SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
20549
________________________________________
FORM 8-K
________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 1, 1996
(Date of earliest event reported)
INSIGNIA FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19066 13-3591193
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification
Number)
One Insignia Financial Plaza
Post Office Box 1089
Greenville, South Carolina 29602
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (803) 239-1000
______________________________________
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Item 5. Other Events
On July 1, 1996, Insignia Financial Group, Inc. ("Insignia" or the
"Company"), pursuant to a Stock and Note Purchase Agreement ("Agreement") dated
as of May 31, 1996 among Paragon Group, L.P., Texas Paragon Management Partners,
L.P., Paragon Group Property Services, Inc. and Insignia Commercial Group, Inc.
acquired Paragon Group, Inc.'s commercial property services operations ("Paragon
Commercial"). The purchase price was $18.1 million in cash plus an "Earn-Out
Amount" of up to an additional $4 million in the event that certain future
revenue targets are met plus warrants to purchase 50,000 shares of Insignia's
Class A Common Stock at a price of $28.96.
The acquisition of Paragon Commercial adds 200 assets with a total of
approximately 24 million square feet of office, retail and industrial space to
Insignia's existing commercial services portfolio. The Company anticipates that
Paragon Commercial will add revenues of approximately $18 million to Insignia's
commercial operations, which would then total approximately 85 million square
feet.
Item 7. Financial Statement and Exhibits
(c) Exhibits
Exhibit No. Exhibit
4.1 Warrant Agreement dated as of June 30,
1996 by and between Paragon Group, L.P.
and Insignia Financial Group, Inc.
4.2 Warrant No. 38 to Purchase up to 50,000
Shares of Class A Common Stock of
Insignia Financial Group, Inc.
4.3 Registration Rights Agreement
10.1 Agreement dated as of May 31, 1996 among
Paragon Group, L.P., Texas Paragon
Management Partners, L.P., Paragon Group
Property Services, Inc. (collectively, the
"Sellers") and Insignia Commercial Group,
Inc. (the "Buyer")
10.2 Addendum to Stock and Note Purchase
Agreement and Escrow Agreement dated as of
June 26, 1996
99.1 Press Release issued June 3, 1996
99.2 Press Release dated July 3, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ John K. Lines
-----------------
John K. Lines
General Counsel
Date: July 12, 1996
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement") is entered into as of June 30,
1996 by and between PARAGON GROUP L.P., a Delaware limited partnership (the
"Warrantholder") and INSIGNIA FINANCIAL GROUP, INC., a Delaware corporation (the
"Company").
In connection with the entrance into a Stock and Note Purchase Agreement
regarding Paragon Group Property Services, Inc. ("Acquiree") (the "Stock
Purchase Agreement") by the Warrantholder, the Company, and others, the Company
hereby agrees to issue and sell to the Warrantholder, in exchange for
consideration consisting of entering into the Stock Purchase Agreement, a Stock
Purchase Warrant, as hereinafter described (the "Warrant"), to purchase up to an
aggregate of 50,000 shares (the "Shares") of the Company's Class A Common Stock,
$0.01 par value ("Common Stock"). The issuance of the Warrant by the Company
shall occur concurrently with the Closing of the Stock Purchase Agreement.
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
for the purpose of defining the terms and provisions of the Warrant and the
respective rights and obligations thereunder, the Company and the Warrantholder
hereby agree as follows:
SECTION 1. Transferability and Form of Warrant.
1.1 Registration. The Warrant shall be numbered and shall be registered on
the books of the Company when issued.
1.2 Non-Transferability. Neither the Warrant nor the right, title or
interest of the Warrantholder in this Agreement may be transferred or assigned
unless such transfer or assignment is to an "accredited investor," as defined in
Rule 501 promulgated under the Securities Act of 1933, as amended, compliance
with said standard to be demonstrated by evidence reasonably satisfactory to the
Company; provided, however, in the event the Warrantholder assigns or transfers
his interest in this Agreement, the assignee or transferee of said interest
shall be subject to all Section 1.3 restrictions and shall acquire only such
partial exercise rights as remain pursuant thereto. This Agreement and all
rights and interests hereunder are assignable or transferrable by Warrantholder
only in whole and not in part. Any Shares issued pursuant to a Warrant issued
hereunder shall be subject to the rights and obligations of that certain
Registration Rights Agreement dated of even date herewith between the Company
and Warrantholder.
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1.3 Securities Law Restrictions on Transfer of the Warrant. Neither this
Agreement, the Warrant, any of the Shares, nor any interest herein or therein
may be sold, transferred, or otherwise disposed of in the absence of
registration or qualification, as the case may be, of the same under the
Securities Act of 1933, as amended, and applicable state securities laws, or an
exemption therefrom. The Warrant may be divided, upon request to the Company by
the Warrantholder, into a certificate or certificates representing the right to
purchase the same aggregate number of Shares, but in no event shall the Company
be obligated to issue a Warrant for less than five thousand (5,000) Shares.
Unless the context indicates otherwise, the term "Warrantholder" shall include
any transferee or transferee of the Warrant and the term "Warrant" shall include
any and all warrants outstanding pursuant to this Agreement, including those
evidenced by a certificate or certificates issued upon division, exchange,
substitution or permitted transfer pursuant to this Agreement.
1.4 Form of Warrant. The text of the Warrant and the form of election to
purchase Shares shall be substantially as set forth in Exhibit 1.4A and
Exhibit 1.4B attached hereto and hereby made a part hereof. The price per Share
and the number of Shares issuable upon exercise of the Warrant are subject to
adjustment upon the occurrence of certain events, all as hereinafter provided.
The Warrant shall be executed on behalf of the Company by its Chairman,
President, or Executive Managing Director and by its Secretary or Treasurer.
A Warrant bearing the signature of an individual who was at any time the
proper officer of the Company shall bind the Company, notwithstanding that such
individual shall have ceased to hold such office prior to the delivery of such
Warrant or did not hold such office on the date of this Agreement.
The Warrant shall be dated as of the date of signature thereof by the
Company either upon initial issuance or upon division, exchange, substitution or
transfer.
1.5 Legend on Warrant Shares. The Warrant and each certificate for Shares
initially issued upon exercise of the Warrant, shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH
SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, EXCHANGED, MORTGAGED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR (II) UPON RECEIPT OF AN OPINION OF THE COUNSEL TO THE TRANSFEROR,
REASONABLY ACCEPTABLE TO THE ISSUER, THAT SUCH SALE, TRANSFER, PLEDGE,
HYPOTHECATION, OR OTHER DISPOSITION IS PURSUANT
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TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. BY ITS ACCEPTANCE HEREOF,
THE HOLDER OF THIS CERTIFICATE REPRESENTS THAT IT IS ACQUIRING SUCH
SECURITIES FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TOWARD THE
DISTRIBUTION OR RESALE THEREOF, AND AGREES TO COMPLY WITH THE WARRANT
AGREEMENT, DATED AS OF JUNE 30, 1996 BY AND AMONG PARAGON GROUP L.P. AND
INSIGNIA FINANCIAL GROUP, INC. AND THE REGISTRATION RIGHTS AGREEMENT DATED
AS OF JUNE 30, 1996 BY AND AMONG INSIGNIA FINANCIAL GROUP INC. AND PARAGON
GROUP L.P."
Any warrant or certificate issued at any time in exchange or substitution
for any warrant or certificate bearing such legend shall also bear the above
legend unless, in the opinion of the Company's counsel or such other counsel as
shall be reasonably approved by the Company, the securities represented thereby
are no longer subject to the restrictions referred to in such legend.
1.6 Investment Letter. Simultaneously with the delivery to the
Warrantholder of certificates or other documents representing the Shares and the
Warrant, the Warrantholder will execute and deliver to the Company a letter, in
the following form of Exhibit 1.6 hereto, representing to the Company as
follows:
(a) The Warrantholder is acquiring the Shares and the Warrant for
Warrantholder's own account (and not for the account of others), for
investment and not with a view to the distribution or resale thereof;
(b) Warrantholder has received copies of all Reports on Form 10-K for
the period ending December 31, 1995, Form 10-Q for the period ending March
31, 1996, and other forms required to be filed and filed by the Company
with the Securities and Exchange Commission (the "Commission") since
January 1, 1996;
(c) (i) The Warrantholder has total assets equal to or in excess of
Five Million Dollars ($5,000,000);
(d) The Warrantholder understands that Warrantholder may not sell or
dispose of the Shares or the Warrant in the absence of either a
registration statement under the 1933 Act or an exemption from the
registration provisions of the 1933 Act;
(e) The Warrantholder understands and agrees that if he should decide
to dispose of or transfer any of the Shares or the Warrant, he may dispose
of them only (i) in compliance with the 1933 Act, as then in effect, and
(ii) upon delivery to the Company of an opinion, in form and substance
reasonably satisfactory to the Company, of recognized securities counsel to
the effect that the disposition or transfer is to be made
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in compliance with all applicable federal and state securities laws; and
(f) The Warrantholder understands that stop-transfer instructions to
the foregoing effect will be in effect with respect to the Shares and the
Warrant.
SECTION 2. Exchange of Warrant Certificate. Subject in all respects to the
limitations on transferability and divisibility of Section 1 hereof, any
certificate evidencing all or a portion of the Warrant may be exchanged for
another certificate or certificates entitling the Warrantholder to purchase a
like aggregate number of Shares as the certificate or certificates surrendered
then entitling such Warrantholder to purchase. Any Warrantholder desiring to
exchange a certificate evidencing all or a portion of the Warrant, shall make
such request in writing delivered to the Company, and shall surrender, properly
endorsed, the certificate evidencing the portion of the Warrant to be so
exchanged. Thereupon, the Company shall, within five (5) business days, execute
and deliver to the person entitled thereto a new certificate evidencing all or a
portion of the Warrant as so requested.
SECTION 3. Term of Warrants; Exercise of Warrants. Subject to the terms of
this Agreement, the Warrantholder shall have the right, at any time during the
period commencing at 9:00 a.m., New York, New York time, on July 1, 1996 (the
"Exercisability Date") and ending at 5:00 p.m,, New York, New York time, on June
30, 2001 (the "Termination Date"), to purchase from the Company up to the number
of shares which the Warrantholder may at the time be entitled to purchase
pursuant to this Agreement and the portion of the Warrant (or certificate
therefor) then held by it, upon surrender to the Company, at its principal
office in Greenville, South Carolina, of the certificate evidencing the portion
of the Warrant to be exercised, together with the purchase form on the reverse
thereof duly filled in and signed, and upon payment to the Company of the
Warrant Price, as defined in and determined in accordance with the provisions of
Sections 6 and 7 hereof, for the number of Shares with respect to which such
portion of the Warrant is then exercised. Payment of the aggregate Warrant Price
shall be made in cash, by cashier's check or by wire transfer.
Upon such surrender of the Warrant (or certificate therefor) and payment of
such Warrant Price as aforesaid, the Company shall, within five (5) business
days, issue and cause to be delivered to or upon the written order of the
Warrantholder, and in such name or names as the Warrantholder may designate,
certificate or certificates for the number of full Shares so purchased upon the
exercise of the Warrant, together with cash, as provided in Section 8 hereof,
with respect to any fractional Shares otherwise issuable upon such surrender and
the cash, property and other securities to which the Warrantholder is entitled
pursuant to the
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provisions of Section 7. The Warrant shall be exercisable, at the election of
the Warrantholder, either in whole or from time to time in part (but in no event
for less than 5,000 Shares) and, in the event that the certificate evidencing
the Warrant is exercised with respect to less than all of the Shares specified
therein at any time prior to the Termination Date, a new certificate evidencing
the remaining Warrant shall be issued by the Company.
SECTION 4. Payment of Taxes. The Warrantholder shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the Shares;
further, provided that the Company shall not be required to pay any tax or taxes
which may be payable with respect to any secondary transfer of the Warrant or
the Shares.
SECTION 5. Mutilated or Missing Warrant. In case the certificate or
certificates evidencing the Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrant and of a bond of indemnity, if requested, also
satisfactory in form and amount at the applicant's cost. Applicants for such
substitute Warrant certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe,
not to exceed Two Hundred Fifty and no/100 Dollars ($250) per occurrence.
SECTION 6. Warrant Price and Cashless Exercise.
6.1 Warrant Price. The price per Share (the "Warrant Price") at which
Shares shall be purchasable upon the exercise of the Warrant shall be
Twenty-eight and 96/100 Dollars ($28.96) per Share, subject to adjustment
pursuant to Section 7 hereof.
6.2 Cashless Exercise. Except as otherwise noted, the Warrant Price may be
paid as follows:
(i) In all cash;
(ii) In a combination of already held Common Stock valued at
its fair market value as of the date of the exercise and cash; or
(iii) If the fair market value of one share of Common Stock
as of the date of exercise is greater than the Warrant Price per
share of Common Stock, in lieu of exercising the Warrant for cash
only, or cash and Common Stock as provided herein, the
Warrantholder may elect to
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receive shares equal to the value (as determined below) of the
Warrant (or the portion thereof being cancelled) plus any cash or
Common Stock (the "other consideration") as provided in paragraph
(ii) above, by surrender to the Company the other consideration
(if any) and the Warrant (or certificate therefor) as provided
above, and the Company shall issue to the Warrantholder a number
of shares of Common Stock equal to: (A) the number of shares of
Common Stock to which the Warrantholder is entitled as a result
of the delivery of the other consideration, plus (B) a number of
shares of Common Stock computed using the following formula
(collectively, a "Cashless Exercise"):
X = Y (A-B)
A
Where: X = the number of shares of Common Stock to
be issued to the Warrantholder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only
a portion of the Warrant is being
exercised, the portion of the Warrant
being cancelled (at the date of such
calculation)
A = the fair market value of one share of the
Company's Common Stock (as of the
exercise date)
B = Warrant Price per Share
For all purposes of this Section 6.2, the fair market value per
share shall equal the average closing price quoted on the New
York Stock Exchange (or on any other exchange on which the Common
Stock is listed) as published in the Eastern Edition of The Wall
Street Journal for the five (5) trading days prior to the date of
determination of fair market value.
SECTION 7. Adjustment of Warrant Price and Number of Shares.
7.1 Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of the Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
(a) Adjustments. The number of Shares purchasable upon the exercise of
the Warrant and the Warrant Price shall be subject to adjustment as
follows:
(i) In the event the Company shall (A) pay a stock dividend or
make a distribution to holders of Common
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Stock in shares of its Common Stock, (B) subdivide its
outstanding shares of Common Stock into a larger number of
shares, (C) combine its outstanding shares of Common Stock into a
smaller number of shares, (D) issue by reclassification of its
shares of Common Stock any shares of capital stock of the
Company, or (E) take any action which would result in any of the
foregoing, then (1) the Warrant Price shall be increased or
decreased, as the case may be, to an amount which shall bear the
same relation to the Warrant Price as the total number of shares
outstanding immediately prior to such action shall bear to the
total number of shares outstanding immediately after such action
and (2) the Warrant automatically shall be adjusted so that it
thereafter shall be convertible into the kind and number of
shares of Common Stock or other securities which the Holder would
have owned and would have been entitled to receive after such
action or any record date with respect thereto. An adjustment
made pursuant to this Section 7.1(a)(i) shall become effective
retroactively immediately after the record date in the case of a
dividend or distribution of Common Stock and shall become
effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
If any event shall occur as to which the provisions of this
Section 7.1(a)(i) shall not be strictly applicable, but with respect
to which the failure to make any adjustment to the Warrant Price and
the number of shares issuable upon exercise of the Warrant would not
fairly protect the purchasing rights contained in this Agreement in
accordance with the intent and principles of this Section 7.1(a)(i),
upon request of the Warrantholder, the Company shall appoint a firm of
independent public accountants reasonably acceptable to the
Warrantholder which shall give its opinion upon the adjustments, if
any, consistent with the intent and principles established in this
Section 7.1(a)(i) necessary to preserve without dilution of the
purchasing rights represented by this Agreement. Upon receipt of such
opinion, the Company will promptly mail a copy thereof to the
Warrantholder and shall make the adjustments described therein.
(ii) In calculating any adjustment hereunder, the Warrant
Price shall be calculated to the nearest cent and the number of
Shares purchasable hereunder shall be calculated to the nearest
.001 of a share.
(iii) For the purpose of this Section 7.1(a), the term
"Common Stock" shall mean (A) the class of stock designated as
the Class A Common Stock of the Company at
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the date of this Agreement, or (B) any other class of stock
resulting from successive changes or reclassifications of such
Common Stock consisting solely of changes in par value, or from
no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 7, the
Warrantholder shall become entitled to purchase any securities of
the Company other than Common Stock, the Company shall duly
reserve such securities for issuance and thereafter the number of
such other securities so purchasable upon exercise of the Warrant
and the Warrant Price of such securities shall be subject to the
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Shares contained in this Section 7.
(iv) In any case in which the provisions of this Section
7.1(a) require that the adjustment shall be effective immediately
after a record date for an event, the Company may defer until the
occurrence of such event (1) issuing to the holder of the Warrant
or portion thereof exercised after such record date and before
the occurrence of such event the additional shares of Common
Stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of Common Stock
issuable upon such exercise before giving effect to such
adjustment, and (2) paying to such holder any cash in lieu of a
fractional share of Common Stock pursuant to Section 8 hereof.
(b) No Adjustment for Dividends. Except as provided in Section 7.1(a),
no adjustment with respect to any ordinary dividends (made out of current
earnings) on shares of Common Stock shall be made during the term of the
Warrant or upon the exercise of the Warrant.
(C) No Adjustment for Rights Offering. Notwithstanding anything
seemingly to the contrary contained herein, no adjustment on shares of
Common Stock (which adjustment might otherwise be effected pursuant to this
Section 7) shall be made in connection with any rights offering made to all
holders of the Common Stock to purchase shares of the capital stock or
other securities of any subsidiary of the Company.
7.2 Statement on Warrants. Irrespective of any adjustment in the Warrant
Price or the number or kind of Shares purchasable upon the exercise of the
Warrant, the Warrant certificate or certificates theretofore issued may continue
to express the same price and number and kind of shares as are stated in the
Warrant initially issuable pursuant to this Agreement.
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7.3 Reservation. The Company shall at all times reserve and keep available,
so long as the Warrant remains outstanding, out of its authorized but unissued
Common Stock the full number of shares of Common Stock deliverable upon the
exercise of the Warrant and shall take all such action and obtain all such
permits or orders as may be necessary to enable the Company lawfully to issue
such Common Stock.
7.4 Change in Control; Merger; Reorganization. Notwithstanding anything to
the contrary contained herein, in the event of (i) a Change of Control (as
hereinafter defined), (ii) any consolidation or merger of the Company with or
into another person, (iii) the sale, lease, or transfer of all or substantially
all of the assets of the Company to another person, (iv) a "going private"
transaction whereby the securities of the Company cease to be traded on a
national stock exchange, or (v) a reorganization of the Company, the Company
may, in its sole discretion, provide written notice of such occurrence to the
Warrantholder (the "Change of Control Notice"). The Warrantholder may, within
ten (10) calendar days of receipt of a Change of Control Notice (the "Notice
Cutoff Date"), exercise the Warrant and purchase, in accordance with the
procedures set forth in Section 3 hereof, up to such number of Shares as the
Warrantholder may be entitled to purchase hereunder. If the Company provides a
Change of Control Notice to the Warrantholder and the Warrantholder has not
exercised the Warrant in accordance with the terms of this Agreement by 5:00
p.m., local time of Greenville, South Carolina, on the Notice Cutoff Date, the
Warrants and all rights hereunder shall expire and terminate (unless the Change
of Control described in a Change of Control Notice provided to the Warrantholder
does not occur within twelve (12) months from the Notice Cutoff Date in which
case the Warrant shall remain outstanding).
For purposes of this Agreement, Change of Control shall mean the
acquisition by any person or group (as such term is defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, (the "Act") of beneficial
ownership (as such term is defined in Rule 13d-3 promulgated under the Act) of
more than 25% of the outstanding shares of Common Stock of the Company, except
for any acquisition, the purpose of which is to create one or more holding
companies for the Company.
SECTION 8. Fractional Interests. The Company shall not be required to issue
fractional Shares on the exercise of the Warrant. If any fraction of a Share
would, except for the provisions of this Section 8, be issuable on the exercise
of the Warrant (or specified portions thereof), the Company shall pay an amount
in cash equal to the adjusted Warrant Price of such fractional Share.
SECTION 9. No Rights as Stockholder. Nothing contained in this Agreement or
in the Warrant shall be construed as conferring upon
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the Warrantholder or its transferee any rights as a stockholder of the Company.
SECTION 10. Notices. Any notice pursuant to this Agreement by the Company
or by the Warrantholder shall be in writing and shall be deemed to have been
duly given if delivered personally with written receipt acknowledged or mailed
by certified mail five days after mailing, return receipt requested:
If to the Company:
Insignia Financial Group, Inc.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Attention: General Counsel
with a copy to:
Farris, Warfield & Kanaday
1900 Third National Financial Center
424 Church Street
Nashville, Tennessee 37219
Attention: B. Riney Green, Esq.
If to the Warrantholder:
Paragon Group L.P.
7557 Rambler Road, Ste. 1200
Dallas, Texas 75231
Attn: William R. Cooper
with a copy to:
Stutzman & Bromberg
2323 Bryan Street
Suite 2200
Dallas, Texas 75201
Attn: M. David Stutzman
Each party hereto may from time to time change the address to which notices
to it are to be delivered or mailed hereunder by notice in accordance herewith
to the other party.
SECTION 11. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrantholder shall bind and inure
to the benefit of their respective successors, heirs and permitted assigns.
SECTION 12. Benefits of this Agreement. Except as otherwise provided
herein, nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Warrantholder any legal or equitable
right, remedy or claim under
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this Agreement, and this Agreement shall be for the sole and exclusive benefit
of the Company and the Warrantholder.
SECTION 13. Further Assurances. The Company hereby agrees promptly to
execute, at the Warrantholder's reasonable request after the issuance of the
Warrant, any documents or materials related to the transactions contemplated by
this Agreement.
SECTION 14. Time of Essence. Time is of the essence in interpreting and
performing this Agreement.
SECTION 15. Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired hereby.
SECTION 16. Jury Trial; Jurisdiction. The parties waive the right to a jury
trial with respect to any controversy or claim between or among the parties
hereto, including but not limited to those arising out of or relating to this
Agreement, including any claim based on or arising from an alleged tort. Venue
for any and all disputes arising out of or in connection with this Agreement
shall be exclusively in the federal and state courts in the State of South
Carolina. The parties hereto consent and submit to the jurisdiction of such
courts and waive any objection to venue laid therein. Process in any action or
proceeding referred to in this Agreement may be served on any party anywhere in
the world.
SECTION 17. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware. The parties,
in acknowledgement that they have been represented by counsel and that this
Agreement has been carefully negotiated, agree that the construction and
interpretation of this Agreement and other documents entered into in connection
herewith shall not be affected by the identity of the party under whose
direction or at whose expense this Agreement and such documents were prepared or
drafted.
SECTION 18. Attorneys' Fees. In the event of any disputes arising hereunder
concerning the interpretation or enforcement of this Agreement, a party shall be
entitled to recover from the party determined to be in breach its attorneys'
fees, costs and expenses.
SECTION 19. Specific Performance. Each of the parties shall be entitled to
specific performance in the event of a breach by the other party of their
respective obligations hereunder. Such remedy shall be in addition to, but shall
not replace, any other remedies which might be available under this Agreement,
at law or in equity, including without limitation, actions for attorney's fees.
SECTION 20. Registration Rights. The Common Stock issuable upon exercise of
this Warrant may be subject to certain rights
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pursuant to the Registration Rights Agreement dated of even date herewith.
SECTION 21. Representations of Company. The Company represents and warrants
to Warrantholder as follows:
21.01 Corporate Organization and Good Standing. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and is duly qualified and in good standing in all
other states where the nature of its business or operations or the ownership of
its property requires such qualification.
21.02 Corporate Approval. The Company has full corporate power and
authority to execute and deliver this Agreement and all other documents and
agreements to be executed and delivered by it hereunder ("Transaction
Documents") and to consummate the transactions contemplated hereby. The board of
directors of the Company has duly and validly approved the execution, delivery,
and performance of this Agreement and the transactions contemplated herein. No
other corporate or legal proceedings on the part of the Company are necessary to
approve and authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement
constitutes, and the other Transaction Documents, when executed, will
constitute, the legal, valid, and binding obligation and agreement of the
Company enforceable against the Company in accordance with its terms, subject
only to the general law of creditors' rights.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
PARAGON GROUP L.P.
By: Paragon Group GP Holdings, Inc.
its General Partner
By: /s/ Steve Means
---------------
Title:
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
---------------------
Title:
WARRANT NO. 38
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SECURITIES
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, EXCHANGED, MORTGAGED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (II) UPON RECEIPT OF
AN OPINION OF THE COUNSEL TO THE TRANSFEROR, REASONABLY ACCEPTABLE TO THE
ISSUER, THAT SUCH SALE, TRANSFER, PLEDGE, HYPOTHECATION, OR OTHER DISPOSITION IS
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. BY ITS ACCEPTANCE
HEREOF, THE HOLDER OF THIS CERTIFICATE REPRESENTS THAT IT IS ACQUIRING SUCH
SECURITIES FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TOWARD THE
DISTRIBUTION OR RESALE THEREOF, AND AGREES TO COMPLY WITH THE WARRANT AGREEMENT,
DATED AS OF JUNE 30, 1996, BY AND AMONG PARAGON GROUP L.P. AND INSIGNIA
FINANCIAL GROUP, INC. AND THE REGISTRATION RIGHTS AGREEMENT DATED AS OF JUNE 30,
1996 BY AND AMONG INSIGNIA FINANCIAL GROUP INC. AND PARAGON GROUP L.P."
WARRANT TO PURCHASE UP TO 50,000 SHARES
OF CLASS A COMMON STOCK OF
INSIGNIA FINANCIAL GROUP, INC., $0.01 PAR VALUE
Exercisable commencing July 1, 1996;
Void after June 30, 2001;
THIS CERTIFIES that, for value received, Paragon Group L.P., a Delaware
limited partnership ("Holder"), or registered assigns, is entitled, subject to
the terms and conditions set forth in this Warrant, to purchase from Insignia
Financial Group, Inc., a Delaware corporation (the "Company"), up to 50,000
shares, of Class A Common Stock, $.01 par value ("Shares"), of the Company,
commencing at 9:00 a.m., Eastern time, on July 1, 1996 and continuing up to 5
p.m. Eastern time on June 30, 2001 at a price per Share of Twenty-eight and
96/100 Dollars ($28.96), such number of Shares and price per Share being subject
to adjustment from time to time as set forth in the Warrant Agreement referred
to below. This Warrant is issued pursuant to a Warrant Agreement between the
Holder and the Company dated as of June 30, 1996 and is subject to all the terms
thereof, including the limitations on transferability set forth therein.
221702.1 7/12/96
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This Warrant may be exercised by the holder hereof, in whole or in part
(but not for less than 5,000 Shares, nor in certain circumstances, as to a
fractional share), by the presentation and surrender of this Warrant with the
form of Election to Purchase duly executed, at the principal office of the
Company (or at such other address as the Company may designate by notice in
writing to the holder hereof at the address of such holder appearing on the
books of the Company), and upon payment to the Company of the purchase price in
cash, by cashier's check, by Cashless Exercise (as defined in the Warrant
Agreement) or by wire transfer. Certificates for the Shares so purchased shall
be delivered or mailed to the Holder promptly after this Warrant shall have been
so exercised, and, unless this Warrant has expired or has been exercised in
full, a new Warrant identical in form but representing the number of Shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the holder hereof.
Nothing contained herein shall be construed to confer upon the holder of
this Warrant, as such, any of the rights of a shareholder of the Company.
Dated: June 30, 1996
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
---------------------
Title: Executive Managing Director
221702.1 7/12/96
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is entered into as of June 30, 1996 by
and among INSIGNIA FINANCIAL GROUP, INC., a Delaware corporation (the
"Company"), and PARAGON GROUP L.P., a Delaware limited partnership ("Holder").
WHEREAS, the Company and the Holder and others have entered into a Stock
and Note Purchase Agreement dated May 31, 1996 (the "Purchase Agreement"); and
WHEREAS, in partial consideration for the Holder's agreement to engage in
the transactions described in the Purchase Agreement, the Company has agreed to
issue warrants to purchase shares of Common Stock of the Company and to register
or cause the registration and qualification of such shares of Common Stock of
the Company held or to be held by the Holder as described in and pursuant to
this Registration Rights Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings (all terms defined in this Section 1 or in other provisions
of this Agreement in the singular shall have the same meanings when used in the
plural and vice versa):
"Affiliate" means any Person (a) which directly or indirectly controls, or
is controlled by, or is under common control with, another Person, (b) which
directly or indirectly beneficially owns or holds 10% or more of any class of
voting stock of another Person, or (c) 10% or more of the voting stock which is
directly or indirectly beneficially owned or held by another Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Business Day" means any day on which commercial banks are not authorized
or required to close in New York, New York, and shall also include any legal
holiday on which the National Market System of the National Association of
Securities Dealers Automated Quotation System is open for trading on a regular
basis.
"Closing Date" means June 30, 1996.
"Commission" means the Securities and Exchange Commission or any successor
thereto.
"Common Stock" means the Company's authorized Class A Common Stock, par
value $0.01 per share, as constituted on the Closing Date, and any other stock
of the Company into
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<PAGE>
which such Common Stock may thereafter be changed or which may be issued to the
holders of shares of Common Stock upon any reclassification thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the date hereof, applied on a basis consistent with
those used in the preparation of the financial statements for the first fiscal
year of the Company ending after the Closing Date (except for changes concurred
in by the Company's independent public accountants).
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Piggyback Registration" has the meaning set forth in Section 2.
"Registerable Securities" means (i) all Warrant Shares, and (ii) all Common
Stock issued as a dividend or other distribution to the Holder with respect to,
or in exchange for, or in replacement of, any of the Warrant Shares held by the
Holder, including any other capital stock or other security issued by the
Company in a reclassification of the Common Stock of the Company (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) after the date of this
Agreement. As to any particular Registerable Securities, once issued such
Registerable Securities shall cease to be Registerable Securities when (i) a
registration statement with respect to the sale of such Registerable Securities
shall become effective under the Securities Act and such Registerable Securities
shall have been disposed of in accordance with such registration statement, (ii)
such Registerable Securities shall have been distributed to the public pursuant
to Rule 144 (or any successor provision) under the Securities Act, (iii) new
certificates for such Registerable Securities not bearing a legend restricting
further transfer shall have been delivered by the Company and subsequent
disposition of them shall not require registration or qualification for them
under the Securities Act or any similar state law then in force in the State of
Delaware or such other state in which the Company is domiciled, or (iv) such
Registerable Securities shall have ceased to be outstanding. In addition, for
the purpose of determining whether the holders of any requisite portion of
Registerable Securities have taken any action contemplated by this Agreement,
(a) a Person shall be deemed to hold Registerable Securities issuable upon
exercise of any Warrants held by such Person, and (b) any Registerable
Securities owned by the Company or any Affiliate of the Company shall not be
deemed outstanding. Notwithstanding the above, "Registrable Securities" shall
not mean or include any securities acquired by Holder in the public market or
through any other source or intermediary, or Warrants.
"Registration", "register", "registered" means a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act and the declaration or ordering of the effectiveness of such registration
statement.
216344.8 7/12/96
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<PAGE>
"Registration Expenses" means any and all expenses incident to the
registration (including maintenance of the effectiveness of any registration, as
required under this Agreement) of the Registerable Securities pursuant to this
Agreement, including, without limitation, (a) all registration and filing fees
required by or payable to the Commission, any stock exchange or the National
Association of Securities Dealers, Inc., (b) all fees and expenses to comply
with state securities or blue sky laws (including reasonable fees and
disbursements of counsel for the underwriters, if any, in connection with blue
sky qualifications), (c) all printing, messenger and delivery expenses, (d) all
fees and disbursements of counsel for the Company and the Company's independent
public accountants, including the expenses of any special audits and/or "cold
comfort" or other accountants' letters required by or incident to such
registration, and (e) fees and disbursements of underwriters imposed on the
Company by the underwriting agreements to which the Company is a party and the
reasonable fees and expenses of any special experts retained in connection with
the requested registration. Notwithstanding the above, "Registration Expenses"
does not mean or include, and the Company shall not be liable under any
circumstances for, the following:
a. any expenses in connection with any amendment or supplement to the
Registration Statement or prospectus filed more than 180 days after the
effective date of such Registration Statement because any Holder of
Registrable Securities has not effected the disposition of the securities
requested to be registered. (Holder acknowledges that the Company shall
have no obligation to Holder to file any such amendment or supplement
regardless of the obligation or readiness of Holder to pay all expenses
incurred in connection therewith.);
b. any fees, discounts, or commissions to any underwriter with respect
to the securities sold by a Holder of Registrable Securities; and
c. any fees and expenses of legal counsel to a Holder of Registrable
Securities.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar or
successor provision at any time in force.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Subsidiary" of any Person means any corporation or other entity of which
at least a majority of the securities or other ownership interests having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by such Person.
"Warrant Agreement" means the Warrant Agreement dated of even date herewith
between the Company and the Holder.
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-3-
<PAGE>
"Warrants" shall mean the Warrants issued pursuant to the Warrant
Agreement, and all Warrants issued upon transfer, division, combination thereof
or substitution therefor.
"Warrant Shares" means the shares of Common Stock issued or to be issued
upon the exercise of the Warrants, and any other stock of the Company into which
such Common Stock may thereafter be changed or which may be issued to the
holders of shares of Common Stock upon any reclassification thereof.
All terms not defined in this Section 1 shall have the same meaning and
definition as in the Purchase Agreement.
2. Piggyback Registration.
a. Notice Of Registration. If the Company, at any time following the
Closing Date and terminating after the later of (i) the date on which the
Warrant Shares can be freely sold under Rule 144 (assuming a Cashless
Exercise, as defined in the Warrant Agreement), or (ii), subject to the
last sentence at Section 2(c) hereof, the filing and effectiveness as
declared by the Commission of two (2) registration statements filed by the
Company (excluding the registration statements referred to below), proposes
to register any Common Stock under the Securities Act (other than pursuant
to a registration statement on Form S-4 or S-8 or any successor form of
securities to be offered in a transaction of the type referred to in Rule
145 under the Securities Act or to employees of the Company pursuant to any
employee benefit plan, respectively) for its own account, the Company will
each such time promptly, but not less than twenty (20) days prior to the
filing date of such a registration statement (unless the Company has filed
a registration statement within twenty (20) days prior to the date hereof,
in which event, the Company will provide such notice on the date hereof),
give written notice to the Holder of its intention to effect that
registration and of the rights of the Holder under this Agreement to
participate therein ("Piggyback Registration"), which notice shall include
a list of jurisdictions in which the Company intends to qualify such
securities under applicable state securities laws or blue sky laws and the
estimated filing date for the registration statement. Upon the written
request of Holder, if holding at least Twenty- Five Thousand (25,000)
shares of Registerable Securities, made within ten (10) days after receipt
of any such notice (which request shall specify the number and class of
Registerable Securities intended to be disposed of by such Holder), the
Company will include in the Piggyback Registration (and any related
qualification under applicable state securities laws or blue sky laws) all
Registerable Securities which the Company has been so requested to
register; provided, however, that the Company shall not be required to
include any such Registerable Securities unless the Holder shall request
the registration of a minimum of 25,000 shares of such Registerable
Securities. The Company shall be entitled, in its sole and absolute
discretion, to terminate any proposed registration initiated by it, to
withdraw the registration statement related to any such registration and to
terminate any offering involved in such terminated registration without the
consent of the Holder. Holder shall be permitted to withdraw all or part of
such securities from a
216344.8 7/12/96
-4-
<PAGE>
Piggyback Registration at any time prior to the declaration of the
effectiveness of such registration statement by the Commission; provided,
however, Holder shall reimburse the Company for any Registration Expenses
incurred in connection with or arising out of such Registerable Securities
being withdrawn. For purposes of this Section 2.a, the number 25,000 shall
be automatically adjusted upward in the event of the effectuation hereafter
by the Company of a stock-split of the Company's shares of Common Stock and
shall be automatically adjusted downward in the event of the effectuation
hereafter by the Company of a reverse stock-split of the Company's shares
of Common Stock.
b. Underwriting. If the registration for which the Company gives
written notice under Section 2a above is for a registered primary public
offering involving an underwriting, the Company shall so advise the Holder
as part of such written notice. In such case, the right of Holder to
participate in an underwritten Piggyback Registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
such Holder's Registerable Securities requested to be included in the
underwriting to the extent provided herein. All holders proposing to
distribute their securities through such underwriting (together with the
Company and other holders, if any, of securities of the Company
participating therein) shall enter into an underwriting agreement in
customary form with the representative of the underwriter(s) selected by
the Company. Prior to the declaration of the effectiveness of the
registration covering the Registerable Securities to be registered in
connection with such underwriting, the Holder shall take all steps
necessary to exercise the Warrants if Warrant Shares are to be included in
the Piggyback Registration. If Holder has not taken all steps necessary to
exercise the Warrants into Warrant Shares prior to the declaration of
effectiveness of the registration statement covering such securities, such
securities shall be deemed to have been withdrawn from registration and
Holder shall reimburse the Company for any Registration Expenses incurred
in the registration of such Registerable Securities being withdrawn. After
a registration statement covering the securities to be sold in connection
with such underwritten Piggyback Registration has been declared effective
by the Commission, such securities shall be sold in accordance with the
method of distribution described therein.
c. Cut Backs. If the managing underwriter for a Piggyback Registration
advises the Company that, in its opinion, the number of securities of a
class sought to be included in such registration exceeds the maximum number
(the "Piggyback Maximum Number") of securities of such class which can be
sold in an orderly manner in such offering within a price range reasonably
acceptable to the Company, the Company shall be entitled to reduce the
aggregate number of securities included in the registration based on
requests by the holders of Registerable Securities and like securities to
an aggregate number equal to the Piggyback Maximum Number, with
participation in the offering being allocated (i) first, among all holders
for whom the Company is making a required demand registration, if any, (ii)
second, for the account of the Company; (iii) third, pro rata among all
holders requesting piggyback registration of such securities (based upon
the number of securities sought to be registered by each such Holder) that
either have
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<PAGE>
been granted registration rights by the Company with priority over the
holders of certain other registration rights or have been granted
registration rights that are not subject to any "cut backs," and (iv)
fourth, pro rata among all other holders of Registerable Securities with
piggyback registration rights and with respect to whom the Company has
consented to register securities (based upon the number of securities
sought to be registered by each such Holder); provided, however, that,
notwithstanding the foregoing, the Company shall have first priority in any
public offering of its securities initiated by the Company and the
participation of others otherwise shall be in the order and based on the
allocation set forth above. If the number of Registrable Securities
included in a registration statement is less than the number requested to
be so included by Holder pursuant to Section 2(a) hereof, then such
registration statement shall not be included in the number of registration
statements filed by the Company for purposes of the rights granted pursuant
to Section 2(a) hereof.
3. Registration Procedures. If and whenever the Company is required by this
Agreement to notify holders of Registerable Securities of a proposed
registration of securities under the Securities Act, then, unless such offering
is terminated by the Company, the Company will:
a. with such information promptly and timely furnished by Holder
regarding the securities held by Holder and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company, the
Company shall prepare and file with the Commission a registration statement
with respect to such securities and use reasonable efforts to cause such
registration statement to become and remain effective until such securities
have all been sold in accordance with the intended methods of disposition
disclosed in the registration statement;
b. furnish to each seller of securities and each underwriter, if any,
of the securities being sold by such seller such number of copies of such
registration statement and of each amendment and supplement therein, such
number of copies of the prospectus, including a preliminary prospectus and
summary prospectus, and such other documents, as such seller or underwriter
may reasonably request in order to facilitate the public sale or other
disposition of the securities owned by such seller;
c. use reasonable efforts to register or qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions in the United States as a seller or
underwriter shall reasonably request, and do such other acts and things as
may be necessary or advisable to enable such seller and underwriter to
consummate the public sale or other disposition in such jurisdictions of
the securities owned by such seller, except that the Company shall not for
any such purpose be required to execute or file any general consent to
service of process or be obligated to qualify to do business under the laws
of any jurisdiction where it has not previously done so;
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<PAGE>
d. notify each seller of any securities covered by such registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the Company's becoming aware that
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such seller promptly prepare and
furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
e. otherwise to comply with all applicable rules and regulations of
the Commission;
f. use reasonable efforts to list such securities on any securities
exchange on which the Common Stock of the Company is then listed, if the
listing of such securities is then permitted under the rules of such
exchange;
g. provide a transfer agent and registrar for all the securities
covered by such registration statement not later than the effective date of
such registration statement;
h. enter into such underwriting, indemnity or similar agreements with
the underwriters in customary form and take such other actions as may be
reasonably necessary in order to expedite or facilitate the disposition of
such securities; and
i. permit any seller of the Registerable Securities included in such
registration statement to reasonably participate in the preparation of such
registration statement and to insert in such registration statement such
material in writing which in the reasonable judgment of such seller (which
judgment shall be reasonably concurred with by the Company) should be
included in such registration statement, including information regarding
the securities owned by such seller and the intended method of disposition.
Holder shall not have any right to obtain or seek an injunction restraining
or otherwise delaying any Piggyback Registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement, or otherwise.
4. Indemnification.
a. Indemnification by the Company. To the extent permitted by
applicable law, the Company will indemnify each Holder of Registerable
Securities, each of its officers and directors, each Affiliate of the
Company, each of the directors and officers
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<PAGE>
of such Affiliate of the Company, and each person controlling such Holder
or Affiliate, with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, against all
claims, losses, damages, costs, expenses and liabilities whatsoever (or
actions in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other similar
document (including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made, or (ii) any violation by the Company of the Securities Act or
any state securities law or of any rule or regulation promulgated under the
Securities Act or any state securities law or any common law or any other
law applicable to the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of
its officers and directors, and each person controlling such Holder, for
any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action unless such action arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by an
instrument duly executed by any Holder and stated to be specifically for
use therein or furnished by any Holder to the Company in response to a
request by the Company stating specifically that such information will be
used by the Company therein. It is expressly acknowledged that the Company
shall not indemnify a Holder, or its officers, directors, or persons
controlling such Holder, if such Holder, or its officers, directors, or
persons controlling such Holder, made an untrue statement or failed to
state a material fact to the Company and if the use of such information by
the Company in connection with its registration statement causes the claim,
loss, damages, cost, expense or liability for which indemnification is
being sought.
b. Indemnification by the Holder. To the extent permitted by
applicable law, Holder will, if Registerable Securities held by or issuable
to such Holder are included in the securities to which such registration,
qualification or compliance is being effected, indemnify the Company, each
of the directors and officers of the Company, each Affiliate of the
Company, each of the directors and officers of each Affiliate of the
Company, and each underwriter, if any, of the Company's securities covered
by such registration statement, and each person who controls the Company
within the meaning of the Securities Act against all claims, losses,
damages, costs, expenses and liabilities whatsoever (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other similar document (including any
related registration statement, notification or the like) incident to any
such registration, qualification or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in the light of the circumstances under which they were made, and will
reimburse the Company, such directors, officers, persons or underwriters
for any
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<PAGE>
legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, cost, expense,
liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in strict
conformity with written information furnished to the Company by an
instrument duly executed by such Holder and stated to be specifically for
use therein or furnished by the Holder to the Company in response to a
request by the Company stating specifically that such information will be
used by the Company therein.
c. Indemnification Mechanics. Each party entitled to indemnification
under this Section 4 (the "Indemnified Party") shall give notice to the
party or parties required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). The failure of any Indemnified Party to give notice as provided
herein shall relieve the Indemnifying Party of its obligations under this
Agreement only to the extent that such failure to give notice shall
materially adversely prejudice the Indemnifying Party in the defense of any
such claim or any such litigation. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation. If any such
Indemnified Party shall have been advised by counsel chosen by it that
there may be one or more legal defenses available to such Indemnified Party
that are different from or additional to those available to the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action on behalf of such Indemnified Party and
will reimburse such Indemnified Party and any person controlling such
Indemnified Party for the reasonable fees and expenses of any counsel
retained by the Indemnified Party, it being understood that the
Indemnifying Party shall not, in connection with any one action or separate
but similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys for such
Indemnified Party or controlling person, which firm shall be designated in
writing by the Indemnified Party to the Indemnifying Party.
d. Contribution. If the indemnification provided for in this Section 4
is unavailable to an Indemnified Party (other than by reason of any
exception provided in Section 4a or 4b hereof) in respect of any losses,
claims, damages, costs, expenses or liabilities for which such Indemnified
Party is entitled to be indemnified hereunder, 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,
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<PAGE>
claims, damages, costs, expenses or liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions which resulted in such losses,
claims, damages, costs, expenses or liabilities, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party 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 Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of losses, claims, damages,
costs, expenses or liabilities referred to above shall be deemed to include,
subject to the limitations set forth in Section 4c, 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 4d 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 this Section 4d. 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 is not
guilty of such fraudulent misrepresentation. If indemnification is available
under this Section 4, the indemnifying parties shall indemnify each indemnified
party to the full extent provided for in this Section 4 without regard to the
relative fault of such Indemnifying Party or Indemnified Party or any other
equitable consideration provided for in this Section 4d.
5. Registration Expenses. Except as provided in Section 2a hereof, the
Company shall pay all Registration Expenses in connection with any Piggyback
Registration requested by Holder pursuant to Section 2.
6. Information Rights. The Company will deliver to Holder promptly upon
their becoming available, a copy of each financial statement, report, notice or
proxy statement sent by the Company to stockholders generally. Holder, if
included in any Piggyback Registration, shall furnish to the Company such
written information regarding Holder as the Company may request in writing and
as shall be required in connection with any registration, qualification, or
compliance referred to in this Agreement.
8. Rule 144 Covenants. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of
restricted securities to the public without registration, the Company agrees to:
a. Make and keep available public information regarding the Company,
as those terms are understood and defined in Rule 144 under the Securities
Act;
b. File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act;
216344.8 7/12/96
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<PAGE>
c. Furnish to the Holder, as long as a Holder owns any Registrable
Securities or rights to acquire Warrant Shares, forthwith upon written
request (i) a written statement by the Company as to its compliance with
the reporting requirements of Rule 144, the Securities Act, and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of
the Company, and (iii) such other reports and documents so filed as a
Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.
9. Sale During Registration. Holder shall not sell any Common Stock of the
Company under Rule 144 or otherwise exempt from registration during the period
beginning on the earlier of:
(a) thirty (30) prior to the date any registration statement is filed
with the Commission by the Company (provided that the Company provides to
Holder written notice of the Company's good faith intention to file a
registration statement on the date specified in such notice, all of which
information Holder agrees to maintain in strict confidence until such
registration shall be declared effective by the Commission); or
(b) the date of Holder's receipt of written notice from the Company of
the Company's good faith intention to file with the Commission within 30
days following such notice a registration statement on the date specified
in such notice as the proposed filing date, all of which information Holder
agrees to maintain in strict confidence until such registration shall be
declared effective by the Commission; or
(c) the date of Holder's receipt of written notice from the Company
that the Company has filed a registration statement with the Commission on
the date specified in such notice as the filing date;
and ending on the earlier of (i) ninety (90) days after the effective date of
such registration, or three hundred (300) days after the date of filing if such
registration has not become effective by that time, or (ii) the date when any
directors or executive officers of the Company sell Common Stock under Rule 144
or otherwise exempt from registration.
10. Notices. All notices and other communication provided for hereunder
shall be in writing and shall be sent by telex, telecopier or hand delivery: (a)
if to the Company, to:
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Attn: General Counsel
Tel: (803) 239-1000
Fax: (803) 239-1096
216344.8 7/12/96
-11-
<PAGE>
with copies to:
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Attn: Chief Financial Officer
Tel: (803) 239-1000
Fax: (803) 239-1096
Farris, Warfield & Kanaday
Suite 1900
SunTrust Center
424 Church Street
Nashville, Tennessee 37219
Attention: Riney Green, Esq.
Tel: (615) 544-5200
Fax: (615) 726-3185
and (b) if to Holder of the Registerable Securities, to the address of Holder as
shown in the stock record books of the Company, or to such other address as any
of the above shall have designated in writing to the Company. All such notice
and communication shall be deemed to have been given or made (a) when delivered
by hand, (b) when telexed, answer-back received, or (c) when telecopied, receipt
acknowledged.
11. Descriptive Headings. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect the interpretation or
construction of this Agreement.
12. Severability. If for any reason any provision of this Agreement shall
be held invalid or unenforceable in whole or in part in any jurisdiction, such
provisions shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
13. Amendments, Etc. No amendment or waiver of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
each of the parties to this Agreement. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose given. No
failure on the part of any party to this Agreement to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof or preclude
any other or further exercise thereof or the exercise of any other right.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute one and the same
instrument.
216344.8 7/12/96
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<PAGE>
15. Assignment and Consolidation or Merger.
a. Assignment. This Agreement may be assigned, transferred or
otherwise conveyed by Holder; provided, however, in the event Holder
assigns, transfers or otherwise conveys his interest in this Agreement, the
assignee, transferee or recipient of said interest shall be subject to all
restrictions and requirements of Section 2a hereof. Any attempted
assignment, transfer or conveyance in violation of the provisions of this
Agreement shall be void. The Warrant Agreement issued in conjunction with
the Purchase Agreement and this Agreement contain restrictions regarding
the assignment, transfer or other conveyance thereof. Said restrictions
limit to whom an assignment, transfer or conveyance may be made, and,
additionally, limit the number of assignments, transfers or conveyances the
holder thereof may make. The exercise of rights pursuant to this Agreement
is limited to the Holder hereof and those who obtained any purported rights
hereunder in compliance with all assignment, transfer or conveyance
restrictions contained in the Warrant Agreement and this Agreement. This
Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the Company and the Holder.
b. Merger or Consolidation. In the case of any consolidation or merger
of the Company with or into another corporation, the consolidation of the
Company with or the merger of the Company with or into any other person, or
in the event of the sale, lease or other transfer of all or substantially
all of the assets of the Company to any other person, then in each case the
rights granted to Holder by this Agreement shall survive such
consolidation, merger, sale, lease or other transfer and shall thereafter
be enforce- able against the entity succeeding as to the rights and
obligations of Company hereunder.
16. Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Company and the Holder contained
herein or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement.
17. Attorneys' Fees. If any action or proceeding is brought to enforce the
terms of the Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and costs.
18. Governing Law. This Agreement shall be governed by, and interpreted and
construed in accordance with, the laws of the State of Delaware. Venue for any
and all disputes arising out of or in connection with this Agreement shall be
exclusively in the federal and state courts in the State of South Carolina. The
parties hereto consent and submit to the jurisdiction of such courts and waive
any objection to venue laid therein. Process in any action or proceeding
referred to in this Agreement may be served on any party anywhere in the world.
19. Waiver of Jury Trial. The parties waive the right to a jury trial with
respect to any controversy or claim between or among the parties hereto,
including but not limited to those
216344.8 7/12/96
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<PAGE>
arising out of or relating to this Agreement, including any claim based on or
arising from an alleged tort.
20. Time of the Essence. Time is of the essence in performing and
interpreting this Agreement.
21. Further Assurances. The Company and the Holder hereby agree promptly to
execute at the other's reasonable request after the date hereof any documents or
materials related to the transactions contemplated by this Agreement.
22. Specific Performance. Each of the parties shall be entitled to specific
performance in the event of a breach by the other party of their respective
obligations hereunder. Such remedy shall be in addition to, but shall not
replace, any other remedies which might be available under this Agreement, at
law or in equity, including without limitation, actions for attorney's fees.
23. Representations of Company. The Company represents and warrants to
Holder as follows:
(a) Corporate Organization and Good Standing. The Company is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware, and is duly qualified and in good
standing in all other states where the nature of its business or operations
or the ownership of its property requires such qualification.
(b) Corporate Approval. The Company has full corporate power and
authority to execute and deliver this Agreement and all other documents and
agreements to be executed and delivered by it hereunder ("Transaction
Documents") and to consummate the transactions contemplated hereby. The
board of directors of the Company has duly and validly approved the
execution, delivery, and performance of this Agreement and the transactions
contemplated herein. No other corporate or legal proceedings on the part of
the Company are necessary to approve and authorize the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement constitutes, and the other Transaction
Documents, when executed, will constitute, the legal, valid, and binding
obligation and agreement of the Company enforceable against the Company in
accordance with its terms, subject only to the general law of creditors'
rights.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
INSIGNIA FINANCIAL GROUP, INC.,
a Delaware corporation
By: /s/ Frank M. Garrison
---------------------
Title: Executive Managing Director
PARAGON GROUP L.P.
By: /s/ Steve Means
---------------
Title:
216344.8 7/12/96
-15-
STOCK AND NOTE PURCHASE AGREEMENT
by and among
Paragon Group L.P.
Texas Paragon Management Partners L.P.
Paragon Group Property Services, Inc.; and
Insignia Commercial Group, Inc.
Dated as of May 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS.................................................... 1
"A.A.A."....................................................... 1
"Accounts Receivable".......................................... 1
"Agreement".................................................... 1
"Annual Earn-Out Statement".................................... 2
"Applicable Contract".......................................... 2
"Barnett Management Termination Event"......................... 2
"Barnett Management Termination Fee"........................... 2
"Barnett Plaza"................................................ 2
"Best Efforts"................................................. 2
"Breach"....................................................... 2
"Buyer"........................................................ 2
"Buyer Advisors"............................................. 2
"Buyer's Closing Certificate".................................. 2
"Buyer's Closing Documents".................................... 2
"Closing"...................................................... 2
"Closing Allocation of Joint Assets Agreement"................. 2
"Closing Cooper Agreements".................................... 2
"Closing Date"................................................. 2
"Closing Date Employee Accounts Receivable".................... 4
"Completed Lease".............................................. 2
"Confidentiality Letter"....................................... 3
"Consent"...................................................... 3
"Contemplated Transactions".................................... 3
"Continuing Liabilities"....................................... 3
"Contract"..................................................... 3
"Controlled Management Properties"............................. 3
"Cooper"....................................................... 3
"Cooper Agreement"............................................. 3
"Cooper Consulting/Non-Competition Agreement".................. 3
"Cooper Partnership"........................................... 4
"Cooper Partnership Properties"................................ 4
"Consulting/Non-Competition Agreements"........................ 3
"Copyrights"................................................... 4
"Damages"...................................................... 4
"Delivered Cooper Partnership Agreements"...................... 4
"Delivered PGPSI Service Agreements"........................... 4
"Designated Employees"......................................... 4
"Earn-Out Amount".............................................. 4
"Earn-Out Payment I"........................................... 4
"Earn-out Payment II".......................................... 4
"Effective Time"............................................... 4
"Effective Time PGPSI Commercial Clients"...................... 4
"Effective Time PGPSI Commercial Properties"................... 4
"Employee Designation Date".................................... 4
"Encumbrance".................................................. 4
"Environment".................................................. 5
i
<PAGE>
"Environmental, Health, and Safety Liabilities"................ 5
"Environmental Law"............................................ 5
"ERISA"........................................................ 6
"ERISA Affiliate".............................................. 6
"Excluded Assets".............................................. 6
"Final Proration Report"....................................... 6
"Fletcher/PGPSI Termination"................................... 6
"GAAP"......................................................... 6
"Governmental Authorization"................................... 6
"Governmental Body"............................................ 6
"Great Southwest Management Agreement"......................... 7
"Hazardous Activity"........................................... 7
"Hazardous Materials".......................................... 7
"HSR Act"...................................................... 7
"IFG".......................................................... 7
"IFG Registration Rights Agreement"............................ 7
"IFG Warrants"................................................. 7
"IFG Warrant Agreement"........................................ 7
"Indemnified Persons".......................................... 7
"Initial Proration Report"..................................... 7
"Intellectual Property Assets"................................. 7
"Interim Balance Sheet"........................................ 8
"IRC".......................................................... 8
"IRS".......................................................... 8
"Knaus Employment Agreement"................................... 8
"Knowledge".................................................... 8
"Legal Requirement"............................................ 8
"Managed Properties"........................................... 8
"Management Termination Event"................................. 8
"Management Termination Properties"............................ 9
"Marks"........................................................ 9
"Means"........................................................ 9
"Means Consulting/Non-Competition Agreement"................... 9
"Modification Notice".......................................... 9
"Multi-Employer Plan".......................................... 9
"1996 Dallas Industrial Property".............................. 9
"New Paragon Residential"...................................... 9
"New Paragon Residential Note"................................. 9
"Non-Affiliated Management Properties"......................... 9
"Non-Designated Employees"..................................... 9
"Non-Transition Employees"..................................... 9
"Non-Voting Class"............................................. 9
"Occupational Safety and Health Law"........................... 10
"Order"........................................................ 10
"Ordinary Course of Business".................................. 10
"Organizational Documents"..................................... 10
"Other Benefit Obligations".................................... 10
"Owned Assets"................................................. 10
"PBGC"......................................................... 10
"PGGPH"........................................................ 10
"PGLPH"........................................................ 11
"PGL".......................................................... 11
ii
<PAGE>
"PG Group"..................................................... 11
"PG Group Person".............................................. 11
"PG Group Properties".......................................... 11
"PG Parent".................................................... 11
"PG Parent Registration Rights Agreement"...................... 11
"PG Parent Warrant Agreement".................................. 11
"PG Parent Warrants"........................................... 11
"PGPSI"........................................................ 11
"PGPSI Commercial Division".................................... 11
"PGPSI Note"................................................... 11
"PGPSI Other Benefit Obligation"............................... 11
"PGPSI Stock Plan"............................................. 11
"PGPSI Plan"................................................... 11
"PGPSI Services Agreement"..................................... 11
"PGPSI VEBA"................................................... 12
"Paragon Consulting/Non-Competition Agreement"................. 12
"Paragon/St. Louis"............................................ 12
"Patents"...................................................... 12
"Pension Plan"................................................. 12
"Person"....................................................... 12
"Plan"......................................................... 12
"Plan Sponsor"................................................. 12
"Proceeding"................................................... 12
"Property" or "Properties"..................................... 12
"Property Interest" or "Property Interests".................... 12
"Property Specific Management Termination Fee"................. 12
"Proprietary Rights Agreement"................................. 12
"Purchase Price"............................................... 12
"Qualified Plan"............................................... 12
"Qualified Revenue"............................................ 12
"Real Estate Brokerage Agreement".............................. 12
"Related Person"............................................... 13
"Release"...................................................... 14
"Replacement PGPSI Management Agreement"....................... 14
"Representative"............................................... 14
"Securities Act"............................................... 14
"Sellers"...................................................... 14
"Seller's Closing Certificate"................................. 14
"Sellers' Closing Documents"................................... 14
"Seller's Control Environmental Liability"..................... 14
"Shares"....................................................... 14
"Southwood".................................................... 14
"St. Louis Lease".............................................. 14
"Syndicated GE Partnerships"................................... 14
"Syndicated GE Partnership Properties"......................... 14
"Subsidiary"................................................... 14
"Tampa Lease".................................................. 14
"Tax Allocation Agreement"..................................... 15
"Tax Return"................................................... 15
"Threat of Release"............................................ 15
"Threatened"................................................... 15
"Title IV Plans"............................................... 15
iii
<PAGE>
"TPMPL"........................................................ 15
"Trade Secrets"................................................ 15
"Transition Employees"......................................... 15
"VEBA"......................................................... 15
"Voting Class"................................................. 15
"Welfare Plan"................................................. 15
"Westgate"..................................................... 15
"WRCH"......................................................... 15
2. SALE AND TRANSFER OF SHARES; PGPSI NOTE PURCHASE;
CLOSING; OTHER AGREEMENTS............................................ 15
2.1 Shares and PGPSI Note........................................ 15
2.2 Purchase Price............................................... 16
2.3 Closing...................................................... 16
2.4 Closing Obligations.......................................... 17
2.5 Earn-Out Amount.............................................. 18
2.6 Balance Sheets on the Closing Date........................... 22
2.7 Liabilities and Revenues/Prorations.......................... 24
2.8 Continuing Liabilities....................................... 28
2.9 Tax Return................................................... 28
2.10 IFG Registration Rights...................................... 28
2.11 PGPSI Services Agreement
in Effect on the Closing Date................................ 28
2.12 Consulting/Non-Competition Agreements........................ 30
2.13 Real Estate Brokerage........................................ 30
2.14 [Intentionally Omitted]...................................... 31
2.15 [Intentionally Omitted]...................................... 31
2.16 Tenancy Leases............................................... 31
2.17 Certain Employment Matters................................... 32
2.18 License to Use Tradename..................................... 35
2.19 Closing Allocation of Joint Assets Agreement................. 35
2.20 Tenure of Jeremy Fletcher.................................... 35
2.21 Barnett Management Termination Fee........................... 36
2.22 Management Termination Fees.................................. 37
2.23 PG Parent Warrants........................................... 39
2.24 PG Parent Registration Rights................................ 39
2.25 [Intentionally Omitted]...................................... 39
2.26 Limitations on Co-Investment with JP Morgan.................. 39
3. REPRESENTATIONS AND WARRANTIES OF SELLERS............................ 40
3.1 Organization and Good Standing............................... 40
3.2 Authority; No Conflict....................................... 41
3.3 Capitalization............................................... 43
3.4 Financial Statements......................................... 44
3.5 Books and Records............................................ 44
3.6 Title to Properties; Encumbrances............................ 45
3.7 Condition and Sufficiency of Assets.......................... 46
3.8 Accounts Receivable.......................................... 46
3.9 [Intentionally Omitted]...................................... 46
3.10 No Undisclosed Liabilities................................... 46
3.11 Taxes........................................................ 47
3.12 No Material Adverse Change................................... 48
iv
<PAGE>
3.13 Employee Benefits............................................ 48
3.14 Compliance with Legal
Requirements; Governmental Authorizations.................... 53
3.15 Legal Proceedings; Orders.................................... 55
3.16 Absence of Certain Changes and Events........................ 56
3.17 Contracts; No Defaults....................................... 57
3.18 Insurance.................................................... 61
3.19 Environmental Matters........................................ 63
3.20 Employees.................................................... 65
3.21 Labor Relations; Compliance.................................. 66
3.22 Intellectual Property........................................ 66
3.23 Certain Payments............................................. 69
3.24 PGPSI Services Agreements.................................... 69
3.25 PGPSI Services Agreement Revenues............................ 70
3.26 Disclosure................................................... 70
3.27 Relationships with Related Persons........................... 70
3.28 Brokers or Finders........................................... 70
3.29 PGPSI Note................................................... 71
3.30 Net Operating Loss........................................... 71
4. REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 71
4.1 Organization and Good Standing............................... 71
4.2 Authority; No Conflict....................................... 71
4.3 Investment Intent............................................ 72
4.4 Certain Proceedings.......................................... 72
4.5 Brokers or Finders........................................... 72
5. COVENANTS OF SELLERS AND PGPSI PRIOR TO/ON CLOSING
DATE................................................................. 73
5.1 Required Approvals........................................... 73
5.2 Shareholder Approval......................................... 73
5.3 Current Information.......................................... 73
5.4 [Intentionally Omitted]...................................... 73
5.5 Securities Laws Compliance................................... 73
5.6 Operations Prior to Closing Date............................. 74
5.7 Miscellaneous Agreements and Consents........................ 75
5.8 Access and Investigation..................................... 76
5.9 Notification................................................. 76
5.10 No Negotiation............................................... 76
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE............................. 77
6.1 Approvals of Governmental Bodies............................. 77
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.................. 77
7.1 Accuracy of Representations.................................. 77
7.2 Performance.................................................. 77
7.3 Consents..................................................... 78
7.4 Additional Documents......................................... 78
7.5 No Proceedings............................................... 79
7.6 No Claim Regarding Stock
Ownership or Sale Proceeds................................... 79
7.7 No Prohibition............................................... 79
v
<PAGE>
7.8 Book Value of Owned Assets................................... 80
7.9 Financial Statements; Comfort Letters........................ 80
7.10 Division/Cost Allocation
of Certain PGPSI Assets...................................... 80
7.11 Unimproved Real Estate....................................... 80
7.12 Revenues Attributable to Continuing
PGPSI Services Agreements.................................... 80
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE................. 81
8.1 Accuracy of Representations.................................. 81
8.2 Buyer's Performance.......................................... 81
8.3 Consents..................................................... 81
8.4 Additional Documents......................................... 81
8.5 No Proceedings............................................... 82
8.6 Division/Cost Allocation of Certain PGPSI Assets............. 82
9. TERMINATION.......................................................... 82
9.1 Termination Events........................................... 82
9.2 Effect of Termination........................................ 83
10. INDEMNIFICATION; REMEDIES............................................ 83
10.1 Survival; Right to Indemnification
Not Affected by Knowledge.................................... 83
10.2 Indemnification and Payment
of Damages by Sellers........................................ 84
10.3 [Intentionally Omitted]...................................... 85
10.4 Indemnification and Payment of Damages by Buyer.............. 86
10.5 [Intentionally Omitted]...................................... 86
10.6 Procedure for Indemnification--
Third Party Claims........................................... 86
10.7 Procedure for Indemnification--Other Claims.................. 88
11. GENERAL PROVISIONS................................................... 88
11.1 Expenses..................................................... 88
11.2 Mandatory Arbitration........................................ 88
11.3 Confidentiality.............................................. 89
11.4 Notices...................................................... 89
11.5 [Intentionally Omitted]...................................... 90
11.6 Further Assurances........................................... 91
11.7 Waiver....................................................... 91
11.8 Entire Agreement and Modification............................ 91
11.9 Agreement with Cooper........................................ 91
11.10 Assignments, Successors,
and No Third-Party Rights.................................... 92
11.11 Severability................................................... 92
11.12 Section Headings, Construction................................. 92
11.13 Time of Essence................................................ 92
11.14 Governing Law.................................................. 92
11.15 Counterparts................................................... 93
vi
<PAGE>
STOCK AND NOTE PURCHASE AGREEMENT
This Stock and Note Purchase Agreement ("Agreement") is made as of May 31,
1996, by Insignia Commercial Group, Inc., a Delaware corporation ("Buyer"),
Paragon Group L.P., a Delaware limited partnership ("PGL"), Texas Paragon
Management Partners L.P., a Texas limited partnership ("TPMPL"), and Paragon
Group Property Services, Inc., a Delaware corporation ("PGPSI"). PGL and TPMPL
are referred to herein collectively as "Sellers."
RECITALS
PGPSI is engaged in the operation of a national multi-family residential
and commercial property management service business, providing its services both
to properties which are owned by affiliates of Paragon Group, Inc. and to
unaffiliated properties.
The Sellers own all the shares of the capital stock of PGPSI (the
"Shares").
Buyer is an affiliate of Insignia Financial Group, Inc., which through one
or more subsidiaries or affiliates operates a national real estate service
business, including property management, asset management, property brokerage
and mortgage banking.
Sellers desire to transfer and assign the multi-family residential
property management service business of PGPSI to another affiliate of Sellers,
leaving PGPSI only in the business of providing commercial property management
services.
Sellers desire to sell, and Buyer desires to purchase PGPSI for the
consideration and on the terms set forth in this Agreement, and thereby to
acquire and to integrate PGPSI's commercial property services business into the
Buyer's existing operations as a major provider of commercial property services.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"A.A.A."--as defined in Section 11.2.
"Accounts Receivable" -- as defined in Section 3.8(a).
"Agreement"-- this Stock and Note Purchase Agreement.
"Annual Earn-Out Statement"--as defined in Section 2.5(d).
<PAGE>
"Applicable Contract"--any Contract, including any PGPSI Services
Agreements presently in effect, (a) under which PGPSI has or may acquire any
rights, (b) under which PGPSI has or may become subject to any obligation or
liability, or (c) by which PGPSI or any of the assets owned or used by it is or
may become bound.
"Barnett Management Termination Event"-- as defined in Section
2.21.
"Barnett Management Termination Fee"-- as defined in Section
2.21.
"Barnett Plaza"-- that certain office building complex presently owned by
Para-Met Plaza Associates and located at 101 East Kennedy, Tampa, Florida.
"Best Efforts"--the reasonable efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible, but without the obligation to expend
any money other than incidental out of pocket expenditures.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
"Buyer"--as defined in the first paragraph of this Agreement.
"Buyer's Advisors"-- as defined in Section 5.8.
"Buyer's Closing Certificate"-- as defined in Section
2.4(b)(vii).
"Buyer's Closing Documents"-- as defined in Section 4.2.
"Closing"--as defined in Section 2.3.
"Closing Allocation of Joint Assets Agreement"--as defined in
Section 7.10.
"Closing Cooper Agreements"-- as defined in Section 7.2(d).
"Closing Date"--the date and time as of which the Closing
actually takes place.
Effective Time Employee Accounts Receivable"--as defined in
Section 3.8(b).
"Completed Lease"--as defined in Section 2.7(c)(viii).
2
<PAGE>
"Confidentiality Letter"-- as defined in Section 11.3.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Consulting/Non-Competition Agreements"--the Paragon
Consulting/Non-Competition Agreement, the Cooper Consulting/Non-
Competition Agreement, and the Means Consulting/Non-Competition
Agreement.
"Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:
(a) the sale by the Sellers to Buyer and the purchase
(and payment therefor) by Buyer from the Sellers of the Shares
and the PGPSI Note;
(b) the execution, delivery, and performance of the Paragon
Consulting/Non-Competition Agreement, the Cooper Agreement, the IFG
Warrant Agreement, the IFG Registration Rights Agreement, the PG Parent
Warrant Agreement, the PG Parent Registration Rights Agreement, the Cooper
Consulting/Non-Competition Agreement, the Knaus Employment Agreement, the
Means Consulting/Non-Competition Agreement, the Real Estate Brokerage
Agreement, the Closing Allocation of the Joint Assets Agreement, and the
Tax Allocation Agreement;
(c) the performance by Buyer, PGPSI and Sellers of their
respective covenants and obligations under this Agreement, including
without limitation their obligations under Section 2 hereof;
(d) Buyer's acquisition and ownership of the Shares and
exercise of control over PGPSI; and
(e) the performance (including performance by Persons who are not
parties hereto) or occurrence of the actions, transactions, events or
obligations necessary to satisfy the conditions set forth in Sections 7
and 8 hereof.
"Continuing Liabilities"--as defined in Section 2.6(b).
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Controlled Management Properties"-- the Cooper Partnership
Properties and the PG Group Properties.
"Cooper"-- William R. Cooper, a resident of Dallas County,
Texas.
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"Cooper Agreement"--as defined in Section 11.9.
"Cooper Consulting/Non-Competition Agreement"-- as defined in
Section 7.4(c).
"Cooper Partnership"-- any general partnership, joint venture, limited
partnership, limited liability company, trust, corporation or other entity
listed on Exhibit 1.A hereto.
"Cooper Partnership Properties"--the Properties listed on
Exhibit 1.B.
"Copyrights"-- as defined in Section 3.22(a)(iii).
"Damages"--as defined in Section 10.2.
"Delivered Cooper Partnership Agreements"-- those documents listed on
Exhibit 1.C consisting of Organizational Documents of the Cooper Partnerships
which (or accurate photocopies of which) were actually delivered to Buyer no
later than May 31, 1996, but excluding any undelivered written portions of such
Organizational Documents or any unwritten portions of such Organizational
Documents.
"Delivered PGPSI Service Agreements"-- those documents listed on Exhibit
1.D consisting of PGPSI Service Agreements which (or accurate photocopies of
which) were actually delivered to Buyer no later than May 31, 1996, but
excluding any undelivered written portions of such Agreements or any unwritten
portions of such Agreements.
"Designated Employees"--as defined in Section 2.17(a).
"Earn-Out Amount"--as defined in Section 2.5.
"Earn-Out Payment I"--as defined in Section 2.5(b).
"Earn-out Payment II"-- as defined in Section 2.5(c).
"Effective Time"--the end of the day June 30, 1996.
"Effective Time PGPSI Commercial Clients"-- as defined in
Section 2.5.(a)(i).
"Effective Time PGPSI Commercial Properties"-- as defined in
Section 2.5.(a)(i).
"Employee Designation Date" --as defined in Section 2.17(a).
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind,
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<PAGE>
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not
such Cleanup has been required or requested by any Governmental Body or
any other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of
the commencements of
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<PAGE>
activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials
into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are
generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological
amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate"-- as defined in Section 3.13.
"Excluded Assets"-- as defined in Section 2.6(a).
"Final Proration Report"-- as defined in Section 2.7(b).
"Fletcher/PGPSI Termination"-- as defined in Section 2.20.
"GAAP"--generally accepted United States accounting
principles, applied on a consistent basis.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
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<PAGE>
"Governmental Body"--any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"Great Southwest Management Agreement"--as defined in Section
2.7(c)(vi).
"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from a
property or any part thereof into the Environment.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"IFG"--Insignia Financial Group, Inc., a Delaware corporation.
"IFG Registration Rights Agreement"--as defined in Section
2.10 hereof.
"IFG Warrants"--as defined in Section 2.2.
"IFG Warrant Agreement"--as defined in Section 2.2.
"Indemnified Persons"-- as defined in Section 10.2.
"Initial Proration Report"-- as defined in Section 2.7(b).
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"Intellectual Property Assets" --as defined in Section 3.22.
"Interim Balance Sheet"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"Knaus Employment Agreement"--as defined in Section 7.4(e).
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. PGPSI and Sellers will be deemed to have "Knowledge" of a
particular fact or other matter if any of Cooper, Means, Doug Knaus, Steve
Caron, Lynn Caldwell, Barry Nelson, David Fitch, Patrick G. ("Rick") Cooper,
Jeremy Fletcher, Scott Smithers, Hal Flowers, Scott Martin, Lewis Levey, Robert
Gidel, Jerry Bonner, Thomas Ferguson, Brian Lavin, James Cobb, Robert Guimbarda,
Gerald Hasara, James Johnson, has, or had, Knowledge of such fact or other
matter. Buyer will be deemed to have "Knowledge" of a particular fact or other
matter if any of Frank M. Garrison, Janice Cole, Alan Ballew, Ronald R. Uretta,
Tina Morrow, Henry Horowitz, Andrew Farkas, John Combs, Wayne Etheridge, Michael
Horowitz, Robert Shibuya, Ken Miller, Louis Genarelli, or Fred Meno has, or had,
Knowledge of such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty (as to
representations and warranties set forth in this Agreement, such orders,
constitutions, laws, ordinances, principles of common law, regulations,
statutes, or treaties in effect as of the date such representation or warranty
is made).
"Managed Properties"--the Properties with respect to which PGPSI provides
or is obligated to provide property management services and/or leasing services
and/or real estate brokerage services and/or development services and/or other
services pursuant to a PGPSI Services Agreement, which Properties as of the date
hereof are listed on Exhibit 1.E hereof.
"Management Termination Event"-- with respect to a Management Termination
Property, the cessation of PGPSI's services under a PGPSI Services Agreement for
any reason (including sale of such Management Termination Property) other than
(i) the voluntary termination by PGPSI of such services, or (ii) termination of
the PGPSI Services Agreement by the owner(s) of such Management
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<PAGE>
Termination Property on the basis of PGPSI's sustained gross negligence, willful
misconduct or mismanagement in the performance of its services under the PGPSI
Services Agreement, as measured by prevailing industry standards.
"Management Termination Properties"-- the Properties listed on
Exhibit 1.J-1 hereof.
"Marks"-- as defined in Section 3.22(a)(i).
"Means"-- Steven A. Means, a resident of Dallas County, Texas.
"Means Consulting/Non-Competition Agreement"-- as defined in
Section 7.4(d).
"Modification Notice"--as defined in Section 5.9.
"Multi-Employer Plan"-- as defined in Section 3.13.
"1996 Dallas Industrial Property"--as defined in Section
2.7(c)(vi).
"New Paragon Residential"--a to-be-formed Delaware corporation which will
be the transferee of the Excluded Assets.
"New Paragon Residential Note"--a promissory note to be created on or
before the Closing Date payable by New Paragon Residential in the original
principal amount of not less than $4,430,000 nor greater than $4,460,000 payable
to the order of PGL, which note represents the assumption of liability by New
Paragon Residential of a portion of a promissory note originally dated July 28,
1994 payable by PGPSI to PGL Associates L.P. (which note was subsequently
endorsed to PGL).
"Non-Affiliated Management Properties"-- Properties listed on
Exhibit 2.11.(d)-1 hereof.
"Non-Designated Employees"--as defined in Section 2.17(b).
"Non-Transition Employees"--as defined in Section 2.17(a).
"Non-Voting Class"--as defined in Section 3.3(a).
"Occupational Safety and Health Law"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any generally recognized program, whether governmental
or private (including those promulgated or sponsored by industry associations
and insurance companies), designed to provide safe and healthful working
conditions.
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<PAGE>
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or
by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter, articles of organization, operating agreement or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person, including a limited liability company; and (e) any
amendment to any of the foregoing.
"Other Benefit Obligations"-- as defined in Section 3.13.
"Owned Assets"-- as defined in Section 2.6(a).
"PBGC"-- as defined in Section 3.13.
"PGGPH"--Paragon Group GP Holdings, Inc., a Delaware
corporation.
"PGLPH"--Paragon Group LP Holdings, Inc., a Delaware
corporation.
"PGL"-- as defined in the first paragraph of this Agreement.
"PG Group"-- collectively, PG Parent, PGL, TPMPL, PGPSI, PGGPH
and PGLPH.
"PG Group Person"-- a Person being a part of the PG Group.
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<PAGE>
"PG Group Properties"-- the seven Properties listed on Exhibit 1.F and any
additional Properties of which one or more PG Group Persons, individually or
collectively, own or control at least nine percent (9%) of the ownership or
economic interest (exclusive of lessee tenancies of a term of less than 25
years).
"PG Parent"-- Paragon Group, Inc., a Maryland corporation.
"PG Parent Registration Rights Agreement"-- as defined in
Section 2.24 hereof.
"PG Parent Warrant Agreement"-- as defined in Section 2.23
hereof.
"PG Parent Warrants"-- as defined in Section 2.23 hereof.
"PGPSI"- the corporation defined in the first paragraph of this Agreement
as "PGPSI" and any predecessor corporations merged into Paragon Group Property
Services, Inc. and any corporation the rights and liabilities of which were
assumed by operation of law by Paragon Group Property Services, Inc. or any such
predecessor.
"PGPSI Commercial Division"--that segment of the business and operations
of PGPSI relating to the rendering of services to Properties, and the assets,
employees and other personnel, facilities, property and other assets employed,
owned or otherwise used by PGPSI in connection therewith.
"PGPSI Note"-- that certain Promissory Note to be dated a date on or
before the Closing Date payable by PGPSI as maker to the order of PGL, to be
created in the form of the promissory note attached hereto as Exhibit 1.G.
"PGPSI Other Benefit Obligation"-- as defined in Section 3.13.
"PGPSI Stock Plan"-- as defined in Section 3.20(d).
"PGPSI Plan"-- as defined in Section 3.13.
"PGPSI Services Agreement"--any Contract pursuant to which PGPSI provides
or is obligated to provide property management services and/or leasing services
and/or real estate brokerage services and/or development services and/or other
services with respect to one or more Properties.
"PGPSI VEBA"-- as defined in Section 3.13.
"Paragon Consulting/Non-Competition Agreement"-- as defined in
Section 2.4 (a)(iv).
"Paragon/St. Louis"--as defined in Section 2.11(a)(1).
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"Patents"-- as defined in Section 3.22(a)(ii).
"Pension Plan"-- as defined in Section 3.13.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan"--as defined in Section 3.13.
"Plan Sponsor"-- as defined in Section 3.13.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Property" or "Properties"-- one or more, as the case may be, office
buildings, retail buildings, industrial buildings and other non-residential
improvement or development (including such buildings, improvements or
developments under construction).
"Property Interest" or "Property Interests"-- as defined in
Section 3.19(a)(ii).
"Property Specific Management Termination Fee"-- the fee payable by
Sellers to Buyer upon the occurrence of a Management Termination Event with
respect to a specific Management Termination Property as designated on Exhibit
1.J-1 hereto and in the amount designated on such Exhibit 1.J-1.
"Proprietary Rights Agreement"-- as defined in Section
3.20(b).
"Purchase Price"--as defined in Section 2.2.
"Qualified Plan"-- as defined in Section 3.13.
"Qualified Revenue"-- as defined in Section 2.5.
"Real Estate Brokerage Agreement"-- as defined in Section
2.13.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such individual's
Family;
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<PAGE>
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the
aggregate) a Material Interest; or
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common
control with such specified Person; or
(b) any Person that holds a Material Interest in such
specified Person; or
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
or
(d) any Person in which such specified Person holds a
Material Interest; or
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a
similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse as a
parent or step-parent, child or step-child, sibling or step-sibling, grandchild
or step- grandchild, aunt or uncle, and (iv) any other natural person who
resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 15% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 15% of the
outstanding equity securities or equity interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Replacement PGPSI Management Agreement"-- as defined in
Section 2.11.
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"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, partner or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Sellers"--as defined in the first paragraph of this
Agreement.
"Sellers' Closing Certificate"-- as defined in Section
2.4(a)(v).
"Sellers' Closing Documents"-- as defined in Section 3.2(a).
"Sellers' Control Environmental Liability"-- as defined in
Section 10.2.
"Shares"--as defined in the Recitals of this Agreement.
"Southwood"--as defined in Section 2.11(a)(1).
"St. Louis Lease"-- as defined in Section 2.16(c).
"Syndicated GE Partnerships"--the partnership listed on Exhibit 1.H hereof
and which owns the Syndicated GE Partnership Properties.
"Syndicated GE Partnership Properties"--the ten Properties
listed on Exhibit 1.I hereof.
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of PGPSI.
"Tampa Lease"-- as defined in Section 2.16(b).
"Tax Allocation Agreement"--as defined in Section 2.9.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed
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with or submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in connection
with the administration, implementation, or enforcement of or compliance with
any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been received
(orally or in writing) or any notice has been received (orally or in writing),
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
"Title IV Plans"-- as defined in Section 3.13.
"TPMPL"- as defined in the first paragraph of this Agreement.
"Trade Secrets"-- as defined in Section 3.22(a)(iv).
"Transition Employees"--as defined in Section 2.17(a).
"VEBA"-- as defined in Section 3.13.
"Voting Class"-- as defined in Section 3.3(b).
"Welfare Plan"-- as defined in Section 3.13.
"Westgate"--as defined in Section 2.11(a)(1).
"WRCH"-- as defined in Section 11.9.
2. SALE AND TRANSFER OF SHARES; PGPSI NOTE PURCHASE; CLOSING;
OTHER AGREEMENTS
2.1 Shares and PGPSI Note
Subject to the terms and conditions of this Agreement, at the Closing:
(a) Sellers will sell and transfer the Shares to Buyer,
and Buyer will purchase the Shares from Sellers; and
(b) PGL will sell and assign the PGPSI Note to Buyer or a designee
of Buyer and Buyer will purchase or cause a designee of Buyer to purchase
the PGPSI Note.
2.2 Purchase Price
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The purchase price (the "Purchase Price") for the Shares and the PGPSI
Note will be $18,100,000 (Eighteen Million One Hundred Thousand Dollars) plus
(i) the Earn-Out Amount and (ii) warrants to purchase 50,000 shares of the Class
A Common Stock of IFG on the terms and conditions set forth in the form of the
IFG Warrant Agreement (the "IFG Warrant Agreement") and IFG Warrant attached
hereto collectively as Exhibit 2.2(a) (the "IFG Warrants"). The Purchase Price
for the PGPSI Note will be the face amount thereof; the balance of the Purchase
Price will be allocated to the Shares.
2.3 Closing
(a) Unless this Agreement is terminated in accordance with Section 9
hereof, the purchase and sale (the "Closing") provided for in this Agreement
will take place at the offices of Sellers' counsel in Dallas, Texas at 1:00 p.m.
(local time):
(i) at the option of Buyer, on a date following the last to be
fulfilled or waived of the conditions set forth in Sections 7 and 8 that
is the third business day following notice by Buyer to Sellers, but in no
event later than July 31, 1996; or
(ii) at the option of Sellers, on a date following the last to be
fulfilled or waived of the conditions set forth in Sections 7 and 8 that
is the third business day following notice by Sellers to Buyer, but in no
event earlier than June 30, 1996 nor later than July 31, 1996; or
(iii) at such other time and place as the parties may
agree.
Subject to the provisions of Section 9, failure to consummate the purchase
and sale provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.3 will not result in the termination of
this Agreement and will not relieve any party of any obligation under this
Agreement.
(b) The parties hereto acknowledge that as of the date of execution hereof
certain of the Exhibits referenced in this Agreement are incomplete and
undelivered. The parties agree to use their Best Efforts in good faith to
complete and deliver all Exhibits in a timely manner, but in no event later than
5 p.m. CDT Monday, June 3, 1996. The Exhibits hereto shall not be deemed
completed and delivered until and unless: (i) all parties have approved them,
which approval any party may withhold in its sole discretion; (ii) one set of
Exhibits has been attached to Buyer's counterpart of this Agreement and another
set has been attached to Sellers' counterpart of this Agreement; and (iii) the
Sellers have delivered to the Buyer and the Buyer has delivered to the Sellers
no later than 5 p.m. CDT June 3, 1996 a certificate acknowledging the
completion, approval and receipt of the Exhibits. In the event
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<PAGE>
that the Exhibits become complete and delivered pursuant to this Section 2.3(b),
they shall be deemed for purposes of this Agreement to have been completed and
delivered as of the date hereof. In the event that the Exhibits do not become
complete and delivered pursuant to this Section 2.3(b), this Agreement shall
automatically terminate as of 5 p.m. CDT June 3, 1996.
2.4 Closing Obligations
At the Closing:
(a) Sellers or PGPSI, as applicable, will deliver to
Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures
guaranteed by a commercial bank or by a member firm of the New
York Stock Exchange, for transfer to Buyer;
(ii) a Tax Allocation Agreement executed by the
Sellers;
(iii) the PGPSI Note duly endorsed to Buyer or
Buyer's designee;
(iv) the Consulting/Non-Competition Agreement executed by
Sellers and PG Parent in the form attached hereto as Exhibit
2.4(a) (the "Paragon Consulting/Non- Competition Agreement");
(v) a certificate executed by Sellers and PGPSI representing
and warranting to Buyer that, except as otherwise stated in such
certificate, each of Sellers' representations and warranties in
this Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date
as if made on the Closing Date (giving full effect to any
Modification Notices) (the "Sellers' Closing Certificate"); and
(vi) the IFG Warrant Agreement executed by PGL, the PG Parent
Warrant Agreement executed by PG Parent, the PG Parent
Registration Rights Agreement executed by PG Parent, the IFG
Registration Rights Agreement executed by PGL, and the Closing
Allocation of Joint Assets Agreement executed by Sellers;
(b) Buyer will deliver to Sellers (or to such other
Persons designated below):
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(i) the following amounts by wire transfer to
accounts specified by Sellers:
1) $18,043,000 to PGL; and
2) $57,000 to TPMPL;
(ii) a consulting fee of $300,000 payable to Sellers or their
designee and a non-competition fee of $100,000 payable to the
Sellers ($80,000), Cooper ($10,000) and Means ($10,000) pursuant
to the Consulting/Non-Competition Agreements, which fees shall be
paid by bank cashier's or certified check payable to the order of
or by wire transfer to accounts specified by Sellers;
(iii) the Paragon Consulting/Non-Competition
Agreement, the Cooper Consulting/Non-Competition
Agreement and the Means Consulting/Non-Competition
Agreement, all executed by Buyer;
(iv) the Great Southwest Management Agreement
executed by Buyer;
(v) the Real Estate Brokerage Agreement executed
by Buyer;
(vi) the Tax Allocation Agreement executed by the Buyer, the
Closing Allocation of Joint Assets Agreement executed by Buyer,
the IFG Warrant Agreement and the IFG Warrant executed by IFG and
the IFG Registration Rights Agreement executed by IFG, the PG
Parent Warrant Agreement and the PG Parent Warrant executed by
Buyer and the PG Parent Registration Rights Agreement executed by
PG Parent; and
(vii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date
(the "Buyer's Closing Certificate").
2.5 Earn-Out Amount
(a) General Terms and Definitions.
Within 90 days (or such longer period provided in Section 2.5(d))
following the second anniversary of the Effective Time and/or following the
third anniversary of the Effective Time, if applicable, Buyer shall, subject to
and in accordance with the
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terms of this Section 2.5 and Section 2.22 hereof, pay two Earn-Out Payments, if
any, to Sellers based on the average annual amount of Qualified Revenue actually
received by PGPSI or any Related Person of IFG during two and/or three
consecutive twelve (12) month periods following the Effective Time.
The First Annual Period shall be a 12 consecutive month period the first
day of which shall be the day of the Effective Time and the last day shall be
the day preceding the first anniversary of the day of the Effective Time. The
first day of the Second Annual Period shall be the first anniversary of the
Effective Time date and the last day shall be the day preceding the second
anniversary of the Effective Time date. The first day of the Third Annual Period
shall be the second anniversary of the Effective Time date and the last day
shall be the day preceding the third anniversary of the Effective Time date.
For purposes of this Section 2.5, "Qualified Revenue" means the sum of:
(i) property management, leasing, development, construction and any other
related fees (but excluding reimbursement payments) actually received by
PGPSI, IFG or any entity of which (through one or more tiers of ownership)
more than 50% of the equity interest is owned, directly or indirectly, by
IFG from those commercial property management clients of PGPSI listed on a
Exhibit 2.5.(a)-1 (the "Effective Time PGPSI Commercial Clients"), which
Exhibit shall be delivered by Sellers to Buyer at the Closing and is
subject to the reasonable approval of Buyer, and which fees are earned
with respect to Properties subject to written binding PGPSI Service
Agreements or other service agreements listed on Exhibit 2.5.(a)-2 (the
"Effective Time PGPSI Commercial Properties"), which Exhibit shall be
delivered by Sellers at the Closing and is subject to the reasonable
approval of Buyer; and
(ii) the property management, leasing, development, construction and other
related fees (but excluding reimbursement payments) earned with respect to
certain Properties located within the continental United States which fees
are actually received by PGPSI, IFG or any Person of which (through one or
more tiers of ownership) more than 50% of the equity interest is owned by
IFG, which fees and Properties are further described on and subject to the
limitations set forth on Exhibit 2.5.(a)-3.
Notwithstanding anything in this Agreement to the contrary:
(a) Qualified Revenue shall not include any revenue received by
PGPSI, IFG or a direct or junior tier wholly-owned subsidiary of
IFG resulting or arising from the acquisition of another Person
(other than PGPSI), or
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in connection with a transaction with a third party in the nature
of an acquisition providing economic consideration to such third
party in exchange for, or in connection with, the receipt of
property management revenue from Contracts (or a subcontracting
arrangement under, or later extension of, such Contracts),
including, but not limited to, "fee split" arrangements;
(b) Qualified Revenue shall not include any revenue derived from
Property services either: (i) which include re-development of
retail properties, except for redevelopment revenue derived from
Effective Time PGPSI Commercial Properties and the Properties
described in Item 1 of Exhibit 2.5(a)-3 paid by Effective Time
PGPSI Commercial Clients; or (ii) which relate to hotel or motel
properties; and
(c) amounts otherwise comprising Qualified Revenue shall be
reduced by the amount of bona fide earned brokerage fees paid to
Persons unaffiliated with IFG to the extent such brokerage fees
were incurred directly in connection with a transaction from which
the item of Qualified Revenue arose or paid to Sellers or New
Paragon Residential pursuant to Section 2.7(c)(viii), (ix), (x),
and (xi).
(d) Qualified Revenue shall not include any revenue derived from
Property services related to Properties, except for Effective Time
PGPSI Commercial Properties and the Properties described in Item 1
of Exhibit 2.5(a)-3 either: (i) in which IFG makes a bona fide
investment in such Property or, in connection with such Property,
in the owner thereof; or (ii) which are located within:
(1) the District of Columbia or the area within 50
miles of the exterior boundary of the District of
Columbia;
(2) Cook County, Illinois or the area within 50
miles of the exterior boundary of such county; or
(3) any borough of New York City, New York or the area within
100 miles of the exterior boundary of any of such boroughs.
(e) For purposes of calculating the amount of Qualified
Revenue, the amount Qualified Revenue deemed received by any
Person of which IFG owns (through one or more tiers of ownership)
more than 50% but less than 100% of the equity interest shall
equal the amount of Qualified Revenue actually received by such
Person
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multiplied by a percentage equal to the percentage of the equity
interest in such Person owned (through one or more tiers of
ownership) by IFG at the time of receipt of such Qualified
Revenue.
(f) Notwithstanding anything seemingly to the contrary
contained in this Agreement, PGPSI, IFG or a Person of which IFG
owns (through one or more tiers of ownership) more than 50% of the
equity interest, shall have the right to decline or reject any
Property services business made available to any of such entities
provided those entities act in good faith in any such decision,
such decision is based upon reasonably prudent business standards,
and such decision is not based upon an attempt to reduce Qualified
Revenue.
(b) Earn-Out Payment I
Provided that both (i) the average annual Qualified Revenue equals at
least Seventeen Million Five Hundred Thousand Dollars ($17,500,000) for the two
annual periods ending on the last day of the Second Annual Period and (ii)
Qualified Revenue for the Second Annual Period is at least $16,500,000, Buyer
shall pay Sellers an
Earn-Out Fee ("Earn-Out Payment I") equal to:
(x) $1,500,000;
(y) plus a one time payment of 75% of each $50,000 increment by which the
average Qualified Revenue for such 24 month period exceeds $17,500,000
up to a total aggregate maximum Earn-Out Payment I of $2,500,000.
(c) Earn-Out Payment II
In addition to any amounts due Sellers under Section 2.5(b) above, if
average annual Qualified Revenue either:
(i) is at least $19,000,000 for the two annual periods ending on the last
day of the Second Annual Period, (provided, however, that the amount of
Qualified Revenue during the Second Annual Period shall not be less than
$17,500,000); or
(ii) is at least $18,000,000 for the three annual periods ending on the
last day of the Third Annual Period (provided, however, that the amount of
Qualified Revenue during the Third Annual Period shall not be less than
$17,000,000)
then Buyer shall pay Sellers an Earn-Out Fee ("Earn-Out Payment II") in the
amount of $1,500,000.
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(d) Reporting and Confirmation
Buyer shall prepare and deliver to Sellers, within sixty-five (65) days
following the end of each of the First Annual Period, the Second Annual Period
and the Third Annual Period, a written notice certified as true and correct by
the Buyer (the "Annual Earn-Out Statement") detailing the amount of Earn-Out
Payment I and/or Earn- Out Payment II, if any, payable to Sellers and the
calculation (and detailed basis of determination thereof) of Qualified Revenue
received during each of such three Annual Periods. Unless Sellers provide
written notice to Buyer of Sellers' objection to the determinations and
calculations within 40 days following receipt of the Annual Earn-Out Statement,
the calculations and determinations contained in such Annual Earn-Out Statement
shall be deemed conclusive and Buyer shall promptly disburse any Earn-Out
Payment payable with respect to such Annual Period(s). Buyer shall make
available to Sellers, at reasonable cost to Sellers, copies of such books and
records pertaining to the calculations and determinations of Qualified Revenue
and Earn-Out Payments as are reasonably requested by Sellers and Sellers may, at
their expense, audit and review the pertinent information, documents and
financial statements related to the calculations and determinations of the
Earn-Out Payments. If Sellers provide the written notice of objection, Buyer
shall promptly disburse any non-disputed amount of any Earn-Out Payment and
Sellers and Buyer shall proceed during the 30 day period following Buyer's
receipt of Sellers' written statement of objection to negotiate in good faith to
resolve the disputed calculations and determinations. In the event that Sellers
and Buyer are unable to agree on a resolution during such 30 day period, Sellers
and Buyer shall promptly submit the dispute (and a proposed calculation of total
Earn-Out Payment(s)) to an arbitration procedure pursuant to Section 11.2
hereof, the fees for which shall be borne solely by the party (either Buyer on
the one hand or Sellers on the other) whose proposed resolution of the disputed
Earn-Out Payment calculation has the largest dollar amount of discrepancy from
the respective total amounts of Earn-Out Payment(s) submitted by the respective
party.
2.6 Balance Sheets on the Closing Date
(a) Owned Assets. At the Effective Time, PGPSI shall own and have good
title, without Encumbrance (except, with respect to the PGPSI Service
Agreements, for subordinations of PGPSI's interest therein to the liens of
mortgagees encumbering any of the Managed Properties), to all of the assets
currently owned and used in conjunction with the operation of PGPSI's business
(which assets are described on Exhibit 2.6.(a)-1 and shall be reflected in the
Interim Balance Sheet of PGPSI) (the "Owned Assets"), including, without
limitation:
(i) all rights and interest of PGPSI in and under the PGPSI
Services Agreements in effect; and
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(ii) all furniture, fixtures, equipment, personalty or intellectual
property of any kind owned and used by PGPSI in the operation of
the PGPSI Commercial Division, including without limitation,
computer software, policies and procedures manuals, permits,
licenses and lease and utility deposits relating to the PGPSI
Commercial Division;
(iii) any other assets which prior to the Effective Time have been used
in the Ordinary Course of Business by both the PGPSI Commercial
Division and in other segments of PGPSI's business operations,
which assets are pursuant to the Closing Allocation of Joint
Assets Agreement to be treated as an Owned Asset.
except for the following assets, which PGPSI shall transfer, distribute or
dispose of before the Effective Time (the "Excluded Assets"):
(i) all cash on hand and immediately available funds immediately
before the Effective Time, including funds in bank accounts, money
market funds and the like (except to the extent that such cash or
funds represents deposits held for third parties or payments or
deposits for future work or services required to be performed by
PGPSI Commercial Division);
(ii) all rights and claims for refunds of, taxes and other
governmental charges for periods ending up to the
Effective Time;
(iii) all property management rights, services agreements and other
rights related to residential properties and commercial property
activities incidental to the rendering of services to residential
properties;
(iv) all furniture, fixtures, equipment, personalty or intellectual
property utilized by PGPSI exclusively in segments of its business
other than the PGPSI Commercial Division including without
limitation, the name "Paragon Group Property Services", the
Paragon logo and the mission statement "The Paragon Way";
(v) all claims or rights against third parties relating to
liabilities or obligations of PGPSI which are not
Continuing Liabilities;
(vi) all rights under PGPSI's insurance policies, including without
limitation credits available for cancellation of such policies at
the Effective Time, except for those rights listed on Exhibit
2.6(a)(vi) hereof;
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(vii) all assets of PGPSI which are presently used in connection with
the operation of the PGPSI Commercial Division that in the
Ordinary Course of Business prior to the Effective Time become
depleted, worn-out or are disposed, but which assets in the
aggregate have a fair market value as of May 31, 1996 of less than
$10,000;
(viii) except as otherwise provided in Section 2.7, all
accounts receivable;
(ix) any stock or options to acquire stock under the PGPSI
Stock Plan; and
(x) contract concerning abatement, demolition and
construction of a parking plaza property owned by Sibag
or its affiliate located in downtown St. Louis,
Missouri;
(xi) any other assets which prior to the Effective Time have been used
in the Ordinary Course of Business by both the PGPSI Commercial
Division and in other segments of PGPSI's business operations,
which assets are pursuant to the Closing Allocation of Joint
Assets Agreement to be treated as an Excluded Asset.
Prior to the Closing, Sellers and PGPSI shall cause the Excluded Assets to
be transferred by PGPSI to a party designated by Sellers. Sellers shall be
responsible for the payment for and shall promptly pay and discharge (and shall
reimburse PGPSI after the Closing for) any and all costs, expenses, taxes,
levies or similar charges incurred by PGPSI or imposed at any time on PGPSI by
virtue of or resulting from such transfer or disposition. Sellers covenant with
and to Buyer that, after giving effect to the transfers and dispositions of
Excluded Assets: (a) the unamortized and undepreciated basis of the amortizable
and depreciable Owned Assets for federal income tax purposes shall not be less
than twelve million dollars on the Closing Date; and (b) the gain (regardless of
whether such gain is treated as ordinary income) realized by PGPSI for federal
income tax purposes resulting from the transfer and sale of the Excluded Assets
will not exceed $100,000.
(b) Liabilities. Other than the liabilities and obligations listed on
Exhibit 2.6.(b), including the obligation as maker under the PGPSI Note, (the
"Continuing Liabilities"), PGPSI shall have no other material (but in no event
in an aggregate amount exceeding $50,000) obligations or liabilities as of the
Effective Time or the Closing Date. As provided in Section 2.7, the Sellers on
or before the Closing Date shall discharge in their entirety, or arrange for the
assumption by New Paragon Residential, or shall cause PGPSI to discharge in
their entirety, all liabilities and obligations of PGPSI, other than the
Continuing Liabilities, which exist on, have accrued to or which relate to the
period up to the Effective Time.
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PGPSI shall have continuing liability for the Continuing Liabilities in
accordance with Section 2.7 hereof.
2.7 Liabilities and Revenues/Prorations
(a) General Rule for Proration of Revenues and Liabilities
Subject to the effectiveness of the Closing, any revenue or income of
PGPSI earned, as determined in accordance with GAAP, prior to the Effective Time
shall inure to the benefit of the Sellers or Sellers' designee. Subject to the
obligation of the Sellers to discharge, to arrange for assumption by New Paragon
Residential, or to cause PGPSI to discharge, on or before the Closing Date,
certain liabilities and obligations of PGPSI in accordance with Section 2.6 and
this Section 2.7, the cash balance of PGPSI as of the end of the day preceding
the Effective Time shall be remitted on the Closing Date to the Sellers or their
designee. Sellers shall discharge, arrange for the assumption by New Paragon
Residential of, or shall cause PGPSI to discharge, on or at Closing all the
liabilities and all operating and other expenses of PGPSI arising, related or
accruing, in accordance with GAAP, to the period prior to the Effective Time,
including, without limitation, accounts payable, insurance premiums, fees, lease
payments, federal, state and local taxes, tariffs and assessments arising,
accruing or related to the period up to the Effective Time. Without limitation,
the liabilities of PGPSI with respect to all real or personal property leases
shall be current through the Effective Time (including the payment of any
pro-rata amounts through the Effective Time) other than any expense
reconciliations which may occur after the Effective Time.
(b) Implementation Procedures
If funds are received by PGPSI after the Effective Time with respect to
items of pre-Effective Time PGPSI income or revenue, such funds shall be paid by
PGPSI to the Sellers or their designee at the later of the Closing Date or
promptly after receipt thereof. If invoices, assessments or other expense claims
are received by PGPSI after the Effective Time with respect to pre-Effective
Time expenses of PGPSI that have accrued or relate to the period prior to the
Effective Time, Sellers shall pay or cause a designee of Sellers to pay such
expenses at the later of the Closing Date or promptly after receipt of bona fide
evidence of such expenses or shall reimburse PGPSI for any pre-Effective Time
expenses of PGPSI paid by PGPSI. Buyer shall use its Best Efforts to obtain the
prior approval of Sellers or its successor as to any single expense exceeding
$5,000 so paid by Buyer, but Buyer's failure to do so shall not constitute a
Breach hereof. PGPSI shall prepare, within sixty (60) days following the
Closing, a proration statement (the "Initial Proration Report") detailing the
amount of any PGPSI pre- Effective Time income or revenue payable to the Sellers
or their designee or of any PGPSI pre-Effective Time expenses payable by the
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Sellers or their designee. PGPSI and Sellers agree to promptly disburse funds
and make payments in accordance with the mutually agreed upon determinations set
forth in such Initial Proration Report and to diligently collect all fees and
other sources of income even though they may be payable to another party. In the
event Sellers disputes one or more proration items, it shall communicate such
disputed proration item(s) to PGPSI within 40 days of delivery to Sellers of the
Initial Proration Report. In the event that Sellers and PGPSI do not agree to a
resolution, PGPSI shall select (which selection shall be reasonably acceptable
to a nationally recognized accounting firm to prepare an adjusting proration
statement for the disputed items, the fees for which shall be borne solely by
the party (either PGPSI on the one hand or Sellers on the other) whose proposed
resolution of the disputed proration items has the largest dollar amount of
discrepancy (collectively, if there is more than one disputed item) from the
proration statement prepared by the accounting firm selected to resolve the
dispute.
PGPSI shall prepare during January 1997 a second proration statement (the
"Final Proration Report") respecting the amounts, if any, of any PGPSI
pre-Effective Time income or revenue payable to the Sellers or their designee or
of any PGPSI pre-Effective Time expenses payable by the Sellers or their
designee which was not covered by the Initial Proration Report. Such
supplemental report will be subject to the same delivery and dispute resolutions
procedures as those governing the Initial Proration Report.
(c) Special Proration Matters
Notwithstanding the general application of the proration provisions of
Section 2.7(a), the following expenses, income and revenue shall be prorated and
allocated as follows:
(i) Any items that are prepaid by PGPSI on an annual basis such as
dues and subscriptions shall not be pro-rated nor credited to the
Sellers; provided, however, that any refundable premiums for
insurance of PGPSI which is cancelled effective the Closing Date
in accordance with the provisions hereof shall be paid to Sellers.
(ii) [Intentionally omitted]
(iii) Sellers shall be responsible for the payment for and shall
promptly pay and discharge (and shall reimburse PGPSI at or after
the Closing for) any and all costs, expenses, taxes, levies or
similar charges incurred by PGPSI or imposed at any time on PGPSI
by virtue of or resulting from the transfer or disposition by
PGPSI of the Excluded Assets as contemplated by this Agreement.
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(iv) Sellers shall, as Sellers' allocation of bonuses payable to
officers and employees of PGPSI attributable to the 1996
pre-Effective Time, immediately after Closing pay to PGPSI
$650,000, together with an amount equal to the employer portion
of tax and withholding liabilities (without limitation, for FICA,
unemployment compensation, PGPSI Plan contributions, etc.)
thereon. The amounts payable by Sellers under this Section
2.7(c)(iv) shall be reduced by the amount of the Effective Time
Employee Accounts Receivable. Seller shall be responsible for the
payment of the employer's portion of tax and withholding
liabilities (without limitation, for FICA, unemployment
compensation, PGPSI Plan contribution, etc.) with respect to
Effective Time Employee Accounts Receivable.
(v) The allocation of certain payments, expenses, compensation and
benefits to certain PGPSI employees or agents or its former
employees or agents is governed by Section 2.17 hereof and to the
extent of any conflict between the provisions of Section 2.7(a)
and Section 2.17, the provisions of Section 2.17 shall control.
(vi) The Sellers shall cause PGPSI to sell and convey the Grand
Prairie, Texas industrial development known as "Great Southwest
Industrial Center (the "1996 Dallas Industrial Property")
immediately before or at Closing to New Paragon Residential.
Sellers shall at Closing cause New Paragon Residential to enter
into a Management and Development Agreement with PGPSI (the
"Great Southwest Management Agreement") pursuant to which PGPSI
will be engaged as construction manager, property manager,
leasing agent and sales broker with respect to the 1996 Dallas
Industrial Property. The Great Southwest Management Agreement
shall provide that Barry Nelson, Steve Sears and Jeff Turner
remain actively involved in the project, and shall provide for
the payment of the following fees to PGPSI: (i) a construction
management fee equal to $12,500 to be paid upon completion of the
project, (ii) property management and leasing fees consistent
with the fees paid under the PGPSI Services Agreement for the PG
Group Properties and (iii) brokerage commission of 2% of the
purchase price if PGPSI is the sole real estate broker, provided
that, if additional brokers participate, the aggregate commission
payable to all brokers shall be 3%.
(vii)PGPSI shall, immediately prior to Closing, terminate and pay and
assume all costs related to terminating any PGPSI Plans and the
PGPSI Stock Plan.
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(viii) With respect to leasing commissions, in cases where at the
Effective Time both: (a) a lease has been executed by all the
parties necessary to create a binding obligation of all the
parties thereto; and (b) there are no contingencies or
unfulfilled conditions which must be satisfied or obligations
which must be performed by any party thereto before the
obligation to pay PGPSI a leasing commission arises (a "Completed
Lease"), then the leasing revenue arising from such Completed
Lease actually received by PGPSI during the 90 day period
beginning on the Effective Time shall be deemed "earned" as of
the Effective Time and shall be paid by PGPSI to Sellers after
deduction for any and all expenses incurred in connection with
such Completed Lease, including without limitation the payment of
any amounts to employees or third parties in connection with such
Completed Lease. Notwithstanding the foregoing, if the only
condition remaining to be satisfied before the obligation to pay
PGPSI a leasing commission is the occupancy by the tenant under
such lease of the designated premises covered thereby and PGPSI
has no obligation to perform tenant improvement services or other
services with respect to such lease or the designated premises
for compensation less than the amount which would be paid by one
party to a non- affiliate for similar services in a similar
geographic location, then such lease shall be treated as a
Completed Lease.
(ix) Tenant supervision fees, consulting fees, and development fees
for billed and unbilled actual work performed by PGPSI through
the Effective Time shall be recorded as a receivable and paid to
Sellers upon receipt. Any expenses of PGPSI accrued prior to the
Effective Time (and attributable to the period ending at the
Effective Time) which directly relate to providing such tenant
supervisory services, consulting services, or development
services shall be recorded as a liability at the Effective Time
and netted against amounts to be paid to the Sellers as tenant
supervision fees, consulting fees, or development fees,
respectively.
(x) Sellers shall be entitled to receive any acquisition fees or
leasing fees (totalling approximately $325,000) associated with
the acquisition of the office building known as 10,0000 North
Central Expressway located in Dallas, Texas, and the occupancy of
space therein by New PGPSI Residential, Sellers or PG Parent.
(xi) With respect to any exclusive agreements which are in writing and
fully executed by all parties as of Closing except for agreements
with respect to PG Group
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Properties, Cooper Partnership Properties and Syndicated GE
Partnership Properties, which agreements provide for the
engagement of PGPSI to dispose of a specific real estate asset or
to acquire a specific real estate asset, in the event that a
closing of any such acquisition or disposition covered by such an
agreement occurs on or prior to December 31, 1996 and PGPSI
receives a fee in connection therewith, then Sellers shall be
entitled to receive 15% of the net amount of such fees so
received by PGPSI (but excluding any payments to co-brokers)
after the payment of all bona fide third party out of pocket
expenses and any payments or credits to employees of PGPSI in the
nature of commission in connection with each of such
transactions, provided, however, that the maximum amount Sellers
shall be entitled to receive pursuant to this sub-paragraph (xi)
shall not exceed $250,000. The payments provided for in this sub-
paragraph (xi) shall not apply to the acquisition of any real
estate asset if PGPSI or an affiliate makes a co- investment in
such property.
(xii)PGPSI will retain the Effective Time Employee Accounts
Receivable and will assign to New Paragon Residential obligations
of employees of PGPSI to PGPSI representing surplus draws against
commission. To the extent that PGPSI collects any of the
obligations from employees for surplus draws against commission
existing as of the Closing Date on or prior to October 31, 1996,
PGPSI shall remit such amount collected to Sellers.
(d) Release of Note Holder
At Closing, Sellers shall deliver to Buyer a release from the holder of
the New Paragon Residential Note.
2.8 Continuing Liabilities
PGPSI shall retain after the Effective Time the liability and
responsibility for the payment and performance of the Continuing Liabilities.
2.9 Tax Return
At Closing Sellers, PGPSI and Buyer shall enter into that certain Tax
Allocation Agreement in the form attached hereto as Exhibit 2.9 (the "Tax
Allocation Agreement"). All Tax Returns shall be prepared and filed and all
other matters respecting Taxes shall be governed by the terms and conditions of
the Tax Allocation Agreement.
2.10 IFG Registration Rights
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IFG at the Closing will enter into an IFG Registration Rights Agreement
with PGL in the form of Exhibit 2.10 attached hereto (the "IFG Registration
Rights Agreement") with respect to all shares of IFG Common Stock obtainable
through exercise of the IFG Warrants.
2.11 PGPSI Services Agreement in Effect on the Closing Date
The Sellers acknowledge that a primary inducement of Buyer to enter into
this Agreement is the financial benefit to be derived from the revenues expected
to be generated from PGPSI Services Agreements in effect on the Closing Date and
thereafter. Subject to effectuation of a Closing:
(a) Sellers shall cause the following Properties to become subject
no later than the Closing Date, and to remain thereafter subject prior to
a sale of such Property, to a replacement PGPSI Services Agreement, in a
form subject to the mutual approval of Buyer and Sellers and with respect
to which Buyer and Sellers agree to use their Best Efforts in good faith
to negotiate and approve (the "Replacement PGPSI Management Agreement")
and which will contain for "cause" termination only provisions, with the
owner of each such Property:
(1) those three PG Group Properties known as "The Paragon" located
in St. Louis, Missouri (the "Paragon/St. Louis"), "Westgate"
located in St. Louis, Missouri ("Westgate") and "Southwood
Shops" located in Bradenton, Florida ("Southwood"), provided
that the compensation and reimbursements payable under the
revised PGPSI Services Agreement shall be substantially the
same as those paid under the existing PGPSI Services
Agreement.
(b) Sellers shall use their Best Efforts to cause the Properties
known as "Gleneagles" located in Richmond, Virginia and "363 North Belt"
located in Houston, Texas to, prior to a sale of such Property, remain
subject to the existing respective PGPSI Services Agreement with the owner
of each such Property, provided that such PGPSI Service Agreements shall
until the first anniversary of the Closing Date be terminable only for
"cause", but thereafter terminable upon 30 days notice.
(c) Sellers shall use their Best Efforts to cause the Syndicated
GE Partnership Properties and those three PG Group Properties known as
"Gateway" located in St. Louis, Missouri, "Fair Oaks" located in Fairfax
County, Virginia and "Shady Grove" located in Rockville, Maryland to
remain subject to the existing PGPSI Services Agreements.
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(d) Sellers shall use their Best Efforts until the Closing Date to
cause all the Non-Affiliated Properties listed on Exhibit 2.11.(d)-1 (the
"Non-Affiliated Management Properties") to remain subject to the
respective PGPSI Services Agreement.
(e) PGPSI shall promptly deliver to Buyer a copy of all PGPSI
Services Agreements presently in effect and will cause any PGPSI Services
Agreement to which it becomes a party during the period after the date
hereof but prior to the Closing Date to be promptly delivered to Buyer.
PGPSI will promptly submit to Buyer any applicable Modification Notices
respecting Exhibit 3.24-1 in order to include the listing of any such
newly executed PGPSI Services Agreement and to delete the listing of any
newly terminated or expired PGPSI Services Agreement.
(f) Except as otherwise provided in this Section 2.11, in addition
to any obligations which the Sellers may have under the Paragon
Consulting/Non-Competition Agreement, neither of the Sellers shall,
without the prior written consent of Buyer, cause, encourage or authorize
any Property owner to terminate or fail to renew any PGPSI Services
Agreement with respect to any Managed Properties except, with respect to
the Controlled Management Properties, any termination or failure to renew
(1) for "cause"; or (2) as may be required by Sellers' fiduciary duty.
(g) In the event a PGPSI Services Agreement respecting a Property
described in Section 2.11(a),(b) and (c), a Cooper Partnership Property or
a Syndicated GE Partnership Property is terminated or not renewed by a
party other than PGPSI, Sellers shall not, nor shall they permit any
Person over which either has control, for a period of five years following
the Closing Date, to sell to, or receive any financial consideration from,
any Person or entity other than Buyer or a Related Person thereof the
right to provide (or to control the designation of the provider thereof)
to any such Property property management services and/or leasing services
and/or real estate brokerage services and/or development services unless
Sellers cause Buyer to be paid 100% of any sale proceeds or other
consideration received by the Sellers or any Related Person thereof.
(h) For purposes of this Section 2.11,: "for cause" means gross
negligence, willful misconduct or mismanagement as measured by prevailing
industry standards.
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2.12 Consulting/Non-Competition Agreements
Subject to effectuation of a Closing, at the Closing the Sellers will
enter into the Paragon Consulting/Non-Competition Agreement.
2.13 Real Estate Brokerage
Subject to effectuation of a Closing, at Closing the Sellers shall cause
the owner of Westgate, Paragon/St. Louis and Southwood to enter into a real
estate brokerage agreement with Buyer or a Related Person of Buyer designated by
Buyer, in a form subject to the mutual approval of Buyer and Sellers and with
respect to which Buyer and Sellers agree to use their Best Efforts in good faith
to negotiate and approve (the "Real Estate Brokerage Agreement") and which will
have the following commission structure with respect to each Property:
(a) Southwood: 6% to all participating brokers on
the first $500,000 of purchase price
and 2.0% on the amounts in excess
thereof, unless additional brokers
participate in which event the
aggregate commissions payable to all
brokers shall be 3%;
(b) Westgate: 2% of the purchase price payable to
Buyer if it is the sole real estate
broker; if additional brokers
participate, the aggregate
commissions payable to all brokers
shall be 3%;
(c) Paragon/St. Louis: 1% payable to Buyer if it is the
sole real estate broker; if
additional brokers participate, the
aggregate commissions payable to all
brokers shall be 2%.
Such right of Buyer or Buyer's Related Person designee to act as real estate
broker with respect to each of the three foregoing Properties shall be exclusive
for a period commencing with the date of notice by such owner to Buyer of such
owner's desire to sell the specified Property and terminating 180 days
thereafter, but in no event shall such exclusive period terminate prior to the
180th day following the Closing Date. Upon the expiration of any exclusivity
period respecting a specified Property, Buyer or its Related Person designee
shall continue to have a similar but non-exclusive listing right for a period of
six (6) additional months.
2.14 [Intentionally Omitted]
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2.15 [Intentionally Omitted]
2.16 Tenancy Leases
PGPSI is a party to certain leases pursuant to which it presently occupies
office space as a tenant. Buyer and Sellers desire to allocate the rights and
obligations thereunder as follows. Subject to effectuation of the Closing:
(a) Dallas Lease. Sellers shall indemnify PGPSI and Buyer against
any and all liabilities and obligations respecting the lease for the
Dallas, Texas office headquarters located at 7557 Rambler Road. In the
event Sellers or New Paragon Residential effectuate an assumption of the
existing lease or negotiate a new lease, subject to a Closing, PGPSI shall
have the right to sublet approximately 12,500 square feet on the 13th
floor for a term expiring December 31, 1996, but otherwise on the same
terms as the assumed/new lease. If prior to the Closing Date PGPSI
exercises an option to terminate the lease, Sellers shall use their Best
Efforts to make the 13th floor available for continued occupancy by PGPSI
through December 31, 1996.
(b) Tampa Lease. Sellers shall be responsible for one-half and
Buyer shall be responsible for one-half of the financial liabilities
payable under that certain lease agreement between Tampa Plaza IV Company,
Ltd. as lessor and Paragon Group, Inc., a Texas corporation (now known as
Texas PGI, Inc.) as the original lessee, dated as of September 21, 1989
(the "Tampa Lease"). Buyer and Sellers shall use their Best Efforts in
good faith to provide in the Closing Allocation of Joint Assets Agreement
for the allocation between the parties of the other rights and obligations
of the lessee under the Tampa Lease.
Sellers represent and warrant that PGPSI has the right to sublease, with
the consent of the lessor, which consent may not be unreasonably withheld
or delayed, any or all of such Tampa Lease office space.
(c) St. Louis Lease. Sellers shall cause PGPSI to assign and shall
cause New Paragon Residential to assume, all the rights and obligations of
PGPSI under the lease for the St., Louis office headquarters located at
12400 Olive Boulevard, St. Louis, Missouri. Sellers indemnify PGPSI and
Buyer against any and all liabilities and obligations respecting such
lease.
(d) PGPSI shall remain obligated for the leased space currently
utilized by the PGPSI Commercial Division at PGPSI's present offices in
Louisville, Kentucky, Lexington, Kentucky, Washington D.C., Houston,
Texas, Los Angeles, California, San
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Francisco, California, and Phoenix, Arizona located as described on
Exhibit 2.16.(d) hereof. With respect to the leased space located at 9100
Shelbyville Road, Louisville, Kentucky, PGPSI shall sublease the portion
of the space currently utilized by the residential group of PGPSI on the
same terms as the current lease. Buyer and Sellers shall use their Best
Efforts in good faith to provide in the Closing Allocation of Joint Assets
Agreement for the allocation between the parties of other rights and
obligations under the sublease. With respect to the leased space located
in Louisville, Kentucky, Lexington, Kentucky, Washington, D.C., and San
Franscisco, California, Sellers indemnify PGPSI and Buyer against any and
all liabilities arising from any default created under such lease by the
acquisition of the Shares by Buyer.
(e) Charlotte Lease. Sellers shall cause PGPSI to assign and shall
cause New Paragon Residential to assume, all the rights and obligations of
PGPSI under the lease for the Charlotte, North Carolina office
headquarters located at 5821 Fairview Road, Charlotte, North Carolina.
Sellers indemnify PGPSI and Buyer against any and all liabilities and
obligations respecting such lease.
2.17 Certain Employment Matters
(a) Categorization of PGPSI Employees
Buyer will provide written notice, no later than June 5, 1996 (the
"Employee Designation Date") to Sellers, of the names of employees and
independent contractors of PGPSI that Buyer intends to retain (subject at all
times to employment at will in the absence of a written agreement effective
entered into at or after the Closing Date between such person and PGPSI (or a
Related Party designee of Buyer) as employees or independent contractors of
PGPSI (or a Related Party designee of Buyer) after the Closing Date (the
"Designated Employees"). The notice of Designated Employees will categorize the
Designated Employees into two divisions: (x) Transition Employees (employees
that Buyer intends will have a short employment duration not intended to exceed
180 days) (the "Transition Employees"); and (y) Non-Transition Employees
(employees that Buyer intends, but without obligation, to employ for longer than
a transition period) ("Non-Transition Employees"). Sellers shall deliver to
Buyer no later than June 7, 1996 a Certificate stating the employment
commencement date of employment with PGPSI of all the Designated Employees.
(b) Non-Designated Employees
PGPSI shall on or before the Effective Time cease the employment of, and
Sellers shall pay and discharge (or assume or cause a creditworthy designee of
Sellers to assume) in full prior
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to the Effective Time any and all employment-related liabilities, benefits and
costs, including, without limitation, wages, benefits, insurance, pension,
profit-sharing, any Plan benefits, accrued vacation, severance, or sick leave of
PGPSI for any employees or independent contractors of PGPSI who are not
Designated Employees ("Non-Designated Employees"). Sellers will pay and
indemnify and reimburse PGPSI for any and all employment-related claims,
including, without limitations, wages, benefits, insurance, pension,
profit-sharing, any Plan benefits, accrued vacation, WARN Act or COBRA benefits,
claims or remedies, severance, or sick leave for all Non-Designated Employees.
(c) Transition Employees
Sellers shall be solely responsible for (and shall reimburse Buyer for any
claims paid or incurred by Buyer or PGPSI) all the costs of Transition
Employees' including wages, withholding taxes, accrued sick leave, accrued or
accumulated vacation, pension, any Plan benefits, health insurance costs,
severance related obligations, accruing or related to the period prior to and
through the Effective Time as if all such Transition Employees had their
employment irrevocably terminated by PGPSI as of the Effective Time. All
additional costs of such Transition Employees' wages, withholding taxes, accrued
sick leave, accrued vacation, pension, health insurance costs, severance related
obligations, accruing or related to the period after the Effective Time shall
remain the liability and obligation of PGPSI. Except as required by applicable
law, neither Buyer, IFG nor any Related Person thereof shall have any obligation
to provide any vacation, health, insurance, pension, insurance or other welfare
benefits to Transition Employees.
(d) Vacation/Post-Closing Benefits for Non-Transition
Employees Generally
(1) Unused Vacation and Sick Leave
Buyer and IFG and any Related Person thereof shall maintain on
behalf of PGPSI employees after the Effective Time such employee benefit
plans as they may determine in their sole discretion; provided, however,
any Person who is a Non- Transition Employee and who remains continuously
employed by PGPSI through July 1, 1998 may use through June 30, 1998
vacation and up to 20 days of sick leave accrued/accumulated as PGPSI
employees through the Closing Date. Thereafter, any and all Non-Transition
Employee vacation and sick leave accrued/accumulated through the Closing
Date shall be forfeited and neither PGPSI nor Buyer shall have any
obligation to honor, permit any such employees to utilize or to provide
any other compensation to such employees respecting such unused
pre-Closing accrued/accumulated vacation and sick leave.
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Any Person who is a Non-Transition Employee and whose employment
with PGPSI or Buyer (or their affiliates) terminates for any reason on or
before June 30, 1998 shall receive cash compensation for the unused
portion of such Non- Transition Employee's pre-Closing accrued/accumulated
vacation and sick leave in accordance with the following calculations and
procedures:
(i) Any vacation utilized by such a Non- Transition
Employee during the period commencing with the Closing Date
and expiring June 30, 1998 shall, for purposes of this Section
2.17, first be applied to any vacation
earned/accrued/accumulated during the period beginning with
the Closing Date and last applied to any vacation
earned/accrued/accumulated during the period prior to the
Closing Date.
(ii) Sellers shall pay such Non-Transition Employee (or,
at Buyer's option, shall reimburse Buyer if Buyer advances
such payment) promptly after receipt from Buyer of evidence of
the cessation of such Non-Transition Employee's employment
with PGPSI (or Buyer or affiliate of Buyer) in cash the value
(as customarily calculated) of all such employee's unused
vacation earned/accrued/accumulated during the period prior to
the Closing Date.
(iii) Buyer shall pay such Non-Transition Employee
promptly after the date of the cessation of such
Non-Transition Employee's employment with PGPSI (or Buyer or
an affiliate of Buyer) in cash the value (as customarily
calculated) of all such employee's unused vacation
earned/accrued/accumulated during the period commencing on
Closing Date.
(iv) Buyer shall provide a quarterly written report to
Sellers of the cessation of employment of any Non-Transition
Employee occurring during the period commencing on the Closing
Date and terminating on June 30, 1998. The report shall
contain a calculation of the respective amounts payable by
Sellers and Buyer under subsections (ii) and (iii) immediately
above together with evidence of such employment cessation.
(2) Other Benefits
Buyer and IFG and any Related Person thereof shall maintain on
behalf of PGPSI employees after the Closing Date
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such employee benefit plans as they may determine in their sole
discretion; provided, however, that at a minimum Buyer shall maintain for
Designated Employees employee benefit plans that are comparable to those
provided to other persons employed by Buyer. Buyer shall (i) credit each
Non-Transition Employee for such Non-Transition Employee's service with
PGPSI or its affiliates for purposes of eligibility, benefits, benefit
service, credited service under any employee benefit plan in which such
Non-Transition Employee is otherwise eligible to participate, and (ii)
permit, at Sellers' expense, a trustee-to-trustee transfer or direct
rollover of the accrued benefit of any Employee under the PGPSI 401-K Plan
into a qualified employee benefit plan upon reasonable notice. With
respect to any employee benefit plans that provide welfare benefits, such
plans shall waive for Non-Transition Employees any exclusions with respect
to preexisting conditions and shall provide that any expenses incurred on
or prior to the Effective Time by any Non-Transition Employee under any
employee plan of PGPSI shall be fully credited for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions
under such employee benefit plans of Buyer.
(e) Except as expressly provide herein, nothing in this Section 2.17 shall
create any rights for any employees of PGPSI, IFG or any Related Person thereof.
(f) Subject to the effectiveness of a Closing, Sellers and
PGPSI shall cause, effective immediately prior to the Closing:
(1) all rights of any grantee or participant under the PGPSI Stock Plan
listed on Exhibit 2.17(f) and who, immediately prior to Closing is an
employee of PGPSI to be fully vested and all shares ever issuable to such
grantee or participant (which have not previously been issued under the
PGPSI Stock Plan) to be issued;
(2) all obligations (including tax withholding obligations)
of PGPSI under the PGPSI Stock Plan to be discharged or
assumed by New Paragon Residential.
Sellers shall cause, at Sellers' expense, PGPSI's sponsorship of any and all
PGPSI Plans to terminate and no PGPSI employee shall accrue further benefits
under such PGPSI Plans. Sellers agree and represent and warrant that after the
Effective Time, PGPSI shall have no duty to: (i) file any Tax Returns related to
any PGPSI Plan, (ii) sponsor, maintain or administer any PGPSI Plan, (iii)
provide any notice or communication to any PGPSI Plan participant; or (iv) make
any contribution to any PGPSI Plan; and Sellers further agree that any
requirement to undertake or perform any of the foregoing shall be the sole
responsibility and obligation of the Sellers or their designee.
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(g) In the event any of the Non-Transition Employees listed on Exhibit
2.17(g) hereof cease being an employee of PGPSI prior to the first anniversary
of the Closing Date for any reason, Buyer agrees to promptly provide a
confidential notice to Sellers stating the date and the basis for such
cessation.
2.18 License to Use Tradename
Subject to the effectiveness of a Closing, Sellers grant to Buyer, in
connection with rendering services to Properties, the exclusive right and
license, in connection with rendering commercial property services, to all of
Sellers' and PGPSI's right, title and interest in the use of the name/words
"Paragon Commercial", but only for use in the context of "Insignia-Paragon
Commercial" for the period of one (1) year following the Closing Date. Buyer
shall cause PGPSI to change its corporate name effective immediately after
Closing to a name permitted by the terms of this Section 2.18. Subject to the
effectiveness of a Closing, Sellers further agree: (i) to cooperate with Buyer
in protecting Buyer's right and license to use the tradename "Insignia-Paragon
Commercial" during the first year following the Closing Date; and (ii) not, nor
permit any affiliate, to use the tradename "Paragon Commercial" during the five
year period following the Closing Date; (iii) never license any non-affiliated
Person to use the tradename "Paragon Commercial"; and (iv) at Buyer's expense,
to institute and pursue any cause of action which Buyer reasonably requests to
protect Buyer's license during the one year period to use the tradename
"Insignia-Paragon Commercial" and/or to restrain any use by any non-affiliated
Person of the tradename "Paragon Commercial" prohibited by the terms hereof.
2.19 Closing Allocation of Joint Assets Agreement
Buyer, PGPSI and Sellers agree to negotiate in good faith and to use their
Best Efforts to enter into at any Closing held hereunder the Closing Allocation
of Joint Assets Agreement. Such agreement shall determine, to the extent not
otherwise expressly provided in this Agreement, allocation, use and ownership
between Sellers (or their designee) on the one hand and Buyer (or its designee)
on the other after the Closing of any assets, including office and
telecommunications equipment and non-exclusive use of policy and procedures
manuals, Trade Secrets and Copyrights, and leasehold interests as tenants at
offices maintained by PGPSI, which prior to Closing have been used in the
Ordinary Course of Business by both the PGPSI Commercial Division and other
segments of PGPSI's business operations.
2.20 Tenure of Jeremy Fletcher
In recognition of Jeremy Fletcher's value to PGPSI, in the event of a
Closing, if prior to the first anniversary of the Closing Date, either:
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(a) Jeremy Fletcher voluntarily terminates his
employment with PGPSI; or
(b) PGPSI terminates his employment with cause
(either termination, a "Fletcher/PGPSI Termination"), Sellers shall pay to Buyer
$100,000 within 30 days after the date of such Fletcher/PGPSI Termination. Buyer
shall promptly provide notice to Sellers upon the occurrence of a Fletcher/PGPSI
Termination.
2.21 Barnett Management Termination Fee
Subject to a Closing, Sellers shall promptly pay to Buyer (or its
designee) a termination fee (the "Barnett Management Termination Fee"), in an
amount set forth below, if prior to the fifth anniversary of the Closing Date
PGPSI's services under the applicable PGPSI Services Agreement cease (including
a cessation resulting from a sale of Barnett Plaza or cessation for non-renewal
of the applicable PGPSI Services Agreement), unless such cessation results:
(a) from the voluntary termination or non-renewal of the
applicable PGPSI Services Agreement by PGPSI; or
(b) from termination of the PGPSI Services Agreement for
"cause"; or
(c) at the sole direction of Metropolitan Life Insurance Company
("Metropolitan") following Metropolitan's purchase of all the ownership
interests in Para-Met Plaza Associates not owned as of the Closing Date by
Metropolitan unless:
(i) Metropolitan's purchase of the remaining ownership
interests resulted from the exercise of its rights under an
applicable buy/sale contractual provision initially invoked by
Cooper and/or WRCH; or
(ii) Cooper and/or WRCH encouraged Metropolitan to either (1)
terminate (or fail to renew) the PGPSI Services Agreement on
grounds not satisfying the standard set forth in (b) above, or
(2) to initiate exercise of Metropolitan's buy/sale rights to
purchase the remaining ownership interest in ParaMet Plaza
Associates;
or;
(d) Buyer (or its designee) succeeds to all the right, power and
authority (other than the rights to receive distributions payable to
partners on account of their ownership of partnership interests in Paragon
Plaza Two, Ltd.)
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of Cooper and WRCH as a general partner as of the date hereof
in Paragon Plaza Two, Ltd. (the co-general partner with
Metropolitan) in Para-Met Plaza Associates.
(a "Barnett Management Termination Event")
The amount of the Barnett Management Termination Fee, if any, shall be
based upon the date of the occurrence of a Barnett Management Termination Event,
as follows:
(i) During the first twelve (12) month period after the
Closing Date: $1,000,000
(ii) During the second twelve (12) month period after the
Closing Date: $750,000
(iii) During the third twelve (12) month period after the
Closing Date: $500,000
(iv) During the fourth twelve (12) month period after the
Closing Date: $250,000
(v) During the fifth twelve (12) month period after the
Closing Date: $100,000
In the event of sale of Barnett Plaza, the Barnett Termination Fee shall
be reduced in an amount equal to thirty percent (30%) of any gross real estate
commission (less any commission paid by PGPSI to a non-affiliated participating
real estate broker) received by PGPSI, but in no event shall the amount of the
Barnett Termination Fee be less than $100,000.
For purposes of this Section 2.21,: "for cause" means gross negligence,
willful misconduct or mismanagement as measured by prevailing industry
standards.
2.22 Management Termination Fees
Subject to a Closing, if a Management Termination Event occurs with
respect to a specific Management Termination Property during the twenty-four
month period commencing on the Closing Date and terminating on (but including)
the second anniversary of the Closing Date, Sellers shall promptly pay, but only
as a deduction against any Earn-Out Payments then due or thereafter due to
Sellers under Section 2.05 hereof, to Buyer (or its designee) the Property
Specific Management Termination Fee set forth on Exhibit 1.J-1 hereof
corresponding to the designated Management Termination Property listed on such
Exhibit 1.J-1. In no event:
(a) shall the aggregate of the Property Specific Management
Termination Fees payable hereunder exceed $2,879,200; nor
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(b) shall any Property Specific Management Termination Fees be payable by
Sellers if no Earn-Out Payments become payable to Sellers under Section
2.05 hereof.
Notwithstanding the foregoing provisions of this Section 2.22, no Property
Specific Management Termination Fee shall be payable with respect to the
occurrence of a Management Termination Event at the following Management
Termination Properties in accordance with the following conditions:
(a) "Gleneagles" located in Richmond, Virginia and "363 North
Belt" located in Houston, Texas: in the event that as of the Closing Date,
these two Properties are subject to the PGPSI Services Agreements
described in subsection (b) of Section 2.11, except that such PGPSI
Service Agreements shall until the second anniversary (instead of until
the first anniversary date) of the Closing Date be terminable only for
"cause" as defined in Section 2.11 herein.
(b) Certain Cooper Partnership Properties: the Cooper Partnership
Properties listed on Exhibit 1.J-1 shall no longer be treated or defined
as a Management Termination Property for purposes of this Section 2.22
(and no Property Specific Management Termination Fee shall ever be payable
by Sellers to Buyer) upon satisfaction of all of the following conditions
with respect to such Management Termination Property:
(i) Cooper and/or WRCH, in accordance with Section 5.2 of the
Cooper Agreement, tender a "Qualified Offer" (as defined in the
Cooper Agreement respecting the sale and transfer to Buyer of
partnership interests in the Cooper Partnership identified as the
owner of the Cooper Partnership Property on Exhibit 1.J-2; and
(ii) either:
1) Buyer accepts the Qualified Offer to
purchase the partnership interests and purchases
such interests in accordance with the applicable
terms of the Cooper Agreement; or
2) Buyer fails to accept the Qualified Offer to purchase
the partnership interests and such partnership interests are
sold to a Person other than Buyer in a bona fide transaction
within 180 days following the date on which the offer to Buyer
is deemed rejected in accordance with Section 5 of the Cooper
Agreement. In the event that Buyer fails to accept the
tendered offer to purchase the partnership interests and
Cooper and/or WRCH does not sell such partnership interests to
another Person within the 180 day time period, the
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partnership interests will again become subject to Buyer's
right of first offer pursuant to the Cooper Agreement.
and;
(iii) in accordance with Section 11 of the Cooper Agreement,
Cooper and/or WRCH delivers to Buyer the agreements of James T.
Cobb and Lewis A. Levey described in the introductory sentence of
such Section 11 respecting the matters described in Section 11.1
and 11.2 of the Cooper Agreement;
Any Property Specific Management Termination Fees payable by Sellers to
Buyer shall be credited against and deducted against the amount of any Earn-Out
Payments payable by Buyer to Sellers in accordance with Section 2.05 hereof.
2.23 PG Parent Warrants
At Closing, to induce Buyer to enter into this transaction, PGL shall
deliver to Buyer warrants to purchase up to 288,000 shares of the common stock,
$0.01 par value per share, of PG Parent on the terms and conditions set forth in
the form of the PG Parent Warrant Agreement (the "PG Parent Warrant Agreement")
and PG Parent Warrant attached hereto collectively as Exhibit 2.23 (the "PG
Parent Warrants").
2.24 PG Parent Registration Rights
PG Parent at the Closing will enter into a PG Parent Registration Rights
Agreement with Buyer in the form of Exhibit 2.24 attached hereto (the "PG Parent
Registration Rights Agreement") with respect to all shares of PG Parent Common
Stock obtainable through exercise of the PG Parent Warrants.
2.25 [Intentionally Omitted]
2.26 Limitations on Co-Investment with JP Morgan
Subject to a Closing, during the period commencing on the Closing Date and
expiring on the first anniversary of the Closing Date, Buyer (including any
Person of which IFG owns (through one or more tiers of ownership) more than 50%
of the equity interest therein) shall not solicit JP Morgan or any Subsidiary
thereof to become a joint venturer, partner or co-owner with Buyer in any non-
individual Person the assets of which do or are intended primarily to consist of
multi-family residential properties (or interests therein). Notwithstanding any
provision of this Section 2.26 seemingly to the contrary, Buyer or any Related
Person thereof may in its capacity as an owner (of a non-individual Person of
which JP Morgan has no equity interest) or broker of multi-family real
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estate solicit or participate in Ordinary Course of Business transactions in
which JP Morgan or a Subsidiary thereof is a party as a purchaser or seller
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
The phrase "their Knowledge" wherever used in this Section 3 refers to the
Knowledge of Sellers and PGPSI.
Sellers and PGPSI represent and warrant to Buyer as follows:
3.1 Organization and Good Standing
(a) Exhibit 3.1 hereof contains a complete and accurate list for
PGPSI and, to their Knowledge, for each Cooper Partnership and, to their
Knowledge, for each owner or holder of an equity interest thereof and each
owner of a general partner or limited partner of a Cooper Partnership, of
its name, its jurisdiction of incorporation or organization, jurisdictions
in which it is authorized to do business, and its capitalization
(including the identity of each equity owner and amount of such
ownership), provided, however, that such Exhibit 3.1 need not set forth
for the Cooper Partnerships or its equity owners the jurisdictions of
organization or authorization or capitalization. PGPSI is a corporation
duly organized on April 7, 1994, validly existing, and in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to conduct its business as it is now being conducted,
to own or use the properties and assets that it purports to own or use,
and to perform all its obligations under Applicable Contracts. PGPSI is
duly qualified to do business as a foreign corporation and is in good
standing under the laws of the states listed in Exhibit 3.1 hereof, which
are all of the states which the nature of the activities conducted by it
requires such qualification. PGPSI has never been a party to a merger.
PGPSI has no and has never had any Subsidiaries.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of PGPSI and, to their Knowledge, copies of the Organizational
Documents of the Cooper Partnerships, as currently in effect. PGL was
formed as a limited partnership under Delaware law on December 31, 1993
and has never been a party to a merger. TPMPL was formed as a Delaware
limited partnership on July 11, 1994 and has never been a party to a
merger.
3.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Sellers and PGPSI, enforceable against each of the
Sellers and PGPSI in accordance with its
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terms except as such enforcement may be limited by applicable bankruptcy
laws. Upon the execution and delivery by Sellers of the Paragon
Consulting/Non-Competition Agreement, the Tax Allocation Agreement, the
IFG Warrant Agreement, the IFG Registration Rights Agreement, the Great
Southwest Management Agreement, the Closing Allocation of Joint Assets
Agreement (collectively, the "Sellers' Closing Documents"), the Sellers'
Closing Documents will constitute the legal, valid, and binding
obligations of the Sellers and PG Parent (to the extent PG Parent is a
party to a Sellers Closing Documents) enforceable against each of them in
accordance with their respective terms except as such enforcement may be
limited by applicable bankruptcy laws. Each of the Sellers and PGPSI has
the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Sellers' Closing Documents to
which each is a party and to perform their obligations under this
Agreement and the Sellers' Closing Documents to which each is a party.
(b) Except as set forth in Exhibit 3.2.(b), neither the execution,
delivery or performance of this Agreement nor any other consummation or
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of PGPSI or, to
their Knowledge, any Cooper Partnership other than a Delivered
Cooper Partnership Agreement, (B) any resolution adopted by the
board of directors or the stockholders of PGPSI or the board of
directors of any corporate general partners of either of the
Sellers, or (C) any duty owed by any of the Sellers or PGPSI to
any Person;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any
Order to which PGPSI or either of the Sellers, or any of the
assets owned or used by PGPSI or the Sellers, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization (excluding any real estate
brokerage licenses and similar professional services licenses)
that is held by PGPSI or that otherwise
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relates to the business of, or any of the assets owned
or used by, PGPSI;
(iv) cause Buyer or PGPSI to become subject to, or
to become liable for the payment of, any Tax;
(v) to their Knowledge, cause any of the assets
owned by PGPSI to be reassessed or revalued by any
taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract or any Contract (including without
limitation any loan documents, but excluding any Delivered PGPSI
Services Agreement which is an Applicable Contract or a Contract)
to which PGPSI or Sellers is a party or, to their Knowledge, with
respect to a Contract to which neither PGPSI nor Sellers is a
party but to which any of their property is subject or, to which
any Managed Property is subject; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by PGPSI
or, to their Knowledge, any Cooper Partnership.
(c) Except for notices or Consents:
(i) required to be given to or obtained from a
person pursuant to the express provisions of the
Delivered Cooper Partnership Agreements; or
(ii) required to be given to or obtained from an owner of one
or more Managed Properties pursuant to the express provisions of
the Delivered PGPSI Service Agreements; or
(iii) described on Exhibit 3.2.(c) hereof,
none of Sellers, PGPSI nor, to their Knowledge, any Cooper Partnership is
or will be required to give any notice to or obtain any Consent from any
Person, including without limitation, any owner or mortgage/lien holder of
any Controlled Management Properties, Syndicated GE Properties or of any
Non-Affiliated Management Properties or any owner of any interest in any
Cooper Partnership, in connection with the execution, delivery or
performance of this Agreement or the consummation or other performance of
any of the Contemplated Transactions, the absence of which notice or
Consent would
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cause to occur or result in the occurrence of any of the events described
in Section 3.2(b)(i) through (vii).
(d) Notwithstanding any other provision of this Agreement to the
contrary, in the event that the execution, delivery or performance of this
Agreement or any other consummation or performance of any of the
Contemplated Transactions (with or without notice or lapse of time)
contravenes, conflicts with, or results in a violation of or breach of any
provision of, or gives any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, the express terms of any Delivered
Cooper Partnership Agreement, no such contravention, conflict, violation
or breach shall be treated by Buyer as a Breach by Sellers of this
Agreement nor give rise to any claim for indemnification under Section
10.2(a) hereof.
(e) PGL is acquiring the IFG Warrants for its own account and not
with a view to their distribution within the meaning of Section 2(11) of
the Securities Act. Each Seller is an "accredited investor" as such term
is defined in Rule 501(a) under the Securities Act.
3.3 Capitalization
The authorized equity securities of PGPSI consist of:
(a) 9800 shares of non-voting common stock, par value $0.01
per share, (the "Non-Voting Class") of which 9800 shares
are issued and outstanding; and
(b) 100 shares of voting common stock, par value $0.01 per share, (the
"Voting Class") of which 100 shares are issued and outstanding.
Such shares constitute the Shares. Sellers are and will be on the Closing Date
the record and beneficial owners and holders of the Shares, free and clear of
all Encumbrances. PGL owns 9800 Shares of the Non-Voting Class and one Share of
the Voting Class and TPMPL owns 99 Shares of the Voting Class. No legend or
other reference to any purported Encumbrance appears upon any certificate
representing equity securities of PGPSI other than customary legends restricting
transfers under applicable securities laws. All of the outstanding equity
securities of PGPSI have been duly authorized and validly issued and are fully
paid and nonassessable. There are no Contracts relating to the issuance, sale,
or transfer of any equity securities or other securities of PGPSI. None of the
outstanding equity securities or other securities of PGPSI was issued in
violation of the Securities Act or any other Legal Requirement. PGPSI does not
own, nor has any Contract to acquire, any equity securities or other securities
of any Person (other than PGPSI) or
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any direct or indirect equity or ownership interest in any other business,
except in accordance with the PGPSI Stock Plan.
3.4 Financial Statements
Sellers have delivered to Buyer: (a) unaudited balance sheets of PGPSI as
at December 31, in each of the years 1994 and 1995, and the related unaudited
consolidated statements of income, changes in stockholders' equity, and cash
flow for each of the fiscal years then ended, and (b) an unaudited balance sheet
of PGPSI as at March 31, 1996 (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income, changes in stockholders' equity,
and cash flow for the three months then ended, including in each case the notes
thereto. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of PGPSI as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP, subject, in the case
of interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the December 31, 1995 balance sheet). The
financial statements referred to in this Section 3.4 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No financial
statements of any Person other than PGPSI are required by GAAP to be included in
the consolidated financial statements of PGPSI.
3.5 Books and Records
The books of account, minute books, stock record books, and other records
of PGPSI, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices and
the requirements of Section 13(b)(2) of the Securities Exchange Act of 1934, as
amended (regardless of whether or not PGPSI are subject to that Section),
including the maintenance of an adequate system of internal controls. The minute
books of PGPSI contain accurate and complete records of all meetings held of,
and corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of PGPSI, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of PGPSI.
3.6 Title to Properties; Encumbrances
Exhibit 3.6 hereto contains a complete and accurate list of all real
property, leaseholds, or other interests therein owned by
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PGPSI. Sellers have delivered or made available to Buyer copies of the deeds and
other instruments (as recorded) by which PGPSI acquired such real property and
interests, and copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of Sellers or PGPSI and relating to such property or
interests. PGPSI owns (with good and indefeasible title in the case of real
property, subject only to the matters permitted by the following sentence) all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that are reflected as owned in the books and records of PGPSI,
including all of the properties and assets reflected in the Interim Balance
Sheet (except for assets held under capitalized leases disclosed or not required
to be disclosed in Exhibit 3.6 hereof and personal property sold since the date
of the Interim Balance Sheet in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by PGPSI since the date of
the Interim Balance Sheet (except for personal property acquired and sold since
the date of the Interim Balance Sheet in the Ordinary Course of Business and
consistent with past practice), which subsequently purchased or acquired
properties and assets (other than inventory and short-term investments) are
listed in Exhibit 3.6 hereof. All material properties and assets reflected in
the Interim Balance Sheet are free and clear of all Encumbrances and are not, in
the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests shown on the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (c) liens for current taxes not yet
due, and (d) with respect to real property, (i) minor imperfections of title, if
any, none of which is substantial in amount, materially detracts from the value
or impairs the use of the property subject thereto, or impairs the operations of
PGPSI, and (ii) zoning laws and other land use restrictions that do not impair
the present or anticipated use of the property subject thereto. All buildings
and structures owned by PGPSI lie wholly within the boundaries of the real
property owned by PGPSI and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person.
3.7 Condition and Sufficiency of Assets
To their Knowledge, the buildings, structures of PGPSI are structurally
sound, are in good operating condition and repair. To their knowledge, the
building, structures, and equipment of PGPSI
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are currently sufficient for the conduct of the PGPSI Commercial
Division.
3.8 Accounts Receivable
(a) To their Knowledge, all accounts receivable of PGPSI that are
reflected on the Interim Balance Sheet or on the accounting records of PGPSI as
of the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. To their Knowledge,
unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Interim Balance Sheet or on the accounting records of PGPSI as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing Date
than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging). To
their Knowledge, subject to such reserves, each of the Accounts Receivable
either has been or will be collected in full, without any set-off, within ninety
days after the day on which it first becomes due and payable. To their
Knowledge, there is no contest, claim, or right of set-off, other than returns
in the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. To their Knowledge, Exhibit 3.8(a) hereof contains a complete and
accurate list of all Accounts Receivable as of the date of the Interim Balance
Sheet, which list sets forth the aging of such Accounts Receivable.
(b) Exhibit 3.8(b) hereof contains a complete and accurate list of all
Accounts Receivable as of the Closing Date representing obligations of employees
of the PGPSI Commercial Division to PGPSI, including obligations for surplus
draws or bonuses creditable against commissions and bonuses not yet earned, (the
"Effective Time Employee Accounts Receivable").
3.9 [Intentionally Omitted]
3.10 No Undisclosed Liabilities
Except as set forth in Exhibit 3.10 hereof, to their Knowledge, PGPSI has
no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Interim Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof or for immaterial liabilities or
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obligations (the aggregate of such immaterial liabilities or
obligations are not in excess of $50,000).
3.11 Taxes
(a) PGPSI has filed or caused to be filed all Tax Returns that are
or were required to be filed by or with respect to any of them, either
separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Sellers have delivered to Buyer copies of,
and Exhibit 3.11 hereof contains a complete and accurate list of, all
federal and state income and gross receipts Tax Returns, and made
available for review by Buyer all other Tax Returns, filed since December
1, 1993. PGPSI has paid, or made provision for the payment of, all Taxes
that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Sellers or PGPSI,
except such Taxes, if any, as are listed in Exhibit 3.11 hereof and are
being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Interim
Balance Sheet.
(b) None of the United States federal and state income Tax Returns
of PGPSI subject to such Taxes have been audited by the IRS or relevant
state tax authorities or are closed by the applicable statute of
limitations for all taxable years through December 31, 1995. Exhibit 3.11
contains a complete and accurate list of all audits of all such Tax
Returns, including a reasonably detailed description of the nature and
outcome of each audit. All deficiencies proposed as a result of such
audits have been paid, reserved against, settled, or, as described in
Exhibit 3.11 hereof, are being contested in good faith by appropriate
proceedings. Exhibit 3.11 hereof describes all adjustments to the United
States federal income Tax Returns filed by PGPSI or any group of
corporations including PGPSI for all taxable years since 1993, and the
resulting deficiencies proposed by the IRS. Except as described in Exhibit
3.11, no Seller nor PGPSI has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by
any other Person) of any statute of limitations relating to the payment of
Taxes of PGPSI or for which PGPSI may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on
the respective books of PGPSI are adequate (determined in accordance with
GAAP) and PGPSI's liability for Taxes through the Closing Date shall not
be not greater than $100,000 more than such charges, accruals and
reserves. There exists no proposed tax assessment against PGPSI except as
disclosed in the Interim Balance Sheet or in Exhibit 3.11 hereof. No
consent to the application of Section 341(f)(2) of the IRC has been filed
with respect to any property or assets
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held, acquired, or to be acquired by PGPSI. All Taxes that PGPSI is or was
required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the
proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) PGPSI are true, correct, and complete. There is no tax sharing
agreement that will require any payment by PGPSI after the date of this
Agreement. PGPSI is not, nor within the five-year period preceding the
Closing Date has been, an "S" corporation.
3.12 No Material Adverse Change
To their Knowledge, except as otherwise set forth in this Agreement,
including the Exhibits hereto, since the date of the Interim Balance Sheet,
there has not been any material adverse change in the business, client
relations, operations, assets of PGPSI, and no event has occurred or
circumstance exists that may result in such a material adverse change.
3.13 Employee Benefits
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"PGPSI Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by PGPSI or an ERISA
Affiliate of PGPSI.
"PGPSI Plan" means all Plans of which PGPSI or an ERISA
Affiliate of PGPSI is or was a Plan Sponsor, or to which PGPSI or
an ERISA Affiliate of PGPSI otherwise contributes or has
contributed, or in which PGPSI or an ERISA Affiliate of PGPSI
otherwise participates or has participated. All references to
Plans are to PGPSI Plans unless the context requires otherwise.
"PGPSI VEBA" means a VEBA whose members include employees of
PGPSI or any ERISA Affiliate of PGPSI.
"ERISA Affiliate" means, with respect to PGPSI, any other
person that, together with PGPSI, would be treated as a single
employer under IRC ss. 414.
"Multi-Employer Plan" has the meaning given in ERISA
ss. 3(37)(A).
"Other Benefit Obligations" means all obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than
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salary, as compensation for services rendered, to present or
former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit
Obligations include consulting agreements under which the
compensation paid does not depend upon the amount of service
rendered, sabbatical policies, severance payment policies, and
fringe benefits within the meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty
Corporation, or any successor thereto.
"Pension Plan" has the meaning given in ERISA ss.
3(2)(A).
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss.
3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet
the requirements of IRC ss. 401(a).
"Title IV Plans" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. ss. 1301 et seq., other than
Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC ss. 501(c)(9).
"Welfare Plan" has the meaning given in ERISA ss.
3(1).
(b) (i) No PGPSI Plan is a VEBA, a Title IV Plan or a
Multi-Employer Plan or provides post-retirement medical, life
insurance or other welfare benefits as described in Financial
Accounting Statement 106 of the Financial
Accounting Standards Board.
(ii) Exhibit 3.13(b)(ii) contains a complete and accurate list
of all PGPSI Plans and PGPSI Other Benefit Obligations, and
identifies as such all PGPSI Plans that are Qualified Plans.
(iii) Exhibit 3.13(b)(iii) contains a complete and accurate
list of (A) all ERISA Affiliates of PGPSI, and (B) all Plans of
which any such ERISA Affiliate is or was a Plan Sponsor, in which
any such ERISA Affiliate participates or has participated, or to
which any such ERISA Affiliate contributes or has contributed.
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(iv) Exhibit 3.13(b)(iv) hereof sets forth a list of PGPSI
other Benefit Obligations and the financial cost of all
obligations owed under any PGPSI Plan or PGPSI Other Benefit
Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
(c) Sellers have delivered to Buyer:
(i) all documents that set forth the terms of each PGPSI Plan
or PGPSI Other Benefit Obligation and of any related trust,
including (A) all plan descriptions and summary plan descriptions
of PGPSI Plans for which Sellers or PGPSI are required to prepare,
file, and distribute plan descriptions and summary plan
descriptions, and (B) all summaries and descriptions furnished to
participants and beneficiaries regarding PGPSI Plans and PGPSI
Other Benefit Obligations for which a plan description or summary
plan description is not required;
(ii) all personnel, payroll, and employment manuals
and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including
both pension and welfare benefits) by PGPSI and the ERISA
Affiliates of PGPSI, and all collective bargaining agreements
pursuant to which contributions are being made or obligations are
owed by such entities;
(iv) a written description of any PGPSI Plan or
PGPSI Other Benefit Obligation that is not otherwise in
writing;
(v) all registration statements filed with respect
to any PGPSI Plan;
(vi) all insurance policies purchased by or to
provide benefits under any PGPSI Plan;
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other independent
contractors that relate to any PGPSI Plan or PGPSI Other Benefit
Obligation;
(viii) all reports submitted within the four years preceding
the date of this Agreement by third party administrators,
actuaries, investment managers, consultants, or other independent
contractors with respect to any PGPSI Plan, PGPSI Other Benefit
Obligation, or PGPSI VEBA;
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(ix) the Form 5500 filed in each of the most recent three plan
years with respect to each PGPSI Plan, including all schedules
thereto and the opinions of independent accountants;
(x) all notices that were given by PGPSI or any ERISA
Affiliate of PGPSI or any PGPSI Plan to the IRS or any participant
or beneficiary, pursuant to statute, within the four years
preceding the date of this Agreement, including notices that are
expressly mentioned elsewhere in this Section 3.13;
(xi) all notices that were given by the IRS or the Department
of Labor to PGPSI, any ERISA Affiliate of PGPSI, or any PGPSI Plan
within the four years preceding the date of this Agreement; and
(xii) with respect to Qualified Plans, the most recent
determination letter for each Plan of PGPSI that is a Qualified
Plan.
(d) Except as set forth in Exhibit 3.13(d) hereof:
(i) PGPSI has performed all of its obligations under all PGPSI
Plans and PGPSI Other Benefit Obligations. PGPSI has made
appropriate entries in their financial records and statements for
all obligations and liabilities under such Plans and Obligations
that have accrued but are not due.
(ii) No statement, either written or oral, has been made by
PGPSI to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other
Benefit Obligation and that could have a material adverse economic
consequence to PGPSI or to Buyer.
(iii) PGPSI, with respect to all PGPSI Plans and PGPSI Other
Benefits Obligations, is, and each PGPSI Plan and PGPSI Other
Benefit Obligation is, in full compliance with ERISA, the IRC, and
other applicable Laws including the provisions of such Laws
expressly mentioned in this Section 3.13, and with any applicable
collective bargaining agreement.
(A) No transaction prohibited by ERISA ss. 406 and no
"prohibited transaction" under IRC ss. 4975(c) have occurred
with respect to any PGPSI Plan.
(B) No Seller nor PGPSI has any liability to the IRS
with respect to any Plan, including any liability imposed by
Chapter 43 of the IRC.
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(C) No Seller nor PGPSI has any liability to the PBGC
with respect to any Plan or has any liability under ERISA ss.
502 or ss. 4071.
(D) All filings required by ERISA and the IRC as to each
Plan have been timely filed, and all notices and disclosures
to participants required by either ERISA or the IRC have been
timely provided.
(E) All contributions and payments made or accrued with
respect to all PGPSI Plans, PGPSI Other Benefit Obligations
and are deductible under IRC ss. 162 or ss. 404. No amount, or
any asset of any PGPSI Plan, is subject to tax as unrelated
business taxable income.
(iv) Each PGPSI Plan can be terminated within thirty days,
without payment of any additional contribution or amount and
without the acceleration of any benefits promised by such Plan.
(v) Since December 1, 1993, there has been no establishment or
amendment of any PGPSI Plan or PGPSI Other Benefit Obligation.
(vi) Other than claims for benefits submitted by participants
or beneficiaries, no claim against, or legal proceeding involving,
any PGPSI Plan or PGPSI Other Benefit Obligation is pending or
threatened.
(vii) No PGPSI Plan is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC ss. 401(a).
(viii) Each Qualified Plan of PGPSI is qualified in form and
operation under IRC ss. 401(a); each trust for each such Plan is
exempt from federal income tax under IRC ss. 501(a). No event has
occurred or circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan or
trust.
(x) PGPSI and each ERISA Affiliate of PGPSI has met the
minimum funding standard, and has made all contributions required,
under ERISA ss. 302 and IRC ss. 402.
(xi) Neither PGPSI nor any ERISA Affiliate of PGPSI has filed
a notice of intent to terminate any Plan or has adopted any
amendment to treat a Plan as terminated.
(xii) Neither the Sellers nor PGPSI know any facts or
circumstances that may give rise to any liability of any Seller,
PGPSI, or Buyer to the PBGC under Title IV of ERISA.
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(xiii) Except to the extent required under ERISA ss. 601 et
seq. and IRC ss. 4980B, PGPSI does not provide health or welfare
benefits for any retired or former employee or is obligated to
provide health or welfare benefits to any active employee
following such employee's retirement or other termination of
service.
(xiv) PGPSI has the right to modify and terminate benefits to
retirees (other than pensions) with respect to both retired and
active employees.
(xv) Sellers and all PGPSI have complied with the
provisions of ERISA ss. 601 et seq. and IRC ss. 4980B.
(xvi) No payment that is owed or may become due to any
director, officer, employee, or agent of PGPSI will be
non-deductible to PGPSI or subject to tax under IRC ss. 280G or
ss. 4999; nor will PGPSI be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise
tax on a payment to such person.
(xxii) The consummation of the Contemplated Transactions will
not result in the payment, vesting, or acceleration of any
benefit.
3.14 Compliance with Legal Requirements; Governmental
Authorizations
(a) Except as set forth in Exhibit 3.14 hereof:
(i) To their Knowledge, PGPSI is, and at all times has been,
in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or
the ownership or use of any of its assets;
(ii) To their Knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may
constitute or result in a violation by PGPSI of, or a failure on
the part of PGPSI to comply with, any Legal Requirement, or (B)
may give rise to any obligation on the part of PGPSI to undertake,
or to bear all or any portion of the cost of, any remedial action
of any nature; and
(iii) to their Knowledge, neither of the Sellers or PGPSI has
received, at any time since December 1, 1993, any notice or other
communication (whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual, alleged, possible,
or potential violation of PGPSI, or failure by PGPSI to
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comply with, any Legal Requirement, which violation or failure has
not been corrected or complied with, or (B) any actual, alleged,
possible, or potential obligation on the part of PGPSI to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Exhibit 3.14 hereof contains a complete and accurate list of
each Governmental Authorization that relates to the business of the PGPSI
Commercial Division or that otherwise relates to the business of, or to
any of the assets used in the operation of the PGPSI Commercial Division.
Each Governmental Authorization of PGPSI is valid and in full force and
effect. Except as set forth in Exhibit 3.14 hereof:
(i) PGPSI is, and at all times since December 1, 1993 has
been, in full compliance with or has fully cured any
non-compliance respecting all of the terms and requirements of
each PGPSI Governmental Authorization;
(ii) to their Knowledge, no event has occurred or circumstance
exists that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation by
PGPSI of or a failure by PGPSI to comply with any term or
requirement of any Governmental Authorization, or (B) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization;
(iii) to their Knowledge, no PG Group Person has received, at
any time since December 1, 1993 any notice or other communication
(whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential
violation by PGPSI of or failure by PGPSI to comply with any term
or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) to their Knowledge, all applications required to have
been filed for the renewal of the Governmental Authorizations
listed or required to be listed in Exhibit 3.14 hereof have been
duly filed on a timely basis with the appropriate Governmental
Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on
a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Exhibit 3.14 hereof
collectively constitute all of the Governmental Authorizations
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necessary to permit PGPSI to lawfully conduct and operate the business of
the PGPSI Commercial Division in the manner they currently conduct and
operate such business and to permit PGPSI to own and use the assets used
in the operation of the PGPSI Commercial Division in the manner in which
they currently own and use such assets.
3.15 Legal Proceedings; Orders
(a) Except as set forth in Exhibit 3.15 hereof, there is
no pending Proceeding:
(i) that has been commenced by or against PGPSI or that
otherwise relates to or may affect the business of, or any of the
assets owned or used by, PGPSI; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
No such Proceeding has been Threatened, and, to their Knowledge,
no event has occurred or circumstance exists that may reasonably be
expected to give rise to or serve as a basis for the commencement of any
such Proceeding. Sellers have delivered to Buyer summaries of (and made
available for review by Buyer copies of) all pleadings, correspondence,
and other documents relating to all Proceedings listed in Exhibit 3.15
hereof. The Proceedings listed in Exhibit 3.15 hereof will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of PGPSI.
(b) Except as set forth in Exhibit 3.15 hereof:
(i) there is no Order to which any of PGPSI, or
any of the assets owned or used by PGPSI, is subject;
(ii) neither Seller is subject to any Order that
relates to the business of, or any of the assets owned
or used by, PGPSI; and
(iii) no officer, director, or, to their Knowledge, agent or
employee, of PGPSI is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the
business of PGPSI.
(c) Except as set forth in Exhibit 3.15 hereof:
(i) PGPSI is, and at all times since December 1, 1993 has
been, in full compliance with all of the terms and requirements of
each Order to which it, or any of the assets owned or used by it,
is or has been subject;
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(ii) to their Knowledge, no event has occurred or circumstance
exists that may constitute or result in (with or without notice or
lapse of time) a violation by PGPSI of or failure by PGPSI to
comply with any term or requirement of any Order to which PGPSI,
or any of the assets owned or used by PGPSI, is subject; and
(iii) to their Knowledge, except for violations or failures
which have been and remain totally cured, no PG Group Person has
received, at any time since December 1, 1993, any notice or other
communication (whether oral or written) from any Governmental Body
or any other Person regarding any actual, alleged, possible, or
potential violation by PGPSI of, or failure by PGPSI to comply
with, any term or requirement of any Order to which PGPSI, or any
of the assets owned or used by PGPSI, is or has been subject.
3.16 Absence of Certain Changes and Events
Except as otherwise expressly set forth in this Agreement or in Exhibit
3.16 hereof, since the date of the Interim Balance Sheet, PGPSI has conducted
its business only in the Ordinary Course of Business and there has not been any:
(a) change in PGPSI's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of PGPSI;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other
acquisition by PGPSI of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of PGPSI;
(c) with respect to the PGPSI Commercial Division, payment or
increase by PGPSI of any bonuses, salaries, or other compensation to any
stockholder, director, officer, or (except in the Ordinary Course of
Business) employee or entry into any employment, severance, or similar
Contract with any director, officer, or employee, other than the payments
and increases which will be assumed at Closing by New Paragon Residential;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of PGPSI;
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(e) damage to or destruction or loss of any asset or property of
PGPSI, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or
prospects of PGPSI, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to
PGPSI of at least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of PGPSI
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of PGPSI, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with
a value to PGPSI in excess of $10,000;
(i) material change in the accounting methods used by
PGPSI; or
(j) agreement, whether oral or written, by PGPSI to do
any of the foregoing.
3.17 Contracts; No Defaults
(a) Sellers have delivered to Buyer true and complete copies of
and Exhibits 3.17(a)(i) - (xiv) hereof contain a complete and accurate
list, of:
(i) in connection with the operation of the PGPSI Commercial
Division, each Applicable Contract that involves performance of
services or delivery of goods or materials by PGPSI of an amount
or value in excess of $5,000 is described on Exhibit 3.17(a)(i);
(ii) in connection with the operation of the PGPSI Commercial
Division, each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts by the PGPSI in excess of $10,000 is described on Exhibit
3.17(a)(ii);
(iii) in connection with the operation of the PGPSI Commercial
Division, each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of,
or any leasehold or other interest in, any real or personal
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property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $5,000 and with terms of less than one year)
is described on Exhibit 3.17(a)(iii);
(iv) [Intentionally Omitted]
(v) in connection with the operation of the PGPSI Commercial
Division, each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation
or the non-disclosure of any of the Intellectual Property Assets
is described on Exhibit 3.17(a)(v);
(vi) in connection with the operation of the PGPSI Commercial
Division, each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees is described on Exhibit
3.17(a)(vi);
(vii) in connection with the operation of the PGPSI Commercial
Division, each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by PGPSI with any other Person is described
on Exhibit 3.17(a)(vii);
(viii) in connection with the operation of the PGPSI
Commercial Division, each Applicable Contract containing covenants
that in any way purport to restrict the business activity of PGPSI
or limit the freedom of PGPSI to engage in any line of business or
to compete with any Person, other than any Delivered PGPSI
Services Agreement which expressly contains such a covenant, is
described on Exhibit 3.17(a)(viii);
(ix) in connection with the operation of the PGPSI Commercial
Division, each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than
direct payments for goods, in excess of $5,000 is described on
Exhibit
3.17(a)(ix);
(x) in connection with the operation of the PGPSI Commercial
Division, each power of attorney that is currently effective and
outstanding is described on Exhibit 3.17(a)(x);
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(xi) in connection with the operation of the PGPSI Commercial
Division, each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an
express undertaking by PGPSI to be responsible for consequential
damages is described on Exhibit 3.17(a)(xi);
(xii) in connection with the operation of the PGPSI Commercial
Division, each Applicable Contract for capital expenditures in
excess of $20,000 is described on Exhibit 3.17(a)(xii);
(xiii) in connection with the operation of the PGPSI
Commercial Division, each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by PGPSI other than in the Ordinary Course of Business is
described on Exhibit 3.17(a)(xiii); and
(xiv) in connection with the operation of the PGPSI Commercial
Division, each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing is described
on Exhibit 3.17(a)(xiv).
Exhibits 3.17(a)(i) - (xiv) hereof sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts,
the amount of the remaining commitment of PGPSI under the Contracts if
such amount exceeds $5,000 and PGPSI's office where details relating to
the Contracts are located.
(b) Except as set forth in Exhibit 3.17(b) hereof:
(i) neither of the Sellers (and no Related Person of either
Seller) has or may acquire any rights under, and neither of the
Sellers has or may become subject to any obligation or liability
under, any Contract that relates to the business of, or any of the
assets used in the operation of the PGPSI Commercial Division; and
(ii) other than as set forth in the express terms of a
Delivered PGPSI Services Agreement, neither PGPSI nor any officer,
director, agent, employee, consultant, or contractor of PGPSI is
bound by any Contract that purports to limit the ability of PGPSI
or such officer, director, agent, employee, consultant, or
contractor to engage in or continue any conduct, activity, or
practice relating to the PGPSI Commercial Division business of
PGPSI.
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(c) Except as set forth in Exhibit 3.17(c) hereof, each Contract
identified or required to be identified in Exhibit 3.17(a) hereof is in
full force and effect and is valid and enforceable in accordance with its
terms.
(d) Except as set forth in Exhibit 3.17(d) hereof:
(i) to their Knowledge, PGPSI is, and at all times since
December 1, 1993 has been, in full compliance with all applicable
terms and requirements of each Contract under which PGPSI has or
had any obligation or liability or by which PGPSI or any of the
assets owned or used by PGPSI is or was bound;
(ii) to their Knowledge, each other Person that has or had any
obligation or liability under any Contract under which PGPSI has
or had any rights is, and at all times since December 1, 1993 has
been, in full compliance with all applicable terms and
requirements of such Contract;
(iii) to their Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time)
may contravene, conflict with, or result in a violation or breach
of, or give PGPSI or other Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) to their Knowledge, no PG Group Person has given to or
received from any other Person, at any time since December 1,
1993, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or
breach by PGPSI of, or default by PGPSI under, any Contract.
(e) To their Knowledge, there are no renegotiations of, attempts
to renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to PGPSI under current or completed Contracts with any
Person and, no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the provision of services by PGPSI
has been entered into in the Ordinary Course of Business and have been
entered into without the commission of any act alone or in concert with
any other Person, or any consideration having been paid or promised, that
is or would be in violation of any Legal Requirement.
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3.18 Insurance
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to
which PGPSI is a party or under which PGPSI, or any director of
PGPSI, is or has been covered at any time since July 1, 1994;
(ii) have made available for review by Buyer and will deliver
to Buyer upon request, true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of PGPSI's financial
statements with regard to the adequacy of such entity's coverage
or of the reserves for claims.
(b) Exhibits 3.18(b)(i)-(iii) hereof describes, relating
to the operation of the PGPSI Commercial Division:
(i) any self-insurance arrangement by or affecting
PGPSI, including any reserves established thereunder as
identified in Exhibit 3.18(i);
(ii) other than in the Ordinary Course of Business, any
contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk by PGPSI as identified in Exhibit
3.18(ii); and
(iii) except for obligations set forth expressly in the
Delivered PGPSI Services Agreements, all obligations of PGPSI to
third parties with respect to insurance (including such
obligations under leases and service agreements) and identifies
the policy under which such coverage is provided as identified in
Exhibit 3.18(iii).
(c) Exhibit 3.18(c) hereof sets forth, by year, for the current
policy year and each of the two preceding policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $25,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer,
type of insurance, and period of coverage; and
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(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Exhibit 3.18(d) hereof:
(i) All policies to which PGPSI is a party or that provide
coverage to either Seller, PGPSI, or any director or officer of
PGPSI:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is
financially sound and reputable;
(C) taken together, provide adequate
insurance coverage for the assets and the
operations of PGPSI ;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which PGPSI is a party or by
which any of them is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions with respect to
losses or claims accruing or arising prior to the Closing
Date; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of
PGPSI.
(ii) No Seller nor PGPSI has received with respect to PGPSI
(A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that
the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) PGPSI has paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy
to which PGPSI is a party or that provides coverage to PGPSI or a
director thereof.
(iv) PGPSI has given notice to the insurer of all material
claims that may be insured thereby.
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3.19 Environmental Matters
Except as set forth in Exhibit 3.19:
(a) To their Knowledge:
(i) PGPSI, and the Properties constituting Managed Properties during
the period from the date hereof until Closing are, and at all
times have been, in full compliance with, and has not been and is
not in violation of or liable under, any Environmental Law; and
(ii) neither PGPSI nor any Cooper Partnership has any basis
to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or
other communication from (i) any Governmental Body or
private citizen acting in the public interest, or (ii)
the current or prior owner, property manager or operator
of any property, of any actual or potential violation or
failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the
cost of any Environmental, Health, and Safety
Liabilities with respect to any properties or assets
(whether real, personal, or mixed) in which PGPSI or any
Cooper Partnership has or had an interest (singularly,
a "Property Interest" and, collectively, the "Property
Interests"), or with respect to any Property Interests
at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or
processed by PGPSI, PGL, any Cooper Partnerships, or any
other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(b) To their Knowledge, there are no pending or Threatened claims,
Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant
to any Environmental Law, with respect to or affecting any Property
Interests.
(c) To their Knowledge, neither the Sellers nor PGPSI has any
basis to expect, nor has any of them or any other Person for whose conduct
they are or may be held responsible, received, any citation, directive,
inquiry, notice, Order, summons, warning, or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged,
actual, or potential violation or failure to comply with any Environmental
Law, or of any alleged, actual, or potential obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any Property
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Interests, or with respect to any property or facility to which Hazardous
Materials were generated, manufactured, refined, transferred, imported,
used, or processed by PGPSI or any Cooper Partnership or any other Person
for whose conduct they are or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) To their Knowledge, neither PGPSI nor any Cooper Partnership,
nor any other Person for whose conduct they are or may be held
responsible, has any Environmental, Health, and Safety Liabilities with
respect to any Property Interests, or at any property geologically or
hydrologically adjoining any such property or assets.
(e) To their Knowledge:
(i) there are no Hazardous Materials present on or in the
Environment at any Property Interests, or at any
geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed)
or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other
part of such properties or assets or of such adjoining
property, or incorporated into any structure therein or
thereon; and
(ii) neither Sellers nor PGPSI nor any other Person for whose conduct
they are or may be held responsible has permitted or conducted, or
is aware of, any Hazardous Activity conducted with respect to any
Property Interests except in full compliance with all applicable
Environmental Laws.
(f) To their Knowledge, there has been no Release or Threat of
Release, of any Hazardous Materials at or from any Property Interests, or
at any other locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used, or processed
from or by the Property Interests, or any geologically or hydrologically
adjoining property, whether by Sellers, PGPSI, a Cooper Partnership or any
other Person.
(g) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed
or initiated by Sellers, PGPSI, PGL or, to their Knowledge, any Cooper
Partnership pertaining to Hazardous Materials or Hazardous Activities in,
on, or under the Property Interests, or concerning compliance by Sellers,
PGPSI, any or any other Person for whose conduct they are or
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may be held responsible, with Environmental Laws pertaining to
the Property Interests.
3.20 Employees
(a) Exhibit 3.20 hereof contains a complete and accurate list of
the following information for each employee or director of PGPSI involved
in the business or operations of the PGPSI Commercial Division, including
each employee on leave of absence or layoff status: employer; name; job
title; current compensation paid or payable and any change in compensation
since January 1, 1996; vacation accrued; and service credited for purposes
of vesting and eligibility to participate under PGPSI's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock
bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) No employee, officer or director of the PGPSI involved in the
business or operations of the PGPSI Commercial Division is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between
such officer or director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the
performance of his duties as an employee, officer or director of PGPSI, or
(ii) the ability of the PGPSI Commercial Division to conduct its business,
including any Proprietary Rights Agreement with Sellers or PGPSI by any
such employee, officer or director. Neither PGPSI nor the Sellers has
Knowledge that any director or officer involved in the business or
operations of the PGPSI Commercial Division intends to terminate his/her
employment with PGPSI prior to April 30, 1997.
(c) Exhibit 3.20 hereof also contains a complete and accurate list
of the following information for each retired employee or director of
PGPSI, or their dependents, receiving benefits or scheduled to receive
benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage, and
other benefits.
(d) Exhibit 3.20(d) hereof lists all Persons who are presently
grantees under or participants in the PGPSI Employee Restricted Stock Plan
(the "PGPSI Stock Plan"). Sellers have provided to Buyer a copy of all
Restricted Stock Agreements presently outstanding under the Plan and all
such agreements are listed on Exhibit 3.20(d). All such agreements are
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enforceable against the parties thereto in accordance with
their terms.
3.21 Labor Relations; Compliance
Since December 1, 1993, PGPSI has not been nor is a party to any
collective bargaining or other labor Contract. Since December 1, 1993, there has
not been, there is not presently pending or existing, and there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any Proceeding against or affecting PGPSI relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting any of PGPSI or their
premises, or (c) any application for certification of a collective bargaining
agent. To their Knowledge, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute. There is
no lockout of any employees by PGPSI, and no such action is contemplated by
PGPSI. PGPSI has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant closing. PGPSI is
not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 Intellectual Property
(a) Intellectual Property Assets--The term "Intellectual Property
Assets" includes, as it relates to the operation and/or assets used by the
PGPSI Commercial Division:
(i) the tradename "Paragon Commercial" and all related
fictional business names, registered and unregistered trademarks,
service marks, and applications (collectively, "Marks");
(ii) all patents, patent applications, and
inventions and discoveries that may be patentable
(collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings,
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and blue prints (collectively, "Trade Secrets"); owned, used, or
licensed by PGPSI as licensee or licensor.
(b) Agreements-- To their Knowledge, Exhibit 3.22(b) hereof
contains a complete and accurate list and summary description, including
any royalties paid or received by PGPSI, of all Contracts relating to the
Intellectual Property Assets to which PGPSI is a party or by which PGPSI
is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with
a value of less than $10,000 under which PGPSI is the licensee. To their
Knowledge, there are no outstanding and no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary
for the operation of PGPSI' businesses as they are currently
conducted. To their Knowledge, PGPSI is the owner of all right,
title, and interest in and to each of the Intellectual Property
Assets, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the
right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Exhibit 3.22(c) hereof, no officer
or employee of PGPSI involved in the operation of the PGPSI
Commercial Division has entered into any Contract that restricts
or limits in any way the scope or type of work in which the
officer or employee may be engaged or requires the officer or
employee to transfer, assign, or disclose information concerning
his work to anyone other than PGPSI.
(d) Trademarks
(i) Exhibit 3.22(d) hereof contains a complete and accurate
list and summary description of all Marks.
(ii) PGPSI has no Marks that have been registered or the
subject of an application for registration with the United States
Patent and Trademark Office.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, no such action is, to their
Knowledge, threatened with the respect to any of the Marks.
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(iv) To their Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) To their Knowledge, no Mark has been
challenged or threatened.
(e) Copyrights
(i) To their Knowledge, Exhibit 3.22(e) hereof contains a
complete and accurate list and summary description of all
Copyrights. To their Knowledge, PGPSI is the owner of all right,
title, and interest in and to each of the Copyrights, free and
clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) No Copyrights have been registered.
(iii) To their Knowledge, no Copyright is infringed or been
challenged or threatened. To their Knowledge, none of the subject
matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative work
based on the work of a third party.
(f) Trade Secrets
(i) With respect to each Trade Secret, to their Knowledge, the
documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content to identify and explain it
and to allow its full and proper use without reliance on the
knowledge or memory of any individual.
(ii) To their Knowledge, Sellers and PGPSI have taken all
reasonable precautions to protect the secrecy, confidentiality,
and value of their Trade Secrets.
(iii) PGPSI has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets, including
computer software, in the manner in which it is presently used by
the PGPSI Commercial Division. To their Knowledge, the Trade
Secrets are not part of the public knowledge or literature, and
have not been used, divulged, or appropriated either for the
benefit of any Person (other than PGPSI) or to the detriment of
PGPSI. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
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3.23 Certain Payments
Since December 1, 1993, neither PGPSI nor any director, officer, agent, or
employee of PGPSI, nor any Representative, has directly or indirectly (a) made
any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of form, whether in
money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of PGPSI or any Related Person thereof, or (iv) in violation of any
Legal Requirement, (b) established or maintained any fund or asset that has not
been recorded in the books and records of PGPSI.
3.24 PGPSI Services Agreements
The PGPSI Services Agreements in effect are listed on Exhibit 3.24-1
hereof. All such listed PGPSI Services Agreements are in full force and effect
and are valid and enforceable according to their terms except as such
enforcement may be limited by applicable insolvency laws or laws affecting
creditors' rights generally. Except as set forth on Exhibit 3.24-2, there is no
default in existence in regard to any such listed PGPSI Services Agreements or,
to their Knowledge, event of default or event, occurrence, condition or act
which, with the giving of notice or the lapse of time, would become a default or
event of default thereunder. Such listed PGPSI Services Agreements contain all
the terms of agreement between PGPSI and such owner respecting the parties'
mutual rights and obligations related to the property management services of
PGPSI.
None of the Encumbrances respecting PGPSI Service Agreements referenced in
Section 2.6(a) have a material adverse effect on the value of any single PGPSI
Service Agreement or on the value of all the PGPSI Service Agreements taken as a
whole.
Except as set forth on Exhibit 3.24-3 hereto, all the Properties
respecting which PGPSI provides management services are either Controlled
Management Properties, Syndicated GE Properties or Non-Affiliated Management
Properties. To their Knowledge, neither the Sellers nor PGPSI has received
notice or other communication that any party (other than PGPSI) to a PGPSI
Services Agreement is considering terminating such agreement, including any
termination either prior to the expiration of their stated term or as a result
of effectuation of the Contemplated Transactions, or failure to renew a PGPSI
Services Agreement.
Except as set forth in Exhibit 3.24-4, to their Knowledge, none of the
Managed Properties is presently being offered for sale (as evidenced by specific
authorization of an owner to any person make a commercially reasonable offer to
sell as to price and term
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and to use customary and professional methods ordinarily utilized in the
brokerage and marketing of commercial real estate.)
Notwithstanding any other provision of this Agreement to the contrary, in
the event that the execution, delivery or performance of this Agreement or any
other consummation or performance of any of the Contemplated Transactions (with
or without notice or lapse of time) contravenes, conflicts with, or results in a
violation of or breach of any provision of, or gives any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, the express terms of any
Delivered PGPSI Services Agreement, no such contravention, conflict, violation
or breach shall be treated by Buyer as a Breach by Sellers of this Agreement nor
give rise to any claim for indemnification under Section 10.2(a) hereof.
3.25 PGPSI Services Agreement Revenues
PGPSI revenues, as measured by GAAP, from PGPSI Services Agreements during
the fiscal year ended 1995 was not less than $20,000,000. PGPSI revenues, as
measured by GAAP on an unconsolidated basis, from PGPSI Services Agreements
during the fiscal quarter ended March 31, 1996 was not less than $3,750,000.
3.26 Disclosure
(a) To their Knowledge, no representation or warranty of Sellers
in this Agreement omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they
were made, not misleading.
(b) To their Knowledge, no notice given pursuant to Section 5.9
will contain any untrue statement or omit to state a material fact
necessary to make the statements therein or in this Agreement, in light of
the circumstances in which they were made, not misleading.
3.27 Relationships with Related Persons
Except as set forth in Exhibit 3.27 hereof, no Seller or any Related
Person of Sellers or of PGPSI is a party to any Contract with, or has any claim
or right against, PGPSI.
3.28 Brokers or Finders
Sellers and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement except for fees
payable at or prior to Closing to Merrill Lynch.
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3.29 PGPSI Note
PGL is and will be on the Closing Date the sole holder of the PGPSI Note,
free and clear of all Encumbrances. The copy of the PGPSI Note attached hereto
as Exhibit 1.G is a true and complete copy of the form of the PGPSI Note.
Immediately before Closing, after giving effect to the creation of the New
Paragon Residential Note, the unpaid principal amount of the PGPSI Note will be
not less than $12,417,000 nor greater than $12,447,000 and no interest will be
outstanding on the PGPSI Note on the Closing Date.
3.30 Net Operating Loss
As of the date of closing and including all transactions reported in the
period ending with the date of the closing, PGPSI will have a federal net
operating loss carryforward (for purposes of IRC Section 172) of at least
$5,000,000. The net operating loss carryforward for Alternative Minimum Tax
purposes (as described in IRC Section 56(a)(4)) will also be at least
$5,000,000. These amounts are exclusive of any other tax attribute carrying
forward (including capital losses and charitable contributions).
In determining the taxable income or loss for the year ended December 31,
1995, it is anticipated that PGPSI will deduct approximately $2,500,000 of
research and development expenditures under IRC Section 174, that these
expenditures will qualify under ss. 174(e), and that this deduction will
establish an accounting method for this entity for these costs. Buyer may
request, and the Sellers may not deny without reasonable cause, that certain
elections, accounting methods, etc. be utilized in the preparation of the
federal and state returns for the year ended December 31, 1995, and the period
ending with the date of closing. These elections may include a statement in the
return specifying that the accounting method chosen for the above-referenced ss.
174 costs may be limited to costs attributable to in-house computer software
development. It will not be unreasonable for the Sellers to deny the request(s)
if, by complying with the request(s), additional tax liability in total (for all
requests) will result (unless Buyer agrees to compensate the Sellers for the
additional liability). Sellers can deny elections causing additional pre-closing
tax liability unless Buyer agrees to pay Sellers for such liability.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization and Good Standing
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
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4.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the three
Consulting/Non-Competition Agreements with (i) Sellers and PG Parent, (ii)
Means and (iii) Cooper, respectively, the Great Southwest Management
Agreement, the Real Estate Brokerage Agreement, the Tax Allocation
Agreement, the IFG Warrant, the IFG Warrant Agreement and the Buyer's
Closing Certificate (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power,
and authority to execute and deliver this Agreement and the Buyer's
Closing Documents and to perform its obligations under this Agreement and
the Buyer's Closing Documents.
(b) Except as set forth in Exhibit 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will give any Person the
right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer
may be subject; or
(iv) any Contract to which Buyer is a party or by
which Buyer may be bound.
Except as set forth in Exhibit 4.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3 Investment Intent
Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
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4.4 Certain Proceedings
There is no pending or Threatened Proceeding that has been commenced
against Buyer and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
4.5 Brokers or Finders
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer as a result of the action of Buyer or its officers or agents.
5. COVENANTS OF SELLERS AND PGPSI PRIOR TO/ON CLOSING DATE
5.1 Required Approvals
As promptly as practicable after the date of this Agreement, Sellers will,
and will cause PGPSI to, make all filings required by Legal Requirements to be
made by them in order to consummate the Contemplated Transactions (including all
filings under the HSR Act). Between the date of this Agreement and the Closing
Date, Sellers will, and will cause PGPSI to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all Consents identified in Exhibit 4.2
(including taking all actions requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act).
5.2 Shareholder Approval
The Sellers shall as soon as practicable after the date of this Agreement
take any necessary action to vote upon and approve this Agreement and the
Contemplated Transactions.
5.3 Current Information
During the period from the date of this Agreement to the Closing Date,
PGPSI shall cause one or more of its representatives to confer on a regular and
frequent basis with representatives of Buyer to report on the general status of
the ongoing operations of the PGPSI Commercial Division. PGPSI shall promptly
notify Buyer of any material change in the normal course of its business or in
the operation of its properties and of any governmental complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of material litigation involving
such party, and will keep Buyer fully informed with respect to such events.
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5.4 [Intentionally Omitted]
5.5 Securities Laws Compliance
Buyer and Sellers shall use their Best Efforts to cause the IFG Warrants
to be issued exempt from registration under the Securities Act in valid reliance
upon the private placement exemption provisions of Section 4(2) of the
Securities Act and, at Buyer's option, Rules 505 and/or 506 of the SEC
promulgated pursuant to Sections 3(b) and 4(2) of the Securities Act.
5.6 Operations Prior to Closing Date
In addition to any other express obligation under this Agreement, between
the date of this Agreement and the Closing Date, PGPSI will, and TPMPL shall
cause PGPSI to:
(a) conduct the business of PGPSI only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current
commercial property management organization of PGPSI, keep available the
services of the current officers, employees, and agents of the current
commercial property management organization of PGPSI, and maintain the
relations and good will with owners of Non-Affiliated Managed Properties,
Syndicated GE Partnership Properties and Controlled Managed Properties,
tenants of Properties, all partners and other equity owners of the Cooper
Partnerships and the Syndicated GE Partnerships, suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with PGPSI.
During the period from the date hereof to and including the Closing Date, except
as expressly contemplated hereby, without the prior written consent of Buyer,
PGPSI will not have:
(a) incurred any liability or obligation of any material
nature (whether accrued, absolute, contingent or otherwise),
except in the Ordinary Course of Business;
(b) permitted any of its Owned Assets to be subjected to any
Encumbrance;
(c) sold, transferred or otherwise disposed of any Owned
assets except in the Ordinary Course of Business;
(d) in connection with the operation of the PGPSI Commercial
Division, made any capital expenditure or commitment therefor,
except in the Ordinary Course of Business;
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(e) redeemed, purchased or otherwise acquired any shares of
its capital stock or any option, warrant or other right to
purchase or acquire any such shares;
(f) except in the Ordinary Course of Business, borrowed
money or made any loan to any Person;
(g) written off as uncollectible any note or accounts receivable, except
write-offs in the Ordinary Course of Business charged to applicable
reserves, none of which individually or in the aggregate is material to
PGPSI;
(h) granted any increase in the rate of wages, salaries,
bonuses or other remuneration of any PGPSI Commercial Division
executive employees or other employees;
(i) cancelled or waived any claims or rights of substantial
value;
(j) made any change in any method of accounting or auditing
practice;
(k) agreed, whether or not in writing, to do any of the
foregoing;
(l) caused the Sellers or PGPSI to, without the prior consent of Buyer,
take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events
listed in Section 3.16 is likely to occur.
5.7 Miscellaneous Agreements and Consents
The Sellers and PGPSI hereto shall use their Best Efforts to: (a) satisfy
all the conditions precedent to its and all other parties' obligations
hereunder; (b) obtain Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement, other than any Consent required
by the express terms of the Delivered PGPSI Service Agreements or the express
terms of the Delivered Cooper Partnership Agreement; and (c) remove any
condition or state of facts pertaining to Sellers or PGPSI that otherwise would
make consummation of the transactions contemplated hereby a violation of
applicable law or a breach of a Contract (including any PGPSI Services
Agreement) to which PGPSI or any Cooper Partnership is a party. Sellers and
Buyer agree to cooperate in good faith and to use their Best Efforts to enable
PGPSI and New Paragon Residential to obtain and/or maintain appropriate real
estate brokerage and related professional services licenses (including the
utilization, at no cost to Sellers, of Paragon Colo. RE Services, Inc. or other
affiliates of Sellers holding such licenses which have in the Ordinary Course of
Business enabled PGPSI to provide services in such states) during and
immediately
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following the transition of the transfer of the Shares. With respect to
performance bonds listed on Exhibit 2.6(b) obtained by PGPSI or a Related Person
respecting activities or obligations of PGPSI as a receiver or contractor, Buyer
will either assume PGPSI's liabilities thereunder (and provide appropriate
indemnity) or obtain replacement bonds immediately after Closing in form and
amount sufficient to satisfy the applicable bonding requirements. The Sellers
and PGPSI further agree promptly to execute at the reasonable request of Buyer
before, on or after the Closing Date any documents or materials related to the
transactions contemplated by this Agreement, including, without limitation,
information to auditors respecting the operations of PGPSI prior to the Closing
Date, letters of authority on the Closing Date and signature cards and other
materials evidencing the transfer of the bank accounts of PGPSI.
Buyer acknowledges and agrees that it is a sophisticated and experienced
acquiror of commercial property management services agreements and related
assets and is relying on its own investigation and examination in its decision
to acquire the Shares and proceed with the Contemplated Transactions herein
described. Nothing in this Section 5.7 shall, however, limit the effect of the
indemnification obligation of the Sellers set forth in Section 10.2 hereof.
5.8 Access and Investigation
Between the date of this Agreement and the Closing Date, Sellers and PGPSI
will, and will cause each PG Group Person and their Representatives to, (a)
afford Buyer and its Representatives and advisors (collectively, "Buyer's
Advisors") full and free access to PGPSI Commercial Division personnel, the
Controlled Managed Properties (and will use their Best Efforts to afford Buyer
and Buyer's Advisors reasonable access to the Non-Affiliated Managed Properties
and Syndicated GE Partnerships) and to PGPSI Contracts, books and records, and
other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of
all such Contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
5.9 Notification
Between the date of this Agreement and the Closing Date, the Sellers and
PGPSI will promptly notify Buyer in writing if a Seller or PGPSI becomes aware
of any fact or condition that causes or constitutes a Breach of any of
representations and warranties of Sellers as of the date of this Agreement and
before Closing, or if a Seller or PGPSI becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a
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Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in any
representations or warranties of a Seller herein if this Agreement were dated
the date of the occurrence or discovery of any such fact or condition, Sellers
or PGPSI will promptly deliver to Buyer written notice specifying such change (a
"Modification Notice"). During the same period, each Seller will promptly notify
Buyer of the occurrence of any Breach of any covenant of Sellers in this Section
5 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 7 impossible or unlikely.
5.10 No Negotiation
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, for so long as Buyer is not in Breach of this Agreement, Sellers and
PGPSI will not, and will not permit any of their Representatives to, directly or
indirectly solicit, initiate, respond to or encourage any inquiries or proposals
from, discuss or negotiate with, provide any non-public information to, or
consider the merits of any unsolicited inquiries or proposals from, any Person
(other than Buyer) relating to any transaction involving the sale of the
business or assets (other than in the Ordinary Course of Business) of PGPSI, or
any of the capital stock of PGPSI, or any merger, consolidation, business
combination, or similar transaction involving PGPSI.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions (including all filings under the HSR Act). The Buyer shall use its
Best Efforts to satisfy all the conditions precedent to its and all other
parties' obligations under this Agreement. Between the date of this Agreement
and the Closing Date, Buyer will, and will cause each Related Person to,
cooperate with Sellers with respect to all filings that Sellers are required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Sellers in obtaining all consents identified in Exhibit
3.2(c) hereof; provided that this Agreement will not require Buyer to dispose of
or make any change in any portion of its business or to incur any other burden
to obtain a Governmental Authorization.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the
other actions required to be taken by Buyer at the Closing is
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subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in part):
7.1 Accuracy of Representations
All of the representations and warranties of Sellers and PGPSI in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate as of the date of
this Agreement, and must be accurate as of the Closing Date as if made on the
Closing Date, without giving effect to any Modification Notice.
7.2 Performance
(a) All of the covenants and obligations that Sellers and PGPSI are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with.
(b) Each document required to be delivered pursuant to
Section 2.4 must have been delivered.
(c) All of the agreements, other documents or certificates, or actions
required to be entered into, delivered and/or taken at or prior to the Closing
in accordance with Section 2 hereof, including actions or deliveries of Persons
not a party hereto, shall have been entered into, delivered and or taken, as
applicable.
(d) All of the covenants and obligations that Cooper and WRCH are required
to perform or to comply with pursuant to the Cooper Agreement at or prior to the
Closing must have been duly performed and complied with; Cooper has delivered
the agreements and documents described in Section 11 of the Cooper Agreement
(the "Closing Cooper Agreements"); and there shall be no Breach in such Closing
Cooper Agreements.
7.3 Consents
Each of the Consents identified in Sections 3.2, 4.2 and 5.7, must have
been obtained and must be in full force and effect.
7.4 Additional Documents
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Stutzman & Bromberg, dated the Closing
Date, in the form of Exhibit 7.4(a); and
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(b) Tax Allocation Agreement; and
(c) a Consulting/Non-Competition Agreement executed by Cooper in
the form of Exhibit 7.4(c) (the "Cooper Consulting/Non-Competition
Agreement"), and the Paragon Consulting/Non-Competition Agreement; and
(d) a Consulting/Non-Competition Agreement executed by Means
substantially similar to the form of Non-Solicitation and Right of First
Opportunity Agreement between Means and PGPSI, dated July 27, 1994,
executed by Means and PGPSI (the "Means Consulting/Non-Competition
Agreement"); and
(e) Employment Non-Competition Agreement in the form of Exhibit
7.4(e), executed by Doug Knaus (the "Knaus Employment Agreement"), the PG
Parent Warrants, the PG Parent Warrant Agreement and the PG Parent
Registration Rights Agreement; and
(f) the Real Estate Brokerage Agreement, the form of which shall
have been agreed upon by Buyer and Sellers no later than June 15, 1996;
and
(g) the Exhibits, in accordance with Section 2.3(b) or
as the parties may otherwise agree; and
(h) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of Sellers'
representations and warranties, (iii) evidencing the performance by either
Seller of, or the compliance by either Seller with, any covenant or
obligation required to be performed or complied with by such Seller, (iv)
evidencing the satisfaction of any condition referred to in this Section
7, or (v) otherwise facilitating the consummation or performance of any of
the Contemplated Transactions.
Buyer and Sellers shall have, no later than June 15, 1996, agreed upon the
form of the PGPSI Replacement Management Agreement.
7.5 No Proceedings
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
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7.6 No Claim Regarding Stock Ownership or Sale Proceeds
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of PGPSI, or (b) is entitled
to all or any portion of the Purchase Price payable for the Shares.
7.7 No Prohibition
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise formally proposed by or before any Governmental Body.
7.8 Book Value of Owned Assets
After giving effect to the transfers and dispositions of Excluded Assets
and the Contemplated Transactions, the unamortized and un-depreciated basis of
the amortizable and depreciable Owned Assets for federal income tax purposes
shall not be less than twelve million dollars on the Closing Date.
7.9 Financial Statements; Comfort Letters
The receipt by Buyer of: (a) pro forma financial statements of PGPSI
giving effect to the sale of the Excluded Assets, prepared by Ernst & Young and
in form and substance satisfactory to Buyer; and (b) "comfort letters" from E&Y,
in form and substance satisfactory to Buyer, dated within 5 days prior to the
Closing Date, of the kind contemplated by the Statement of Auditing Standards
with respect to Letters to Underwriters promulgated by the American Institute of
Certified Public Accountants relating to the foregoing financial statements and
customarily included in comfort letters relating to similar transactions.
7.10 Division/Cost Allocation of Certain PGPSI Assets
Buyer and Sellers will have entered into a Closing Allocation of Joint
Assets Agreement (the "Closing Allocation of Joint Assets Agreement") governing
the division, future possession and use, and cost allocation of those assets,
including equipment and leased office space, of PGPSI (including the designation
of an asset as an Owned Asset or an Excluded Asset) which are presently used
both in the operation of the PGPSI Commercial Division and the operation of
PGPSI's residential property services business.
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7.11 Unimproved Real Estate
PGPSI will have transferred (and provided to Buyer satisfactory evidence
thereof) all its right, title and interest in the 1996 Dallas Industrial
Property immediately prior to the Closing and PGPSI and New Paragon Residential
will have entered into the Great Southwest Management Agreement respecting the
1996 Dallas Industrial Property.
7.12 Revenues Attributable to Continuing PGPSI Services
Agreements
The annualized aggregate amount of revenues payable on PGPSI Service
Agreements in effect on the Closing Date (excluding revenues from PGPSI Service
Agreements respecting which the owner has provided PGPSI notice of termination,
cancellation or non-renewal as of the Closing Date) shall not be greater than
$1,000,000 less than the annualized aggregate amount of revenues payable on
PGPSI Service Agreements in effect on the date of execution of this Agreement
(excluding revenues from PGPSI Service Agreements respecting which the owner has
provided PGPSI notice of termination, cancellation or non-renewal as of the date
of execution of this Agreement).
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
8.1 Accuracy of Representations
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate as of the date of this
Agreement and must be accurate as of the Closing Date as if made on the Closing
Date.
8.2 Buyer's Performance
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and
complied with.
(b) Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 2.4 and
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must have made the cash payments required to be made by Buyer pursuant to
Sections 2.4(b)(i) and 2.4(b)(ii).
8.3 Consents
Each of the Consents identified in Exhibit 3.2 hereof must have been
obtained and must be in full force and effect.
8.4 Additional Documents
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of Farris, Warfield & Kanaday, dated the
Closing Date, in the form of Exhibit 8.4(a); and
(b) the Exhibits, in accordance with Section 2.3(b) or
as the parties may otherwise agree; and
(c) such other documents as Sellers may reasonably request for the
purpose of (ii) evidencing the accuracy of any representation or warranty
of Buyer, (ii) evidencing the performance by Buyer of, or the compliance
by Buyer with, any covenant or obligation required to be performed or
complied with by Buyer, or (iii) evidencing the satisfaction of any
condition referred to in this Section 8.
8.5 No Proceedings
Since the date of this Agreement, there must not have been commenced or
Threatened against Sellers or PGPSI, or against any Person affiliated with
Sellers, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
8.6 Division/Cost Allocation of Certain PGPSI Assets
Buyer and Sellers will have entered into a Closing Allocation of Joint
Assets Agreement governing the division, future possession and use, and cost
allocation of those assets, including equipment and leased office space, of
PGPSI (including the designation of an asset as an Owned Asset or an Excluded
Asset) which are presently used both in the operation of the PGPSI Commercial
Division and the operation of PGPSI's residential property services business.
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9. TERMINATION
9.1 Termination Events
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) by Buyer: if any of the conditions in Section 7 has not been
satisfied as of the Closing Date; or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived
such condition on or before the Closing Date;
(c) by Sellers: if any of the conditions in Section 8 has not been
satisfied of the Closing Date; or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Sellers to comply
with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date; or
(d) by mutual consent of Buyer and Sellers; or
(e) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before July 31, 1996, or such later date as the parties may agree upon.
9.2 Effect of Termination
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
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10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification Not Affected by
Knowledge
All representations, warranties, covenants, and obligations in this
Agreement, the Modification Notices, the certificates delivered pursuant to
Section 2.4(a) and (b), and any other certificate or document delivered pursuant
to this Agreement will indefinitely survive the Closing, except as otherwise
provided below.
(a) The representations and warranties of Sellers and PGPSI contained in
the following Sections of this Agreement shall survive until the third
anniversary of the Closing Date:
3.2(c),(d); 3.4; 3.5; 3.6; 3.7; 3.10; 3.14 (except 3.14(b)(iii)
which shall survive indefinitely); 3.16(c) through (h); 3.17(a);
3.17(d) through (f); 3.18(b) and (c); 3.20 (a) and (c); 3.21;
3.22; 3.24; 3.25; 3.26; 3.27; 3.28
(b) The representations and warranties of Sellers and PGPSI contained in
the following Sections of this Agreement shall survive until the second
anniversary of the Closing Date:
3.8; and 3.12
(c) The representations and warranties of Buyer contained in the Section
4.5 of this Agreement shall survive until the third anniversary of the
Closing Date.
Provided further that, if prior to the expiration of the survival period
with respect to any claim for indemnity hereunder, Buyer or Sellers, as the case
may be, shall have been notified of such claim and such claim shall not have
been finally resolved before the expiration of such survival period, any
representation, warranty, covenant or agreement that is the basis for such claim
shall continue to survive as to such claim and shall remain a basis for
indemnity as to such claim until such claim is finally resolved.
10.2 Indemnification and Payment of Damages by Sellers
Sellers, jointly and severally, will indemnify and hold harmless Buyer,
PGPSI, IFG and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving
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a third-party claim (collectively, "Damages"), arising or resulting from,
directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by any PG
Group Person in this Agreement (after giving effect to any Modification
Notice) or any other certificate or document delivered by Sellers or by
any other PG Group Person pursuant to this Agreement;
(b) any Breach by any PG Group Person of any covenant or
obligation of such PG Group Person in this Agreement or in any Sellers'
Documents or any other document delivered by Sellers or any other PG Group
Person pursuant to this Agreement;
(c) regardless of whether it may also constitute a Breach under
Section 10.2 (a) or (b) above, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs
of investigation and defense and reasonable attorneys' fees) arising from
or relating to the operation, management or ownership of PGPSI, arising or
related to the period on or prior to the Closing Date (whether known or
unknown on the Closing Date).
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
With respect to any indemnification required of the Sellers as a result of
any breach of a representation or warranty set forth in Section 3.30 hereof, the
parties hereto hereby stipulate and agree that the indemnifiable claim hereunder
shall be an amount equal to 38% of the resulting reduction in the net operating
loss carryforward, and that such claim shall be payable in full at the time the
adjustment giving rise to such reduction is final, with appropriate adjustment
to reflect the time period over which PGPSI is or reasonably anticipate to be
able to utilize any portion of the carryforward eliminated by such adjustment.
Notwithstanding anything in this Agreement to the contrary, the aggregate
Damages for which Sellers shall be liable under this Section 10.2 or otherwise
under this Agreement shall be limited to Twenty-Five Million Dollars
($25,000,000); provided, however, that
such limitation shall not apply to:
(1) any payment of Ordinary Course of Business liabilities or
obligations required to be made by Sellers pursuant to Sections
2.6 and 2.7 if such payment constituted an Ordinary Course of
Business liability of which PGPSI or any employee, officer or
director of PGPSI had Knowledge on or before the Closing Date;
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(2) payments required to be made by Sellers pursuant to
Sections 2.16(a) and 2.17;
(3) payments made by a Seller for a liability of a Seller arising
under Environmental Laws as a result of Sellers' ownership of or
control over PGPSI during any period prior to the Closing Date
("Sellers' Control Environmental Liability") (and Buyer shall have
the right to cross claim or otherwise assert against Sellers
claims related to Sellers Control Environmental Liability);
(4) an indemnity claim against Sellers for payment after the Closing
of an indemnification obligation by PGPSI to a Person who was an
officer, employee or director of PGPSI prior to the Closing who is
entitled to indemnification from PGPSI under applicable statutory
law, under Organizational Documents of PGPSI or otherwise.
10.3 [Intentionally Omitted]
10.4 Indemnification and Payment of Damages by Buyer
Buyer will indemnify and hold harmless Sellers and their respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Sellers' Indemnified Persons"), and will pay to Sellers'
Indemnified Persons the amount of any Damages arising, directly or indirectly,
from or in connection with:
(a) any Breach of any representation or warranty made by
Buyer in this Agreement or in any certificate delivered by
Buyer pursuant to this Agreement; or
(b) any Breach by Buyer of any covenant or obligation of
Buyer in this Agreement; or
(c) regardless of whether it may also constitute a Breach under
Section 10.4 (a) or (b) above, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs
of investigation and defense and reasonable attorneys' fees) arising from
or relating to the operation, management or ownership of PGPSI, arising or
related to the period after the Closing Date (whether known or unknown on
the Closing Date).
Notwithstanding anything in this Agreement to the contrary, the aggregate
Damages for which Buyer shall be liable under this Section 10.4 (a) and/or (b)
or otherwise under this Agreement shall be limited to Four Million Dollars
($4,000,000) and the aggregate Damages for which Buyer shall be liable under
Section 10(c) shall be limited to Three Million Dollars ($3,000,000); provided,
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however, that such limitations shall not apply to Earn-Out Payments required to
be made by Buyer pursuant to Section 2.5 hereof.
10.5 [Intentionally Omitted]
10.6 Procedure for Indemnification--Third Party Claims
(a) Promptly after receipt by an indemnified party under Section
10.2 or 10.4, of notice of the commencement of any Proceeding against it
or of notice that such Proceeding has been Threatened against it, such
indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim or threatened Proceeding, but the failure to
notify the indemnifying party will not relieve the indemnifying party of
any liability that it may have to any indemnified party, except to the
extent that the indemnifying party demonstrates that the defense of such
action or the ability of the indemnifying party to obtain otherwise
available insurance proceeds is materially prejudiced by the indemnified
party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.6(a) is brought
against an indemnified party and it gives notice to the indemnifying party
of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying
party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate,
or (ii) the indemnifying party fails to provide reasonable assurance to
the indemnified party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to assume
the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) no compromise
or settlement of such claims may be effected by the indemnifying party
without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the
rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the
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indemnifying party; and (ii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected
without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within
ten days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the
indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may materially adversely affect it or its affiliates other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice
to the indemnifying party, and following a good faith attempt to consult
with the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will not
be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10.7 Procedure for Indemnification--Other Claims
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS
11.1 Expenses
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of a Closing, Buyer will reimburse
Sellers $22,500 for the HSR Act filing fee previously paid by Sellers. In the
event of a Closing, Buyer will also pay Sellers $27,500 on a non-accountable
basis to reimburse Sellers for fees and expenses paid by Sellers to their
independent certified public accounting firm and others incurred in connection
with the preparation of the pro forma financial statements and Tax Returns of
PGPSI required to be delivered at or before the Closing Date pursuant to Section
7.9 hereof. Sellers will cause PGPSI not to incur or accrue after the Effective
Time any out-of-pocket expenses in connection with this Agreement. In the event
of termination of this Agreement, the obligation of each party to pay its own
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expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2 Mandatory Arbitration
Any controversy or claim between or among the parties hereto, including
but not limited to those arising out of or relating to this Agreement, including
any claim based on or arising from an alleged tort, (but excluding claims,
controversies and disputes under the Consulting/Non-Competition Agreements, the
IFG Registration Rights Agreement(s), the PG Parent Warrant Agreement, the PG
Parent Registration Rights Agreement, the IFG Warrant Agreement, the IFG
Registration Rights Agreement, and the Employment Agreement(s), all of which
shall be governed by the terms thereof) shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or, if not
applicable, the applicable New York law), the rules of practice and procedure
for the arbitration of commercial disputes of the American Arbitration
Association ("A.A.A."), and the "Special Rules" set forth below. In the event of
any inconsistency, the Special Rules shall control. Judgment upon any
arbitration award may be entered in any court having jurisdiction. Any party to
this Agreement may bring an action, including a summary or expedited proceeding,
to compel arbitration of any controversy or claim to which this Agreement
applies in any court having jurisdiction over such action.
(i) Special Rules. The arbitration shall be conducted in the
Borough of Manhattan, New York, New York and administered by A.A.A., who
will appoint an arbitrator. All arbitration hearings will be commenced
within ninety (90) days of the demand for arbitration. Further, the
arbitrator shall only, upon a showing of cause, be permitted to extend the
commencement of such hearing for an additional sixty (60) days.
11.3 Confidentiality
All information and documentation furnished to Buyer shall be covered by
that certain letter agreement dated March 6, 1996 (the "Confidentiality
Letter"). Prior to Closing, no party or affiliate of a party hereto or to the
Confidentiality Letter will issue or cause publication of any press release or
other announcement or public communications with respect to the Contemplated
Transactions, including without limitation a general announcement to such
party's employees, without the prior consent of the other parties hereto, which
consent will not be unreasonably withheld; provided, however, that nothing
herein will prohibit any party (or affiliate) from issuing or causing
publication of any such press release, announcement or public communication to
the extent that such party (or affiliate) reasonably determines such action to
be required by law or the rules of any national stock exchange or
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association applicable to it, in which case the party (or affiliate) making such
determination will use reasonable efforts to allow the other party reasonable
time to comment on such release or announcement in advance of its issuance or to
make any disclosure necessary to obtain any consents required or deemed
appropriate by Purchaser.
11.4 Notices
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Sellers:
Paragon Group L.P.
Texas Paragon Management Partners L.P.
7557 Rambler Road
Suite 1200
Dallas, Texas 75231
Telephone: (214) 891-2000
Facsimile: (214) 891-2019
Attention: William R. Cooper
with a copy to:
Stutzman & Bromberg, a Professional Corporation
2323 Bryan Street
Suite 2200
Dallas, Texas 75201
Telephone: (214) 969-4900
Facsimile: (214) 969-4999
Attention: M. David Stutzman
If to Buyer:
Insignia Commercial Group, Inc.
c/o Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Telephone: (864) 239-1675
Facsimile: (864) 239-1096
Attention: John K. Lines, General Counsel and Secretary
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With a copy to:
Insignia Financial Group, Inc.
102 Woodmont Boulevard, Suite 400
Nashville, Tennessee 37205
Telephone: (615) 783-1000
Facsimile: (615) 783-1099
Attention: Frank M. Garrison
With a copy to its counsel:
Farris, Warfield & Kanaday
Suite 1900, 424 Church Street
Nashville, Tennessee 37219
Telephone: (615) 244-5200
Facsimile: (615) 726-3185
Attention: B. Riney Green
11.5 [Intentionally Omitted]
11.6 Further Assurances
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 Waiver
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
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11.8 Entire Agreement and Modification
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer and
Sellers dated April 29, 1996) and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
11.9 Agreement with Cooper
The Sellers acknowledge that the entering into concurrently with this
Agreement of that certain Cooper Agreement by and among Cooper, WRC Holdings,
Inc., ("WRCH") and Buyer dated as of the date hereof (the "Cooper Agreement") is
a material inducement to Buyer to enter into this Agreement.
11.10 Assignments, Successors, and No Third-Party Rights
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of IFG. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
11.11 Severability
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 Section Headings, Construction
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
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provided, the word "including" does not limit the preceding words or terms. The
parties, in acknowledgement that all of them have been represented by counsel
and that this Agreement has been carefully negotiated, agree that the
construction and interpretation of this Agreement and other documents entered
into in connection herewith shall not be affected by the identity of the party
or parties under whose direction or at whose expense this Agreement and such
documents were prepared or drafted.
11.13 Time of Essence
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 Governing Law
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
11.15 Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
REMAINING PORTION OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
PARAGON GROUP L.P. PARAGON GROUP PROPERTY
SERVICES, INC.
By: Paragon Group GP Holdings, Inc.
its General Partner
By: /s/ Steve Means By: /s/ Steve Means
--------------- ---------------
Title: Title:
TEXAS PARAGON MANAGEMENT PARTNERS INSIGNIA COMMERCIAL GROUP,
L.P., a Texas limited partnership INC.
By: PGI Management Holdings, Inc. By: /s/ Frank M. Garrison
---------------------
a Texas corporation
Title:
By: /s/ Steve Means
---------------
Title:
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INDEX OF EXHIBITS
Exhibit 1.A Cooper Partnerships
Exhibit 1.B Cooper Partnership Properties
Exhibit 1.C Delivered Cooper Partnership Agreements
Exhibit 1.D Delivered PGPSI Service Agreements
Exhibit 1.E Managed Properties
Exhibit 1.F PG Group Properties
Exhibit 1.G PGPSI Note
Exhibit 1.H Syndicated GE Partnerships
Exhibit 1.I Syndicated GE Partnership Properties
Exhibit 1.J-1 Management Termination Properties
Exhibit 2.2(a) Form of IFG Warrant Agreement
Exhibit 2.4(a) Form of Paragon Consulting/Non-Competition
Agreement
Exhibit 2.5.(a)-1 Effective Time PGPSI Commercial Clients
Exhibit 2.5.(a)-2 Effective Time PGPSI Commercial Properties
Exhibit 2.5.(a)-3 Additional Effective Time PGPSI Commercial
Clients
Exhibit 2.6.(a)-1 Owned Assets
Exhibit 2.6(a)(vi) Excluded Assets
Exhibit 2.6.(b) Continuing Liabilities of PGPSI
Exhibit 2.9 Form of Tax Allocation Agreement
Exhibit 2.10 Form of IFG Registration Rights Agreements
Exhibit 2.11.(d)-1 Non-Affiliated Management Properties
Exhibit 2.16.(d) Leased Space Utilized by PGPSI
Exhibit 2.17(f) Stock Option Plan Information
Exhibit 2.17(g) List of PGPSI Employees Subject to Notice
Exhibit 2.23 PG Parent Warrants
Exhibit 2.24 PG Parent Registration Rights Agreement
Exhibit 3.1 List of States in Which Qualified
Exhibit 3.2.(b) Conflicts with Agreement
Exhibit 3.2.(c) Required Consents and Notices
Exhibit 3.6 List of Real property, Leaseholds, Other
Interests Owned by PGPSI
Exhibit 3.8(a) List of Accounts Receivable
Exhibit 3.8(b) List of Employee Accounts Receivable
Exhibit 3.10 Excluded Liabilities
Exhibit 3.11 Contested Taxes
Exhibit 3.13(b)(ii) List of PGPSI Plans, PGPSI Other Benefit
Obligations, and Qualified Plans
Exhibit 3.13(b)(iii) List of ERISA Affiliates of PGPSI
Exhibit 3.13(b)(iv) List of PGPSI Other Benefit Obligations and
Financial Cost of Obligations
Exhibit 3.13(d) Certain Plan Changes and Events
Exhibit 3.14 List of Governmental Authorizations
Exhibit 3.15 Litigation
Exhibit 3.16 Changes
Exhibit 3.17(a)(i) Performance of Services or Delivery of
Goods
Exhibit 3.17(a)(ii) Non-Ordinary Course of Business in Excess
$10,000
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Exhibit 3.17(a)(iii) Affecting Real or Personal property
Exhibit 3.17(a)(iv) [Intentionally Omitted]
Exhibit 3.17(a)(v) Patents, Trademarks, Copyrights
Exhibit 3.17(a)(vi) Labor Union
Exhibit 3.17(a)(vii) Sharing of Profits, Losses, Costs, or
liabilities
Exhibit 3.17(a)(viii) Restrict the Business Activity
Exhibit 3.17(a)(ix) Payments based on Sales, Purchases, or
Profits
Exhibit 3.17(a)(x) Power of Attorney
Exhibit 3.17(a)(xi) Non-Ordinary Course of Business responsible
for Consequential Damages
Exhibit 3.17(a)(xii) Capital Expenditures in Excess of $20,000
Exhibit 3.17(a)(xiii) Non-Ordinary Course of Business Contractual
Performance
Exhibit 3.17(a)(xiv) Amendment, Supplement, and Modification
Exhibit 3.17(b) Certain Contract Claims or Employee
Restrictions
Exhibit 3.17(c) Invalid Contracts
Exhibit 3.17(d) Contract Compliance and Default Matters
Exhibit 3.18(b)(i) Self-Insurance Arrangement
Exhibit 3.18(b)(ii) Transferring or Sharing of Risk by PGPSI
Exhibit 3.18(b)(iii) Insurance Obligations of PGPSI to Third
Parties
Exhibit 3.18(c) Insurance Losses and Claims
Exhibit 3.18(d) Excluded Insurance
Exhibit 3.19 Environmental Matters
Exhibit 3.20 List of Employees and Directors and Related
Information
Exhibit 3.20(d) PGPSI Employee Restricted Stock Plan
Exhibit 3.22(b) Intellectual Property Assets
Agreements/Contracts
Exhibit 3.22(c) Employees without Written Contracts
Exhibit 3.22(d) List of Trademarks
Exhibit 3.22(e) List of Copyrights
Exhibit 3.24-1 List of PGPSI Services Agreements
Exhibit 3.24-2 List of Defaulted PGPSI Services Agreements
Exhibit 3.24-3 List of Managed Properties Other than
Controlled Management Properties or Non-
Affiliated Management Properties
Exhibit 3.24-4 List of Managed Properties for Sale
Exhibit 3.27 Claims against or Contracts with PGPSI
Exhibit 4.2 Buyer's Required Consents
Exhibit 7.4(a) Opinion Letter of Stutzman & Bromberg
Exhibit 7.4(b) [Intentionally Omitted]
Exhibit 7.4(c) Form of Consulting/Non-Competition
Agreement of Cooper
Exhibit 7.4(e) Form of Employment Non-Competition
Agreement of Doug Knaus
Exhibit 8.4(a) Opinion Letter of Farris, Warfield &
Kanaday
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ADDENDUM TO STOCK AND NOTE PURCHASE AGREEMENT
AND ESCROW AGREEMENT
This Addendum to Stock and Note Purchase Agreement and Escrow Agreement
("Addendum and Escrow Agreement") is made as of June 26, 1996, by Insignia
Commercial Group, Inc., a Delaware corporation ("Buyer"), Paragon Group L.P., a
Delaware limited partnership ("PGL"), Texas Paragon Management Partners L.P., a
Texas limited partnership ("TPMPL"), and Paragon Group Property Services, Inc.,
a Delaware corporation ("PGPSI"). PGL and TPMPL are referred to herein
collectively as "Sellers."
RECITALS
Buyer, Sellers and PGPSI entered into that certain Stock and Note Purchase
Agreement dated as of May 31, 1996 ("Stock Purchase Agreement").
The parties to the Stock Purchase Agreement wish to make certain
modifications to the Stock Purchase Agreement, including modifications to the
procedure for the Closing.
In addition, the parties desire to create certain escrow procedures to
facilitate the consummation of the Contemplated Transactions and the Closing.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows: AGREEMENT
DEFINITIONS.
1.1 "Buyer's Delivered Documents" shall mean the documents required by the
Stock Purchase Agreement to be executed and/or delivered by Buyer, and/or
related parties, to Sellers on or before the Closing Date, and required
hereunder to be executed and/or delivered to Dallas Escrow Agent on the Delivery
Date, and listed on Exhibit 1.1 hereto and appropriate counterparts of Sellers'
Delivered Documents.
1.2 "Delivery Date" shall mean June 28, 1996.
1.3. "Escrow Release Date" shall mean that time at or after 9:00 a.m.
(Central Daylight Time) July 1, 1996, when the conditions precedent to Sellers'
obligation to close have been satisfied and the conditions precedent to Buyer's
obligation to close have been satisfied and when
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the conditions in this Addendum and Escrow Agreement, including the procedural
requirements for the Transferred Funds, have been satisfied, but in no event
later than 9:00 a.m. (Central Daylight Time) July 5, 1996.
1.4 "PGL Account" shall mean the account maintained at NationsBank, Dallas,
Texas designated by PGL as the account into which certain funds shall be sent by
wire transfer pursuant to this Addendum and Escrow Agreement.
1.5 "Sellers' Delivered Documents" shall mean the documents required by the
Stock Purchase Agreement to be executed and/or delivered by Sellers, and/or
related parties, to Buyer on or before the Closing Date, and required hereunder
to be executed and/or delivered to Nashville Escrow Agent on the Delivery Date,
and listed on Exhibit 1.5. hereto and appropriate copies of Buyer's Delivered
Documents.
1.6. "Stock Certificates" shall mean the stock certificates representing
the Shares.
1.7. "Stock Purchase Escrow" shall mean: (a) the receipt of and holding in
trust by Nashville Escrow Agent of (i) Sellers' Delivered Documents and (ii) the
Stock Certificates; and (b) the receipt of and holding in trust by Dallas Escrow
Agent of Buyer's Delivered Documents, in each case until the Escrow Release Date
or until the Escrow Cancellation Date, as applicable.
1.8 "Transferred Funds" shall mean the funds described on Exhibit 1.8,
hereto, and transmitted by wire transfer to the PGL Account.
All defined terms not defined herein shall be given the same meanings as
such terms are given in the Stock Purchase Agreement.
CLOSING DATE DESIGNATION; IFG WARRANT AGREEMENT EXERCISE PRICE
2.1. For purposes of the Stock Purchase Agreement, in the event a Closing
occurs under the Stock Purchase Agreement and this Addendum and Escrow
Agreement, the "Closing Date" and "Closing" shall be deemed to be concurrent
with the Effective Time (the end of the day (midnight) Central Daylight Time
June 30, 1996). Sellers' Closing Documents and Buyer's Closing Documents and
other related documents entered into by the parties in connection with the Stock
Purchase
<PAGE>
Agreement and required hereunder to be delivered on the Delivery Date shall be
dated as of June 30, 1996.
2.2 The exercise price at which PGL shall be entitled to purchase shares of
Common Stock of IFG under the IFG Warrant shall be calculated through the period
ending at the close of business on June 25, 1996.
EXTENSION OF TIME BY BUYER FOR PROVISION OF CERTAIN INFORMATION; SETTLE-UP
WITH RESPECT TO CERTAIN OUTSTANDING MATTERS
3.1 With respect to certain information described on Exhibit 3 hereto and
required by the Stock Purchase Agreement to be provided to Buyer by Sellers as
of the Closing Date, Sellers shall, on the Delivery Date, provide the most
recent information available to Sellers in the Ordinary Course of Business, and
shall update that information as soon as practicable after the Closing but in
all events within thirty (30) days after the Delivery Date, except with respect
to the information concerning the Performance Bonds, such information to be
provided within seven (7) business days following the Closing. The information
provided, when properly provided within the time allowed in this Section 3 and
Exhibit 3, of the Delivery Date, shall be deemed to have been provided as of the
Closing Date.
3.2 The parties agree that following reconciliation of the accounts listed
on Item 1 and 2 of Exhibit 3, hereto, any liabilities and/or obligations arising
in connection with such accounts shall remain with Sellers and any assets that
remain following reconciliation of such accounts shall be the property of
Sellers.
MODIFICATION TO SECTION 2.4(b) AND 2.7(c) OF THE STOCK PURCHASE AGREEMENT
IN CONNECTION WITH THE PAYMENT AMOUNTS AND PAYMENT PROCEDURE.
4.1 Section 2.4(b) and Section 2.7(c) of the Stock Purchase Agreement are
hereby amended, as necessary, to provide that Buyer shall transmit and deliver
via wire transfer to the PGL Account, for the benefit of Sellers, Cooper and
Means, all amounts due Sellers, Cooper and Means under the Stock Purchase
Agreement, less all amounts due from Sellers to Buyer pursuant to Section
2.7(c)(iv), plus all amounts due from Buyer to Sellers under the Closing
Allocation of Joint Assets Agreement, all as described on Exhibit 1.8 hereto.
4.2 Section 2.7(c) is amended to provide that the payment required to be
made by Sellers to Buyer in respect of the employer portion of tax and
withholding liabilities in connection with the $650,000 bonus amount
<PAGE>
described in Section 2.7(c) shall be paid as follows: one and forty- five
hundredths percent (1.45%) of such $650,000 shall be paid in connection with the
payment of the Purchase Price, as described herein, and an adjustment, as
necessary to reflect the actual liability with respect to such tax and
withholding liabilities, shall be made on December 31, 1996.
MODIFICATION TO SECTION 2.7(c)(vii) AND 2.17(d)(2) OF STOCK PURCHASE
AGREEMENT.
5.1 Section 2.7(c)(vii) of the Stock Purchase Agreement is hereby modified
to allow Sellers or an affiliate thereof to maintain the PGPSI Plans listed on
Exhibit 5.1, hereto, instead of terminating such PGPSI Plans as currently
required by such Section 2.7(c)(vii), provided, however, that (i) Sellers shall
change no later than July 15, 1996 the Sponsor of such PGPSI Plans and Sellers
shall promptly at or immediately after the Effective Time take all steps
required to be taken to terminate PGPSI's connection with and relationship with
such PGPSI Plans, (ii) all costs and expenses associated with the changes
necessary to maintain the PGPSI Plans and/or to terminate PGPSI's connection and
relationship of PGPSI with and to such PGPSI Plans shall be borne by Sellers,
(iii) all costs, expenses, liabilities and obligations accrued in respect of
such PGPSI Plans after the Effective Time shall be borne by Sellers, and (iv)
Sellers, jointly and severally, indemnify and hold harmless the Indemnified
Persons for, and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage (including incidental and consequential damages),
expense (including costs of administration, investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third-party claim arising or resulting from, directly or indirectly, from or in
connection with such PGPSI Plans allowed to remain in effect after the Effective
Time. The foregoing costs of indemnification shall not be subject to the
$25,000,000 indemnification limits of Section 10.2 of the Stock Purchase
Agreement.
5.2 Section 2.17(d)(2) clause (ii) of the Stock Purchase Agreement is
amended by deleting its present provision and substituting in lieu thereof the
following:
"(ii) permit, at Sellers' expense, within a reasonable time following
Closing, a bulk trustee-to-trustee transfer of assets of the tax qualified
PGPSI 401(k) Plan that are held for the benefit of Non-Transition Employees
or Transition Employees to the IFG 401(k) Plan; provided, however, that
neither Buyer nor IFG shall be required to effectuate or
<PAGE>
accept the bulk trustee-to-trustee transfer to the IFG 401(k) Plan in the
event Buyer reasonably determines (and provides written notice to PGL no
later than July 31, 1996 of such determination) that the effectuation of
such bulk trustee-to- trustee transfer would either impose substantial
financial or administrative burdens or costs on IFG or the IFG 401(k) Plan
or require substantial modifications to the terms or provisions of the IFG
401(k) Plan. Sellers shall bear all the costs and expenses of initial
implementation of any such trustee-to-trustee transfer of assets and shall
indemnify the Indemnified Parties for any such additional costs. The
foregoing costs of indemnification shall not be subject to the $25,000,000
indemnification limits of Section 10.2 of the Stock Purchase Agreement."
6. AMENDMENT TO SECTION 2.7(c) OF STOCK PURCHASE AGREEMENT.
The following subsections shall be added to Section 2.7(c) of the Stock
Purchase Agreement: (xiii) With respect to a proposed lease having Trinity
Universal Life as lessee and J.P. Morgan as lessor at the 10,000 North Central
office building in Dallas, Texas (the "TUL Lease") and a proposed lease having
Hughes Electronics as lessee and Metropolitan Life Insurance Company as lessor
at Valwood 25 in the Dallas, Texas area (the "HE Lease"), the projected $125,000
gross leasing commission respecting the TUL Lease and the projected $45,000
gross leasing commission respecting the HE Lease, if actually paid, after
deduction for any and all expenses incurred in connection with such leases,
including without limitation the payment of any amounts to employees or third
parties in connection with such leases shall be allocated between Sellers and
Buyer as follows:
(1) if the TUL Lease or HE Lease becomes fully executed (and
delivered) by the parties thereto on or before July 31, 1996, the net
leasing commission attributable to such lease(s) which become executed (and
delivered) during such period shall be allocated 50% to the Sellers and 50%
to the Buyer;
(2) if the TUL Lease or HE Lease becomes fully executed (and
delivered) by the parties thereto after July 31, 1996 but before August 16,
1996, the net leasing commission attributable to such lease(s) which become
executed (and
<PAGE>
delivered) during such period shall be allocated 25% to the Sellers and 75%
to the Buyer; and
(3) if the TUL Lease or HE Lease becomes fully executed (and
delivered) by the parties thereto after August 15, 1996, all the net
leasing commission attributable to such lease(s) which become executed (and
delivered) during such period shall be allocated to Buyer.
Notwithstanding anything to the contrary stated herein, (y) in respect of
the commissions described in subsection (1) above, Sellers shall receive no
more than 50% of $125,000 in connection with the TUL Lease and no more than
50% of $45,000 in connection with the HE Lease, in each case subject to
Sellers' obligation to pay the appropriate portion of all expenses incurred
in connection with such leases; and (z) in respect of commissions described
in subsection (2) above, Sellers shall receive no more than 25% of $125,000
in connection with the TUL Lease and no more than 25% of $45,000 in
connection with the HE Lease, in each case subject to the Sellers'
obligation to pay the appropriate portion of all expenses incurred in
connection with such leases. In all events, Buyer shall be entitled to
receive the share described in subsections (1) and (2) above and all
portions of gross leasing commissions greater than $125,000 for the TUL
Lease and $45,000 for the HE Lease.
(xiv) Sellers shall be entitled to receive 70% of any net
acquisition/brokerage fees associated with the sale by AEW to IHG of the
office building known as Hurstborne Business Center located in Louisville,
Kentucky provided that any such sale closes after June 30, 1996, but before
July 15, 1996.
7. ADDENDUM TO SECTION 2.9 OF STOCK PURCHASE AGREEMENT.
In addition to the requirement of Section 2.9 that the parties enter
into a Tax Allocation Agreement, Sellers also agree to the following:
Within sixty days following the Closing, Sellers will provide to Buyer
all information reasonably necessary to prepare required annual federal and
state information returns for the period January 1, 1996 through the date
of closing. The information provided will include the data needed to
complete Forms W-2, including a reconciliation of the Forms 941 for the
first two quarters to the
<PAGE>
W-2 amounts. The data will be provided in spreadsheet format (either 1-2-3
by Lotus or Microsoft Excel) (or other format agreed to by both parties).
Separate spreadsheets (or files) will be provided for each information
return. Additionally (within the sixty day period), Sellers will also
provide Buyer any permanent documents related to these reports, including
vendor and employee lists (with name, address, federal identification
number, and other relevant data), Form W-9, and related materials. Should
any terminated employee(s) request his(their) form(s) W-2 under the
procedures of Revenue Procedure 84-77, Sellers will prepare the necessary
federal and state forms and provide them to the employee(s) and provide
copies to Buyer. If requested by Buyer, Sellers will prepare and distribute
required information returns for the period ending with the Closing Date;
these reports will be distributed to the payees no later than January 22,
1997, and the copies for the employer and the government (including
magnetic media) given to IFG's payroll department no later than January 24,
1997. Nothing herein shall obligate Sellers to provide Forms 1099 to Buyer
prior to the tenth day before the date such Forms are required by
applicable law to be filed.
8. MISCELLANEOUS MODIFICATIONS AND ADDENDUMS TO THE STOCK PURCHASE
AGREEMENT.
8.1. The term "Sellers' Closing Documents" in Section 3.2 and the term
"Buyer's Closing Document" in Section 4.2 is amended to include this
Addendum and Escrow Agreement and that certain letter agreement dated as of
the Closing Date by and among Sellers, Buyer and Cooper (the "Closing Date
Letter Agreement").
8.2. The provisions of Section 2.16(d) with respect to a
lease/sublease in Louisville, Kentucky are amended to conform to the
provisions of Section 4 of the Closing Allocation of Joint Assets
Agreement.
8.3. The forms of the Paragon Consulting/Non-Compete Agreement and the
Cooper Consulting/Non-Compete Agreement are amended to the extent necessary
to conform to the Letter Agreement.
8.4. Personalty, including intangible personalty, which as of June 24,
1996 were assets of PGPSI used jointly in the operation of the PGPSI
Commercial Division and in the operation of other business of PGPSI and
whose ownership and use are not expressly allocated to Buyer or Sellers in
the Closing Allocation Agreement (the "Unallocated Joint Assets") shall be
used and allocated as set forth below:
<PAGE>
(a) any insurance policies insuring the life of Cooper shall be
exclusively allocated and title transferred to Sellers or their
designee at or prior to the Closing Date;
(b) any tickets or rights to attend sports and entertainment
events in the states of Kentucky and Missouri and in the city of
Dallas, Texas (and within a 100 mile radius of Dallas) shall be
exclusively allocated and transferred to Sellers or their designee at
or prior to the Closing Date;
(c) any (i) restricted stock agreements, (ii) employment
agreements, (iii) non-solicitation agreements, (iv) non-compete
agreements or (v) other employment arrangements, in each case between
PGPSI and PGPSI employees or former employees (other than any such
agreements between PGPSI and any PGPSI employees who become employees
of Buyer or its designee, but not such agreements with Transition
Employees) shall be assigned and transferred to Sellers (or their
designee) at or prior to the Closing;
(d) subject to subparagraphs 8.5(e) below, all other Unallocated
Joint Assets shall continue to be available after the Closing Date for
the joint and equitable use and benefit of Buyer and Sellers, it being
expressly agreed that: (1) Buyer and Sellers shall pay each other
reasonable rent or other amounts for the disproportionate use thereof
(as measured by relative value, benefit and use between the PGPSI
Commercial Division on the one hand and all other business segments of
PGPSI on the other), and (2) with respect to intangible Unallocated
Joint Assets, the beneficiaries (such as PGPSI respecting the
pre-Closing PGPSI Commercial Division and New Paragon Residential
respecting pre- Closing other business segments of PGPSI) of such
intangible assets shall continue after the Closing Date to have the
right to enforce the rights and obligations thereunder regardless of
whether such intended beneficiary is the title holder of such
personalty and Buyer and Sellers (and the respective affiliates of
Buyer and Sellers) shall cooperate with each other to assist any
intended beneficiary in realizing the intended benefits and right
thereunder;
(e) notwithstanding any provision of Section 8.5(d) to the
contrary:(1) Buyer shall have the right to purchase (and shall pay to
Sellers a fair price based on the relative value, benefit and use
between the PGPSI Commercial Division on the one hand and all other
<PAGE>
business segments of PGPSI on the other) and to acquire the exclusive
possessory use and title of any Unallocated Joint Assets which have
been predominantly used in the operation of the PGPSI Commercial
Division; and
(2) Sellers shall have the right to purchase (and shall pay to Buyer a fair
price based on the relative value, benefit and use between the PGPSI Commercial
Division on the one hand and all other business segments of PGPSI on the other)
and to acquire the exclusive title and possessory use of all Unallocated Joint
Assets not described in subparagraph 8.5(e)(1) above.
8.5 Section 2.7(b) of the Stock Purchase Agreement is amended to require
the Initial Proration Report to be delivered in two parts, the first part within
five (5) business days following thirty (30) days after the Closing and the
second part within five (5) business days following sixty (60) days after the
Closing.
9. EXECUTION AND DELIVERY OF DOCUMENTS.
9.1. Representatives of the parties shall convene at the offices of
Sellers, 7557 Rambler Road, Dallas, Texas, on the Delivery Date and deliver into
the Stock Purchase Escrow all documents required to be executed and/or delivered
at or before Closing, including without limitation the Sellers' Closing
Documents, the Closing Cooper Agreements, the Stock Certificates, and Buyer's
Closing Documents.
9.2. This Agreement shall not relieve any party of any obligation under the
Stock Purchase Agreement to notify any other party if it becomes aware before
the Closing Date of any fact or condition that causes or constitutes a Breach of
any of its representations and warranties as of the date of the Stock Purchase
Agreement and before the Closing Date, or if a party becomes aware of the
occurrence after the date of the Stock Purchase Agreement of any fact or
condition that would (except as expressly contemplated by the Stock Purchase
Agreement or this Addendum and Escrow Agreement) cause or constitute a Breach of
any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition,
provided, however, that any notification or document delivery obligation arising
on the Closing Date shall terminate at noon Central Daylight Time on the Closing
Date. Notwithstanding such termination of the notification and document delivery
obligation of the parties at noon Central Daylight Time on the Closing Date and
notwithstanding any other
<PAGE>
provision in this Addendum and Escrow Agreement or of the Stock Purchase
Agreement, each party shall have not less than twelve hours after actual receipt
of any notice or document delivery from the other party to evaluate any
information provided and respond to such information. Any correspondence, notice
or other document delivered by one party to the other shall be deemed to be a
Modification Notice if in the reasonable judgment of the deliveree party it has
a material effect on the representations, warranties or other disclosures
contained in or required to be made by the Stock Purchase Agreement or other
Transaction Documents.
9.3. Notwithstanding any other provision of this Addendum and Escrow
Agreement or of the Stock Purchase Agreement any notice or document delivery
obligation of a party hereto otherwise arising between 5 p.m. Central Daylight
Time, Friday, June 28, 1996 and noon, Central Daylight Time on the Closing Date
shall also include the obligation to use the notifying or delivering party's
Best Efforts to contact Janice Cole by calling her beeper number (888/582-1781),
and then personally conversing via telephone with Ms. Cole, with confirmation by
facsimile, at 615-783-1099, of any information conveyed if Buyer is the notified
or deliveree party or by contacting Lynn Caldwell at 214/821-1291, with
confirmation by facsimile, at 214-891-2019, of any information conveyed, if
Sellers or Cooper is the notified or deliveree party.
10. THE CLOSING.
The Closing shall be effectuated as follows:
10.1. In the absence prior to the Effective Time, (a) of a facsimile
notification by Buyer to Sellers of a failure of a condition precedent to
Buyer's obligation to close, and/or (b) of facsimile notification by Sellers to
Buyer of a failure of a conditition precedent to Sellers' obligation to close,
all conditions precedent to Sellers' obligation to close and to Buyer's
obligation to close shall be deemed to have been satisfied.
10.2 If all conditions precedent to Sellers' obligation to close and to
Buyer's obligation to close have been satisfied, Buyer shall, at or before 9:00
a.m. (Central Daylight Time) July 1, 1996, initiate the procedure to transmit by
wire transfer to the PGL Account the funds required to be paid to Sellers,
Cooper and Means pursuant to the Stock Purchase Agreement, the other Transaction
Documents, and this Addendum and Escrow Agreement, all as described in Exhibit
1.8, hereto (once transferred, the "Transferred Funds.")
<PAGE>
10.3. The Stock Purchase Escrow Agents shall carry out their duties as
Stock Purchase Escrow Agents, pursuant to this Addendum and Escrow Agreement.
11. APPOINTMENT OF COUNSEL AS ESCROW AGENTS.
11.1 With the approval of Buyer, the parties appoint Farris, Warfield &
Kanaday, a Tennessee general partnership engaged in the practice of law with its
offices in Nashville, Tennessee, as an escrow agent ("Nashville Escrow Agent"),
to receive and hold Sellers' Delivered Documents and the Stock Certificates,
from the Delivery Date until the Escrow Release Date or until the Escrow
Cancellation Date, whichever first occurs.
11.2 With the approval of Sellers, the parties appoint Stutzman & Bromberg,
a Texas professional corporation engaged in the practice of law, as an escrow
agent ("Dallas Escrow Agent"), to receive and hold Buyer's Delivered Documents
from the Delivery Date until the Escrow Release Date or until the Escrow
Cancellation Date, whichever first occurs.
11.3 The parties acknowledge that Nashville Escrow Agent represents Buyer
and IFG and that the Dallas Escrow Agent represents Sellers, Cooper and Means.
The parties further acknowledge that the appointment and fulfillment of duties
as escrow agent do not create an attorney/client relationship: (a) between
Nashville Escrow Agent and any of Sellers, Cooper or Means, or (b) between
Dallas Escrow Agent and either Buyer or ICG.
12. DUTIES OF STOCK PURCHASE ESCROW AGENTS.
Dallas Escrow Agent and Nashville Escrow Agent (collectively, the "Stock
Purchase Escrow Agents") agree to take the following actions, with respect to
which they shall have no discretion:
12.1. Nashville Escrow Agent shall receive and hold in safe-keeping and
trust the Sellers' Delivered Documents and the Stock Certificates, and Dallas
Escrow Agent shall receive and hold in safe-keeping and in trust Buyer's
Delivered Documents, according to the instructions provided herein and subject
to other written instructions provided by Sellers or Buyer, as applicable,
pursuant to the procedure described herein.
<PAGE>
12.2 PGL shall immediately notify Buyer, Dallas Escrow Agent and Nashville
Escrow Agent, in writing by facsimile, of the receipt of the Transferred Funds
into the PGL Account.
12.3 Upon receipt of written notice delivered by PGL by facsimile that the
Transferred Funds have been received, (a) Nashville Escrow Agent shall
immediately release and deliver to Buyer the Stock Certificates and Sellers'
Delivered Documents, and (b) the Dallas Escrow Agent shall immediately release
and deliver to Sellers Buyer's Delivered Documents.
12.4 If, prior to the Effective Time, Buyer notifies Sellers and Dallas
Escrow Agent by facsimile of non-satisfaction of a condition precedent to
Buyer's obligation to close and/or Sellers notify Buyer and Nashville Escrow
Agent by facsimile of non-satisfaction of a condition precedent to Sellers'
obligation to close, Nashville Escrow Agent shall return to Sellers via a
recognized overnight delivery courier Sellers' Delivered Documents and the Stock
Certificates, and Dallas Escrow Agent shall return to Buyer via a recognized
overnight delivery courier Buyer's Delivered Documents.
12.5. If, after the Effective Time and after the respective conditions
precedent to Sellers' and Buyer's obligations to close have been deemed to be
satisfied, the funds described on Exhibit 1.8 hereto are not wired by Buyer to
nor received into the PGL Account by 9:00 a.m. (Central Daylight Time) on July
2, 1996, Nashville Escrow Agent shall, upon its receipt thereafter of facsimile
notice by PGL of the failure of PGL Account to receive such funds, return, via a
recognized overnight delivery courier, to Sellers Sellers' Delivered Documents
and the Stock Certificates unless expressly instructed by facsimile otherwise in
writing by PGL, and Dallas Escrow Agent shall return, via a recognized overnight
delivery courier, to Buyer Buyer's Delivered Documents unless expressly
instructed by facsimile otherwise in writing by Buyer.
12.6. In all events, if prior to 9:00 a.m. (Central Daylight Time) on July
5, 1996 PGL has not received into the PGL Account the Transferred Funds and has
not disseminated facsimile notices in accordance with this Addendum and Escrow
Agreement:
(a) Nashville Escrow Agent shall return to Sellers the Stock
Certificates via a recognized overnight delivery courier and shall destroy
all the Sellers' Delivered Documents; and
(b) Dallas Escrow Agent shall destroy Buyer's Delivered Documents.
<PAGE>
13. PERFORMANCE BONDS.
With respect to the performance bonds described in Section 5.7 of the Stock
Purchase Agreement:
(a) Buyer shall cause such bonds to be replaced as soon as i
commercially practicable; and
(b) , subject to its obligations in 13(a) above, Buyer shall continue
such bonds in effect until they are replaced (or their expiration, if
earlier); and
(c) except as may otherwise be provided in Sections 2.6, 2.7 and 10.2
of the Stock Purchase Agreement, Buyer hereby indemnifies Sellers against
any loss, claims, ], damages or costs arising from or related to the
continuation of the performance bonds after the Closing Date.
14. NO OTHER CHANGES; GENERAL PROVISIONS OF STOCK PURCHASE AGREEMENT
CONTROL.
The execution, delivery and effectiveness of this Addendum and Escrow
Agreement does not operate as an amendment to or modification or waiver of the
Stock Purchase Agreement except with respect to the express terms herein and is
subject to the specific conditions described herein. In addition, the general
provisions of the Stock Purchase Agreement set forth in Sections 11.1 through
11.4, 11.6, 11.7, 11.8, and 11.10 through 11.15 are hereby incorporated by
reference.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Addendum
and Escrow Agreement as of the date first written above.
PARAGON GROUP L.P. PARAGON GROUP PROPERTY
SERVICES, INC.
By: Paragon Group G Holdings, Inc.
its General Partner
By: /s/ Steve Means By: /s/ Steve Means
--------------- ---------------
Title: Title:
TEXAS PARAGON MANAGEMENT PARTNERS INSIGNIA COMMERCIAL GROUP,
L.P., a Texas limited partnership INC.
By: PGI Management Holdings, Inc. By: /s/ Frank M. Garrison
---------------------
a Texas corporation
Title:
By: /s/ Steve Means
-------------------
Title:
ACKNOWLEDGED:
WILLIAM R. COOPER
STEVEN A. MEANS
EXHIBIT 99.1
FOR IMMEDIATE RELEASE CONTACT:
Ron Uretta
Chief Financial Officer and Treasurer
Insignia Financial Group, Inc.
864-239-1692
INSIGNIA ANNOUNCES PARAGON COMMERCIAL GROUP ACQUISITION;
INCREASES SIZE OF INSIGNIA COMMERCIAL OPERATIONS BY 35%
Greenville, SC, June 3, 1996----Insignia Financial Group, Inc. (NYSE:IFS)
announced today that it has entered into an agreement to acquire Paragon Group,
Inc.'s (NYSE:PAO) commercial property services operation ("Paragon Commercial").
Paragon Commercial will operate as a subsidiary of Insignia Financial Group's
commercial property services subsidiary, Insignia Commercial Group, Inc.
("ICG"). The consideration is approximately $18.2 million, paid 100% in cash.
The purchase price may increase by up to an additional $4 million over time in
the event that certain revenue targets are met.
The acquisition of Paragon Commercial adds 200 assets with a total of
approximately 24 million square feet of office, retail and industrial space with
an estimated value in excess of $2 billion to Insignia's existing commercial
services portfolio. While Paragon Commercial has traditionally been a prominent
manager of investment grade commercial properties for institutional owners,
approximately 25% of its managed portfolio (in terms of revenues) have contracts
that are both long term in nature and include provisions for financial penalties
to be paid to ICG by owners of such properties in the event that ICG is
terminated as property manager. Insignia anticipates that Paragon Commercial
will add approximately $18 million annually in revenue to ICG's operations.
The Paragon Commercial portfolio, located in 34 major metropolitan areas
across the country, will both enhance and add market depth to Insignia's
existing national portfolio. Growing by approximately 35% through this
acquisition alone, ICG's combined commercial portfolio will consist of a total
of 85 million square feet spanning the Western, Central and Eastern regions of
the country.
Insignia is the largest manager of multifamily residential properties in
the United States and has been gradually increasing its presence in the
commercial property services industry. ICG is currently listed among the
nation's top ten commercial property management firms.
Andrew L. Farkas, Chairman, President and Chief Executive Officer of
Insignia Financial Group, Inc. said, "Paragon Commercial is one of the finest
commercial property services firms in the Unites States; we are proud to be able
to integrate their expertise and operations with our own. This acquisition
clearly demonstrates our commitment to the growth of our commercial property
services division. It has always been our objective to be among the most
dominant players in each field of endeavor in which we choose to operate, and
the Paragon Commercial acquisition takes us one step closer to achieving that
objective in the commercial property services industry."
In commenting on the acquisition, Henry Horowitz, President of Insignia
Commercial Group, Inc. said, "Paragon Commercial brings knowledge and proven
transactional expertise in the areas of acquisition, disposition, management,
leasing and development of commercial real estate. We are particularly pleased
with the strength of Paragon's executive and management teams who will be
assuming positions of leadership within the Insignia organization as we position
ourselves for the current real estate cycle and future growth."
Doug Knaus, President of Paragon Commercial, said, "We are particularly
excited to have the opportunity to combine with one of the most dynamic
companies in the real estate industry. Paragon Commercial's senior commercial
executives have worked together for more than a decade. We will integrate our
national and local expertise and our long time client relationships with
Insignia's impressive vision for the future."
The acquisition, which is subject to the approval of Insignia Financial
Group, Inc.'s Board of Directors, is expected to close on or about June 30,
1996.
With corporate headquarters in Greenville, South Carolina, Insignia is a
fully integrated real estate services company specializing in the ownership and
operation of securitized real estate assets. As a full service real estate
management organization, Insignia performs property management, asset
management, investor services, partnership accounting, real estate investment
banking, mortgage banking, and real estate brokerage services for various types
of owners including approximately 900 limited partnerships having approximately
400,000 limited partners.
Insignia is the largest manager of multifamily residential properties in
the United States and is among the largest managers of commercial properties.
Insignia commenced operations in December 1990 and since then has grown to
provide property and/or asset management services for over 2,400 properties
which include approximately 300,000 residential units (including cooperative and
condominium units), and approximately 60 million square fee of commercial space
located in over 500 cities and 48 states.
###
EXHIBIT 99.2
FOR IMMEDIATE RELEASE CONTACT:
Insignia Financial Group, Inc.
Ron Uretta
Chief Financial Officer
(864) 239-1692
or
Frank Garrison
Executive Managing Director
(615) 783-1021
INSIGNIA CLOSES ON ACQUISITIONS OF TWO COMMERCIAL
REAL ESTATE FIRMS IN TRANSACTIONS TOTALING $92.2 MILLION
Greenville, SC, July 3, 1996---Insignia Financial Group, Inc. (NYSE:IFS)
today said that it has closed two previously announced transactions under which
it agreed to acquire two major commercial real estate firms. Insignia paid
approximately $50 million cash at closing to conclude its $74 million purchase
of substantially all of the assets of The Edward S. Gordon Company and its
affiliates, with the balance paid by the assumption of existing stock options.
Additionally, Insignia paid $18.2 million in cash for the property services
operations of Paragon Commercial. Insignia said that the two companies acquired
had historical annual revenues of approximately $108 million and approximate
EBITDA of $18.5 million combined, but that there could be no assurance that such
results could be achieved in the future.
-more-
<PAGE>
Insignia said the acquisitions reflect its ongoing strategy to achieve
dominance in each business segment in which it operates. With the closings
announced today, the company, which since 1993 has been the industry's leading
manager of U.S. multi-family residential housing, has taken a major step towards
achieving national dominance in the commercial segment as well. With the
acquisitions complete, Insignia's commercial management portfolio now stands in
excess of 110 million square feet of retail, commercial and industrial space
across the U.S.
The Edward S. Gordon Company, which is based in New York, will operate as a
wholly owned independent subsidiary of Insignia. Paragon is being integrated
into Insignia's existing commercial property services subsidiary, Insignia
Commercial Group. Insignia said it expects that it will be able to achieve some
savings and efficiencies based on economies of scale and enhanced capabilities
derived from the acquired units.
With corporate headquarters in Greenville, SC, Insignia is a fully
integrated real estate services company specializing in the ownership and
operation of securitized real estate assets. As a full service real estate
management organization, Insignia, operating in 500 cities and 48 states,
performs property management, asset management, investor services, partnership
accounting, real estate investment banking, mortgage banking and
-more-
<PAGE>
real estate brokerage services for various types of owners including
approximately 900 limited partnerships having approximately 400,000 limited
partners. IFS is the largest manager of multifamily residential properties in
the United States and is among the largest managers of commercial properties.
IFS commenced operations in December 1990 and since then has grown to provide
property and/or asset management services for over 2,600 properties, which
include approximately 300,000 residential units (including cooperative and
condominium units) and, after giving effect to the acquisitions concluded today,
in excess of 110 million square feet of retail, commercial and industrial space.
###
