is defined for this purpose
as the excess of the debtor's liabilities over the fair market value of its
assets immediately before the discharge of indebtedness. The Code also provides,
however, that if a debtor's insolvency or bankruptcy enables it to avoid
recognizing income on account of a cancellation of indebtedness, the debtor must
generally reduce its tax attributes (such as net operating losses and the basis
of assets) by an amount equal to the amount of debt canceled. These rules apply
on an entity-by-entity basis; therefore, the Company's subsidiaries will not be
required to reduce their separate tax attributes.
The Company does not expect to pay any current federal income taxes from any
discharge of indebtedness resulting from the Exchange Offers because the Company
believes that the total amount of indebtedness to be discharged will not exceed
the amount by which the Company is insolvent immediately before the discharge of
indebtedness plus the anticipated losses from operations in 1997. However, no
assurance can be given with respect to the accuracy of the Company's assessment.
Further, no assurance can be given that the IRS will agree with this assessment.
If the total amount of indebtedness canceled in the Exchange Offers were to
exceed the amount by which the Company is insolvent immediately before the
cancellation of indebtedness and projected losses from operations in 1997, the
Company may recognize income in the amount of such excess. The Company does not
expect to pay any current federal income taxes from any discharge of
indebtedness resulting from the Prepackaged Plan.
Even if the Company does not recognize income due to the cancellation of
indebtedness in the Exchange Offers or the Prepackaged Plan, its net operating
losses for the current and preceding years would be reduced and/or eliminated
and other tax attributes (such as the basis of assets) could be reduced.
LIMITATION ON NET OPERATING LOSSES.
GENERAL. Section 382 of the Code will limit the Company's use of its net
operating losses after the Exchange Offers if the Exchange Offers constitute an
"ownership change." An ownership change will occur if the percentage of the
Company's stock by value held by certain persons (including creditors who
exchange debt for stock) is increased by more than 50 percentage points over a
three-year testing period. In the opinion of Tax Counsel, the Exchange Offers
will cause an ownership change. When the ownership change occurs, the Company's
annual use of its net operating losses will be limited to the value of the
Corporation's equity immediately before the ownership change (estimated at
approximately $15 million) multiplied by the "long-term tax-exempt rate," which
is published monthly by the IRS. The long-term tax-exempt rate for ownership
changes occurring in April 1997, is 5.50%, which would limit the Company's
annual use of its net operating losses to less than $1 million per year.
If the Company has net unrealized built-in gains at the time of the Exchange
Offers, the Section 382 limitation which would otherwise apply to the Company
for any tax year following the Exchange Offers will be increased by the amount
of these built-in gains which existed at the date of the ownership change and
are recognized during the 5-year recognition period following the ownership
change. The overall limitation to this increase in the Section 382 limitation is
the amount of the Company's net unrealized built-in gains at the time of the
ownership change.
SPECIAL RULES IN THE CASE OF THE PREPACKAGED PLAN. Unless a corporation
"elects out," an exception to the general rules of Section 382 of the Code
provides that the rules described in the preceding paragraph will not apply if
the increase in ownership occurs in a case under the Bankruptcy Code and if the
shareholders and certain "qualifying creditors" of the corporation before such
increase occurs own at least 50 percent of the corporation's stock after such
increase. When this exception to the general rule applies, the corporation is
required to reduce its net operating losses by the amount of interest accrued on
any debt exchanged for stock in the bankruptcy proceeding during the year of the
proceeding and the three prior taxable years. To the extent the net operating
losses have been reduced by this interest, the attribute
156
<PAGE>
reduction of Section 108(b) does not apply. In addition, if another ownership
change occurs within two years, the corporation's use of its net operating
losses would be disallowed in its entirety.
If a corporation "elects out" of Section 382(l)(5) or if the requirements of
such section are not met, the general rules of Section 382 apply. However, in
determining the limitation placed on the corporation's annual use of its net
operating losses under those general rules, Section 382(l)(6) provides that the
value of the equity of the corporation immediately before the ownership change
is deemed to include the increase in the value of the corporation's equity
resulting from any surrender or cancellation of creditors' claims in the
bankruptcy proceeding.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THE
EXCHANGE OFFERS AND THE PREPACKAGED PLAN ARE COMPLEX. THE FOREGOING SUMMARY DOES
NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A
PARTICULAR HOLDER OF OUTSTANDING DEBENTURES, SERIES A PREFERRED STOCK OR COMMON
STOCK IN LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX
SITUATION. EACH SUCH HOLDER SHOULD CONSULT WITH SUCH HOLDER'S TAX ADVISOR AS TO
THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE TRANSACTIONS CONTEMPLATED BY
THE EXCHANGE OFFERS AND THE PREPACKAGED PLAN, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by McDermott, Will & Emery, Newport Beach, California.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996,
and the related statements of operations, cash flows and changes in
stockholders' equity for each of the three years in the period ended December
31, 1996, have been audited by Deloitte & Touche LLP, independent auditors, as
indicated in their report dated February 18, 1997, and have been included in
this Prospectus in reliance upon such report given upon the authority of said
firm as experts in accounting and auditing.
157
<PAGE>
INDEX TO AUDITED HISTORIC FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
Independent Auditor's Report............................................................................. F-2
Audited Historic Financial Statements.................................................................... F-3
Notes to Audited Historic Financial Statements........................................................... F-7
</TABLE>
F-1
<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. as of December 31, 1996 and 1995, and the related statements of operations,
cash flows and changes in stockholders' equity for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Koll Real Estate Group, Inc.
at December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
The Company carries its real estate properties at cost, net of impairment
losses. 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 5, the development of the Company's Bolsa Chica project is
dependent upon various governmental approvals and various economic factors.
Accordingly, the amount ultimately realized from such project may differ
materially from the current estimate of fair value.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 18, 1997
F-2
<PAGE>
KOLL REAL ESTATE GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1996
--------- ---------
DECEMBER 31,
--------------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Cash and cash equivalents...................................................................... $ 4.9 $ 2.1
Restricted cash................................................................................ 2.5 .2
Real estate held for development or sale....................................................... 28.1 25.2
Operating properties, net...................................................................... 4.8 --
Land held for development...................................................................... 220.0 223.5
Other assets................................................................................... 16.9 21.2
--------- ---------
$ 277.2 $ 272.2
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities................................................... $ 4.9 $ 11.7
Senior bank debt........................................................................... 16.6 7.1
Project debt............................................................................... -- 12.5
Subordinated debentures.................................................................... 173.2 195.9
Other liabilities.......................................................................... 52.9 43.9
--------- ---------
Total liabilities........................................................................ 247.6 271.1
--------- ---------
Commitments and Contingencies
Stockholders' equity:
Series A (convertible redeemable nonvoting) Preferred Stock--$.01 par value; 42,505,504
shares authorized; 40,290,735 and 38,886,626 shares outstanding, respectively............ .4 .4
Class A (voting) Common Stock--$.05 par value; 625,000,000 shares authorized; 47,534,472
and 48,938,543 shares outstanding, respectively.......................................... 2.4 2.4
Class B (convertible nonvoting) Common Stock--$.05 par value; 25,000,000 shares authorized
and no shares outstanding................................................................ -- --
Capital in excess of par value............................................................. 229.9 229.2
Deferred proceeds from stock issuance...................................................... (1.1) (.4)
Minimum pension liability.................................................................. (1.0) (.6)
Accumulated deficit........................................................................ (201.0) (229.9)
--------- ---------
Total stockholders' equity............................................................... 29.6 1.1
--------- ---------
$ 277.2 $ 272.2
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to financial statements.
F-3
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN MILLIONS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues:
Asset sales........................................................................ $ 11.1 $ 23.5 $ 33.6
Operations......................................................................... 10.3 10.5 11.2
--------- --------- ---------
21.4 34.0 44.8
--------- --------- ---------
Costs of:
Asset sales........................................................................ 10.7 21.6 30.2
Operations......................................................................... 9.5 10.3 10.0
--------- --------- ---------
20.2 31.9 40.2
--------- --------- ---------
Gross operating margin............................................................... 1.2 2.1 4.6
General and administrative expenses.................................................. 8.7 7.7 9.6
Interest expense..................................................................... 19.4 22.6 24.9
Write-down of real estate properties................................................. -- 121.1 --
Other expense (income), net.......................................................... 2.1 3.1 (1.1)
--------- --------- ---------
Loss from continuing operations before income taxes.................................. (29.0) (152.4) (28.8)
Provision (benefit) for income taxes................................................. (10.3) (35.5) .1
--------- --------- ---------
Loss from continuing operations...................................................... (18.7) (116.9) (28.9)
Discontinued operations:
Gain on disposition, net of income taxes of $.3.................................... .7 -- --
--------- --------- ---------
Net loss............................................................................. $ (18.0) $ (116.9) $ (28.9)
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per common share:
Continuing operations.............................................................. $ (0.43) $ (2.48) $ (.60)
Discontinued operations............................................................ 0.02 -- --
--------- --------- ---------
Net loss per common share............................................................ $ (0.41) $ (2.48) $ (.60)
--------- --------- ---------
--------- --------- ---------
</TABLE>
See the accompanying notes to financial statements.
F-4
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................................................... $ (18.0) $ (116.9) $ (28.9)
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization.................................................... 1.2 1.2 1.2
Non-cash interest expense........................................................ 18.0 20.5 23.2
Write-down of real estate properties............................................. -- 121.1 --
Gains on asset sales............................................................. (.4) (1.9) (3.4)
Gains on dispositions of discontinued operations................................. (.7) -- --
Proceeds from asset sales, net................................................... 10.5 22.5 31.5
Investments in real estate held for development or sale.......................... (6.1) (18.2) (20.4)
Investment in land held for development.......................................... (9.9) (7.8) (3.5)
Decrease (increase) in other assets.............................................. (.6) 11.9 (5.5)
Decrease in accounts payable, accrued and other liabilities...................... (9.7) (61.8) (2.7)
Other, net....................................................................... (.1) -- .4
--------- --------- ---------
Cash used by operating activities.............................................. (15.8) (29.4) (8.1)
--------- --------- ---------
Cash flows from investing activities:
Sale of short-term investments..................................................... 21.7 -- --
Proceeds from disposition of discontinued operation................................ 1.0 -- --
Acquisitions....................................................................... (1.2) (.3) --
--------- --------- ---------
Cash provided (used) by investing activities................................... 21.5 (.3) --
--------- --------- ---------
Cash flows from financing activities:
Borrowings of senior bank debt..................................................... -- 21.6 8.7
Repayments of senior bank debt..................................................... (7.0) (5.0) (18.2)
Borrowings of project debt......................................................... -- -- 12.5
Use of restricted cash............................................................. -- 10.0 2.3
Deposits of restricted cash........................................................ (7.5) (5.0) --
--------- --------- ---------
Cash provided (used) by financing activities................................... (14.5) 21.6 5.3
--------- --------- ---------
Net decrease in cash and cash equivalents............................................ (8.8) (8.1) (2.8)
Cash and cash equivalents--beginning of year......................................... 21.8 13.0 4.9
--------- --------- ---------
Cash and cash equivalents--end of year............................................... $ 13.0 $ 4.9 $ 2.1
--------- --------- ---------
--------- --------- ---------
</TABLE>
See the accompanying notes to financial statements.
F-5
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DEFERRED
CAPITAL PROCEEDS
IN EXCESS FROM MINIMUM
PREFERRED COMMON OF PAR STOCK PENSION ACCUMULATED
STOCK STOCK VALUE ISSUANCE LIABILITY DEFICIT TOTAL
-------- -------- --------- --------- --------- ------------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994............ $ .4 $ 2.2 $ 230.0 $ (1.5) $ (1.5) $ (66.1) $163.5
Net Loss......................... -- -- -- -- -- (18.0) (18.0)
Minimum pension liability........ -- -- -- -- (.5) -- (.5)
Valuation adjustment to deferred
proceeds from stock issuance... -- -- .1 (.1) -- -- --
Issuance of stock related to
acquisition.................... -- .1 .4 -- -- -- .5
--- --- --------- --------- --------- ------------- ------
Balance December 31, 1994.......... .4 2.3 230.5 (1.6) (2.0) (84.1) 145.5
Net loss......................... -- -- -- -- -- (116.9) (116.9)
Minimum pension liability........ -- -- -- -- 1.0 -- 1.0
Valuation adjustment to deferred
proceeds from stock issuance... -- -- (.5) .5 -- -- --
Conversion of preferred to
common......................... -- .1 (.1) -- -- -- --
--- --- --------- --------- --------- ------------- ------
Balance December 31, 1995.......... .4 2.4 229.9 (1.1) (1.0) (201.0) 29.6
Net loss......................... -- -- -- -- -- (28.9) (28.9)
Minimum pension liability........ -- -- -- -- .4 -- .4
Valuation adjustment to deferred
proceeds from stock issuance... -- -- (.7) .7 -- -- --
--- --- --------- --------- --------- ------------- ------
Balance December 31, 1996.......... $ .4 $ 2.4 $ 229.2 $ (.4) $ (.6) $ (229.9) $ 1.1
--- --- --------- --------- --------- ------------- ------
--- --- --------- --------- --------- ------------- ------
</TABLE>
See the accompanying notes to financial statements.
F-6
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS
NOTE 1--FORMATION AND BASIS OF PRESENTATION
The principal activities of Koll Real Estate Group, Inc. and its
consolidated subsidiaries (the "Company", formerly known as The Bolsa Chica
Company and Henley Properties Inc.) include: (i) obtaining zoning and other
entitlements for land it owns and improving the land for residential
development; (ii) single and multi-family residential construction in Southern
California; and (iii) 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 and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes.
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,
including its subsidiary Signal Landmark.
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. In the Merger, Henley Properties, through its Henley Group
subsidiary, received 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. In connection with this acquisition, The Bolsa Chica Company was
renamed Koll Real Estate Group, Inc.
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain amounts have been reclassified to
conform with the current year presentation.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with a maturity of three
months or less when purchased to be cash equivalents.
REAL ESTATE
Real estate held for development and land held for development (real estate
properties) are carried at cost net of impairment losses based on undiscounted
cash flows. Real estate held for sale is carried at cost, net of impairment
losses and selling costs based on undiscounted cash flows. The estimation
process involved in the determination of fair value is inherently uncertain
since it requires estimates as to future
F-7
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
fair 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.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of" ("SFAS 121"), which requires an impaired asset (real property or
intangible) to be written down to fair value. If an impairment occurs, the fair
value of an asset for purposes of SFAS 121 is deemed to be the amount a willing
buyer would pay a willing seller for such asset in a current transaction. As
required, the Company adopted SFAS 121 during the quarter ended March 31, 1996
which did not have any effect on its financial statements. The Company is
currently implementing an Exchange Offer to deleverage its capital structure as
discussed in Note 6. Under the Exchange Offer as proposed, no revaluation of
real estate properties would be required based on undiscounted cash flows. If an
alternative recapitalization is implemented by the Company pursuant to Court
confirmation of a Prepackaged Plan of reorganization, the Company would apply
the principles required by the American Institute of Certified Public
Accountant's Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("Fresh Start Accounting") and the
carrying value of real estate properties would be adjusted to fair value.
The cost of sales of multi-unit projects is generally computed using the
relative sales value method, with direct construction costs and property taxes
accumulated by phase, using the specific identification method. Interest cost is
capitalized to real estate projects during their development and construction
period.
Operating properties are generally depreciated utilizing the straight-line
method over estimated lives ranging principally from 5 to 7 years. Accumulated
depreciation amounted to $1.1 million and $1.0 million at December 31, 1995 and
1996, respectively.
INTANGIBLE ASSETS
Goodwill, which represents the difference between the purchase price of a
business acquired in 1993 and the related fair value of net assets acquired, is
amortized on a straight-line basis over 15 years. Goodwill of $7.9 million and
$7.3 million as of December 31, 1995, and 1996, respectively, is included in
other assets. The carrying value of goodwill is reviewed periodically based on
projected cash flows to be received from related operations over the remaining
amortization period of the goodwill. If such projected cash flows were less than
the carrying value of the goodwill, the difference would be charged to
operations.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company accounted for the cost of post-retirement benefits other than
pensions, which are primarily health care related, during each employee's active
working career under a plan which was frozen in 1993. As of December 31, 1995,
and 1996, the accrued unfunded costs totaled $1.3 million and $.9 million,
respectively.
F-8
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes on the liability method. 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.
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.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123") which required the Company to adopt disclosure
provisions for stock-based compensation effective January 1, 1996. The standard
defines a fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation is measured at the grant
date based on the fair value of the award and is recognized over the service
period, which is usually the vesting period. This standard encourages rather
than requires adoption of the fair value method of accounting for employee
stock-based transactions. Companies are permitted to continue to account for
such transactions under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," but will be required to disclose in
a note to the financial statements pro forma net income and net income per share
as if the new method of accounting had been applied. The Company has elected to
continue to apply APB Opinion No. 25 in its financial statements and no pro
forma disclosure was required as of and for the year ended December 31, 1996.
EARNINGS PER COMMON SHARE
The weighted average numbers of common shares outstanding for the years
ended December 31, 1994, 1995 and 1996 were 43.8 million, 47.1 million, and 48.3
million, respectively. The Series A Preferred Stock, as well as outstanding
stock options are not included in the loss per share calculation for each year
because the effect is antidilutive. The earnings per share calculations include
the effect of 2.0 million shares of Class A Common Stock issued on November 9,
1994, in connection with the acquisition of the Kathryn G. Thompson Company
(Note 3). The 1994, 1995 and 1996 earnings per share calculations reflect the
conversion of 1.2 million shares, an additional 1.0 million shares, and an
additional 1.4 million shares, respectively, of Series A Preferred Stock to an
equal number of shares of Class A Common Stock.
NOTE 3--ACQUISITIONS AND DISPOSITIONS
In November 1994, the Company acquired the stock of Kathryn G. Thompson
Company ("KGTC") and related assets. The principal activities of the acquired
business are residential real estate development and homebuilding, focusing on
the entry-level and first time move-up market segments. The principal project of
the acquired business is a 49% general partnership interest in a 230-acre
project planned for approximately 1,200 residential units in Aliso Viejo in
southern Orange County ("AV Partnership"). In connection with the acquisition,
the Company paid $1.2 million in cash and a $.5 million note, issued 2
F-9
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--ACQUISITIONS AND DISPOSITIONS (CONTINUED)
million shares of Class A Common Stock and warrants to purchase an additional 2
million shares. The Company guaranteed approximately $4.8 million of capital
contribution notes related to the Aliso Viejo partnership interest, which notes
are primarily payable out of positive net cash flow to be generated by the
partnership interest and are not due until the earlier of the completion of the
project or April 1999. In addition, in November 1994, Ms. Kathryn G. Thompson,
who was appointed as a director of the Company, entered into a covenant not to
compete with the Company with respect to real estate development, subject to
certain limited exceptions. Ms. Thompson resigned as an officer and director of
the Company effective November 1, 1996. In conjunction with her resignation, the
covenant of Ms. Thompson was released.
Summarized financial information of AV Partnership is presented below at
December 31, 1995 and 1996 and for the years then ended (in millions):
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Balance Sheet Data:
Total assets........................................................ $ 111.9 $ 102.5
Total project debt and other liabilities............................ 107.9 110.5
----------- -----------
Partners' capital................................................... $ 4.0 $ (8.0)
----------- -----------
----------- -----------
Statement of Operations Data:
Revenues............................................................ $ -- $ 44.3
Expenses............................................................ (4.1) (55.3)
----------- -----------
Net loss............................................................ $ (4.1) $ (11.0)
----------- -----------
----------- -----------
</TABLE>
The Company uses the equity method to account for its investment in AV
Partnership and accordingly, the statement of operations includes a $.1 million
loss for the period from the acquisition date through December 31, 1994, and
losses of $2.0 million and $1.2 million, respectively, for the years ended
December 31, 1995 and 1996. The loss recorded in 1996 reflects accrued interest
on guaranteed capital contribution notes only, as the Company's net investment
is $0 and the recorded liability reflects the Company's guaranty of capital
contribution notes due to the partnership discussed below. Due to a significant
shortfall in sales during 1995 versus forecast, the financial structure of the
partnership and the significant amount of participating mortgages with
preference to the Company's equity interest, the Company does not expect to
receive a financial return from this partnership and in 1995 reserved for its
guaranty of $4.8 million of capital contribution notes. In 1996, certain
information came to the Company's attention concerning the enforceability of the
Company's guarantee of $4.8 million of capital contribution notes. While the
Company has reserved for this guarantee, the Company intends to dispute the
enforceability of the guarantee. A reserve relating to the guaranteed capital
contribution notes, including accrued interest, for this partnership of $4.8
million and $6.0 million at December 31, 1995 and 1996, respectively, is
included in other liabilities.
In December 1993, the Company completed a transaction with Libra whereby it
exchanged the Company's Lake Superior Land Company subsidiary for approximately
$42.4 million in aggregate face amount of Senior Subordinated Debentures held by
Libra, and 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. The
Company also completed a separate transaction with Libra in December 1993,
whereby the Company exchanged
F-10
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--ACQUISITIONS AND DISPOSITIONS (CONTINUED)
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. The shares issued to Libra were deposited in a custodial account
for periodic sale in accordance with instructions from the Company. In February
1994, the Company received $1 million in cash from Libra in exchange for the
immediate termination of a contingent payment provision of the December 1993
transaction with Libra.
NOTE 4--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>
1995 1996
--------- ---------
<S> <C> <C>
Residential.................................................................. $ 26.3 $ 12.4
Commercial/industrial........................................................ 1.8 12.8
--------- ---------
$ 28.1 $ 25.2
--------- ---------
--------- ---------
</TABLE>
NOTE 5--LAND HELD FOR DEVELOPMENT
Following completion of the Company's sale of approximately 880 lowland
acres of its Bolsa Chica property to the State of California on February 14,
1997 as described below, land held for development consists of approximately 310
acres located in Orange County, California, adjacent to the Pacific Ocean,
surrounded by the City of Huntington Beach and approximately 35 miles south of
downtown Los Angeles ("Bolsa Chica").
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 December 1994, the Orange County Board of Supervisors
unanimously approved a Local Coastal Program ("LCP") for up to 3,300 units of
residential development and a wetlands restoration plan for this property. The
3,300-unit LCP provides for development of up to 2,500 homes on the mesa (high
ground) portion of the property and up to 900 homes on the lowland portion of
the property, not to exceed 3,300 homes in the aggregate. The related
Development Agreement was unanimously approved by the Orange County Board of
Supervisors in April 1995. The California Coastal Commission approved the LCP in
January 1996 subject to suggested modifications. These suggested modifications
were approved by the Orange County Board of Supervisors in June 1996, and on
July 11, 1996 the California Coastal Commission certified the LCP for the
Company's Bolsa Chica property.
On February 14, 1997, the Company completed the sale of approximately 880
lowland acres owned by the Company at Bolsa Chica to the California State Lands
Commission for $25 million and will, therefore, forego opportunities to develop
900 homes in the lowland. Under an interagency agreement among various state and
federal agencies, these agencies have agreed to restore the Bolsa Chica lowlands
utilizing escrowed funds from the Ports of Los Angeles and Long Beach. A reserve
of $1.5 million has been included in other liabilities as of December 31, 1996,
with respect to potential costs payable by the Company under agreements
negotiated with the State Lands Commission and certain oil field operators
regarding environmental clean-up at the Bolsa Chica lowlands. In connection with
the lowlands sale, the Company paid $833,333 of these costs at closing, leaving
a reserve balance of $700,000 on its financial statements for potential
additional clean-up costs.
F-11
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LAND HELD FOR DEVELOPMENT (CONTINUED)
The Company is now pursuing the secondary permitting process for the mesa
through the County of Orange in order to implement the approved development plan
for up to 2,500 homes. This process is currently expected to be completed in the
fourth quarter of 1997. The Company expects, subject to its ability to obtain
financing on a commercially reasonable and timely basis, and subject to
obtaining the secondary permits, to commence infrastructure construction on the
mesa in the fourth quarter of 1997. However, due to certain 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 start of construction could be delayed. In this regard,
on January 13, 1995, two lawsuits challenging the Orange County Board of
Supervisors' approval of the Bolsa Chica project were filed in Orange County
Superior Court (the "Court"). Although the lawsuits differed in the particular
issues they raised, generally they each alleged, among other things, violations
of the California Environmental Quality Act and violations of the California
Government Code planning and zoning laws. One lawsuit, which was brought by the
school districts, has been settled with an agreement regarding school fees to be
paid to the plaintiff districts. In the other "environmental lawsuit", the
plaintiffs did not seek monetary damages, but instead asked the Court to set
aside the approval of the Bolsa Chica project. In February 1996, the Court ruled
on the "environmental lawsuit", rejecting all but one of the arguments, and
requiring an additional 45-day public review and comment period regarding the
tidal inlet portion of the wetlands restoration plan, which was completed in the
second quarter of 1996. The County reapproved the plan without change in June
1996. On January 24, 1997 this lawsuit was dismissed by the Court. In filing the
judgement, the Court ruled that the County had fulfilled all requirements for
approval of the Bolsa Chica development plans, without the Court requiring any
change to the plans.
In addition, on March 6, 1996 and March 11, 1996 two lawsuits were filed
against the Coastal Commission, the Company and other Bolsa Chica landowners as
real parties in interest, alleging that the Coastal Commission's approval of the
LCP is not in compliance with the Coastal Act and other statutory requirements.
These lawsuits seek to set aside the approval of the Bolsa Chica project, and
are currently scheduled to be tried in April 1997. Given the recent sale of the
Bolsa Chica lowlands described above, the primary issues which were the subject
of this litigation have been eliminated. Furthermore, the plaintiffs in one of
these lawsuits have informed the Company that given the sale of the lowlands,
they will work with the Company in an effort to resolve the remaining issues of
their lawsuit. The Company believes that the remaining litigation issues which
challenge development of the Bolsa Chica mesa are without merit. Furthermore,
the Company does not believe that these lawsuits will be successful in
permanently preventing the Company from completing the Bolsa Chica project,
however, there can be no assurance in this regard or that these suits will not
result in delays.
In 1995, in accordance with Statement of Financial Accounting Standard No.
67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects"
("SFAS 67"), the Company carried real estate properties, including Bolsa Chica,
at the lower of cost or net realizable value, with net realizable value defined
as the undiscounted estimated future cash flows from the project. As of December
31, 1995, the Company's review of the current estimated cash flows for Bolsa
Chica indicated that a reserve of approximately $113.6 million was required to
adjust the carrying value of Bolsa Chica to its then estimated net realizable
value of $220 million pursuant to SFAS 67. The valuation reserve primarily
reflects management's decision in the fourth quarter of 1995 (following the
approval of additional funding by the Ports) to make completing the sale of the
lowlands to a government agency a strategic goal of the Company, along with
updated estimates of future cash flows for the mesa portion of the project
reflecting recent market conditions. During 1995, the Southern California
residential real estate market continued to
F-12
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LAND HELD FOR DEVELOPMENT (CONTINUED)
decline, affecting estimated sale pricing, housing mix and number of units
planned. The Company's decision in 1995 to pursue a sale of the lowlands was
expected to, and subsequently has, resulted in the elimination of up to 900
units previously planned in the lowlands, which, in turn, resulted in a
significant reduction as of December 31, 1995 in projected future cash flows
previously anticipated from the Bolsa Chica project. 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 6--DEBT
SENIOR BANK DEBT
In December 1994, the Company entered into a letter of credit and
reimbursement agreement with Nomura Asset Capital Corporation ("Nomura") to fund
payment of the settlement of the Abex litigation in excess of $7.5 million to be
funded by the Company. In February 1995, the Company paid an aggregate of $22
million to settle the litigation, of which $15.5 million was funded by
borrowings under the letter of credit and reimbursement agreement and the
balance of $6.5 million from restricted cash. Since this financing agreement was
solely for the purpose described above, no additional funds are available under
this facility. The Company repaid $8.4 million of such borrowings during 1996.
In December 1994, the Company also entered into a construction loan agreement
with Nomura to partially fund infrastructure construction at Rancho San Pasqual,
the Company's golf/residential property in San Diego County. The Company
borrowed $1.3 million and $8.7 million during 1995 and 1996, respectively, under
this loan agreement. As required under the construction loan agreement, the
Company deposited $5 million into an escrow account in January 1995 to be used
solely for the funding of infrastructure construction costs at Rancho San
Pasqual, of which $2.5 million was included in restricted cash on December 31,
1995. The Company repaid $.2 million and $9.8 million of borrowings under the
construction loan agreement during 1995 and 1996, respectively.
The remaining borrowings outstanding as of December 31, 1996 under the
letter of credit and reimbursement agreement were principally secured by a deed
of trust on Rancho San Pasqual and a pledge and security interest in the
Company's interest in Fairbanks Highlands, LLC, a joint venture with Taylor
Woodrow Homes, Inc. formed on December 6, 1996, along with a pledge of the stock
of Signal Bolsa Corporation. Amounts outstanding under the letter of credit and
reimbursement agreement bear interest at 30 Day LIBOR plus 4%, which was 9.69%
as of December 31, 1996. The agreements initially required principal prepayments
equal to 80% of the net proceeds from any sales at Rancho San Pasqual, Fairbanks
Highlands, and principal prepayments equal to 50% of the net proceeds from
Rancho San Pasqual assessment district reimbursements. After March 12, 1996, the
agreements require principal repayments equal to 90% of the net proceeds from
any sales at Rancho San Pasqual, Fairbanks Highlands and Bolsa Chica. The
agreements contain certain restrictive covenants that limit, among other things,
(i) the incurrence of indebtedness, (ii) the making of investments and (iii) the
creation or incurrence of liens on existing and future assets of the Company.
The agreements also contain various financial covenants and events of default
customary for such agreements. In December 1996, the Company exercised its
option to extend the initial maturity date under the loans from December 20,
1996 to December 22, 1997. On February 18, 1997 the outstanding Nomura loan
balance was fully repaid with a portion of the proceeds from the sale of the
Bolsa Chica lowlands and the loan agreements were terminated.
In December 1994, the Company entered into a $6.5 million construction loan
agreement with the Bank of Boston, principally secured by resort and residential
property in New Hampshire ("Wentworth").
F-13
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--DEBT (CONTINUED)
The Company borrowed $4.8 million under this loan agreement and applied $4.2
million in proceeds from sales of residential homes from Wentworth to satisfy
required prepayments, resulting in an outstanding balance of $.6 million on
November 2, 1995, when the Company sold all of its interest in the Wentworth
residential land to its development manager for $4.1 million in cash plus the
buyer's prepayment of the outstanding balance under the Bank of Boston credit
agreement, which terminated this credit facility.
PROJECT DEBT
During 1996, the Company entered into several contracts to develop and
construct commercial properties on a build-to-suit basis. Subsidiaries of the
Company have entered into three construction loan agreements aggregating $31.9
million, which have been guaranteed by the parent, to finance these projects. As
of December 31, 1996, a total of $12.5 million was drawn and $19.4 million was
available under these construction loan agreements. The loans bear interest at
prime plus .75% or 30-day LIBOR +2% and have maturity dates between June and
August 1997.
In addition, as of December 31, 1996, one development project is owned by an
unconsolidated partnership in which a subsidiary of the Company is the general
partner. The partnership has entered into a construction loan agreement for $3.5
million, which has also been guaranteed by the parent. Under this construction
loan agreement, $1.3 million was drawn and $2.2 million was available as of
December 31, 1996.
SUBORDINATED DEBENTURES
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 Company's 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002 (the "Senior Subordinated
Debentures"); and (ii) $1.50 aggregate principal amount of the 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002 (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.
The Debentures were comprised of the following as of December 31 (in
millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Senior Subordinated Debentures............................................. $ 138.2 $ 155.3
Subordinated Debentures.................................................... 34.6 38.8
--------- ---------
Total face amount........................................................ 172.8 194.1
Less unamortized discount.................................................. (5.6) (5.0)
Plus accrued interest...................................................... 6.0 6.8
--------- ---------
$ 173.2 $ 195.9
--------- ---------
--------- ---------
</TABLE>
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
F-14
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--DEBT (CONTINUED)
certain conditions. The Debentures prohibit the payment of any dividends or
other distributions on the Company's equity securities.
In November 1996, representatives of certain holders of the Debentures
indicated to the Company that they intend to support a de-leveraging of the
Company's capital structure through a voluntary exchange of the Debentures for
equity (the "Exchange Offer"). Under the proposed Exchange Offer,
Senior-Subordinated holders and Subordinated holders would, subject to the
successful completion of the Exchange Offer, receive 56 shares and 28 shares,
respectively, (after consolidation of the preferred and common stock and the
proposed reverse split discussed below) for each $1,000 of principal amount
outstanding as of March 15, 1997, after taking into account the next scheduled
"in-kind" interest payment. The solicitation of Debentureholders, as well as
stockholder approval, will not commence until the Securities and Exchange
Commission ("SEC") completes its review of a registration statement to be filed
by the Company with the SEC in February 1997, and the entire
solicitation/exchange offer process is not expected to be completed prior to
June 1997.
A 100% acceptance rate for the Exchange Offer would result in 90% of the
Company's equity, in the form of newly issued shares of common stock, being held
by the Debentureholders (approximately 80% by Senior-Subordinated and 10% by
Subordinated). The remaining 10% of the Company's equity would be owned, in the
aggregate, by current preferred and common stockholders (approximately 5.8% by
preferred stockholders and 4.2% by common stockholders). A condition to closing
the Exchange Offer will be that a minimum of 90% of the of the face amount
outstanding of the Debentures are tendered to the Company. The Company expects
to solicit the consent of its common and preferred stockholders to the Exchange
Offer and to the consolidation of the preferred and common stock into a single
class of common stock, through the issuance of 1.75 shares of Common Stock for
each outstanding share of Preferred Stock. In addition, all stockholders will be
asked to approve a one for one hundred (1:100) reverse stock split, and the
common stockholders will be asked to elect six new directors who have been
nominated by a committee of the Debentureholders and to elect four of the
Company's existing directors to be nominated by the Company.
At December 31, 1996 the estimated aggregate fair value of the Company's
Debentures was within a range of approximately $105 million to $115 million
based on quotes from certain bond traders making a market in the Debentures.
However, due to the low trading volume and illiquid market for the Debentures,
such quotes 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 for interest on senior bank debt of $1.4
million, $1.4 million and $1.5 million for the years ended December 31, 1994,
1995 and 1996, respectively.
F-15
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--OTHER LIABILITIES
Other liabilities were comprised of the following as of December 31 (in
millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Net deferred tax liabilities (Note 8)........................................ $ 10.0 $ 10.0
Other tax liabilities (Note 8)............................................... 4.5 4.5
Accrued pensions and benefits................................................ 10.7 5.6
Guaranty of capital contribution notes....................................... 4.8 6.0
Accrued indemnity obligations................................................ 18.7 17.8
Majority interest and other liabilities of consolidated partnership.......... 4.2 --
--------- ---------
$ 52.9 $ 43.9
--------- ---------
--------- ---------
</TABLE>
During 1996, the Company terminated certain group annuity contracts for the
pension plan of a discontinued operation, and experienced favorable investment
returns on pension assets, resulting in a significant decrease in accrued
pensions and benefits.
NOTE 8--INCOME TAXES
The tax effects of items that gave rise to significant portions of the
deferred tax accounts are as follows for the years ended December 31 (in
millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Real estate held for development or sale and operating properties
(due to asset revaluations and interest capitalized for tax
purposes).......................................................... $ 33.4 $ 13.8
Accruals not deductible until paid................................... 6.6 6.1
Net operating loss carryforwards..................................... 64.7 94.1
Other................................................................ 1.7 .4
Valuation allowance.................................................. (59.2) (71.3)
--------- ---------
$ 47.2 $ 43.1
--------- ---------
--------- ---------
Deferred tax liabilities:
Land held for development, (principally due to accounting for a prior
business combination, partially offset by the asset revaluation in
1995)................................................................ $ 55.0 $ 51.2
Other................................................................ 2.2 1.9
--------- ---------
$ 57.2 $ 53.1
--------- ---------
--------- ---------
</TABLE>
Net deferred tax liabilities at December 31, 1996 are comprised entirely of
state net deferred tax liabilities.
At December 31, 1996, the Company had available tax net operating loss
carryforwards of approximately $282 million which expire in the years 2004
through 2011 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 in 1992. As a result,
approximately $23 million of the Company's net operating
F-16
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES (CONTINUED)
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 which ends July 16, 1997. Additionally, the use
of the Company's net operating loss carryforwards will be further limited if the
Exchange Offer is completed.
The following is a summary of the income tax provision (benefit) applicable
to losses from continuing operations for the years ended December 31 (in
millions):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Income Tax Provision (Benefit):
Current................................................... $ (.3) $(10.1) $ .1
Deferred.................................................. (10.0) (25.4) --
------ ------ ------
$(10.3) $(35.5) $ .1
------ ------ ------
------ ------ ------
</TABLE>
Cash payments for federal, state and local income taxes were approximately
$.6 million, $.3 million and $.2 million for the years ended December 31, 1994,
1995 and 1996, respectively. Tax refunds received for the years ended December
31, 1994, 1995 and 1996 were approximately $.8 million, $.4 million and $.2
million, respectively.
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>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Benefit for income taxes at statutory rate........................ $ (10.2) $ (53.3) $ (10.1)
State income taxes, net........................................... (.1) .6 (.1)
Increase in valuation allowance................................... -- 28.3 12.1
Reduction in other tax liabilities................................ -- (10.0) --
All other items, net.............................................. -- (1.1) (1.8)
--------- --------- ---------
$ (10.3) $ (35.5) $ .1
--------- --------- ---------
--------- --------- ---------
</TABLE>
TAX SHARING AGREEMENTS
Henley Group and Abex, a former subsidiary of Henley Group whose stock was
distributed to stockholders of Henley Group in July 1992, 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.
F-17
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES (CONTINUED)
The Internal Revenue Service ("IRS") has completed its examinations of the
tax returns of the Company and its consolidated subsidiaries, including formerly
affiliated entities, for the years ended December 31, 1989, 1990 and 1991. With
respect to each examination, the IRS has proposed material audit adjustments.
The Company disagrees with the positions taken by the IRS and has filed a
protest with the IRS to vigorously contest the proposed adjustments. After
review of the IRS's proposed adjustments, the Company estimates that, if upheld,
the adjustments could result in Federal tax liability, before interest, of
approximately $17 million (net of amounts which may be payable by former
affiliates pursuant to tax sharing agreements). The IRS proposed adjustments, if
upheld, could also result in a disallowance of up to $147 million of available
net operating loss carryforwards, of which none are recognized, after
consideration of the valuation allowance, as of December 31, 1996. The Company
has not determined the extent of potential accompanying state tax liability
adjustments should the proposed IRS adjustments be upheld. The Company's protest
was filed in August 1995 and is still being considered by the IRS Appeals
Division. Management currently believes that the IRS's positions will not
ultimately result in any material adjustments to the Company's financial
statements. The Company is prepared to pursue all available administrative and
judicial appeal procedures with regard to this matter and the Company is advised
that its dispute with the IRS could take up to five years to resolve.
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. Under the agreements, the
Company was charged with the responsibility for paying $25 million, plus amounts
payable with respect to liabilities which are attributable to certain of the
Company's subsidiaries. The Company's $25 million limitation amount was accrued
in the Company's financial statements in December 1989, and following payments
made in the first quarter of 1993, $22 million remained as of December 31, 1994.
In January 1993, the IRS completed its examination of the Federal tax returns of
WTI for the periods May 1986 through December 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. In March 1994, prior to the June 1994 trial
date, WTI and the IRS entered into a Stipulation of Settlement that resulted in
a tax payable together with interest of approximately $72 million.
In April 1994, the Company contested the alleged obligation and asserted
various defenses to making any payment under these agreements and Abex and WTI
filed suit in Delaware Chancery Court ("the Court") against the Company seeking,
among other things, declaratory relief, specific performance, and monetary
damages for the Company's alleged failure to pay approximately $21 million
claimed to be owed pursuant to tax sharing agreements entered into in 1988 and
1989, plus pre-judgment interest and attorneys' fees. The Company vigorously
defended its position with respect to the nonpayment of the alleged tax sharing
obligation, filing suit in the Supreme Court of the state of New York against
WTI and Abex. In December 1994, the Court decided against the Company, prompting
the Company to file an appeal in January 1995. In February 1995, the Company
entered into an agreement with WTI and Abex to settle both state actions in
order to avoid the ongoing cost of litigation. Under the terms of the
settlement, the Company paid an aggregate of $22 million, of which $15.5 million
was funded by borrowings under a financing agreement with a major financial
institution (Note 6) and $6.5 million was funded by the Company's restricted
cash. The Company also settled other disputes with Abex as described in Note 9.
F-18
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--COMMITMENTS AND CONTINGENCIES
Pursuant to a 1992 transition agreement, amended in March 1993, each of Abex
and the Company provided to the other certain administrative support services
until March 31, 1994. The amendment provided for the Company to pay $.5 million
quarterly for such services and for the termination of the New Hampshire
facilities lease on March 31, 1993. Accordingly, the Company reimbursed Abex
approximately $1.8 million for the year ended December 31, 1993. Fees accrued
but not paid in the fourth quarter of 1993 and the first quarter of 1994
totaling $1.0 million were waived by Abex in connection with the February 1995
settlement with Abex described in Note 8.
LEGAL PROCEEDINGS
See Note 5 for a discussion of certain litigation relating to the Orange
County Board of Supervisors' and California Coastal Commission's approvals of
the Bolsa Chica project.
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
financial condition or results of operations.
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.
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 all claims that may be asserted against UOP by EPA or other
parties with respect to the site. EPA has proposed a clean-up 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 $6.2 million. EPA estimates
that it has spent approximately $3.9 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. In June 1995, EPA
proposed a CERCLA settlement pursuant to which UOP pay approximately between
$2.6 and $3.3 million in exchange for a limited covenant by EPA not to sue UOP
in the future. The Company, without admission of any obligation to UOP, has
determined to vigorously defend UOP's position that the EPA's proposed cleanup
plan is unnecessary and inconsistent with the requirements of CERCLA given that
the EPA's own Site Assessment and Record of Decision found no immediate threat
to human health. In the Company's view the proposed remediation costs would be
in excess of any resulting benefits.
F-19
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS
CONSTRUCTION MANAGEMENT AGREEMENTS
In 1993, the Company entered into a construction management agreement with
Koll Construction, a wholly owned subsidiary of The Koll Company, for demolition
of bunkers at Bolsa Chica. In 1995, the Company also entered into a construction
management agreement with Koll Construction for infrastructure construction at
Rancho San Pasqual. In 1996, the Company entered into a general contractor
agreement with Koll Construction in conjunction with a build-to-suit project for
a third-party corporate office building in Nevada. During 1994, 1995 and 1996
the Company incurred fees aggregating approximately $100 thousand, $500 thousand
and $1.7 million, respectively, to Koll Construction in consideration for these
services and related reimbursements.
SERVICE AGREEMENTS
In September 1993, the Company entered into a Financing and Accounting
Services Agreement to provide The Koll Company 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
years ended December 31, 1994, 1995 and 1996 were approximately $400 thousand,
$100 thousand and $100 thousand, respectively.
The Company also entered into a Management Information Systems and Human
Resources Services Agreement in September 1993 with Koll Management Services,
Inc., also known as Koll Real Estate Services ("KRES"), a company approximately
14% owned by a subsidiary of The Koll Company. Under this agreement, KRES
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 incurred were approximately $200 thousand for each of the years
ended December 31, 1994, 1995 and 1996.
SUBLEASE AGREEMENTS
In September 1993, the Company entered into an annual Sublease Agreement
with The Koll Company to sublease a portion of The Koll Company affiliate's
office building located in Newport Beach, California. The Company also entered
into lease agreements on a month-to-month basis, which were terminated in 1996,
for office space in Northern California and San Diego, California with KRES.
Combined lease costs on these leases were approximately $400 thousand for each
of the years ended December 31, 1994, 1995, and 1996, respectively.
DEVELOPMENT FEES
For the years ended December 31, 1994, 1995, and 1996 the Company earned
fees of approximately $3.5 million, $2.7 million, and $1.9 million respectively,
for real estate development and disposition services provided to partnerships in
which The Koll Company and certain directors and officers of the Company have an
ownership interest. In addition, the Company paid approximately $300 thousand
to, and received $100 thousand from Koll Construction for services provided to
each other in conjunction with two separate development service transactions for
the year ended December 31, 1994. The Company paid $100 thousand and $400
thousand to Koll Construction for construction services in the years ended
December 31, 1995 and 1996, respectively.
F-20
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS (CONTINUED)
JOINT BUSINESS OPPORTUNITY AGREEMENT
The Company and The Koll Company entered into an agreement to jointly
develop business opportunities in the Pacific Rim effective February 1, 1994.
Effective February 1, 1995 The Koll Company assigned its interests under this
agreement to KRES. Under the terms of the agreement, the Company and KRES share
on a 50%-50% basis all costs and expenses incurred in connection with
identifying and obtaining business opportunities and will share in all revenues
generated from any such opportunities on a 50%-50% basis. The Company's share of
net loss was approximately $200 thousand, $300 thousand and $100 thousand for
the years ended December 31, 1994, 1995 and 1996, respectively. Service
contracts entered into under this agreement in 1995 included construction
services from Koll Construction, for which the venture paid approximately $100
thousand to Koll Construction for services rendered for each of the years ended
December 31, 1995 and 1996. In February 1997, KRES notified the Company that it
plans to terminate the venture effective March 5, 1997, and its interest will be
adjusted accordingly.
In March 1995, the Company and The Koll Company entered into an agreement to
jointly develop commercial development business opportunities in Mexico. Under
the terms of the agreement, the Company and The Koll Company share on a 50%-50%
basis all costs and expenses incurred in connection with identifying and
obtaining business opportunities and will share in all revenues generated from
such opportunities on a 50%-50% basis. The Company's share of such net costs and
expenses was approximately $300 thousand and $100 thousand for the ten months
ended December 31, 1995, and for year ended December 31, 1996, respectively.
During the first quarter of 1996, the Company determined that, given current
economic conditions in Mexico, it could more efficiently service opportunities
in Mexico from its offices in California and Dallas and closed its Mexico City
office. The Koll Company informed the Company that effective March 1, 1996 it
would no longer fund costs and expenses related to the pursuit of commercial
development opportunities in Mexico, and The Koll's Company interest was diluted
accordingly.
Effective April 1, 1994, the Company and KRES entered into an agreement to
combine operations in the Northwest Region in order to become a full service
real estate company in that region. This agreement was terminated effective June
30, 1996. Operating profits and losses were split on a 50%-50% basis at the end
of each calendar year or portion thereof. The Company's share of profits was
approximately $500 thousand, $600 thousand and $200 thousand for the nine months
ended December 31, 1994, the year ended December 31, 1995, and the six months
ended June 30, 1996, respectively.
STOCK PLEDGE BY DIRECTOR
In December of 1995, the Company accepted pledges of all of the common stock
and warrants convertible into the common stock of the Company owned by Ms.
Kathryn G. Thompson as security against any potential construction liability
which could be asserted against the Company as a result of the 1994 acquisition
by the Company of KGTC and in exchange for the Company releasing Ms. Thompson
from a covenant to maintain insurance with respect to such potential liability.
Ms. Thompson resigned as a director of the Company and as an officer of certain
wholly-owned subsidiaries of the Company effective November 1, 1996. Ms.
Thompson received compensation of $300,000 during each of the years ended
December 31, 1995 and 1996 for her services rendered as an officer of these
subsidiaries. In connection with her resignation, Ms. Thompson received a
release from certain non-competition covenants and a release of the stock pledge
described above.
F-21
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS (CONTINUED)
OTHER TRANSACTIONS
See Notes 3, 8 and 9 for descriptions of other transactions and agreements
with Koll, Libra, Abex and WTI.
NOTE 11--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. The benefit accrual for all
participants was terminated on December 31, 1993. In November 1996, the assets
held in trust under the Company's supplemental and executive retirement plan
were paid to participants in exchange for each participant's release of any
future benefit claims under this plan, resulting in termination of the executive
plan and the curtailment gain recorded in 1996. Net periodic pension cost for
the years ended December 31 consisted of the following (in millions):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost................................................ $ -- $ -- $ --
Interest cost............................................... .5 .5 .5
Actual return on assets..................................... .1 (1.4) (.8)
Net amortization and deferral............................... (.5) 1.0 .4
Gain on curtailment......................................... -- -- (.3)
------ ------ ------
Net periodic pension cost (income).......................... $ .1 $ .1 $ (.2)
------ ------ ------
------ ------ ------
</TABLE>
The funded status and accrued pension cost at December 31, 1995 and 1996 for
defined benefit plans were as follows (in millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested...................................................................... $ (6.9) $ (5.3)
Nonvested................................................................... -- --
--------- ---------
Accumulated benefit obligation................................................ $ (6.9) $ (5.3)
--------- ---------
--------- ---------
Projected benefit obligation.................................................. $ (6.9) $ (5.3)
Plan assets at fair value..................................................... 5.9 5.0
--------- ---------
Projected benefit obligation in excess of plan assets......................... (1.0) (.3)
Unrecognized net loss......................................................... 1.0 .7
Adjustment required to recognize additional minimum liability................. (1.0) (.7)
--------- ---------
Accrued pension cost.......................................................... $ (1.0) $ (.3)
--------- ---------
--------- ---------
</TABLE>
The development of the projected benefit obligation for the plans at
December 31, 1994, 1995, and 1996 is based on the following assumptions: a
discount rate of 7%, and an expected long-term rate of return on assets of 9%.
Assets of the plans are invested primarily in stocks, bonds, short-term
securities and cash equivalents.
F-22
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--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. During 1994, 1995 and 1996, 1.2
million, an additional 1.0 million, and an additional 1.4 million shares,
respectively, of Series A Preferred Stock were converted into an equal number of
shares of Class A Common Stock.
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 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.
In November 1994 the Company issued 2 million shares of its Class A Common
Stock and warrants for the purchase of an additional 2 million shares in
connection with the acquisition of the Kathryn G. Thompson Company. The warrants
have an exercise price of $.25, are exercisable over a ten year period, vest in
equal installments over five years and are subject to certain cancellation
rights of the Company.
Under the Company's Indentures for the Debentures (Note 6), 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. Since the Series A Preferred
Stock became convertible in July 1994, approximately 3.6 million shares have
been converted into an equal number of shares of Class A Common Stock.
NOTE 13--STOCK PLANS
1993 STOCK OPTION/STOCK ISSUANCE PLAN
The 1993 Stock Option/Stock Issuance Plan ("1993 Stock Option Plan") was
approved 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 were incorporated into the 1993 Stock Option Plan
F-23
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--STOCK PLANS (CONTINUED)
upon its approval. Under the 1993 Stock Option Plan, 7.5 million shares each
(including 3 million shares each originally authorized under the 1988 Stock
Plan) of Series A Preferred Stock and Class A Common Stock were 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 Stock Option 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 Stock Option 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.
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 vest incrementally over the
individual's period of Board service during the year for which the election is
in effect. During the year ended December 31, 1994, 126,856 shares were issued
under this provision. No shares were issued under this provision during 1995 or
1996.
F-24
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--STOCK PLANS (CONTINUED)
A summary of the status of the Company's stock option plans for the three
years ended December 31, 1996, follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PRICE PER SHARE
---------------------- ------------------------
CLASS A SERIES A CLASS A SERIES A
COMMON PREFERRED COMMON PREFERRED
OPTIONS OUTSTANDING STOCK STOCK STOCK STOCK
- ------------------------------------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
December 31, 1993......................... 6,350,000 6,350,000 .23 - .41 .14 - .41
Granted................................. -- -- -- --
Exercised............................... -- -- -- --
Cancelled............................... -- -- -- --
---------- ---------- ----------- -----------
December 31, 1994......................... 6,350,000 6,350,000 .23 - .41 .14 - .41
Granted................................. -- -- -- --
Exercised............................... -- -- -- --
Cancelled............................... (75,000) (75,000) .41 .41
---------- ---------- ----------- -----------
December 31, 1995......................... 6,275,000 6,275,000 $ .23 - .41 $ .14 - .41
Granted................................. -- -- -- --
Exercised............................... -- -- -- --
Cancelled............................... -- -- -- --
---------- ---------- ----------- -----------
December 31, 1996......................... 6,275,000 6,275,000 $ .23 - 41 $ .14 - 41
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Options exercisable at December 31,
1996.................................... 6,275,000 6,275,000 $ .23 - 41 $ .14 - 41
Options available at December 31, 1996.... 1,098,144 1,225,000
</TABLE>
In connection with the Exchange Offer, the outstanding options set forth
above will be cancelled and new options comprising 6% of the Company's fully
diluted equity will be granted based on the average trading price for 20-days
following completion of the Exchange Offer.
F-25
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14--UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of quarterly financial information for 1995 and
1996 (in millions, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FULL YEAR
--------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
1996
Revenues (a)................................. $ 2.7 $ 16.0 $ 6.4 $ 19.7 $ 44.8
Cost of sales (a)............................ 2.5 14.3 5.2 18.2 40.2
Loss from continuing operations.............. (7.9) (6.7) (7.6) (6.7) (28.9)
Net loss..................................... (7.9) (6.7) (7.6) (6.7) (28.9)
Loss per common share........................ (.17) (.14) (.16) (.14) (.60)
Weighted average common shares
outstanding (b)............................ 47.7 48.0 48.5 48.9 48.3
1995
Revenues (c)................................. $ 6.4 $ 5.7 $ 6.8 $ 15.1 $ 34.0
Cost of sales (c)............................ 7.3 5.2 5.9 13.5 31.9
Loss from continuing operations (d).......... (5.7) (2.6) (8.5) (100.1) (116.9)
Net loss (d)................................. (5.7) (2.6) (8.5) (100.1) (116.9)
Loss per common share........................ (.12) (.06) (.18) (2.11) (2.48)
Weighted average common shares
outstanding (b)............................ 46.6 47.0 47.3 47.5 47.1
</TABLE>
- ------------------------
(a) The Company recorded revenues and cost of sales of approximately $10.1
million from residential lot sales at Rancho San Pasqual primarily during
the second and fourth quarters. In addition, the second quarter includes the
sale of the Eagle Crest golf course at Rancho San Pasqual, and the fourth
quarter includes the sale of Fairbanks Highlands as a result of the
formation of a joint venture in which the Company has a continuing interest.
(b) The Series A Preferred Stock is not included in the calculation of weighted
average shares outstanding because the effect is antidilutive.
(c) The Company recorded revenues and cost of sales of approximately $8.0
million and $8.1 million, respectively, in the fourth quarter of 1995 from
the sale of residential land and the marina at its Wentworth By The Sea
project in New Hampshire.
(d) The Company recorded asset revaluations of $7.5 million and $116.6 million,
which were partially offset by income tax benefits of $2.6 million and $24.0
million, respectively, in the third and fourth quarters of 1995.
F-26
<PAGE>
APPENDIX A
PREPACKAGED PLAN OF REORGANIZATION
A-1
<PAGE>
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
<TABLE>
<S> <C>
In re
Chapter 11
KOLL REAL ESTATE
GROUP, INC. Case No. 97-
Honorable
Debtor. Bankruptcy Judge
</TABLE>
PREPACKAGED PLAN OF REORGANIZATION
OF KOLL REAL ESTATE GROUP, INC.
A-2
<PAGE>
PREPACKAGED PLAN OF REORGANIZATION
OF KOLL REAL ESTATE GROUP, INC.
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the following terms shall have the
following meanings when used in initially capitalized form in the Prepackaged
Plan. Such meanings shall be equally applicable to both the singular and plural
forms of such terms. The words "herein," "hereof" and "hereunder" and other
words of similar import refer to the Prepackaged Plan as a whole and not to any
particular section, subsection, or clause contained in the Prepackaged Plan
unless the context requires otherwise. Whenever from the context it appears
appropriate, each term stated in either the singular or the plural includes the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender include the masculine, feminine and the neuter. Any term used in
initially capitalized form in the Prepackaged Plan that is not defined herein
but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the
meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules.
ADMINISTRATIVE CLAIM means a Claim for payment of an administrative expense
of a kind specified in section 503(b) of the Bankruptcy Code and referred to in
section 507(a)(1) of the Bankruptcy Code, including, without limitation, the
actual, necessary costs and expenses incurred after the commencement of the
Reorganization Case of preserving the Estate and operating the business of the
Debtor, including wages, salaries or commissions for services, compensation for
legal and other services and reimbursement of expenses awarded under section
330(a) or 331 of the Bankruptcy Code, certain retiree benefits under section
1114(e)(2) of the Bankruptcy Code, and all fees and charges assessed against the
Estate under section 1930 of Chapter 123 of Title 28, United States Code.
AFFILIATE means with respect to the Debtor, any corporation, partnership or
other entity which, directly or indirectly, controls, is controlled by or is
under common control with the Debtor, excluding natural persons. With respect to
any entity other than the Debtor, a governmental unit or a natural person,
affiliate means any corporation, partnership, association or other entity which,
directly or indirectly, controls, is controlled by or is under common control
with such entity. For purposes of this definition, the term "control" means the
ownership of more than 20% of the beneficial or voting interest in the
corporation or other entity referred to herein.
ALLOWED ADMINISTRATIVE CLAIM means all or that portion of any
Administrative Claim which (a) has been allowed by a Final Order, (b) was
incurred by the Debtor in the ordinary course of business during the
Reorganization Case, or (c) relates to any payment for retiree benefits required
to be made before the Prepackaged Plan is confirmed, pursuant to section
1114(e)(2) of the Bankruptcy Code.
ALLOWED CLAIM means that portion of any Claim, other than an Administrative
Claim or a Contested Claim, (a) as to which, on or prior to the Bar Date, (i) no
proof of claim has been filed with the Court and (ii) the liquidated
non-Contingent amount of which is scheduled by the Debtor pursuant to the
Bankruptcy Code as undisputed, (b) as to which a proof of claim has been filed
in a liquidated non-Contingent amount with the Court on or prior to the Bar
Date, provided that (i) no objection to the allowance of such Claim or motion to
expunge or limit recovery of such Claim has been interposed or (ii) if such
objection or motion has been filed, such objection or motion has been overruled
by a Final Order, or such Claim has been otherwise allowed by a Final Order, and
(c) a Claim against the Debtor that is allowed (i) in any contract, instrument,
or other agreement entered into in connection with the Prepackaged Plan, or (ii)
pursuant to the terms of the Prepackaged Plan.
ALLOWED INTEREST means that portion of any Interest, other than a contested
Interest, of record held prior to the Effective Date, as to which, (a) no
objection to the allowance of such Interest or motion to expunge or limit
recovery of such Interest has been interposed or (b) if such objection or motion
has been
A-3
<PAGE>
filed, such objection or motion has been overruled by a Final Order, or such
Interest has been otherwise allowed by a Final Order.
AMENDED AND RESTATED BYLAWS means the Amended and Restated Bylaws of the
Reorganized Debtor which shall be substantially in the form set forth in Exhibit
2.
AMENDED AND RESTATED CERTIFICATE means the Amended and Restated Certificate
of Incorporation of the Reorganized Debtor which shall be substantially in the
form set forth in Exhibit 1.
BANKRUPTCY CODE means chapter 11, Title 11 of the United States Code, 11
U.S.C. Section 101 ET SEQ., as amended.
BANKRUPTCY COURT means the United States Bankruptcy Court for the District
of Delaware, or such other court that exercises jurisdiction over the
Reorganization Case, including the United States District Court of the District
of Delaware to the extent reference of the Reorganization Case is withdrawn.
BANKRUPTCY RULES means the Federal Rules of Bankruptcy Procedure, as
amended, promulgated under 28 U.S.C. Section 2075 and the local rules of
practice and procedure of the Court, as applicable, from time to time in the
Reorganization Case.
BAR DATE means the date set by the Court as the last date for filing proofs
of Claims against and Interests in the Debtor, and with respect to Claims
arising from the rejection of executory contracts or unexpired leases, the
earlier of the date set forth in the order rejecting such executory contract or
unexpired lease or thirty (30) days after the Confirmation Date.
BUSINESS DAY means any day except Saturday, Sunday or any other day on
which commercial banks in Los Angeles, California are authorized by law to be
closed for business.
CAPITAL STOCK COMBINATION means the combination of the Class A Common
Stock, Class B Common Stock (none of which is outstanding), and Preferred Stock
into one (1) combined class and series (the "Capital Stock Combination")
designated "Common Stock" and having the same rights that the Class A Common
Stock had prior to the Capital Stock Combination.
CASH means cash and cash equivalents.
CLAIM means a claim against the Debtor, whether or not asserted, as defined
in section 101(5) of the Bankruptcy Code.
CLASS means a category of holders of Claims or Interests as classified in
Article III of the Prepackaged Plan pursuant to section 1123(a)(1) of the
Bankruptcy Code.
CLASS A COMMON STOCK means all the outstanding Class A Common Stock, par
value $0.05 per share, of the Company.
COMMON STOCK means the 11,802,845 shares of the Reorganized Debtor's new
common stock having a par value of $0.05 per share being issued pursuant to the
Prepackaged Plan.
COMPANY means Koll Real Estate Group, Inc., a Delaware corporation.
CONFIRMATION DATE means the date on which the Court enters the Confirmation
Order.
CONFIRMATION ORDER means the order confirming this Prepackaged Plan
pursuant to section 1129 of the Bankruptcy Code.
CONSUMMATION means the occurrence of the Effective Date.
A-4
<PAGE>
CONTESTED CLAIM OR INTEREST means any Claim or Interest against which the
Debtor or the Reorganized Debtor, as the case may be, or any other party in
interest, has filed an objection to the allowance of such Claim or Interest or a
motion to expunge or limit the recovery of such Claim or Interest and which
objection or motion has not been withdrawn or overruled by a Final Order.
CONTINGENT means a Claim is contingent as to liability if the debt is one
which the debtor may be called upon to pay only upon the occurrence or happening
of an extrinsic event which will trigger the liability of the debtor to the
alleged creditor.
CREDITOR means any holder of a Claim.
DEBTOR means the Company, when acting in its capacity as representative of
the Estate.
DEBENTURE HOLDERS' COMMITTEE means the group of restricted holders of the
Outstanding Debentures organized prior to the Petition Date to negotiate with
the Company regarding the Recapitalization.
DELAWARE GENERAL CORPORATION LAW means Title 8 of the Delaware Code, as now
in effect or hereafter amended.
DISTRIBUTION RECORD DATE means the Business Day immediately preceding the
Effective Date.
EFFECTIVE DATE means a date selected by the Reorganized Debtor that is no
more than ten (10) Business Days following the date on which all conditions to
consummation set forth in Section 8.2 of the Prepackaged Plan have been
satisfied or waived.
ESTATE means the bankruptcy estate of the Company created by section 541 of
the Bankruptcy Code upon the commencement of the Reorganization Case.
EXCHANGE AGENT means the entity or entities designated pursuant to Section
7.2 of the Prepackaged Plan to make distributions under the Prepackaged Plan.
EQUITY HOLDER means a holder of an Interest.
FINAL ORDER means an order or judgment entered by the Court or any other
court exercising jurisdiction over the subject matter and the parties (i) that
has not been reversed, stayed, modified or amended, (ii) as to which no appeal,
certiorari proceeding, reargument, or other review or rehearing has been
requested or is still pending, and (iii) as to which the time for filing a
notice of appeal or petition for certiorari shall have expired.
IMPAIRED means a Claim or Interest that is impaired within the meaning of
section 1124 of the Bankruptcy Code.
INDENTURE TRUSTEES means the trustee under the Indenture dated July 15,
1992 governing the Senior Debentures and the Indenture dated July 15, 1992
governing the Subordinated Debentures.
LITIGATION CLAIMS means all Claims against the Company asserted under
lawsuits or complaints which are pending as of the commencement of the
Reorganization Case in state or federal court, unless the Company (i) allows the
Claim for voting purposes, (ii) files a proof of claim on behalf of the
Creditor, and the Court allows the Claim of the Creditor under the Prepackaged
Plan.
INTEREST means the rights of the owners of the issued and outstanding
shares of any class of stock of the Debtor or the rights of the owners of
warrants issued by the Debtor.
1993 STOCK OPTION PLAN means the Company's 1993 Stock Option/Stock Issuance
Plan.
OUTSTANDING DEBENTURES means collectively the Senior Debentures and the
Subordinated Debentures.
OTHER CLASS 5 CLAIMS means all Allowed Claims in Class 5 other than those
relating to the Senior Debentures.
PETITION DATE means the date on which the Company files its chapter 11
bankruptcy petition.
A-5
<PAGE>
PREPACKAGED PLAN means this Prepackaged Plan of Reorganization, together
with any exhibits or schedules attached hereto, as they may be amended, modified
or supplemented by the Debtor from time to time in accordance with the
provisions set forth herein, in the Bankruptcy Code and in the Bankruptcy Rules.
PREFERRED STOCK means all of the outstanding Series A Convertible
Redeemable Preferred Stock of the Company.
PRIORITY CLAIM means a Claim for an amount entitled to priority under
section 507(a) of the Bankruptcy Code, other than an Administrative Claim or a
Tax Claim.
PROSPECTUS means the Proxy Statement/Prospectus and Disclosure Statement of
the Company dated April , 1997.
NET CLAIM means the amount owed to Affiliates, after allowing for the set
off of the respective Affiliates' Claims owed to the Debtor.
RECAPITALIZATION means the capital restructuring of the Company whereby all
Senior Debentures and Subordinated Debentures are exchanged for Common Stock of
the Reorganized Debtor.
REORGANIZATION CASE means the Debtor's case under chapter 11 of the
Bankruptcy Code.
REORGANIZED DEBTOR means the Debtor on and after the Confirmation Date, and
the entity that shall succeed to all of the rights and obligations of the Debtor
under the Prepackaged Plan.
REVERSE STOCK SPLIT means the one for one hundred (l:100) reverse stock
split of the outstanding Common Stock to be effected by the Debtor immediately
following the Capital Stock Combination.
SECURED CLAIM means any Claim of a creditor secured by a valid, perfected
and enforceable lien on any property of the Estate, but only to the extent such
Claim constitutes a secured claim under section 506 or 1111(b) of the Bankruptcy
Code.
SENIOR DEBENTURE INDENTURE means the Indenture dated July 15, 1992
governing the Senior Debentures.
SENIOR DEBENTURES means all of the outstanding 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002.
SENIOR DEBT means Senior Debt as defined in the Senior Debenture Indenture
and the Subordinated Debenture Indenture.
SUBCLASS means a category of holders of Claims or Interests within a Class.
SUBORDINATED DEBENTURES means all of the outstanding 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002.
SUBORDINATED DEBENTURE INDENTURE means the Indenture dated July 15, 1992
governing the Subordinated Debentures.
TAX CLAIM means a Claim for an amount entitled to priority under section
507(a)(7), 507(a)(8) and 502(i) of the Bankruptcy Code, other than a Claim for a
penalty.
UNIMPAIRED means a Claim or Interest that is not impaired within the
meaning of section 1124 of the Bankruptcy Code.
UNLIQUIDATED means if the amount of the Claim cannot be ascertained by a
mere computation, based on the terms of the obligation or on some other accepted
standard.
Unless otherwise specified herein, any reference to an entity as a holder of
a Claim or Interest includes that entity's successors, assigns, and affiliates.
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ARTICLE II
TREATMENT OF UNCLASSIFIED ADMINISTRATIVE AND TAX CLAIMS
2.1 ADMINISTRATIVE CLAIMS. Unless otherwise agreed to by the parties, each
holder of an Allowed Administrative Claim shall receive cash equal to the unpaid
portion of such Allowed Administrative Claim on the later of (a) the Effective
Date, and (b) the date on which such Claim becomes an Allowed Administrative
Claim; PROVIDED, HOWEVER, that Administrative Claims that represent liabilities
incurred by the Debtor in the ordinary course of its business during the
Reorganization Case shall be paid in the ordinary course of business and in
accordance with any terms and conditions of any agreements relating thereto.
2.2 TAX CLAIMS. On the Effective Date, each holder of a Tax Claim (a)
shall be paid cash in an amount equal to the amount of its Allowed Claim, or
shall be paid on account of its Allowed Claim on such other terms as have been
or may be agreed to between such holder and the Debtor, or (b) shall receive on
account of its Allowed Claim deferred cash payments, in equal quarterly
installments over a period not exceeding six years after the date of assessment
of such Tax Claim, of a value, as of the Effective Date, equal to the amount of
such Allowed Claim. The amount of any Tax Claim that is not an Allowed Claim,
and the rights of the holder of such Claim, if any, to payment in respect
thereof shall (a) be determined in the manner in which the amount of such Claim
and the rights of the holder of such Claim would have been resolved or
adjudicated if the Reorganization Case had not been commenced, (b) survive the
Effective Date and the consummation of the Prepackaged Plan as if the
Reorganization Case had not been commenced, and (c) not be discharged pursuant
to Section 9.1 of the Prepackaged Plan and section 1141 of the Bankruptcy Code.
ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS
This classification of Claims and Interests is made for purposes of voting
on the Prepackaged Plan and making distribution hereunder and for ease of
administration hereof. A Claim or Interest shall be deemed classified in a
particular Class only to the extent that the Claim or Interest qualifies within
the description of that Class.
3.1 CLASS 1--PRIORITY CLAIMS. Class 1 consists of all Priority Claims, not
otherwise treated as unclassified in Article II above.
3.2 CLASS 2--SECURED CLAIMS. Class 2 consists of each Claim secured by a
security interest in or lien upon property of the Company, including, but not
limited to, Claims secured by (i) mortgages or trust deeds on real property,
(ii) mechanics' or materialmen's liens, (iii) security deposits, or (iv) liens
on miscellaneous personal property such as office furniture, telephone systems,
copiers and mailing equipment. Each Class 2 Secured Claim shall be treated for
all purposes of the Prepackaged Plan and under the Bankruptcy Code as a separate
Subclass of Class 2.
3.3 CLASS 3--UNLIQUIDATED OR CONTINGENT CLAIMS. Class 3 consists of all
Claims of holders of Unliquidated or Contingent Claims, including, but not
limited to, Litigation Claims.
3.4 CLASS 4--AFFILIATES' CLAIMS. Class 4 consists of all Net Claims of
Affiliates.
3.5 CLASS 5--GENERAL UNSECURED CLAIMS. Class 5 consists of all general
unsecured Claims of Creditors against the Company, however arising, and not
included in any other Class in the Prepackaged Plan or otherwise provided for in
the Prepackaged Plan, including (i) Senior Debentures, and (ii) Claims for
damages resulting from the rejection of leases or executory contracts.
3.6 CLASS 6--SUBORDINATED DEBENTURES. Class 6 consists of all Claims of
holders of Subordinated Debentures.
3.7 CLASS 7--PREFERRED STOCK. Class 7 consists of all Interests of holders
of Preferred Stock.
3.8 CLASS 8--CLASS A COMMON STOCK. Class 8 consists of all Interests of
holders of Class A Common Stock.
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3.9 CLASS 9--WARRANTS. Class 9 consists of all Interests of holders of
outstanding warrants.
ARTICLE IV
TREATMENT OF CLASSES UNDER THE PLAN
SUMMARY
<TABLE>
<CAPTION>
CLASS STATUS
- --------------------------------------------------------------------- ------------------------------------
<S> <C>
Class 1--Priority Claims Unimpaired; deemed to have accepted
the Prepackaged Plan
Class 2--Secured Claims Unimpaired; deemed to have accepted
the Prepackaged Plan
Class 3--Unliquidated or Contingent Claims Unimpaired; deemed to have accepted
the Prepackaged Plan
Class 4--Affiliates' Claims Impaired; while such claimants
deemed to have rejected the
Prepackaged Plan, the Company
shall cause such holders to
support the Prepackaged Plan
Class 5--General Unsecured Claims Impaired; entitled to vote
Class 6--Claims of Holders of Subordinated Debentures Impaired; entitled to vote
Class 7--Interests of Holders of Preferred Stock Impaired; entitled to vote
Class 8--Interests of Holders of Class A Common Stock Impaired; entitled to vote
Class 9--Interests of Holders of Warrants Impaired; deemed to have rejected
the Prepackaged Plan
</TABLE>
4.1 PRIORITY CLAIMS. Class 1 Claims are Unimpaired. Unless otherwise
agreed to by the parties, each holder of an Allowed Claim in Class 1 shall be
paid the allowed amount of such Claim in full in cash on the later of (a) the
Effective Date, and (b) the date such Claim becomes an Allowed Claim.
4.2 SECURED CLAIMS. Class 2 Claims are Unimpaired. Unless otherwise agreed
to by the parties, either (a) the legal, equitable and contractual rights of
each holder of an Allowed Claim in any Subclass of Class 2 shall be unaltered by
the Prepackaged Plan, or (b) at the option of the Debtor, any Allowed Claim in
any Subclass of Class 2 shall be treated in any other manner that will result in
such Allowed Claim being deemed Unimpaired under section 1124 of the Bankruptcy
Code. To the extent not previously paid, any accrued and unpaid interest due on
the Secured Claims will be paid in Cash on the Effective Date.
4.3 UNLIQUIDATED OR CONTINGENT CLAIMS. Class 3 Claims are Unimpaired. The
legal, equitable and contractual rights of the holders of Class 3 Claims shall
not be affected by the Prepackaged Plan, Class 3 Claims shall survive the
discharge provided for in Section 9.1 of the Prepackaged Plan and section 1141
of the Bankruptcy Code, and the rights of a holder of such Claim and the rights
of such holder of such Claim to payment, if any, in respect thereof shall be
determined in the manner in which the amount of such Claim and the rights of the
holder of such Claim would have been resolved or adjudicated if the
Reorganization Case had not been commenced.
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4.4 AFFILIATES' CLAIMS. Class 4 Claims are Impaired. The holders of
Allowed Net Claims, if any, in Class 4 shall receive no distributions nor retain
any property under the Prepackaged Plan on account of such Allowed Net Claims.
4.5 GENERAL UNSECURED CLAIMS. Class 5 Claims are Impaired. In the event
Classes 6, 7 and 8 accept the Prepackaged Plan, on the Effective Date, without
regard to the subordination provisions in the Senior Debenture Indenture but
giving effect to the rights of Senior Debt, each holder of Senior Debentures
will receive 56 shares of Common Stock on a post-Capital Stock Combination and
post-Reverses Stock Split basis for each $1,000 principal amount of Senior
Debentures it holds and each holder of a liquidated non-Contingent Claim will
receive 56 shares of Common Stock on a post-Capital Stock Combination and post-
Reverse Stock Split basis for each $1,000 principal amount of Allowed Claim.
Collectively, holders of Class 5 Claims shall hold approximately 81% of the
outstanding shares of the Common Stock of the Reorganized Debtor on the
Effective Date. If Class 6, 7, or 8 fails to accept the Prepackaged Plan, the
holders of the Senior Debentures shall enforce the subordination provisions of
the Senior Debenture Indenture with respect to such rejecting Class of Claims
and/or Interests and the Prepackaged Plan shall be deemed automatically amended
pursuant to Article V.
4.6 SUBORDINATED DEBENTURES. Class 6 Claims are Impaired. Subject to
Article V, on the Effective Date, each holder of an Allowed Claim in Class 6
shall receive 28 shares of Common Stock on a post-Capital Stock Combination and
post-Reverse Stock Split basis for each $1,000 principal amount of Subordinated
Debentures it holds. Collectively, holders of Class 6 Claims shall hold
approximately 10% of the outstanding shares of the Common Stock of the
Reorganized Debtor on the Effective Date.
4.7 PREFERRED STOCK. Class 7 Interests are Impaired. Subject to Article V,
on the Effective Date, after giving effect to the Capital Stock Combination and
the Reverse Stock Split, each holder of an Allowed Interest in Class 7 shall be
deemed to hold on a one and three quarter for one (1.75:1) basis Common Stock.
4.8 CLASS A COMMON STOCK. Class 8 Interests are Impaired. Subject to
Article V, on the Effective Date, after giving effect to the Capital Stock
Combination and the Reverse Stock Split, each holder of an Allowed Interest in
Class 8 shall be deemed to hold on a one for one (1:1) basis Common Stock.
4.9 WARRANTS. Class 9 Interests are Impaired. On the Effective Date, all
outstanding warrants shall be cancelled.
4.10 ACCRUAL OF INTEREST. Distributions of Common Stock to holders of
Outstanding Debentures will be based upon the principal amount of the
Outstanding Debentures as of March 15, 1997.
4.11 FRACTIONAL SHARES. (a) CAPITAL STOCK COMBINATION AND REVERSE STOCK
SPLIT. If the Capital Stock Combination or the Reverse Stock Split creates a
fraction of a share of Common Stock, holders of an Allowed Class 7 or 8
Interest, respectively, shall not receive or be deemed to hold any fractional
shares. All fractional shares which would otherwise have been created by the
Capital Stock Combination or the Reverse Stock Split shall be aggregated and
after the Effective Date, such shares shall be sold in the market by the
Exchange Agent and the net proceeds thereof disbursed pro rata to the holders of
Allowed Class 7 and 8 Interests based upon the fraction of the shares each
holder would have been entitled to receive or would have been deemed to hold had
the Company authorized the issuance of fractional shares.
(b) DEBENTURE/CLAIM EXCHANGE. Whenever any distribution of a fraction of a
share of Common Stock to any holder of an Allowed Class 5 or 6 Claim would
otherwise be called for, all such fractional shares will be aggregated and after
the Effective Date, the shares will be sold in the market by the Exchange Agent
and the net proceeds thereof disbursed prorata to the holders of Allowed Class 5
and Class 6 Claims based upon the fraction of the shares each such holder would
have been entitled to receive or deemed to hold had the Company authorized the
issuance of fractional shares.
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<PAGE>
ARTICLE V
REALLOCATION OF DISTRIBUTIONS FOR NONCONSENSUAL CONFIRMATION
5.1 HOLDERS OF SUBORDINATED DEBENTURES FAIL TO ACCEPT THE PREPACKAGED
PLAN. In the event that the holders of Allowed Claims in Class 6 shall, as a
Class, fail to accept the Prepackaged Plan as set forth in Section 6.3 of the
Prepackaged Plan, then (a) the Prepackaged Plan shall be deemed automatically
amended without further action by the Debtor such that (i) the distributions
which would otherwise have been made in accordance with Section 4.6 of the
Prepackaged Plan shall be made to holders of Allowed Claims in Class 5, (ii) the
holders of Allowed Claims in Class 6 shall receive no distributions nor retain
any property under the Prepackaged Plan on account of such Allowed Claims, (iii)
the existing Subordinated Debentures held by holders of Class 6 Allowed Claims
shall be deemed to be cancelled, and (iv) such holders shall be deemed to have
rejected the Prepackaged Plan pursuant to section 1126(g) of the Bankruptcy
Code; and (b) the Debtor shall seek to confirm the Prepackaged Plan as so
automatically amended pursuant to this Article, in accordance with section
1129(b) of the Bankruptcy Code.
5.2 HOLDERS OF PREFERRED STOCK FAIL TO ACCEPT THE PREPACKAGED PLAN. In the
event that the holders of Allowed Interests in Class 7 shall, as a Class, fail
to accept the Prepackaged Plan as set forth in Section 6.3 of the Prepackaged
Plan, then (a) the Prepackaged Plan shall be deemed automatically amended
without further action by the Debtor such that (i) the Common Stock which would
otherwise have been retained by the holders of the Preferred Stock in accordance
with Section 4.7 of the Prepackaged Plan shall be delivered by the Exchange
Agent to holders of Allowed Claims in Class 5, (ii) the holders of Allowed
Interests in Class 7 shall receive no distributions nor retain any property
under the Prepackaged Plan on account of such Allowed Interests, (iii) the
Preferred Stock held by holders of Allowed Interests in Class 7 shall be deemed
to be cancelled and, (iv) such holders shall be deemed to have rejected the
Prepackaged Plan pursuant to section 1126(g) of the Bankruptcy Code; and (b) the
Debtor shall seek to confirm the Prepackaged Plan as so automatically amended
pursuant to this Article, in accordance with section 1129(b) of the Bankruptcy
Code.
5.3 HOLDERS OF CLASS A COMMON STOCK FAIL TO ACCEPT THE PREPACKAGED
PLAN. In the event that the holders of Allowed Interests in Class 8 shall, as a
Class, fail to accept the Prepackaged Plan as set forth in Section 6.3 of the
Prepackaged Plan, then (a) the Prepackaged Plan shall be deemed automatically
amended without further action by the Debtor such that (i) the Common Stock
which would otherwise have been retained by the holders of the Class A Common
Stock in accordance with Section 4.8 of the Prepackaged Plan shall be delivered
by the Exchange Agent to holders of Allowed Claims in Class 5, (ii) the holders
of Allowed Interests in Class 8 shall receive no distributions nor retain any
property under the Prepackaged Plan on account of such Allowed Interests, (iii)
the Class A Common Stock held by holders of Allowed Interests in Class 8 shall
be deemed to be cancelled, and (iv) such holders shall be deemed to have
rejected the Prepackaged Plan pursuant to section 1126(g) of the Bankruptcy
Code; and (b) the Debtor shall seek to confirm the Prepackaged Plan as so
automatically amended pursuant to this Article, in accordance with section
1129(b) of the Bankruptcy Code.
ARTICLE VI
ACCEPTANCE OR REJECTION OF THE PLAN
6.1 UNIMPAIRED CLASSES. The Allowed Claims in Classes 1, 2 and 3 are
Unimpaired under the Prepackaged Plan and the holders of such Allowed Claims are
conclusively presumed to have accepted the Prepackaged Plan.
6.2 IMPAIRED CLASSES TO VOTE ON PREPACKAGED PLAN. The Allowed Claims in
Classes 5 and 6 and the Allowed Interests in Classes 7 and 8 are Impaired;
consequently, the holders in such Classes are entitled to vote to accept or
reject the Prepackaged Plan. The holders of Allowed Interests in Classes 4 and 9
are
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<PAGE>
conclusively presumed to have rejected the Prepackaged Plan. The Company shall
cause the holders of Class 4 Claims (which it controls) to support the
Prepackaged Plan.
6.3 ACCEPTANCE BY IMPAIRED CLASSES. An Impaired Class of Claims shall have
accepted the Prepackaged Plan if the Prepackaged Plan is accepted by the holders
(other than any holder designated under section 1126(e) of the Bankruptcy Code)
that hold at least two-thirds (2/3) in amount and more than one-half (1/2) in
number of the Allowed Claims of such Class that have voted to accept or reject
the Prepackaged Plan. An Impaired Class of Interests shall have accepted the
Prepackaged Plan if the Prepackaged Plan is accepted by the holders (other than
any holder designated under section 1126(e) of the Bankruptcy Code) that hold at
least two-thirds (2/3) in amount of the Allowed Interests of such Class that
have voted to accept or reject the Prepackaged Plan.
6.4 NONCONSENSUAL CONFIRMATION/CRAMDOWN. In the event that any Impaired
Class of Claims or Class of Interests shall fail to accept the Prepackaged Plan
in accordance with Section 1129(a)(8) of the Bankruptcy Code, the Debtor
reserves the right to (i) seek to have the Court confirm the Prepackaged Plan in
accordance with Section 1129(b) of the Bankruptcy Code, or (ii) modify the
Prepackaged Plan in accordance with Section 13.5 of the Prepackaged Plan.
ARTICLE VII
MEANS FOR IMPLEMENTATION OF THE PLAN
7.1 CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED
DEBTOR. The Debtor shall, as a Reorganized Debtor, continue to exist after the
Effective Date as a separate corporate entity, with all powers of a corporation
under the laws of the State of Delaware and without prejudice to any right to
alter or terminate such existence (whether by merger or otherwise) under such
applicable state law. Except as otherwise expressly provided in the Prepackaged
Plan on the Confirmation Date, the Reorganized Debtor shall be vested with all
of the property of the Estate free and clear of all claims, liens, encumbrances,
charges and other interests of creditors and equity security holders, and may
operate its businesses free of any restrictions imposed by the Bankruptcy Code
or by the Court, including, without limitation, any contracts or leases entered
into or assumed by the Debtor after the Petition Date; PROVIDED, HOWEVER, that
the Reorganized Debtor shall continue as a debtor in possession under the
Bankruptcy Code until the Effective Date, and, thereafter, the Reorganized
Debtor may operate its business free of any restrictions imposed by the
Bankruptcy Code or the Court.
7.2 EXCHANGE AGENT. The Debtor may designate an entity or entities to
serve as Exchange Agent to distribute all the property to be distributed under
the Prepackaged Plan, including, without limitation, the delivery of the Common
Stock in exchange for the Outstanding Debentures and as replacement for the
Preferred Stock and Class A Common Stock.
7.3 PREPACKAGED PLAN IMPLEMENTATION STEPS. On or as soon as practicable
after the Effective Date (unless otherwise expressly indicated), the following
actions shall be effectuated in the following sequential order:
(a) AMENDMENTS TO CERTIFICATE OF INCORPORATION. The Reorganized Debtor
shall file its Amended and Restated Certificate with the office of the
Secretary of State of the State of Delaware in accordance with Section 103
of the Delaware General Corporation Law. The Amended and Restated
Certificate will, among other things, provide (to the extent necessary to
effectuate the terms of the Prepackaged Plan) for (i) the prohibition of the
issuance of non-voting equity securities, (ii) the authorization of 18
million shares of Common Stock, (iii) the Reverse Stock Split, (iv) the
Capital Stock Combination, (v) the elimination of the provisions providing
for the Company's Board of Directors to be classified into three classes
with staggered terms, (vi) the removal of all supermajority voting
provisions, and (vii) the elimination of the provisions prohibiting stock
holders from acting by written consent.
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(b) AMENDMENTS TO BYLAWS. The Reorganized Debtor shall adopt and effect
the Amended and Restated Bylaws which shall provide for, among other things,
(i) the elimination of the provisions providing for the Company's Board of
Directors to be classified into three classes with staggered terms, and (ii)
the removal of all supermajority voting provisions.
(c) CAPITAL STOCK COMBINATION. To the extent necessary to effectuate the
Prepackaged Plan, the Reorganized Debtor shall effect the Capital Stock
Combination whereby the Class A Common Stock, Class B Common Stock (none of
which is outstanding), and Preferred Stock are combined into one (1) class
and series designated "Common Stock" having the same rights that the Class A
Common Stock had prior to the Capital Stock Combination. Pursuant to the
Capital Stock Combination, each share of outstanding Preferred Stock will be
reclassified to be one and three quarter (1.75) shares of Common Stock and
each outstanding share of Class A Common Stock will be reclassified to be
one share of Common Stock.
(d) REVERSE STOCK SPLIT. To the extent necessary to effectuate the
Prepackaged Plan, the Reorganized Debtor shall effect the Reverse Stock
Split.
(e) DELIVERY OF AUTHORIZED SHARES. The Reorganized Debtor shall deliver
the shares of Common Stock authorized for issuance to the Exchange Agent for
delivery to the holders of Allowed Claims and Allowed Interests in
accordance with the Prepackaged Plan.
(f) DEBENTURE EXCHANGE. The Exchange Agent shall deliver to holders of
Outstanding Debentures and Other Class 5 Claims, Common Stock in accordance
with the Prepackaged Plan.
(g) 1993 STOCK OPTION PLAN. The Reorganized Debtor shall execute an
amendment to the 1993 Stock Option Plan which shall be substantially in the
form attached as Exhibit 3.
7.4 EXCHANGE OF PREFERRED AND COMMON STOCK. Subject to Article V, upon
presentment of certificates evidencing Preferred Stock and Class A Common Stock,
the Exchange Agent shall deliver to holders thereof, Common Stock.
7.5 CANCELLATION OF SECURITIES AND AGREEMENTS. On the Effective Date, all
Outstanding Debentures, Class A Common Stock, Class B Common Stock (none of
which is outstanding), Preferred Stock and warrants shall be cancelled. Also, on
the Effective Date, the Senior Debenture Indenture and the Subordinated
Debenture Indenture shall be cancelled.
7.6 DIRECTORS. After giving effect to the Amended and Restated Certificate
and the Amended and Restated Bylaws, there shall be a declassification of the
Board of Directors of the Company. The Reorganized Debtor's Board of Directors
shall be comprised of ten (10) directors, four (4) of whom are present directors
of the Company and six (6) of whom have been designated by the members of the
Debenture Holders' Committee in consultation with the Debtor. The names of the
present directors and director nominees are set forth in the Prospectus. Any
changes from that set forth in the Prospectus shall be disclosed at or prior to
the hearing to consider confirmation of the Prepackaged Plan. All such directors
shall be deemed elected, and those directors not continuing in office shall be
deemed removed therefrom, effective on the Effective Date, pursuant to the
Confirmation Order. Such directors' tenure and the manner of selection of new
directors shall be as provided in the Amended and Restated Certificate and the
Amended and Restated Bylaws.
7.7 OFFICERS. On the Effective Date, the existing officers of the
Reorganized Debtor shall be retained and shall remain as officers and shall
continue to serve until such time as they may resign, be removed or be replaced.
7.8 EMPLOYMENT CONTRACTS. On the Confirmation Date, the Company will
assume the Employment Contracts with certain executive officers and directors of
the Company as disclosed on Exhibit 4 to the Prepackaged Plan. In addition, from
and after the Effective Date, the Reorganized Debtor may enter into employment
contracts with any other officer, agent or employee.
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7.9 CORPORATE ACTION. The adoption of the Amended and Restated
Certificate, the Amended and Restated Bylaws, the selection of directors and
officers for the Reorganized Debtor, the issuance and distribution of the Common
Stock, execution and delivery of all contracts, leases, instruments, releases,
and other agreements related to any of the foregoing; and the other matters
provided for under the Prepackaged Plan involving the corporate action to be
taken by or required of the Reorganized Debtor shall be deemed to have occurred
and be effective as provided herein, and shall be authorized and approved in all
respects without any requirement of further action by stockholders or directors
of the Debtor or Reorganized Debtor.
7.10 SOURCES OF CASH FOR PREPACKAGED PLAN DISTRIBUTION. All Cash necessary
for the Reorganized Debtor to make payments pursuant to the Prepackaged Plan
shall be obtained from existing Cash balances, under existing debt agreements,
the operations of the Debtor or Reorganized Debtor, or from the sale of
fractional shares of Common Stock as described in Section 4.11 of the
Prepackaged Plan. The Reorganized Debtor may also make such payments using Cash
received from its subsidiaries in the ordinary course of its business, either by
way of advances or dividends.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO CONFIRMATION. It is a condition to confirmation of the
Prepackaged Plan that the Confirmation Order include provisions:
(a) authorizing the Reorganized Debtor to adopt and file the Amended and
Restated Certificate;
(b) authorizing the Reorganized Debtor to adopt and effect the Amended
and Restated Bylaws;
(c) authorizing the Capital Stock Combination;
(d) authorizing the Reverse Stock Split;
(e) authorizing the Reorganized Debtor to issue authorized shares of
Common Stock and to deliver such shares to the Exchange Agent;
(f) authorizing and directing the Exchange Agent to deliver the Common
Stock to holders of Other Class 5 Claims, the Outstanding Debentures, the
Preferred Stock and the Class A Common Stock in accordance with the
Prepackaged Plan and to sell aggregated fractional shares and to distribute
the proceeds in accordance with Section 4.11 of the Prepackaged Plan;
(g) authorizing the Reorganized Debtor to amend and assume the 1993
Stock Option Plan;
(h) giving effect to the releases set forth in Section 9.4 of the
Prepackaged Plan;
(i) giving effect to the injunction set forth in Section 9.5 of the
Prepackaged Plan;
(j) authorizing all of the other transactions contemplated by the
Prepackaged Plan in order to effectuate the Prepackaged Plan; and
(k) making the provisions of the Confirmation Order non-severable and
mutually dependent.
8.2 CONDITIONS TO CONSUMMATION. The Confirmation Order shall contain the
provisions set forth in Section 8.1 of the Prepackaged Plan and the Confirmation
Order shall have become a Final Order before the Prepackaged Plan will be
consummated.
8.3 WAIVER OF CONDITIONS. The Debtor may waive any condition set forth in
this Article VIII at any time, without notice, without leave of or order of the
Court, and without any formal action other than proceeding to consummate the
Prepackaged Plan.
ARTICLE IX
EFFECTS OF PLAN CONFIRMATION
9.1 DISCHARGE. Except as otherwise expressly provided in the Prepackaged
Plan, the confirmation of the Prepackaged Plan shall (i) bind all holders of
Claims and Interests, whether or not they accept the Prepackaged Plan, and (ii)
discharge and release, pursuant to section 1141(d)(1) of the Bankruptcy Code,
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the Debtor effective immediately from any Claim, Interest or any "debt" (as that
term is defined in section 101(12) of the Bankruptcy Code) that arose or was
incurred before the Confirmation Date, and completely extinguish the Debtor's
and the Reorganized Debtor's liability in respect thereof, including, without
limitation, any liability of a kind specified in section 502(g) of the
Bankruptcy Code, regardless of whether: (a) a proof of the Claim or Interest was
filed, or the Interest or Claim was scheduled by the Debtor, (b) the Claim or
Interest is an Allowed Claim or Allowed Interest, as the case may be, or (c) the
holder of such Claim or Interest voted to accept or reject, or abstained from
voting on, the Prepackaged Plan. In addition, except as otherwise provided in
the Prepackaged Plan, confirmation of the Prepackaged Plan pursuant to the
Confirmation Order acts as a discharge and release, effective as of the
Confirmation Date, as to each holder of a Claim or Interest receiving or
entitled to receive any distribution under the Prepackaged Plan in respect of
any direct or indirect right, Claim or Interest such holder had or may have had
against or in the Debtor. On and after the Confirmation Date, as to every
discharged Claim and Interest, every holder of a Claim and Interest shall be
precluded from asserting against the Debtor or the Reorganized Debtor or its
assets or properties any further Claim or Interest based on any document or
instrument or act, omissions, transaction or other activity of any kind or
nature that occurred prior to the Confirmation Date.
9.2 RETENTION OF CAUSES OF ACTION/RESERVATION OF RIGHTS.
(a) Nothing contained in the Prepackaged Plan or the Confirmation Order
shall be deemed to be a waiver or relinquishment of any rights or causes of
action that the Debtor or the Reorganized Debtor may have currently or which
the Reorganized Debtor may choose to assert on behalf of the Estate under
any provision of the Bankruptcy Code or any similar applicable
non-bankruptcy law, including, without limitation, (i) the avoidance of any
transfer by or obligation of the Company or the Debtor or (ii) the turnover
of any property to the Estate, all of which are expressly reserved by the
Prepackaged Plan.
(b) Nothing contained in the Prepackaged Plan or the Confirmation Order
shall be deemed to be a waiver or relinquishment of any claim, cause of
action, right of setoff, or other legal or equitable defense which the
Company had immediately prior to the Petition Date, against or with respect
to any Claim left unaltered or Unimpaired by the Prepackaged Plan. The
Reorganized Debtor shall have, retain, reserve and be entitled to assert all
such claims, causes of action, rights of setoff and other legal or equitable
defenses which it had immediately prior to the Petition Date fully as if the
Chapter 11 Case had not been commenced; and all of the Reorganized Debtor's
legal and equitable rights respecting any Claim left unaltered or Unimpaired
by the Prepackaged Plan may be asserted after the Confirmation Date to the
same extent as if the Chapter 11 Case had not been commenced.
9.3 POST-CONSUMMATION EFFECT OF EVIDENCES OF CLAIMS OR
INTERESTS. Outstanding Debentures, stock certificates and other evidences of
Claims against or Interests in the Debtor shall, effective upon the Effective
Date, represent only the right to participate in the distributions contemplated
by the Prepackaged Plan.
9.4 RELEASE. Except as otherwise expressly provided in the Prepackaged
Plan, on the Effective Date, in consideration for, or as part of, the treatment
accorded to the holders of Impaired Claims and Interests under the Prepackaged
Plan, each holder of an Impaired Claim or Interest against or in the Debtor
shall be deemed to have released the Debtor from any and all causes of action
and claims, in law or in equity, whether based on tort, fraud, contract or
otherwise, which arose prior to the date of the filing of the Chapter 11 Case.
9.5 LIMITED RELEASE OF DIRECTORS, OFFICERS AND EMPLOYEES. As of the
Effective Date, the Debtor shall be deemed to have waived and released its
present and former directors, officers and employees from any and all claims of
the Debtor (including claims which the Debtor or Debtor in Possession otherwise
has legal power to assert, compromise or settle in connection with its Chapter
11 Case) arising on or prior to the Effective Date; PROVIDED HOWEVER, that this
provision shall not operate as a waiver or release of any claim (i) in respect
to any loan, advance or similar payment by the Debtor to any such person, (ii)
in respect of any contractual obligation owed by such person to the Debtor, or
(iii) or to the extent based upon or attributable to such person gaining in fact
a personal profit to which such person was not legally
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entitled, including, without limitation, profits made from the purchase or sale
of equity securities of the Debtor which are recoverable by the Debtor pursuant
to section 16(b) of the Securities Exchange Act of 1934, as amended.
9.6 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided, all
injunctions or stays provided for in the Reorganization Case pursuant to section
105 or 362 of the Bankruptcy Code or otherwise in effect on the Confirmation
Date shall remain in full force and effect until the Effective Date.
9.7 EXCULPATION. Neither the Company, the Reorganized Debtor nor any of
their respective officers, directors, employees, advisors, agents or
representatives shall have or incur any liability to any holder of a Claim or
Interest for any act or omission in connection with or arising out of their
solicitation of votes on or their administration of the Prepackaged Plan or the
property to be distributed under the Prepackaged Plan except for any liabilities
which may arise under the statutes or regulations administered by the Securities
and Exchange Commission or from willful misconduct or gross negligence, and, in
all respects, shall be entitled to rely upon the advice of counsel with respect
to their duties and responsibilities under the Prepackaged Plan.
ARTICLE X
CONTESTED CLAIMS AND CONTESTED INTERESTS
10.1 OBJECTIONS TO CLAIMS AND INTERESTS. The Debtor may object to the
allowance of Claims or Interests filed with the Bankruptcy Court. From and after
the Effective Date, the Reorganized Debtor, or any entity chosen by the
Reorganized Debtor, shall have the exclusive responsibility for reviewing and
objecting to the allowance of Claims and Interests. All objections shall be
litigated to a Final Order; PROVIDED, HOWEVER, that the Debtor or the
Reorganized Debtor, as the case may be, may compromise and settle any objections
to Claims or Interests, subject to the approval of the Court, and may seek Court
estimation of Contested Claims or Contested Interests pursuant to section 502(c)
of the Bankruptcy Code.
10.2 DISTRIBUTIONS. At such time as a Contested Claim or Contested
Interest becomes an Allowed Claim or Allowed Interest, in whole or in part, the
holder of such Claim or Interest shall receive the property that would have been
distributed to such holder under the Prepackaged Plan if such Allowed Claim or
Allowed Interest was an Allowed Claim or Allowed Interest on the Effective Date.
Such distributions shall be made as soon as practicable after the date that the
order or judgment of the Court allowing such Claim or Interest becomes a Final
Order.
10.3 RESERVED COMMON STOCK. At the time distributions to holders of Class
5 Claims are made, the Exchange Agent shall reserve shares of Common Stock
sufficient to satisfy the full amount to which the holder of any Contested Claim
may be entitled to under the Prepackaged Plan. The Exchange Agent shall hold the
Common Stock so reserved pursuant to this section and shall not distribute such
Common Stock to other Creditors. Upon any such Contested Claim becoming an
Allowed Claim, the number of shares of Common Stock then due to the Creditor in
respect of such Allowed Claim shall be distributed to such Creditor.
Distributions with respect to an Allowed Claim shall be made in accordance with
the provisions of the Plan. The distribution to each holder of an Allowed Claim
shall be made as soon as reasonably practicable after the date that the order or
judgment of the Bankruptcy Court allowing such Claim becomes a Final Order.
After all Contested Claims have been resolved, the Exchange Agent shall deliver
to the Company the excess Common Stock to be held as authorized and unissued.
ARTICLE XI
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
11.1 ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. On the
Effective Date, and to the extent permitted by applicable law all executory
contracts and unexpired leases of the Debtor shall be assumed in accordance with
the provisions of section 365 and section 1123 of the Bankruptcy Code, excluding
(a) any and all executory contracts or unexpired leases which are the subject of
separate motions filed pursuant to section 365 of the Bankruptcy Code by the
Debtor prior to the commencement of the hearing on confirmation of the
Prepackaged Plan, (b) such contracts or leases as are listed on any
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"Schedule of Rejected Executory Contracts and Unexpired Leases" filed by the
Debtor on or before entry of the Confirmation Order, all of which contracts or
leases shall be deemed rejected pursuant to the provisions of section 365 and
section 1123 of the Bankruptcy Code, and (c) any and all executory contracts or
unexpired leases rejected prior to entry of the Confirmation Order.
Contracts or leases entered into after the Petition Date will be performed
by the Reorganized Debtor in the ordinary course of business. Without limiting
the generality of the foregoing, the agreements set forth on Exhibit 4 attached
hereto will be deemed assumed immediately prior to the Effective Date in
accordance with the provisions and requirements of sections 365 and 1123 of the
Bankruptcy Code.
11.2 CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED
LEASES. Any Claims arising out of the rejection of contracts or leases must be
filed with the Court within the time set by any Final Order rejecting an
executory contract or unexpired lease or 30 days after the Confirmation Date.
Any Claims not filed within such time will be forever barred from assertion
against the Debtor or Reorganized Debtor, its estate and property. Unless
otherwise ordered by the Bankruptcy Court or provided in this Prepackaged Plan,
all such Claims for which proofs of Claim are required to be filed will be
treated as General Unsecured Claims.
11.3 INDEMNIFICATION OBLIGATIONS. Notwithstanding any provision of the
Prepackaged Plan to the contrary, the obligations of the Company or the Debtor
to indemnify its present and former directors, controlling persons, officers,
affiliates, employees, advisors or agents against any obligations pursuant to
its Amended and Restated Certificate, Amended and Restated Bylaws, applicable
state law or specific agreement, or any combination of the foregoing, shall
survive confirmation of the Prepackaged Plan, remain unaffected thereby, and not
be discharged, irrespective of whether indemnification is owed in connection
with an event occurring before or after the Petition Date.
ARTICLE XII
RETENTION OF JURISDICTION
12.1 RETENTION OF JURISDICTION. Notwithstanding the entry of the
Confirmation Order or the Effective Date having occurred, the Court shall retain
jurisdiction to (a) determine any Contested Claims, (b) determine requests for
payment of Claims entitled to priority under section 507(a)(1) of the Bankruptcy
Code, including compensation of and reimbursement of expenses of parties
entitled thereto, (c) resolve controversies and disputes regarding
interpretation and implementation of the Prepackaged Plan, (d) enter orders in
aid of the Prepackaged Plan, including, without limitation, appropriate orders
(which may include contempt or other sanctions) to protect the Debtor and the
Reorganized Debtor, (e) modify the Prepackaged Plan pursuant to Section 13.6 of
the Prepackaged Plan, (f) determine any and all applications, adversary
proceedings and contested or litigated matters pending on the Effective Date,
(g) allow, disallow, estimate, liquidate or determine any Claim or Interest and
to enter or enforce any order requiring the filing of any such Claim before a
particular date, (h) determine any and all pending applications for the
rejection or disaffirmance of executory contracts or leases, or for the
assignment of assumed executory contracts and leases, and to hear and determine,
and if need to be liquidate, any and all Claims arising therefrom, (i) determine
any actions or controversies arising under or in connection with the Prepackaged
Plan, the Prospectus, the Confirmation Order, or any contract, instrument,
release, or other agreement created in connection with the Prepackaged Plan or
the Prospectus, (j) enter and implement orders as are necessary or appropriate
if the Confirmation Order is for any reason modified, stayed, reversed, revoked
or vacated, and (k) enter a final decree closing the Reorganization Case.
12.2 FAILURE OF COURT TO EXERCISE JURISDICTION. If the Court abstains from
exercising or declines to exercise jurisdiction, or is otherwise without
jurisdiction over any matter arising out of the Reorganization Case, including
the matters set forth in this Article XII, this Article shall not prohibit or
limit the exercise of jurisdiction by any other court having competent
jurisdiction with respect to such matter.
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<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 DISTRIBUTION RECORD DATE. As of the close of business on the
Distribution Record Date, the respective transfer registers for the Senior
Debentures and Subordinated Debentures as maintained by the Debtor, the
respective Indenture Trustees, or their respective agents, shall be closed and
the transfers of the Outstanding Debentures, or any interest therein, will be
prohibited. Moreover, the Exchange Agent shall have no obligation to recognize
the transfer of the Outstanding Debentures in Classes 5 and 6 occurring after
the Distribution Record Date, and shall be entitled for all purposes herein to
recognize and deal only with those holders of record as of the close of business
on the Distribution Record Date.
13.2 SURRENDER OF INSTRUMENTS--DEBENTURE HOLDERS. As a condition to
participation under the Prepackaged Plan, each holder of an Outstanding
Debenture evidencing a Claim that desires to receive the Common Stock to be
distributed on account of an Allowed Claim based on such debenture shall
surrender such debenture to the Reorganized Debtor, or its designee, and shall
execute and deliver such other documents as are necessary to effectuate the
Prepackaged Plan. If such debenture is not surrendered and the holder does not
provide an affidavit that such debenture was lost, and any other required
documents, all in form and substance satisfactory to the Reorganized Debtor,
within one year of the Effective Date, then no distribution will be made to such
holder whose Allowed Claim is based on such debenture. Such holder shall be
deemed to forfeit all rights under the Prepackaged Plan.
13.3 UNCLAIMED DISTRIBUTIONS. If any holder of Outstanding Debentures
entitled to Common Stock directly from the Exchange Agent under the Prepackaged
Plan cannot be located on the Effective Date, such securities shall be set aside
and maintained by the Exchange Agent. If such person is located within one year
of the Effective Date, such securities shall be distributed to such person. If
such person cannot be located within one year of the Effective Date, any such
securities shall become the property of and shall be released to the Reorganized
Debtor; PROVIDED, HOWEVER, that nothing contained in this Prepackaged Plan shall
require the Reorganized Debtor to attempt to locate such person.
13.4 RETIREE BENEFITS. On and after the Effective Date, pursuant to
section 1129(a)(13) of the Bankruptcy Code, the Reorganized Debtor shall
continue to be obligated to pay all retiree benefits, as that term is defined in
section 1114 of the Bankruptcy Code, and shall continue to pay such retiree
benefits as they become due at the level established at any time prior to
confirmation of the Prepackaged Plan pursuant to subsection (e)(1)(B) or (g) of
section 1114, for the duration of the period the Debtor has obligated itself to
provide such benefits.
13.5 MODIFICATION OF PREPACKAGED PLAN. The Debtor reserves the right, in
accordance with the Bankruptcy Code, to amend or modify the Prepackaged Plan
prior to the entry of the Confirmation Order. After the entry of the
Confirmation Order, the Reorganized Debtor may, upon order of the Court, amend
or modify the Prepackaged Plan in accordance with section 1127(b) of the
Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency
in the Prepackaged Plan in such manner as may be necessary to carry out the
purpose and intent of the Prepackaged Plan.
13.6 WITHDRAWAL OF PREPACKAGED PLAN. The Debtor reserves the right, at any
time prior to the entry of the Conformation Order, to revoke and withdraw the
Prepackaged Plan. If the Debtor revokes or withdraws the Prepackaged Plan under
this section, or if entry of the Confirmation Order does not occur, then the
Prepackaged Plan shall be deemed null and void. In that event, nothing contained
in the Prepackaged Plan shall be deemed to constitute a waiver or release of any
Claims by or against or any Interests in the Debtor or to prejudice in any
manner the rights of the Debtor in any further proceedings involving the Debtor.
13.7 TAX PROVISIONS. Pursuant to section 1146(c) of the Bankruptcy Code,
the issuance, transfer or other exchange of a security, or the making or
delivery of an instrument of transfer under the Prepackaged Plan, shall not be
taxed under any state or local law imposing a stamp tax or similar tax.
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13.8 PAYMENT DATES. Whenever any payment to be made under the Prepackaged
Plan is due on a day other than a Business Day, such payment will instead by
made, without interest, on the next Business Day.
13.9 HEADINGS. The headings used in this Prepackaged Plan are inserted for
convenience only and neither constitute a portion of the Prepackaged Plan nor in
any manner affect the provisions of the Prepackaged Plan.
13.10 SUCCESSORS AND ASSIGNS. The rights, benefits and obligations of any
person or entity named or referred to in the Prepackaged Plan shall be binding
upon, and shall inure to the benefit of, the heir, executor, administrator,
successor or assign of such person.
13.11 PAYMENT OF STATUTORY FEES. All fees payable pursuant to section 1930
of Title 28 of the United States Code, as determined by the Bankruptcy Court at
the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or
before the Effective Date.
13.12 GOVERNING LAW. Except to the extent that the Bankruptcy Code, the
Bankruptcy Rules or other federal law is applicable, the rights, duties and
obligations arising under the Prepackaged Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
Dated: , 1997
Newport Beach, California
KOLL REAL ESTATE GROUP, INC.
By:
--------------------------------------
Name: Raymond J. Pacini
Title: Executive Vice President and
Chief Financial Officer
William H. Sudell, Jr., Esq.
Robert J. Dehney, Esq.
MORRIS, NICHOLS, ARSHT & TUNNELL
By:
--------------------------------------
Attorneys for Debtor and
Debtor-in-Possession
Brian S. Hucker, P.C., Esq.
Gregory W. Preston, Esq.
McDERMOTT, WILL & EMERY
By:
--------------------------------------
Attorneys for Debtor and
Debtor-in-Possession
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<PAGE>
EXHIBIT 1
PROPOSED
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
KOLL REAL ESTATE GROUP, INC.
PURSUANT TO SECTION 245 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
KOLL REAL ESTATE GROUP, INC. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"), hereby certifies as follows:
1. The name of the Corporation is Koll Real Estate Group, Inc. The
Corporation was originally incorporated under the name "Henley Newco Inc." The
name of the Corporation was changed from "Henley Newco Inc." to "The Henley
Group, Inc." pursuant to a Certificate of Amendment to the Certificate of
Incorporation of the Corporation filed with the Secretary of State of the State
of Delaware (the "Secretary of State") on December 29, 1988, and the name of the
Corporation was further changed from "The Henley Group, Inc." to "Henley
Properties Inc." pursuant to a Certificate of Ownership and Merger of the
Corporation filed with the Secretary of State on December 29, 1989.
2. The name of the Corporation was further changed from "Henley Properties
Inc." to "The Bolsa Chica Company," and the capitalization increased to
900,000,000 shares, of which 750,000,000 shares are Common Stock, par value
$0.05 per share and 150,000,000 shares are Preferred Stock, par value $0.01 per
share, all pursuant to a Certificate of Amendment to Restated Certificate of
Incorporation of the Corporation filed with the Secretary of State on July 16,
1992.
3. The name of the Corporation was further changed from "The Bolsa Chica
Company" to "Koll Real Estate Group, Inc." pursuant to a Certificate of
Ownership and Merger merging Koll Real Estate Group, Inc. into the Bolsa Chica
Company filed with the Secretary of State on September 13, 1993.
4. The address of the registered office of the Corporation was changed from
"229 South Street, in the City of Dover, County of Kent" to "32 Loockerman
Square, Suite L-100, City of Dover, County of Kent" pursuant to a Certificate of
Change of Address of Registered Office and of Registered Agent filed with the
Secretary of State on October 27, 1989.
5. A Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Series A Convertible Redeemable Preferred
Stock and Qualifications, Limitations and Restrictions Thereof was filed with
the Secretary of State on July 16, 1992, the terms of which are included in this
Restated Certificate of Incorporation.
6. The date of filing of the original Certificate of Incorporation of the
Corporation with the Secretary of State was September 20, 1988.
7. This Amended and Restated Certificate of Incorporation was duly adopted
in accordance with Section 245 of the General Corporation Law by the Board of
Directors of the Corporation.
8. The text of the Restated Certificate of Incorporation of the Corporation
as heretofore amended and/or supplemented, is hereby amended and restated to
read in its entirety as herein set forth:
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FIRST: The name of the Corporation is Koll Real Estate Group, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
Newcastle. The name of its registered agent at that address is CSC Corporation,
Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The Corporation shall have the authority to issue one class of
stock. The total number of shares of stock which the Corporation shall have the
authority to issue is 18 million shares of Common Stock, par value $0.05 per
share (the "Common Stock"). The Corporation shall not issue any non-voting
equity securities.
FIFTH: Effective upon the filing of this amendment to the Restated
Certificate of Incorporation, the Class A Common Stock, Class B Common Stock and
Series A Convertible Preferred Stock shall be reclassified and combined to
create one class and series of stock designated "Common Stock." Effective
immediately upon the filing of this amendment to the designated "Common Stock."
Effective immediately upon the filing of this amendment to the Restated
Certificate of Incorporation, each outstanding share of Class A Common Stock
shall be automatically reclassified to be one (1) share of Common Stock and each
outstanding share of Series A Convertible Preferred Stock shall be automatically
reclassified to be one and three quarter (1.75) shares of Common Stock.
Effective on the date of the filing of this amendment to the restated
Certificate of Incorporation, and immediately following the effectiveness of the
combination of the Class A Common Stock, Class B Common Stock and Series A
Preferred Stock, the resulting outstanding shares of Common Stock shall be
reverse split so that each 100 shares of outstanding Common Stock shall be
automatically reclassified into one share of Common Stock. The Company shall not
issue, and no stockholder of the Company shall be deemed to hold, fractional
shares of Common Stock as a result of the above described capital stock
combination and reverse stock split. Instead, the Company's exchange agent will
aggregate all such fractional shares of Common Stock that would otherwise result
from the above described capital stock combination and reverse stock split and
sell such aggregated shares of Common Stock, rounded to the nearest whole share,
as whole shares, in an orderly manner. Upon completion of such sales,
stockholders who would otherwise have held such fractional shares of Common
Stock, will receive in lieu thereof, the cash proceeds from such sales (without
interest) in amounts proportionate to the fractional shares of Common Stock
which such stockholders would otherwise have held. The designations and the
powers, preferences and rights, and qualifications, limitations or restrictions
thereof, of each share of Common Stock shall be governed by the follow:
(i) Identical Rights. All shares of Common Stock shall be identical and
shall entitle the holders thereof to the same rights and privileges.
(ii) Voting Rights. On all matters submitted to the Corporation's
stockholders, the holders of Common Stock shall be entitled to one vote per
share.
(iii) Dividend Rights. When and as dividends or other distributions are
declared, whether in cash, in property or in securities of the Corporation,
the holders of shares of Common Stock shall be entitled to share equally,
share for share, in such dividends or distributions.
(iv) Stock Splits. If the Corporation shall in any manner subdivide,
split or combine the outstanding shares of Common Stock, each share of
outstanding Common Stock shall be proportionately subdivided, split or
combined.
(v) No Charge. The issuance of certificates representing shares of
Common Stock in exchange for outstanding certificates of Class A Common
Stock or Series A Preferred Stock shall be made without charge to the
holders of such certificates, PROVIDED that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involving the issuance and delivery of
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any certificate in a name other than that of the holder of record of such
shares of Class A Common Stock or Series A Preferred Stock exchanged.
SIXTH: Intentionally Omitted.
SEVENTH: The duration of the Corporation is to be perpetual.
EIGHTH: (a) The number of directors of the Corporation shall be determined
from time to time in the manner described in the Bylaws. Each director shall
serve for a term ending on the next annual meeting following the meeting at
which such director was elected, or on such later date as such director's
successor shall have been elected and qualified.
(b) Newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office, even
if less than a quorum of the Board of Directors, or by a sole remaining
director. Any director elected in accordance with the preceding sentence shall
hold office until the next annual meeting of stockholders and until such
director's successor shall have been duly elected and qualified. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
(c) Any director may be removed from office, with or without cause, by the
affirmative vote of the holders of a majority of the voting power of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), voting together as
a single class."
(d) Intentionally Omitted
NINTH: Special meetings of stockholders may be called either (i) by the
Board of Directors or by the Chief Executive Officer pursuant to a resolution
approved by a majority of the then authorized number of directors of the
Corporation (as determined in accordance with the By-Laws) or (ii) by the
holders of capital stock of the Company representing at least ten percent (10%)
of the outstanding shares of capital stock of the Company entitled to vote in
the election of directors.
TENTH: Intentionally Omitted.
ELEVENTH: Unless and except to the extent that the By-Laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
TWELFTH: No contract or other transaction of the Corporation shall be void,
voidable, fraudulent or otherwise invalidated, impaired or affected, in any
respect, by reason of the fact that any one or more of the officers, directors
or stockholders of the Corporation shall individually be party or parties
thereto or otherwise interested therein, or shall be officers, directors or
stockholders of any other corporation or corporations which shall be party or
parties thereto or otherwise interested therein; PROVIDED that such contract or
otherwise transactions be duly authorized or ratified by the Board of Directors,
with the assenting vote of a majority of the disinterested directors then
present, or, if only one such is present, with his assenting vote.
THIRTEENTH: The Board of Directors may from time to time make, amend,
supplement or repeal any By-Laws; PROVIDED, however, that the stockholders may
change or repeal any By-Law adopted by the Board of Directors; and PROVIDED,
FURTHER, that no amendment or supplement to the By-Laws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement adopted by the
stockholders.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter
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prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
FIFTEENTH: (a) A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for beach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
(b)(1) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a part to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or the
person of whom he or she is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action or inaction in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights then said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorney's fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators;
PROVIDED, HOWEVER, that except as provided in this paragraph (b), the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this paragraph (b)
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; PROVIDED, HOWEVER, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director of officer of the Corporation (and
not in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may, by action if
its Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
(2) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under subparagraph (b)(1)
is not paid in full by the Corporation within 30 days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal
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counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(3) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this paragraph (b) shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Amended and Restated Certificate of Incorporation, By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise.
(4) INSURANCE. The Corporation may maintain insurance, as its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprises
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SIXTEENTH: The Corporation expressly elects not to be governed by Section
203 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned, being a duly authorized Executive Vice
President and Chief Financial Officer of the Corporation, for the purpose of
amending and restating the Restated Certificate of Incorporation of the
Corporation pursuant to Section 245 of the General Corporation Law, does make
and file this Certificate, hereby declaring and certifying that the facts herein
stated are true, and accordingly has hereunto set his hand, this day of
, 1997.
--------------------------------------
Raymond J. Pacini
Executive Vice President and
Chief Financial Officer
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EXHIBIT 2
PROPOSED
AMENDED AND RESTATED BY-LAWS
OF
THE KOLL REAL ESTATE GROUP, INC.
ARTICLE I
OFFICES
Section 1. DELAWARE OFFICE. The office of The Koll Real Estate Group, Inc.
(the "Corporation") within the State of Delaware shall be in the City of
Wilmington, County of Newcastle.
Section 2. OTHER OFFICES. The Corporation may also have an office or
offices and keep the books and records of the Corporation, except as otherwise
may be required by law, in such other place or places, either within or without
the State of Delaware, as the Board of Directors of the Corporation (the
"Board") may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of holders of shares of capital
stock of the Corporation shall be held at the office of the Corporation in the
State of Delaware or at such other place, within or without the State of
Delaware, as may from time to time be fixed by the Board or specified or fixed
in the respective notices or waivers of notice thereof.
Section 2. ANNUAL MEETINGS. An annual meeting of stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting (an "Annual Meeting") shall be
held at 9:00 a.m. on the first Wednesday of May of each year or on such other
date and at such other time as may be fixed by the Board. If the Annual Meeting
shall not be held on the day designated, the Board shall call a special meeting
of stockholders as soon as practicable for the election of directors.
Section 3. SPECIAL MEETINGS. Special meetings of stockholders, unless
otherwise provided by law, may be called at any time by the Board pursuant to a
resolution adopted by a majority of the then authorized number of directors (as
determined in accordance with Section 2 of Article III of these By-Laws), by the
Chief Executive Officer or by holders of capital stock of the Company
representing at least ten percent (10%) of the outstanding shares of capital
stock of the Company entitled to vote in the election of directors. Any such
call must specify the matter or matters to be acted upon at such meeting and
only such matter or matters shall be acted upon thereat.
Section 4. NOTICE OF MEETINGS. Except as otherwise may be required by law,
notice of each meeting of stockholders, whether an Annual Meeting or a special
meeting, shall be in writing, shall state the purpose or purposes of the
meeting, the place, date and hour of the meeting and, unless it is an Annual
Meeting, shall indicate that the notice is being issued by or at the direction
of the person or persons calling the meeting, and a copy thereof shall be
delivered or sent by mail, not less than 10 or more than 60 days before the date
of said meeting, to each stockholder entitled to vote at such meeting. If
mailed, such notice shall be directed to such stockholder at his address as it
appears on the stock records of the Corporation, unless he shall have filed with
the Secretary a written request that notices to him be mailed to some other
address, in which case it shall be directed to him at such other address. Notice
of an adjourned meeting
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need not be given if the time and place to which the meeting is to be adjourned
was announced at the meeting at which the adjournment was taken, unless (i) the
adjournment is for more than 30 days or (ii) the Board shall fix a new record
date for such adjourned meeting after the adjournment.
Section 5. QUORUM. At each meeting of stockholders of the Corporation, the
holders of shares having a majority of the voting power of the capital stock of
the Corporation issued and outstanding and entitled to vote thereat shall be
present or represented by proxy to constitute a quorum for the transaction of
business, except as otherwise provided by law.
Section 6. ADJOURNMENTS. In the absence of a quorum at any meeting of
stockholders or any adjournment or adjournments thereof, holders of shares
having a majority of the voting power of the capital stock present or
represented by proxy at the meeting may adjourn the meeting from time to time
until a quorum shall be present or represented by proxy. At any such adjourned
meeting at which a quorum shall be present or represented by proxy, any business
may be transacted which might have been transacted at the meeting as originally
called if a quorum had been present or represented by proxy thereat.
Section 7. ORDER OF BUSINESS. (a) At any Annual Meeting, only such
business shall be conducted as shall have been brought before the Annual Meeting
(i) by or at the direction of the Board of Directors or (ii) by any stockholder
who complies with the procedures set forth in this Section 7.
(b) For business properly to be brought before an Annual Meeting by a
stockholder, the stockholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 30 days nor more than 60 days prior to
the Annual Meeting; PROVIDED, HOWEVER, that in the event that less than 40 days'
notice or prior public disclosure of the date of the Annual Meeting is given or
made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the tenth day following the day on which
such notice of the date of the Annual Meeting was mailed or such public
disclosure was made. To be in proper written form, a stockholder's notice to the
Secretary shall set forth in writing as to each matter the stockholder proposes
to bring before the Annual Meeting: (i) a brief description of the business
desired to be brought before the Annual Meeting and the reasons for conducting
such business at the Annual Meeting; (ii) the name and address, as they appear
on the Corporation's books, of the stockholder proposing such business; (iii)
the class and number of shares of the Corporation which are beneficially owned
by the stockholder; and (iv) any material interest of the stockholder in such
business. Notwithstanding anything in these By-Laws to the Contrary, no business
shall be conducted at an Annual Meeting except in accordance with the procedures
set forth in this Section 7. The chairman of an Annual Meeting shall, if the
facts warrant, determine and declare to the Annual Meeting that business was not
properly brought before the Annual Meeting in accordance with the provisions of
this Section 7 and, if he should so determine, he shall so declare to the Annual
Meeting and any such business not properly brought before the Annual Meeting
shall not be transacted.
Section 8. VOTING. Except as otherwise provided in the Amended and
Restated Certificate of Incorporation, as amended from time to time (the
"Certificate of Incorporation") or in a resolution of the Board of Directors
adopted pursuant to the Certificate of Incorporation establishing a series of
Preferred Stock of the Corporation ("Preferred Stock") or a class of Common
Stock of the Corporation having special, limited or no voting rights, at each
meeting of stockholders, every stockholder of the Corporation shall be entitled
to one vote for every share of capital stock standing in his name on the stock
records of the Corporation (i) at the time fixed pursuant to Section 6 of
Article VII of these By-Laws as the record date for the determination of
stockholders entitled to vote at such meeting, or (ii) if no such record date
shall have been fixed, then at the close of business on the day next preceding
the day on which notice thereof shall be given. At each meeting of stockholders,
all matters (except as otherwise provided in Section 3 of Article III of these
By-Laws and except in cases where a larger vote is required by law or by
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the Certificate of Incorporation of the Corporation or these By-Laws) shall be
decided by a majority of the votes cast at such meeting by the holders of shares
of capital stock present or represented by proxy and entitled to vote thereon, a
quorum being present.
Section 9. INSPECTORS. For each election of directors by the stockholders
and in any other case in which it shall be advisable, in the opinion of the
Board, that the voting upon any matter shall be conducted by inspectors of
election, the Board shall appoint two inspectors of election. If, for any such
election of directors or the voting upon any such other matter, any inspector
appointed by the Board shall be unwilling or unable to serve, or if the Board
shall fail to appoint inspectors, the chairman of the meeting shall appoint the
necessary inspector or inspectors. The inspectors so appointed, before entering
upon the discharge of their duties, shall be sworn faithfully to execute the
duties of inspectors with strict impartiality, and according to the best of
their ability, and the oath so taken shall be subscribed by them. Such
inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each of the shares represented
at the meeting, the existence of a quorum, and the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the chairman of the meeting or any stockholder entitled to vote
thereat, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and shall execute a certificate of any
fact found by them. No director or candidate for the office of director shall
act as an inspector of election of directors. Inspectors need not be
stockholders.
ARTICLE III
DIRECTORS
Section 1. POWERS. The business of the Corporation shall be managed under
the direction of the Board. The Board may exercise all such authority and powers
of the Corporation and do all such lawful acts and things as are not by law or
otherwise directed or required to be exercised or done by the stockholders.
Section 2. NUMBER, ELECTION AND TERMS. The authorized number of directors
may be determined from time to time by a vote of a majority of the then
authorized number of directors or by the affirmative vote of the holders of at
least a majority of the voting power of the then outstanding shares of capital
stock of the corporation entitled to vote generally in the election of
directors, voting together as a single class; PROVIDED, HOWEVER, that such
number initially shall be ten (10). Except as otherwise provided in the
Certificate of Incorporation, newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office, even if less than a quorum of the Board, or by a sole remaining
director. Any director elected in accordance with the preceding sentence shall
hold office until the next Annual Meeting and until such director's successor
shall have been duly elected and qualified. No decrease in the number of
directors constituting the Board shall shorten the term of any incumbent
director.
Section 3. NOMINATIONS OF DIRECTORS; ELECTION. Nominations for the
election of directors may be made by the Board or a committee appointed by the
Board, or by any stockholder entitled to vote generally in the election of
directors who complies with the procedures set forth in this Section 3.
Directors shall be at least 21 years of age. Directors need not be stockholders.
At each meeting of stockholders for the election of directors at which a quorum
is present, the persons receiving a plurality of the votes cast shall be elected
directors. All nominations by stockholders shall be made pursuant to timely
notice in proper written form to the Secretary of the Corporation. To be timely,
a stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 60 days prior to the meeting; PROVIDED, HOWEVER, that in the event that
less than 40 days'
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notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper written form, such stockholder's notice shall set forth in
writing (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected; and (ii) as to the
stockholder giving the notice, (x) the name and address, as they appear on the
Corporation's books, of such stockholder and (y) the class and number of shares
of the Corporation which are beneficially owned by such stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation the information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. In the event that a stockholder
seeks to nominate one or more directors, the Secretary shall appoint two
inspectors, who shall not be affiliated with the Corporation, to determine
whether a stockholder has complied with this Section 3. If the inspectors shall
determine that a stockholder has not complied with this Section 3, the
inspectors shall direct the chairman of the meeting to declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-Laws of the Corporation, and the chairman shall so declare to the meeting
and the defective nomination shall be disregarded.
Section 4. PLACE OF MEETINGS. Meetings of the Board shall be held at the
Corporation's office in the State of Delaware or at such other place, within or
without such State, as the Board may from time to time determine or as shall be
specified or fixed in the notice or waiver of notice of any such meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board shall be held
in accordance with a yearly meeting schedule as determined by the Board; or such
meetings may be held on such other days and at such other times as the Board may
from time to time determine. Notice of regular meetings of the Board need not be
given except as otherwise required by these By-Laws.
Section 6. SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chief Executive Officer and shall be called by the Secretary at the
request of any two of the other directors.
Section 7. NOTICE OF MEETINGS. Notice of each special meeting of the Board
(and of each regular meeting for which notice shall be required), stating the
time, place and purposes thereof, shall be mailed to each director, addressed to
him at his residence or usual place of business, or shall be sent to him by
telex, cable or telegram so addressed, or shall be given personally or by
telephone, on 24 hours' notice.
Section 8. QUORUM AND MANNER OF ACTING. The presence of at least a
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business at any meeting of the
Board. If a quorum shall not be present at any meeting of the Board, a majority
of the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present. Except where a different vote is required or permitted by law or these
By-Laws or otherwise, the act of a majority of the directors present at any
meeting at which a quorum shall be present shall be the act of the Board. Any
action required or permitted to be taken by the Board may be taken without a
meeting if all the directors consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
directors shall be filed with the minutes of the proceedings of the Board. Any
one or more directors may participate in any meeting of the Board by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall be deemed to constitute presence in person at a meeting of
the Board.
Section 9. RESIGNATION. Any director may resign at any time by giving
written notice to the Corporation; PROVIDED, HOWEVER, that written notice to the
Board, the Chairman of the Board, the Chief
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Executive Officer or the Secretary shall be deemed to constitute notice to the
Corporation. Such resignation shall take effect upon receipt of such notice or
at any later time specified therein and, unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective.
Section 10. REMOVAL OF DIRECTORS. Any director may be removed from office,
with or without cause, by the affirmative vote of a majority of the voting power
of all shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
Section 11. COMPENSATION OF DIRECTORS. The Board may provide for the
payment to any of the directors, other than officers or employees of the
Corporation, of a specified amount for services as director or member of a
committee of the Board, or of a specified amount for attendance at each regular
or special Board meeting or committee meeting, or of both, and all directors
shall be reimbursed for expenses of attendance at any such meeting; PROVIDED,
HOWEVER, that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
COMMITTEES OF THE BOARD
Section 1. APPOINTMENT AND POWERS OF EXECUTIVE COMMITTEE. The Board may,
by resolution adopted by the affirmative vote of a majority of the authorized
number of directors, designate an Executive Committee of the Board which shall
consist of such number of members as the Board shall determine. Except as
provided by Delaware law, during the interval between the meetings of the Board,
the Executive Committee shall possess and may exercise all of the powers of the
Board in the management and direction of all the business and affairs of the
Corporation (except the matters hereinafter assigned to any other Committee of
the Board), in such manner as the Executive Committee shall deem in the best
interests of the Corporation in all cases in which specific directions shall not
have been given by the Board. A majority of the members of the Executive
Committee shall constitute a quorum for the transaction of business by the
committee and the act of a majority of the members of the committee present at a
meeting at which a quorum shall be present shall be the act of the committee.
Either the Chairman of the board, the Chief Executive Officer or the Chairman of
the Executive Committee may call the meetings of the Executive Committee.
Section 2. APPOINTMENT AND POWERS OF AUDIT COMMITTEE. The Board may, by
resolution adopted by the affirmative vote of a majority of the authorized
number of directors, designate an Audit Committee of the Board, which shall
consist of such number of members as the Board shall determine. The Audit
Committee shall (i) make recommendations to the Board as to the independent
accountants to be appointed by the Board; (ii) review with the independent
accountants the scope of their examination; (iii) receive the reports of the
independent accountants and meet with representatives of such accountants for
the purpose of reviewing and considering questions relating to their examination
and such reports; (iv) review, either directly or through the independent
accountants, the internal accounting and auditing procedures of the Corporation;
and (v) perform such other functions as may be assigned to it from time to time
by the Board. The Audit Committee may determine its manner of acting and fix the
time and place of its meetings, unless the Board shall otherwise provide. A
majority of the members of the Audit Committee shall constitute a quorum for the
transaction of business by the committee and the act of a majority of the
members of the committee present at a meeting at which a quorum shall be present
shall be the act of the committee.
Section 3. COMPENSATION COMMITTEE; OTHER COMMITTEES. The Board may, by
resolution adopted by the affirmative vote of a majority of the authorized
number of directors, designate members of the Board to constitute a Compensation
Committee and such other committees of the Board as the Board may determine.
Such committees shall in each case consist of such number of directors as the
Board may
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determine, and shall have and may exercise, to the extent permitted by law, such
powers as the Board may delegate to them, in the respective resolutions
appointing them. Each such committee may determine its manner of acting and fix
the time and place of its meetings, unless the Board shall otherwise provide. A
majority of the members of any such committee shall constitute a quorum for the
transaction of business by the committee and the act of a majority of the
members of such committee present at a meeting at which a quorum shall be
present shall be the act of the committee.
Section 4. ACTION BY CONSENT; PARTICIPATION BY TELEPHONE OR SIMILAR
EQUIPMENT. Unless the Board shall otherwise provide, any action required or
permitted to be taken by any committee may be taken without a meeting if all
members of the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the committee shall be filed with the minutes of the proceedings of
the committee. Unless the Board shall otherwise provide, any one or more members
of any such committee may participate in any meeting of the committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation by
such means shall constitute presence in person at a meeting of the committee.
Section 5. CHANGES IN COMMITTEES; RESIGNATIONS; REMOVALS. The Board shall
have power, by the affirmative vote of a majority of the authorized number of
directors, at any time to change the members of, to fill vacancies in, and to
discharge any committee of the Board. Any member of any such committee may
resign at any time by giving notice to the Corporation; PROVIDED, HOWEVER, that
notice to the Board, the Chairman of the Board, the Chief Executive Officer, the
chairman of such committee or the Secretary shall be deemed to constitute notice
to the Corporation. Such resignation shall take effect upon receipt of such
notice or at any later time specified therein; and, unless otherwise specified
therein, acceptance of such resignation shall not be necessary to make it
effective. Any member of any such committee may be removed at any time, either
with or without cause, by the affirmative vote of a majority of the authorized
number of directors at any meeting of the Board called for that purpose.
ARTICLE V
OFFICERS
Section 1. NUMBER AND QUALIFICATION. The Corporation shall have such
officers as may be necessary or desirable for the business of the Corporation.
The elected officers of the Corporation shall be a Chairman of the Board, a
Chief Executive Officer, a Treasurer and Secretary, and such other persons
having such other titles and such other duties as the Board may prescribe. The
same person may hold more than one office. The Chairman of the Board and the
Chief Executive Officer shall be elected from among the directors. The Chief
Executive Officer may appoint one or more deputies, associates or assistant
officers, or such other agents as may be necessary or desirable for the business
of the Corporation. In case one or more deputies, associates or assistant
officers shall be appointed, the officer such appointee assists may delegate to
him the authority to perform such of the officer's duties as the officer may
determine.
Section 2. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Corporation; PROVIDED, HOWEVER, that notice to the Board,
the Chairman of the Board, the Chief Executive Officer or the Secretary shall be
deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3. REMOVAL. Any officer or agent may be removed, either with or
without cause, at any time, by the Board at any meeting called for that purpose;
PROVIDED, HOWEVER, that the Chief Executive Officer may remove any agent
appointed by him.
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Section 4. VACANCIES. Any vacancy among the officers, whether caused by
death, resignation, removal or any other cause, shall be filled in the manner
prescribed for election or appointment to such office.
Section 5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, if
present, preside at all meetings of the Board and, in the absence of the Chief
Executive Officer, at all meetings of the stockholders. The Chairman of the
Board shall perform the duties incident to the office of the Chairman of the
Board and all such other duties as are specified in these By-Laws or as shall be
assigned to the Chairman of the Board from time to time by the Board.
Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall, if
present, preside at all meetings of the stockholders. The Chief Executive
Officer shall have, under the control of the Board, general supervision and
direction of the business and affairs of the Corporation. The Chief Executive
Officer shall at all times see that all resolutions or determinations of the
Board are carried into effect. The Chief Executive Officer may from time to time
appoint, remove or change members of and discharge one or more advisory
committees, each of which shall consist of such number of persons (who may, but
need not, be directors or officers of the Corporation), and have such advisory
duties, as the Chief Executive Officer shall determine. The Chief Executive
Officer shall perform the duties incident to the office of the Chief Executive
Officer and all such other duties as are specified in these By-Laws or as shall
be assigned to the Chief Executive Officer from time to time by the Board.
Section 7. TREASURER. The Treasurer shall have charge and custody of, and
be responsible for, all funds and securities of the Corporation, shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Corporation, shall deposit all moneys and other valuables to the credit of the
Corporation in such depositories as may be designated pursuant to these By-Laws,
shall receive, and give receipts for, moneys due and payable to the Corporation
from any source whatsoever, shall disburse the funds of the Corporation and
shall render to all regular meetings of the Board, or whenever the Board may
require, an account of all the Treasurer's transactions as Treasurer. The
Treasurer shall, in general, perform all the duties incident to the office of
Treasurer and all such other duties as may be assigned to the Treasurer from
time to time by the Chief Executive Officer or such other officer to whom the
Treasurer reports.
Section 8. SECRETARY. The Secretary shall, if present, act as secretary
of, and keep the minutes of, all meetings of the Board, the Executive Committee
and other committees of the Board and the stockholders in one or more books
provided for that purpose, shall see that all notices are duly given in
accordance with these By-Laws and as required by law, shall be custodian of the
seal of the Corporation and shall affix and attest the seal to all documents to
be executed on behalf of the Corporation under its seal. The Secretary shall, in
general, perform all the duties incident to the office of Secretary and all such
other duties as may be assigned to the Secretary from time to time by the Chief
Executive Officer or such other officer to whom the Secretary reports.
Section 9. BONDS OF OFFICERS. If required by the Board, any officer of the
Corporation shall give a bond for the faithful discharge of such Officer's
duties in such amount and with such surety or sureties as the Board may require.
Section 10. COMPENSATION. The salaries of the officers shall be fixed from
time to time by the Compensation Committee of the Board; PROVIDED, HOWEVER, that
the Chief Executive Officer may fix or delegate to others the authority to fix
the salaries of any agents appointed by the Chief Executive Officer.
Section 11. OFFICERS OF OPERATING COMPANIES OR DIVISIONS. The Chief
Executive Officer shall have the power to appoint, remove, and prescribe the
terms of office, responsibilities, duties and salaries of, the officers of the
operating companies or divisions, other than those who are officers of the
Corporation.
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ARTICLE VI
CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC.
Section 1. CONTRACTS. The Board may authorize any officer or officers,
agent or agents, in the name and on behalf of the Corporation, to enter into any
contract or to execute and deliver any instrument, which authorization may be
general, or confined to specific instances; and, unless so authorized by the
Board, no officer, agent or employee shall have any power or authority to bind
the Corporation by an contract or engagement or to pledge its credit or to
render it liable pecuniarily for any purpose or for any amount.
Section 2. CHECKS, ETC. All checks, drafts, bills of exchange or other
orders for the payment of money out of the funds of the Corporation, and all
notes or other evidences of indebtedness of the Corporation, shall be signed in
the name and on behalf of the Corporation in such manner as shall from time to
time be authorized by the Board, which authorization may be general or confined
to specific instances.
Section 3. LOANS. No loan shall be contracted on behalf of the
Corporation, and no negotiable paper shall be issued in its name, unless
authorized by the Board, which authorization may be general or confined to
specific instances. All bonds, debentures, notes and other obligations evidences
of indebtedness of the Corporation issued for such loans shall be made, executed
and delivered as the Board shall authorize.
Section 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositors as may be selected by or in the
manner designated by the Board. The Board or its designees may make such special
rules and regulations with respect to such bank accounts, not inconsistent with
the provisions of the Certificate of Incorporation or these By-Laws, as they may
deem advisable.
ARTICLE VII
CAPITAL STOCK
Section 1. STOCK CERTIFICATES. Each stockholder shall be entitled to have,
in such form as shall be approved by the Board, a certificate or certificates
signed by the Chairman of the Board or the Chief Executive Officer, and by
either the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary (except that, when any such certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation or an employee of
the Corporation, the signatures of any such officers may be facsimiles, engraved
or printed), which may be sealed with the seal of the Corporation (which seal
may be a facsimile, engraved or printed), certifying the number of shares of
capital stock of the Corporation owned by such stockholder. In the event any
officer who has signed or whose facsimile signature has been placed upon any
such certificate shall have ceased to be such officer before such certificate is
issued, such certificate may be issued by the Corporation with the same effect
as if he were such officer at the date of its issue.
Section 2. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make or cause to be prepared or made, at least 10 days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares of capital stock registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the
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meeting for the duration thereof, and may be inspected by any stockholder of the
Corporation who is present.
Section 3. STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 2 of this Article VII or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 4. TRANSFERS OF CAPITAL STOCK. Transfers of shares of capital
stock of the Corporation shall be made only on the stock ledger of the
Corporation by the holder of record thereof, by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, or by the transfer agent of the Corporation, and only on
surrender of the certificate or certificates representing such shares, properly
endorsed or accompanied by a duly executed stock transfer power. The Board may
make such additional rules and regulations as it may deem advisable concerning
the issue and transfer of certificates representing shares of the capital stock
of the Corporation.
Section 5. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 6. FIXING OF RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividends or other distributions or allotments of any rights, or entitled to
exercise any rights in respect to any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than 60 days nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED,
HOWEVER, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, except as otherwise provided by law.
ARTICLE VIII
FISCAL YEAR
The Corporation's fiscal year shall coincide with the calendar year.
ARTICLE IX
SEAL
The Corporation's seal shall be circular in form and shall include the words
"THE KOLL REAL ESTATE GROUP, INC., Delaware, 1988, Seal."
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required by law, the Certificate of Incorporation or
these By-Laws to be given to any director, member of a committee or stockholder,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether signed before or after the time stated in such written waiver,
shall be deemed equivalent to such notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when such person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the grounds that the meeting is
not lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE XI
AMENDMENTS
These By-Laws or any of them may be amended or supplemented in any respect
at any time, either (i) at any meeting of stockholders, provided that any
amendment or supplement proposed to be acted upon at any such meeting shall have
been described or referred to in the notice of such meeting; or (ii) at any
meeting of the Board, provided that any amendment or supplement proposed to be
acted upon at any such meeting shall have been described or referred to in the
notice of such meeting or an announcement with respect thereto shall have been
made at the last previous Board meeting, and PROVIDED FURTHER that no amendment
or supplement adopted by the Board shall vary or conflict with any amendment or
supplement adopted by the stockholders.
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EXHIBIT 3
KOLL REAL ESTATE GROUP
AMENDED AND RESTATED
1993 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE AMENDED AND RESTATED PLAN
A. This Amended and Restated 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), and (ii) 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 amends and restates the Koll Real Estate Group 1993 Stock
Option/Stock Issuance Plan (the "1993 Plan") which became effective immediately
upon adoption by the Board on November 29, 1993.
C. The Corporation was formerly known as The Bolsa Chica Company, and this
Plan shall serve as an amendment and restatement of the 1993 Plan which is 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 the 1993 Plan. All
outstanding stock options under the Predecessor Plan on the effective date of
the 1993 Plan were incorporated into the 1993 Plan and were treated as
outstanding stock options under the 1993 Plan. As of , 1997, all such
options issued under the Predecessor Plan and under the 1993 Plan have been
cancelled by agreement between the holders thereof and the Company or have
expired or terminated in accordance with their terms.
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in effect:
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
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the Board members described in clause (A) who were still in office at the
time such election or nomination was approved by the Board.
COMMON STOCK: shares of the Corporation's Common Stock, par value $.05 per
share, on a post 1997 capital stock combination and one for one hundred (1:100)
reverse stock split basis.
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
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 Common Stock
determined in accordance with the following provisions:
a. If the 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 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 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 Common Stock, as such price
is officially quoted in the composite tape of transactions on such exchange.
If there is no reported sale of 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.
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
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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 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.
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 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
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 two (2) separate
components: the Discretionary Option Grant Program specified in Article Two and
the Director Fee Program specified in Article Three. Under the Discretionary
Option Grant Program, eligible individuals may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock in
accordance with the provisions of Article Two. Under the Director Fee Program,
each non-employee Board member may, in accordance
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with the provisions of Article Three, elect to apply all or any portion of his
or her annual retainer fee to the acquisition of unvested shares of Common
Stock.
B. GENERAL PROVISIONS. Unless the context clearly indicates otherwise, the
provisions of Articles One and Four shall apply to the Discretionary 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 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 Director Fee Program shall be self-executing in
accordance with the express terms and conditions of Article Three and the
Committee as Plan Administrator shall exercise no discretionary functions with
respect to option grants or share issuances made pursuant to those programs.
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 Director Fee Program, to the extent they are
eligible for participation in those latter programs in accordance with the
provisions of Articles Three.
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
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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 Common Stock shall be available for issuance under the Plan
and shall be drawn from either the Corporation's authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. Seven Hundred Fifty-One
Thousand Four Hundred and Forty-Nine (751,449) shares of 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 the number of shares of Common Stock which remained available
for issuance under the 1993 Plan prior to this amendment, as reduced by this
amendment.
B. In no event shall there be issued over the remaining term of the Plan,
from the effective date of this amendment to the 1993 Plan until the termination
of the Plan pursuant to Article Four, Section IV, more than Seven Hundred
Fifty-One Thousand Four Hundred and Forty-Nine (751,449) shares in the aggregate
of Common Stock. The foregoing share limitations shall be subject to periodic
adjustment in accordance with the provisions of Section F of this Article VI.
C. Should one or more outstanding options under 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 Common Stock available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock or should
shares of 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 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 Common Stock actually
issued to the holder of such option or share issuance.
D. Should any change be made to the 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 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 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 share issuances are subsequently to be made
to non-employee Board members under the Director Fee Program, and (iv) the
number and/or class of securities and price per share in effect under each
option outstanding under the Discretionary Option Grant. 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 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 Four 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 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 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 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.
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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 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.
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 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.
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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 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 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 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 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 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 the Corporation or any one of its parent or subsidiary
corporations, then the exercise price per share of the 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.
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Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Four 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
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 completion 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 completion 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 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 completion 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.
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<PAGE>
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.
X. 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 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 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
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 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 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 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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<PAGE>
ARTICLE THREE
DIRECTOR FEE PROGRAM
I. ELIGIBILITY
Subject to the availability of shares of Common Stock under the Plan
pursuant to Article One, Section VI of the Plan, 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 Common Stock under this Article Three 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 Three Program
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 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 Common Stock by dividing the elected dollar amount by the Fair Market
Value per share of the Common Stock on that trading day. The number of issuable
shares shall be rounded 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.
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<PAGE>
IV. AMENDMENT OF THE DIRECTOR FEE PROGRAM
F. LIMITED AMENDMENTS. The provisions of this Director Fee Program,
together with the unvested share issuances 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.
ARTICLE FOUR
MISCELLANEOUS
XI. 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 Director Fee Program (or any stock options or share issuances outstanding
thereunder) shall be in compliance with the limitation of 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, or increase the maximum number of shares of
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.F 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 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.
A-45
<PAGE>
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of 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 Four 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 or unvested shares (other
than the unvested shares issued under the Director Fee Program) with the right
to use shares of the Corporation's 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:
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 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 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. The 1993 Plan originally became effective immediately upon adoption by
the Board on November 29, 1993. The Plan, as amended hereby, will become
effective immediately upon completion of the Company's proposed
recapitalization. Stock options may be made under the Plan, as amended hereby,
immediately thereafter upon the effective date of this amendment.
B. 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
XVI. 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 Common Stock upon the exercise or surrender of the option grants made
hereunder shall be subject to the Corporation's procurement of all approvals
A-46
<PAGE>
and permits required by regulatory authorities having jurisdiction over the
Plan, the options granted under it and the Common Stock issued pursuant to it.
B. No shares of 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 Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the 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 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 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.
A-47
<PAGE>
EXHIBIT 4
1. Financing and Accounting Services Agreement dated as of September 30, 1993
between the Company and The Koll Company.
2. Management Information Systems and Human Resources Services Agreement dated
as of September 30, 1993 between the Company and Koll Management Services,
Inc.
3. License Agreement dated September 30, 1993, as amended, among the Company,
The Koll Company and Mr. Donald M. Koll.
4. Sublease Agreement dated September 30, 1993 between the Company and the Koll
Company.
5. Employment Agreement between the Company and Mr. Donald M. Koll dated April
28, 1997.
6. Employment Agreement between the Company and Mr. Richard M. Ortwein dated
April 28, 1997.
7. Employment Agreement between the Company and Mr. Raymond J. Pacini dated
April 28, 1997.
8. Consulting Agreement between the Company and Mr. Ray Wirta dated April 28,
1997.
9. Agreement between the Company and Rothschild, Inc. dated May 31, 1996.
10. Agreement between the Company and Houlihan Lokey Howard and Zukin, Inc.
dated February 6, 1996.
A-48
<PAGE>
Master Ballots, Ballots and Proxies should be sent by the respective holders
of Outstanding Debentures, Preferred Stock, Class A Common Stock, Impaired
Claims and Impaired Interests, as the case may be, or by the respective broker,
dealer, commercial bank, trust company or other nominee of such entities, to the
Exchange Agent at the following address:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Hand or Overnight Delivery: By Facsimile:
600 Willowtree Road (201) 329-8930
Leonia, NJ 07605 Telephone:
Attn: Proxy Department (201) 296-4124
By Mail:
Midtown Station
P.O. Box 947
New York, NY 10138
Consents and Letters of Transmittal should be sent by the respective holders
of Outstanding Debentures or by the respective broker, dealer, commercial bank,
trust company or other nominee of such entities, to the Exchange Agent at the
following address:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Hand or Overnight Courier: By Facsimile:
120 Broadway (201) 329-8936
13th Floor Telephone:
New York, New York 10271 (201) 296-4860
Attn: Reorganization Dept.
By Mail:
P.O. Box 3301
South Hackensack, NJ 07606
Attn: Reorganization Dept.
Any questions or requests for assistance with respect to the Exchange
Offers, Consent Solicitation, Annual Meeting or the Prepackaged Plan or requests
for additional copies of this Prospectus, the Consent and Letter of Transmittal,
Master Ballots, Ballots or Proxies may be directed to the Information Agent at
its address or telephone number set forth below. Holders of Outstanding
Debentures, Preferred Stock or Class A Common Stock may also contact their
broker, dealer, commercial bank, trust company or other nominee, as applicable
concerning the Exchange Offers, Consent Solicitation, Annual Meeting or the
Prepackaged Plan.
THE INFORMATION AGENT:
Georgeson & Company Inc.
Wall Street Plaza
New York, NY 10005
Call Toll Free (800) 223-2064
Banks and Brokers call collect (212) 440-9800
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article FIFTEENTH(b)(1) of the Amended Certificate of Incorporation of the
Registrant requires the Registrant to indemnify directors and officers to the
fullest extent permitted by the Delaware General Corporation Law ("DGCL"). The
effect of the DGCL is summarized as follows:
(a) The DGCL permits a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a director,
or officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, the person had no reasonable cause to believe the
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation,
and with respect to any criminal action or proceeding, that the person had
reasonable cause to believe that the conduct was unlawful.
(b) The DGCL permits a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) above, or
in defense of any claim, issue or matter therein, the DGCL provides that the
director, officer, employee or agent shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by that person
in connection therewith.
(d) The DGCL also provides that any indemnification under paragraphs (a)
and (b) above (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth in paragraphs (a) and (b) above. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there
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<PAGE>
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that that person is not entitled to be
indemnified by the corporation as authorized by the DGCL. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by or
granted pursuant to the DGCL shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The rights of indemnification or advancement of expenses described above are
not exclusive of any other rights of indemnification to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of shareholders
or disinterested directors or otherwise.
The Registrant has directors' and officers' liability insurance coverage
which insures directors and officers of the Registrant and its subsidiaries
against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibits
<TABLE>
<C> <S>
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 Form of Certificate of the Registrant's Common Stock registered
hereunder, incorporated by reference to Exhibit 4.01 to the
Registrant's Registration Statement on Form 8-A filed April 17, 1997.
4.04 Proposed Amended and Restated Certificate of Incorporation of the
Registrant to be implemented upon the completion of the
Recapitalization (filed herewith as Exhibit 1 to Appendix A of the
Prospectus).*
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
4.05 Proposed Amended and Restated By-Laws of the Registrant to be
implemented upon the completion of the Recapitilization (filed
herewith as Exhibit 2 to Appendix A of the Prospectus).*
4.06 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.
4.07 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.
4.08 Form of Senior Subordinated Debentures (included in Exhibit 4.03).
4.09 Form of Subordinated Debentures (included in Exhibit 4.04).
5.01 Legal Opinion of McDermott, Will & Emery with respect to the legality
of the securities being issued.*
8.01 Legal Opinion of McDermott, Will & Emery with respect to certain tax
matters.*
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,
incorporated by reference to Exhibit 10.02A to the Registrant's
Annual Report on Form 10-K for 1993.
10.03 1993 Stock Option/Stock Issuance Plan, incorporated by reference to
Exhibit 10.03A to the Registrant's Annual Report on Form 10-K for
1993.
10.03A Amended and Restated 1993 Stock Option/Stock Issuance Plan of the
Registrant to be implemented upon the completion of the
Recapitalization (filed herewith as Exhibit 3 to Appendix A of the
Prospectus).*
10.04 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.
10.05 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.
10.06 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.
10.06A Amendment to Retirement Plan of the Registrant dated December 8,
1993, incorporated by reference to Exhibit 10.07A to the Registrant's
Annual Report on Form 10-K for 1993.
10.07 The 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, incorporated by reference to Exhibit
10.08 to the Registrant's Annual Report on Form 10-K for 1993.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.08 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.
10.09 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.
10.10 Transition Agreement dated as of July 16, 1992 ("Transition
Agreement"), among the Registrant, Henley Group and Abex Inc.,
incorporated by reference to Exhibit 10.14 to the Registrant's Annual
Report on Form 10-K for 1992.
10.10A Amendment to Transition Agreement dated April 1, 1993, incorporated
by reference to Exhibit 10.12A to the Registrant's Annual Report on
Form 10-K for 1993.
10.11 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.
10.12 Conditional Guarantee dated as of July 9, 1992, among the Registrant,
Abex Inc., Henley Group and Allied-Signal, incorporated by reference
to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for
1992.
10.13 Reimbursement Agreement dated as of July 16, 1992, among the
Registrant, Henley Group and Abex Inc., incorporated by reference to
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for
1992.
10.14 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.
10.15 Stock Purchase Agreement ("Stock Agreement") dated December 17, 1993
between the Registrant, certain of its subsidiaries and Libra Invest
& Trade Ltd. ("Libra") incorporated by reference to Exhibit 10.19 to
the Registrant's Annual Report on Form 10-K for 1993.
10.15A Amendment No. 1 to the Stock Agreement dated as of February 15, 1994,
incorporated by reference to Exhibit 10.19A to the Registrant's
Annual Report on Form 10-K for 1993.
10.16 Exchange Agreement dated December 17, 1993, between the Registrant
and Libra, incorporated by reference to Exhibit 10.20 to the
Registrant's Annual Report on Form 10-K for 1993.
10.17 Financing and Accounting Services Agreement dated as of September 30,
1993 between the Registrant and The Koll Company, incorporated by
reference to Exhibit 10.21 to the Registrant's Annual Report on Form
10-K for 1993.
10.18 Management Information Systems and Human Resources Services Agreement
dated as of September 30, 1993 between the Registrant and Koll
Management Services, Inc., incorporated by reference to Exhibit 10.22
to the Registrant's Annual Report on Form 10-K for 1993.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.19 License Agreement ("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.
10.19A Amendment No. 1 to the License Agreement.*
10.20 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.
10.20A Amendment No. 1 to the Asset Agreement dated as of December 29, 1993,
incorporated by reference to Exhibit 10.18A to the Registrant's
Annual Report on Form 10-K for 1993.
10.20B Amendment No. 2 to the Asset Agreement.*
10.21 Sublease Agreement dated September 30, 1993 between the Registrant
and the Koll Company, incorporated by reference to Exhibit 10.24 to
the Registrant's Annual Report on Form 10-K for 1993.
10.22 Netting Agreement dated as of October 1, 1993 between a subsidiary of
the Registrant and an executive officer of the Registrant, together
with a schedule identifying five (5) substantially identical
documents not filed therewith, incorporated by reference to Exhibit
10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994.
10.23 Agreement of Limited Partnership dated as of October 1, 1993 between
a subsidiary of the Registrant and an executive officer of the
Registrant, together with a schedule identifying five (5)
substantially identical documents not filed therewith, incorporated
by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
10.24 Agreement Respecting Vesting of Rights dated as of October 1, 1993
between a subsidiary of the Registrant and an executive officer of
the Registrant, together with a schedule identifying five (5)
substantially identical documents not filed therewith, incorporated
by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
10.25 Promissory Note Agreement dated April 29, 1995 between the Registrant
and AV Partnership, incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
10.26 Koll Asia Pacific Development Services Amended and Restated Pacific
Rim Joint Business Opportunity Agreement, incorporated by reference
to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
10.27 Bargain Purchase and Sale Agreement and Escrow Instructions between a
Subsidiary of the Registrant and the State of California, acting by
and through the State Lands Commission, incorporated by reference to
Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for
1996.
10.28 Employment Agreement between the Registrant and Mr. Donald M. Koll.*
10.29 Employment Agreement between the Registrant and Mr. Richard M.
Ortwein.*
10.30 Employment Agreement between the Registrant and Mr. Raymond J.
Pacini.*
10.31 Consulting Agreement between the Registrant and Mr. Ray Wirta.*
21.01 Subsidiaries of the Registrant, incorporated by reference to Exhibit
21.01 to the Registrant's Annual Report on Form 10-K for 1996.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
23.01 Consent of McDermott, Will & Emery (included in opinions filed as
Exhibits 5.01 and 8.01).
23.02 Consent of Deloitte & Touche LLP.*
24.01 Power of Attorney (included on page II-8 of the Registrant's
Registration Statement on Form S-4 filed on February 20, 1997).
27.01 Financial Data Schedule, incorporated by reference to Exhibit 27.01
to the Registrant's Annual Report on Form 10-K for 1996.
99.01 Form of Proxy for Class A Common Stock.*
99.02 Form of Proxy for Series A Convertible Preferred Stock.*
99.03A Form of Consent and Letter of Transmittal for exchange of the 12%
Senior Subordinated Pay-In-Kind Debentures due March 15, 2002.*
99.03B Form of Consent and Letter of Transmittal for exchange of the 12%
Subordinated Pay-In-Kind Debentures due March 15, 2002.*
99.04A Form of Notice of Guaranteed Delivery for 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002.*
99.04B Form of Notice of Guaranteed Delivery for 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002.*
99.05A Form of Master Ballot for Class 5: General Unsecured
Creditors--Senior Debentures.*
99.05B Form of Master Ballot for Class 6: Claims of Holders of Subordinated
Debentures.*
99.05C Form of Master Ballot for Class 7: Interests of Holders of Preferred
Stock.*
99.05D Form of Master Ballot for Class 8: Interests of Holders of Class A
Common Stock.*
99.05E Form of Master Ballot for Class 5: General Unsecured Creditors--Other
than Senior Debentures.*
99.06A Form of Ballot for Class 5: General Unsecured Creditors--Senior
Debentures.*
99.06B Form of Ballot for Class 6: Claims of Holders of Subordinated
Debentures.*
99.06C Form of Ballot for Class 7: Interests of Holders of Preferred Stock.*
99.06D Form of Ballot for Class 8: Interests of Holders of Class A Common
Stock.*
99.06E Form of Ballot for Class 5: General Unsecured Creditors--Other than
Senior Debentures.*
99.07 Consents of Director Nominees.*
99.08 Form of Advisor Warrant.*
</TABLE>
- ------------------------
* Filed herewith.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of
II-6
<PAGE>
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
See Item 20 hereof for the Registrant's undertaking with respect to
indemnification.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to its Registration Statement to
be signed on behalf of the Registrant by the undersigned, thereto duly
authorized, in the City of Newport Beach, State of California, on April 29,
1997.
KOLL REAL ESTATE GROUP, INC.
By: /s/ RAYMOND J. PACINI
--------------------------------------
Raymond J. Pacini
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------------------- ------------------------------------------ ----------------------
<C> <S> <C>
/s/ DONALD M. KOLL* Chairman of the Board and
------------------------------------- Chief Executive Officer April 29, 1997
(Donald M. Koll) (Principal Executive Officer)
/s/ RAYMOND J. PACINI Executive Vice President and Chief
------------------------------------- Financial Officer (Principal Financial April 29, 1997
(Raymond J. Pacini) and Accounting Officer)
/s/ RAY WIRTA*
------------------------------------- Director April 29, 1997
(Ray Wirta)
/s/ HAROLD A. ELLIS, JR.*
------------------------------------- Director April 29, 1997
(Harold A. Ellis, Jr.)
/s/ PAUL C. HEGNESS*
------------------------------------- Director April 29, 1997
(Paul C. Hegness)
/s/ J. THOMAS TALBOT*
------------------------------------- Director April 29, 1997
(J. Thomas Talbot)
/s/ MARCO F. VITULLI*
------------------------------------- Director April 29, 1997
(Marco F. Vitulli)
*By: /s/ RAYMOND J. PACINI
-------------------------------------
(Raymond J. Pacini, Attorney-in-fact)
</TABLE>
II-8
<PAGE>
EXHIBIT 5.01
McDermott, Will & Emery
1301 Dove Street, Suite 500
Newport Beach, California 92660
April 29, 1997
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, CA 92660
Re: Registration Statement on Form S-4, Registration No. 333-22121.
---------------------------------------------------------------
Ladies and Gentlemen:
We are acting as counsel for Koll Real Estate Group, Inc., a Delaware
corporation (the "Company"), in connection with the registration, under the
Securities Act of 1933, as amended (the "Act"), of an aggregate of 12,204,802
shares of common stock, $0.05 par value (the "Common Stock"), issuable pursuant
to the Registration Statement of the Company, Registration No. 333-22121,
initially filed with the Securities and Exchange Commission ("SEC") on February
20, 1997, as amended by Amendment No. 1 filed with the SEC on April 10, 1997 and
Amendment No. 2 filed with the SEC on April 29, 1997 (the "Registration
Statement").
In connection with the issuance of the Common Stock, we have examined
originals, or copies submitted to us that we have assumed are genuine, accurate
and complete, of all such corporate records of the Company, agreements, and
other instruments, certificates of public officials, officers, and
representatives of the Company, and other documents we have deemed necessary and
appropriate to require as the basis for the opinion hereinafter expressed. As to
various questions of fact material to this opinion, where relevant facts were
not independently established, we have relied upon statements of the officers of
the Company.
Based and relying solely upon the foregoing, it is our opinion that when the
shares of Common Stock, or any portion thereof, are issued pursuant to and as
described in the Registration Statement, such shares will be duly authorized,
validly and legally issued, fully paid and nonassessable.
Consent is hereby given to the filing of this opinion as an exhibit to the
Registration Statement, and to the references to this firm in the Registration
Statement and any subsequent amendment thereto under the captions "Summary" and
"Legal Matters" as having passed upon certain legal matters in connection with
the validity of the shares of Common Stock to be issued pursuant to the
Registration Statement. In giving our consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Sincerely,
McDERMOTT, WILL & EMERY
/s/ McDERMOTT, WILL & EMERY
<PAGE>
EXHIBIT 8.01
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
April 29, 1997
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Re: Registration Statement on Form S-4; File No. 333-22121
------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Koll Real Estate Group, Inc. (the "Company")
in connection with the above-referenced Registration Statement on Form S-4
(the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), for the
registration of Common Stock of the Company to be offered under the
circumstances described in the Registration Statement. Capitalized terms used
herein and not otherwise defined have the meanings set forth in the
Registration Statement.
We have reviewed the information that appears under the caption
"Material Federal Income Tax Consequences" in the Registration Statement and
any subsequent amendment thereto. In our opinion, subject to the
qualifications and limitations set forth therein, such information is an
accurate summary of the material United States federal income tax
considerations applicable to the Exchange Offers and the Prepackaged Plan.
Consent is hereby given to the filing of this opinion as an exhibit to
the Registration Statement, and to the references to this firm under the
captions "Federal Income Tax Consequences Of The Exchange Offers and The
Prepackaged Plan To Holders Of Outstanding Securities" as having passed upon
certain federal income tax matters in connection with the Exchange Offers and
the Prepackaged Plan. In giving our consent, we do not thereby admit that
we come within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Sincerely,
McDERMOTT, WILL & EMERY
/s/ McDERMOTT, WILL & EMERY
<PAGE>
AMENDMENT NO. 1
TO
LICENSE AGREEMENT
THIS AMENDMENT NO. 1 TO LICENSE AGREEMENT ("Amendment") is entered into
effective as of April 28, 1997, by and among KREG Operating Co., a Delaware
corporation ("Licensee"), Donald M. Koll ("Koll") and The Koll Company, a
California corporation ("TKC") (Koll and TKC are collectively referred to herein
as "Licensors").
RECITALS
A. The parties have previously entered into that certain License
Agreement dated as of September 30, 1993 (the "License").
B. Licensee's 100% parent company, Koll Real Estate Group, Inc. (the
"Company") has proposed to effect a recapitalization (the "Recapitalization") as
set forth in that certain Registration Statement on Form S-4, Registration No.
333-22121, including any amendments thereto.
C. In connection with the Recapitalization, the parties hereto wish to
amend the termination provisions of the License in order to permit the
Recapitalization and to add to the events which may cause a termination of the
License.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree that the terms of Section 4 of the
License entitled "Term; Termination" shall be amended and restated to read in
full as follows:
"4. TERM; TERMINATION. The License granted hereunder shall be
effective as of the date of this Agreement and shall remain in effect
for ten (10) years, unless earlier terminated as set forth below.
This Agreement shall be automatically renewed for an unlimited number
of additional ten (10) year periods, unless earlier terminated as set
forth below. This Agreement and the license granted hereunder shall
terminate on the first to occur of the following: (a) upon
consummation of the Recapitalization, and the occurrence of any one of
the following: (i) the resignation of Koll as an officer and director
of the Company after the first anniversary of the Recapitalization,
(ii) the resignation of Koll as an officer and director of the Company
at any time following the consummation of the Recapitalization in the
event the Board of Directors of the Company duly resolves to authorize
any sale of all or substantially all of the properties or interests in
the properties of the Company, any merger or consolidation of the
Company with any other entity, other than a merger or consolidation in
which the Company will control the merged or
-1-
<PAGE>
consolidated entity, any dissolution of the Company, any cessation of a
present operation of the Company or any other extraordinary corporate
transaction involving properties or interest in property of the Company,
(iii) the removal of Koll from his positions as an officer or director of
the Company, or (iv) the failure to elect Koll to such offices at any
future meeting of stockholders held after consummation of the
Recapitalization; (b) either of the Licensors delivers written notice to
Licensee that Licensee has materially breached any of its covenants or
agreements set forth in the License and Licensee does not cure such breach
within thirty (30) days after delivery of such notice; (c) Licensee
defaults in the payment of any amounts required to be paid to either of the
Licensors under the Purchase Agreement and such default continues for a
period of ten (10) days following delivery of written notice of such
payment default by either of the Licensors to Licensee; (d) the mutual
written consent of Licensors and Licensee; (e) pursuant to or within the
meaning of Title 11, U.S. Code or any similar United States federal or
state law for relief of debtors ("Bankruptcy Law") any of the following
shall occur otherwise than in connection with the Recapitalization: (i) the
commencement, or taking of any action authorizing or seeking to authorize
the commencement, of a voluntary case by Licensee or Koll Real Estate
Group, Inc., a Delaware corporation ("Parent"), (ii) Licensee's or Parent's
consent to the entry of an order for relief against the Licensee or Parent
in an involuntary case, (iii) Licensee's or Parent's filing of an answer or
other pleading admitting or failing to deny the material allegations of a
petition filed against the Licensee or Parent in an involuntary case or
consenting to or acquiescing in the relief provided therein, (iv)
Licensee's or Parent's consenting to the appointment of a custodian,
receiver, trustee, assignee, liquidator or similar official of the Licensee
or Parent or for all or substantially all of their respective properties,
(v) Licensee's or Parent's making a general assignment for the benefit of,
or entering into composition with, Licensee's or Parent's creditors, or
(vi) Licensee's or Parent's generally being unable to pay its debts as the
same become due; or (f) the entry by a court of competent jurisdiction of
an order or decree under any Bankruptcy Law which order (i) is for relief
against the Licensee or Parent in an involuntary case, (ii) appoints a
custodian, receiver, trustee, assignee, liquidator or similar official of
the Licensee or Parent or for all or substantially all of Licensee's or
Parent's property or orders the liquidation of the Licensee or Parent, and
(iii) such order or decree remains unstayed and in effect for 60 days."
Defined terms not otherwise defined in this Amendment shall have the
meanings provided in the License.
[SIGNATURE PAGE FOLLOWS]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the date first above written.
KREG OPERATING CO., a Delaware corporation
By: /s/ RAYMOND J. PACINI
--------------------------------------
Raymond J. Pacini
Executive Vice President, Chief
Financial Officer and Treasurer
THE KOLL COMPANY, a California corporation
By: /s/ DONALD M. KOLL
--------------------------------------
Donald M. Koll
Chairman and Chief Executive Officer
/s/ DONALD M. KOLL
--------------------------------------
DONALD M. KOLL
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<PAGE>
AMENDMENT NO. 2
TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT ("Amendment") is
entered into effective as of April 28, 1997, by and among KREG Operating Co.,
a Delaware corporation ("Purchaser"), Donald M. Koll ("Koll"), The Koll
Company, a California corporation ("Seller") and Koll Real Estate Group, Inc.
(the "Company").
RECITALS
A. Purchaser and Seller have previously entered into (i) that certain
Asset Purchase Agreement dated as of September 30, 1993 and (ii) that certain
Amendment No. 1 to Asset Purchase Agreement dated as of December 29, 1993
(collectively, the "Agreement"). Koll has executed the Agreement for the sole
purpose of agreeing and entering into the provisions of Article XII-Covenant Not
to Compete (the "Non-Compete") contained therein.
B. The Company is Purchaser's 100% parent company, and the Company has
proposed to effect a recapitalization (the "Recapitalization") as set forth
in that certain Registration Statement on Form S-4, Registration No.
333-22121, including any amendments thereto.
C. In connection with the Recapitalization, the parties hereto wish to
amend the termination provisions of the Non-Compete in order to permit the
Recapitalization and to add to the events which may cause a termination of the
Non-Compete.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree that the terms of Section 12.4 of the
Agreement entitled "Termination" shall be amended and restated to read in full
as follows:
"12.4 TERMINATION. In addition to the termination of the Covenant
Not to Compete Set forth in Section 12.1 above on account of the lapse
of time as set forth therein, in the event that Purchaser defaults in
the payment of any amounts due to the Seller or Koll under this
Agreement, and such default continues for a period of ten (10) days
after delivery of notice of such payment default by the Seller or
Koll, as applicable, the Covenant Not to Compete of the Seller and
Koll shall immediately terminate and be of no further force and
effect. Notwithstanding anything to the contrary contained in this
Agreement, and in addition to any other termination of the Covenant
Not to Compete provided in the Agreement, the Covenant Not to Compete
of the Seller and Koll shall immediately terminate and be of no
further force and effect upon consummation of the Recapitalization,
AND the occurrence of any one of the following (i) the resignation of
Koll as an officer and director of the Company after the first
anniversary of the Recapitalization, (ii) the resignation of Koll as
an officer and director of the Company at any time following the
consummation of the
-1-
<PAGE>
Recapitalization in the event the Board of Directors of the Company duly
resolves to authorize any sale of all or substantially all of the
properties or interests in the properties of the Company, any merger or
consolidation of the Company with any other entity, other than a merger or
consolidation in which the Company will control the merged or consolidated
entity, any dissolution of the Company, any cessation of a present
operation of the Company or any other extraordinary corporate transaction
involving properties or interests in property of the Company, (iii) the
removal of Koll from his positions as an officer or director of the
Company, or (iv) the failure to elect Koll to such offices at any future
meeting of stockholders held after consummation of the Recapitalization.
In connection with any such termination of the Covenant Not to Compete,
Koll, Seller and their respective affiliates shall be released by
Purchaser, the Company and their respective affiliates, from claims of
usurpation of corporate opportunity, interference with prospective
advantage and like torts; provided, Koll, Seller and their respective
affiliates will not be released from claims of improper employee
solicitation for two (2) years after the consummation of the
Recapitalization and, in the event Koll is removed from office with the
Company on the basis of a conclusive determination of usurpation of
corporate opportunity, Koll and his affiliates will not be released from
claims of usurpation of corporate opportunity. In addition, Purchaser, the
Company and their respective affiliates shall similarly release any
officer, director or employee of the Company who thereafter leaves the
Company to join Koll, Seller or their respective affiliates."
Defined terms not otherwise defined in this Amendment shall have the
meanings provided in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the date first above written.
KREG OPERATING CO., a Delaware corporation
By: /s/ RAYMOND J. PACINI
--------------------------------------
Raymond J. Pacini
Chief Financial Officer
KOLL REAL ESTATE GROUP, INC., a Delaware
corporation
By: /s/ RAYMOND J. PACINI
--------------------------------------
Raymond J. Pacini
Executive Vice President and
Chief Financial Officer
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
-2-
<PAGE>
THE KOLL COMPANY, a California corporation
By: /s/ DONALD M. KOLL
--------------------------------------
Name: Donald M. Koll
-------------------------------
Title: Chairman and
Chief Executive Officer
-------------------------------
/s/ DONALD M. KOLL
--------------------------------------
DONALD M. KOLL
-3-
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of April 28, 1997 by and
between KOLL REAL ESTATE GROUP, INC., a Delaware corporation ("Employer"), and
DONALD M. KOLL ("Executive").
WITNESSETH:
WHEREAS, Executive has served Employer in various executive capacities
and Employer desires to obtain the benefit of continued service by Executive,
and Executive desires to render continued services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that because of Executive's substantial experience and business
relationships in connection with the business of Employer, it is in the
Employer's best interest and that of its stockholders to secure services of
Executive and to provide Executive certain additional benefits; and
WHEREAS, Employer and Executive desire to set forth in this Agreement
the terms and conditions of Executive's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
SECTION 1. TERM. Employer agrees to employ Executive and Executive agrees
to serve Employer, in accordance with the terms of this Agreement, for a term of
three (3) years, commencing on the date hereof.
SECTION 2. SERVICES. So long as this Agreement shall continue in effect,
Executive shall use Executive's commercially reasonably efforts and abilities to
promote Employer's business, affairs and interests, and shall perform the
services contemplated by this Agreement in accordance with policies established
by and under the direction of the Board.
SECTION 3. SPECIFIC POSITION; DUTIES AND RESPONSIBILITIES. Employer and
Executive agree that, subject to the provisions of this Agreement, Employer will
employ Executive and Executive will serve Employer as a senior officer for the
duration of this Agreement. The specific job position in which Executive shall
serve shall be Chairman and Chief Executive Officer. Executive agrees to observe
and comply with the rules and regulations of Employer as adopted by the Board
respecting the performance of Executive's duties and agrees to carry out and
perform directions and policies of Employer and its Board as they may be, from
time to time, stated either orally or in writing. Employer agrees that the
duties which may be assigned to Executive shall be usual and customary duties of
the job position set forth in this Section 3, and shall not be inconsistent with
the provisions of the charter documents of Employer
1.
<PAGE>
or applicable law. Executive shall have such corporate power and authority as
shall reasonably be required to enable the discharge of duties in any office
that may be held. Executive shall only be required to devote such time as is
reasonably necessary to the performance of his duties in accordance with past
practices, and Employer acknowledges that Executive shall continue to serve
as an officer and/or director of other corporations and business entities.
SECTION 4. COMPENSATION.
(a) BASE SALARY AND BONUS.
(i) BASE SALARY. During the term of this Agreement, Employer agrees
to pay Executive a base salary of at least Three Hundred Twenty Five Thousand
Dollars ($325,000) per year in bi-weekly installments on the same dates the
other senior officers of Employer are paid ("Base Salary").
(ii) BONUSES. Employer agrees to provide Executive with an annual
incentive bonus to be established for the 1997 calendar year not later than
three months following the consummation of the Recapitalization (defined
below), which annual bonus shall be based upon the bonus amount and
performance targets mutually agreed to by the Board and Executive. For
subsequent calendar years, the bonus amounts and performance targets shall be
agreed upon in advance of the applicable year. Following the establishment
of the performance targets and the bonus amounts, Employer and Executive
shall execute a letter detailing the terms and conditions thereof.
(iii) RECAPITALIZATION BONUS. In addition to the bonuses described
above, Executive shall also be entitled to receive the bonus of Two Hundred
Seventy Five Thousand Dollars ($275,000), which bonus was previously approved by
the Board to be paid upon the consummation of the recapitalization contemplated
in the Company's Registration Statement on Form S-4 filed with the Securities
and Exchange Commission (the "Recapitalization"). Such bonus is intended to
compensate Executive for Executive's critical contribution to Employer's
successful completion of the Recapitalization.
(b) ADDITIONAL BENEFITS. Executive shall also be entitled to all rights
and benefits under any bonus plan, incentive, participation or extra
compensation plan, pension plan, profit-sharing plan, life, medical, dental,
disability, or insurance plan or policy or other plan or benefit that Employer
or its subsidiaries may provide for Executive (provided Executive is eligible to
participate therein) or employees of Employer generally as from time to time in
effect during the term of this Agreement (the "Plans"). In any event, Employer
shall provide Executive with term life insurance, health insurance and long-term
disability insurance provided for Employer's executive employees generally.
Executive shall also be entitled to fringe benefits in accordance with the
plans, practices, programs and policies as in effect generally with respect to
other peer executives of Employer.
(c) STOCK OPTIONS. Immediately upon the effective date of this Agreement,
Executive shall be granted stock options ("Stock Options") to purchase 2.5% of
the shares of Employer's recapitalized common stock on a fully diluted basis
("Option Shares"), at the exercise price per share equal to the average of the
per share trading price of Employer's common stock for the first twenty (20) day
Nasdaq trading period commencing immediately following consummation of the
Recapitalization. The Stock Options will vest, subject to Employer's Amended
and Restated 1993
2.
<PAGE>
Stock Option/Stock Issuance Plan, over a three year period with 40%, 30% and 30%
vesting on each of the first, second and third anniversaries of the effective
date of this Agreement. The vesting of the Stock Options shall be subject to
acceleration as provided in Section 5(d) below upon a termination without cause
or upon the occurrence of a Change in Control, as defined below in Section 5(d).
The more specific terms and conditions of such Stock Options shall be provided
for in a Stock Option Agreement to be entered into by and between Employer and
Executive upon the granting of the Stock Option ("Stock Option Agreement").
(d) PERQUISITES.
(i) VACATION. Executive shall be entitled to four (4) weeks of paid
vacation each twelve-month period, which shall accrue on a monthly basis. Such
vacation shall be taken at such time or times as shall not unduly disrupt the
orderly conduct of the business of Employer and the duties of Executive. At the
time of any termination of employment, Executive shall be paid for all accrued
but unused vacation.
(ii) AUTO ALLOWANCE. During the term of this agreement, Employer
shall provide Executive a monthly automobile allowance in the amount of $800
plus reimbursement of operating costs as is currently covered under Employer's
Auto Allowance Policy.
(e) OVERALL QUALIFICATION. Employer reserves the right to modify, suspend
or discontinue any and all practices, policies and programs at any time (whether
before or after termination of employment) without notice to or recourse by
Executive; however, Employer shall not amend the perquisites set forth in
Section 4(d) to reduce Executive's benefits thereunder during the term of this
Agreement.
SECTION 5. TERMINATION. The compensation and other benefits provided to
Executive pursuant to this Agreement, and the employment of Executive by
Employer, shall be terminated prior to expiration of the term of this Agreement
only as provided in this Section 5:
(a) DISABILITY. In the event that Executive shall fail, because of
illness, incapacity or injury which is determined to be total ("Disability") by
a physician selected by Employer or its insurers and acceptable to Executive or
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably), to render, for three consecutive months or for shorter
periods aggregating ninety (90) or more business days in any twelve (12)-month
period, the services contemplated by this Agreement, Executive's employment
hereunder may be terminated by sixty (60) days' prior written notice of
termination from Employer to Executive. Thereafter, Employer shall continue to
(i) pay the Base Salary to Executive for a period of six (6) months after the
date of termination, subject to adjustments referenced in the following
paragraph, and (ii) provide medical insurance as in effect prior to such
termination for a period of six (6) months following the date of termination.
Thereafter, no further salary shall be paid or medical insurance be provided.
Executive's rights under the Plans subsequent to termination of employment
pursuant to this paragraph shall be determined under the applicable provisions
of the respective Plans, unless otherwise expressly stated herein. This
Agreement in all other respects will terminate upon the termination of
employment pursuant to this paragraph.
3.
<PAGE>
The amount of compensation to be paid to Executive pursuant to the
preceding paragraph shall be adjusted in the event Executive becomes entitled to
and receives disability benefits under any disability payment plan, including
disability insurance. The amount of Executive's compensation otherwise payable
by Employer pursuant to the preceding paragraph shall be reduced, on a dollar-
for-dollar basis, but not to less than zero, by the amount of any such
disability benefits received by Executive, but only to the extent such benefits
are attributable to payments made by Employer.
(b) DEATH. In the event of Executive's death during the term of this
Agreement, Executive's Base Salary shall immediately terminate and Employer
shall pay to the estate of Executive the Base Salary accrued to the date of
Executive's death to the extent not theretofore paid. If Executive's death
occurs while receiving payments under Section 5(a) above, such payments shall
cease. Executive's rights under the Plans subsequent to his death shall be
determined under the applicable provisions of the respective Plans; PROVIDED
that, notwithstanding any provisions to the contrary therein, (i) Employer shall
continue to provide medical insurance to the dependents of Executive for a
period of six (6) months following the death of Executive and (ii) Stock Options
shall be exercisable only to the extent the rights had vested at the time of
death of Executive. This Agreement in all other respects will terminate upon
the death of Executive.
(c) FOR CAUSE. The employment of Executive hereunder shall be terminable
by Employer in the event that Executive (i) is or has been engaging in willful
or grossly negligent conduct which has resulted in a failure to perform
Executive's duties hereunder or, (ii) has committed an act of dishonesty, gross
negligence or misconduct, which has a direct, substantial and adverse effect on
Employer, its business or reputation.
Notwithstanding the foregoing, Executive shall not be terminated for
cause pursuant to the first paragraph of this subsection 5(c) unless and until
Executive has received written notice of a proposed termination for cause and
Executive has had an opportunity to be heard before at least a majority of the
number of members of the Board authorized to take such action. Executive shall
be deemed to have had such opportunity if given written or telephonic notice by
any director at least 72 hours in advance of a meeting.
In the event of Executive's termination pursuant to this subsection
5(c), Executive's rights to receive Base Salary shall immediately terminate and
Employer shall pay to Executive his Base Salary and vacation accrued to the date
of such termination to the extent not theretofore paid. Executive's rights
under the Plans subsequent to termination shall be determined under the
applicable provisions of the respective plans; provided, however, that Stock
Options shall be exercisable only to the extent the rights had vested at the
time of such termination. This Agreement in all other respects will terminate
upon such termination.
(d) WITHOUT CAUSE. Notwithstanding any other provision of this Section 5,
the Board shall have the right to terminate Executive's employment with Employer
without cause at any time upon at least thirty (30) days' prior written notice
to Executive. The following conditions shall thereupon become applicable:
4.
<PAGE>
(i) SEVERANCE PAY. Employer shall continue to pay Executive the
Base Salary on a bi-monthly basis for a period of twelve (12) months following
the date of such termination.
(ii) MEDICAL INSURANCE CONTINUATION. Employer shall continue to
provide (under COBRA) medical insurance as in effect prior to such termination
for twelve (12) months following such termination, and Employer shall bear
all costs for such insurance.
(iii) ACCELERATED VESTING. Despite the vesting requirements set forth
in the Stock Option Agreement, termination of employment pursuant to this
subsection 5(d) or the occurrence of a Change in Control (as defined below)
shall result in an immediate vesting of the right to exercise the Stock Options
with respect to one hundred percent (100%) of the Option Shares.
For purposes of the foregoing paragraph, a "Change of Control" means,
and shall be deemed to have taken place upon, the occurrence of: (i) a
transaction requiring shareholder approval involving the sale of all or
substantially all of the assets of Employer or the merger of Employer with or
into another corporation or business entity, other than a transaction in which
shareholders of Employer immediately prior to the closing of such transaction
own a majority of the acquiring corporation or entity immediately after giving
effect to such transaction, or (ii) the acquisition by any Person as Beneficial
Owner (as such terms are defined in the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of Employer representing fifty
percent (50%) or more of the total voting power represented by Employer's then
outstanding voting securities.
(iv) BONUS PAYMENT. If Executive is terminated without cause,
Executive shall also be paid for any potential bonuses under this Agreement (the
"Bonus Severance"). The amount of any such Bonus Severance shall be equal to
the amount of any bonus payment(s) received for services rendered during the
calendar year preceding the year of termination.
(e) VOLUNTARY TERMINATION. At any time during the term of this Agreement,
Executive shall have the right, upon thirty (30) days prior written notice to
Employer, to terminate his employment with Employer. Upon termination of
Executive's employment pursuant to this subsection 5(e), (i) Executive's right
to receive Base Salary shall immediately terminate and Employer shall pay to
Executive his Base Salary accrued to the date of such termination to the extent
not theretofore paid, (ii) Executive's rights under the Plans subsequent to such
termination shall be determined under the applicable provisions of the
respective Plans, and (iii) Stock Options held by Executive shall be exercisable
only to the extent the rights had vested at the time of such termination. This
Agreement in all other respects will terminate upon such termination.
(f) TERMINATION BY EXECUTIVE FOR "GOOD REASON". Notwithstanding any other
provisions of this Agreement, Employer shall provide Executive with the payments
and benefits set forth in Section 5(d) in the event Executive terminates
employment for "Good Reason." For purposes of this Agreement, "Good Reason" for
Executive to terminate employment shall mean voluntary termination as a result
of (i) the assignment to Executive of duties inconsistent with the position and
status of Executive as set forth in this Agreement without Executive's prior
written consent, (ii) a substantial alteration in the nature, status or prestige
of Executive's responsibilities
5.
<PAGE>
as set forth in this Agreement or a change in Executive's title or reporting
level from that set forth in this Agreement, (iii) the relocation of Employer's
executive offices or principal business location to a point more than twenty-
five (25) miles from the location of such offices or business as of the date of
this Agreement, (iv) reduction by Employer of Executive's Base Salary in effect
on the date hereof or as the same may be increased from time to time, (v) any
action by Employer (including the elimination of benefit plans without
providing substitutes therefor or the reduction of Executive's benefits
thereunder) that would substantially diminish the aggregate value of Executive's
incentive awards and other fringe benefits, or (vi) a failure by Employer to
obtain from any successor, before the succession takes place, an agreement to
assume and perform this Agreement.
SECTION 6. BUSINESS EXPENSES. During the term of this Agreement, Employer
shall reimburse Executive promptly for reasonable business expenditures,
including travel, entertainment, parking, business meetings, Pacific Club dues,
and professional dues made and substantiated in accordance with policies,
practices and procedures established from time to time by the Board and incurred
in pursuit and furtherance of Employer's business and goodwill.
SECTION 7. MISCELLANEOUS.
(a) SUCCESSION; SURVIVAL. This Agreement shall inure to the benefit of
and shall be binding upon Employer, its successors and assigns. Absent the
prior written consent of Executive, this Agreement may not be assigned by
Employer other than in connection with a merger or sale of all or substantially
all the assets of Employer or a similar transaction in which the successor or
assignee assumes (whether by operation of law or express assumption) all
obligations of Employer hereunder. The obligations and duties of Executive
hereunder are personal and otherwise not assignable. Executive's obligations
and representations under this Agreement will survive the termination of
Executive's employment, regardless of the manner of such termination.
(b) NOTICES. Any notice or other communication provided for in this
Agreement shall be in writing and sent if to Employer to its office at:
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Chief Financial Officer
or at such other address as Employer may from time to time in writing designate,
and if to Executive at such address as Executive may from time to time in
writing designate (or Executive's business address of record in the absence of
such designation). Each such notice or other communication shall be effective
(i) if given by telecommunication, when transmitted to the applicable number so
specified in (or pursuant to) this Section 7 and an appropriate answer back is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
6.
<PAGE>
(c) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and it supersedes
any prior agreements, undertakings, commitments and practices relating to
Executive's employment by Employer. No amendment or modification of the terms
of this Agreement shall be valid unless made in writing and signed by Executive
and, on behalf of Employer, by an officer expressly so authorized by the Board.
(d) WAIVER. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof or of any other
right, nor shall any single or partial exercise preclude any further or other
exercise of such right or any other right.
(e) CHOICE OF LAW. This Agreement, the legal relations between the
parties and any action, whether contractual or non-contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement, the relationship of the parties
or the subject matter hereof shall be governed by and construed in accordance
with the laws of the State of California, applicable to contracts made and
performed in such State and without regard to conflicts of law doctrines, to the
extent permitted by law.
(f) ATTORNEY'S FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover reasonable attorney's fees, costs and necessary
disbursements from the non-prevailing party in addition to any other relief to
which such party may be entitled.
(g) CONFIDENTIALITY; PROPRIETARY INFORMATION. Executive agrees to not
make use of, divulge or otherwise disclose, directly or indirectly, any trade
secret or other confidential or proprietary information concerning the business
(including but not limited to its products, employees, services, practices or
policies) of Employer or any of its affiliates of which Executive may learn or
be aware as a result of Executive's employment during the term of the Agreement
or prior thereto as stockholder, employee, officer or director of, or consultant
to, Employer, except to the extent such use or disclosure is (i) necessary to
the performance of this Agreement and in furtherance of Employer's best
interests, (ii) required by applicable law, (iii) lawfully obtainable from other
public sources, or (iv) authorized in writing by or pursuant to a written
agreement with Employer. The provisions of this subsection (g) shall survive
the expiration, suspension or termination, for any reason, of this Agreement.
(h) SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect, and if any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances, to the fullest extent permitted by law.
(i) WITHHOLDING; DEDUCTIONS. All compensation payable hereunder,
including salary and other benefits, shall be subject to applicable taxes,
withholding and other required, normal or elected employee deductions.
7.
<PAGE>
(j) SECTION HEADINGS. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(k) COUNTERPARTS. This Agreement and any amendment hereto may be executed
in one or more counterparts. All of such counterparts shall constitute one and
the same agreement and shall become effective when a copy signed by each party
has been delivered to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"EMPLOYER"
KOLL REAL ESTATE GROUP, INC.
By: /s/ RICHARD M. ORTWEIN
------------------------------
Richard M. Ortwein, President
"EXECUTIVE"
/s/ DONALD M. KOLL
----------------------------------
DONALD M. KOLL
8.
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of April 28, 1997 by and
between KOLL REAL ESTATE GROUP, INC., a Delaware corporation ("Employer"), and
RICHARD M. ORTWEIN ("Executive").
WITNESSETH:
WHEREAS, Executive has served Employer in various executive capacities
and Employer desires to obtain the benefit of continued service by Executive,
and Executive desires to render continued services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that because of Executive's substantial experience and business
relationships in connection with the business of Employer, it is in the
Employer's best interest and that of its stockholders to secure services of
Executive and to provide Executive certain additional benefits; and
WHEREAS, Employer and Executive desire to set forth in this Agreement
the terms and conditions of Executive's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
SECTION 1. TERM. Employer agrees to employ Executive and Executive agrees
to serve Employer, in accordance with the terms of this Agreement, for a term of
three (3) years, commencing on the date hereof.
SECTION 2. SERVICES. So long as this Agreement shall continue in effect,
Executive shall use Executive's commercially reasonably efforts and abilities to
promote Employer's business, affairs and interests, and shall perform the
services contemplated by this Agreement in accordance with policies established
by and under the direction of the Board.
SECTION 3. SPECIFIC POSITION; DUTIES AND RESPONSIBILITIES. Employer and
Executive agree that, subject to the provisions of this Agreement, Employer will
employ Executive and Executive will serve Employer as a senior officer for the
duration of this Agreement. The specific job position in which Executive shall
serve shall be President. Executive agrees to observe and comply with the rules
and regulations of Employer as adopted by the Board respecting the performance
of Executive's duties and agrees to carry out and perform directions and
policies of Employer and its Board as they may be, from time to time, stated
either orally or in writing. Employer agrees that the duties which may be
assigned to Executive shall be usual and customary duties of the job position
set forth in this Section 3, and shall not be inconsistent with the provisions
of the charter documents of Employer or applicable law. Executive shall have
1.
<PAGE>
such corporate power and authority as shall reasonably be required to enable the
discharge of duties in any office that may be held.
SECTION 4. COMPENSATION.
(a) BASE SALARY AND BONUS.
(i) BASE SALARY. During the term of this Agreement, Employer
agrees to pay Executive a base salary of at least Three Hundred Fifty Thousand
Dollars ($350,000) per year in bi-weekly installments on the same dates the
other senior officers of Employer are paid ("Base Salary").
(ii) BONUSES. Employer agrees to provide Executive with an
annual incentive bonus to be established for the 1997 calendar year not later
than three months following the consummation of the Recapitalization (defined
below), which annual bonus shall be based upon the bonus amount and
performance targets mutually agreed to by the Board and Executive. For
subsequent calendar years, the bonus amounts and performance targets shall be
agreed upon in advance of the applicable year. Following the establishment
of the performance targets and the bonus amounts, Employer and Executive
shall execute a letter detailing the terms and conditions thereof.
(iii) RECAPITALIZATION BONUS. In addition to the bonuses described
above, Executive shall also be entitled to receive the bonus of One Hundred
Thousand Dollars ($100,000), which bonus was previously approved by the Board to
be paid upon the consummation of the recapitalization contemplated in the
Company's Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "Recapitalization"). Such bonus is intended to
compensate Executive for Executive's critical contribution to Employer's
successful completion of the Recapitalization.
(b) ADDITIONAL BENEFITS. Executive shall also be entitled to all rights
and benefits under any bonus plan, incentive, participation or extra
compensation plan, pension plan, profit-sharing plan, life, medical, dental,
disability, or insurance plan or policy or other plan or benefit that Employer
or its subsidiaries may provide for Executive (provided Executive is eligible to
participate therein) or employees of Employer generally as from time to time in
effect during the term of this Agreement (the "Plans"). In any event, Employer
shall provide Executive with term life insurance, health insurance and long-term
disability insurance provided for Employer's executive employees generally.
Executive shall also be entitled to fringe benefits in accordance with the
plans, practices, programs and policies as in effect generally with respect to
other peer executives of Employer.
(c) STOCK OPTIONS. Immediately upon the effective date of this Agreement,
Executive shall be granted stock options ("Stock Options") to purchase 1.5% of
the shares of Employer's recapitalized common stock on a fully diluted basis
("Option Shares"), at the exercise price per share equal to the average of the
per share trading price of Employer's common stock for the first twenty (20) day
Nasdaq trading period commencing immediately following consummation of the
Recapitalization. The Stock Options will vest, subject to Employer's Amended
and Restated 1993
2.
<PAGE>
Stock Option/Stock Issuance Plan, over a three year period with 40%, 30% and 30%
vesting on each of the first, second and third anniversaries of the effective
date of this Agreement. The vesting of the Stock Options shall be subject to
acceleration as provided in Section 5(d) below upon a termination without cause
or upon the occurrence of a Change in Control, as defined below in Section 5(d).
The more specific terms and conditions of such Stock Options shall be provided
for in a Stock Option Agreement to be entered into by and between Employer and
Executive upon the granting of the Stock Option ("Stock Option Agreement").
(d) PERQUISITES.
(i) VACATION. Executive shall be entitled to four (4) weeks of paid
vacation each twelve-month period, which shall accrue on a monthly basis. Such
vacation shall be taken at such time or times as shall not unduly disrupt the
orderly conduct of the business of Employer and the duties of Executive. At the
time of any termination of employment, Executive shall be paid for all accrued
but unused vacation.
(ii) AUTO ALLOWANCE. During the term of this agreement, Employer
shall provide Executive a monthly automobile allowance in the amount of $800
plus reimbursement of operating costs as is currently covered under Employer's
Auto Allowance Policy.
(e) OVERALL QUALIFICATION. Employer reserves the right to modify, suspend
or discontinue any and all practices, policies and programs at any time (whether
before or after termination of employment) without notice to or recourse by
Executive; however, Employer shall not amend the perquisites set forth in
Section 4(d) to reduce Executive's benefits thereunder during the term of this
Agreement.
SECTION 5. TERMINATION. The compensation and other benefits provided to
Executive pursuant to this Agreement, and the employment of Executive by
Employer, shall be terminated prior to expiration of the term of this Agreement
only as provided in this Section 5:
(a) DISABILITY. In the event that Executive shall fail, because of
illness, incapacity or injury which is determined to be total ("Disability") by
a physician selected by Employer or its insurers and acceptable to Executive or
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably), to render, for three consecutive months or for shorter
periods aggregating ninety (90) or more business days in any twelve (12)-month
period, the services contemplated by this Agreement, Executive's employment
hereunder may be terminated by sixty (60) days' prior written notice of
termination from Employer to Executive. Thereafter, Employer shall continue to
(i) pay the Base Salary to Executive for a period of six (6) months after the
date of termination, subject to adjustments referenced in the following
paragraph, and (ii) provide medical insurance as in effect prior to such
termination for a period of six (6) months following the date of termination.
Thereafter, no further salary shall be paid or medical insurance be provided.
Executive's rights under the Plans subsequent to termination of employment
pursuant to this paragraph shall be determined under the applicable provisions
of the respective Plans, unless otherwise expressly stated herein. This
Agreement in all other respects will terminate upon the termination of
employment pursuant to this paragraph.
3.
<PAGE>
The amount of compensation to be paid to Executive pursuant to the
preceding paragraph shall be adjusted in the event Executive becomes entitled to
and receives disability benefits under any disability payment plan, including
disability insurance. The amount of Executive's compensation otherwise payable
by Employer pursuant to the preceding paragraph shall be reduced, on a dollar-
for-dollar basis, but not to less than zero, by the amount of any such
disability benefits received by Executive, but only to the extent such benefits
are attributable to payments made by Employer.
(b) DEATH. In the event of Executive's death during the term of this
Agreement, Executive's Base Salary shall immediately terminate and Employer
shall pay to the estate of Executive the Base Salary accrued to the date of
Executive's death to the extent not theretofore paid. If Executive's death
occurs while receiving payments under Section 5(a) above, such payments shall
cease. Executive's rights under the Plans subsequent to his death shall be
determined under the applicable provisions of the respective Plans; PROVIDED
that, notwithstanding any provisions to the contrary therein, (i) Employer shall
continue to provide medical insurance to the dependents of Executive for a
period of six (6) months following the death of Executive and (ii) Stock Options
shall be exercisable only to the extent the rights had vested at the time of
death of Executive. This Agreement in all other respects will terminate upon
the death of Executive.
(c) FOR CAUSE. The employment of Executive hereunder shall be terminable
by Employer in the event that Executive (i) is or has been engaging in willful
or grossly negligent conduct which has resulted in a failure to perform
Executive's duties hereunder or, (ii) has committed an act of dishonesty, gross
negligence or misconduct, which has a direct, substantial and adverse effect on
Employer, its business or reputation.
Notwithstanding the foregoing, Executive shall not be terminated for
cause pursuant to the first paragraph of this subsection 5(c) unless and until
Executive has received written notice of a proposed termination for cause and
Executive has had an opportunity to be heard before at least a majority of the
number of members of the Board authorized to take such action. Executive shall
be deemed to have had such opportunity if given written or telephonic notice by
any director at least 72 hours in advance of a meeting.
In the event of Executive's termination pursuant to this subsection
5(c), Executive's rights to receive Base Salary shall immediately terminate and
Employer shall pay to Executive his Base Salary and vacation accrued to the date
of such termination to the extent not theretofore paid. Executive's rights
under the Plans subsequent to termination shall be determined under the
applicable provisions of the respective plans; provided, however, that Stock
Options shall be exercisable only to the extent the rights had vested at the
time of such termination. This Agreement in all other respects will terminate
upon such termination.
(d) WITHOUT CAUSE. Notwithstanding any other provision of this Section 5,
the Board shall have the right to terminate Executive's employment with Employer
without cause at any time upon at least thirty (30) days' prior written notice
to Executive. The following conditions shall thereupon become applicable:
4.
<PAGE>
(i) SEVERANCE PAY. Employer shall continue to pay Executive the
Base Salary on a bi-monthly basis for a period of twelve (12) months following
the date of such termination.
(ii) MEDICAL INSURANCE CONTINUATION. Employer shall continue to
provide (under COBRA) medical insurance as in effect prior to such termination
for twelve (12) months following such termination, and Employer shall bear
all costs for such insurance.
(iii) ACCELERATED VESTING. Despite the vesting requirements set
forth in the Stock Option Agreement, termination of employment pursuant to this
subsection 5(d) or the occurrence of a Change in Control (as defined below)
shall result in an immediate vesting of the right to exercise the Stock Options
with respect to one hundred percent (100%) of the Option Shares.
For purposes of the foregoing paragraph, a "Change of Control" means,
and shall be deemed to have taken place upon, the occurrence of: (i) a
transaction requiring shareholder approval involving the sale of all or
substantially all of the assets of Employer or the merger of Employer with or
into another corporation or business entity, other than a transaction in which
shareholders of Employer immediately prior to the closing of such transaction
own a majority of the acquiring corporation or entity immediately after giving
effect to such transaction, or (ii) the acquisition by any Person as Beneficial
Owner (as such terms are defined in the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of Employer representing fifty
percent (50%) or more of the total voting power represented by Employer's then
outstanding voting securities.
(iv) BONUS PAYMENT. If Executive is terminated without cause,
Executive shall also be paid for any potential bonuses under this Agreement (the
"Bonus Severance"). The amount of any such Bonus Severance shall be equal to
the amount of any bonus payment(s) received for services rendered during the
calendar year preceding the year of termination.
(e) VOLUNTARY TERMINATION. At any time during the term of this Agreement,
Executive shall have the right, upon thirty (30) days prior written notice to
Employer, to terminate his employment with Employer. Upon termination of
Executive's employment pursuant to this subsection 5(e), (i) Executive's right
to receive Base Salary shall immediately terminate and Employer shall pay to
Executive his Base Salary accrued to the date of such termination to the extent
not theretofore paid, (ii) Executive's rights under the Plans subsequent to such
termination shall be determined under the applicable provisions of the
respective Plans, and (iii) Stock Options held by Executive shall be exercisable
only to the extent the rights had vested at the time of such termination. This
Agreement in all other respects will terminate upon such termination.
(f) TERMINATION BY EXECUTIVE FOR "GOOD REASON". Notwithstanding any other
provisions of this Agreement, Employer shall provide Executive with the payments
and benefits set forth in Section 5(d) in the event Executive terminates
employment for "Good Reason." For purposes of this Agreement, "Good Reason" for
Executive to terminate employment shall mean voluntary termination as a result
of (i) the assignment to Executive of duties inconsistent with the position and
status of Executive as set forth in this Agreement without Executive's prior
written consent, (ii) a substantial alteration in the nature, status or prestige
of Executive's responsibilities
5.
<PAGE>
as set forth in this Agreement or a change in Executive's title or reporting
level from that set forth in this Agreement, (iii) the relocation of Employer's
executive offices or principal business location to a point more than twenty-
five (25) miles from the location of such offices or business as of the date of
this Agreement, (iv) reduction by Employer of Executive's Base Salary in effect
on the date hereof or as the same may be increased from time to time, (v) any
action by Employer (including the elimination of benefit plans without
providing substitutes therefor or the reduction of Executive's benefits
thereunder) that would substantially diminish the aggregate value of Executive's
incentive awards and other fringe benefits, or (vi) a failure by Employer to
obtain from any successor, before the succession takes place, an agreement to
assume and perform this Agreement.
SECTION 6. BUSINESS EXPENSES. During the term of this Agreement, Employer
shall reimburse Executive promptly for reasonable business expenditures,
including travel, entertainment, parking, business meetings, Pacific Club dues,
and professional dues made and substantiated in accordance with policies,
practices and procedures established from time to time by the Board and incurred
in pursuit and furtherance of Employer's business and goodwill.
SECTION 7. MISCELLANEOUS.
(a) SUCCESSION; SURVIVAL. This Agreement shall inure to the benefit of
and shall be binding upon Employer, its successors and assigns. Absent the
prior written consent of Executive, this Agreement may not be assigned by
Employer other than in connection with a merger or sale of all or substantially
all the assets of Employer or a similar transaction in which the successor or
assignee assumes (whether by operation of law or express assumption) all
obligations of Employer hereunder. The obligations and duties of Executive
hereunder are personal and otherwise not assignable. Executive's obligations
and representations under this Agreement will survive the termination of
Executive's employment, regardless of the manner of such termination.
(b) NOTICES. Any notice or other communication provided for in this
Agreement shall be in writing and sent if to Employer to its office at:
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Chief Financial Officer
or at such other address as Employer may from time to time in writing designate,
and if to Executive at such address as Executive may from time to time in
writing designate (or Executive's business address of record in the absence of
such designation). Each such notice or other communication shall be effective
(i) if given by telecommunication, when transmitted to the applicable number so
specified in (or pursuant to) this Section 7 and an appropriate answer back is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
6.
<PAGE>
(c) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and it supersedes
any prior agreements, undertakings, commitments and practices relating to
Executive's employment by Employer. No amendment or modification of the terms
of this Agreement shall be valid unless made in writing and signed by Executive
and, on behalf of Employer, by an officer expressly so authorized by the Board.
(d) WAIVER. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof or of any other
right, nor shall any single or partial exercise preclude any further or other
exercise of such right or any other right.
(e) CHOICE OF LAW. This Agreement, the legal relations between the
parties and any action, whether contractual or non-contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement, the relationship of the parties
or the subject matter hereof shall be governed by and construed in accordance
with the laws of the State of California, applicable to contracts made and
performed in such State and without regard to conflicts of law doctrines, to the
extent permitted by law.
(f) ATTORNEY'S FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover reasonable attorney's fees, costs and necessary
disbursements from the non-prevailing party in addition to any other relief to
which such party may be entitled.
(g) CONFIDENTIALITY; PROPRIETARY INFORMATION. Executive agrees to not
make use of, divulge or otherwise disclose, directly or indirectly, any trade
secret or other confidential or proprietary information concerning the business
(including but not limited to its products, employees, services, practices or
policies) of Employer or any of its affiliates of which Executive may learn or
be aware as a result of Executive's employment during the term of the Agreement
or prior thereto as stockholder, employee, officer or director of, or consultant
to, Employer, except to the extent such use or disclosure is (i) necessary to
the performance of this Agreement and in furtherance of Employer's best
interests, (ii) required by applicable law, (iii) lawfully obtainable from other
public sources, or (iv) authorized in writing by or pursuant to a written
agreement with Employer. The provisions of this subsection (g) shall survive
the expiration, suspension or termination, for any reason, of this Agreement.
(h) SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect, and if any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances, to the fullest extent permitted by law.
(i) WITHHOLDING; DEDUCTIONS. All compensation payable hereunder,
including salary and other benefits, shall be subject to applicable taxes,
withholding and other required, normal or elected employee deductions.
7.
<PAGE>
(j) SECTION HEADINGS. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(k) COUNTERPARTS. This Agreement and any amendment hereto may be executed
in one or more counterparts. All of such counterparts shall constitute one and
the same agreement and shall become effective when a copy signed by each party
has been delivered to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"EMPLOYER"
KOLL REAL ESTATE GROUP, INC.
By: /s/ DONALD M. KOLL
-----------------------------
Donald M. Koll, Chairman and
Chief Executive Officer
"EXECUTIVE"
/s/ RICHARD M. ORTWEIN
---------------------------------
RICHARD M. ORTWEIN
8.
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into as of April 28, 1997 by and
between KOLL REAL ESTATE GROUP, INC., a Delaware corporation ("Employer"), and
RAYMOND J. PACINI ("Executive").
WITNESSETH:
WHEREAS, Executive has served Employer in various executive capacities
and Employer desires to obtain the benefit of continued service by Executive,
and Executive desires to render continued services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that because of Executive's substantial experience and business
relationships in connection with the business of Employer, it is in the
Employer's best interest and that of its stockholders to secure services of
Executive and to provide Executive certain additional benefits; and
WHEREAS, Employer and Executive desire to set forth in this Agreement
the terms and conditions of Executive's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
SECTION 1. TERM. Employer agrees to employ Executive and Executive agrees
to serve Employer, in accordance with the terms of this Agreement, for a term of
three (3) years, commencing on the date hereof.
SECTION 2. SERVICES. So long as this Agreement shall continue in effect,
Executive shall use Executive's commercially reasonably efforts and abilities to
promote Employer's business, affairs and interests, and shall perform the
services contemplated by this Agreement in accordance with policies established
by and under the direction of the Board.
SECTION 3. SPECIFIC POSITION; DUTIES AND RESPONSIBILITIES. Employer and
Executive agree that, subject to the provisions of this Agreement, Employer will
employ Executive and Executive will serve Employer as a senior officer for the
duration of this Agreement. The specific job position in which Executive shall
serve shall be Executive Vice President and Chief Financial Officer. Executive
agrees to observe and comply with the rules and regulations of Employer as
adopted by the Board respecting the performance of Executive's duties and agrees
to carry out and perform directions and policies of Employer and its Board as
they may be, from time to time, stated either orally or in writing. Employer
agrees that the duties which may be assigned to Executive shall be usual and
customary duties of the job position set forth in this Section 3, and shall not
be inconsistent with the provisions of the charter documents
1.
<PAGE>
of Employer or applicable law. Executive shall have such corporate power and
authority as shall reasonably be required to enable the discharge of duties in
any office that may be held.
SECTION 4. COMPENSATION.
(a) BASE SALARY AND BONUS.
(i) BASE SALARY. During the term of this Agreement, Employer agrees
to pay Executive a base salary of at least Two Hundred Fifty Eight Thousand Four
Hundred Four Dollars ($258,404) per year in bi-weekly installments on the same
dates the other senior officers of Employer are paid ("Base Salary").
(ii) BONUSES. Employer agrees to provide Executive with an
annual incentive bonus to be established for the 1997 calendar year not later
than three months following the consummation of the Recapitalization (defined
below), which annual bonus shall be based upon the bonus amount and
performance targets mutually agreed to by the Board and Executive. For
subsequent calendar years, the bonus amounts and performance targets shall be
agreed upon in advance of the applicable year. Following the establishment
of the performance targets and the bonus amounts, Employer and Executive
shall execute a letter detailing the terms and conditions thereof.
(iii) RECAPITALIZATION BONUS. In addition to the bonuses described
above, Executive shall also be entitled to receive the bonus of Two Hundred
Fifty Thousand Dollars ($250,000), which bonus was previously approved by the
Board to be paid upon the consummation of the recapitalization contemplated in
the Company's Registration Statement on Form S-4 filed with the Securities and
Exchange Commission (the "Recapitalization"). Such bonus is intended to
compensate Executive for Executive's critical contribution to Employer's
successful completion of the Recapitalization.
(b) ADDITIONAL BENEFITS. Executive shall also be entitled to all rights
and benefits under any bonus plan, incentive, participation or extra
compensation plan, pension plan, profit-sharing plan, life, medical, dental,
disability, or insurance plan or policy or other plan or benefit that Employer
or its subsidiaries may provide for Executive (provided Executive is eligible to
participate therein) or employees of Employer generally as from time to time in
effect during the term of this Agreement (the "Plans"). In any event, Employer
shall provide Executive with term life insurance, health insurance and long-term
disability insurance provided for Employer's executive employees generally.
Executive shall also be entitled to fringe benefits in accordance with the
plans, practices, programs and policies as in effect generally with respect to
other peer executives of Employer.
(c) STOCK OPTIONS. Immediately upon the effective date of this Agreement,
Executive shall be granted stock options ("Stock Options") to purchase 1.5% of
the shares of Employer's recapitalized common stock on a fully diluted basis
("Option Shares"), at the exercise price per share equal to the average of the
per share trading price of Employer's common stock for the first twenty (20) day
Nasdaq trading period commencing immediately following consummation of the
Recapitalization. The Stock Options will vest, subject to Employer's Amended
and Restated 1993
2.
<PAGE>
Stock Option/Stock Issuance Plan, over a three year period with 40%, 30% and 30%
vesting on each of the first, second and third anniversaries of the effective
date of this Agreement. The vesting of the Stock Options shall be subject to
acceleration as provided in Section 5(d) below upon a termination without cause
or upon the occurrence of a Change in Control, as defined below in Section 5(d).
The more specific terms and conditions of such Stock Options shall be provided
for in a Stock Option Agreement to be entered into by and between Employer and
Executive upon the granting of the Stock Option ("Stock Option Agreement").
(d) PERQUISITES.
(i) VACATION. Executive shall be entitled to four (4) weeks of
paid vacation each twelve-month period, which shall accrue on a monthly basis.
Such vacation shall be taken at such time or times as shall not unduly disrupt
the orderly conduct of the business of Employer and the duties of Executive. At
the time of any termination of employment, Executive shall be paid for all
accrued but unused vacation.
(ii) AUTO ALLOWANCE. During the term of this agreement, Employer
shall provide Executive a monthly automobile allowance in the amount of $800
plus reimbursement of operating costs as is currently covered under Employer's
Auto Allowance Policy.
(e) OVERALL QUALIFICATION. Employer reserves the right to modify, suspend
or discontinue any and all practices, policies and programs at any time (whether
before or after termination of employment) without notice to or recourse by
Executive; however, Employer shall not amend the perquisites set forth in
Section 4(d) to reduce Executive's benefits thereunder during the term of this
Agreement.
SECTION 5. TERMINATION. The compensation and other benefits provided to
Executive pursuant to this Agreement, and the employment of Executive by
Employer, shall be terminated prior to expiration of the term of this Agreement
only as provided in this Section 5:
(a) DISABILITY. In the event that Executive shall fail, because of
illness, incapacity or injury which is determined to be total ("Disability") by
a physician selected by Employer or its insurers and acceptable to Executive or
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably), to render, for three consecutive months or for shorter
periods aggregating ninety (90) or more business days in any twelve (12)-month
period, the services contemplated by this Agreement, Executive's employment
hereunder may be terminated by sixty (60) days' prior written notice of
termination from Employer to Executive. Thereafter, Employer shall continue to
(i) pay the Base Salary to Executive for a period of six (6) months after the
date of termination, subject to adjustments referenced in the following
paragraph, and (ii) provide medical insurance as in effect prior to such
termination for a period of six (6) months following the date of termination.
Thereafter, no further salary shall be paid or medical insurance be provided.
Executive's rights under the Plans subsequent to termination of employment
pursuant to this paragraph shall be determined under the applicable provisions
of the respective Plans, unless otherwise expressly stated herein. This
Agreement in all other respects will terminate upon the termination of
employment pursuant to this paragraph.
3.
<PAGE>
The amount of compensation to be paid to Executive pursuant to the
preceding paragraph shall be adjusted in the event Executive becomes entitled to
and receives disability benefits under any disability payment plan, including
disability insurance. The amount of Executive's compensation otherwise payable
by Employer pursuant to the preceding paragraph shall be reduced, on a dollar-
for-dollar basis, but not to less than zero, by the amount of any such
disability benefits received by Executive, but only to the extent such benefits
are attributable to payments made by Employer.
(b) DEATH. In the event of Executive's death during the term of this
Agreement, Executive's Base Salary shall immediately terminate and Employer
shall pay to the estate of Executive the Base Salary accrued to the date of
Executive's death to the extent not theretofore paid. If Executive's death
occurs while receiving payments under Section 5(a) above, such payments shall
cease. Executive's rights under the Plans subsequent to his death shall be
determined under the applicable provisions of the respective Plans; PROVIDED
that, notwithstanding any provisions to the contrary therein, (i) Employer shall
continue to provide medical insurance to the dependents of Executive for a
period of six (6) months following the death of Executive and (ii) Stock Options
shall be exercisable only to the extent the rights had vested at the time of
death of Executive. This Agreement in all other respects will terminate upon
the death of Executive.
(c) FOR CAUSE. The employment of Executive hereunder shall be terminable
by Employer in the event that Executive (i) is or has been engaging in willful
or grossly negligent conduct which has resulted in a failure to perform
Executive's duties hereunder or, (ii) has committed an act of dishonesty, gross
negligence or misconduct, which has a direct, substantial and adverse effect on
Employer, its business or reputation.
Notwithstanding the foregoing, Executive shall not be terminated for
cause pursuant to the first paragraph of this subsection 5(c) unless and until
Executive has received written notice of a proposed termination for cause and
Executive has had an opportunity to be heard before at least a majority of the
number of members of the Board authorized to take such action. Executive shall
be deemed to have had such opportunity if given written or telephonic notice by
any director at least 72 hours in advance of a meeting.
In the event of Executive's termination pursuant to this subsection
5(c), Executive's rights to receive Base Salary shall immediately terminate and
Employer shall pay to Executive his Base Salary and vacation accrued to the date
of such termination to the extent not theretofore paid. Executive's rights
under the Plans subsequent to termination shall be determined under the
applicable provisions of the respective plans; provided, however, that Stock
Options shall be exercisable only to the extent the rights had vested at the
time of such termination. This Agreement in all other respects will terminate
upon such termination.
(d) WITHOUT CAUSE. Notwithstanding any other provision of this Section 5,
the Board shall have the right to terminate Executive's employment with Employer
without cause at any time upon at least thirty (30) days' prior written notice
to Executive. The following conditions shall thereupon become applicable:
4.
<PAGE>
(i) SEVERANCE PAY. Employer shall continue to pay Executive the
Base Salary on a bi-monthly basis for a period of twelve (12) months following
the date of such termination.
(ii) MEDICAL INSURANCE CONTINUATION. Employer shall continue to
provide (under COBRA) medical insurance as in effect prior to such termination
for twelve (12) months following such termination, and Employer shall bear
all costs for such insurance.
(iii) ACCELERATED VESTING. Despite the vesting requirements set
forth in the Stock Option Agreement, termination of employment pursuant to this
subsection 5(d) or the occurrence of a Change in Control (as defined below)
shall result in an immediate vesting of the right to exercise the Stock Options
with respect to one hundred percent (100%) of the Option Shares.
For purposes of the foregoing paragraph, a "Change of Control" means,
and shall be deemed to have taken place upon, the occurrence of: (i) a
transaction requiring shareholder approval involving the sale of all or
substantially all of the assets of Employer or the merger of Employer with or
into another corporation or business entity, other than a transaction in which
shareholders of Employer immediately prior to the closing of such transaction
own a majority of the acquiring corporation or entity immediately after giving
effect to such transaction, or (ii) the acquisition by any Person as Beneficial
Owner (as such terms are defined in the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of Employer representing fifty
percent (50%) or more of the total voting power represented by Employer's then
outstanding voting securities.
(iv) BONUS PAYMENT. If Executive is terminated without cause,
Executive shall also be paid for any potential bonuses under this Agreement (the
"Bonus Severance"). The amount of any such Bonus Severance shall be equal to
the amount of any bonus payment(s) received for services rendered during the
calendar year preceding the year of termination.
(e) VOLUNTARY TERMINATION. At any time during the term of this Agreement,
Executive shall have the right, upon thirty (30) days prior written notice to
Employer, to terminate his employment with Employer. Upon termination of
Executive's employment pursuant to this subsection 5(e), (i) Executive's right
to receive Base Salary shall immediately terminate and Employer shall pay to
Executive his Base Salary accrued to the date of such termination to the extent
not theretofore paid, (ii) Executive's rights under the Plans subsequent to such
termination shall be determined under the applicable provisions of the
respective Plans, and (iii) Stock Options held by Executive shall be exercisable
only to the extent the rights had vested at the time of such termination. This
Agreement in all other respects will terminate upon such termination.
(f) TERMINATION BY EXECUTIVE FOR "GOOD REASON". Notwithstanding any other
provisions of this Agreement, Employer shall provide Executive with the payments
and benefits set forth in Section 5(d) in the event Executive terminates
employment for "Good Reason." For purposes of this Agreement, "Good Reason" for
Executive to terminate employment shall mean voluntary termination as a result
of (i) the assignment to Executive of duties inconsistent with the position and
status of Executive as set forth in this Agreement without Executive's prior
written consent, (ii) a substantial alteration in the nature, status or prestige
of Executive's responsibilities
5.
<PAGE>
as set forth in this Agreement or a change in Executive's title or reporting
level from that set forth in this Agreement, (iii) the relocation of Employer's
executive offices or principal business location to a point more than twenty-
five (25) miles from the location of such offices or business as of the date of
this Agreement, (iv) reduction by Employer of Executive's Base Salary in effect
on the date hereof or as the same may be increased from time to time, (v) any
action by Employer (including the elimination of benefit plans without
providing substitutes therefor or the reduction of Executive's benefits
thereunder) that would substantially diminish the aggregate value of Executive's
incentive awards and other fringe benefits, or (vi) a failure by Employer to
obtain from any successor, before the succession takes place, an agreement to
assume and perform this Agreement.
SECTION 6. BUSINESS EXPENSES. During the term of this Agreement, Employer
shall reimburse Executive promptly for reasonable business expenditures,
including travel, entertainment, parking, business meetings, Pacific Club dues,
and professional dues made and substantiated in accordance with policies,
practices and procedures established from time to time by the Board and incurred
in pursuit and furtherance of Employer's business and goodwill.
SECTION 7. MISCELLANEOUS.
(a) SUCCESSION; SURVIVAL. This Agreement shall inure to the benefit of
and shall be binding upon Employer, its successors and assigns. Absent the
prior written consent of Executive, this Agreement may not be assigned by
Employer other than in connection with a merger or sale of all or substantially
all the assets of Employer or a similar transaction in which the successor or
assignee assumes (whether by operation of law or express assumption) all
obligations of Employer hereunder. The obligations and duties of Executive
hereunder are personal and otherwise not assignable. Executive's obligations
and representations under this Agreement will survive the termination of
Executive's employment, regardless of the manner of such termination.
(b) NOTICES. Any notice or other communication provided for in this
Agreement shall be in writing and sent if to Employer to its office at:
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: President
or at such other address as Employer may from time to time in writing designate,
and if to Executive at such address as Executive may from time to time in
writing designate (or Executive's business address of record in the absence of
such designation). Each such notice or other communication shall be effective
(i) if given by telecommunication, when transmitted to the applicable number so
specified in (or pursuant to) this Section 7 and an appropriate answer back is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
6.
<PAGE>
(c) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and it supersedes
any prior agreements, undertakings, commitments and practices relating to
Executive's employment by Employer. No amendment or modification of the terms
of this Agreement shall be valid unless made in writing and signed by Executive
and, on behalf of Employer, by an officer expressly so authorized by the Board.
(d) WAIVER. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof or of any other
right, nor shall any single or partial exercise preclude any further or other
exercise of such right or any other right.
(e) CHOICE OF LAW. This Agreement, the legal relations between the
parties and any action, whether contractual or non-contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement, the relationship of the parties
or the subject matter hereof shall be governed by and construed in accordance
with the laws of the State of California, applicable to contracts made and
performed in such State and without regard to conflicts of law doctrines, to the
extent permitted by law.
(f) ATTORNEY'S FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover reasonable attorney's fees, costs and necessary
disbursements from the non-prevailing party in addition to any other relief to
which such party may be entitled.
(g) CONFIDENTIALITY; PROPRIETARY INFORMATION. Executive agrees to not
make use of, divulge or otherwise disclose, directly or indirectly, any trade
secret or other confidential or proprietary information concerning the business
(including but not limited to its products, employees, services, practices or
policies) of Employer or any of its affiliates of which Executive may learn or
be aware as a result of Executive's employment during the term of the Agreement
or prior thereto as stockholder, employee, officer or director of, or consultant
to, Employer, except to the extent such use or disclosure is (i) necessary to
the performance of this Agreement and in furtherance of Employer's best
interests, (ii) required by applicable law, (iii) lawfully obtainable from other
public sources, or (iv) authorized in writing by or pursuant to a written
agreement with Employer. The provisions of this subsection (g) shall survive
the expiration, suspension or termination, for any reason, of this Agreement.
(h) SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect, and if any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances, to the fullest extent permitted by law.
(i) WITHHOLDING; DEDUCTIONS. All compensation payable hereunder,
including salary and other benefits, shall be subject to applicable taxes,
withholding and other required, normal or elected employee deductions.
7.
<PAGE>
(j) SECTION HEADINGS. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(k) COUNTERPARTS. This Agreement and any amendment hereto may be executed
in one or more counterparts. All of such counterparts shall constitute one and
the same agreement and shall become effective when a copy signed by each party
has been delivered to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"EMPLOYER"
KOLL REAL ESTATE GROUP, INC.
By: /s/ DONALD M. KOLL
-----------------------------
Donald M. Koll, Chairman and
Chief Executive Officer
"EXECUTIVE"
/s/ RAYMOND J. PACINI
---------------------------------
RAYMOND J. PACINI
8.
<PAGE>
INDEPENDENT CONTRACTOR CONSULTING AGREEMENT
-------------------------------------------
This Agreement ("Agreement") is made effective as of October 1, 1996,
between KOLL REAL ESTATE GROUP, INC., a Delaware corporation (the "Company"),
and RAY WIRTA ("Consultant").
WHEREAS, the Company and Consultant desire to enter into an agreement
regarding consulting services to be provided to the Company by Consultant; and
WHEREAS, the Company and Consultant have agreed to execute and deliver this
Agreement to memorialize the terms and conditions of the above described
relationship.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. CONSULTING SERVICES. Consultant hereby agrees to provide consulting
services to the Company, including without limitation the following:
- reviewing and commenting on individual development projects,
including without limitation, financing and equity structures
applicable thereto;
- assisting in analysis of alternative approaches to a
recapitalization of the Company;
- providing motivational advice and counsel to the Company's staff;
and
- assisting in sourcing new development opportunities for the
Company and procuring staff to support such opportunities.
2. INDEPENDENT CONTRACTOR STATUS. This Agreement is not intended to be
an employment agreement and there does not exist any intent to create any
employment relationship between the Company and Consultant. At all times during
the term of this Agreement, Consultant shall be an independent contractor and
shall be solely responsible for all federal, state and local taxes, withholdings
and related obligations which may arise from any payments from the Company to
Consultant hereunder, including without limitation, federal and state income tax
obligations and contributions to social security, disability and workers'
compensation insurance benefits. Consultant agrees that he will indemnify,
defend and hold the Company harmless from and against any and all claims or
liability arising out of or in connection with any alleged failure to satisfy
any such obligations.
1.
<PAGE>
3. COMPENSATION. During the term of this Agreement, the Company hereby
agrees to pay Consultant compensation at the annual rate of Fifty Thousand
Dollars ($50,000.00) per year payable in equal monthly installments of Four
Thousand One Hundred and Sixty-Six Dollars and Sixty-Seven Cents ($4,166.67).
4. TERMINATION. This Agreement may be terminated by either party,
without cause, upon thirty (30) days prior written notice. However, the Company
shall pay Consultant the amount of $50,000 on a lump sum basis and any and all
unvested stock options of Consultant shall immediately become vested in the
event that the Company terminates this Agreement without cause, where "cause" is
defined as the event where Consultant (i) is or has been engaging in willful or
grossly negligent conduct which has resulted in a failure to perform
Consultant's services hereunder or, (ii) has committed an act of dishonesty,
gross negligence or misconduct, which has a direct, substantial and adverse
effect on the Company, its business or reputation.
Notwithstanding the foregoing, Consultant shall not be terminated for
cause unless and until Consultant has received written notice of a proposed
termination for cause and Consultant has had an opportunity to be heard before
at least a majority of the number of members of the Board authorized to take
such action. Consultant shall be deemed to have had such opportunity if given
written or telephonic notice by any director at least 72 hours in advance of a
meeting.
5. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof. This Agreement
supersedes any and all prior agreements and understandings between the parties
hereto respecting the subject matter hereof.
6. CHANGES. The terms and provisions of this Agreement may not be
modified or amended except pursuant to the written consent of Consultant and of
the Company. The waiver by either party of any breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach.
7. ASSIGNABILITY. The obligations of Consultant may not be delegated and
Consultant may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein. Any such attempted delegation or disposition
shall be null and void AB INITIO and without effect. This Agreement and all of
the Company's rights and obligations hereunder may be assigned or transferred by
the Company to, and shall be binding upon and inure to the benefit of, any
subsidiary of the Company or any successor to the Company.
8. NOTICES. All notices, requests, consents and other communications
hereunder to either party shall be deemed to be sufficient if contained in a
written instrument delivered in person, duly sent by first class registered or
certified airmail, postage prepaid, or telecopied or telexed addressed to such
party at his or its address as set forth below. All such notices, requests,
consents and communications shall be deemed to have been delivered (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
telex or facsimile transmission, on the
2.
<PAGE>
date on which the sender receives machine confirmation of such transmission, and
(c) in the case of mailing, on the fifth (5th) business day following the date
of such mailing. Either party may change the address to which notices,
requests, consents and other communications hereunder shall be sent by sending
written notice of such change of address to the other party.
If to Company: Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Raymond J. Pacini
Facsimile: (714) 261-6550
If to Consultant: Ray Wirta
Koll Real Estate Services, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Facsimile: (714) 250-4344
9. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
11. HEADINGS. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
12. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability. Such prohibition or
unenforceability in any one jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Any provision of this
Agreement that is prohibited or unenforceable by reason of its temporal duration
or geographical scope shall be deemed to be changed to the longest duration and
widest geographical scope that is enforceable.
3.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written, in the case of the Company by an officer thereunto
duly authorized.
KOLL REAL ESTATE GROUP, INC.
By: /s/ DONALD M. KOLL
-------------------------------------------
Donald M. Koll, Chairman and
Chief Executive Officer
CONSULTANT:
Signature: /s/ RAY WIRTA
--------------------------------------
RAY WIRTA
4.
<PAGE>
EXHIBIT 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement
333-22121 of Koll Real Estate Group, Inc. on Form S-4 of our report dated
February 18, 1997, appearing in the Prospectus, which is a part of such
Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Costa Mesa, California
April 25, 1997
<PAGE>
KOLL REAL ESTATE GROUP, INC.
(CUSIP No. 500434 105)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE ___, 1997
The undersigned hereby authorizes and appoints Messrs. Richard M. Ortwein and
Raymond J. Pacini and each of them, as proxies with full power of
substitution in each, to vote all shares of Class A Common Stock, par value
$.05 per share, of Koll Real Estate Group, Inc. (the "Company") held of
record on April 24,1997 by the undersigned at the Annual Meeting of
Stockholders to be held at 9:30 a.m., Eastern Daylight Time, on June___,
1997, at the Mellon Bank Building, 8 Loockerman Street, Dover, Delaware, and
at any adjournments or postponements thereof, on all matters that may
properly come before said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (i) AS DIRECTED ON
THE REVERSE SIDE, OR, IN THE ABSENCE OF SUCH DIRECTION, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 THROUGH 9; AND (ii) IN ACCORDANCE WITH
THE JUDGMENT OF THE PROXIES UPON OTHER MATTERS THAT MAY PROPERLY COME
BEFORE SAID MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE HEREOF
AND RETURN IT IN THE ENCLOSED ENVELOPE.
- ------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE>
Please mark
your votes as /X/
indicated in
this example
____________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE PROPOSALS SET FORTH
BELOW.
<TABLE>
<S><C> <C> <C> <C><C> <C> <C> <C> <C> <C> <C>
WITHHOLD INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AUTHORITY NOMINEE, WRITE THE NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.
1. / / / / / / 5. / / / / / / 8a. / / / / NOMINEES: Donald M. Koll, J. Thomas Talbot, Marco Vitulli, Ray
Wirta, Phillip R. Burnaman II, James J. Gaffney, Robert J.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN Gagalis, Thomas W. Sabin, Jr., P. John Wickser II and Paul M.
2. / / / / / / 6. / / / / / / Zeller.
______________________________________________________________
WITHHOLD
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AUTHORITY NOMINEES: Mr. Gagalis - 1998; Messrs. Koll, Sabin and Wickser
3. / / / / / / 7. / / / / / / 8b. / / / / - 1999; Messrs. Wirta, Burnaman, Gaffney and Zeller - 2000.
_______________________________________________________________
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
4. / / / / / / 9. / / / / / /
WITHHOLD
FOR AUTHORITY
__ 8c. / / / / NOMINEES: Messrs. Koll and Hegness - 1999;
| Messrs. Wirta nd Ellis - 2000.
________________________________________________________________
A MAJORITY (OR IF ONLY ONE THEN THAT ONE) OF THE ABOVE PERSONS
OR THEIR SUBSTITUTES WHO SHALL BE PRESENT AND ACTING AT THE
MEETING SHALL HAVE THE POWERS CONFERRED HEREBY.
EXECUTION OF THIS PROXY BY A STOCKHOLDER WILL REVOKE ANY AND
ALL PRIOR PROXIES GIVEN BY SUCH STOCKHOLDER WITH RESPECT TO THE
ANNUAL MEETING.
</TABLE>
Signature(s)________________ Signature(s)_______________ Dated:_________,1997
Signature(s) of Stockholder(s) - please sign name exactly as imprinted (do not
print). Please indicate any change of address.
NOTE: Executors, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they sign;
if shares are held jointly, EACH should sign.
______________________________________________________________________________
- FOLD AND DETACH HERE -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE
PROPOSALS SET FORTH BELOW.
PROPOSAL 1 -- Approval and adoption of the Exchange Offer proposal which
provides for the exchange by the Company of up to all 12% Senior Subordinated
Pay-In-Kind Debentures Due March 15, 2002 ("Senior Debentures") and up to all
12% Subordinated Pay-In-Kind Debentures Due March 15, 2002 outstanding as of
March 15, 1997 for shares of the Company's Common Stock equal to 90% of the
Company's outstanding Common Stock, on a post-Capital Stock Combination and
Reverse Stock Split basis (as described in Proposals 2 and 3).
PROPOSAL 2 -- Approval and adoption of the Capital Stock Combination Proposal
which provides for the amendment of Articles Fourth, Fifth and Sixth of the
Company's Restated Certificate of Incorporation (the "Restated Certificate"),
subject to the completion of the Recapitalization, in order to provide for
the combination of the Company's Class A Common Stock, Class B Common Stock
and Series A Convertible Redeemable Preferred Stock ("Preferred Stock") into
one class and series of stock to be designated "Common Stock," each
outstanding share of Preferred Stock will be reclassified to be one and three
quarter (1.75) shares of Common Stock and each outstanding share of Class A
Common Stock will be reclassified to be one (1) share of Common Stock, and to
provide for the elimination of the Board's authority to issue class or series
of stock with preferences over the combined Common Stock (the "Capital Stock
Combination").
PROPOSAL 3 -- Approval and adoption of the Reverse Split Proposal which
provides for the amendment of Article Fifth of the Restated Certificate,
subject to the completion of the Recapitalization, to provide for a one for
one hundred (1:100) reverse stock split of each outstanding share of the
Company's capital stock (the "Reverse Stock Split").
PROPOSAL 4 -- Approve and adopt the Authorized Capital Proposal which
provides for the amendment of Article Fourth of the Restated Certificate,
subject to the completion of the Recapitalization and the approval and
implementation of both the Capital Stock Combination and the Reverse Stock
Split, to reduce the authorized capital stock to 18 million shares of the
combined Common Stock.
PROPOSAL 5 -- Approval and adoption of the Board Proposal which provides for
the amendment of Articles Eighth and Thirteenth of the Company's Restated
Certificate and Articles III and XI of the Company's Bylaws, subject to the
completion of the Recapitalization, to: (i) delete the classified Board of
Directors; (ii) increase the size of the Board of Directors from seven (7) to
ten (10) members; (iii) delete the 80% supermajority vote requirement to
change the number of directors by stockholder vote; (iv) delete the 80%
supermajority vote requirement to remove any director for cause and permit
directors to be removed with or without cause; and (v) delete the 80%
supermajority vote requirement to amend any of the above described provisions
contained in the Company's Restated Certificate or Bylaws.
PROPOSAL 6 -- Approval and adoption of the Special Meetings Proposal which
provides for amendments to Articles Ninth and Thirteenth of the Company's
Restated Certificate and Articles II and XI of the Company's Bylaws, subject
to the completion of the Recapitalization, to: (i) delete the 80%
supermajority vote requirements to amend or repeal any provisions of Article
Ninth of the Company's Restated Certificate of Incorporation and Article II,
Section 3 of the Company's Bylaws regarding the power to call special
meetings of the Company's stockholders; (ii) delete the provisions contained
in Article Ninth of the Company's Restated Certificate of Incorporation and
Article II, Section 3 of the Company's Bylaws which provide that only the
Board of Directors or the Company's Chief Executive Officer can call such
special meetings; and (iii) permit the holders of capital stock of the
Company representing at least ten percent (10%) of the outstanding shares of
capital stock of the Company entitled to vote in the election of directors to
call a special meeting of the Company's stockholders.
PROPOSAL 7 -- Approval and adoption of the Written Consent Proposal which
provides for an amendment to Article Tenth of the Company's Restated
Certificate, subject to the completion of the Recapitalization, to delete the
provisions which currently prohibit stockholders from acting by written
consent without a meeting, and which require an 80% supermajority vote to
amend or repeal such provisions.
PROPOSAL 8(a) -- In the event the Recapitalization is completed, election
of each director nominee described in the Board Election Proposal with terms
expiring at the Annual Meeting in 1998:
NOMINEES: Donald M. Koll, J. Thomas Talbot, Marco Vitulli, Ray Wirta, Phillip
R. Burnaman II, James J. Gaffney, Robert J. Gagalis, Thomas W. Sabin, Jr., P.
John Wickser II and Paul M. Zeller.
8(b) -- In the event the Recapitalization is completed, but the Board
Proposal is not approved by the Stockholders, election of Mr. Gagalis to
serve until the Annual Meeting of Stockholders in 1998, Messrs. Koll, Sabin
and Wickser to serve until the Annual Meeting of Stockholders in 1999 and
Messrs. Wirta, Gaffney, Burnaman and Zeller to serve until the Annual Meeting
of Stockholders in 2000.
NOMINEES: Mr. Gagalis - 1998; Messrs. Koll, Sabin and Wickser - 1999; Messrs.
Wirta, Burnaman, Gaffney and Zeller - 2000.
8(c) -- In the event the Recapitalization is not completed, election of
Messrs. Koll and Hegness to serve until the Annual Meeting of Stockholders in
1999 and of Messrs. Wirta and Ellis to serve until the Annual Meeting of
Stockholders in 2000.
NOMINEES: Messrs. Koll and Hegness - 1999; Messrs. Wirta and Ellis - 2000.
PROPOSAL 9 -- Approval and adoption of the Auditor Proposal which provides
for the ratification and appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending December 31, 1997.
<PAGE>
- -------------------------------------------------------------------------------
KOLL REAL ESTATE GROUP, INC.
(CUSIP NO. 500434 204)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE __, 1997
The undersigned hereby authorizes and appoints Messrs. Richard M. Ortwein and
Raymond J. Pacini and each of them, as proxies with full power of
substitution in each, to vote all shares of Series A Convertible Redeemable
Preferred Stock, par value $.01 per share, of Koll Real Estate Group, Inc.
(the "Company") held of record on April 24, 1997 by the undersigned at the
Annual Meeting of Stockholders to be held at 9:30 a.m., Eastern Daylight
Time, on June __, 1997 at the Mellon Bank Building, 8 Loockerman Street,
Dover, Delaware, and at any adjournments or postponements thereof, on any
matters that may properly come before said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED: (I) AS DIRECTED ON THE
REVERSE SIDE, OR, IN THE ABSENCE OF SUCH DIRECTION, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4; AND (II) IN ACCORDANCE WITH THE
JUDGMENT OF THE PROXIES UPON OTHER MATTERS THAT MAY PROPERLY COME BEFORE
SAID MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE HEREOF AND
RETURN IT IN THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
Please mark
your votes as X
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE PROPOSALS SET FORTH
BELOW.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1./ / / / / / 2./ / / / / / 3./ / / / / /
FOR AGAINST ABSTAIN
4./ / / / / /
A MAJORITY (OR IF ONLY ONE
THEN THAT ONE) OF THE ABOVE
PERSONS OR THEIR
SUBSTITUTES WHO SHALL BE
PRESENT AND ACTING AT THE
MEETING SHALL HAVE THE
POWERS CONFERRED HEREBY.
EXECUTION OF THIS PROXY BY
A STOCKHOLDER WILL REVOKE
ANY AND ALL PRIOR PROXIES
GIVEN BY SUCH STOCKHOLDER
WITH RESPECT TO THE ANNUAL
MEETING.
Signature(s) Signature(s) Dated: , 1997
--------------------- ------------------ --
Signature(s) of Stockholder(s) - please sign name exactly as imprinted (do not
print). Please indicate any change of address.
NOTE: Executors, administrators, trustees and others signing in a representative
capacity should indicate the capacity in which they sign; if shares are held
jointly, EACH should sign.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE PROPOSALS
SET FORTH BELOW.
PROPOSAL 1 - Approval and adoption of the Exchange Offer proposal which
provides for the exchange by the Company of up to all 12% Senior Subordinated
Pay-In-Kind Debentures Due March 15, 2002 ("Senior Debentures") and up to all
12% Subordinated Pay-In-Kind Debentures Due March 15, 2002 outstanding as of
March 15, 1997 for shares of the Company's Common Stock equal to 90% of the
Company's outstanding Common Stock, on a post-Capital Stock Combination and
Reverse Stock Split basis (as described in Proposals 2 and 3).
PROPOSAL 2 - Approval and adoption of the Capital Stock Combination Proposal
which provides for the amendment of Articles Fourth, Fifth and Sixth of the
Company's Restated Certificate of Incorporation (the "Restated Certificate"),
subject to the completion of the Recapitalization, in order to provide for
combination of the Company's Class A Common Stock, Class B Common Stock and
Series A Convertible Redeemable Preferred Stock ("Preferred Stock") into one
class and series of stock to be designated "Common Stock," each outstanding
share of Preferred Stock will be reclassified to be one and three quarter (1.75)
shares of Common Stock and each outstanding share of Class A Common Stock will
be reclassified to be one (1) share of Common Stock, and to provide for the
elimination of the Board's authority to issue classes or series of stock with
preferences over the combined Common Stock (the "Capital Stock Combination").
PROPOSAL 3 - Approval and adoption of the Reverse Split Proposal which provides
for the amendment of Article Fifth of the Restated Certificate, subject to the
completion of the Recapitalization, to provide for a one for one hundred
(1:100) reverse stock split of each outstanding share of the Company's capital
stock (the "Reverse Stock Split").
PROPOSAL 4 - Approve and adopt the Authorized Capital Proposal which provides
for the amendment of Article Fourth of the Restated Certificate, subject to the
completion of the Recapitalization and the approval and implementation of both
the Capital Stock Combination and the Reverse Stock Split, to reduce the
authorized capital stock to 18 million shares of the combined Common Stock.
<PAGE>
- --------------------------------------------------------------------------------
CONSENT AND
LETTER OF TRANSMITTAL
TO TENDER AND TO GIVE CONSENT TO PROPOSED AMENDMENTS TO THE INDENTURE IN RESPECT
OF 12% SENIOR SUBORDINATED PAY-IN-KIND DEBENTURES DUE MARCH 15, 2002
(THE "SENIOR DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
(FORMERLY, THE BOLSA CHICA COMPANY)
(CUSIP NO. 097679 AA 2)
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND DISCLOSURE STATEMENT
DATED , 1997
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON
JUNE , 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED. HOLDERS OF SENIOR
DEBENTURES MUST TENDER THEIR SENIOR DEBENTURES AND PROVIDE THEIR CONSENTS TO
THE PROPOSED AMENDMENTS ON OR PRIOR TO 12:00 MIDNIGHT EASTERN DAYLIGHT TIME ON
THE EXPIRATION DATE IN ORDER TO RECEIVE THE EXCHANGE OFFER CONSIDERATION.
TENDERED SENIOR DEBENTURES MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY
TIME PRIOR TO 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE,
BUT NOT THEREAFTER. THE EXCHANGE OFFER IS CONDITIONED UPON THE SATISFACTION OF
CERTAIN CONDITIONS, INCLUDING AMONG OTHER THINGS, THE VALID TENDER OF AT LEAST
90% IN AGGREGATE PRINCIPAL AMOUNT OF ALL OUTSTANDING DEBENTURES OF THE COMPANY
OWNED BY PERSONS OTHER THAN THE COMPANY, ITS SUBSIDIARIES AND CERTAIN OF THEIR
AFFILIATES.
TO EXCHANGE AGENT: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY:
P.O. Box 3301 (FOR ELIGIBLE INSTITUTIONS ONLY) 120 Broadway
South Hackensack, NJ 07606 (201) 329-8936 13th Floor
Attn: Reorganization Dept. CONFIRM BY TELEPHONE: New York, New York 10271
(201) 296-4860 Attn: Reorganization Dept.
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY. The accompanying instructions should be read
carefully before this Consent and Letter of Transmittal is completed.
Capitalized terms used in this Consent and Letter of Transmittal not otherwise
defined herein shall have the meanings provided in the Proxy
Statement/Prospectus and Disclosure Statement dated April , 1997 (the
"Prospectus") of Koll Real Estate Group, Inc., a Delaware corporation (the
"Company").
List below the Senior Debentures that are to be tendered pursuant to this
Consent and Letter of Transmittal. If the space below is inadequate, list the
information requested below on a separate signed schedule and affix the list to
this Consent and Letter of Transmittal.
<TABLE>
<CAPTION>
DESCRIPTION OF SENIOR DEBENTURES TENDERED
PRINCIPAL AMOUNT
TENDERED AND
AGGREGATE PRINCIPAL AS TO WHICH
NAMES AND ADDRESS(ES) OF HOLDER(S) CERTIFICATE NUMBER(S) AMOUNT REPRESENTED BY CONSENTS ARE
(PLEASE FILL IN, BLANK) (1) CERTIFICATES (2) DELIVERED (2)
<S> <C> <C> <C>
TOTAL PRINCIPAL AMOUNT TENDERED
(1) Need not be completed by Holders who tender by book-entry.
(2) Unless otherwise indicated in this column, any tendering Holder will be deemed to have tendered, and delivered Consents with
respect to, the entire principal amount represented by the Senior Debentures indicated in this column. See Instruction 5.
</TABLE>
/ / IF THE PRINCIPAL AMOUNT PRESENTED HEREWITH DOES NOT EQUAL THE AMOUNT
PRINTED ON THE LABEL ABOVE, AND YOU ARE UNABLE TO LOCATE SUCH
CERTIFICATE(S) TO SUBMIT HEREWITH AND YOU WISH TO TENDER SUCH
CERTIFICATE(S), PLEASE CHECK THIS BOX AND COMPLETE THE AFFADAVIT OF LOSS.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus and
this Consent and Letter of Transmittal, which together constitute (i) the
Company's offer (the "Exchange Offer") to exchange an aggregate of up to
9,217,320 shares of the Company's post-Capital Stock Combination and
post-Reverse Stock Split Common Stock (the "Common Stock") for up to all of the
Company's outstanding 12% Senior Subordinated Debentures due March 15, 2002 (the
"Senior Debentures"), on a 56 shares per $1000 principal amount basis, and (ii)
the Company's solicitation (the "Consent Solicitation") of consents (the
"Consents") from persons in whose names the Senior Debentures are registered on
the books of the registrar for the Senior Debentures (the "Holders") to certain
amendments (the "Proposed Amendments") to the Indenture (the "Indenture")
pursuant to which the Senior Debentures were issued. The consideration payable
by the Company for the Senior Debentures is set forth in the Prospectus. HOLDERS
WHO TENDER THEIR SENIOR DEBENTURES PURSUANT TO THE EXCHANGE OFFER WILL BE
DEEMED, BY ACCEPTANCE OF THE EXCHANGE OFFER, TO CONSENT TO THE PROPOSED
AMENDMENTS.
HOLDERS MAY NOT CONSENT TO THE PROPOSED AMENDMENTS WITHOUT TENDERING THEIR
SENIOR DEBENTURES. Holders who do not tender their Senior Debentures and deliver
their Consents and Letters of Transmittal on or prior to 12:00 midnight, Eastern
Daylight Time, on the Expiration Date will not receive the Exchange Offer
consideration. See "Procedure for Tendering Outstanding Debentures and Giving
Consents" in the Prospectus. No Holder may withdraw any tendered Senior
Debentures or revoke a Consent following 12:00 midnight, Eastern Daylight Time,
on the Expiration Date. The Company will issue certificates for shares of Common
Stock in exchange for tendered Senior Debentures as promptly as practicable
after such Senior Debentures are accepted for exchange pursuant to the Exchange
Offer.
The Exchange Offer or Consent Solicitation may be extended, terminated or
amended, as provided in the Prospectus. During any such extension of the
Exchange Offer or Consent Solicitation, all Senior Debentures previously
tendered and Consents delivered and not withdrawn or revoked pursuant to the
Exchange Offer that have not been accepted for exchange will remain subject to
the Exchange Offer and may be accepted thereafter for exchange by the Company.
No alternative, conditional or contingent tenders will be accepted. A
tendering Holder, by execution of this Consent and Letter of Transmittal, or
facsimile thereof, waives all rights to receive notice of acceptance of such
Holder's Senior Debentures for exchange.
PLEASE READ THIS ENTIRE CONSENT AND LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY INFORMATION REQUESTED HEREIN
This Consent and Letter of Transmittal is to be completed by Holders of
Senior Debentures if certificates representing such Senior Debentures are to be
forwarded herewith or if delivery of such certificates are to be made by
book-entry transfer to the account established by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in this
Consent and Letter of Transmittal and in the Prospectus under the caption
"Procedure for Tendering Outstanding Debentures and Giving Consents," or
"Book-Entry Transfer Procedures." PURSUANT TO THE TERMS OF THE EXCHANGE OFFER
AND CONSENT SOLICITATION, THE COMPLETION, EXECUTION AND DELIVERY OF THIS CONSENT
AND LETTER OF TRANSMITTAL WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED
AMENDMENTS.
Holders of Senior Debentures that are tendering by book-entry transfer to
the Exchange Agent's account at DTC can execute the tender through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible. DTC participants that are accepting the Exchange Offer must transmit
their acceptance to DTC (in accordance with DTC procedures) which will verify
the acceptance and execute a book-entry delivery to the Exchange Agent's account
at DTC. DTC will then send an agent's message ("Agent's Message") to the
Exchange Agent, which Agent's Message shall state that DTC has received an
express acceptance from each Holder tendering through ATOP that each such Holder
has received this Consent and Letter of Transmittal and has agreed to be bound
by the terms and conditions hereof. Delivery by DTC of the Agent's Message, and
receipt thereof by the Exchange Agent will satisfy the terms of the Exchange
Offer as to execution and delivery of a Consent and Letter of Transmittal by
each Holder identified in the Agent's Message.
2
<PAGE>
Holders whose certificates representing the Senior Debentures are not
immediately available or who cannot deliver certificates and all other required
documents to the Exchange Agent or complete the procedure for book-entry
transfer on or prior to the Expiration Date, may nevertheless tender Senior
Debentures pursuant to the guaranteed delivery procedure set forth in the
Prospectus under the caption "Guaranteed Delivery Procedures." See Instruction 2
on pages 9 and 10 below.
/ / CHECK HERE IF ALL OR SOME CERTIFICATES FOR TENDERED SENIOR DEBENTURES ARE
ENCLOSED HEREWITH. IF ONLY SOME SUCH CERTIFICATES ARE ENCLOSED HEREWITH,
PLEASE CHECK BOX BELOW AND EXECUTE AN AFFIDAVIT OF LOSS.
/ / CHECK HERE IF TENDERED SENIOR DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER SENIOR
DEBENTURES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ____________________________________________
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE IF TENDERED SENIOR DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holders _______________________________________________________
Window Ticket Number (if any) ____________________________________________
Date of Execution of Notice of Guaranteed Delivery and Consent ___________
Name of Eligible Institution that guaranteed delivery ____________________
If delivery by book-entry transfer, check box here: / /
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
NOTE: SIGNATURE(S) AND
TAXPAYER IDENTIFICATION NUMBER MUST BE PROVIDED.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE>
Only Holders are entitled to tender their Senior Debentures in the Exchange
Offer and consent to the Proposed Amendments in the Consent Solicitation. Any
financial institution that is a participant in DTC's system and whose name
appears on a security position listing as the record owner of the Senior
Debentures and who wishes to make book-entry delivery of the Senior Debentures
as described above and to consent to the Proposed Amendments must complete,
execute and deliver this Consent and Letter of Transmittal to DTC, which will
then send an Agent's message to the Exchange Agent (as described above). Persons
who are beneficial owners of Senior Debentures but are not Holders and who seek
to tender Senior Debentures and deliver Consents to the Proposed Amendments
should (i) contact the Holder of such Senior Debentures and instruct such Holder
to tender and consent on his or her behalf, (ii) obtain and include with this
Consent and Letter of Transmittal Senior Debentures properly endorsed for
transfer by the Holder or accompanied by a properly completed bond power from
the Holder, together with a properly completed irrevocable proxy that authorizes
such person to consent to the Proposed Amendments on behalf of such Holder, with
signatures on the endorsement or bond power guaranteed by a firm that is a
member of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or by a commercial bank, trust company,
credit union or savings association having an office in the United States (each,
an "Eligible Institution") or (iii) effect a record transfer of such Senior
Debentures from the Holder to such beneficial owner and comply with the
requirements applicable to Holders for tendering Senior Debentures and
delivering Consents prior to 12:00 midnight, Eastern Daylight Time, on the
Expiration Date, as the case may be.
A HOLDER WHO TENDERS SENIOR DEBENTURES PURSUANT TO THE EXCHANGE OFFER WILL
BE DEEMED, BY ACCEPTANCE OF THE EXCHANGE OFFER TO CONSENT TO THE PROPOSED
AMENDMENTS. HOLDERS WHO WISH TO RECEIVE COMMON STOCK PURSUANT TO THE EXCHANGE
OFFER MUST TENDER THEIR SENIOR DEBENTURES AND DELIVER CONSENTS PRIOR TO 12:00
MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE. SEE "PROCEDURE FOR
TENDERING OUTSTANDING DEBENTURES AND GIVING CONSENTS" IN THE PROSPECTUS.
TO: KOLL REAL ESTATE GROUP, INC.
Upon the terms and subject to the conditions of the Exchange Offer and
Consent Solicitation, the undersigned hereby tenders to the Company the Senior
Debentures indicated on page 1 above. Subject to, and effective upon, acceptance
for exchange for the Senior Debentures tendered herewith, the undersigned hereby
sells, assigns and transfers to or upon the order of the Company all rights,
title and interest in and to all such Senior Debentures tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent the
true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as agent of the Company) with
respect to such Senior Debentures, with full power of substitution and
resubstitution (such power of attorney being, deemed to be an irrevocable power
coupled with an interest) to (a) deliver certificates representing such Senior
Debentures, or transfer ownership of such Senior Debentures on the account books
maintained by DTC, together, in each such case, with all accompanying evidences
of transfer and authenticity to or upon the order of the Company, (b) present
such Senior Debentures for transfer on the relevant security registrar and (c)
receive all benefits or otherwise exercise all rights of beneficial ownership on
behalf of the Company of such Senior Debentures all in accordance with the terms
of the Exchange Offer and Consent Solicitation. EXECUTION AND DELIVERY OF THIS
CONSENT AND LETTER OF TRANSMITTAL WILL ALSO BE DEEMED TO CONSTITUTE A CONSENT TO
THE PROPOSED AMENDMENTS.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, SELL, ASSIGN AND TRANSFER THE SENIOR DEBENTURES
TENDERED HEREBY AND TO GIVE THE CONSENT CONTAINED HEREIN AND, THAT WHEN THE SAME
ARE ACCEPTED FOR EXCHANGE BY THE COMPANY, THE COMPANY WILL ACQUIRE GOOD,
MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
4
<PAGE>
CLEAR OF ALL SECURITY INTERESTS, LIENS, RESTRICTIONS, CLAIMS, CHARGES,
ENCUMBRANCES, CONDITIONAL SALES AGREEMENTS OR OTHER OBLIGATIONS RELATING TO THE
SALE OR TRANSFER THEREOF, AND NOT BE SUBJECT TO ANY ADVERSE CLAIM. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE EXCHANGE AGENT OR THE COMPANY TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE ASSIGNMENT, TRANSFER AND EXCHANGE OF THE SENIOR DEBENTURES TENDERED
HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER AND CONSENT SOLICITATION. DELIVERY OF THE ENCLOSED SENIOR
DEBENTURES SHALL BE EFFECTED, AND RISK OF LOSS AND TITLE TO SUCH SENIOR
DEBENTURES SHALL PASS, ONLY UPON PROPER DELIVERY THEREOF TO THE EXCHANGE AGENT
IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER.
All authority conferred or agreed to be conferred pursuant to this Consent
and Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding, upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy, and personal and legal representatives
of the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Senior Debentures properly tendered may be
withdrawn and Consents may be revoked at any time prior to 12:00 midnight,
Eastern Daylight Time, on the Expiration Date.
The Exchange Offer and Consent Solicitation are subject to a number of
conditions, each of which may be waived or modified by the Company, in whole or
in part, at any time and from time to time, as described in the Prospectus under
the caption "Conditions of the Exchange Offers." The undersigned recognizes that
as a result of such conditions the Company may not be required to accept the
Senior Debentures properly tendered hereby. In such event, the tendered Senior
Debentures not accepted for exchange will be returned to the undersigned without
cost to the undersigned as soon as practicable following the earlier to occur of
the Expiration Date or the date on which the Exchange Offer is terminated
without any Senior Debentures being purchased thereunder, at the address shown
below the undersigned's signature(s) unless otherwise indicated under "Special
Payments Instructions" below.
Unless otherwise indicated below under "Special Payment Instructions" or
"Special Delivery Instructions," as applicable, please send share certificates
for Common Stock to be issued in exchange for any Senior Debentures tendered
hereby and accepted for exchange, and/or return any certificates representing
Senior Debentures not tendered or not accepted for exchange in the name(s) of
the Holder(s) and to the addressees appearing under "Description of Senior
Debentures Tendered" herein. In the event that both the Special Payment
Instructions and the Special Delivery Instructions are completed, please issue
and send the share certificates for Common Stock to be issued in exchange for
any Senior Debentures tendered hereby and/or return any certificates
representing Senior Debentures not tendered or not accepted for exchange to, the
person or persons so indicated. Unless otherwise indicated under "Special
Payment Instructions," in the case of a book-entry delivery of Senior
Debentures, please credit the account maintained at DTC with any Senior
Debentures not tendered or not accepted for exchange. The undersigned recognizes
that the Company does not have any obligation pursuant to the Special Payment
Instructions to transfer any Senior Debentures from the name of the Holder
thereof if the Company does not accept for exchange any of the Senior Debentures
so tendered.
5
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if Common Stock share certificates to To be completed ONLY if the Common Stock share certificates
be issued in exchange for the Senior Debentures accepted for to be issued in exchange for the Subordinated Debentures
exchange, and/or certificates representing Senior Debentures accepted for exchange, and/or certificates representing
not accepted for exchange are to be issued in the name of Subordinated Debentures not accepted for exchange are to be
someone other than the undersigned, or if Senior Debentures sent to someone other than the undersigned or to the
delivered by book-entry transfer not accepted for exchange undersigned at an address other than that indicated on page
are to be returned by credit to an account maintained at DTC 1 above.
other than the account indicated on page 1 above. Mail: Common Stock Share Certificate(s) to
Issue: Common Stock Share Certificate(s) to Name:
Name: (Please Print)
(Please Print) Address:
Address:
(Include Zip Code)
(Including Zip Code)
(Taxpayer Identification or Social Security Number)
(Taxpayer Identification or Social Security Number)
Credit unpurchased Senior Debentures delivered by
book-entry transfer to the DTC account set forth below:
(Account Number)
</TABLE>
6
<PAGE>
AFFIDAVIT OF LOST OR DESTROYED DEBENTURE CERTIFICATE
AND AGREEMENT OF INDEMNITY
NAME ___________________________________________________________________________
ADDRESS ________________________________________________________________________
CITY/STATE/ZIP _________________________________________________________________
CERTIFICATE NUMBER(S) __________________________________________________________
PRINCIPAL AMOUNT _______________________________________________________________
REGISTERED IN THE NAME OF ______________________________________________________
The undersigned person(s), being first duly sworn, deposes and says that: I am
the lawful owner of the above described certificate(s) and Debentures. The
certificate(s) (WERE NOT) (WERE) [circle appropriate word(s)] endorsed, cashed
negotiated, transferred, assigned, or otherwise disposed of. I have made a
diligent search for the certificate(s) and have been unable to find it and make
this affidavit for the purpose of including the cancellation and replacement or
liquidation of the certificate(s) and the exchange of the Debentures represented
thereby without the surrender of the certificate(s), and hereby agree to
surrender the certificate(s) for cancellation should I, at any time, find the
certificate(s).
I, hereby agree, for myself, my heirs, assigns and personal representatives,
that in consideration of the proceeds of the sale of the replacement of the
Debentures representative by the certificate(s) agree to completely indemnify,
protect and hold harmless Federal Insurance Company (the Surety), the Exchange
Agent, the Company, and any other party to the transaction (the "obligees"),
from and against all loss, costs and damages, including court costs and
attorneys' fees, which they may be subject to or liable for in respect of the
cancellation and replacement of the certificate(s). The right accuring to the
Obligees under the preceding sentence shall not be limited by the negligence,
inadvertence, accident, oversight or breach of any duty or obligation on the
part of the obligees or their respective officers, employees and agents or their
failure to inquire into, contest, or litigate any claims, whichever such
negligence, inadvertence, accident, oversight, breach or failure may occur or
have occurred. I agree that this Affidavit is delivered to accompany a bond of
indemnity #8302-00-67 underwritten by Federal Insurance Company to protect the
foregoing obligees.
Any person who, knowingly and with intent to defraud any insurance company or
other person, files an application for insurance, containing any materially
false information, or conceals for the purpose of misleading, information
concerning any fact material thereto, commits a fraudulent insurance act, which
is a crime.
Signed, sealed, and delivered by affiant this _________ day of
___________________ 19____
______________________________________
Signature of Affiant (S.S. #: )
YOUR SIGNATURE MUST BE NOTARIZED
On this _________ day of ___________________ 19____ before me personally
appeared ______________________________________ known to me to be the
individual(s) who executed the foregoing instrument, and being duly sworn, did
depose and say that the statements contained therein are true.
(Affix Notarial Seal) ______________________________________
My Commission Expires ________________
7
<PAGE>
HOLDERS OF SENIOR DEBENTURES SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN
THIS CONSENT AND LETTER OF TRANSMITTAL
X_______________________________________________________________________________
X_______________________________________________________________________________
Signature(s) of Holder(s) of Securities
Dated: , 1997 (Must be signed by the Holder(s) exactly as name(s)
appear(s) on certificates) representing the Senior Debentures or on a security
position listing or by person(s) authorized to become Holder(s) by certificates
and documents transmitted herewith. If signature is by attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation or other
person acting in a fiduciary or representative capacity, please provide the
following information and see Instruction 6.)
Capacity (Full Title) __________________________________________________________
Name(s) ________________________________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Tax Identification or Social Security No. ______________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 6)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Dated: ____________________________
8
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Consent and Letter of
Transmittal must be guaranteed by an Eligible Institution unless the Senior
Debentures tendered hereby are tendered (i) by a Holder of Senior Debentures (or
by a participant in DTC whose name appears on a security position listing as the
owner of such Senior Debentures) who has not completed either the box entitled
"Special Delivery Instructions" or "Special Payment Instructions" above, or (ii)
for the account of a member firm of an Eligible Institution. If the Senior
Debentures are registered in the name of a person other than the signer of this
Consent and Letter of Transmittal or if Senior Debentures not accepted for
exchange or not tendered are to be returned to a person other than the
registered Holder, then the signatures on the Consents and Letters of
Transmittal accompanying the tendered Senior Debentures must be guaranteed by an
Eligible Institution as described above. Persons who are beneficial owners of
Senior Debentures but are not Holders and who seek to tender Senior Debentures
and deliver Consents to the Proposed Amendments should (i) contact the Holder of
such Senior Debentures and instruct such Holder to tender and consent on his or
her behalf, (ii) obtain and include with this Consent and Letter of Transmittal,
Senior Debentures properly endorsed for transfer by the Holder or accompanied by
a properly completed bond power from the Holder, together with a properly
completed irrevocable proxy that authorizes such person to consent to the
Proposed Amendments on behalf of such Holder, with signatures on the endorsement
or bond power guaranteed by an Eligible Institution or (iii) effect a record
transfer of such Senior Debentures from the Holder to such beneficial owner and
comply with the requirements applicable to Holders for tendering Senior
Debentures and delivering Consents prior to 12:00 midnight, Eastern Daylight
Time, on the Expiration Date. See Instruction 6.
2. REQUIREMENTS OF TENDER AND CONSENT. This Consent and Letter of
Transmittal is to be completed by Holders of Senior Debentures if certificates
representing such Senior Debentures are to be forwarded herewith or if delivery
is to be made by book-entry transfer to the account maintained by DTC, pursuant
to the procedures set forth in the Prospectus under the captions "Procedure for
Tendering Outstanding Debentures and Giving Consents" and "Book-Entry Transfer
Procedures." All Holders who wish to tender their Senior Debentures must, prior
to 12:00 midnight, Eastern Daylight Time, on the Expiration Date: (i) complete,
sign and deliver this Consent and Letter of Transmittal, or a facsimile thereof,
to the Exchange Agent, in person or to the address set forth on page 1 hereof,
together with any signature guarantees and any other documents required in
Instructions 1-12 hereof, and (ii) tender (and not withdraw) his or her properly
endorsed certificates representing such Senior Debentures to the Exchange Agent,
or if a tender of a Senior Debenture is to be made by book-entry transfer to the
Exchange Agent's account at DTC, confirm such book-entry transfer and the
receipt by the Exchange Agent of the Agent's Message, in each case in accordance
with the procedures set forth in this Consent and Letter of Transmittal.
PURSUANT TO THE TERMS OF THE EXCHANGE OFFER AND CONSENT SOLICITATION, THE
COMPLETION, EXECUTION AND DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL OR
TENDER PURSUANT TO THE BOOK-ENTRY TRANSFER OR GUARANTEED DELIVERY PROCEDURES
WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED AMENDMENTS WITH RESPECT
TO ANY SENIOR DEBENTURES SO TENDERED.
Notwithstanding the foregoing paragraph, Holders whose certificates
representing Senior Debentures are not immediately available or who cannot
deliver such certificates and all other required documents to the Exchange Agent
or participants in the DTC who cannot complete the procedure for book-entry
transfer on or prior to the Expiration Date may nevertheless tender Senior
Debentures by properly completing and duly executing the Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in the
Prospectus under the caption "Guaranteed Delivery Procedures." Pursuant to such
procedures, (i) the tender must be made by or through an Eligible Institution,
(ii) a Notice of Guaranteed Delivery, substantially in the form provided
herewith, properly completed and duly executed, must be received by the Exchange
Agent on or prior to 12:00 midnight, Eastern Daylight Time, on the Expiration
Date or, in the case of DTC participants, a Notice of Guaranteed Delivery is
properly
9
<PAGE>
completed, duly executed and delivered to DTC (in accordance with DTC
procedures) and confirmation of such delivery to DTC is received by the Exchange
Agent on or prior to 12:00 midnight, Eastern Daylight Time, on the Expiration
Date and (iii) the certificates for the tendered Senior Debentures, in proper
form for transfer, together with this Consent and Letter of Transmittal,
properly completed and duly executed, with any required signature guarantees and
any other documents required by this Consent and Letter of Transmittal, or a
book-entry confirmation of the transfer of such Senior Debentures into the
Exchange Agent's account at DTC and an Agent's Message stating that such Holder
has received this Consent and Letter of Transmittal and has agreed to be bound
by the terms hereof, are received by the Exchange Agent within three (3)
business days after the date of execution of the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THE OUTSTANDING DEBENTURES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER OF THE
OUTSTANDING DEBENTURES, BUT, IF SUCH DELIVERY IS EFFECTED BY MAIL, IT IS
RECOMMENDED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE AS TO ASSURE DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE.
3. CONSENTS TO PROPOSED AMENDMENTS. A valid Consent to the Proposed
Amendments may be given only by the Holder or by his or her attorney-in-fact. A
beneficial owner who is not a Holder must arrange with the Holder to execute and
deliver a Consent and Letter of Transmittal on his or her behalf, obtain a
properly completed irrevocable proxy that authorizes such beneficial owner to
consent to the Proposed Amendments on behalf of such Holder or become a Holder.
Any financial institution that is a participant in DTC's system and whose name
appears on a security position listing as the record owner of the Senior
Debentures who wishes to make book-entry delivery of Senior Debentures as
described above and who wishes to consent to the Proposed Amendments must
complete and execute a participant's letter (which will be distributed to
participants by DTC) instructing the DTC's nominee to complete and sign the
proxy attached thereto.
4. WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS. Tenders of Senior
Debentures may be withdrawn and the concurrent Consents may be revoked at any
time prior to 12:00 midnight, Eastern Daylight Time, on the Expiration Date (but
not thereafter if the Company accepts the Senior Debentures for exchange). A
valid withdrawal of tendered Senior Debentures effected prior to 12:00 midnight,
Eastern Daylight Time, on the Expiration Date will constitute the concurrent
valid revocation of such Holder's related Consent. In order for a Holder to
revoke a Consent, such Holder must withdraw the related tendered Senior
Debentures. Tenders of Senior Debentures may not be withdrawn, and Consents may
not be revoked, after 12:00 midnight, Eastern Daylight Time, on the Expiration
Date. In addition, tenders of Senior Debentures may be validly withdrawn if the
Exchange Offer is terminated without any Senior Debentures being purchased
thereunder. In the event of a termination of the Exchange Offer, the Senior
Debentures tendered pursuant to the Exchange Offer will be promptly returned to
the tendering Holder and any Consents given will not be effective.
For a withdrawal of a tender of Senior Debentures (and the concurrent
revocation of Consents) to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be received by the Exchange Agent prior
to 12:00 midnight, Eastern Daylight Time, on the Expiration Date at its address
set forth on the back cover of this Consent and Letter of Transmittal. Any such
notice of withdrawal must (i) specify the name of the person who tendered the
Senior Debentures to be withdrawn, (ii) contain the description of the Senior
Debentures to be withdrawn and identify the certificate number or numbers shown
on the particular certificates evidencing such Senior Debentures (unless such
Senior Debentures were tendered by book-entry transfer) and the aggregate
principal amount represented by such Senior Debentures and (iii) be signed by
the holder of such Senior Debentures in the same manner as the original
signature on the Consent and Letter of Transmittal by which such Senior
Debentures were tendered (including any required signature guarantees), if any,
or be accompanied by (a) documents of transfer sufficient to have the Trustee
register the transfer of the Senior Debentures into the name of the person
withdrawing such Senior Debentures and (b) a properly completed irrevocable
proxy that authorized such
10
<PAGE>
person to effect such revocation on behalf of such Holder. If the Senior
Debentures to be withdrawn have been delivered or otherwise identified to the
Exchange Agent, a signed notice of withdrawal is effective immediately upon
written or facsimile notice of withdrawal even if physical release is not yet
effected.
If Senior Debentures have been tendered pursuant to the procedures for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn Senior Debentures. Any
such notice of withdrawal must be signed by the registered holder of Senior
Debentures in the same manner as the original signature on this Consent and
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the ownership of the Senior Debentures.
Any Senior Debentures properly withdrawn will be deemed to be not validly
tendered for purposes of the Exchange Offer, and will constitute the concurrent
valid revocation of such Holder's Consent. Any valid revocation of Consents will
automatically render the prior tender for the Senior Debentures to which such
Consents relate defective and the Company will have the right, which it may
waive, to reject such tender as invalid and ineffective. Any permitted
withdrawal of Senior Debentures and revocation of Consents may not be rescinded,
and any Senior Debentures properly withdrawn will thereafter be deemed not
validly tendered and any Consents revoked will be deemed not validly delivered
for purposes of the Exchange Offer; PROVIDED, HOWEVER, that withdrawn Senior
Debentures may be re-tendered and revoked Consents may be delivered by again
following one of the appropriate procedures described herein at any time on or
prior to the Expiration Date.
If the Company extends the Exchange Offer or is delayed in its acceptance
for exchange of Senior Debentures or is unable to exchange Senior Debentures
pursuant to the Exchange Offer for any reason, then, without prejudice to the
Company's rights hereunder, tendered Senior Debentures may be retained by the
Exchange Agent on behalf of the Company and may not be withdrawn (subject to the
prompt acceptance and delivery of shares of Common Stock in exchange for
tendered Senior Debentures or the prompt return of tendered Senior Debentures
which are not accepted after the termination or withdrawal of the Exchange
Offer), except as otherwise provided in this section.
5. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF SENIOR DEBENTURES WHO
TENDER BY BOOK-ENTRY TRANSFER). If less than the entire principal amount of any
Senior Debentures evidenced by a submitted certificate is tendered, the
tendering Holder should fill in the applicable principal amount of the Senior
Debentures that are to be tendered in the box entitled "Description of Senior
Debentures Tendered." The entire principal amount represented by the
certificates for all Senior Debentures delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. If the entire principal
amount of all Senior Debentures is not tendered or not accepted for exchange,
new certificate(s) representing the remainder of the principal amount of the
Senior Debentures that were evidenced by the old certificate(s) will be sent to
the Holder, unless otherwise provided in the boxes entitled "Special Payment
Instructions" or "Special Delivery Instructions" above, as soon as practicable
after the expiration of the Exchange Offer.
6. SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Consent and Letter of Transmittal is signed by the
Holder(s) of the Senior Debentures tendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever.
If any of the Senior Debentures tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Consent and Letter of
Transmittal. If any tendered Senior Debentures are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate Consents and Letters of Transmittal as there are names in which
certificates are held.
If this Consent and Letter of Transmittal or any certificates or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a
11
<PAGE>
fiduciary or representative capacity, such persons should so indicate when
signing, and proper evidence satisfactory to the Company of its authority so to
act must be submitted, unless waived by the Company.
If this Consent and Letter of Transmittal is signed by the Holder(s) of the
Senior Debentures listed and transmitted hereby, no endorsement of certificates
or separate bond powers are required unless exchange is to be made to, or
certificates for Senior Debentures not tendered or not accepted for exchange are
to be issued to, a person other than the Holder(s). Signatures on such
certificates must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
If this Consent and Letter of Transmittal is signed by a person other than
the Holder(s) of the Senior Debentures listed, the certificates representing
such Senior Debentures must be properly endorsed for transfer by the Holder or
be accompanied by a properly completed bond power from the Holder, together with
a properly completed irrevocable proxy that authorizes such person to consent to
the Proposed Amendments on behalf of such Holder, with signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
7. TRANSFER TAXES. The Company will pay or cause to be paid any transfer
taxes with respect to the exchange of Senior Debentures to it or its order
pursuant to the Exchange Offer. If, however, certificates representing shares of
Common Stock issued in exchange for tendered Senior Debentures or certificates
representing Senior Debentures not tendered or not accepted for exchange are to
be registered in the name of, any person other than the Holder(s), or if
tendered certificates re-registered in the name of any person other than the
person(s) signing this Consent and Letter of Transmittal, the number of shares
or amount of Senior Debentures will be reduced by a number sufficient when sold
by the Exchange Agent to satisfy the amount of any transfer taxes (whether
imposed on the Holder(s) or such other person) payable on account of the
transfer to such person unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS CONSENT AND
LETTER OF TRANSMITTAL.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for shares
of Common Stock exchanged for tendered Senior Debentures are to be issued in the
name of, and/or certificates representing Senior Debentures not accepted for
exchange are to be returned to, a person other than the person(s) signing this
Consent and Letter of Transmittal, or are to be sent and/or are to be returned
to a person other than the person(s) signing this Consent and Letter of
Transmittal or to an address other than that shown on page 1 hereof, the
appropriate boxes on this Consent and Letter of Transmittal should be completed.
Holders of Senior Debentures delivering Senior Debentures by book-entry transfer
may request that Senior Debentures not accepted for exchange be credited to such
account maintained at DTC as such Holder(s) may designate hereon. If no such
instructions are given, such Senior Debentures not accepted for payment will be
returned by crediting the account at DTC designated above.
9. WAIVER OF CONDITIONS. To the extent permitted by applicable law, the
Company reserves the right to waive any and all conditions to the Exchange Offer
and Consent Solicitation and accept for exchange any Senior Debentures tendered.
10. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax
law generally requires that a Holder whose tendered Senior Debentures are
accepted for exchange, or such Holder's assignee (in either case, the "Payee"),
provide the Exchange Agent (the "Payor"), with such Payee's correct Taxpayer
Identification Number ("TIN"), which, in the case of a Payee who is an
individual, is such Payee's social security number. If the Payor is not provided
with the correct TIN or an adequate basis for an exemption, such Payee may be
subject to a $50 penalty imposed by the Internal Revenue Service and backup
withholding in an amount equal to 31% of the gross proceeds received
12
<PAGE>
pursuant to the Exchange Offer and Consent Solicitation. If withholding results
in an overpayment of taxes, a refund may be obtained.
To prevent backup withholding, each Payee must provide such Payee's correct
TIN by completing the "Substitute Form W-9" set forth herein certifying that the
TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the
Payee is exempt from backup withholding, (ii) the Payee has not been notified by
the Internal Revenue Service that such Payee is subject to backup withholding as
a result of a failure to report all interest or dividends, or (iii) the Internal
Revenue Service has notified the Payee that such Payee is no longer subject to
backup withholding.
If the Payee does not have a TIN, such Payee should refer to the enclosed
copy of the Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 (the "W-9 Guidelines") for instructions on applying for a
TIN, write "Applied For" in the space for the TIN in Part I of the Substitute
Form W-9, and sign and date the Substitute Form W-9 and the Certificate of
Awaiting Taxpayer Identification Number set forth herein. If the Payee does not
provide such Payee's TIN to the Payor within 60 days, backup withholding will
begin and continue until such Payee furnishes such Payee 's TIN to the Payor.
Note: Writing "Applied For" on the form means that the Payee has already applied
for a TIN or that such Payee intends to apply for one in the near future.
If the Senior Debentures are held in more than one name or are not in the
name of the actual owner, consult the W-9 Guidelines for information on which
TIN to report.
Exempt Payees (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
should write "Exempt" in Part 2 of Substitute Form W-9. Refer to the enclosed
copy of the W-9 Guidelines for additional instructions. In order for a
nonresident alien or foreign entity to qualify as exempt, such person must
complete the Form W-8, "Certificate of Foreign Status," signed under penalty of
perjury attesting to such exempt status.
11. MUTILATED, LOST, STOLEN OR DESTROYED SENIOR DEBENTURES. Holders of
Senior Debentures which have been mutilated, lost stolen or destroyed should
complete the Affidavit of Loss.
12. REQUESTS FOR ASSISTANCE OF ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent as set forth on the last page hereof or
from the tendering Holder's broker, dealer, commercial bank or trust company.
Additional copies of the Prospectus, this Consent and Letter of Transmittal, and
the Notice of Guaranteed Delivery may be obtained from the Information Agent.
IMPORTANT: THIS CONSENT AND LETTER OF TRANSMITTAL, TOGETHER WITH
CERTIFICATES FOR, OR CONFIRMATION OF BOOK-ENTRY TRANSFER WITH RESPECT TO, ANY
TENDERED SENIOR DEBENTURES, WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, ON OR PRIOR TO 12:00
MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE.
13
<PAGE>
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<C> <S>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN ON THE LINE BELOW AND CERTIFY
FORM W-9 BY SIGNING AND DATING IN PART 3.
DEPARTMENT OF THE TREASURY TIN
INTERNAL REVENUE SERVICE (Social Security Number or Employer Identification Number)
PAYOR'S REQUEST FOR PART 2--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE
TAXPAYER IDENTIFICATION "EXEMPT" HERE (SEE INSTRUCTIONS):
NUMBER) ("TIN") AND .
CERTIFICATION
PART 3-- CERTIFICATION UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) The number shown on
this form is my correct TIN (or I am waiting for a number to be issued to me), and (2) I am
not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest or dividends or (c) the
IRS has notified me that I am no longer subject to backup withholding.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
SIGNATURE DATE , 1997
You must cross out item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because of under reporting interest or dividends on
your tax return and you have not been notified by the IRS that you are no longer subject to
backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE
"APPLIED FOR" IN PART 1 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been
issued to me, and that I mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service Center or Social Security
Administration office (or I intend to mail or deliver an application in the near future). I
understand that if I do not provide a taxpayer identification number to the payor, 31% of
all reportable payments made to me will be withheld until I provide a number.
SIGNATURE DATE , 1997
SUBSTITUTE FORM W-8
By checking this box / /, the person signing this Consent and Letter of Transmittal hereby
certifies under penalties of perjury that the Holder is an "exempt foreign person" for
purposes of the backup withholding rules under U.S. federal income tax laws, because the
Holder:
(i) is a nonresident alien individual or a foreign corporation, partnership, estate or
trust;
(ii) If an individual, has not been and plans not to be present in the U.S. for a total of
183 days or more during the calendar year; and:
(iii) Neither engages, nor plans to engage, in a U.S. trade or business that has
effectively connected gains from transactions with a broker or banter exchange.
In order for a Holder who is a FOREIGN PERSON (i.e., not a United States citizen or a
resident alien, a domestic corporation, a domestic partnership, a domestic trust or a
domestic estate to qualify as exempt from 31% backup withholding, such foreign Unitholder
must certify, under penalties of perjury, the statement in BOX C of this Letter of
Transmittal attesting to that foreign person's status by checking the box in such statement.
UNLESS THE BOX IS CHECKED, SUCH FOREIGN PERSON WILL BE SUBJECT TO 31% WITHHOLDING OF TAX
UNDER SECTION 1445 OF THE CODE.
</TABLE>
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<PAGE>
THE INFORMATION AGENT IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER AND CONSENT SOLICITATION IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY:
P.O. Box 3301 (FOR ELIGIBLE INSTITUTIONS ONLY) 120 Broadway
South Hackensack NJ 07606 (201) 329-8936 13th Floor
Attn: Reorganization Dept. CONFIRM BY TELEPHONE: New York, New York 10271
(201) 296-4860 Attn: Reorganization Dept.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONSENT AND
LETTER OF TRANSMITTAL
TO TENDER AND TO GIVE CONSENT TO PROPOSED AMENDMENTS TO THE INDENTURE IN RESPECT
OF 12% SUBORDINATED PAY-IN-KIND DEBENTURES DUE MARCH 15, 2002
(THE "SUBORDINATED DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
(FORMERLY, THE BOLSA CHICA COMPANY)
(CUSIP NO. 097679 AB 0)
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND DISCLOSURE STATEMENT
DATED , 1997
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON
JUNE , 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED. HOLDERS OF
SUBORDINATED DEBENTURES MUST TENDER THEIR SUBORDINATED DEBENTURES AND PROVIDE
THEIR CONSENTS TO THE PROPOSED AMENDMENTS ON OR PRIOR TO 12:00 MIDNIGHT
EASTERN DAYLIGHT TIME ON THE EXPIRATION DATE IN ORDER TO RECEIVE THE EXCHANGE
OFFER CONSIDERATION. TENDERED SUBORDINATED DEBENTURES MAY BE WITHDRAWN AND
CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO 12:00 MIDNIGHT, EASTERN DAYLIGHT
TIME, ON THE EXPIRATION DATE, BUT NOT THEREAFTER. THE EXCHANGE OFFER IS
CONDITIONED UPON THE SATISFACTION OF CERTAIN CONDITIONS, INCLUDING AMONG OTHER
THINGS, THE VALID TENDER OF AT LEAST 90% IN AGGREGATE PRINCIPAL AMOUNT OF ALL
OUTSTANDING DEBENTURES OF THE COMPANY OWNED BY PERSONS OTHER THAN THE COMPANY,
ITS SUBSIDIARIES AND CERTAIN OF THEIR AFFILIATES.
TO EXCHANGE AGENT: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY:
P.O. Box 3301 (FOR ELIGIBLE INSTITUTIONS ONLY) 120 Broadway
South Hackensack NJ 07606 (201) 329-8936 13th Floor
Attn: Reorganization Dept. CONFIRM BY TELEPHONE: New York, New York 10271
(201) 296-4860 Attn: Reorganization Dept.
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY. The accompanying instructions should be read
carefully before this Consent and Letter of Transmittal is completed.
Capitalized terms used in this Consent and Letter of Transmittal not otherwise
defined herein shall have the meanings provided in the Proxy
Statement/Prospectus and Disclosure Statement dated April , 1997 (the
"Prospectus") of Koll Real Estate Group, Inc., a Delaware corporation (the
"Company").
List below the Subordinated Debentures that are to be tendered pursuant to
this Consent and Letter of Transmittal. If the space below is inadequate, list
the information requested below on a separate signed schedule and affix the list
to this Consent and Letter of Transmittal.
<TABLE>
<CAPTION>
DESCRIPTION OF SUBORDINATED DEBENTURES TENDERED
PRINCIPAL AMOUNT
TENDERED AND
AGGREGATE PRINCIPAL AS TO WHICH
NAMES AND ADDRESS(ES) OF HOLDER(S) CERTIFICATE NUMBER(S) AMOUNT REPRESENTED BY CONSENTS ARE
(PLEASE FILL IN, BLANK) (1) CERTIFICATES (2) DELIVERED (2)
<S> <C> <C> <C>
TOTAL PRINCIPAL AMOUNT TENDERED
(1) Need not be completed by Holders who tender by book-entry.
(2) Unless otherwise indicated in this column, any tendering Holder will be deemed to have tendered, and delivered Consents with
respect to, the entire principal amount represented by the Subordinated Debentures indicated in this column. See Instruction 5.
</TABLE>
/ / IF THE PRINCIPAL AMOUNT PRESENTED HEREWITH DOES NOT EQUAL THE AMOUNT
PRINTED ON THE LABEL ABOVE, AND YOU ARE UNABLE TO LOCATE SUCH
CERTIFICATE(S) TO SUBMIT HEREWITH AND YOU WISH TO TENDER SUCH
CERTIFICATE(S), PLEASE CHECK THIS BOX AND COMPLETE THE AFFIDAVIT OF LOSS.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus and
this Consent and Letter of Transmittal, which together constitute (i) the
Company's offer (the "Exchange Offer") to exchange an aggregate of up to
1,151,864 shares of the Company's post-Capital Stock Combination and
post-Reverse Stock Split Common Stock (the "Common Stock") for up to all of the
Company's outstanding 12% Subordinated Debentures due March 15, 2002 (the
"Subordinated Debentures"), on a 28 shares per $1000 principal amount basis, and
(ii) the Company's solicitation (the "Consent Solicitation") of consents (the
"Consents") from persons in whose names the Subordinated Debentures are
registered on the books of the registrar for the Subordinated Debentures (the
"Holders") to certain amendments (the "Proposed Amendments") to the Indenture
(the "Indenture") pursuant to which the Subordinated Debentures were issued. The
consideration payable by the Company for the Subordinated Debentures is set
forth in the Prospectus. HOLDERS WHO TENDER THEIR SUBORDINATED DEBENTURES
PURSUANT TO THE EXCHANGE OFFER WILL BE DEEMED, BY ACCEPTANCE OF THE EXCHANGE
OFFER, TO CONSENT TO THE PROPOSED AMENDMENTS.
HOLDERS MAY NOT CONSENT TO THE PROPOSED AMENDMENTS WITHOUT TENDERING THEIR
SUBORDINATED DEBENTURES. Holders who do not tender their Subordinated Debentures
and deliver their Consents and Letters of Transmittal on or prior to 12:00
midnight, Eastern Daylight Time, on the Expiration Date will not receive the
Exchange Offer consideration. See "Procedure for Tendering Outstanding
Debentures and Giving Consents" in the Prospectus. No Holder may withdraw any
tendered Subordinated Debentures or revoke a Consent following 12:00 midnight,
Eastern Daylight Time, on the Expiration Date. The Company will issue
certificates for shares of Common Stock in exchange for tendered Subordinated
Debentures as promptly as practicable after such Subordinated Debentures are
accepted for exchange pursuant to the Exchange Offer.
The Exchange Offer or Consent Solicitation may be extended, terminated or
amended, as provided in the Prospectus. During any such extension of the
Exchange Offer or Consent Solicitation, all Subordinated Debentures previously
tendered and Consents delivered and not withdrawn or revoked pursuant to the
Exchange Offer that have not been accepted for exchange will remain subject to
the Exchange Offer and may be accepted thereafter for exchange by the Company.
No alternative, conditional or contingent tenders will be accepted. A
tendering Holder, by execution of this Consent and Letter of Transmittal, or
facsimile thereof, waives all rights to receive notice of acceptance of such
Holder's Subordinated Debentures for exchange.
PLEASE READ THIS ENTIRE CONSENT AND LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY INFORMATION REQUESTED HEREIN
This Consent and Letter of Transmittal is to be completed by Holders of
Subordinated Debentures if certificates representing such Subordinated
Debentures are to be forwarded herewith or if delivery of such certificates are
to be made by book-entry transfer to the account established by the Exchange
Agent at The Depository Trust Company ("DTC"), pursuant to the procedures set
forth in this Consent and Letter of Transmittal and in the Prospectus under the
caption "Procedure for Tendering Outstanding Debentures and Giving Consents," or
"Book-Entry Transfer Procedures." PURSUANT TO THE TERMS OF THE EXCHANGE OFFER
AND CONSENT SOLICITATION, THE COMPLETION, EXECUTION AND DELIVERY OF THIS CONSENT
AND LETTER OF TRANSMITTAL WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED
AMENDMENTS.
Holders of Subordinated Debentures that are tendering by book-entry transfer
to the Exchange Agent's account at DTC can execute the tender through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible. DTC participants that are accepting the Exchange Offer must transmit
their acceptance to DTC (in accordance with DTC procedures) which will verify
the acceptance and execute a book-entry delivery to the Exchange Agent's account
at DTC. DTC will then send an agent's message ("Agent's Message") to the
Exchange Agent, which Agent's Message shall state that DTC has received an
express acceptance from each Holder tendering through ATOP that each such Holder
has received this Consent and Letter of Transmittal and has agreed to be bound
by the terms and conditions hereof. Delivery by DTC of the Agent's Message, and
receipt thereof by the Exchange Agent will satisfy the terms of the Exchange
Offer as to execution and delivery of a Consent and Letter of Transmittal by
each Holder identified in the Agent's Message.
2
<PAGE>
Holders whose certificates representing the Subordinated Debentures are not
immediately available or who cannot deliver certificates and all other required
documents to the Exchange Agent or complete the procedure for book-entry
transfer on or prior to the Expiration Date, may nevertheless tender
Subordinated Debentures pursuant to the guaranteed delivery procedure set forth
in the Prospectus under the caption "Guaranteed Delivery Procedures." See
Instruction 2 on pages 9 and 10 below.
/ / CHECK HERE IF ALL OR SOME CERTIFICATES FOR TENDERED SUBORDINATED DEBENTURES
ARE ENCLOSED HEREWITH. IF ONLY SOME SUCH CERTIFICATES ARE ENCLOSED
HEREWITH, PLEASE CHECK THE BOX ON PAGE 1 HEREOF AND EXECUTE AN AFFIDAVIT OF
LOSS.
/ / CHECK HERE IF TENDERED SUBORDINATED DEBENTURES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER
SUBORDINATED DEBENTURES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ____________________________________________
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE IF TENDERED SUBORDINATED DEBENTURES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name(s) of Holders _______________________________________________________
Window Ticket Number (if any) ____________________________________________
Date of Execution of Notice of Guaranteed Delivery and Consent ___________
Name of Eligible Institution that guaranteed delivery ____________________
If delivery by book-entry transfer, check box here: / /
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
NOTE: SIGNATURE(S) AND
TAXPAYER IDENTIFICATION NUMBER MUST BE PROVIDED.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE>
Only Holders are entitled to tender their Subordinated Debentures in the
Exchange Offer and consent to the Proposed Amendments in the Consent
Solicitation. Any financial institution that is a participant in DTC's system
and whose name appears on a security position listing as the record owner of the
Subordinated Debentures and who wishes to make book-entry delivery of the
Subordinated Debentures as described above and to consent to the Proposed
Amendments must complete, execute and deliver this Consent and Letter of
Transmittal to DTC, which will then send an Agent's Message to the Exchange
Agent (as described above). Persons who are beneficial owners of Subordinated
Debentures but are not Holders and who seek to tender Subordinated Debentures
and deliver Consents to the Proposed Amendments should (i) contact the Holder of
such Subordinated Debentures and instruct such Holder to tender and consent on
his or her behalf, (ii) obtain and include with this Consent and Letter of
Transmittal Subordinated Debentures properly endorsed for transfer by the Holder
or accompanied by a properly completed bond power from the Holder, together with
a properly completed irrevocable proxy that authorizes such person to consent to
the Proposed Amendments on behalf of such Holder, with signatures on the
endorsement or bond power guaranteed by a firm that is a member of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc. or by a commercial bank, trust company, credit union or savings
association having an office in the United States (each, an "Eligible
Institution") or (iii) effect a record transfer of such Subordinated Debentures
from the Holder to such beneficial owner and comply with the requirements
applicable to Holders for tendering Subordinated Debentures and delivering
Consents prior to 12:00 midnight, Eastern Daylight Time, on the Expiration Date,
as the case may be.
A HOLDER WHO TENDERS SUBORDINATED DEBENTURES PURSUANT TO THE EXCHANGE OFFER
WILL BE DEEMED, BY ACCEPTANCE OF THE EXCHANGE OFFER TO CONSENT TO THE PROPOSED
AMENDMENTS. HOLDERS WHO WISH TO RECEIVE COMMON STOCK PURSUANT TO THE EXCHANGE
OFFER MUST TENDER THEIR SUBORDINATED DEBENTURES AND DELIVER CONSENTS PRIOR TO
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE. SEE "PROCEDURE
FOR TENDERING OUTSTANDING DEBENTURES AND GIVING CONSENTS" IN THE PROSPECTUS.
TO: KOLL REAL ESTATE GROUP, INC.
Upon the terms and subject to the conditions of the Exchange Offer and
Consent Solicitation, the undersigned hereby tenders to the Company the
Subordinated Debentures indicated on page 1 above. Subject to, and effective
upon, acceptance for exchange for the Subordinated Debentures tendered herewith,
the undersigned hereby sells, assigns and transfers to or upon the order of the
Company all rights, title and interest in and to all such Subordinated
Debentures tendered hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that the Exchange Agent also acts as agent
of the Company) with respect to such Subordinated Debentures, with full power of
substitution and resubstitution (such power of attorney being, deemed to be an
irrevocable power coupled with an interest) to (a) deliver certificates
representing such Subordinated Debentures, or transfer ownership of such
Subordinated Debentures on the account books maintained by DTC, together, in
each such case, with all accompanying evidences of transfer and authenticity to
or upon the order of the Company, (b) present such Subordinated Debentures for
transfer on the relevant security registrar and (c) receive all benefits or
otherwise exercise all rights of beneficial ownership on behalf of the Company
of such Subordinated Debentures all in accordance with the terms of the Exchange
Offer and Consent Solicitation. EXECUTION AND DELIVERY OF THIS CONSENT AND
LETTER OF TRANSMITTAL WILL ALSO BE DEEMED TO CONSTITUTE A CONSENT TO THE
PROPOSED AMENDMENTS.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, SELL, ASSIGN AND TRANSFER THE SUBORDINATED
DEBENTURES TENDERED HEREBY AND TO GIVE THE CONSENT CONTAINED HEREIN
4
<PAGE>
AND, THAT WHEN THE SAME ARE ACCEPTED FOR EXCHANGE BY THE COMPANY, THE COMPANY
WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF
ALL SECURITY INTERESTS, LIENS, RESTRICTIONS, CLAIMS, CHARGES, ENCUMBRANCES,
CONDITIONAL SALES AGREEMENTS OR OTHER OBLIGATIONS RELATING TO THE SALE OR
TRANSFER THEREOF, AND NOT BE SUBJECT TO ANY ADVERSE CLAIM. THE UNDERSIGNED WILL,
UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE
EXCHANGE AGENT OR THE COMPANY TO BE NECESSARY OR DESIRABLE TO COMPLETE THE
ASSIGNMENT, TRANSFER AND EXCHANGE OF THE SUBORDINATED DEBENTURES TENDERED
HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER AND CONSENT SOLICITATION. DELIVERY OF THE ENCLOSED
SUBORDINATED DEBENTURES SHALL BE EFFECTED, AND RISK OF LOSS AND TITLE TO SUCH
SUBORDINATED DEBENTURES SHALL PASS, ONLY UPON PROPER DELIVERY THEREOF TO THE
EXCHANGE AGENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFER.
All authority conferred or agreed to be conferred pursuant to this Consent
and Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding, upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy, and personal and legal representatives
of the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Subordinated Debentures properly tendered may be
withdrawn and Consents may be revoked at any time prior to 12:00 midnight,
Eastern Daylight Time, on the Expiration Date.
The Exchange Offer and Consent Solicitation are subject to a number of
conditions, each of which may be waived or modified by the Company, in whole or
in part, at any time and from time to time, as described in the Prospectus under
the caption "Conditions of the Exchange Offers." The undersigned recognizes that
as a result of such conditions the Company may not be required to accept the
Subordinated Debentures properly tendered hereby. In such event, the tendered
Subordinated Debentures not accepted for exchange will be returned to the
undersigned without cost to the undersigned as soon as practicable following the
earlier to occur of the Expiration Date or the date on which the Exchange Offer
is terminated without any Subordinated Debentures being purchased thereunder, at
the address shown below the undersigned's signature(s) unless otherwise
indicated under "Special Payments Instructions" below.
Unless otherwise indicated below under "Special Payment Instructions" or
"Special Delivery Instructions," as applicable, please send share certificates
for Common Stock to be issued in exchange for any Subordinated Debentures
tendered hereby and accepted for exchange, and/or return any certificates
representing Subordinated Debentures not tendered or not accepted for exchange
in the name(s) of the Holder(s) and to the addressees appearing under
"Description of Subordinated Debentures Tendered" herein. In the event that both
the Special Payment Instructions and the Special Delivery Instructions are
completed, please issue and send the share certificates for Common Stock to be
issued in exchange for any Subordinated Debentures tendered hereby and/or return
any certificates representing Subordinated Debentures not tendered or not
accepted for exchange to, the person or persons so indicated. Unless otherwise
indicated under "Special Payment Instructions," in the case of a book-entry
delivery of Subordinated Debentures, please credit the account maintained at DTC
with any Subordinated Debentures not tendered or not accepted for exchange. The
undersigned recognizes that the Company does not have any obligation pursuant to
the Special Payment Instructions to transfer any Subordinated Debentures from
the name of the Holder thereof if the Company does not accept for exchange any
of the Subordinated Debentures so tendered.
5
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if Common Stock share certificates to To be completed ONLY if the Common Stock share certificates
be issued in exchange for the Subordinated Debentures to be issued in exchange for the Subordinated Debentures
accepted for exchange, and/or certificates representing accepted for exchange, and/or certificates representing
Subordinated Debentures not accepted for exchange are to be Subordinated Debentures not accepted for exchange are to be
issued in the name of someone other than the undersigned, or sent to someone other than the undersigned or to the
if Subordinated Debentures delivered by book-entry transfer undersigned at an address other than that indicated on page
not accepted for exchange are to be returned by credit to an 1 above.
account maintained at DTC other than the account indicated Mail: Common Stock Share Certificate(s) to
on page 1 above. Name:
Issue: Common Stock Share Certificate(s) to (Please Print)
Name: Address:
(Please Print)
Address: (Include Zip Code)
(Include Zip Code) (Taxpayer Identification or Social Security Number)
(Taxpayer Identification or Social Security Number)
Credit unpurchased Subordinated Debentures delivered by
book-entry transfer to the DTC account set forth below:
</TABLE>
6
<PAGE>
AFFIDAVIT OF LOST OR DESTROYED DEBENTURE CERTIFICATE
AND AGREEMENT OF INDEMNITY
NAME ___________________________________________________________________________
ADDRESS ________________________________________________________________________
CITY/STATE/ZIP _________________________________________________________________
CERTIFICATE NUMBER(S) __________________________________________________________
PRINCIPAL AMOUNT OF_____________________________________________________________
REGISTERED IN THE NAME OF ______________________________________________________
The undersigned person(s), being first duly sworn, deposes and says that: I am
the lawful owner of the above described certificate(s) and Debentures. The
certificate(s) (WERE NOT) (WERE) [circle appropriate word(s)] endorsed, cashed
negotiated, transferred, assigned, or otherwise disposed of. I have made a
diligent search for the certificate(s) and have been unable to find it and make
this affidavit for the purpose of including the cancellation and replacement or
liquidation of the certificate(s) and the exchange of the Debentures represented
thereby without the surrender of the certificate(s), and hereby agree to
surrender the certificate(s) for cancellation should I, at any time, find the
certificate(s).
I, hereby agree, for myself, my heirs, assigns and personal representatives,
that in consideration of the proceeds of the sale of the replacement of the
Debentures representative by the certificate(s) agree to completely indemnify,
protect and hold harmless Federal Insurance Company (the Surety), the Exchange
Agent, the Company, and any other party to the transaction (the "obligees"),
from and against all loss, costs and damages, including court costs and
attorneys' fees, which they may be subject to or liable for in respect of the
cancellation and replacement of the certificate(s). The right accruing to the
Obligees under the preceding sentence shall not be limited by the negligence,
inadvertence, accident, oversight or breach of any duty or obligation on the
part of the obligees or their respective officers, employees and agents or their
failure to inquire into, contest, or litigate any claims, whichever such
negligence, inadvertence, accident, oversight, breach or failure may occur or
have occurred. I agree that this Affidavit is delivered to accompany a bond of
indemnity #8302-00-67 underwritten by Federal Insurance Company to protect the
foregoing obligees.
Any person who, knowingly and with intent to defraud any insurance company or
other person, files an application for insurance, containing any materially
false information, or conceals for the purpose of misleading, information
concerning any fact material thereto, commits a fraudulent insurance act, which
is a crime.
Signed, sealed, and delivered by affiant this _________ day of
___________________ 19____
______________________________________
Signature of Affiant (S.S. #: )
YOUR SIGNATURE MUST BE NOTARIZED
On this _________ day of ___________________ 19____ before me personally
appeared ______________________________________ known to me to be the
individual(s) who executed the foregoing instrument, and being duly sworn, did
depose and say that the statements contained therein are true.
(Affix Notarial Seal) ______________________________________
My Commission Expires ________________
7
<PAGE>
HOLDERS OF SUBORDINATED DEBENTURES SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN
THIS CONSENT AND LETTER OF TRANSMITTAL
X_______________________________________________________________________________
X_______________________________________________________________________________
Signature(s) of Holder(s) of Securities
Dated: , 1997 (Must be signed by the Holder(s) exactly as name(s)
appear(s) on certificates) representing the Subordinated Debentures or on a
security position listing or by person(s) authorized to become Holder(s) by
certificates and documents transmitted herewith. If signature is by
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please provide the following information and see Instruction 6.)
Capacity (Full Title) __________________________________________________________
Name(s) ________________________________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Tax Identification or Social Security No. ______________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 6)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Dated: ____________________________
8
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Consent and Letter of
Transmittal must be guaranteed by an Eligible Institution, unless the
Subordinated Debentures tendered hereby are tendered (i) by a Holder of
Subordinated Debentures (or by a participant in DTC whose name appears on a
security position listing as the owner of such Subordinated Debentures) who has
not completed either the box entitled "Special Delivery Instructions" or
"Special Payment Instructions" above, or (ii) for the account of a member firm
of an Eligible Institution. If the Subordinated Debentures are registered in the
name of a person other than the signer of this Consent and Letter of Transmittal
or if Subordinated Debentures not accepted for exchange or not tendered are to
be returned to a person other than the registered Holder, then the signatures on
the Consents and Letters of Transmittal accompanying the tendered Subordinated
Debentures must be guaranteed by an Eligible Institution as described above.
Persons who are beneficial owners of Subordinated Debentures but are not Holders
and who seek to tender Subordinated Debentures and deliver Consents to the
Proposed Amendments should (i) contact the Holder of such Subordinated
Debentures and instruct such Holder to tender and consent on his or her behalf,
(ii) obtain and include with this Consent and Letter of Transmittal,
Subordinated Debentures properly endorsed for transfer by the Holder or
accompanied by a properly completed bond power from the Holder, together with a
properly completed irrevocable proxy that authorizes such person to consent to
the Proposed Amendments on behalf of such Holder, with signatures on the
endorsement or bond power guaranteed by an Eligible Institution or (iii) effect
a record transfer of such Subordinated Debentures from the Holder to such
beneficial owner and comply with the requirements applicable to Holders for
tendering Subordinated Debentures and delivering Consents prior to 12:00
midnight, Eastern Daylight Time, on the Expiration Date. See Instruction 6.
2. REQUIREMENTS OF TENDER AND CONSENT. This Consent and Letter of
Transmittal is to be completed by Holders of Subordinated Debentures if
certificates representing such Subordinated Debentures are to be forwarded
herewith or if delivery is to be made by book-entry transfer to the account
maintained by DTC, pursuant to the procedures set forth in the Prospectus under
the captions "Procedure for Tendering Outstanding Debentures and Giving
Consents" and "Book-Entry Transfer Procedures." All Holders who wish to tender
their Subordinated Debentures must, prior to 12:00 midnight, Eastern Daylight
Time, on the Expiration Date: (i) complete, sign and deliver this Consent and
Letter of Transmittal, or a facsimile thereof, to the Exchange Agent, in person
or to the address set forth on page 1 hereof, together with any signature
guarantees and any other documents required in Instructions 1-12 hereof, and
(ii) tender (and not withdraw) his or her properly endorsed certificates
representing such Subordinated Debentures to the Exchange Agent, or if a tender
of a Subordinated Debenture is to be made by book-entry transfer to the Exchange
Agent's account at DTC, confirm such book-entry transfer and the receipt by the
Exchange Agent of the Agent's Message, in each case in accordance with the
procedures set forth in this Consent and Letter of Transmittal. PURSUANT TO THE
TERMS OF THE EXCHANGE OFFER AND CONSENT SOLICITATION, THE COMPLETION, EXECUTION
AND DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL OR TENDER PURSUANT TO THE
BOOK-ENTRY TRANSFER OR GUARANTEED DELIVERY PROCEDURES WILL BE DEEMED TO
CONSTITUTE A CONSENT TO THE PROPOSED AMENDMENTS WITH RESPECT TO ANY SUBORDINATED
DEBENTURES SO TENDERED.
Notwithstanding the foregoing paragraph, Holders whose certificates
representing Subordinated Debentures are not immediately available or who cannot
deliver such certificates and all other required documents to the Exchange Agent
or participants in the DTC who cannot complete the procedure for book-entry
transfer on or prior to the Expiration Date may nevertheless tender Subordinated
Debentures by properly completing and duly executing the Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in the
Prospectus under the caption "Guaranteed Delivery Procedures." Pursuant to such
procedures, (i) the tender must be made by or through an Eligible Institution,
(ii) a Notice of Guaranteed Delivery, substantially in the form provided
herewith, properly completed and duly
9
<PAGE>
executed, must be received by the Exchange Agent on or prior to 12:00 midnight,
Eastern Daylight Time, on the Expiration Date or, in the case of DTC
participants, a Notice of Guaranteed Delivery is properly completed, duly
executed and delivered to DTC (in accordance with DTC procedures) and
confirmation of such delivery to DTC is received by the Exchange Agent on or
prior to 12:00 midnight, Eastern Daylight Time, on the Expiration Date and (iii)
the certificates for the tendered Subordinated Debentures, in proper form for
transfer, together with this Consent and Letter of Transmittal, properly
completed and duly executed, with any required signature guarantees and any
other documents required by this Consent and Letter of Transmittal; or a
book-entry confirmation of the transfer of such Subordinated Debentures into the
Exchange Agent's account at DTC and an Agent's Message stating that such Holder
has received this Consent and Letter of Transmittal and has agreed to be bound
by the terms hereof are received by the Exchange Agent within three (3) business
days after the date of execution of the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THE OUTSTANDING DEBENTURES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER OF THE
OUTSTANDING DEBENTURES, BUT, IF SUCH DELIVERY IS EFFECTED BY MAIL, IT IS
RECOMMENDED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE AS TO ASSURE DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE.
3. CONSENTS TO PROPOSED AMENDMENTS. A valid Consent to the Proposed
Amendments may be given only by the Holder or by his or her attorney-in-fact. A
beneficial owner who is not a Holder must arrange with the Holder to execute and
deliver a Consent and Letter of Transmittal on his or her behalf, obtain a
properly completed irrevocable proxy that authorizes such beneficial owner to
consent to the Proposed Amendments on behalf of such Holder or become a Holder.
Any financial institution that is a participant in DTC's system and whose name
appears on a security position listing as the record owner of the Subordinated
Debentures who wishes to make book-entry delivery of Subordinated Debentures as
described above and who wishes to consent to the Proposed Amendments must
complete and execute a participant's letter (which will be distributed to
participants by DTC) instructing the DTC's nominee to complete and sign the
proxy attached thereto.
4. WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS. Tenders of
Subordinated Debentures may be withdrawn and the concurrent Consents may be
revoked at any time prior to 12:00 midnight, Eastern Daylight Time, on the
Expiration Date (but not thereafter if the Company accepts the Subordinated
Debentures for exchange). A valid withdrawal of tendered Subordinated Debentures
effected prior to 12:00 midnight, Eastern Daylight Time, on the Expiration Date
will constitute the concurrent valid revocation of such Holder's related
Consent. In order for a Holder to revoke a Consent, such Holder must withdraw
the related tendered Subordinated Debentures. Tenders of Subordinated Debentures
may not be withdrawn, and Consents may not be revoked, after 12:00 midnight,
Eastern Daylight Time, on the Expiration Date. In addition, tenders of
Subordinated Debentures may be validly withdrawn if the Exchange Offer is
terminated without any Subordinated Debentures being purchased thereunder. In
the event of a termination of the Exchange Offer, the Subordinated Debentures
tendered pursuant to the Exchange Offer will be promptly returned to the
tendering Holder and any Consents given will not be effective.
For a withdrawal of a tender of Subordinated Debentures (and the concurrent
revocation of Consents) to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be received by the Exchange Agent prior
to 12:00 midnight, Eastern Daylight Time, on the Expiration Date at its address
set forth on the back cover of this Consent and Letter of Transmittal. Any such
notice of withdrawal must (i) specify the name of the person who tendered the
Subordinated Debentures to be withdrawn, (ii) contain the description of the
Subordinated Debentures to be withdrawn and identify the certificate number or
numbers shown on the particular certificates evidencing such Subordinated
Debentures (unless such Subordinated Debentures were tendered by book-entry
transfer) and the aggregate principal amount represented by such Subordinated
Debentures and (iii) be signed by the holder of such
10
<PAGE>
Subordinated Debentures in the same manner as the original signature on the
Consent and Letter of Transmittal by which such Subordinated Debentures were
tendered (including any required signature guarantees), if any, or be
accompanied by (a) documents of transfer sufficient to have the Trustee register
the transfer of the Subordinated Debentures into the name of the person
withdrawing such Subordinated Debentures and (b) a properly completed
irrevocable proxy that authorized such person to effect such revocation on
behalf of such Holder. If the Subordinated Debentures to be withdrawn have been
delivered or otherwise identified to the Exchange Agent, a signed notice of
withdrawal is effective immediately upon written or facsimile notice of
withdrawal even if physical release is not yet effected.
If Subordinated Debentures have been tendered pursuant to the book-entry
transfer procedures, any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn Subordinated Debentures.
Any such notice of withdrawal must be signed by the Holder in the same manner as
the original signature on this Consent and Letter of Transmittal (including any
required signature guarantees) or be accompanied by evidence satisfactory to the
Company that the person withdrawing the tender has succeeded to the ownership of
the Subordinated Debentures.
Any Subordinated Debentures properly withdrawn will be deemed to be not
validly tendered for purposes of the Exchange Offer, and will constitute the
concurrent valid revocation of such Holder's Consent. Any valid revocation of
Consents will automatically render the prior tender for the Subordinated
Debentures to which such Consents relate defective and the Company will have the
right, which it may waive, to reject such tender as invalid and ineffective. Any
permitted withdrawal of Subordinated Debentures and revocation of Consents may
not be rescinded, and any Subordinated Debentures properly withdrawn will
thereafter be deemed not validly tendered and any Consents revoked will be
deemed not validly delivered for purposes of the Exchange Offer; PROVIDED,
HOWEVER, that withdrawn Subordinated Debentures may be re-tendered and revoked
Consents may be delivered by again following one of the appropriate procedures
described herein at any time on or prior to the Expiration Date.
If the Company extends the Exchange Offer or is delayed in its acceptance
for exchange of Subordinated Debentures or is unable to exchange Subordinated
Debentures pursuant to the Exchange Offer for any reason, then, without
prejudice to the Company's rights hereunder, tendered Subordinated Debentures
may be retained by the Exchange Agent on behalf of the Company and may not be
withdrawn (subject to the prompt acceptance and delivery of shares of Common
Stock in exchange for tendered Subordinated Debentures or the prompt return of
tendered Subordinated Debentures which are not accepted after the termination or
withdrawal of the Exchange Offer), except as otherwise provided in this section.
5. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF SUBORDINATED DEBENTURES
WHO TENDER BY BOOK-ENTRY TRANSFER). If less than the entire principal amount of
any Subordinated Debentures evidenced by a submitted certificate is tendered,
the tendering Holder should fill in the applicable principal amount of the
Subordinated Debentures that are to be tendered in the box entitled "Description
of Subordinated Debentures Tendered." The entire principal amount represented by
the certificates for all Subordinated Debentures delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Subordinated Debentures is not tendered or not accepted
for exchange, new certificate(s) representing the remainder of the principal
amount of the Subordinated Debentures that were evidenced by the old
certificate(s) will be sent to the Holder, unless otherwise provided in the
boxes entitled "Special Payment Instructions" or "Special Delivery Instructions"
above, as soon as practicable after the expiration of the Exchange Offer.
6. SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Consent and Letter of Transmittal is signed by the
Holder(s) of the Subordinated Debentures tendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever.
11
<PAGE>
If any of the Subordinated Debentures tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Consent and Letter of
Transmittal. If any tendered Subordinated Debentures are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate Consents and Letters of Transmittal as there are names in which
certificates are held.
If this Consent and Letter of Transmittal or any certificates or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Company of its authority so to act must be submitted, unless
waived by the Company.
If this Consent and Letter of Transmittal is signed by the Holder(s) of the
Subordinated Debentures listed and transmitted hereby, no endorsement of
certificates or separate bond powers are required unless payment is to be made
to, or certificates for Subordinated Debentures not tendered or not accepted for
exchange are to be issued to, a person other than the Holder(s). Signatures on
such certificates must be guaranteed by an Eligible Institution (unless signed
by an Eligible Institution).
If this Consent and Letter of Transmittal is signed by a person other than
the Holder(s) of the Subordinated Debentures listed, the certificates
representing such Subordinated Debentures must be properly endorsed for transfer
by the Holder or be accompanied by a properly completed bond power from the
Holder, together with a properly completed irrevocable proxy that authorizes
such person to consent to the Proposed Amendments on behalf of such Holder, with
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
7. TRANSFER TAXES. The Company will pay or cause to be paid any transfer
taxes with respect to the exchange of Subordinated Debentures to it or its order
pursuant to the Exchange Offer. If, however, certificates representing shares of
Common Stock issued in exchange for tendered Subordinated Debentures or
certificates representing Subordinated Debentures not tendered or not accepted
for exchange are to be registered in the name of, any person other than the
Holder(s), or if tendered certificates re-registered in the name of any person
other than the person(s) signing this Consent and Letter of Transmittal, the
number of shares or amount of Subordinated Debentures will be reduced by a
number sufficient when sold by the Exchange Agent to satisfy the amount of any
transfer taxes (whether imposed on the Holder(s) or such other person) payable
on account of the transfer to such person unless satisfactory evidence of the
payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS CONSENT AND
LETTER OF TRANSMITTAL.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for shares
of Common Stock exchanged for tendered Subordinated Debentures are to be issued
in the name of, and/or certificates representing Subordinated Debentures not
accepted for exchange are to be returned to, a person other than the person(s)
signing this Consent and Letter of Transmittal, or are to be sent and/or are to
be returned to a person other than the person(s) signing this Consent and Letter
of Transmittal or to an address other than that shown on page 1 hereof, the
appropriate boxes on this Consent and Letter of Transmittal should be completed.
Holders of Subordinated Debentures delivering Subordinated Debentures by
book-entry transfer may request that Subordinated Debentures not accepted for
exchange be credited to such account maintained at DTC as such Holder(s) may
designate hereon. If no such instructions are given, such Subordinated
Debentures not accepted for payment will be returned by crediting the account at
DTC designated above.
9. WAIVER OF CONDITIONS. To the extent permitted by applicable law, the
Company reserves the right to waive any and all conditions to the Exchange Offer
and Consent Solicitation and accept for exchange any Subordinated Debentures
tendered.
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<PAGE>
10. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax
law generally requires that a Holder whose tendered Subordinated Debentures are
accepted for exchange, or such Holder's assignee (in either case, the "Payee"),
provide the Exchange Agent (the "Payor"), with such Payee's correct Taxpayer
Identification Number ("TIN"), which, in the case of a Payee who is an
individual, is such Payee's social security number. If the Payor is not provided
with the correct TIN or an adequate basis for an exemption, such Payee may be
subject to a $50 penalty imposed by the Internal Revenue Service and backup
withholding in an amount equal to 31% of the gross proceeds received pursuant to
the Exchange Offer and Consent Solicitation. If withholding results in an
overpayment of taxes, a refund may be obtained.
To prevent backup withholding, each Payee must provide such Payee's correct
TIN by completing the "Substitute Form W-9" set forth herein certifying that the
TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the
Payee is exempt from backup withholding, (ii) the Payee has not been notified by
the Internal Revenue Service that such Payee is subject to backup withholding as
a result of a failure to report all interest or dividends, or (iii) the Internal
Revenue Service has notified the Payee that such Payee is no longer subject to
backup withholding.
If the Payee does not have a TIN, such Payee should refer to the enclosed
copy of the Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 (the "W-9 Guidelines") for instructions on applying for a
TIN, write "Applied For" in the space for the TIN in Part I of the Substitute
Form W-9, and sign and date the Substitute Form W-9 and the Certificate of
Awaiting Taxpayer Identification Number set forth herein. If the Payee does not
provide such Payee's TIN to the Payor within 60 days, backup withholding will
begin and continue until such Payee furnishes such Payee 's TIN to the Payor.
Note: Writing "Applied For" on the form means that the Payee has already applied
for a TIN or that such Payee intends to apply for one in the near future.
If the Subordinated Debentures are held in more than one name or are not in
the name of the actual owner, consult the W-9 Guidelines for information on
which TIN to report.
Exempt Payees (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
should write "Exempt" in Part 2 of Substitute Form W-9. Refer to the enclosed
copy of the W-9 Guidelines for additional instructions. In order for a
nonresident alien or foreign entity to qualify as exempt, such person must
complete the Form W-8, "Certificate of Foreign Status," signed under penalty of
perjury attesting to such exempt status.
11. MUTILATED, LOST, STOLEN OR DESTROYED SUBORDINATED DEBENTURES. Holders
of Subordinated Debentures which have been mutilated, lost, stolen or destroyed
should complete the Affidavit of Loss.
12. REQUESTS FOR ASSISTANCE OF ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent as set forth on the last page hereof or
from the tendering Holder's broker, dealer, commercial bank or trust company.
Additional copies of the Prospectus, this Consent and Letter of Transmittal, and
the Notice of Guaranteed Delivery may be obtained from the Information Agent.
IMPORTANT: THIS CONSENT AND LETTER OF TRANSMITTAL, TOGETHER WITH
CERTIFICATES FOR, OR CONFIRMATION OF BOOK-ENTRY TRANSFER WITH RESPECT TO, ANY
TENDERED SUBORDINATED DEBENTURES, WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, ON OR PRIOR TO
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE.
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PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<C> <S>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN ON THE LINE BELOW AND CERTIFY
FORM W-9 BY SIGNING AND DATING IN PART 3.
DEPARTMENT OF THE TREASURY TIN
INTERNAL REVENUE SERVICE (Social Security Number or Employer Identification Number)
PAYOR'S REQUEST FOR PART 2--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE
TAXPAYER IDENTIFICATION "EXEMPT" HERE (SEE INSTRUCTIONS):
NUMBER) ("TIN") AND .
CERTIFICATION
PART 3-- CERTIFICATION UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) The number shown on
this form is my correct TIN (or I am waiting for a number to be issued to me), and (2) I am
not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest or dividends or (c) the
IRS has notified me that I am no longer subject to backup withholding.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
SIGNATURE DATE , 1997
You must cross out item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because of under reporting interest or dividends on
your tax return and you have not been notified by the IRS that you are no longer subject to
backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE
"APPLIED FOR" IN PART 1 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been
issued to me, and that I mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service Center or Social Security
Administration office (or I intend to mail or deliver an application in the near future). I
understand that if I do not provide a taxpayer identification number to the payor, 31% of
all reportable payments made to me will be withheld until I provide a number.
SIGNATURE DATE , 1997
SUBSTITUTE FORM W-8
By checking this box / /, I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and that I mailed or delivered an
application to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration office (or I intend to mail or deliver an
application in the near future). I understand that if I do not provide a taxpayer
identification number to the payor, 31% of all reportable payments made to me will be
withheld until I provide a number.
SIGNATURE DATE , 1997
</TABLE>
14
<PAGE>
THE INFORMATION AGENT IS:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER AND CONSENT SOLICITATION IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY:
P.O. Box 3301 (FOR ELIGIBLE INSTITUTIONS ONLY) 120 Broadway
South Hackensack NJ 07606 (201) 329-8938 13th Floor
Attn: Reorganization Dept. CONFIRM BY TELEPHONE: New York, New York 10271
(201) 296-4860 Attn: Reorganization Dept.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTICE OF
GUARANTEED DELIVERY
TO TENDER AND CONSENT TO PROPOSED AMENDMENTS TO THE INDENTURE IN RESPECT
OF 12% SENIOR SUBORDINATED PAY-IN-KIND DEBENTURES DUE MARCH 15, 2002
("SENIOR DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
(FORMERLY, THE BOLSA CHICA COMPANY)
(CUSIP NO. 097679 AA 2)
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND
DISCLOSURE STATEMENT
DATED , 1997
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT
EASTERN DAYLIGHT TIME, ON JUNE , 1997 (THE
"EXPIRATION DATE"), UNLESS EXTENDED.
HOLDERS OF SENIOR DEBENTURES MUST TENDER THEIR SENIOR DEBENTURES AND PROVIDE
THEIR CONSENTS TO THE PROPOSED AMENDMENTS ON OR PRIOR TO THE EXPIRATION DATE IN
ORDER TO RECEIVE THE EXCHANGE OFFER CONSIDERATION. TENDERED SENIOR DEBENTURES
MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO 12:00
MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE, BUT NOT THEREAFTER. THE
EXCHANGE OFFER IS CONDITIONED UPON THE SATISFACTION OF CERTAIN CONDITIONS,
INCLUDING, AMONG OTHER THINGS, THE VALID TENDER OF AT LEAST 90% IN AGGREGATE
PRINCIPAL AMOUNT OF THE OUTSTANDING DEBENTURES OF KOLL REAL ESTATE GROUP, INC.
(THE "COMPANY"), OWNED BY PERSONS OTHER THAN THE COMPANY, ITS SUBSIDIARIES AND
CERTAIN OF THEIR AFFILIATES.
As set forth in the Proxy Statement/Prospectus and Disclosure Statement
dated April , 1997 (the "Prospectus") under the captions "The Exchange
Offers--Procedure for Tendering Outstanding Debentures and Giving Consents" and
"--Guaranteed Delivery Procedures" and the accompanying Consent and Letter of
Transmittal and "Instruction 2" thereto, this Notice of Guaranteed Delivery, or
one substantially equivalent hereto, must be used to accept the Exchange Offer
and deliver a Consent if (i) certificates representing the Senior Debentures are
not immediately available, (ii) the procedure for book-entry transfer cannot be
completed on a timely basis or (iii) time will not permit a holder's Consent and
Letter of Transmittal, certificates or other required documents to reach the
Exchange Agent on or prior to the Expiration Date. This Notice of Guaranteed
Delivery may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution unless such form is submitted on behalf of an Eligible
Institution. Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Prospectus.
The Exchange Offers and the Consent Solicitations are not being made to (nor
will the surrender of Senior Debentures be accepted from or on behalf of)
holders of Senior Debentures in any jurisdiction in which the making or
acceptance of the Exchange Offers or the Consent Solicitations would not be in
compliance with the laws of such jurisdiction.
The Exchange Agent for the Exchange Offers and Consent Solicitation is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
<S> <C>
P.O. Box 3301 120 Broadway
South Hackensack, NJ 07606 13th Floor
Attn: Reorganization Dept. New York, New York 10271
Attn: Reorganization Dept.
<CAPTION>
FACSIMILE TRANSMISSION: CONFIRM BY TELEPHONE:
<S> <C>
(FOR ELIGIBLE INSTITUTIONS ONLY) (201) 296-4860
(201) 329-8936
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON THE
CONSENT AND LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE
INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST
APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE CONSENT AND
LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus,
the undersigned hereby tender(s) to the Company, and thereby delivers to the
Company Consents with respect to, the principal amount of Senior Debentures set
forth on page 3 hereof, pursuant to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offers-Guaranteed Delivery
Procedures."
The undersigned understands that holders of Senior Debentures who tender
Senior Debentures are obligated to consent to the Proposed Amendments as
described in the Prospectus under the caption "Proposed Amendments to
Indentures," and, accordingly, the undersigned hereby consents to the Proposed
Amendments and acknowledges that tendering such Senior Debentures in accordance
with the Exchange Offers constitute a Consent with respect to such Senior
Debentures.
The undersigned understand(s) that Consents may be revoked, and tenders of
Senior Debentures may be withdrawn, by written notice of withdrawal received by
the Exchange Agent at any time prior to 12:00 Midnight, Eastern Daylight Time,
on the Expiration Date. A valid withdrawal of tendered Senior Debentures prior
to 12:00 Midnight, Eastern Daylight Time, on the Expiration Date will constitute
the concurrent valid revocation of such holder's related Consent. In order for a
holder to revoke a Consent, such Holder must withdraw the related tendered
Senior Debentures. In the event of a termination of the Exchange Offers, the
Senior Debentures tendered pursuant to the Exchange Offers will be returned to
the tendering holders promptly (or, in the case of Senior Debentures tendered by
book-entry transfer, such Senior Debentures will be credited to the account
maintained at DTC from which such Senior Debentures were delivered). If the
Company makes a material change in the terms of the Exchange Offers or
Solicitation or the information concerning the Exchange Offers or Consent
Solicitations, the Company will disseminate additional Exchange Offers and
Consent Solicitations materials and extend the Offer or, if applicable, the
Solicitation, to the extent required by law. If the Solicitation is amended
prior to the Expiration Date in a manner determined by the Company to constitute
a material adverse change to the holders, the Company promptly will disclose
such amendment and, if necessary, extend the Solicitation for a period deemed by
the Company to be adequate to permit holders to revoke their Consents and
withdraw their Senior Debentures.
Subject to and effective upon acceptance for exchange of the Senior
Debentures tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and to, and any and all claims in respect of or arising or having arisen as a
result of the undersigned's status as a holder of, all Senior Debentures
tendered hereby. The undersigned authorizes the Exchange Agent to deliver this
Notice of Guaranteed Delivery to the Company and the Trustee as evidence of the
undersigned's Consent to the Proposed Amendments with respect to the Senior
Debentures tendered hereby. The undersigned understands that within three (3)
business days from the execution hereof the Exchange Agent must receive (i) the
certificates for the tendered Senior Debentures, in proper form for transfer,
together with a duly executed and properly completed Consent and Letter of
Transmittal, with any required signature guarantees and any other documents
required by the Consent and Letter of Transmittal, or (ii) a book-entry transfer
confirmation of the transfer into the Exchange Agent's account at DTC and an
Agent's Message stating that the undersigned has agreed to be bound by the terms
of the Consent and Letter of Transmittal.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
2
<PAGE>
<TABLE>
<S> <C>
PLEASE SIGN AND COMPLETE
Certificate No(s). of Senior Debentures
(if available) Name(s) of Registered Holder(s)
Principal Amount of Senior Debentures
Tendered Address(es)
If Senior Debentures will be delivered by
book-entry transfer at The Depository Trust
Company, please provide the following:
Transaction Code No. Signature(s) of Registered Holder(s)
Depository Account No. or Authorized Signatory
Area Code and Tel. No.
</TABLE>
HOLDERS WHO TENDER SENIOR DEBENTURES ARE OBLIGATED TO CONSENT TO THE
PROPOSED AMENDMENTS. DELIVERY OF SENIOR DEBENTURES PURSUANT TO THIS NOTICE OF
GUARANTEED DELIVERY WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED
AMENDMENTS WITH RESPECT TO SUCH SENIOR DEBENTURES.
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Senior Debentures exactly as their name(s) appear(s) on the
Senior Debentures or, if tendered by a participant in DTC, exactly as such
participant's name appears on a security position listing as the owner of the
Senior Debentures, or by person(s) authorized to become registered holder(s)
by endorsements and documents transmitted with this Notice of Guaranteed
Delivery. If signature is by a trustee, guardian, attorney-in-fact, officer of
a corporation, executor, administrator, agent or other representative, such
person must provide the following information:
<TABLE>
<S> <C>
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s)
Capacity
Address(es)
</TABLE>
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an officer or a correspondent in the
United States or another "Eligible Guarantor Institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby
guarantees that, within three business days from the date of this Notice of
Guaranteed Delivery, a properly completed and validly executed Consent and
Letter of Transmittal (or a facsimile thereof), together with Senior
Debentures tendered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Senior Debentures into the Depositary's account at
DTC, pursuant to the procedures for book-entry transfer set forth in the
Statement) and all other required documents will be deposited by the
undersigned with the Depositary at one of its addresses set forth above.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
Name
Address Please Type or Print
City State Zip Code Title
Area Code and Telephone No. Date
</TABLE>
DO NOT SEND SENIOR DEBENTURES WITH THIS FORM.
ACTUAL SURRENDER OF SENIOR DEBENTURES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND VALIDLY EXECUTED CONSENT AND LETTER
OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
4
<PAGE>
- --------------------------------------------------------------------------------
NOTICE OF
GUARANTEED DELIVERY
TO TENDER AND CONSENT TO CERTAIN INDENTURE AMENDMENTS WITH RESPECT
TO 12% SUBORDINATED PAY-IN-KIND DEBENTURES DUE MARCH 15, 2002
("SUBORDINATED DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
(CUSIP NO. 097679 AB 0)
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND
DISCLOSURE STATEMENT
DATED , 1997
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT
EASTERN DAYLIGHT TIME, ON JUNE , 1997 (THE
"EXPIRATION DATE"), UNLESS EXTENDED.
HOLDERS OF SUBORDINATED DEBENTURES MUST TENDER THEIR SUBORDINATED DEBENTURES
AND PROVIDE THEIR CONSENTS TO THE PROPOSED AMENDMENTS ON OR PRIOR TO THE
EXPIRATION DATE IN ORDER TO RECEIVE THE EXCHANGE OFFER CONSIDERATION. TENDERED
SUBORDINATED DEBENTURES MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME
PRIOR TO 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON THE EXPIRATION DATE, BUT NOT
THEREAFTER. THE EXCHANGE OFFER IS CONDITIONED UPON THE SATISFACTION OF CERTAIN
CONDITIONS, INCLUDING, AMONG OTHER THINGS, THE VALID TENDER OF AT LEAST 90% IN
AGGREGATE PRINCIPAL AMOUNT OF THE OUTSTANDING DEBENTURES OF KOLL REAL ESTATE
GROUP, INC. (THE "COMPANY"), OWNED BY PERSONS OTHER THAN THE COMPANY, ITS
SUBSIDIARIES AND CERTAIN OF THEIR AFFILIATES.
As set forth in the Proxy Statement/Prospectus and Disclosure Statement
dated April , 1997 (the "Prospectus") under the captions "The Exchange
Offers-Procedure for Tendering Outstanding Debentures and Giving Consents" and
"--Guaranteed Delivery Procedures" and the accompanying Consent and Letter of
Transmittal and "Instruction 2" thereto, this Notice of Guaranteed Delivery, or
one substantially equivalent hereto, must be used to accept the Exchange Offer
and deliver a Consent if (i) certificates representing the Subordinated
Debentures are not immediately available, (ii) the procedure for book-entry
transfer cannot be completed on a timely basis or (iii) time will not permit a
holder's Consent and Letter of Transmittal, certificates or other required
documents to reach the Exchange Agent on or prior to the Expiration Date. This
Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Exchange Agent and must
include a guarantee by an Eligible Institution unless such form is submitted on
behalf of an Eligible Institution. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Prospectus.
The Exchange Offers and the Consent Solicitations are not being made to (nor
will the surrender of Subordinated Debentures be accepted from or on behalf of)
holders of Subordinated Debentures in any jurisdiction in which the making or
acceptance of the Exchange Offers or the Consent Solicitations would not be in
compliance with the laws of such jurisdiction.
The Exchange Agent for the Exchange Offers and Consent Solicitation is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
<S> <C>
P.O. Box 3301 120 Broadway
South Hackensack, NJ 07606 13th Floor
Attn: Reorganization Dept. New York, New York 10271
Attn: Reorganization Dept.
<CAPTION>
FACSIMILE TRANSMISSION: CONFIRM BY TELEPHONE:
<S> <C>
(FOR ELIGIBLE INSTITUTIONS ONLY) (201) 296-4860
(201) 329-8936
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON THE
CONSENT AND LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE
INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST
APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE CONSENT AND
LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus,
the undersigned hereby tender(s) to the Company, and thereby delivers to the
Company Consents with respect to, the principal amount of Subordinated
Debentures set forth on page 3 hereof, pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange
Offers-Guaranteed Delivery Procedures."
The undersigned understands that holders of Subordinated Debentures who
tender Subordinated Debentures are obligated to consent to the Proposed
Amendments as described in the Prospectus under the caption "Proposed Amendments
to Indentures," and, accordingly, the undersigned hereby consents to the
Proposed Amendments and acknowledges that tendering such Subordinated Debentures
in accordance with the Exchange Offers constitute a Consent with respect to such
Subordinated Debentures.
The undersigned understand(s) that Consents may be revoked, and tenders of
Subordinated Debentures may be withdrawn, by written notice of withdrawal
received by the Exchange Agent at any time prior to 12:00 Midnight, Eastern
Daylight Time, on the Expiration Date. A valid withdrawal of tendered
Subordinated Debentures prior to 12:00 Midnight, Eastern Daylight Time, on the
Expiration Date will constitute the concurrent valid revocation of such holder's
related Consent. In order for a holder to revoke a Consent, such Holder must
withdraw the related tendered Subordinated Debentures. In the event of a
termination of the Exchange Offers, the Subordinated Debentures tendered
pursuant to the Exchange Offers will be returned to the tendering holders
promptly (or, in the case of Subordinated Debentures tendered by book-entry
transfer, such Subordinated Debentures will be credited to the account
maintained at DTC from which such Subordinated Debentures were delivered). If
the Company makes a material change in the terms of the Exchange Offers or
Solicitation or the information concerning the Exchange Offers or Consent
Solicitations, the Company will disseminate additional Exchange Offers and
Consent Solicitations materials and extend the Offer or, if applicable, the
Solicitation, to the extent required by law. If the Solicitation is amended
prior to the Expiration Date in a manner determined by the Company to constitute
a material adverse change to the holders, the Company promptly will disclose
such amendment and, if necessary, extend the Solicitation for a period deemed by
the Company to be adequate to permit holders to revoke their Consents and
withdraw their Subordinated Debentures.
Subject to and effective upon acceptance for exchange of the Subordinated
Debentures tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and to, and any and all claims in respect of or arising or having arisen as a
result of the undersigned's status as a holder of, all Subordinated Debentures
tendered hereby. The undersigned authorizes the Exchange Agent to deliver this
Notice of Guaranteed Delivery to the Company and the Trustee as evidence of the
undersigned's Consent to the Proposed Amendments with respect to the Senior
Debentures tendered hereby. The undersigned understands that within three (3)
business days from the execution hereof the Exchange Agent must receive (i) the
certificates for the tendered Subordinated Debentures, in proper form for
transfer, together with a duly executed and properly completed Consent and
Letter of Transmittal, with any required signature guarantees and any other
documents required by the Consent and Letter of Transmittal, or (ii) a
book-entry transfer confirmation of the transfer into the Exchange Agent's
account at DTC and an Agent's Message stating that the undersigned has agreed to
be bound by the terms of the Consent and Letter of Transmittal.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
2
<PAGE>
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<TABLE>
<S> <C>
PLEASE SIGN AND COMPLETE
Certificate No(s). of Subordinated
Debentures
(if available) Name(s) of Registered Holder(s)
Principal Amount of Subordinated Debentures
Tendered Address(es)
If Subordinated Debentures will be delivered
by book-entry transfer at The Depository
Trust Company, please provide the following:
Transaction Code No. Signature(s) of Registered Holder(s)
Depository Account No. or Authorized Signatory
Area Code and Tel. No.
</TABLE>
HOLDERS WHO TENDER SUBORDINATED DEBENTURES ARE OBLIGATED TO CONSENT TO THE
PROPOSED AMENDMENTS. DELIVERY OF SUBORDINATED DEBENTURES PURSUANT TO THIS
NOTICE OF GUARANTEED DELIVERY WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE
PROPOSED AMENDMENTS WITH RESPECT TO SUCH SUBORDINATED DEBENTURES.
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Subordinated Debentures exactly as their name(s) appear(s) on the
Subordinated Debentures or, if tendered by a participant in DTC, exactly as
such participant's name appears on a security position listing as the owner of
the Subordinated Debentures, or by person(s) authorized to become registered
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, guardian, attorney-in-fact,
officer of a corporation, executor, administrator, agent or other
representative, such person must provide the following information:
<TABLE>
<S> <C>
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s)
Capacity
Address(es)
</TABLE>
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an officer or a correspondent in the
United States or another "Eligible Guarantor Institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby
guarantees that, within three business days from the date of this Notice of
Guaranteed Delivery, a properly completed and validly executed Consent and
Letter of Transmittal (or a facsimile thereof), together with Subordinated
Debentures tendered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Subordinated Debentures into the Depositary's
account at DTC, pursuant to the procedures for book-entry transfer set forth
in the Statement) and all other required documents will be deposited by the
undersigned with the Depositary at one of its addresses set forth above.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
Name
Address Please Type or Print
City State Zip Code Title
Area Code and Telephone No. Date
</TABLE>
DO NOT SEND SUBORDINATED DEBENTURES WITH THIS FORM.
ACTUAL SURRENDER OF SUBORDINATED DEBENTURES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND VALIDLY EXECUTED CONSENT AND LETTER
OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
4
<PAGE>
- --------------------------------------------------------------------------------
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 5: GENERAL UNSECURED CLAIMS -- HOLDERS
OF SENIOR DEBENTURES
(CUSIP NO. 097679 AA2)
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of the
beneficial owners of the securities described below to accept or reject the
Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real Estate
Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated _________ __, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case to
be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Company may
commence a chapter 11 case and seek to have the Prepackaged Plan confirmed by
the Bankruptcy Court; however, the Company expressly reserves the right, in its
sole and absolute discretion, to not commence such a chapter 11 case, even if it
receives sufficient votes accepting the Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE BEFORE
COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 5 Voting. The undersigned
certifies that / / beneficial owners of Senior Debentures having an aggregate
principal amount of $/ / have delivered ballots to the undersigned voting Class
5 claims to ACCEPT the Prepackaged Plan.
The undersigned certifies that / / beneficial owners of Senior
Debentures having on aggregate principal amount of $/ / have delivered ballots
to the undersigned voting Class 5 claims to REJECT the Prepackaged Plan.
Item 2. Class 5 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Senior Debentures, that have delivered ballots to the
undersigned voting Class 5 claims to accept or reject the Prepackaged Plan.
(Please complete the following table or attach the information requested by this
Item 2 in the following format.)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
SENIOR DEBENTURES VOTING
YOUR CUSTOMER ACCOUNT NUMBER(S) --------------------------------------------------
FOR EACH BENEFICIAL OWNER TO ACCEPT TO REJECT
- --------------------------------------------------------------- ------------------------ ------------------------
<S> <C> <C>
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
</TABLE>
Item 3. The undersigned certifies that the undersigned is an agent of
the registered owner with full power and authority to execute this
document in its own name or through a position held at a securities depository
of the Senior Debentures set forth in Item 1. The undersigned further certifies
that none of the Class 5 accounts identified in Item 2 above have previously
been voted by any other Master Ballot, except to the extent provided in Item 5
of the Voting information and instructions on the reverse side hereof, submitted
by the undersigned. The undersigned also acknowledges the terms and conditions
set forth in the Prospectus.
<TABLE>
<CAPTION>
DATED:
<S> <C>
(Print or type name) (If by Authorized Agent, Name and Title)
(Signature) Address: (Street)
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
</TABLE>
Return this Master Ballot before 12:00 Midnight, Eastern Daylight Time, June __,
1997 to: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 201/329-8930
600 Willowtree Road Midtown Station TO CONFIRM BY PHONE:
Proxy Department P.O. Box 947 201/296-4124
Leonia, NJ 07605 New York, NY 10138
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 5 to accept or reject the Prepackaged Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services, L.L.C.,
at the addresses and facsimile number indicated on the front of this Master
Ballot, (the "Voting Agent"), by 12:00 Midnight, Eastern Daylight Time on
June __, 1997 (the "Voting Expiration Date"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Expiration Date by
overnight mail service, courier or facsimile transmission, please send the
original hard copy by overnight mail to ChaseMellon Shareholder Services.
Master Ballots not received by the Voting Expiration Date will not be
counted.
3. The Master Ballot is not a letter of transmittal and may not be used for any
purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES WITH A BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL
ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter transmittal which will be
furnished to you by the Company (or its agent) after confirmation of the
Prepackaged Plan by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting
Agent indicating the appropriate authority to vote on each such ballot
submitted; or (b) complete a Master Ballot summarizing the voting with
respect to such individual ballots, return the Master Ballot to the Voting
Agent, and retain ALL such individual ballots for inspection by the
Bankruptcy Court until December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting Agent.
Votes reflected by multiple Master Ballots will be counted except to the
extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master
Ballot received prior to the Voting Expiration Date will, to the extent of
such inconsistency, supersede and revoke any prior Master Ballot. If more
than one Master Ballot is submitted and the later Master Ballot(s)
supplement rather than supersede earlier Master Ballot(s), please mark the
subsequent Master Ballot(s) with the words "Additional Vote" or such other
language as you customarily use to indicate an additional vote that is not
meant to revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in the
indicated format for each individual beneficial owner on whose behalf you
are executing the Master Ballot. To identify such beneficial owners without
disclosing their names, please use the customer account number assigned by
you to each such beneficial owner. In the event that a single customer has
more than one account with the identical registration, that customer should
be listed no more than once in Item 2. In completing Item 2, the total
principal amount of all accounts voted with respect to a single customer
should be listed in a single line entry, so that each line will represent a
different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest within a
single class under the Prepackaged Plan to either accept or reject the
Prepackaged Plan. A beneficial owner may not split its vote within a class
and, accordingly, an individual ballot (or multiple individual ballots with
respect to multiple claims or equity interests within a single class)
received from a beneficial owner that partially rejects and partially
accepts the Prepackaged Plan should not be counted. Furthermore, for
purposes of computing the vote on a Master Ballot, each voting beneficial
owner should be deemed to have voted the full amount of its holdings
according to your records as of the close of business on April 24, 1997 (the
"Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any broker,
dealer or other person in connection with the solicitation by the Company
pursuant to the Prepackaged Plan. The Company will, however, upon written
request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding individual ballots and accompanying solicitation
packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR AUTHORIZE
YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE STATEMENTS CONTAINED
IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES,
OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL BALLOTS OR
SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE PROSPECTUS, PLEASE
CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
BANKS AND BROKERS CALL
(212) 440-9800
(COLLECT)
<PAGE>
- --------------------------------------------------------------------------------
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 6: HOLDERS OF SUBORDINATED DEBENTURES
(CUSIP NO. 097679 A130)
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT EASTERN DAYLIGHT TIME, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of the
beneficial owners of the securities described below to accept or reject the
Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real Estate
Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April
- ---, 1997 (the "Prospectus"). The Prepackaged Plan could be filed in connection
with a case to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11 case.
If sufficient votes are received accepting the Prepackaged Plan, the Company may
commence a chapter 11 case and seek to have the Prepackaged Plan confirmed by
the Bankruptcy Court; however, the Company expressly reserves the right, in its
sole and absolute discretion, to not commence such a chapter 11 case, even if it
receives sufficient votes accepting the Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE BEFORE
COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 6 Voting. The undersigned
certifies that / / beneficial owners of Subordinated Debentures having an
aggregate principal amount of $/ / have delivered ballots to the undersigned
voting Class 6 claims to ACCEPT the Prepackaged Plan.
The undersigned certifies that / / beneficial owners of Subordinated
Debentures having an aggregate principal amount of $/ / have delivered ballots
to the undersigned voting Class 6 claims to REJECT the Prepackaged Plan.
Item 2. Class 6 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Subordinated Debentures, that have delivered ballots to the
undersigned voting Class 6 claims to accept or reject the Prepackaged Plan.
(Please complete the following table or attach the information requested by this
Item 2 in the following format.)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
SUBORDINATED DEBENTURES VOTING
YOUR CUSTOMER ACCOUNT NUMBER(S) --------------------------------------------------
FOR EACH BENEFICIAL OWNER TO ACCEPT TO REJECT
- --------------------------------------------------------------- ------------------------ ------------------------
<S> <C> <C>
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
</TABLE>
Item 3. The undersigned certifies that the undersigned is an agent of
the registered owner with full power and authority to execute this
document in its own name or through a position held at a securities depository
of the Subordinated Debentures set forth in Item 1. The undersigned further
certifies that none of the Class 6 accounts identified in Item 2 above have
previously been voted by any other Master Ballot, except to the extent provided
in Item 5 of the Voting Information and Instructions on the reverse side hereof,
submitted by the undersigned. The undersigned also acknowledges the terms and
conditions set forth in the Prospectus.
<TABLE>
<CAPTION>
DATED:
<S> <C>
(Print or type name) (If by Authorized Agent, Name and Title)
(Signature) Address: (Street)
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
</TABLE>
Return this Master Ballot before 12:00 Midnight, Eastern Daylight Time, June __,
1997 to: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 201/329-8930
600 Willowtree Road Midtown Station TO CONFIRM BY PHONE:
Proxy Department P.O. Box 947 201/296-4124
Leonia, NJ 07605 New York, NY 10138
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 6 to accept or reject the Prepackaged Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services, L.L.C.,
at the addresses and facsimile number indicated on the front of this Master
Ballot, (the "Voting Agent"), by 12:00 Midnight, Eastern Daylight Time on
June , 1997 (the "Voting Expiration Date"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Expiration Date by
overnight mail service, courier or facsimile transmission, please send the
original hard copy by overnight mail to ChaseMellon Shareholder Services.
Master Ballots not received by the Voting Expiration Date will not be
counted.
3. The Master Ballot is not a letter of transmittal and may not be used for any
purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES WITH A BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL
ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter transmittal which will be
furnished to you by the Company (or its agent) after confirmation of the
Prepackaged Plan by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting
Agent indicating the appropriate authority to vote on each such ballot
submitted; or (b) complete a Master Ballot summarizing the voting with
respect to such individual ballots, return the Master Ballot to the Voting
Agent, and retain ALL such individual ballots for inspection by the
Bankruptcy Court until December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting Agent.
Votes reflected by multiple Master Ballots will be counted except to the
extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master
Ballot received prior to the Voting Expiration Date will, to the extent of
such inconsistency, supersede and revoke any prior Master Ballot. If more
than one Master Ballot is submitted and the later Master Ballot(s)
supplement rather than supersede earlier Master Ballot(s), please mark the
subsequent Master Ballot(s) with the words "Additional Vote" or such other
language as you customarily use to indicate an additional vote that is not
meant to revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in the
indicated format for each individual beneficial owner on whose behalf you
are executing the Master Ballot. To identify such beneficial owners without
disclosing their names, please use the customer account number assigned by
you to each such beneficial owner. In the event that a single customer has
more than one account with the identical registration, that customer should
be listed no more than once in Item 2. In completing Item 2, the aggregate
principal amount of all accounts voted with respect to a single customer
should be listed in a single line entry, so that each line will represent a
different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest within a
single class under the Prepackaged Plan to either accept or reject the
Prepackaged Plan. A beneficial owner may not split its vote within a class
and, accordingly, an individual ballot (or multiple individual ballots with
respect to multiple claims or equity interests within a single class)
received from a beneficial owner that partially rejects and partially
accepts the Prepackaged Plan should not be counted. Furthermore, for
purposes of computing the vote on a Master Ballot, each voting beneficial
owner should be deemed to have voted the full amount of its holdings
according to your records as of the close of business on April 24, 1997 (the
'Voting Record Date').
8. No fees or commissions or other renumeration will be payable to any broker,
dealer or other person in connection with the solicitation by the Company
pursuant to the Prepackaged Plan. The Company will, however, upon written
request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding individual ballots and accompanying solicitation
packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR AUTHORIZE
YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE STATEMENTS CONTAINED
IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES,
OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL BALLOTS OR
SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE PROSPECTUS, PLEASE
CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
BANKS AND BROKERS CALL
(212) 440-9800
(COLLECT)
<PAGE>
- --------------------------------------------------------------------------------
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 7: INTERESTS OF HOLDERS OF PREFERRED STOCK
(CUSIP NO. 500434 204)
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of the
beneficial owners of the securities described below to accept or reject the
Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real Estate
Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated _________ __, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case to
be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Company may
commence a chapter 11 case and seek to have the Prepackaged Plan confirmed by
the Bankruptcy Court; however, the Company expressly reserves the right, in its
sole and absolute discretion, to not commence such a chapter 11 case, even if it
receives sufficient votes accepting the Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE BEFORE
COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 7 Voting. The undersigned
certifies that / / beneficial holders of / / shares of Series A Convertible
Redeemable Preferred Stock (the "Preferred Stock") have delivered ballots to the
undersigned voting Class 7 claims to ACCEPT the Prepackaged Plan.
The undersigned certifies that / / beneficial holders of / / shares of
Preferred Stock have delivered ballots to the undersigned voting Class 7 claims
to REJECT the Prepackaged Plan.
Item 2. Class 7 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Preferred Stock, that have delivered ballots to the
undersigned voting Class 7 claims to accept or reject the Prepackaged Plan.
(Please complete the following table or attach the information requested by this
Item 2 in the following format.)
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF PREFERRED STOCK VOTING
YOUR CUSTOMER ACCOUNT NUMBER(S) --------------------------------------------------
FOR EACH BENEFICIAL OWNER TO ACCEPT TO REJECT
- --------------------------------------------------------------- ------------------------ ------------------------
<S> <C> <C>
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
</TABLE>
Item 3. The undersigned certifies that the undersigned is an agent of
the registered owner with full power and authority to execute this document in
its own name or through a position held at a securities depository of the
Preferred Stock set forth in Item 1. The undersigned further certifies that none
of the Class 7 accounts identified in Item 2 above have previously been voted by
any other Master Ballot, except to the extent provided in Item 5 of the Voting
Information and Instructions on the reverse side hereof, submitted by the
undersigned. The undersigned also acknowledges the terms and conditions set
forth in the Prospectus.
<TABLE>
<CAPTION>
DATED:
<S> <C>
(Print or type name) (If by Authorized Agent, Name and Title)
(Signature) Address: (Street)
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
</TABLE>
Return this Master Ballot before 12:00 Midnight, Eastern Daylight Time, June __,
1997 to: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 201/329-8930
600 Willowtree Road Midtown Station TO CONFIRM BY PHONE:
Proxy Department P.O. Box 947 201/296-4124
Leonia, NJ 07605 New York, NY 10138
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 7 to accept or reject the Prepackaged Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services, L.L.C.,
at the addresses and facsimile number indicated on the front of this Master
Ballot, (the "Voting Agent"), by 12:00 Midnight, Eastern Daylight Time on
June , 1997 (the "Voting Expiration Date"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Expiration Date by
overnight mail service, courier or facsimile transmission, please send the
original hard copy by overnight mail to ChaseMellon Shareholder Services.
Master Ballots not received by the Voting Expiration Date will not be
counted.
3. The Master Ballot is not a letter of transmittal and may not be used for any
purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES WITH A BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL
ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter transmittal which will be
furnished to you by the Company (or its agent) after confirmation of the
Prepackaged Plan by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting
Agent indicating the appropriate authority to vote on each such ballot
submitted; or (b) complete a Master Ballot summarizing the voting with
respect to such individual ballots, return the Master Ballot to the Voting
Agent, and retain ALL such individual ballots for inspection by the
Bankruptcy Court until December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting Agent.
Votes reflected by multiple Master Ballots will be counted except to the
extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master
Ballot received prior to the Voting Expiration Date will, to the extent of
such inconsistency, supersede and revoke any prior Master Ballot. If more
than one Master Ballot is submitted and the later Master Ballot(s)
supplement rather than supersede earlier Master Ballot(s), please mark the
subsequent Master Ballot(s) with the words "Additional Vote" or such other
language as you customarily use to indicate an additional vote that is not
meant to revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in the
indicated format for each individual beneficial owner on whose behalf you
are executing the Master Ballot. To identify such beneficial owners without
disclosing their names, please use the customer account number assigned by
you to each such beneficial owner. In the event that a single customer has
more than one account with the identical registration, that customer should
be listed no more than once in Item 2. In completing Item 2, the total
number of shares of all accounts voted with respect to a single customer
should be listed in a single line entry, so that each line will represent a
different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest within a
single class under the Prepackaged Plan to either accept or reject the
Prepackaged Plan. A beneficial owner may not split its vote within a class
and, accordingly, an individual ballot (or multiple individual ballots with
respect to multiple claims or equity interests within a single class)
received from a beneficial owner that partially rejects and partially
accepts the Prepackaged Plan should not be counted. Furthermore, for
purposes of computing the vote on a Master Ballot, each voting beneficial
owner should be deemed to have voted the full amount of its holdings
according to your records as of the close of business on April 24, 1997 (the
"Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any broker,
dealer or other person in connection with the solicitation by the Company
pursuant to the Prepackaged Plan. The Company will, however, upon written
request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding individual ballots and accompanying solicitation
packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR AUTHORIZE
YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE STATEMENTS CONTAINED
IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES,
OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL BALLOTS OR
SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE PROSPECTUS, PLEASE
CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
BANKS AND BROKERS CALL
(212) 440-9800
(COLLECT)
<PAGE>
- --------------------------------------------------------------------------------
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 8: INTERESTS OF HOLDERS OF CLASS A COMMON STOCK
(CUSIP NO. 500434 015)
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of the
beneficial owners of the securities described below to accept or reject the
Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real Estate
Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated _________ __, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case to
be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Company may
commence a chapter 11 case and seek to have the Prepackaged Plan confirmed by
the Bankruptcy Court; however, the Company expressly reserves the right, in its
sole and absolute discretion, to not commence such a chapter 11 case, even if it
receives sufficient votes accepting the Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE BEFORE
COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 8 Voting. The undersigned
certifies that / / beneficial holders of / / shares of Class A Common Stock have
delivered ballots to the undersigned voting Class 8 claims to ACCEPT the
Prepackaged Plan.
The undersigned certifies that / / beneficial owners of / / shares of
Class A Common Stock have delivered ballots to the undersigned voting Class 8
claims to REJECT the Prepackaged Plan.
Item 2. Class 8 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Class A Common Stock, that have delivered ballots to the
undersigned voting Class 8 claims to accept or reject the Prepackaged Plan.
(Please complete the following table or attach the information requested by this
Item 2 in the following format.)
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
CLASS A COMMON STOCK VOTING
YOUR CUSTOMER ACCOUNT NUMBER(S) --------------------------------------------------
FOR EACH BENEFICIAL OWNER TO ACCEPT TO REJECT
- --------------------------------------------------------------- ------------------------ ------------------------
<S> <C> <C>
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
</TABLE>
Item 3. The undersigned certifies that the undersigned is an agent of
the registered owner with full power and authority to execute this
document in its own name or through a position held at a securities depository
of the Class A Common Stock set forth in Item 1. The undersigned further
certifies that none of the Class 8 accounts identified in Item 2 above have
previously been voted by any other Master Ballot, except to the extent provided
in Item 5 of the Voting Information and Instructions on the reverse side hereof,
submitted by the undersigned. The undersigned also acknowledges the terms and
conditions set forth in the Prospectus.
<TABLE>
<CAPTION>
DATED:
<S> <C>
(Print or type name) (If by Authorized Agent, Name and Title)
(Signature) Address: (Street)
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
</TABLE>
Return this Master Ballot before 12:00 Midnight, Eastern Daylight Time, June __,
1997 to: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 201/329-8930
600 Willowtree Road Midtown Station TO CONFIRM BY PHONE:
Proxy Department P.O. Box 947 201/296-4124
Leonia, NJ 07605 New York, NY 10138
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 8 to accept or reject the Prepackaged Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services, L.L.C.,
at the addresses and facsimile number indicated on the front of this Master
Ballot, (the "Voting Agent"), by 12:00 Midnight, Eastern Daylight Time on
June __, 1997 (the "Voting Expiration Date"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Expiration Date by
overnight mail service, courier or facsimile transmission, please send the
original hard copy by overnight mail to ChaseMellon Shareholder Services.
Master Ballots not received by the Voting Expiration Date will not be
counted.
3. The Master Ballot is not a letter of transmittal and may not be used for any
purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES WITH A BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL
ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter transmittal which will be
furnished to you by the Company (or its agent) after confirmation of the
Prepackaged Plan by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting
Agent indicating the appropriate authority to vote on each such ballot
submitted; or (b) complete a Master Ballot summarizing the voting with
respect to such individual ballots, return the Master Ballot to the Voting
Agent, and retain ALL such individual ballots for inspection by the
Bankruptcy Court until December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting Agent.
Votes reflected by multiple Master Ballots will be counted except to the
extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master
Ballot received prior to the Voting Expiration Date will, to the extent of
such inconsistency, supersede and revoke any prior Master Ballot. If more
than one Master Ballot is submitted and the later Master Ballot(s)
supplement rather than supersede earlier Master Ballot(s), please mark the
subsequent Master Ballot(s) with the words "Additional Vote" or such other
language as you customarily use to indicate an additional vote that is not
meant to revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in the
indicated format for each individual beneficial owner on whose behalf you
are executing the Master Ballot. To identify such beneficial owners without
disclosing their names, please use the customer account number assigned by
you to each such beneficial owner. In the event that a single customer has
more than one account with the identical registration, that customer should
be listed no more than once in Item 2. In completing Item 2, the total
number of shares of all accounts voted with respect to a single customer
should be listed in a single line entry, so that each line will represent a
different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest within a
single class under the Prepackaged Plan to either accept or reject the
Prepackaged Plan. A beneficial owner may not split its vote within a class
and, accordingly, an individual ballot (or multiple individual ballots with
respect to multiple claims or equity interests within a single class)
received from a beneficial owner that partially rejects and partially
accepts the Prepackaged Plan should not be counted. Furthermore, for
purposes of computing the vote on a Master Ballot, each voting beneficial
owner should be deemed to have voted the full amount of its holdings
according to your records as of the close of business on April 24, 1997 (the
"Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any broker,
dealer or other person in connection with the solicitation by the Company
pursuant to the Prepackaged Plan. The Company will, however, upon written
request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding individual ballots and accompanying solicitation
packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR AUTHORIZE
YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE STATEMENTS CONTAINED
IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES,
OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL BALLOTS OR
SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE PROSPECTUS, PLEASE
CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
BANKS AND BROKERS CALL
(212) 440-9800
(COLLECT)
<PAGE>
- --------------------------------------------------------------------------------
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 5: GENERAL UNSECURED CLAIMS -- OTHER THAN HOLDERS
OF SENIOR DEBENTURES
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of the
beneficial owners of the securities described below to accept or reject the
Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real Estate
Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April , 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case to
be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Company may
commence a chapter 11 case and seek to have the Prepackaged Plan confirmed by
the Bankruptcy Court; however, the Company expressly reserves the right, in its
sole and absolute discretion, to not commence such a chapter 11 case, even if it
receives sufficient votes accepting the Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE BEFORE
COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 5 Voting. The undersigned
certifies that / / beneficial holders of General Unsecured Claims other than
holders of Senior Debentures having an aggregate principal amount of $/ / have
delivered ballots to the undersigned voting Class 5 claims to ACCEPT the
Prepackaged Plan.
The undersigned certifies that / / beneficial holders of General
Unsecured Claims other than holders of Senior Debentures having an aggregate
principal amount of $/ / have delivered ballots to the undersigned voting Class
5 claims to REJECT the Prepackaged Plan.
Item 2. Class 5 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of General Unsecured Claims--Other than Holders of Senior
Debentures, that have delivered ballots to the undersigned voting Class 5 (other
than holders of Senior Debentures) claims to accept or reject the Prepackaged
Plan.
(Please complete the following table or attach the information requested by this
Item 2 in the following format.)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS 5 CLAIMS (OTHER THAN
SENIOR DEBENTURES) VOTING
YOUR CUSTOMER ACCOUNT NUMBER(S) --------------------------------------------------
FOR EACH BENEFICIAL OWNER TO ACCEPT TO REJECT
- --------------------------------------------------------------- ------------------------ ------------------------
<S> <C> <C>
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
</TABLE>
Item 3. The undersigned certifies that the undersigned is an agent of
the registered owner with full power and authority to execute this document in
its own name or through a position held at a securities depository of the
General Unsecured Claims--Other than Holders of Senior Debentures set forth in
Item 1. The undersigned further certifies that none of the Class 5 accounts
identified in Item 2 above have previously been voted by any other Master
Ballot, except to the extent provided in Item 5 of the Voting Information and
Instructions on the reverse side hereof, submitted by the undersigned. The
undersigned also acknowledges the terms and conditions set forth in the
Prospectus.
<TABLE>
<CAPTION>
DATED:
<S> <C>
(Print or type name) (If by Authorized Agent, Name and Title)
(Signature) Address: (Street)
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
</TABLE>
Return this Master Ballot before 12:00 Midnight, Eastern Daylight Time, June __,
1997 to: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 201/329-8930
600 Willowtree Road Midtown Station TO CONFIRM BY PHONE:
Proxy Department P.O. Box 947 201/296-4124
Leonia, NJ 07605 New York, NY 10138
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 5 (other than Senior Debentures) to accept or reject the
Prepackaged Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services, L.L.C.,
at the addresses and facsimile number indicated on the front of this Master
Ballot (the "Voting Agent"), by 12:00 Midnight, Eastern Daylight Time on
June __, 1997 (the "Voting Expiration Date"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Expiration Date by
overnight mail service, courier or facsimile transmission, please send the
original hard copy by overnight mail to ChaseMellon Shareholder Services.
Master Ballots not received by the Voting Expiration Date will not be
counted.
3. The Master Ballot is not a letter of transmittal and may not be used for any
purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR CLAIMS
WITH A BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER BALLOT.
Surrender of claims for exchange pursuant to the Prepackaged Plan may be
made only pursuant to a letter transmittal which will be furnished to you by
the Company (or its agent) after confirmation of the Prepackaged Plan by the
Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting
Agent indicating the appropriate authority to vote on each such ballot
submitted; or (b) complete a Master Ballot summarizing the voting with
respect to such individual ballots, return the Master Ballot to the Voting
Agent, and retain ALL such individual ballots for inspection by the
Bankruptcy Court until December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting Agent.
Votes reflected by multiple Master Ballots will be counted except to the
extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master
Ballot received prior to the Voting Expiration Date will, to the extent of
such inconsistency, supersede and revoke any prior Master Ballot. If more
than one Master Ballot is submitted and the later Master Ballot(s)
supplement rather than supersede earlier Master Ballot(s), please mark the
subsequent Master Ballot(s) with the words "Additional Vote" or such other
language as you customarily use to indicate an additional vote that is not
meant to revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in the
indicated format for each individual beneficial owner on whose behalf you
are executing the Master Ballot. To identify such beneficial owners without
disclosing their names, please use the customer account number assigned by
you to each such beneficial owner. In the event that a single customer has
more than one account with the identical registration, that customer should
be listed no more than once in Item 2. In completing Item 2, the aggregate
principal amount of all accounts voted with respect to a single customer
should be listed in a single line entry, so that each line will represent a
different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest within a
single class under the Prepackaged Plan to either accept or reject the
Prepackaged Plan. A beneficial owner may not split its vote within a class
and, accordingly, an individual ballot (or multiple individual ballots with
respect to multiple claims or equity interests within a single class)
received from a beneficial owner that partially rejects and partially
accepts the Prepackaged Plan should not be counted. Furthermore, for
purposes of computing the vote on a Master Ballot, each voting beneficial
owner should be deemed to have voted the full amount of its holdings
according to your records as of the close of business on April 24, 1997 (the
"Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any broker,
dealer or other person in connection with the solicitation by the Company
pursuant to the Prepackaged Plan. The Company will, however, upon written
request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding individual ballots and accompanying solicitation
packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR AUTHORIZE
YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE STATEMENTS CONTAINED
IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES,
OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL BALLOTS OR
SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE PROSPECTUS, PLEASE
CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
BANKS AND BROKERS CALL
(212) 440-9800
(COLLECT)
<PAGE>
- -------------------------------------------------------------------------------
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS
OF THE DATE OF THIS DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 5: GENERAL UNSECURED CLAIMS - HOLDERS OF SENIOR DEBENTURES)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON JUNE __, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April__, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Company may commence a chapter 11 case and seek to have the Prepackaged Plan
confirmed by the Bankruptcy court; however, the Company expressly reserves
the right, in its sole and absolute discretion, to not commence such a
chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES WITH THIS
BALLOT, AND NEITHER THE COMPANY NOR THE VOTING AGENT WILL ACCEPT DELIVERY
OF ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID OR COUNTED AS HAVING BEEN CAST. PLEASE VERIFY ITEM 1 AND
COMPLETE ITEMS 2 AND 3 ON THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
- -------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes as / X /
indicated in
this example
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CUSIP NO. 097679 AA2)
Item 1: The undersigned, a Holder of a Class 5 Claim (General Unsecured Claim -
Senior Debentures) as defined in the Prepackaged Plan, is the beneficial owner
of the 12% Senior Subordinated Pay-In-Kind Debentures due March 15, 2002 (the
"Senior Debentures") of Koll Real Estate Group, Inc. (the "Company") having the
aggregate principal amount indicated above.
Item 2: The undersigned votes all Class 5 claim(s) referenced in Item 1
(check box):
To accept To reject
the Prepackaged Plan the Prepackaged Plan
/ / / /
Item 3: By signing this Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Senior Debentures voted on this Ballot and/or has
full power and authority to vote to accept or reject the Prepackaged Plan. The
undersigned also acknowledges receipt of the Proxy Statement/Prospectus and
Disclosure Statement dated April __, 1997 (the "Prospectus") and other
applicable Prepackaged Plan Solicitation Materials as well as all terms and
conditions set forth therein.
/ / Check this box if you hold Senior Debentures in accounts other
than those represented by this Ballot, and list any such other
accounts here:
Dated:_________________________________________ , 1997
X ____________________________________________________
X ____________________________________________________
Signature(s) of Debentureholder(s)
Signature(s) of Debentureholder(s) - please sign name
exactly as imprinted (do not print). Please indicate
any change of address.
NOTE: Executive, administrators, trustees and others
signing in a representative capacity should indicate the
capacity in which they sign.
If debentures are held jointly, EACH should sign.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the
Ballot as follows:
a. IF YOUR CLASS 5: SENIOR DEBENTURES HELD THROUGH A BROKER, BANK, OR
OTHER NOMINEE: To have your vote count you must verify Item 1,
complete Items 2 and 3 and return this Ballot to such broker, bank
or nominee. You must return the Ballot to such entity, early enough
for your vote to be processed and forwarded to and received by the
Voting Agent (defined below) prior to 12:00 Midnight, Eastern
Standard Time, on June __, 1997 to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the Ballot the
value of your account as of the close of business on April 24, 1997
(the "Voting Record Date"). If that data has not been provided,
please contact the institution(s) at which your account(s) are held
and request such information.
b. IF YOUR CLASS 5: SENIOR DEBENTURES HELD IN YOUR OWN NAME: For your
vote to be counted, you must verify Item 1, complete Items 2 and 3
and return this Ballot to ChaseMellon Shareholders Services (the
"Voting Agent") at the address set forth on the enclosed
pre-addressed postage pre-paid business reply envelope. You will find
your holdings, as of the close of business on the Voting Record Date,
indicated above.
If for any reason you did not receive a pre-addressed postage
pre-paid business reply envelope or if the amount of your holdings
indicated above is unclear or incorrect, please contact Georgeson &
Company Inc. at the toll-free number below.
BALLOTS MUST BE RECEIVED BY 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON
JUNE __, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS
RECEIVED AFTER THE VOTING EXPIRATION DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
Ballot, coded by class number and color and one set of solicitation
materials for each such class of claims or equity interests. Please
complete and return each Ballot you receive. YOU MUST VOTE ALL OF YOUR
CLAIMS OR EQUITY INTERESTS WITHIN A SINGLE CLASS UNDER THE PREPACKAGED
PLAN TO EITHER ACCEPT OR REJECT THE PREPACKAGED PLAN. ACCORDINGLY, A
BALLOT THAT PARTIALLY REJECTS AND/OR PARTIALLY ACCEPTS THE PREPACKAGED
PLAN WILL NOT BE COUNTED.
3. The Ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES WITH THIS BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING
AGENT WILL ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED
TOGETHER WITH A BALLOT. Surrender of securities for exchange pursuant
to the Prepackaged Plan may be made only pursuant to a letter of
transmittal which will be furnished to you by the Company (or its
agent) after confirmation of the Prepackaged Plan by the Bankruptcy
Court.
4. The Ballot is for voting purposes only and does not constitute and
shall not be deemed a proof of claim or interest or an assertion of
a claim or interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
GEORGESON & COMPANY INC.
TOLL-FREE AT (800) 223-2064
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS OF THE DATE OF THIS
DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 6: CLAIMS OF HOLDERS OF SUBORDINATED DEBENTURES)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE __, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April __, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Company may commence a chapter 11 case and seek to have the Prepackaged Plan
confirmed by the Bankruptcy court; however, the Company expressly reserves
the right, in its sole and absolute discretion, to not commence such a
chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES WITH THIS
BALLOT, AND NEITHER THE COMPANY NOR THE VOTING AGENT WILL ACCEPT DELIVERY OF
ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID COUNTED AS HAVING BEEN CAST. PLEASE VERIFY ITEM 1 AND COMPLETE
ITEMS 2 AND 3 ON THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
Please mark
your votes as /X/
indicated in
this example
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PREPACKAGED PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CUSIP NO. 097679 AB0)
Item 1: The undersigned, a Holder of a Class 6 Claim (Claims of Holders of
Subordinated Debentures) as defined in the Prepackaged Plan, is the beneficial
owner of the 12% Subordinated Pay-In-Kind Debentures due March 15, 2002 (the
"Subordinated Debentures") to Koll Real Estate Group, Inc. (the "Company")
having the aggregate principal amount as indicated above.
Item 2: The undersigned votes all Class 6 claim(s) referenced in Item 1 (check
box):
To accept To reject
the Prepackaged Plan the Prepackaged Plan
/ / / /
Item 3: By signing this Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Subordinated Debentures voted on this Ballot
and/or has full power and authority to vote to accept or reject the Prepackaged
Plan. The undersigned also acknowledges receipt of the Proxy Statement/
Prospectus and Disclosure Statement dated April __, 1997 (the "Prospectus") and
other applicable Prepackaged Plan Solicitation Materials as well as all terms
and conditions set forth therein.
/ / Check this box if you hold Senior Debentures in accounts
other than those represented by this Ballot, and list any
such other accounts here:
Dated:_______________________________________________,1997
X_________________________________________________________
X_________________________________________________________
Signature(s) of Debentureholder(s)
Signature(s) of Debentureholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If debentures are held jointly, EACH should sign.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the Ballot as
follows:
a. IF YOUR CLASS 6: SUBORDINATED DEBENTURES IS HELD THROUGH A BROKER,
BANK, OR OTHER NOMINEE: To have your vote count you must complete Items
2 and 3 and return this Ballot to such broker, bank or nominee. You
must return the Ballot to such entity, early enough for your vote to be
processed and forwarded to and received by the Voting Agent (defined
below) prior to 12:00 Midnight, EASTERN DAYLIGHT TIME, on June__, 1997
to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the Ballot the
value of your account as of the close of business on April 24, 1997
(the "Voting Record Date"). If that data has not been provided, please
contact the institution(s) at which your account(s) are held and
request such information.
b. IF YOUR CLASS 6: SUBORDINATED DEBENTURES IS REGISTERED IN YOUR OWN
NAME: For your vote to be counted, you must verify Item 1, complete
Item 2 and return this Ballot to ChaseMellon Shareholder Services (the
"Voting Agent") at the address set forth on the enclosed pre-addressed
postage pre-paid business reply envelope. You will find your holdings,
as of the close of business on the Voting Record Date, indicated
above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated
above is unclear or incorrect, please contact Georgeson & Company Inc.
the toll-free number below.
BALLOTS MUST BE RECEIVED BY 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE
__, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER THE
VOTING EXPIRATION DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
Ballot, coded by class number and color and one set of solicitation
materials for each such class of claims or equity interests. Please
complete and return each Ballot you receive. YOU MUST VOTE ALL OF YOUR
CLAIMS OR EQUITY INTERESTS WITHIN A SINGLE CLASS UNDER THE PREPACKAGED
PLAN TO EITHER ACCEPT OR REJECT THE PREPACKAGED PLAN. ACCORDINGLY, A
BALLOT THAT PARTIALLY REJECTS, AND/OR PARTIALLY ACCEPTS THE PREPACKAGED
PLAN WILL NOT BE COUNTED.
3. The Ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES
WITH THIS BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A BALLOT.
Surrender of securities for exchange pursuant to the Prepackaged Plan may
be made only pursuant to a letter of transmittal which will be furnished
to you by the Company (or its agent) after confirmation of the Prepackaged
Plan by the Bankruptcy Court.
4. The Ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
GEORGESON & COMPANY INC.
TOLL-FREE AT (800) 223-2064
<PAGE>
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED
AS OF THE DATE OF THIS DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 7: INTERESTS OF HOLDERS OF PREFERRED STOCK)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE __, 1997,
UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April __, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Company may
commence a chapter 11 case and seek to have the Prepackaged Plan confirmed by
the Bankruptcy court; however, the Company expressly reserves the right, in its
sole and absolute discretion, to not commence such a chapter 11 case, even if
it receives sufficient votes accepting the Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES WITH THIS
BALLOT, AND NEITHER THE COMPANY NOR THE VOTING AGENT WILL ACCEPT DELIVERY OF
ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID COUNTED AS HAVING BEEN CAST. PLEASE VERIFY ITEM 1 AND COMPLETE
ITEMS 2 AND 3 ON THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
Please mark
your votes as
indicated in /X/
this example
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CUSIP NO. 500434 204)
Item 1: The undersigned, a Holder of a Class 7 Claim Interests of (holders of
Preferred Stock) as defined in the Prepackaged Plan, is the beneficial owner of
the number of shares of Series A Convertible Redeemable Preferred Stock (the
"Preferred Stock") of Koll Real Estate Group, Inc. (the "Company") as indicated
above.
Item 2: The undersigned votes all Class 7 claim(s) referenced in Item 1 (check
box):
To accept To reject
the Prepackaged Plan the Prepackaged Plan
/ / / /
Item 3: By signing this Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Preferred Stock voted on this Ballot and/or has
full power and authority to vote to accept or reject the Prepackaged Plan. The
undersigned also acknowledges receipt of the Proxy Statement/Prospectus and
Disclosure Statement dated April __, 1997 (the "Prospectus") and other
applicable Prepackaged Plan Solicitation Materials as well as all terms and
conditions set forth therein.
/ / Check this box if you hold Preferred Stock in accounts other then those
represented by this Ballot, and list any such other accounts here:
- --------------------------------------------------------------------------------
Dated: , 1997
--------------------------------------
X
--------------------------------------
X
--------------------------------------
Signature(s) of Stockholder(s)
Signature(s) of Stockholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If shares are held jointly, EACH should sign.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the Ballot
as follows:
a. IF YOUR CLASS 7: PREFERRED STOCK IS HELD THROUGH A BROKER, BANK, OR OTHER
NOMINEE: To have your vote count you must verify Item 1 complete Items 2
and 3 and return this Ballot to such broker, bank or nominee. You must
return the Ballot to such entity, early enough for your vote to be
processed and forwarded to and received by the Voting Agent (defined
below) prior to 12:00 Midnight, Eastern Daylight Time, on June __, 1997
to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the Ballot the value
of your account as of the close of business on April 24, 1997 (the
"Voting Record Date"). If that data has not been provided, please contact
the institution(s) at which your account(s) are held andrequest such
information.
b. IF YOUR CLASS 7: PREFERRED STOCK IS REGISTERED IN YOUR OWN NAME: For your
vote to be counted, you must verify Item 1, complete Items 2 and 3 and
return this Ballot to ChaseMellon Shareholder Services (the "Voting
Agent") at the address set forth on the enclosed pre-addressed postage
pre-paid business reply envelope. You will find your holdings, as of the
close of business on the Voting Record Date, indicated above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated above
is unclear or incorrect, please contact Georgeson & Company Inc. at the
toll-free number below.
BALLOTS MUST BE RECEIVED BY 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE
__, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER THE
VOTING EXPIRATION DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
Ballot, coded by class number and color and one set of solicitation materials
for each such class of claims or equity interests. Please complete and return
each Ballot you receive. YOU MUST VOTE ALL OF YOUR CLAIMS OR EQUITY
INTERESTS WITHIN A SINGLE CLASS UNDER THE PREPACKAGED PLAN TO EITHER ACCEPT
OR REJECT THE PREPACKAGED PLAN. ACCORDINGLY, A BALLOT THAT PARTIALLY REJECTS
AND/OR PARTIALLY ACCEPTS THE PREPACKAGED PLAN WILL NOT BE COUNTED.
3. The Ballot is not a letter of transmittal and may not be used for any other
purpose other than to vote to accept or reject the Prepackaged Plan. HOLDERS
SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES WITH THIS
BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT DELIVERY OF
ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A BALLOT. Surrender of
securities for exchange pursuant to the Prepackaged Plan may be made only
pursuant to a letter of transmittal which will be furnished to you by the
Company (or its agent) after confirmation of the Prepackaged Plan by the
Bankruptcy Court.
4. The Ballot is for voting purposes only and does not constitute and shall not
be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
GEORGESON & COMPANY INC.
TOLL-FREE AT (800) 223-2064
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED
AS OF THE DATE OF THIS DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 8: INTERESTS OF HOLDERS OF CLASS A COMMON STOCK)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE __, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April __, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Company may commence a chapter 11 case and seek to have the Prepackaged Plan
confirmed by the Bankruptcy court; however, the Company expressly reserves
the right, in its sole and absolute discretion, to not commence such a
chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES WITH THIS
BALLOT, AND NEITHER THE COMPANY NOR THE VOTING AGENT WILL ACCEPT DELIVERY OF
ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF
THIS BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID COUNTED AS HAVING BEEN CAST. PLEASE VERIFY ITEM 1 AND COMPLETE
ITEMS 2 AND 3 ON THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes as / X /
indicated in
this example
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CUSIP NO. 500434 015)
Item 1: The undersigned, a Holder of a Class 8 Claim (Interests of Holders of
Class A Common Stock) as defined in the Prepackaged Plan, is the beneficial
owner of the number of shares of Class A Common Stock of Koll Real Estate Group,
Inc. (the "Company") as indicated above.
Item 2: The undersigned votes all Class 8 claim(s) referenced in Item 1 (check
box):
To accept To reject
the Prepackaged Plan the Prepackaged Plan
/ / / /
Item 3: By signing this Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Class A Common Stock voted on this Ballot,
and/or has full power and authority to vote to accept or reject the
Prepackaged Plan, and that, unless the box below is checked by the
undersigned, the Class A Common Stock voted on this Ballot represents all
such Class A Common Stock held by the undersigned. The undersigned also
acknowledges receipt of the Proxy Statement/Prospectus and Disclosure
Statement dated April __, 1997 (the "Prospectus") and other applicable
Prepackaged Plan Solicitation Materials as well as all terms and conditions
set forth therein. Check this box if you hold Class A Common Stock in
accounts other than those represented by this Ballot, and list any such other
accounts here:
/ / Check this box if you hold Class A Common Stock in
accounts other than those represented by this Ballot,
and list any such other accounts here:
________________________________________
Dated:__________________________ ,1997
X ____________________________________
X ____________________________________
Signature(s) of Stockholder(s)
Signature(s) of Stockholder(s) - please
sign name exactly as imprinted (do not
print). Please indicate any change of address.
NOTE: Executive, administrators, trustees
and others signing in a representative
capacity should indicate the capacity in which
they sign.
If shares are held jointly, EACH should sign.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the
Ballot as follows:
a. IF YOUR CLASS 8: CLASS A COMMON STOCK IS HELD THROUGH A BROKER, BANK,
OR OTHER NOMINEE: To have your vote count you must verify Item 1,
complete Items 2 and 3 and return this Ballot to such broker, bank or
nominee. You must return the Ballot to such entity, early enough for
your vote to be processed and forwarded to and received by the Voting
Agent (defined below) prior to 12:00 Midnight, Eastern Daylight Time,
on June __, 1997 to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the Ballot the
value of your account as of the close of business on April 24, 1997
(the "Voting Record Date"). If that data has not been provided,
please contact the institution(s) at which your account(s) are held
and request such information.
b. IF YOUR CLASS 8: CLASS A COMMON STOCK IS REGISTERED IN YOUR OWN NAME:
For your vote to be counted, you must verify Item 1, complete Items 2
and 3 and return this Ballot to ChaseMellon Shareholder Services (the
"Voting Agent") at the address set forth on the enclosed
pre-addressed postage pre-paid business reply envelope. You will find
your holdings, as of the close of business on the Voting Record Date,
indicated above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated
above is unclear or incorrect, please contact Georgeson & Company Inc.
at the toll-free number below.
BALLOTS MUST BE RECEIVED BY 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON
JUNE __, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS
RECEIVED AFTER THE VOTING EXPIRATION DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
Ballot, coded by class number and color and one set of solicitation
materials for each such class of claims or equity interests. Please
complete and return each Ballot you receive. YOU MUST VOTE ALL OF YOUR
CLAIMS OR EQUITY INTERESTS WITHIN A SINGLE CLASS UNDER THE PREPACKAGED
PLAN TO EITHER ACCEPT OR REJECT THE PREPACKAGED PLAN. ACCORDINGLY, A
BALLOT THAT PARTIALLY REJECTS AND/OR PARTIALLY ACCEPTS THE PREPACKAGED
PLAN WILL NOT BE COUNTED.
3. The Ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES WITH THIS BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING
AGENT WILL ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED
TOGETHER WITH A BALLOT. Surrender of securities for exchange pursuant
to the Prepackaged Plan may be made only pursuant to a letter of
transmittal which will be furnished to you by the Company (or its
agent) after confirmation of the Prepackaged Plan by the Bankruptcy
Court.
4. The Ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
GEORGESON & COMPANY INC.
TOLL-FREE AT (800) 223-2064
<PAGE>
- -------------------------------------------------------------------------------
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS OF THE DATE OF THIS
DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 5: GENERAL UNSECURED CLAIMS -- OTHER THAN SENIOR DEBENTURES)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE __, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject the
Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April __, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Company may commence a chapter 11 case and seek to have the Prepackaged Plan
confirmed by the Bankruptcy court; however, the Company expressly reserves
the right, in its sole and absolute discretion, to not commence such a
chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES WITH THIS
BALLOT, AND NEITHER THE COMPANY NOR THE VOTING AGENT WILL ACCEPT DELIVERY OF
ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS BALLOT
BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID COUNTED AS HAVING BEEN CAST. PLEASE VERIFY ITEM 1 AND COMPLETE
ITEMS 2 AND 3 ON THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
- ------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
Please mark your
votes as indicated
in this example
/X/
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
Item 1: The undersigned, a Holder of a Class 5 Claim (General Unsecured Claim
- --Other than Senior Debentures) as defined in the Prepackaged Plan, is the
beneficial owner of a General Unsecured Claim (other than Senior Debentures)
against Koll Real Estate Group, Inc. (the "Company") as indicated above.
Item 2: The undersigned votes all Class 5 claim(s) referenced in Item 1 (check
box):
To accept To reject
the Prepackaged Plan the Prepackaged Plan
/ / / /
Item 3: By signing this Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Class 5 Claim(s) voted on this Ballot and/or
has full power and authority to vote to accept or reject the Prepackaged
Plan. The undersigned also acknowledges receipt of the Proxy
Statement/Prospectus and Disclosure Statement dated April __, 1997 (the
"Prospectus") and other applicable Prepackaged Plan Solicitation Materials as
well as all terms and conditions set forth therein.
/ / Check this box if you hold Class 5 Claims (other than Senior
Debentures) in accounts other than those represented by this
Ballot, and list any such other accounts here:
Dated:______________________________________,1997
X_________________________________________________
X_________________________________________________
Signature(s) of Claimholder(s)
Signature(s) of Claimholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If Claims are held jointly, EACH should sign.
- ------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the Ballot as
follows:
a. IF YOUR CLASS 5: GENERAL UNSECURED CLAIM -- OTHER THAN SENIOR DEBENTURES
IS HELD THROUGH A BROKER, BANK, OR OTHER NOMINEE: To have your vote count
you must verify Item 1, complete Items 2 and 3 and return this Ballot
to such broker, bank or nominee. You must return the Ballot to such
entity, early enough for your vote to be processed and forwarded to and
received by the Voting Agent (defined below) prior to 12:00 Midnight,
Eastern Standard Time, on June __, 1997 to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the Ballot the
value of your account as of the close of business on April 24, 1997 (the
"Voting Record Date"). If that data has not been provided, please
contact the institution(s) at which your account(s) are held and request
such information.
b. IF YOUR CLASS 5: GENERAL UNSECURED CLAIM -- OTHER THAN SENIOR DEBENTURES
IS REGISTERED IN YOUR OWN NAME: For your vote to be counted, you must verify
Item 1, complete Items 2 and 3 and return this Ballot to ChaseMellon
Shareholder Services (the "Voting Agent") at the address set forth on
the enclosed pre-addressed postage pre-paid business reply envelope. You
will find your holdings, as of the close of business on the Voting
Record Date, indicated above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated above
is unclear or incorrect, please contact Georgeson & Company Inc. at the
toll-free number below.
BALLOTS MUST BE RECEIVED BY 12:00 MIDNIGHT, EASTERN DAYLIGHT TIME, ON JUNE
__, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER THE
VOTING EXPIRATION DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
Ballot, coded by class number and color and one set of solicitation
materials for each such class of claims or equity interests. Please
complete and return each Ballot you receive. YOU MUST VOTE ALL OF
YOUR CLAIMS OR EQUITY INTERESTS WITHIN A SINGLE CLASS UNDER THE
PREPACKAGED PLAN TO EITHER ACCEPT OR REJECT THE PREPACKAGED PLAN.
ACCORDINGLY, A BALLOT THAT PARTIALLY REJECTS AND/OR PARTIALLY ACCEPTS
THE PREPACKAGED PLAN WILL NOT BE COUNTED.
3. The Ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR CLAIMS WITH
THIS BALLOT, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A BALLOT.
Surrender of claims for exchange pursuant to the Prepackaged Plan may
be made only pursuant to a letter of transmittal which will be furnished
to you by the Company (or its agent) after confirmation of the Prepackaged
Plan by the Bankruptcy Court.
4. The Ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
GEORGESON & COMPANY INC.
TOLL-FREE AT (800) 223-2064
<PAGE>
EXHIBIT 99.07
DIRECTOR NOMINEE'S CONSENT
I consent to my being named as a director nominee in this Registration
Statement of Koll Real Estate Group, Inc. on Form S-4, including Amendment
No. 2 and any further amendments thereto, and to the references to me under
the headings "Proposal No. 8 Elect Slate of Directors to Reconstitute the
Board of Directors" and "Executive Officers and Directors of the Company" in
the Prospectus, which is part of this Registration Statement.
/s/ PHILLIP R. BURNAMAN II
------------------------------
Phillip R. Burnaman II
April 15, 1997
/s/ JAMES J. GAFFNEY
------------------------------
James J. Gaffney
April 8, 1997
/s/ ROBERT J. GAGALIS
------------------------------
Robert J. Gagalis
April 15, 1997
/s/ THOMAS W. SABIN, JR.
------------------------------
Thomas W. Sabin, Jr.
April 15, 1997
/s/ P. JOHN WICKSER II
------------------------------
P. John Wickser II
April 15, 1997
/s/ PAUL M. ZELLER
------------------------------
Paul M. Zeller
April 15, 1997
<PAGE>
KOLL REAL ESTATE GROUP, INC.
FORM OF
COMMON STOCK PURCHASE WARRANT
_______________, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions............................................................. 1.
2. Exercise of Warrant..................................................... 3.
2.1 Manner of Exercise...............................................3.
2.2 Payment of Taxes.................................................4.
2.3 Fractional Shares................................................4.
3. Transfer, Division and Combination.......................................4.
3.1 Transfer.........................................................4.
3.2 Division and Combination.........................................5.
3.3 Expenses.........................................................5.
3.4 Maintenance of Books.............................................5.
4. Adjustments..............................................................5.
4.1 Stock Dividends, Subdivisions, Combinations
and Reclassifications........................................... 5.
4.2 Other Provisions Applicable to Adjustments under this Section....6.
5. Notices to Warrant Holders; Notice of Adjustments........................6.
6. Reservation and Authorization of Common Stock............................6.
7. Taking of Record; Stock and Warrant Transfer Books.......................6.
8. Transferability and Registration.........................................7.
8.1 Notice of Proposed Transfers.....................................7.
8.2 Required Registration............................................7.
8.3 Registration Procedures..........................................8.
8.4 Expenses; Limitations on Registration............................9.
8.5 Indemnification..................................................9.
8.6 Listing on Securities Exchange..................................11.
8.7 Certain Limitations on Registration Rights......................11.
9. Loss or Mutilation......................................................11.
10. Office of The Company...................................................12.
11. Financial and Business Information......................................12.
12. Limitation of Liability.................................................12.
13. Miscellaneous...........................................................12.
13.1 Nonwaiver and Expenses.........................................12.
13.2 Notice Generally...............................................12.
13.3 Successors and Assigns.........................................13.
13.4 Amendment......................................................13.
13.5 Construction...................................................13.
13.6 Severability...................................................13.
13.7 Headings.......................................................14.
13.8 Governing Law; Service of Process..............................14.
13.9 Mutual Waiver of Jury Trial....................................14.
Exhibit A
Exhibit B
i.
<PAGE>
KOLL REAL ESTATE GROUP, INC.
COMMON STOCK PURCHASE WARRANT
_______________, 1997
THIS IS TO CERTIFY THAT ___________________ or its registered assigns, is
entitled, at any one time on and after the First Available Exercise Date and on
or prior to the Expiration Date to purchase from KOLL REAL ESTATE GROUP, INC., a
Delaware corporation (the "Company"), for no additional consideration, that
number of shares of Common Stock of the Company (as hereinafter defined and
subject to adjustment as provided herein) determined by dividing
_________________ Dollars ($______) by the average of the per share trading
price of the Company's Common Stock for the first twenty (20) Trading Day period
commencing on the next Trading Day following the Closing Date, all on the terms
and conditions and pursuant to the provisions hereinafter set forth.
Capitalized terms used herein and not otherwise defined, shall have the meanings
set forth below.
1. DEFINITIONS.
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company following the date of this Warrant.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the States of
California or New York.
"Closing Date" shall mean the date on which the closing of the
Recapitalization occurs.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock par value $0.05 per share of the Company, and any capital stock
into which such Common Stock may thereafter be changed, and shall also include
capital stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of Common Stock upon any reclassification
thereof which is not preferred as to dividends or assets over any other class of
stock of the Company and which is not subject to redemption.
"Convertible Securities" shall mean evidences of indebtedness, options,
warrants or other rights to receive shares of stock or other securities which
are convertible into or exchangeable for Common Stock, with or without payment
of additional consideration in cash or property, either immediately or upon the
occurrence of a specified date or a specified event.
1.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean the date that is two (2) years following the
Registration Effective Date.
"First Available Exercise Date" shall mean the date which is twenty (20)
Trading Days following the Closing Date.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of this Warrant and all other Convertible Securities
or other rights to purchase or receive Common Stock outstanding on such date.
"Holder" shall mean the Person or Persons in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose. In the event more than one Person is so registered, "Holder" for
purposes of consent, demand or other action allowed or required to be taken
hereunder by the Holder(s) of this Warrant, the word "Holder" shall refer to a
simple majority in interest of such Persons.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the stock market operated by the NASD.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held exclusively by or for
the account solely of the Company or any wholly-owned Subsidiary thereof
(collectively, "Subsidiary-Held Shares"), and shall include all shares issuable
in respect of any certificates representing fractional interests in shares of
Common Stock. Subsidiary-Held Shares shall remain Subsidiary-Held Shares even
if held in pledge as security unless and until such shares are foreclosed upon
and record, beneficial or equitable ownership transferred.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
2.
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"Preferred Stock" shall mean any class of the Company's stock having
rights, preferences or privileges senior or prior in right to any other class.
"Recapitalization" means the Recapitalization of the Company as proposed
and described in that certain Registration Statement of the Company first filed
with the Commission on Form S-4 on February 20, 1997 Registration No. 333-22121.
"Registration Effective Date" shall mean the date a registration statement
first becomes effective with the Commission registering the sale and
distribution of the Warrants and Warrant Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall mean, with respect to any Person, any corporation of
which an aggregate of more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Subsidiary-Held Shares" shall have the meaning set forth above in the
definition of "Outstanding."
"Trading Day" shall mean any day on which NASDAQ is open for trading.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 8.1.
"Warrant" or Warrants" shall mean this Warrant and all warrants issued upon
Transfer, division or combination of, or in substitution for, this Warrant. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the percentage of Fully Diluted Outstanding Shares of Common Stock
for which they may be exercised. Collectively, all unexercised Warrants shall
be exercisable for the exact same number of shares as this Warrant would be
exercisable in the event any such Transfer or division had not occurred.
Exercise of any warrant(s) shall not trigger any of the adjustments contemplated
by Section 4 of this Warrant.
"Warrant Stock" shall mean the shares of Common Stock issuable to the
Holder of the Warrants upon the exercise thereof.
3.
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2. EXERCISE OF WARRANT.
2.1 MANNER OF EXERCISE. From and after the First Available
Exercise Date and until 5:00 p.m., Eastern time, on the Expiration Date, the
Holder may exercise the Warrant on Business Days, for all or any part of shares
(subject to adjustment as provided herein) of Common Stock then purchasable
hereunder. In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 4343 Von Karman, Newport
Beach, California 92660, ATTENTION: Raymond J. Pacini or at the office or agency
designated by the Company pursuant to Section 11, (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased and (ii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as EXHIBIT A, duly executed by Holder or its agent or
attorney. Upon receipt thereof, the Company shall, as promptly as practicable,
and in any event within five (5) Business Days thereafter, execute or cause to
be executed and deliver or cause to be delivered to Holder a certificate or
certificates representing the aggregate number of full shares of Common Stock
issuable upon such exercise. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as such
Holder shall request in the notice and shall be registered in the name of Holder
or, subject to Section 8, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice and this
Warrant are received by the Company as described above and all taxes required to
be paid by Holder, if any, pursuant to Section 2.2 prior to the issuance of such
shares have been paid or agreed to be paid when finally determined.
2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable. The Company shall pay all expenses in connection
with, and all taxes and other governmental charges that may be imposed with
respect to, the issue or delivery thereof, unless such taxes or charges are
imposed by law upon Holder, in which case such taxes or charges shall be paid by
Holder. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any Transfer involved in the issuance of any
certificate for shares of Common Stock issuable upon exercise of this Warrant in
any name other than that of Holder, and in such case the Company shall not be
required to issue or deliver any stock certificate until any such tax or other
charge has been paid or it has been established to the satisfaction of the
Company that no such tax or other charge is due.
2.3 FRACTIONAL SHARES. The Company shall not issue a fractional
share of Common Stock upon exercise of this Warrant. A fractional share
otherwise issuable shall be rounded up or down to the nearest whole share.
3. TRANSFER, DIVISION AND COMBINATION.
3.1 TRANSFER. Transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon
4.
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surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 10, together with a written assignment of this Warrant substantially in
the form of EXHIBIT B hereto duly executed by Holder or its agent or attorney
and funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company
shall, subject to Section 8, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned in compliance with
Section 8, may be exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant issued. If requested by the Company, a new
Holder shall acknowledge in writing, in form reasonably satisfactory to the
Company, such Holder's continuing obligations under this Warrant.
3.2 DIVISION AND COMBINATION. Subject to Section 8, this Warrant
may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 8, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3 EXPENSES. The Company shall prepare, issue and deliver at its
own expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4 MAINTENANCE OF BOOKS. The Company shall maintain, at its
aforesaid office or agency, books for the registration, and the registration of
transfer, of this Warrant.
4. ADJUSTMENTS. The number of shares of Common Stock for which this
Warrant is exercisable shall be subject to adjustment from time to time as set
forth in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1 STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS AND
RECLASSIFICATIONS. If at any time the Company shall with respect to its Common
Stock or Convertible Securities:
(a) pay a dividend or make distribution to holders of the
Company's securities generally of Additional Shares of Common Stock or
Convertible Securities, other than convertible indebtedness or convertible
Preferred Stock,
(b) subdivide its Outstanding shares of Common Stock into a
larger number of shares of Common Stock,
(c) combine its Outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or
5.
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(d) reclassify its Common Stock (other than a change in par
value, or from par value to no par value) into shares of any other class of
stock; and, if the Outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the Outstanding shares of Common Stock within the meaning of
this Section 4.1., then the number of shares of Common Stock for which this
Warrant is exercisable after the occurrence of any such event shall be equal to
(A) the maximum number of shares of Common Stock underlying this Warrant prior
to the occurrence of any such event, multiplied by (B) the number of Fully
Diluted Outstanding shares of Common Stock after any such event, divided by the
number of Fully Diluted Outstanding shares of Common Stock prior to any such
event. Any increased number of shares of Common Stock subject to this Warrant
resulting from application of the foregoing shall be allocated ratably among all
shares of Common Stock subject to this Warrant prior to each such event.
4.2 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION.
The following provisions shall be applicable to the making of adjustments to the
number of shares of Common Stock for which this Warrant is exercisable:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required
by this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(b) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
5. NOTICES TO WARRANT HOLDERS; NOTICE OF ADJUSTMENTS. Whenever the number
of shares of Common Stock for which this Warrant is exercisable shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated, specifying the number of shares of
Common Stock for which this Warrant is exercisable, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to each Holder in accordance with Section 13.2. The
Company shall keep at its office or agency designated pursuant to Section 10
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK. From and after the
Closing Date, the Company shall at all times reserve and keep available for
issuance upon the exercise of Warrants such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding Warrants. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrants and payment therefor in
accordance with the terms of such Warrants, shall be duly and validly issued,
fully paid and nonassessable, and shall not be subject to preemptive rights.
7. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the case of all
dividends or other distributions by the Company to the holders of its Common
Stock with respect to which any provision of Section 4 requires the taking of a
record of such holders, the Company will in each such case take such a record as
of the close of business on a Business Day. The Company will not at any time,
except upon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in the prevention
of or delay in the exercise or transfer of any Warrant.
8. TRANSFERABILITY AND REGISTRATION. This Warrant and the Warrant Stock
shall not be transferred, hypothecated or assigned before satisfaction of the
conditions specified in this Section 8, which conditions are intended to ensure
compliance with the provisions of the Securities Act and state law, with respect
to the Transfer of this Warrant or any Warrant Stock. Holder, by
6.
<PAGE>
acceptance of this Warrant, agrees to be bound by the provisions of this Section
8.
8.1 NOTICE OF PROPOSED TRANSFERS. Prior to any Transfer or
attempted Transfer of any Warrants or any shares of Warrant Stock, the holder of
such Warrants or Warrant Stock shall give prior written notice (a "Transfer
Notice") to the Company of such holder's intention to effect such Transfer,
describing the manner and circumstances of the proposed Transfer, and during any
period in which the Warrants or Warrant Stock are not covered by an effective
registration statement permitting their Transfer, shall obtain and deliver to
the Company an opinion in form and substance reasonably satisfactory to the
Company (addressed to the Company and upon which the Company may rely) from
counsel to such holder who shall be reasonably satisfactory to the Company, that
the proposed Transfer of such Warrants or such Warrant Stock may be effected
without registration under the Securities Act and any applicable state
securities law(s). During any period in which such Warrants or Warrant Stock
are not covered by an effective registration statement, after receipt of the
Transfer Notice and opinion, as applicable, the Company shall, within five (5)
Business Days thereof, notify the holder of such Warrants or Warrant Stock and
such holder shall thereupon be entitled to Transfer such Warrants or such
Warrant Stock, in accordance with the terms of the Transfer Notice. During any
period in which such Warrants or Warrant Stock are covered by an effective
registration statement, Holder may immediately Transfer such Warrants or Warrant
Stock subject to any state blue sky laws which may restrict such Transfer. Each
certificate, if any, evidencing Warrants or shares of Warrant Stock issued upon
a Transfer which occurs during any period in which such Warrants or Warrant
Stock are not covered by an effective registration statement shall bear
appropriate restrictive legends, unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act and
any applicable state securities law(s).
8.2 REQUIRED REGISTRATION. The Company shall, as expeditiously as
is possible, use its commercially reasonable efforts to effect and continue the
registration under the Securities
7.
<PAGE>
Act of the Warrants and all shares of Warrant Stock for sale, all to the extent
required to permit the disposition of the Warrants and the Warrant Stock so
registered during the Exercise Period; provided, however, that the Company shall
not be required to effect more than one registration of the Warrants or any
Warrant Stock pursuant to this Section 8.2. If the Company furnishes to the
Holder a copy of a resolution of the Board of Directors of the Company certified
by the Secretary of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company and its
stockholders for such registration statement to remain effective as long as such
registration statement would otherwise be required to remain effective, the
Company shall have the right to suspend such effectiveness for a period of not
more than 120 days; provided that, if effectiveness of such registration
statement is suspended pursuant to this provision, the period of such suspension
shall be added to the end of the period that such registration statement would
otherwise be required to be effective hereunder and the Exercise Period shall be
extended so that the aggregate number of days that such registration statement
is required to remain effective hereunder and the aggregate number of days that
the Warrants remain exercisable with such an effective registration statement in
place shall remain unchanged. Holder agrees that during any period in which the
effectiveness of a registration statement is suspended, Holder will discontinue
disposition of Warrants or Warrant Stock pursuant to such registration statement
and will comply with the terms of Section 8.1 applicable to Transfers occurring
when there is no effective registration statement in place with respect to any
Transfer of Warrants or Warrant Stock.
8.3 REGISTRATION PROCEDURES. In connection with the Company's
above described obligation to use its commercially reasonable efforts to effect
the registration of the Warrants and Warrant Stock under the Securities Act, the
Company will, subject to the provisions of Section 8.2 above, as expeditiously
as possible use its commercially reasonable efforts to:
(a) prepare and file with the Commission a registration
statement with respect to such securities and to cause such registration
statement to become and remain effective during the Exercise Period;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities covered by such registration
statement during the Exercise Period;
(c) furnish to any selling security holders such number of
copies of a summary prospectus or other prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such selling
security holders may reasonably request;
(d) register or qualify the securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions within the United States and Puerto Rico as each Holder of such
securities shall reasonably request in light of such Holder's intended plan of
distribution (provided, however, that the Company shall have no such obligation
in the event the Company's shares are traded on a national securities exchange
or national market
8.
<PAGE>
system, and provided further that the Company shall not be obligated to qualify
as a foreign corporation to do business under the laws of any jurisdiction in
which it is not then qualified or to file any general consent to service of
process or subject itself to taxation in any such jurisdiction), and do such
other reasonable acts and things as may be required of it to enable such holder
to consummate the disposition in such jurisdiction of the securities covered by
such registration statement;
(e) otherwise comply with all applicable rules and
regulations of the Commission applicable to the registration of the Warrants and
the Warrant Stock; and
(f) notify each selling Holder of such registrable
securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the securities covered by the
registration statement, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and promptly make
available to each selling Holder any such supplement or amendment.
It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Section 8 in respect of the securities which
are to be registered that the Holder of Warrants or Warrant Stock shall furnish
to the Company such information regarding the securities held by such holder and
the intended method of disposition thereof as the Company shall reasonably
request and as shall be required in connection with the action taken by the
Company.
Each selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 8.3(f)
hereof, such selling Holder will forthwith discontinue disposition of Warrants
and Warrant Stock pursuant to the registration statement covering such
securities and will comply with the terms of Section 8.1 applicable to Transfers
occurring when there is no effective registration statement in place with
respect to any Transfer of Warrants or Warrant Stock until such selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 8.3(f) hereof, and, if so directed by the Company such selling Holder
will deliver to the Company all copies, other than permanent file copies then in
such selling Holder's possession, of the most recent prospectus covering the
securities covered by registration statement at the time of receipt of such
notice. If the Company shall give such notice, the Company shall extend the
period during which such registration statement shall be maintained effective
and the Exercise Period by the number of days during the period from and
including the date of the giving of notice pursuant to Section 8.3(f) hereof to
the date when the Company shall make available to the selling Holders of the
securities covered by such registration statement a prospectus supplemented or
amended to conform with the requirements of Section 8.3(f) hereof.
8.4 EXPENSES; LIMITATIONS ON REGISTRATION. All expenses incurred
in complying with the Company's registration requirements described in this
Section 8, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD,
9.
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printing expenses, fees and disbursements of counsel for the Company, expenses
of any special audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any jurisdictions
pursuant to Section 8.3(d), shall be paid by the Company, except that the
Company shall not be liable for any fees, discounts or commissions to any
underwriter, broker or counsel in respect of the securities sold by such holder
of Warrants or Warrant Stock.
8.5 INDEMNIFICATION.
(a) Upon registration of any of the Warrant Stock under the
Securities Act pursuant to this Section 8, the Company shall indemnify and hold
harmless the holder of such Warrant Stock, such holder's directors and officers,
and each other Person who participated in the offering of such Warrant Stock and
each other Person, if any, who controls such holder or such participating Person
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or participating Person or controlling Person may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse such Holder or such director, officer or participating
Person or controlling Person for any legal or any other expenses reasonably
incurred by such holder or such director, officer or participating Person or
controlling Person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any alleged untrue statement or
alleged omission made in such registration statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
information furnished to the Company by such holder specifically for use
therein. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or such director, officer or
participating Person or controlling Person, and shall survive the transfer of
such securities by such holder.
(b) Each holder of any Warrant Stock, by acceptance
thereof, agrees to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls the Company within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director or
officer or any such Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
information provided to the Company by such Holder of such Warrant Stock
contained, on the effective date thereof, in any registration statement under
which securities were registered under the Securities Act at the request of such
holder, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto; provided, however, that such Holder's
obligation under this Section 8.5(b) to indemnify
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and hold harmless the Company shall in no event exceed the damage attributable
solely to the inclusion of such written information in such registration
statement, preliminary prospectus, final prospectus, or amendment or supplement
suffered by the Person or Persons whose claims gave rise to such losses, claims,
damages or liabilities.
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information furnished in writing by persons specifically
for inclusion in any prospectus or registration statement.
(c) If the indemnification provided for in this Section 8.5 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party under this Section 8.5 as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.5(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Notwithstanding any other provisions of this Warrant, the
Company shall not be liable in any case to the extent that any loss, claim,
damage, liability or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission in any registration
statement or prospectus, if such untrue statement or alleged untrue statement,
omission or alleged omission is corrected in an amendment or supplement to the
registration statement and the Holder thereafter fails to deliver such
registration statement or prospectus as so amended or supplemented prior to or
concurrently with the sale of the securities covered by such registration
statement to the person asserting such loss, claim, damage, liability or expense
after the Company had furnished such Holder with a sufficient number of copies
of the same.
11.
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8.6 LISTING ON SECURITIES EXCHANGE. If and so long as the Company
shall list any shares of Common Stock on NASDAQ or any securities exchange, it
will, at its expense, list thereon, maintain and, when necessary, increase such
listing of, all shares of Common Stock issued or, to the extent permissible
under the applicable NASDAQ or securities exchange rules, issuable upon the
exercise of this Warrant concurrently with registration of such shares under the
Securities Act for so long as any shares of Common Stock shall be so listed
during any such Exercise Period.
8.7 CERTAIN LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding
the other provisions of Section 8, the Company shall not be obligated to
continue to maintain an effective registration statement registering the
Warrants or Warrant Stock of any Holder if (x) in the opinion of counsel to the
Company, the sale or other disposition of such Holder's Warrants or Warrant
Stock, in the manner proposed by such Holder may be effected without
registration of such Warrants or Warrant Stock under the Securities Act.
9. LOSS OR MUTILATION. Upon receipt by the Company from any Holder of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it, and in case of mutilation upon surrender and cancellation thereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
10. OFFICE OF THE COMPANY. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive office of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant. The Company shall notify Holder in writing prior to any change of
the address of the office at which the Warrants may be presented.
11. FINANCIAL AND BUSINESS INFORMATION. The Company will file on or
before the required date all required regular or periodic reports (pursuant to
the Exchange Act) with the Commission and will deliver to Holder upon written
request by Holder promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its stockholders
generally, and of each regular or periodic report (pursuant to the Exchange Act)
and any registration statement, prospectus or written communication (other than
transmittal letters) pursuant to the Securities Act, filed by the Company with
(i) the Commission or (ii) any securities exchange on which shares of Common
Stock are listed (provided, however, that the Company may request filing
extensions pursuant to Rule 12b-25 under the Securities and Exchange Act of
1934, as amended).
12. LIMITATION OF LIABILITY. No provision hereof, in the absence of
affirmative action by the Holder to exercise the Warrant and acquire shares of
Common Stock, and no enumeration herein of the rights or privileges of Holder
hereof, shall give rise to any liability of such Holder as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
12.
<PAGE>
13. MISCELLANEOUS.
13.1 NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Company shall operate
as a waiver of such right or otherwise prejudice the Company's rights, powers or
remedies. No course of dealing or any delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right or
otherwise prejudice the Holder's rights, powers or remedies. If the Company
fails to make, when due, any payments provided for hereunder, or fails to comply
with any other provision of this Warrant, the Company shall pay to the Holder
such amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
13.2 NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered (i) in person with receipt acknowledged,
(ii) by facsimile transmission, with receipt electronically confirmed during
normal business hours of recipient, and that is confirmed by sending, no later
than one (1) Business Day following such transmission, a copy of such facsimile,
by registered or certified mail, return receipt requested, postage prepaid, or
(iii) by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its
last known address or facsimile transmission number appearing on the books of
the Company maintained for such purpose.
(b) IF TO THE COMPANY TO:
Koll Real Estate Group, Inc.
4343 Von Karman Avenue
Newport Beach, California 92660
Attention: Raymond J. Pacini
Fax: (714) 261-6550
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged or sent by facsimile with receipt
electronically confirmed during normal business hours of recipient, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
approval, declaration, delivery or other communication to the person designated
above to receive a copy shall in no way adversely affect the effectiveness of
such notice, demand, request, approval, declaration, delivery or other
communication.
13.
<PAGE>
13.3 SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections
3.1 and 8, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for
the benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
13.4 AMENDMENT. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Holder.
13.5 CONSTRUCTION. The parties hereby acknowledge that they
participated jointly in the preparation of this Warrant. Each party to this
Warrant has had the opportunity to review, comment upon and redraft this
Warrant. It is agreed that no rule of construction shall apply against any
party or in favor of any party. This Agreement shall be construed as if the
parties jointly prepared this Agreement and any uncertainty and ambiguity shall
not be interpreted against any one party. This Agreement is to be enforced and
governed by and under the laws of the State of Delaware.
13.6 SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
13.7 HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
13.8 GOVERNING LAW; SERVICE OF PROCESS. In all respects, including
all matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the state of Delaware applicable to contracts
made and performed in such state, without regard to the principles thereof
regarding conflict of laws, and any applicable laws of the United States of
America.
13.9 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE COMPANY AND HOLDER HEREOF
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE COMPANY AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES PERTAINING TO THE
WARRANT BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE COMPANY AND HOLDER HEREOF WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION SEEKING ENFORCEMENT OF THE PARTIES' RIGHTS UNDER THIS WARRANT.
14.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of the date first above written.
KOLL REAL ESTATE GROUP, INC.
By:
------------------------------
Raymond J. Pacini
Executive Vice President and
Chief Financial Officer
15.
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of the attached Warrant irrevocably
exercises such Warrant for the purchase of_______Shares of Common Stock of
Koll Real Estate Group, Inc., all on the terms and conditions specified in such
Warrant and requests that certificates for the shares of Common Stock hereby
purchased (and any securities or other property issuable upon such exercise) be
issued in the name of and delivered to________________________ whose address is
___________________________________________ and, if such shares of Common Stock
shall not include all of the shares of Common Stock issuable as provided in such
Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.
----------------------------------
(Name of Registered Owner)
----------------------------------
(Signature of Registered Owner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the
attached Warrant hereby sells, assigns and transfers unto the Assignee named
below all of the rights of the undersigned under such Warrant, with respect to
the number of shares of Common Stock set forth below:
NAME AND ADDRESS OF ASSIGNEE NO. OF SHARES OF
COMMON STOCK
and does hereby irrevocably constitute and appoint____________________________
attorney-in-fact to register such transfer on the books of Koll Real Estate
Group, Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated: Print Name:
-------------- ------------------------
Signature:
--------------------
Witness:
-----------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
