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
______________________________________
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 1, 1996 ("Closing Date"), Insignia Financial Group, Inc.
("Insignia" or the "Company") acquired substantially all of the assets of Edward
S. Gordon Company, Incorporated and its affiliates ("ESG"), the nation's fourth
largest commercial real estate firm in its New York headquarters market pursuant
to an Asset and Stock Purchase Agreement (the "Agreement") dated as of June 17,
1996 among Insignia Financial Group, Inc., Insignia Buyer Corporation, Edward S.
Gordon Company Incorporated, Edward S. Gordon Company of New Jersey, Inc. and
Edward S. Gordon. The assets acquired included leases for office space at four
locations where ESG operates its commercial real estate business, together with
related furniture, fixtures and equipment. The company intends to continue such
use of the acquired assets.
The purchase price was $73.8 million paid $49.3 million in cash at closing
with the balance, which was determined through arms-length negotiation, through
the assumption of existing ESG stock options. The cash portion of the purchase
price was financed by borrowing under the Company's syndicated credit facility
with First Union National Bank of South Carolina as Administrative Agent; and
Lehman Commercial Paper, Inc., as Syndication Agent.
ESG provides commercial property management services for approximately 27
million square feet of office space, primarily in the New York metropolitan
area. The company also provides commercial leasing, tenant representation, and
corporate consulting services for properties and tenants primarily in the New
York New Jersey and Connecticut markets, as well as investment sales of
commercial properties nationally. ESG will operate as a wholly-owned subsidiary
of Insignia.
<PAGE>
Item 7. Financial Statement and Exhibits
(c) Exhibits
Exhibit No. Exhibit
2.1 Asset and Stock Purchase Agreement
dated as of June 17, 1996 among
Insignia Financial Group, Inc.,
Insignia Buyer Corporation, Edward
S. Gordon Company Incorporated,
Edward S. Gordon Company of New
Jersey, Inc. and Edward S. Gordon
10.1 $5,000,000 Promissory Note of Edward
S. Gordon Company Incorporated and
Edward S. Gordon Company of New
Jersey, Inc.
10.2 Employment Agreement dated as of
June 17, 1996 by and among Insignia
Financial Group, Inc., Insignia Buyer
Corporation and Edward S. Gordon
10.3 Employment Agreement dated as of
June 17, 1996 by and among Insignia
Financial Group, Inc., Insignia Buyer
Corporation and Anthony M.
Saytanides
10.4 Employment Agreement dated as of
June 17, 1996 by and among Insignia
Financial Group, Inc., Insignia Buyer
Corporation and Stephen B. Siegel
99.1 Press Release dated June 17, 1996
99.2 Press Release dated July 3, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ John K. Lines
-----------------------------
John K. Lines
General Counsel
Date: July 11, 1996
EXHIBIT 2.1
ASSET AND STOCK PURCHASE AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
Exhibits and Schedules.......................................................v
Definitions.................................................................ix
I. The Sale and Purchase............................................. 2
1.01 Sale and Purchase........................................ 2
1.02 Excluded Assets.......................................... 6
1.03 Delivery of Interests and Closing Payment
Price.................................................... 7
1.04 Allocation of Closing Payment............................ 8
1.05 Hart-Scott-Rodino and Other Regulatory
Filings.................................................. 8
1.06 Reimbursement of Pre-Closing Expenses.................... 9
1.07 Consents and Filings; Registrations...................... 15
1.08 Certain Payments Concerning Brokerage
Commissions.............................................. 15
1.09 Proration of Certain Items............................... 18
1.10 Make-up of Buyer EBITDA.................................. 21
II. Loan.............................................................. 21
2.01 Loan to be Made.......................................... 21
2.02 ESG Guarantee of Note.................................... 22
2.03 Sellers' Accounts Receivable............................. 22
III. Liabilities....................................................... 25
3.01 Assumed Contracts........................................ 25
3.02 Certain Taxes............................................ 27
3.03 Excluded Liabilities..................................... 27
IV. Options........................................................... 29
4.01 Amendment of Options; Assumption by
Insignia................................................. 29
V. Closing........................................................... 30
5.01 The Closing.............................................. 30
5.02 Transactions at the Closing.............................. 31
VI. Representations and Warranties of Sellers and ESG................. 36
6.01 Ownership of Sellers; Title to Assets.................... 36
6.02 Organization, Qualification and Licensing................ 37
6.03 Authority................................................ 38
6.04 Business Conducted....................................... 39
6.05 Financial Statements..................................... 40
6.06 Liabilities.............................................. 41
6.07 Insurance................................................ 41
6.08 Material Events and Changes.............................. 42
6.09 No Conflicts or Defaults; No Violations.................. 45
6.10 Consents................................................. 46
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6.11 Information.............................................. 47
6.12 Taxes.................................................... 47
6.13 Agreements............................................... 49
6.14 Environmental Matters.................................... 55
6.15 Investment Company....................................... 56
6.16 Employees................................................ 56
6.17 Employee Benefits........................................ 60
6.18 Litigation and Claims.................................... 67
6.19 Properties............................................... 68
6.20 Intellectual Property.................................... 69
6.21 Certain Payments......................................... 70
6.22 Books and Records........................................ 71
6.23 Completeness of Disclosure............................... 72
6.24 Solvency................................................. 72
6.25 Absence of Inducement.................................... 73
6.26 No Knowledge of Breach................................... 74
6.27 Customer Data............................................ 74
II. Representations and Warranties of Buyer........................... 74
7.01 Organization............................................. 75
7.02 Authority................................................ 75
7.03 Capitalization; Title to Interests....................... 76
7.04 Validity of Interests.................................... 77
7.05 Securities Act and Exchange Act Filings.................. 77
7.06 No Conflicts or Defaults; No Violations.................. 78
7.07 Consents................................................. 79
7.08 Financial Statements..................................... 80
7.09 No Material Change....................................... 80
7.10 Taxes.................................................... 81
7.11 Intentionally Omitted.................................... 82
7.12 Litigation; Legal and Governmental
Proceedings and Judgments; Licenses and
Permits.................................................. 82
7.13 Absence of Inducement.................................... 83
7.14 No Knowledge of Breach................................... 84
VIII. Additional Agreements............................................. 84
8.01 General.................................................. 84
8.02 Conduct of Business...................................... 85
8.03 Confidentiality.......................................... 86
8.04 Public Statements........................................ 88
8.05 Access................................................... 89
8.06 No Disposition........................................... 90
8.07 Notice of Certain Events................................. 91
8.08 Tax Matters.............................................. 92
8.09 Delivery of Financial Statements......................... 92
8.10 Furniture, Fixtures and Equipment........................ 93
IX. Covenants......................................................... 93
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9.01 Termination of Agreements................................ 93
9.02 New Lines of Business.................................... 94
9.03 Liens.................................................... 94
9.04 Affiliate Transactions................................... 96
9.05 Assets................................................... 97
9.06 Advances, Investments and Loans.......................... 97
9.07 No Contrary Agreements................................... 97
9.08 Reserved Interests....................................... 98
9.09 Registration of Interests................................ 98
9.10 Maintenance of Insurance................................. 98
9.11 Owner's Insurance........................................ 99
9.12 Section 338 and Section 754 Elections.................... 99
9.13 Use of Aircraft..........................................100
9.14 Certain Employment Matters...............................100
9.15 Cooperation Regarding Licensing..........................102
9.16 Non-Competition and Confidentiality
Agreement................................................103
X. Conditions to Obligations of Buyer................................107
10.01 Accuracy of Representations and Compliance
with Conditions..........................................107
10.02 Sellers' Deliveries......................................107
10.03 Legal Action.............................................107
10.04 No Material Change.......................................108
10.05 No Governmental Action...................................109
10.06 Key Man Insurance........................................110
10.07 Hart-Scott-Rodino Waiting Period.........................110
10.08 Governmental Consents....................................110
10.09 Contractual Consents Needed; Estoppels...................111
10.10 Absence of Certain Events................................111
10.11 Other Closing Documents..................................112
XI. Conditions to the Obligations of ESG and Sellers..................112
11.01 Accuracy of Representations and Compliance
with Conditions..........................................112
11.02 Buyer's Deliveries.......................................113
11.03 Legal Action.............................................113
11.04 No Material Change.......................................113
11.05 No Governmental Action...................................113
11.06 Hart-Scott-Rodino Waiting Period.........................114
11.07 Other Closing Documents..................................114
XII. Survival of Representations and Warranties........................115
12.01 Survival.................................................115
12.02 Intentionally Omitted....................................115
12.03 Indemnification and Related Matters......................115
(A) Indemnification..............................115
(B) Calculation of Damages.......................118
(C) Limitation on Amount; Threshold..............118
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(D) Limitation on Indemnification................119
(E) Time and Manner of Certain Claims............119
(F) Defense of Claims by Third Parties...........121
(G) Certain Obligations Excluded From
Limitations........................................122
XIII. Miscellaneous.....................................................122
13.01 Brokerage Fees...........................................122
13.02 Further Actions..........................................122
13.03 Availability of Equitable Remedies.......................123
13.04 Notices..................................................123
13.05 Waiver...................................................124
13.06 Binding Effect...........................................125
13.07 No Third-Party Beneficiaries.............................125
13.08 Severability.............................................125
13.09 Headings.................................................126
13.10 Arbitration..............................................126
13.11 Counterparts; Governing Law..............................127
13.12 Attorneys' Fees..........................................128
13.13 Waiver of Trial by Jury..................................128
13.14 No Joint Venture or Partnership..........................129
13.15 Construction of Documents................................129
13.16 Whole Agreement; Exhibits and Schedules;
Amendments...............................................129
13.17 Retention of Records and Access Thereto..................130
13.18 Knowledge................................................131
XIV. Termination.......................................................132
14.01 Bases for Termination....................................132
14.02 Manner of Exercise.......................................133
14.03 Effect of Termination....................................134
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Exhibits and Schedules
Exhibits Section
A Form of Promissory Note 2.01
B Form of Guarantee of Edward S. 2.02
Gordon
C Employee Leasing Agreement 3.01(b)
D Form of Amendment to Option 4.01(a)
Agreement
E Form of Non-Competition and 5.02(a)(viii)
Confidentiality Agreement
F Aircraft Lease Agreement 5.02(a)(xiii)
G Form of Release 5.02(a)(xiv)
H Form of Opinion of Morgan Lewis & 5.02(a)(xv)
Bockius LLP
I Consent to Register 5.02(a)(vii)
J Form of Opinion of Proskauer Rose 5.02(b)(vi)
Goetz & Mendelsohn LLP
K Form of Joint Press Release 8.04
Schedules
1.01 Affiliated Entities Recital, 1.01,
9.14 (c)
1.01(l) Receivables due from Employees 1.01(l),
Pursuant to Employment Agreement 1.02(b), 2.03(a)
Supplements
1.03(b) Payment of Closing Payment 1.03(b)
1.04 Closing Payment Allocation 1.04
1.06(a)(1) Agreed Upon Manner 1.06(a), 802(d)
1.06(a)(2) Allocation of EBITDA Payment 1.06(a)
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1.09(a)(i) Sellers' Prorata Share of 1.09(a)(i),
Sellers' Payments 1.09(d)
1.09(a)(ii) Sellers' Prorata Share of 1.09(a)(ii),
Buyer's Payments 1.09(d)
3.01 Assumed Contracts 1.01(a), 3.01,
502(a)(xvii)
4.01(a) Amendment of Options 4.01(a), 6.01
4.01(b) Option Holders 1.03(b), 6.01
4.01(b), 1.06(b)
6.01 Ownership of Sellers 4.01(a), 6.01,
6.17(a)
6.02 Sellers Jurisdictions 5.02(a)(iii),
6.02
6.05 Liabilities of Affiliated 6.05(b)
Entities
6.06 Certain Liabilities 6.06
6.07 Insurance Policies 9.10
6.08(b) Distribution on Capital Stock 6.08(b)
6.08(d) Casualty to Properties or 6.08(d)
Material Assets
6.09 Seller Conflicts or Defaults; 6.09
Violations
6.10 Real Estate Brokerage Licensing 6.10, 7.07
Authorities; Notices
6.12 Tax Liabilities 6.12
6.13(a) Material Agreements 5.02(a)(xvii),
6.13(a)
6.13(b) Management Agreements 1.01(a),
5.02(a)(xvii),
6.13(b), 6.13(e)
10.04(a)
6.13(c) Commission Agreements 6.13(c)
10.04(a)
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6.13(d) Representation Agreements 5.02(a)(xvii),
6.13(d),
10.04(a)
6.13(e) Restrictive Agreements 6.13(e)
6.14 Environmental Matters 6.14(a)
6.16(a) Employees; Employment Agreements 5.02(a)(xvii)
6.16(a),
10.04(a)
6.16(b) Reimbursable Employees 6.16(b)
6.16(c) Changed Compensation 6.16(c)
6.16(e) Collective Bargaining Agreements 6.16(e), 6.17(a)
6.16(f) Unfair Labor Practices 6.16(f)
6.17(b) Multiemployer Plans 6.17(b),
6.17(b)(vi),
6.17(b)(vii)
6.17(d)(i) Non-qualified Plans 6.17(d)(i)
6.17(d)(viii) Retroactive Rate Adjustments 6.17(d)(viii)
6.17(e) Liabilities Pursuant to 6.17(e)
Consummation of Agreement
Transactions
6.18 Material Litigation 6.18
6.19 Leases/Licenses/Liens 6.19, 10.09
6.20 Intellectual Property 6.20
7.03 Right in Capital Stock of 7.03
Insignia
7.06 Buyer Conflict or Defaults; 7.06
Violations
7.12 Substantial Litigation Known to 7.12
Insignia
9.02 New Lines of Business 9.02
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9.03 Permitted Liens 5.02(a)(xviii),
9.03
9.04 Affiliate Transactions 9.04
9.16(a) Permitted Activities 9.16(a)
10.04 Sale of Property 10.04(a)
10.06 Key Man Insurance Policy 10.06
10.09 Consents Needed 10.09
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Definitions
Defined Term Section Page
Accounts Receivables 2.03 22
Affiliate 6.08(b) 43
Agreed Upon Manner 1.06(a) 10
Annual Commissions Schedule 1.08(a) 17
Assets 1.01 3
Assumed Contracts 3.01 25
Audited Statements 6.05 40
Average Commission Rate 1.08(a)(iii) 16
Brokers Commissions Payable 2.03 23
Brokers Consent 2.03(c) 24
Business Recitals 1
Buyer Parties 1
Buyer EBITDA 1.06(a) 10
Buyer's Accounts Receivable 1.08(a)(ii) 16
Buyer's Payments 1.09(a)(ii) 19
CERCLA 6.14(a) 55
Closing 5.01 30
Closing Date 5.01 30
Closing Payment 1.03(b) 7
Code 6.12 48
Collected Accounts Receivable 1.08(a)(ii) 16
Commission Agreements 6.13(c) 52
Consenting Broker 2.03(c) 23
Contracts 1.01(a) 3
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Determination Time 5.01 30
DOJ 1.05 9
EBITDA Payment 1.06(a) 9
Employee Plan Lists 6.17(a) 60
Employees 9.14(a) 100
Employment Agreements 6.16(a) 56
Environmental Laws 6.14(c) 55
ERISA 6.17(a) 60
ERISA Affiliate 6.17(a) 61
ESG Parties 1
ESG Guarantee 2.02 22
Exchange Act 7.05 77
Excluded Assets 1.02 6
Excluded Liabilities 3.02 28
FTC 1.05 8
GAAP 1.02(b) 6
Gordon EBITDA 1.06(a) 10
Governmental Authority 7.07 78
HSR Act 1.05 9
HUD 7.11 82
Insignia Parties 1
Insignia Group 12.03(A)(a) 115
Intangibles 6.20 70
Interests 1.01 3
IRS 6.17(d)(i) 64
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Key Man Policy 10.06 110
Liabilities 12.03(A)(a)(i) 116
Lien 6.08(b) 43
Loan 2.01 21
Management 9.14(d) 102
Management Agreements 6.13(b) 50
Material Agreements 6.13(a) 49
Most Current Balance Sheet 6.05 40
Multiemployer Plan 6.17(b) 61
New Agreements 1.06(b) 13
New Jersey Corp. Parties 1
New York Corp. Parties 1
Nonrepresented Plans 9.14(c) 101
Note 2.01 22
Option Amendments 4.01 29
Options 4.01 29
Organizational Documents 6.02 38
Participate In 9.16(a) 103
Participating In 9.16(a) 103
Person 6.08(b) 43
Plan 6.17(a) 61
Plans 6.17(a) 61
Post-Closing Brokers Notes 2.03(c) 24
Payable
Post-Closing Commissions 2.03(c) 24
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Pre-Closing Brokers Notes 2.03(a) 22
Payable
Proration Schedule 1.09(a) 18
Reimbursable Employees 6.16(b) 57
Representation Agreements 6.13(d) 53
SEC 8.09 93
Securities Act 7.05 77
Seller Group 12.03(A)(b) 117
Sellers Parties 1
Sellers' Overpayments 1.09(a)(i) 19
Sellers' Payments 1.09(a)(i) 19
Sellers' Prorata Share of Buyers's 1.09(a)(ii) 19
Payments
Sellers' Prorata Share of Sellers' 1.09(a)(i) 19
Payments
Sellers' Underpayments 1.09(a)(ii) 19
Shared Broker 1.08(a) 15
Taxes 6.12 48
Terminated Agreement 1.06(b) 13
Transferred Employees 9.14(a) 100
Unamended Option 1.03(b) 8
Unaudited Statements 7.08 80
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ASSET AND STOCK PURCHASE AGREEMENT
Asset and Stock Purchase Agreement, dated as of June 17, 1996, among
Insignia Financial Group, Inc., a Delaware corporation ("Insignia") and Insignia
Buyer Corporation, a Delaware corporation ("Buyer");
and
Edward S. Gordon Company Incorporated, a New York corporation ("New York
Corp."), Edward S. Gordon Company of New Jersey, Inc., a New Jersey corporation
("New Jersey Corp.") (New York Corp. and New Jersey Corp. are hereinafter
collectively referred to as "Sellers");
and
Edward S. Gordon, the sole stockholder of each of the Sellers ("ESG").
WITNESSETH:
WHEREAS, ESG and Sellers together with the affiliated entities identified
in Schedule 1.01 hereto (the "Affiliated Entities") are engaged, collectively,
in the business of providing real estate management, leasing, brokerage,
landlord and tenant and seller and purchaser representation, consulting and
other real estate related services (the "Business");
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WHEREAS, Sellers wish to sell, transfer, convey, assign and deliver to
Buyer, and Buyer wishes to purchase and acquire from Sellers, certain of
Sellers' assets;
WHEREAS, ESG and New York Corp. wish to sell, transfer, convey, assign and
deliver to Buyer, and Buyer wishes to purchase and acquire from ESG and New York
Corp., all of the outstanding equity interests in the entities set forth on
Schedule 1.01;
WHEREAS, in connection with such sale and purchase, Sellers desire to have
Buyer assume, and Buyer desires to assume, certain obligations of Sellers; and
WHEREAS, the parties wish to make certain other agreements in connection
with such sale and purchase;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the covenants, agreements, representations
and warranties herein contained, the parties hereto hereby agree as follows:
I. The Sale and Purchase.
----------------------
Section 1.01 Sale and Purchase
------------ -----------------
Subject to the terms and conditions set forth in this Agreement, at the
Closing (as defined in Section 5.01 hereof) ESG and Sellers shall sell, assign,
transfer, convey and deliver to Buyer or its designee, and Buyer or its designee
shall purchase
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and acquire from ESG and Sellers, for the consideration provided for herein (i)
all of the outstanding shares of capital stock of the corporations set forth on
Schedule 1.01 and all of the equity interests in the limited liability company
identified on such Schedule 1.01 (collectively, the "Interests") and (ii) all of
Sellers' right, title and interest in and to Sellers' assets (wherever located,
tangible and intangible, real, personal or mixed, whether known or unknown and
whether or not carried on the books and records of Seller) and the Business (and
the goodwill associated therewith) as a going concern (excluding only the assets
specified in Section 1.02 hereof) (the "Assets"), including, but not limited to,
the following:
(a) all of each Seller's rights under all contracts, agreements,
arrangements, commitments, instruments and understandings ("Contracts") to which
such Seller is a party or which relate to the Business, including, without
limitation, the Contracts (other than the employment agreements to which Edward
S. Gordon, Stephen B. Siegel and Anthony M. Saytanides are party) set forth on
Schedule 3.01 hereto; provided, however, that to the extent that an attempted
assignment thereof without a required consent of any other party to such
Contract would constitute a breach thereof, such assignment shall not occur
(unless Buyer elects otherwise) until such time as the consent of such other
party to the Contract shall have been obtained or Buyer elects in writing to
have it assigned; and provided further, that until
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such time as such consent is obtained, Sellers shall cooperate with Buyer in any
arrangement designed to provide Buyer the benefits of such Contract;
(b) subject to Sellers' rights pursuant to Section 13.17 hereof, all of
Sellers' records, files, books, documents and other data relating to the Assets
and the Business;
(c) all of Sellers' copyrights and all of Sellers' rights in the
trademarks, service marks, personal names, rights of publicity, trade names and
logos now or previously used by Sellers in connection with the Business or
related thereto as defined below (including registrations and applications for
registration of any of them);
(d) all of Sellers' inventions, computer software (including licenses
therefor), trade secrets and confidential data (including data bases, reports
and customer lists);
(e) all of Sellers' rights to use the trademarks, trade names, service
marks and/or personal names "Edward S. Gordon," "ESG," "Gordon," and all names
derivative therefrom or substantially similar thereto as a matter of law in
connection with the Business or in connection with a use authorized by,
sponsored by, endorsed by or affiliated with the Business, including promotional
uses not directly related to the Business but inuring to the benefit of the
goodwill and good reputation of the Business, but not limited thereto;
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(f) all of Sellers' leasehold and other interests in all real property
leases, and any prepaid rent, security deposits and options to renew or purchase
in connection therewith;
(g) good and marketable title to, or Sellers' leasehold or other interests
in, all furnishings, furniture, leasehold improvements, supplies, vehicles,
spare parts, signs, computers, machinery, equipment, and art work;
(h) good and marketable title to, or Sellers' leasehold or other interests
in, all fixed assets;
(i) all municipal, state and federal franchises, permits, licenses and
authorizations held or used by Sellers;
(j) all deposits, deferred and prepaid charges, and similar sums;
(k) all tickets to sports events and related subscription rights;
(l) all receivables from employees of the Sellers pursuant to employment
agreements as identified on Schedule 1.01(l);
(m) all other tangible assets owned by Sellers wherever located;
(n) all contract rights to receive commissions upon the exercise of options
in leases to extend the term or expand
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space to be occupied which leases, as of the Closing, have been executed by all
parties necessary to create a binding obligation of all parties thereto and with
respect to which no employee or broker of Sellers or Buyer is required to
perform any material services to the extent such commissions in the aggregate
exceed $250,000 in any year; and
(o) all claims against third parties relating to physical assets and
Intangibles (as hereinafter defined) included in the Assets.
Section 1.02 Excluded Assets
------------ ---------------
The following assets (collectively, the "Excluded Assets") shall be
retained by Sellers and no interest in them shall be assigned, transferred,
conveyed or delivered to Buyer:
(a) the minute books, stock ledgers and tax returns of Sellers;
(b) the cash, cash equivalents, investment securities, notes receivable
from employees of Sellers (other than the receivables identified on Schedule
1.01(l)) and accounts receivable determined in accordance with generally
accepted accounting principles ("GAAP") of Sellers;
(c) aircraft, aircraft furnishings, fixtures and equipment and related logs
and other documents, licenses, certificates and spare parts; and
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(d) all contract rights to receive commissions upon the exercise of options
in leases to extend the term or expand space to be occupied which leases, as of
the Closing, have been executed by all parties necessary to create a binding
obligation of all parties thereto and with respect to which no employee or
broker of Sellers or Buyer is required to perform any material services to the
extent such commissions in the aggregate do not exceed $250,000 in any year.
Section 1.03 Delivery of Interests and Closing Payment Price
------------ ----------------------------------------------
(a) At the Closing (i) the Sellers shall deliver bills of sale and other
instruments of assignment, transfer and conveyance for the Assets reasonably
satisfactory to Buyer and (ii) ESG shall deliver stock certificates, duly
endorsed in blank or accompanied by stock transfer powers, with signature
guaranteed, and with all requisite stock transfer tax stamps attached, and ESG
and New York Corp. shall deliver instruments of assignment, transfer and
conveyance reasonably satisfactory to Buyer, together representing the
Interests.
(b) At the Closing, Buyer shall pay an aggregate amount equal to
$49,300,000, subject to adjustment as provided in the following sentence (the
"Closing Payment"), by paying to ESG and each Seller the amount set forth next
to ESG's and such Seller's name on Schedule 1.03(b) by certified or official
bank
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check payable to ESG or such Seller or by wire transfer to ESG or such Seller at
the account and in accordance with the wire instructions given by ESG or each
Seller to Insignia at least two business days prior to the Closing Date. In the
event the Seller and an option holder party to any Option (as hereinafter
defined) set forth on Schedule 4.01(b) have not entered into an Option Amendment
(as hereinafter defined) with respect to such Option prior to the Closing Date
as provided in Section 4.01 (an "Unamended Option"), the Closing Payment shall
be increased by an amount equal to the aggregate Value (as set forth on Schedule
4.01(b)) of all Unamended Options.
Section 1.04 Allocation of Closing Payment
------------------------------------------
The consideration to be paid under this Agreement shall be allocated to the
Interests and the Assets as set forth on Schedule 1.04 hereto and Insignia,
Buyer, ESG and each Seller shall file all returns, notices or other filings
(including, without limitation, Internal Revenue Service Forms 8594) on a basis
consistent with such allocation.
Section 1.05 Hart-Scott-Rodino and Other Regulatory Filings
-----------------------------------------------------------
Promptly, and not later than three business days following the execution of
this Agreement, Buyer and ESG shall each file or cause to be filed any
Notification and Report Forms and related material that it or he may be required
to file with the Federal Trade Commission (the "FTC") and the Antitrust
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Division of the United States Department of Justice (the "DOJ") under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), in connection with the transactions contemplated by this Agreement and
will make any further filings pursuant thereto that may be necessary in
connection therewith. Sellers, on the one hand, and Insignia and Buyer, on the
other hand, shall each pay one-half of the filing fees payable in connection
with such filings. Each of the parties hereto agrees to request early
termination of the filings, and to respond promptly to any request from the FTC
or the DOJ for further information. Sellers shall also promptly file with
applicable regulatory authorities (including state real estate brokerage
licensing authorities) any other applications, notices or other documents
required to be filed by any of them (and prosecute diligently any related
proceedings) in order to consummate the transactions contemplated by this
Agreement.
Section 1.06 Reimbursement of Pre-Closing Expenses
--------------------------------------------------
(a) As a reimbursement of certain of the Sellers' pre- Closing expenses,
and at the time hereinafter provided, Buyer shall pay Sellers an aggregate
amount equal to the EBITDA Payment. For purposes of this Agreement, the "EBITDA
Payment" shall mean the sum of (i) the amount, if any, by which the Buyer EBITDA
(as hereinafter defined) exceeds $9,250,000, up to a maximum amount equal to the
difference between $7,000,000 less the Gordon EBITDA (as hereinafter defined)
plus (ii) 50% of the
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amount, if any, by which the Buyer EBITDA exceeds an amount equal to the
difference between $16,250,000 less the Gordon EBITDA; the "Buyer EBITDA" shall
mean that portion of Insignia's earnings (before interest, taxes, depreciation
and amortization) determined in a manner consistent with the Agreed Upon Manner
(as hereinafter defined) which is attributable to the Business for the year
ending December 31, 1996; and the "Gordon EBITDA" shall mean the Sellers'
combined earnings (before interest, taxes, depreciation and amortization)
determined in a manner consistent with the Agreed Upon Manner for the period
beginning January 1, 1996 and ending on the Closing Date. For purposes of this
Agreement, the "Agreed Upon Manner" shall mean the method which begins with the
historical operating results of the appropriate entity for the appropriate
period determined in accordance with GAAP and adjusted in accordance with the
principles set forth on Schedule 1.06(a)(1), which adjustments shall be true and
accurate representations of the amount of such items included in such historical
financial statements. ESG and Sellers represent and warrant that the information
set forth on Schedule 1.06(a)(1) has been calculated in the Agreed Upon Manner
based upon the historical combined results of operations of the Sellers for the
four month period ended April 30, 1996. As promptly as practicable after the
Closing Date, but in no event later than 60 days after the Closing Date, ESG and
Sellers shall prepare and deliver to Insignia and Buyer a calculation of Gordon
EBITDA together with supporting information and a certificate of ESG and
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an officer of each Seller representing that Gordon EBITDA has been calculated in
the Agreed Upon Manner. On or before March 31, 1997, Insignia and Buyer shall
prepare and deliver to ESG and Sellers a calculation of Buyer EBITDA together
with supporting information and a certificate of an officer of each of Insignia
and Buyer representing that Buyer EBITDA has been calculated in the Agreed Upon
Manner. In calculating Buyer EBITDA, reasonable allocations to Buyer of expenses
incurred by Insignia for the benefit of Buyer shall be made, but in no event
shall they be greater, on an annualized basis, than comparable expenses of
Sellers incurred during the period beginning on January 1, 1996 and ending on
the Closing Date. The calculated Gordon EBITDA shall be subject to verification
by Insignia and Buyer within 20 business days of delivery of such calculation
and supporting information to them. The calculated Buyer EBITDA shall be subject
to verification by ESG and Sellers within 20 business days of delivery of such
calculation and supporting information to them. ESG and Sellers, on the one
hand, and Insignia and Buyer, on the other hand, shall each notify the other
parties of any dispute with respect to the Buyer EBITDA or the Gordon EBITDA, as
the case may be, before the expiration of such verification period, and any such
dispute which cannot be resolved after good faith negotiations and in any event
within 20 business days from the date such notice was given, shall be resolved
by arbitration as provided in Section 13.10. The EBITDA Payment shall be payable
on the later of (i) September 30, 1997
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or (ii) five business days after final determination thereof pursuant to this
Section 1.06(a), shall be allocated among Sellers in the proportion set forth on
Schedule 1.06(a)(2), and shall be paid by certified or official bank check
payable to such Seller or by wire transfer to such Seller at the account and in
accordance with the wire instructions given by such Seller to Insignia and Buyer
no later than September 15, 1997. Sellers agree that the EBITDA Payment is not
part of the consideration for the purchase of the Assets and shall report, or
cause to be reported, the EBITDA Payment as ordinary income for tax purposes.
(b) Notwithstanding anything to the contrary contained in this Agreement,
if, on or prior to the Closing Date (or, in the case of Management Agreements,
December 31, 1996), (x) any of the Material Agreements, Management Agreements or
Representation Agreements (as such terms are hereinafter defined) are not
renewed, or are cancelled or terminated, or (y) ESG or any of the Sellers or the
Affiliated Entities receives notice (oral or written) of any party's intention
to not renew, or to cancel or terminate any such agreement or (z) ESG or any of
the Sellers or the Affiliated Entities has knowledge that any party is
considering not renewing or canceling or terminating any such agreement and
within 120 days after the Closing Date such agreement is not renewed, or is
cancelled or terminated or any of ESG, Sellers, the Affiliated Entities,
Insignia or Buyer receives notice (written or oral) of the party's intention to
not renew,
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or to cancel or terminate such agreement (other than any agreement as to which
any such nonrenewal, cancellation or termination is rescinded on or prior to the
Closing Date (or, in the case of Management Agreements, December 31, 1996))
(together, the "Terminated Agreements"), Sellers and ESG agree, jointly and
severally, to pay to Buyer an amount (if greater than zero) equal to the product
of (i) the sum of the unadjusted Closing Payment plus the aggregate Value of the
Options set forth on Schedule 4.01(b) multiplied by (ii) a fraction, the
numerator of which is equal to the amount by which (A) the Annualized Revenue
Loss (as defined below) is greater than (B) $4.6 million, and the denominator of
which is $92 million. For purposes of this Agreement, the term "Annualized
Revenue Loss" shall mean the amount by which the aggregate annualized revenue
that would have been received in respect of the Terminated Agreements
(annualized fees for Management Agreements and fees reasonably estimated to be
received from other agreements), is greater than the aggregate annualized
revenue that is to be received from Management Agreements entered into between
the date hereof and December 31, 1996 and the revenues reasonably estimated to
be received from other new agreements entered into between the date hereof and
the Closing Date (together, the "New Agreements").
(c) ESG and Sellers shall deliver to Buyer on or
before April 30, 1997 a schedule of the Terminated Agreements and
the New Agreements setting forth each Terminated Agreement and
<PAGE>
each New Agreement, the annualized revenue that would have been or is to be
received as provided above with respect to each such agreement, the date notice
or knowledge of termination of or intent to terminate each Terminated Agreement
was received, and the date each New Agreement was executed, together with a
schedule setting forth in reasonable detail the calculation of the payment to
Buyer provided for in Section 1.06(b). Each such schedule shall be certified by
ESG and an officer of each Seller as true, correct and complete. The schedule
and the calculated purchase price adjustment shall be subject to verification by
Buyer within 20 business days of delivery of such schedule and calculation to
Buyer. Buyer shall notify ESG and Sellers of any dispute with respect to the
purchase price adjustment before the expiration of such verification period and
any such dispute which cannot be resolved after good faith negotiations and in
any event within 20 business days from the date such notice was given, shall be
resolved by arbitration as provided in Section 13.10.
(d) Sellers and ESG shall pay to Buyer the amount, if any, due to Buyer
pursuant to Section 1.06(b) within three business days of the final
determination thereof pursuant to this Section 1.06(d) by certified or official
bank check payable to Buyer or by wire transfer to Buyer at the account and in
accordance with the wire transfer instructions given by Buyer prior to such
determination.
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Section 1.07 Consents and Filings; Registrations
------------------------------------------------
As soon as practicable after the date hereof, each of ESG, Sellers,
Insignia and Buyer shall seek to obtain all consents, approvals, waivers, or
other documents from any third parties, including any governmental authorities,
required to be obtained by it or him, and shall obtain before the Closing each
such consent, approval, waiver, or other document (other than consents of
parties to real property leases, office equipment leases, Commission Agreements,
Management Agreements, and Representation Agreements), and make all filings,
registrations and other notifications required to be made by it or him, as may
be required to effect the transactions contemplated by this Agreement.
Section 1.08 Certain Payments Concerning Brokerage Commissions
--------------------------------------------------------------
(a) On or prior to the 90th day following the end of each fiscal year of
Insignia ending after the Closing Date for so long as there are any Accounts
Receivable (as hereinafter defined) outstanding, Buyer shall, with respect to
such fiscal year, prepare and furnish to Sellers a schedule (the "Annual
Commissions Schedule") setting forth, with respect to each commissionable broker
who was employed by either of Sellers at any time prior to the Closing Date
(each such broker, a "Shared Broker"):
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(i) the brokerage commissions paid such broker in that year in respect of
(A) the Brokers Commissions Payable (as that term is defined in Section 2.03
hereof) and (B) the brokers commissions payable by Buyer arising at any time
after the Closing Date;
(ii) the associated commissions received by Buyer in that year in respect
of (A) the Accounts Receivable collected by Buyer as agent for Sellers as
provided in Section 2.03(b) hereof (the "Collected Accounts Receivable"), and
(B) the accounts receivable of Buyer arising after the Closing Date ("Buyer's
Accounts Receivable"); and
(iii) the quotient, expressed as a percentage, resulting from the division
of the aggregate amounts described in clause (i) above by the aggregate amounts
described in clause (ii) above (hereinafter referred to as the "Average
Commission Rate").
(b) Notwithstanding anything to the contrary contained in this Agreement or
in any agreement either Seller or Buyer may have or have had with any Shared
Broker, (i) Sellers, jointly and severally, shall be responsible to each Shared
Broker for commissions in respect of the Collected Accounts Receivable in an
amount equal to the Collected Accounts Receivable multiplied by the Average
Commission Rate, and (ii) Buyer shall be responsible to each Shared Broker for
commissions in respect of the Buyer's
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Accounts Receivable in an amount equal to the Buyer's Accounts Receivable
multiplied by the Average Commission Rate.
(c) To the extent the aggregate amounts for which Sellers are responsible
pursuant to Section 1.08(b) hereof exceed the aggregate amounts applied by Buyer
during such year to the payment of Brokers Commissions Payable pursuant to
Section 2.03(b) hereof, Sellers and ESG, jointly and severally, shall pay to
Buyer, within two business days after Buyer furnishes Sellers the Annual
Commissions Schedule, an amount equal to such excess by certified or official
bank check payable to Buyer or by wire transfer to Buyer at the account and in
accordance with the wire transfer instructions given by Buyer at the time the
Annual Commissions Schedule is furnished to Sellers.
(d) To the extent the aggregate amounts applied by Buyer during such year
to the payment of Brokers Commissions Payable pursuant to Section 2.03(b) hereof
exceeds the aggregate amounts for which Buyer is responsible pursuant to Section
1.08(b) hereof, Buyer shall pay to Sellers, within two business days after Buyer
furnishes Sellers the Annual Commissions Schedule, an amount equal to such
excess by certified or official bank check payable to Sellers or by wire
transfer to Sellers at the account and in accordance with the wire transfer
instructions given by Sellers at any time within two business days prior to the
time the Annual Commissions Schedule is furnished to Sellers.
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(e) The amounts, if any, payable to Buyer pursuant to Section 1.08(c)
hereof and the amounts, if any, payable to Sellers pursuant to Section 1.08(d)
hereof shall be reflected by each party as a pro ration of their respective
obligations to Shared Brokers.
(f) In the event any dispute arises relating to the determination of
amounts payable pursuant to this Section 1.08, such dispute shall be resolved
pursuant to arbitration as provided in Section 13.10. Any amount determined by
the arbitrators to be payable shall be paid within three business days of such
determination.
Section 1.09 Proration of Certain Items
--------------------------------------
(a) On or before March 31, 1997, Buyer shall prepare and furnish Sellers a
schedule (the "Proration Schedule") setting forth
(i) with respect to the items listed on Schedule 1.09(a)(i) hereto (A) the
expense thereof paid by Sellers on or prior to the Closing or payable by Sellers
thereafter ("Sellers' Payments"), and (B) Sellers' pro rata share thereof,
calculated by (I) multiplying such expense by a fraction, the denominator of
which shall be the total number of days as to which such expense has been paid
or is payable by Sellers and the numerator of which shall be the number of days
of such total that elapsed as of the close of business on the Closing Date or
(II) allocating such
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expense on the basis of actual consumption or utilization, as applicable,
("Sellers' Prorata Share of Sellers' Payments") (the excess of Sellers' Payments
over Sellers' Prorata Share of Sellers' Payments is hereinafter referred to as
"Sellers' Overpayments"); and
(ii) with respect to the items listed on Schedule 1.09(a)(ii) hereto (A)
the expense thereof paid or payable by Buyer after the Closing Date ("Buyer's
Payments"), and (B) Seller's prorata share thereof, calculated by (I)
multiplying such expense by a fraction, the denominator of which shall be the
total number of days as to which such expense has been paid or is payable by
Buyer and the numerator of which shall be the number of days of such total that
elapsed as of the Closing Date or (II) allocating such expense on the basis of
actual consumption or utilization, as applicable, ("Sellers' Prorata Share of
Buyer's Payments") (the excess of Buyer's Payments over Sellers' Prorata Share
of Buyer's Payments is hereinafter referred to as "Sellers' Underpayments").
(b) If Sellers' Overpayments exceed Sellers' Underpayments, within two
business days after Buyer furnishes Sellers the Proration Schedule, an amount
equal to such excess shall be paid by Buyer to Sellers by certified or official
bank check payable to Sellers or by wire transfer to Sellers at the account and
in accordance with the wire transfer instructions
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given by Sellers at any time within two business days prior to the time the
Proration Schedule is furnished to Sellers.
(c) If Sellers' Underpayments exceed Sellers' Overpayments, within two
business days after Buyer furnishes Sellers the Proration Schedule, an amount
equal to such excess shall be paid by Sellers and ESG, jointly and severally, to
Buyer by certified or official bank check payable to Buyer or by wire transfer
to Sellers at the account and in accordance with the wire transfer instructions
given by Buyer at the time the Proration Schedule is furnished to Sellers.
(d) Sellers shall cooperate with Buyer with respect to the preparation of
the Proration Schedule, and such cooperation shall include, without limitation,
furnishing Buyer appropriate documentation or other evidence of Sellers'
Payments. From and after the preparation of the Proration Schedule, Sellers and
Buyer shall, from time to time, in good faith apportion in a manner similar to
that hereinabove provided, and settle by payments in a manner similar to that
hereinabove provided, any and all items that are of a type described on Schedule
1.09(a)(i) or Schedule 1.09(a)(ii), but as to which no data or insufficient data
was available at the time the Proration Schedule was prepared. Payments made
pursuant to this Section 1.09 shall be allocated to the specific assets and
liabilities so prorated.
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(e) In the event any dispute arises relating to the determination of
amounts payable pursuant to this Section 1.09, such dispute shall be resolved
pursuant to arbitration as provided in Section 13.10. Any amount determined by
the arbitrators to be payable shall be paid within three business days of such
determination.
Section 1.10 Make-up of Buyer EBITDA
------------------------------------
If Buyer EBITDA, as determined in accordance with Section 1.06 hereof, is
less than $9,250,000, Sellers and ESG, jointly and severally, shall pay Buyer an
amount equal to the lesser of (a) $2,250,000, or (b) the excess of $9,250,000
over Buyer EBITDA. The amount, if any, payable to Buyer pursuant to this Section
1.10 shall be payable five business days after final determination of Buyer
EBITDA pursuant to Section 1.06, and shall be paid by certified or official bank
check payable to Buyer or by wire transfer to Buyer at the account and in
accordance with the wire instructions given by Buyer to Sellers and ESG no later
than the second business day prior to the date such amount is payable hereunder.
II. Loan.
-----
Section 2.01 Loan to be Made
----------------------------
At the Closing, Buyer shall extend to Sellers a loan (the "Loan") in the
aggregate principal amount equal to the
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lesser of (a) $5,000,000 or (b) an amount requested in writing by Sellers
delivered to Buyer not later than two business days prior to the Closing Date.
Sellers shall be jointly and severally liable for repayment of the Loan. The
Loan shall be evidenced by a promissory note (the "Note") in the form of Exhibit
A hereto to be executed and delivered by Sellers at the Closing.
Section 2.02 ESG Guarantee of Note
----------------------------------
ESG shall guarantee to Buyer Sellers' obligations to pay to Buyer all
amounts owed to Buyer in respect of the Note, pursuant to the guarantee in the
form of Exhibit B hereto (the "ESG Guarantee") to be executed and delivered by
ESG at the Closing.
Section 2.03 Sellers' Accounts Receivable
-----------------------------------------
(a) Each Seller shall, at the Closing, provide Buyer a complete and
accurate list setting forth with respect to each of its accounts receivable
existing on the Closing Date, including advances to and notes receivable from
commissionable employees (other than the notes receivable identified on
Schedule 1.01(l)) (the "Pre-Closing Brokers Notes Payable"), (its "Accounts
Receivable"), (i) the amount thereof owed to cooperating brokers and the name of
the obligor and whether commission is gross or net to commissionable employees,
(ii) the date such Account Receivable was earned and whether such obligee is a
cooperating broker or a commissionable employee, (iii) the name of each
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obligee with respect to any associated accounts payable to cooperating brokers
and commissionable employees, if any, existing on the Closing Date relating to
such Accounts Receivable (its "Brokers Commissions Payable"), indicating whether
such obligee is a cooperating broker or a commissionable employee, stating the
amount of such commission or, if determined by percentage, whether it is a gross
commission or a net commission, and if a net commission, the percentage of such
commission.
(b) Following the Closing, Buyer, as agent for each Seller, shall use its
reasonable best efforts to collect the Accounts Receivable on behalf of each
Seller. Buyer shall apply all such amounts collected, first, to the payment of
the related Brokers Commissions Payable (net of the amount applied to the
related Pre-Closing Brokers Notes Payable, which amount shall be paid to the
Seller entitled thereto), and second, any excess 50% to the appropriate Seller
and 50% to Buyer as a payment on the Note. Buyer shall not be obligated to
commence any legal or other action or incur any expense in the collection of the
Accounts Receivable. Buyer's obligations under this Section 2.03 shall terminate
48 months after the Closing Date.
(c) Following the Closing, Sellers may deliver to Buyer a written consent,
in form reasonably satisfactory to Buyer and Insignia, (a "Broker Consent") of
any commissionable employee (a "Consenting Broker") from which Sellers hold
Pre-Closing Brokers Notes Payable consenting to Buyer withholding from
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<PAGE>
commissions payable to such broker which are earned after the Closing
("Post-Closing Commissions") amounts necessary to pay indebtedness under
Pre-Closing Brokers Notes Payable, and directing Buyer to pay such withheld
amounts to Sellers. For purposes of this Agreement, "Post-Closing Brokers Notes
Payable" shall mean advances to and notes receivable from commissionable
employees with respect to funds advanced to them by Buyer after the Closing.
Following receipt of a Brokers Consent, Buyer shall apply all Post-Closing
Commissions first, to the related Post- Closing Brokers Notes Payable and
second, to the related Pre- Closing Brokers Notes Payable.
(d) Notwithstanding the foregoing, when Buyer contemporaneously receives
payments of Post Closing Commissions and, as Sellers' Agent, Accounts Receivable
as to which a Consenting Broker from whom Sellers have a Pre-Closing Brokers
Note Payable is entitled to a Brokers Commission Payable, Buyer may apply to the
payment of Post-Closing Brokers Notes Payable and Pre-Closing Brokers Notes
payable amounts collected with respect to the Accounts Receivable prior to
amounts collected with respect to the Post-Closing Commissions, provided that no
portion of the Accounts Receivable shall be applied to Post- Closing Brokers
Notes Payable.
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III. Liabilities
-----------
Section 3.01 Assumed Contracts
------------------------------
(a) At the Closing Buyer shall assume and agree to pay, perform and
discharge all liabilities and obligations of each Seller arising after the
Closing Date under the Contracts listed on Schedule 3.01 hereto, or which are
entered into after the date hereof in the ordinary course of business consistent
with past practice on commercially reasonable terms and conditions (and with
Buyer's prior written consent as to any such agreement pursuant to which Sellers
or Buyer as assignee would incur a liability or other obligation of $10,000 or
more) and listed on an amended Schedule 3.01 delivered to Buyer two business
days prior to Closing, which are validly assigned to Buyer or as to which Buyer
directly (but not indirectly) receives the benefit (the "Assumed Contracts"),
other than liabilities or obligations arising from or as a result of a breach of
any Assumed Contract in connection with the transactions contemplated hereby or
by either Seller or either Seller's failure to satisfy any requirement which it
was required to satisfy on or prior to the Closing, and provided further, with
respect to each Assumed Contract, that: (i) such Assumed Contract and matters
related thereto are consistent with the representations and warranties of
Sellers and ESG contained herein with respect thereto; (ii) the other party or
parties to such Assumed Contract have not previously prepaid or otherwise
furnished either Seller the
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<PAGE>
consideration to be paid by such person or persons pursuant to the terms of the
Assumed Contract with respect to the period after the Closing; and (iii) Buyer
receives the benefit of such Assumed Contract with respect to the period after
the Closing.
(b) Commencing on the date hereof and until December 31, 1996, ESG and
Sellers shall use their reasonable best efforts to obtain the written consent of
each party to a Management Agreement to the assignment of such Management
Agreement to Buyer, and shall report in writing the status of such efforts to
Insignia and Buyer not less frequently than once every 60 days. Pending receipt
of such consent, Sellers shall continue to provide management services under
each such Management Agreement and shall lease from Buyer the services of
personnel necessary to perform such services, for a fee equal to the fee payable
to Sellers under each such Management Agreement pursuant to the form of Employee
Leasing Agreement attached as Exhibit C. Upon receipt of such consent with
respect to any Management Agreement, Sellers shall promptly assign such
Management Agreement to Buyer. At the election of Insignia, any Management
Agreement as to which such consent has not been received by December 31, 1996
(i) shall be deemed to be a Terminated Agreement for purposes of Section 1.06,
in which case Sellers shall terminate such Management Agreement effective
December 31, 1996 or (ii) shall not be deemed to be a Terminated Agreement for
purposes of Section 1.06(a), in which case Sellers shall take no action to
terminate such
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Management Agreement and Sellers and ESG shall be relieved of any obligations to
Insignia and Buyer with respect to such Management Agreements with respect to
periods after December 31, 1996.
Section 3.02 Certain Taxes
--------------------------
Sellers shall pay all New York State and City sales taxes arising in
connection with the transfer of the Assets up to $45,000, and Buyer shall be
responsible for such taxes in excess of such amount. Any other sales, use or
similar transfer taxes, and any transfer fees and charges, arising in connection
with the transfer of Assets from Sellers to Buyer hereunder, shall be paid by
the party subject to such tax, fee or charge in accordance with the statutes
providing for such taxes, fees and charges without regard to the party required
to collect or transmit such amounts.
Section 3.03 Excluded Liabilities
---------------------------------
Except as specifically provided in Section 3.01 or Section 3.02, Buyer
shall not assume, and shall not have any liability for, any liabilities or
obligations of Sellers, or any liabilities or obligations which arose or may
arise out of or relate to the operations of the Business or Sellers' assets or
properties or otherwise on or prior to the Closing Date or as a result of the
Closing, the amendment of the Options or the allocation of consideration
hereunder among ESG, Sellers and holders of Options, and Sellers shall duly and
timely pay,
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perform and discharge all such liabilities and obligations (the "Excluded
Liabilities"). Without limiting the generality of the foregoing and except as
otherwise specifically provided in this Agreement, the term Excluded Liabilities
shall include and Buyer shall not assume, and shall not have any liability for,
(a) any income, franchise, sales, payroll, withholding or other taxes, (b) any
accounts payable, (c) any expenses related to the negotiation, preparation, and
execution of this Agreement and the other documents required to be delivered
hereby or the consummation of the transactions contemplated hereby including the
portion of the HSR filing fee to be paid by Sellers, (d) any obligations arising
under, or relating to, any of the Plans listed on the Employee Plan Lists (as
hereinafter defined) or any other compensation or benefit plan or arrangement of
the Sellers or the Affiliated Entities, including but not limited to, vacation
pay, personal days, sick pay, bonus, and severance accrued in accordance with
GAAP or (e) any and all costs or liabilities arising from the disposal,
discharge or release of solid wastes, pollutants or hazardous substances (as all
such terms are defined by the Environmental Laws) on or prior to the Closing
Date by or on behalf of the Sellers, the Affiliated Entities or any of their
Affiliates or otherwise in connection with the ownership of the Assets or the
conduct of the Business. At Closing, the Affiliated Entities shall not have any
liabilities of the nature of the Excluded Liabilities which arose
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or may arise out of or relate to the period ending on the Closing Date.
IV. Options
-------
Section 4.01 Amendment of Options; Assumption by Insignia
---------------------------------------------------------
(a) ESG and Sellers represent and warrant to Insignia and Buyer that prior
to the date hereof, each Seller has taken all actions necessary to effectively
amend the terms of each option to acquire capital stock of such Seller pursuant
to Option and Deferred Compensation Agreements (the "Options") with the option
holders listed on Schedule 4.01(b) by entering into an amendment with each
option holder other than the option holders identified on Schedule 4.01(a) (the
"Option Amendments") in substantially the form annexed hereto as Exhibit D.
(b) At the Closing, those Options and any additional Options as to which
Option Amendments have been entered into by the appropriate Seller and the
holder thereof (but not any obligations for deferred compensation or any other
obligations provided in the Option and Deferred Compensation Agreements) which
are identified on Schedule 4.01(b) as to be assumed by Insignia through Buyer
will be assumed by Insignia through Buyer and upon assumption of such Options by
Insignia through Buyer (i) each Option to acquire a share of common stock of New
York Corp. shall be converted to the right to acquire the number of shares of
Insignia Class A Common Stock at the exercise price per
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share as are set forth next to the name of such Option holder on Schedule
4.01(b) hereto; and (ii) each Option to acquire a share of common stock of New
Jersey Corp. shall be converted to the right to acquire the number of shares of
Insignia Class A Common Stock at the exercise price as are set forth next to the
name of such Option holder on Schedule 4.01(b) hereto. Schedule 4.01(b) also
sets forth the Value for purposes of this Agreement of each Option set forth
thereon. ESG and Sellers represent and warrant to Insignia and Buyer that,
except as set forth on Schedule 4.01(b), each of the Options to be assumed by
Insignia hereunder was granted to the holder thereof prior to February 17, 1993.
V. Closing
-------
Section 5.01 The Closing
------------ -----------
The closing of the transactions contemplated by Section 1.01 (the
"Closing") shall take place at the offices of Proskauer Rose Goetz & Mendelsohn
LLP, 1585 Broadway, New York, New York, at 10:00 A.M., local time, on the second
business day following fulfillment of the conditions set forth in Articles X and
XI hereof or at such other time and place as the parties shall hereafter agree
in writing (the "Closing Date"). The close of business on the Closing Date is
herein referred to as the "Determination Time."
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Section 5.02 Transactions at the Closing
------------ ---------------------------
The following transactions shall take place at the Closing, all of which
shall be deemed to have occurred simultaneously and none of which shall be
deemed completed unless and until all of them shall have been completed (or
waived in writing by the parties entitled to performance):
(a) ESG and Sellers shall deliver to Buyer the following:
(i) such bills of sale, assignments, consents or other instruments of
confirmation, transfer and assignment, in form and substance reasonably
satisfactory to Buyer, as are effective to vest in Buyer title to the
Assets, including the intangible assets, with a waiver of ESG to any claim
to enforce rights against use in the Business of the personal name of ESG
as heretofore described;
(ii) stock certificates, duly endorsed in blank or accompanied by
stock transfer powers, with signature guaranteed, and with all requisite
stock transfer tax stamps attached, and instruments of assignment, transfer
and conveyance which convey a one percent interest in Edward S. Gordon
Company of CT, LLC to Insignia Commercial Group, Inc. and a ninety-nine
percent interest in such entity to Buyer, all reasonably satisfactory to
Buyer, together representing the Interests;
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(iii) certificates of the chief executive officer of each Seller and
each Affiliated Entity in form and substance reasonably satisfactory to
Buyer, certifying each such Seller's and Affiliated Entity's Certificate of
Incorporation, By-laws, articles of organization and operating agreement or
similar document, its valid existence and good standing in all
jurisdictions listed on Schedule 6.02 hereto, the incumbency of officers or
others acting in a representative capacity, the due authorization of the
transactions contemplated hereby, the accuracy of such Seller's
representations and warranties, the due performance and compliance by such
Seller of and with all of their respective covenants and agreements
hereunder and satisfac- tion of the conditions to Buyer's obligations
hereunder to be satisfied by such Seller and such other matters as Buyer
shall reasonably request;
(iv) a copy of resolutions of the Boards of Directors and stockholders
of each of the Sellers authorizing the execution, delivery and performance
of this Agreement by such Seller, and a certificate of the Secretary or
Assistant Secretary of such Seller, dated the Closing Date, that such
resolutions were duly adopted, have not been amended and are in full force
and effect;
(v) a certificate of ESG and the chief executive officer of each
Seller, in form and substance reasonably satisfactory to Buyer, certifying
the accuracy of ESG's and
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Sellers' representations and warranties, the due performance and compliance
by ESG and Sellers of and with all of his and their covenants and
agreements hereunder and satisfaction of the conditions to Insignia's
Buyer's obligations hereunder to be satisfied by ESG and Sellers and such
other matters as Buyer shall reasonably request;
(vi) a certificate of the chief executive officer of each Seller in
form and substance satisfactory to Buyer with respect to the absence of any
material adverse change as set forth in Section 10.04;
(vii) evidence in form and substance satisfactory to Buyer of all
consents to be received by Sellers and ESG pursuant to Sections 10.08 and
10.09 hereof, including the consent, in the form annexed hereto as Exhibit
I, of ESG to register with the United States Patent and Trademark Office
any trademark or service mark incorporating in whole or in part the
personal name of ESG, as long as such registration is sought in connection
with goods and/or services related to the Business;
(viii) a Non-Competition and Confidentiality Agreement, in the form
appended hereto as Exhibit E, executed by Stephen B. Siegel and Anthony M.
Saytanides;
(ix) written consents of not less than 90% of the senior management
and brokers employed by the Sellers and the Affiliated Entities on the date
hereof (other than ESG, Stephen
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B. Siegel and Anthony M. Saytanides) to the assignment of their Employment
Agreements to Buyer, and an assignment executed by New York Corp. of Martin
Turchin's existing Employment Agreement with New York Corp.;
(x) an Employee Leasing Agreement, in the form appended hereto as
Exhibit C, executed by each Seller;
(xi) all Option Amendments executed prior to the Closing Date by the
appropriate Seller and an Option holder;
(xii) executed amendments to each Seller's Certificate of
Incorporation and certificates of qualification in any jurisdiction wherein
it is qualified to do business to change its name to a name that is not
confusingly similar to the name Edward S. Gordon Company;
(xiii) the Aircraft Lease Agreement in the form annexed hereto as
Exhibit F executed by New York Corp.;
(xiv) agreements in or embodying the form appended hereto as Exhibit G
executed by ESG and the other holders of Options;
(xv) the opinion of Morgan Lewis & Bockius LLP, counsel for Sellers
and ESG, substantially in the form appended hereto as Exhibit H; and
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(xvi) a valid assignment of the Key Man Policy (as hereinafter
defined) to Insignia and the designation of Insignia as sole beneficiary
thereunder;
(xvii) amended Schedules 3.01, 6.13(a), 6.13(b), 6.13(d) and 6.16(a)
accurate as of the Closing Date and in accordance as of such date with the
representations set forth in Sections 3.01, 6.13(a), 6.13(b), 6.13(d) and
6.16(a); and
(xviii) evidence, satisfactory to Insignia and Buyer, of the
termination of the Liens identified on Schedule 9.03, together with
appropriate UCC termination statements executed by the secured party or
parties.
(b) Buyer and Insignia shall deliver to Sellers and ESG the following:
(i) the Closing Payment payable pursuant to Section 1.03(b) hereof;
(ii) instruments, in form and substance reasonably satisfactory to
Seller, pursuant to which Buyer shall assume the obligations and
liabilities to be assumed by it and Insignia under Sections 3.01 and 4.01
hereof, respectively;
(iii) a copy of resolutions of the Boards of Directors of Buyer and
Insignia authorizing the execution, delivery and performance of this
Agreement by Buyer, and a certificate of the Secretary or Assistant
Secretary of Buyer,
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<PAGE>
dated the Closing Date, that such resolutions were duly adopted, have not
been amended and are in full force and effect;
(iv) a copy of the Aircraft Lease Agreement executed by Buyer;
(v) [intentionally omitted]; and
(vi) the opinion of Proskauer Rose Goetz & Mendelsohn LLP, counsel to
Buyer and Insignia, substantially in the form appended hereto as Exhibit J.
VI. Representations and Warranties of Sellers and ESG
-------------------------------------------------
Sellers and ESG each, jointly and severally, represents and warrants to and
agrees with Insignia and Buyer as of the date hereof and as of the Closing Date
as follows:
Section 6.01 Ownership of Sellers; Title to Assets
------------ -------------------------------------
Schedule 6.01 hereto sets forth with respect to each Seller and each
Affiliated Entity a complete and accurate list of its outstanding securities,
its treasury securities or interests and all persons who currently own any
securities of such Seller or Affiliated Entity and their respective ownership
interests in such securities. The outstanding securities of, or interests in,
each Seller and each Affiliated Entity are owned by each such holder free and
clear of all claims, agreements, voting trusts and rights of third parties of
any kind or nature whatsoever.
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Except as set forth on Schedule 6.01 hereto, there are outstanding no options,
warrants, calls, rights to purchase or other agreements of any kind affecting
any securities of Sellers or Affiliated Entities, whether or not outstanding.
Schedule 6.01 also sets forth with respect to each Seller a complete and
accurate list of all options or other rights to acquire securities of such
Seller which will be cancelled prior to the Closing. The information set forth
on Schedules 4.01(a) and 4.01(b) is complete and accurate. Sellers have good
title to their respective Assets, ESG and New York Corp. have good title to the
Interests, and the Affiliated Entities have good title to their respective
assets, in each case free and clear of Liens.
Section 6.02 Organization, Qualification and Licensing
------------- -----------------------------------------
(a) Schedule 6.02 correctly sets forth as to each of the Sellers and
Affiliated Entities, its place of incorporation or formation, principal
place of business, jurisdictions in which it is qualified to do business
and jurisdictions in which it holds licenses as a real estate broker.
(b) Sellers have delivered to Buyer with respect to each of the
Sellers and Affiliated Entities, true, complete and correct copies of each
of the following documents including all amendments and supplements
thereto: (i) the certificate of incorporation, by-laws and shareholders
agreements, if any, with respect to each such entity which is a
corporation, and (ii) the
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articles of organization and operating agreement, or similar documents,
with respect to each of such entities which is a limited liability company
(collectively, "Organizational Documents"). Each of the Sellers and
Affiliated Entities which is identified in this Agreement as a corporation
or limited liability company is a corporation or a limited liability
company, as the case may be, duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization, with all
requisite power and authority, and all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from, and
declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and tribunals, to own, lease,
license, and use its properties and assets and to carry on the business in
which it is now engaged.
Section 6.03 Authority
------------ ---------
Each of ESG and Sellers has all requisite power and authority to execute,
deliver, and perform the Option Amendments, this Agreement and the other
documents required to be delivered hereby. All necessary corporate proceedings
(including, without limitation, any shareholder consents) of or on behalf of
Sellers have been duly taken to authorize their execution, delivery, and
performance of the Option Amendments, this Agreement and the other documents
required to be delivered hereby. Each Option Amendment has been duly authorized,
executed and delivered by the
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Seller and Option Holder signatory thereto, and constitutes the legal, valid and
binding obligation of each such signatory, enforceable as to each of them in
accordance with its terms. This Agreement and the other documents required to be
delivered hereby have been (or when delivered will be) duly authorized,
executed, and delivered by ESG and Sellers and constitute (or will constitute
when executed and delivered) the legal, valid, and binding obligation of ESG and
Sellers, enforceable as to each of them in accordance with their terms.
Section 6.04 Business Conducted
------------ ------------------
Each of Sellers and the Affiliated Entities conducts no business other than
real estate management, leasing, brokerage, landlord and tenant and seller and
purchaser representation, consulting and other real estate related services. The
Assets together with assets which are owned by the Affiliated Entities
constitute all of the assets (other than the Excluded Assets and the personal
property belonging to employees of Sellers which is located in such employees'
personal offices) used in the Business, all of which will be assigned,
transferred, conveyed and delivered to Buyer at Closing (other than certain
Contracts as to which consent to assignment had not been obtained and which will
be so assigned, transferred and conveyed to Buyer upon the earlier of Buyer's
written request following Closing or Sellers receipt of such consent), and no
other asset is necessary to
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conduct the Business as it has been conducted prior to the date hereof.
Section 6.05 Financial Statements
------------ --------------------
(a) Sellers have delivered to Buyer their combined (i) audited balance
sheets as of December 31, 1994 and 1995 and audited statements of
operations, statements of stockholders' equity and statements of cash flows
for the years ended December 31, 1993, 1994 and 1995 (the "Audited
Statements"), and (ii) unaudited balance sheet as of April 30, 1996 (such
balance sheet being hereinafter referred to as the "Most Current Balance
Sheet") and unaudited statements of operations, statements of stockholders'
equity and statements of cash flows for the four months then ended (such
financial statements, together with the Most Current Balance Sheet being
hereinafter referred to as the Interim Statements). The foregoing financial
statements, including without limitation, the Most Current Balance Sheet,
have been prepared on an accrual basis in accordance with GAAP consistently
applied, except as otherwise noted in the footnotes to the Audited
Statements which footnotes are deemed to apply to the Interim Statements,
and present fairly in all material respects the financial position of the
Sellers and the results of their operations as of the dates and for the
periods indicated therein, subject, in the case of the Interim Statements,
to normal year-end audit adjustments.
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(b) Except as set forth on Schedule 6.05, none of the Affiliated
Entities has conducted any business which is material to the Sellers and
the Affiliated Entities taken as a whole or, as of the date hereof, owns
any assets that are carried on the books and records of such Affiliated
Entity or has any liabilities of any nature whatsoever.
Section 6.06 Liabilities
------------ ----------
As of the date of the respective Most Current Balance Sheets, and as of the
Closing, none of the Sellers or the Affiliated Entities had or will have any
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise, known or unknown), which were not fully disclosed or reserved against
in the Most Current Balance Sheet, except liabilities set forth on Schedule 6.06
and liabilities arising after the date of the Most Current Balance Sheet in the
ordinary course of business consistent with past practice and that are not
material to Sellers and the Affiliated Entities, taken as a whole. Sellers and
ESG do not know of any valid basis for the assertion against any of Sellers or
the Affiliated Entities of any other material liability or obligation.
Section 6.07 Insurance
----------------------
Schedule 6.07 hereto lists all of the policies of insurance of any kind
covering each of Sellers and the Affiliated Entities and their respective assets
and businesses, setting
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forth the nature of the insurance, the insurance carrier, the amount of
coverage, and the owner of and expiration date of such policies. All such
policies of insurance are in full force and effect and all premiums due thereon
for all periods through the Closing Date are fully paid. None of ESG, the
Sellers or the Affiliated Entities has received any notice of cancellation or
termination with respect to any such policy or otherwise has knowledge of any
intention to so cancel or terminate. The policies in effect are sufficient to
comply with all requirements of law and all agreements to which any of Sellers
or the Affiliated Entities is a party. Schedule 6.07 also explains all risks for
which any of Sellers and the Affiliated Entities is self-insured, in whole or in
part, the stop loss level, and sets forth their respective workers compensation
and unemployment insurance coverage. Schedule 6.07 identifies each insurance
program which is subject to any retroactive adjustment. For the past three
years, all personal injury insurance has been on an "occurrence" basis. Sellers'
and the Affiliated Entities' relations with each of the insurance carriers
listed on Schedule 6.07 is good.
Section 6.08 Material Events and Changes
------------ ---------------------------
Since the date of the Most Current Balance Sheet:
(a) There has at no time been a material adverse change in the
condition (financial or otherwise), results of
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operations, business, properties, assets, nature of assets, liabilities, or
future prospects of any of the Sellers, the Affiliated Entities and the
Business, taken as a whole.
(b) Except as set forth on Schedule 6.08(b) hereto, no Affiliated
Entity has authorized, declared, paid, or effected any dividend or
liquidating or other distribution in respect of its capital stock or
membership interests or any direct or indirect redemption, purchase, or
other acquisition of any of its own or any other Person's capital stock or
membership interests. As used in this Agreement: (i) "Person" means an
individual, corporation, partnership, limited liability company, joint
venture, association, joint-stock company, trust, business trust,
government or any agency or political subdivision thereof, unincorporated
organization or any other entity of any kind; (ii) "Affiliate" means, with
respect to any Person, any other Person directly or indirectly controlling,
controlled by or under common control with such Person; and (iii) "Lien"
means any lien, pledge, security interest, claim, charge, mortgage,
encumbrance, restriction, voting trust, or any other rights of any other
Person.
(c) The operations and Business of Sellers and the Affiliated Entities
has been conducted in all respects only in the ordinary course and
consistent with past practice utilizing the highest commercial standards,
except for actions expressly required or permitted to be taken by this
Agreement.
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(d) Without limiting the foregoing, since the date of the Most Current
Balance Sheet, except as set forth on Schedule 6.08(d), no Seller or
Affiliated Entity has:
(i) suffered any loss, damage, destruction or other casualty
(whether or not covered by insurance) to any of its properties or to
any assets material to the Sellers and the Affiliated Entities, taken
as a whole;
(ii) mortgaged, pledged, subjected to or suffered any Lien, or
granted any Lien, in respect of any of its properties;
(iii) amended its Organizational Documents;
(iv) defaulted under any contract, license or permit material to
Sellers and the Affiliated Entities, taken as a whole; or
(v) experienced any change in control which is prohibited by the
terms of any note, bond, mortgage, indenture, lease, license,
franchise, agreement or other instrument or obligation by which it or
any of its properties or assets is affected or bound.
(e) There is no fact known to any Seller, any Affiliated Entity or ESG
which materially adversely affects or in the future (as far as can be
reasonably foreseen) may materially adversely affect Sellers and the
Affiliated Entities, taken as a
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whole, or the condition (financial or otherwise), results of operations,
business, properties, assets, nature of assets, liabilities, or future
prospects of Sellers and the Affiliated Entities, taken as a whole.
Section 6.09 No Conflicts or Defaults; No Violations
------------ ---------------------------------------
Except as set forth on Schedule 6.09, neither the execution, delivery or
performance of this Agreement and the other documents required to be delivered
hereby nor the consummation of the transactions contemplated hereby or thereby
by ESG and Sellers will (with or without the giving of notice, lapse of time or
both): (a) contravene any provisions of any law, statute, rule or regulation or
any order, writ, judgment, injunction or decree of any court or governmental
instrumentality; or (b) except as set forth on Schedule 6.09 hereto conflict
with or result in any breach of, or constitute a default under, any Contract,
Material Agreement, Management Agreement, Commission Agreement, Representation
Agreement or Employment Agreement (as such terms are hereinafter defined), or
result in the creation or imposition (or the obligation to create or impose) any
Lien upon any of the Assets or the property or assets of any of the Affiliated
Entities pursuant to the terms of any note, bond, indenture, mortgage, deed of
trust, loan agreement, credit agreement, lease, franchise, or any other
agreement, contract or instrument to which any of them is a party or to which
any of their respective properties or assets is
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subject or (with or without the giving of notice or the passage of time or both)
entitle any party to terminate or call a default under, entitle any party to
rights and privileges that such party was not entitled to receive immediately
before this Agreement was executed under, or create any obligation on the part
of any of Sellers and the Affiliated Entities that it was not obligated to pay
immediately before this Agreement was executed under, any term of any such note,
bond, indenture, mortgage, deed of trust, loan agreement, credit agreement,
lease, franchise or other agreement, contract or instrument; (c) violate any
provision of their respective Organizational Documents; (d) entitle any current
or former employee of any Seller or Affiliated Entity to any brokerage
commission, severance pay, unemployment compensation or any similar payment; (e)
accelerate the time of payment or vesting or increase the amount of any
compensation payable to any such employee or former employee; or (f) directly or
indirectly result in any payment made or to be made to or on behalf of any
person to constitute a "parachute payment" within the meaning of Section 280G of
the Code.
Section 6.10 Consents
------------ --------
Except for the consents of parties to the Management Agreements, Commission
Agreements, Representation Agreements, Employment Agreements and the realty
leases and personal property leases included in Material Agreements, and except
for the filings under the HSR Act described in Section 1.05, the filings
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<PAGE>
with the United States Patent and Trademark Office and filings with the state
real estate brokerage licensing authorities identified on Schedule 6.10, no
approval or consent of, notice to, or filing or registration with, or
authorization, order, license, certificate, or permit of or from, any
Governmental Authority (defined below) or any other notice to or consent of any
third party is required in connection with (a) the execution, delivery and
performance of, (b) the legality, validity, binding effect or enforceability of
or (c) the consummation of the transactions contemplated by this Agreement or
the other documents required or permitted to be delivered hereby.
Section 6.11 Information
------------------------
All factual information furnished by or on behalf of Sellers or ESG to
Insignia or Buyer in this Agreement, including the Schedules hereto, and any
certificate or other document to be furnished to Insignia or Buyer pursuant
hereto, is, and will be, true and accurate in all material respects on the date
as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information not misleading in
any material respect at such time in light of the circumstances under which such
information was provided.
Section 6.12 Taxes
------------ -----
Except as set forth on Schedule 6.12, (i) each of the Sellers and
Affiliated Entities is, and has been for every
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taxable year since the date of its incorporation or formation, either a valid S
corporation under Section 1361 et seq. of the Internal Revenue Code of 1986, as
amended (the "Code"), and under state tax law or a partnership under Section
7701 of the Code or under state tax law; (ii) each of the Sellers will be an S
corporation on the Closing Date and each of the Affiliated Entities will be
either an S corporation or a partnership for tax purposes as of the close of the
date immediately preceding the Closing Date; (iii) each of the Sellers and the
Affiliated Entities has duly and properly filed all federal, state, local, and
other tax reports and returns required to be filed by it hereof and such reports
and returns were, when filed, true, complete and correct; (iv) none of the
Affiliated Entities is undergoing, or has undergone, an audit or investigation
by any taxing authority; (v) all federal, state, local, or foreign taxes,
assessments and governmental charges and penalties, interest, and additions to
tax (collectively, "Taxes") owed by each of the Sellers and Affiliated Entities
prior to the date hereof has been timely paid; (vi) the first day of the taxable
year of each of the Affiliated Entities is January 1, and none of the Affiliated
Entities (or their successors) will have any liability for Taxes attributable to
the period from January 1, 1996 through the Closing Date (whether or not this is
a separate period for tax purposes) other than state franchise taxes; (vii)
there are no Liens for any Tax on any of the assets of any of the Sellers or
Affiliated Entities other than for taxes not
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yet due and payable; and (viii) none of the Affiliated Entities will be required
to include any adjustment in taxable income under Section 481 of the Code (or
any similar provision of the Tax laws of any jurisdiction) on or after the
Closing Date as a result of any change in method of accounting prior to the
Closing Date.
Section 6.13 Agreements
------------ ----------
(a) Schedule 6.13(a) sets forth all of the Material Agreements, as
hereinafter defined, and the parties thereto to which any Seller or Affiliated
Entity is a party or is subject or to which any of their respective properties
or assets is subject on the date hereof. For purposes of this Agreement,
"Material Agreements" means all agreements (other than agreements described in
Sections 6.13(b), 6.13(c), 6.13(d) or 6.16(a)), including all amendments
thereto, to which any of the Sellers or Affiliated Entities is a party or is
subject or to which any of its properties or assets is subject (i) that cannot
be cancelled without penalty within 30 days or (ii) that are material to the
financial condition, results of operations, business, properties, assets or
liabilities of any of the Sellers and the Affiliated Entities, taken as a whole,
other than any individual agreement as to which any of Affiliated Entities,
Sellers or Buyer as assignee has or would incur a liability or other obligation
of less than $5,000. Sellers have delivered to Buyer true, complete and correct
copies of each Material Agreement. On the date
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hereof, all of such agreements are in full force and effect and no party is in
default of any provision thereof. Except as set forth on Schedule 6.13(a), all
of such agreements are on commercially reasonable terms, with customary
provisions, and can be terminated by the Seller or Affiliated Entity party
thereto without cost or penalty on not more than 30 days' notice. None of the
Sellers or the Affiliated Entities shall amend, modify, extend or terminate any
Material Agreement or enter into any new Material Agreement which would have had
to be scheduled under this Section if it had existed on the date hereof without
the prior written consent of the Buyer except in the ordinary course of business
consistent with past practice on commercially reasonable terms and conditions
(and with Buyer's prior written consent as to any such agreement pursuant to
which Sellers or Buyer as assignee would incur a liability or other obligation
of $10,000 or more). None of ESG or the Sellers has any reason to believe that
any such agreement will be cancelled or terminated before or after the Closing,
whether or not as a result of the Closing.
(b) Schedule 6.13(b) sets forth all existing agreements and arrangements of
every kind relating to the management of any real property or other assets or
under which any Seller or Affiliated Entity receives or is to receive any
management fees or commissions, and all amendments thereto (the "Management
Agreements"), and identifies, the date of such
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agreement the real property subject to such agreement and the parties thereto.
Sellers have made available true and complete copies of all Management
Agreements to Buyer. On the date hereof, all Management Agreements are in full
force and effect and no party is in default of any provision thereof. None of
the Sellers or the Affiliated Entities shall amend, modify, extend or terminate
any Management Agreement or enter into any new Management Agreement which would
have had to be scheduled under this Section if it had existed on the date hereof
without the prior written consent of the Buyer. None of ESG, the Sellers or the
Affiliated Entities has received notice of, or otherwise has knowledge of, any
party's intention to terminate any of such agreements. Except as specifically
set forth on Schedule 6.13(e), none of such agreements prohibits or limits the
right of any of the Sellers or the Affiliated Entities to manage real property
of any Person or to contract with any other Person to perform such services.
There are no other property management agreements or asset management agreements
under which any Seller or Affiliated Entity is the property manager or asset
manager of any real property or asset, or which relates to any Seller or
Affiliated Entity providing management, administrative or bookkeeping services,
or any similar services that contributes income to any Seller or Affiliated
Entity other than those listed on Schedule 6.13(b) hereto. To the best knowledge
of ESG, the Sellers and the Affiliated Entities, except as set forth on Schedule
6.13(b), none of the properties which are the subject of
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the Management Agreements is presently being offered for sale (as evidenced by
specific authorization of an owner to any person to make a commercially
reasonable offer to sell as to price and term and to use customary and
professional methods ordinarily utilized in the brokerage and marketing of
commercial real estate.) None of ESG or the Sellers has any reason to believe
that any such agreement will be cancelled or terminated before or after the
Closing, whether or not as a result of the Closing.
(c) The term "Commission Agreements" shall mean all agreements and
arrangements of every kind relating to the brokerage of any real properties or
other assets or under which any Seller or Affiliated Entity receives or may
receive any brokerage fees or commissions (except for Representation
Agreements), as amended. On the date hereof, all Commission Agreements are in
full force and effect and no party is in default of any provision thereof, other
than with respect to payments due thereunder. Except as set forth on Schedule
6.13(c), all of such agreements are on commercially reasonable terms, with
customary provisions. None of the Sellers or the Affiliated Entities shall
amend, modify, extend or terminate any Commission Agreement other than in the
ordinary course of business consistent with past practice on commercially
reasonable terms and conditions. None of ESG, the Sellers or the Affiliated
Entities has received notice of, or otherwise has knowledge of, any party's
intention to terminate any of such
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agreements. None of such agreements contains any provision which prohibits or
limits in any manner the right of any of the Sellers or the Affiliated Entities
to perform brokerage services for or to contract with any other person to
perform such services. None of ESG or the Sellers has any reason to believe that
any such agreement will be cancelled or terminated before or after the Closing,
whether or not as a result of the Closing.
(d) Schedule 6.13(d) sets forth all existing agreements and arrangements of
every kind relating to the representation of owners, landlords, sublandlords,
prospective tenants, purchasers or sellers of any real property (including
exclusive leasing agreements) under which any Seller or Affiliated Entity
receives or is to receive any fees or commissions, including all amendments
thereto (the "Representation Agreements"), and identifies the date of such
agreement and the parties thereto. Sellers have made available true and complete
copies of all Representation Agreements to Buyer. On the date hereof, all
Representation Agreements are in full force and effect and no party is in
default of any provision thereof. Except as set forth on Schedule 6.13(d), all
of such agreements are on commercially reasonable terms, with customary
provisions. None of the Sellers or the Affiliated Entities shall amend, modify,
extend or terminate any Representation Agreement or enter into any new
Representation Agreement which would have had to be scheduled under this Section
if it had existed on the
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date hereof without the prior written consent of the Buyer other than in the
ordinary course of business consistent with past practice on commercially
reasonable terms and conditions and which does not restrict any of Sellers or
the Affiliated Entities in a manner which would cause the representation and
warranty in Section 6.13(e) to be untrue. None of ESG, the Sellers or the
Affiliated Entities has received notice of, or otherwise has knowledge of, any
party's intention to terminate any of such agreements. Except as set forth on
Schedule 6.13(d) hereto, none of such agreements contains any provision which
prohibits or limits in any manner the right of any of the Sellers or the
Affiliated Entities to contract with any other person to perform such services.
There are no other agreements under which any Seller or Affiliated Entity is or
may become entitled to receive a fee or commission for representing any owner,
landlord, sublandlord, prospective tenant, purchaser or seller of any real
property on an exclusive basis other than those listed on Schedule 6.13(d)
hereto. None of ESG or the Sellers has any reason to believe that any such
agreement will be cancelled or terminated prior to its scheduled termination
date, whether before or after the Closing, whether or not as a result of the
Closing.
(e) Except as set forth on Schedule 6.13(e), none of Sellers or the
Affiliated Entities are parties to or otherwise subject to any agreement,
arrangement or understanding which
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prohibits or limits the right of any of the Sellers or the Affiliated Entities
to manage real property of or perform other real estate services for any Person,
to contract with any other Person to perform such services, to engage in any
business, or to employ, contract with or engage in any transaction with any
Person.
Section 6.14 Environmental Matters
------------ ---------------------
(a) Schedule 6.14 contains a complete list of the names and locations of
all the sites listed, or proposed for listing, on the National Priorities List
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") 42 U.S.C. Section 9601 et seq., or inventory of inactive
hazardous waste sites maintained by any state (i) currently or formerly owned,
leased, occupied or used by the Sellers, the Affiliated Entities or any of their
Affiliates or (ii) with respect to which the Sellers, the Affiliated Entities or
any of their Affiliates has received notice that it is considered to be a
potentially responsible person.
(b) There are no conditions existing on the Sellers' premises that require,
or with the giving of notice or the passage of time or both may require,
remedial action, removal or closure by the Sellers, the Affiliated Entities or
any of their Affiliates pursuant to the Environmental Laws.
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(c) "Environmental Laws" means all federal, state and local environmental
protection and health and safety laws and regulations.
Section 6.15 Investment Company
------------ ------------------
None of the Sellers or the Affiliated Entities is an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
Section 6.16 Employees
------------ ---------
(a) All of the employees of Sellers and the Affiliated Entities on the date
of this Agreement are listed on Schedule 6.16(a) hereto together with a list of
any employment agreements or arrangements or confidentiality agreements (the
"Employment Agreements"), identifying the parties to such agreements or
arrangements and the dates thereof. Except as set forth on Schedule 6.16(a), no
employee of any of Sellers and the Affiliated Entities has any employment
agreement or confidentiality agreement, written or oral, and each is an employee
at will. Each of the Employment Agreements was knowingly and validly executed by
the employer and employee party thereto, is valid, and is in full force and
effect. No employee party to an Employment Agreement was improperly induced to
enter into such Employment Agreement. None of Sellers and the Affiliated
Entities is in breach of any Employment Agreement and,
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to the knowledge of ESG, Sellers and the Affiliated Entities, no employee party
to any Employment Agreement is in breach thereof. Each Employment Agreement is
assignable to Buyer by the Seller or Affiliated Entity party thereto in
accordance with the terms of this Agreement with the consent of the employee
party thereto. Each such consent which Sellers deliver to Buyer will be validly
executed by the employee party to such Employment Agreement. Upon assignment of
the Employment Agreements which are to be assigned to Buyer pursuant to this
Agreement, each of the Employment Agreements will be valid, and is in full force
and effect. None of ESG, Sellers or Affiliated Entities has received notice, or
otherwise has knowledge, of the termination by any senior executive or
commissionable broker of the Sellers or the Affiliated Entities or the intention
of any senior executive or broker to terminate his or her employment with the
Sellers or the Affiliated Entities. No employee of Sellers or the Affiliated
Entities is subject to any contractual or other restriction as to who he or she
can work for, other than not to compete with Sellers or the Affiliated Entities
as set forth in their respective Employment Agreements.
(b) The entire compensation costs of all employees of the Sellers and the
Affiliated Entities listed on Schedule 6.16(b) hereto (the "Reimbursable
Employees") are reimbursable under the Management Agreements with respect to the
properties for which they work. None of the senior managers or
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commissionable brokers of any of Sellers and the Affiliated Entities are
independent contractors, except for income tax purposes.
(c) Except as set forth on Schedule 6.16(c) between the date hereof and the
Closing Date, the compensation of the employees of Sellers and the Affiliated
Entities (including the Reimbursable Employees) shall not be changed.
(d) It is the consistent policy of Sellers and the Affiliated Entities that
non-union employees are entitled to severance payments upon termination of
employment without cause of one week's salary per year of service. Except as
otherwise provided in this Agreement, on the Closing Date, none of Sellers or
the Affiliated Entities shall have any liability for severance as a result of
any transactions contemplated by this Agreement and Buyer shall not be or become
liable for severance with respect to the employees of Sellers and the Affiliated
Entities for any service prior to the Closing Date. ESG and Seller understand
that Insignia and Buyer have no severance policy.
(e) Except for the Reimbursable Employees and except as set forth on
Schedule 6.16(e), none of Sellers or the Affiliated Entities is currently or has
ever been a party to, as principals, or otherwise bound by, as principals, and
none of its employees is covered by, any collective bargaining agreement or
other employment agreement or arrangement (whether or not legally
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binding), and none of its employees are represented by any union.
Sellers have delivered to Buyer true, complete and correct copies
of each agreement listed on Schedule 6.16(e).
(f) Each Seller and Affiliated Entity has paid in full to its employees all
wages, salaries, commissions, bonuses and other direct compensation for all
services performed by them, other than amounts that have not yet become payable
in accordance with such employer's customary practices. Except as set forth on
Schedule 6.16(f), each of Sellers and the Affiliated Entities (i) is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
and has not engaged in any unfair labor practice, (ii) is not the subject of any
pending or threatened unfair labor practice complaint before the National Labor
Relations Board, (iii) is not the subject of any labor strike, dispute, slowdown
or stoppage pending or threatened against or affecting it, (iv) is not and has
not been the subject of any representation question respecting its employees,
(v) except as to Reimbursable Employees, has not experienced any strike, work
stoppage or other labor difficulty since its formation, and (vi) is not
currently negotiating any collective bargaining agreement relating to any of its
employees.
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Section 6.17 Employee Benefits
------------ -----------------
(a) The Employee Handbook of Edward S. Gordon Company Incorporated, the
Edward S. Gordon Company Incorporated Employee Handbook for the Property
Management Group (On-Site, Non-Union) and the collective bargaining agreements
set forth on Schedule 6.16(e), true and correct copies of which have been
delivered to Buyer, and the Option and Deferred Compensation Agreement listed on
Schedule 6.01 (together, the "Employee Plan Lists"), contain a true and complete
list of all "employee benefit plans," within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
other bonus, profit sharing, compensation, pension, severance, savings deferred
compensation, material fringe benefit, insurance, welfare, medical,
post-retirement health or welfare benefit, medical reimbursement, health, life,
stock option, stock purchase, material tuition refund, material service award,
company car, material scholarship, material relocation, disability, accident,
sick pay, sick leave, vacation, termination, individual employment, executive
compensation, incentive, bonus, commission, payroll practices, retention, change
in control, noncompetition, or other plan, agreement, policy, trust fund or
arrangement (whether written or unwritten, insured or self-insured), maintained,
sponsored or contributed to (previously or currently) by any of the Sellers or
Affiliated Entities or any entity that would be deemed a "single employer"
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with any of the Sellers or Affiliated Entities under Section 414(b), (c), (m) or
(o) of the Code or Section 4001 of ERISA (an "ERISA Affiliate") on behalf of any
employee, director shareholder or partner of any of the Sellers or Affiliated
Entities (whether current, former or retired) or their beneficiaries or with
respect to which any of the Sellers, the Affiliated Entities or any ERISA
Affiliate has any obligation on behalf of any such employee, director,
shareholder, partner or beneficiary (each a "Plan" and, collectively, the
"Plans"). With respect to each Plan, true and complete copies of the documents
embodying and relating to the Plan have been delivered to Buyer.
(b) Except with respect to the Multiemployer Plans (as defined below)
listed on Schedule 6.17(b), none of the ERISA Affiliates, any of the Sellers or
the Affiliated Entities has ever contributed to, contributes to, has ever been
required to contribute to, or otherwise participated in or participates in any
way, directly or indirectly has any liability with respect to any plan subject
to Title IV of ERISA or Section 412 of the Code including, without limitation,
any "multiemployer plan" (within the meaning of Section 3(37) or Section
4001(a)(3) of ERISA or Section 414(f) of the Code) ("Multiemployer Plan") or any
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA). With respect to each Multiemployer Plan listed on Schedule 6.17(b):
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(i) none of the Sellers, the Affiliated Entities, any ERISA Affiliate,
or any of their respective predecessors has incurred or has any reason to
believe it has incurred or, prior to Closing, will incur any withdrawal
liability; no event has occurred, prior to Closing, which with the giving
of notice would result in any liability under Section 4201 of ERISA as a
result of a complete withdrawal (within the meaning of Section 4203 of
ERISA) or a partial withdrawal (within the meaning of Section 4205 of
ERISA); none of the Sellers, the Affiliated Entities or any ERISA Affiliate
has received any notice of any claim or demand for complete or partial
withdrawal liability;
(ii) none of the Sellers, the Affiliated Entities or any ERISA
Affiliate has received any notice or has any reason to believe that such
Multiemployer Plan is in "reorganization" (within the meaning of Section
4241 of ERISA), that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of an excise tax, or that the
Multiemployer Plan is or may become "insolvent" (within the meaning of
Section 4241 of ERISA);
(iii) the Sellers, each Affiliated Entity, and each ERISA Affiliate
have timely made any required contributions or payments to any
Multiemployer Plan;
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(iv) no Multiemployer Plan is a party to any pending merger or asset
or liability transfer under Part 2 of Subtitle E of Title IV of ERISA;
(v) the PBGC has not instituted proceedings against the Multiemployer
Plan;
(vi) except as disclosed on Schedule 6.17(b) there is no contingent
liability for withdrawal liability by reason of a sale of assets pursuant
to Section 4204 of ERISA; and
(vii) except as disclosed on Schedule 6.17(b) if the Sellers,
Affiliated Entities or any ERISA Affiliate were to have a complete or
partial withdrawal as of the Closing, no obligation to pay withdrawal
liability would exist on the part of the Sellers, Affiliated Entities or
any ERISA Affiliate with respect to any of the Multiemployer Plans.
(c) Each of Sellers, each Affiliated Entity, each ERISA Affiliate, each
Plan and each "plan sponsor" (within the meaning of Section 3(16) of ERISA) of
each "welfare benefit plan" (within the meaning of Section 3(1) of ERISA) has
complied in all respects with the requirements of Section 4980B of the Code and
Title I, Subtitle B, Part 6 of ERISA.
(d) With respect to each of the Plans identified in the Employee Plan
Lists:
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(i) except as set forth on Schedule 6.17(d)(i), each Plan intended to
qualify under Section 401(a) of the Code has received a determination
letter from the Internal Revenue Service (the "IRS") to the effect that the
Plan is qualified under Section 401 of the Code and any trust maintained
pursuant thereto is exempt from federal income taxation under Section 501
of the Code and, to the best knowledge of ESG, Sellers and the Affiliated
Entities, nothing has occurred or is expected to occur through the date of
the Closing that caused or could cause the loss of such qualification or
exemption or the imposition of any penalty or tax liability; each of
Sellers, Affiliated Entities, or an ERISA Affiliate, as the case may be,
has applied for prior to the end of the remedial amendment period, as
defined under Treasury Regulation Section 1.401(b) and as modified by IRS
pronouncements, or has obtained a determination letter from the IRS
pursuant to Revenue Procedure 93-39, for each Plan intended to qualify
under Section 401(a) of the Code;
(ii) all payments required by any Plan, any collective bargaining
agreement or by law (including all contributions, insurance premiums or
intercompany charges) with respect to all periods through the date of the
Closing shall have been made prior to the Closing or provided for by each
of the Sellers and the Affiliated Entities by full accruals on its
financial statements;
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(iii) no claim, lawsuit, arbitration or other section has been
asserted or instituted or, to the best knowledge of ESG, Sellers and the
Affiliated Entities, has been threatened or is anticipated against the
Plans (other than non-material routine claims for benefits, and appeals of
such claims), any trustee or fiduciaries thereof, any of the Sellers,
Affiliated Entities, or any ERISA Affiliate, any director, officer or
employee thereof, or any of the assets of any trust or the Plans;
(iv) the Plan complies and has been maintained and operated in
accordance with its terms and the terms and the provisions of applicable
law, including, without limitation, ERISA and the Code in all material
respects;
(v) no "prohibited transaction," within the meaning of Section 4975 of
the Code and Section 406 of ERISA, has occurred or is expected to occur
with respect to the Plan;
(vi) no Plan is under audit or investigation by the IRS or the U.S.
Department of Labor or any other governmental authority and no such
completed audit, if any, has resulted in the imposition of any tax or
penalty;
(vii) each Plan intended to meet the requirements for tax-favored
treatment under Sections 79, 105, 106, 117, 120, 125, 127, 129, 132, 404,
404A, 419, 419A or 501(c)(9) of the Code satisfies the applicable
requirements under the Code; and
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(viii) except as set forth on Schedule 6.17(d) (viii) hereto, with
respect to each Plan that is funded mostly or partially through an
insurance policy, none of the Sellers, the Affiliated Entities or any ERISA
Affiliate has any liability in the nature of retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability arising
wholly or partially out of events occurring on or before the Closing.
(e) Except as set forth on Schedule 6.17(e) hereto, the consummation of the
transactions contemplated by this Agreement will not give rise to any liability,
including, without limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits due to any
current, former, or retired employee, director, shareholder or partner or their
beneficiaries solely by reason of such transactions. No amounts payable under
any Plan will fail to be deductible for federal income tax purposes by virtue of
Section 280G of the Code.
(f) Neither of the Sellers nor any of the Affiliated Entities maintains,
contributes to, or in any way provides for any benefits of any kind whatsoever
(other than under Section 4980B of the Code, the Federal Social Security Act or
a plan qualified under Section 401(a) of the Code) to any current or future
retiree or terminee.
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(g) Except as expressly required by this Agreement, none of the Sellers,
the Affiliated Entities or any ERISA Affiliate, or any officer or employee
thereof, has made any promises or commitments, to any current or former officer
or employee of the Sellers or any of the Affiliated Entities (or any of their
beneficiaries), whether legally binding or not, to create any additional plan,
agreement or arrangement, or to modify or change any existing Plan.
Section 6.18 Litigation and Claims
------------ ---------------------
Except as set forth on Schedule 6.18, (i) there is no litigation,
arbitration, claim, governmental or other proceeding (formal or informal), or
investigation pending or threatened (or any substantial basis therefor known to
any of the Sellers or ESG) with respect to any of the Sellers or the Affiliated
Entities or any of their respective employees, businesses, properties, or assets
which could reasonably be expected to have a material adverse effect on the
Sellers and the Affiliated Entities taken as a whole, (ii) none of the Sellers
or the Affiliated Entities is in violation of, or in default with respect to,
any law, rule, regulation, order, judgment, or decree which has not been
subsequently reversed, suspended or vacated, which could reasonably be expected
to have a material adverse effect on the Sellers and the Affiliated Entities
taken as a whole; nor is any of them required to take any action in order to
avoid such violation or default, and (iii) the litigation listed
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on Schedule 6.18 will not prohibit the consummation of any of the transactions
contemplated hereby, and there is no valid basis for any other litigation,
arbitration, claim, governmental or other proceeding (formal or informal), or
investigation which could reasonably be expected to have a material adverse
effect on the Sellers and the Affiliated Entities taken as a whole.
Section 6.19 Properties
------------ ----------
None of the Sellers and Affiliated Entities owns or has ever owned a fee
interest in any real property. Each of the Sellers and the Affiliated Entities
has good title to all properties and assets used in its business or owned by it
(except such real and other properties and assets as are held pursuant to leases
or licenses described on Schedule 6.19 hereto), free and clear of all Liens
(except such as are listed on such Schedule 6.19). No Person holds a right of
first refusal or option to purchase with respect to any asset of any of the
Sellers or the Affiliated Entities.
(a) Each account and note receivable, net of reserves, (other than
notes receivable from commissionable brokers) reflected on the Most Current
Balance Sheet of the Sellers, or arising since the date thereof, has been
collected, or is and will be good and collectible in accordance with its
terms after the date such account or note receivable arose, in each case at
the aggregate recorded amounts thereof without right of recourse,
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defense, deduction, return of goods, counterclaim, offset, or set-off on
the part of the obligor. The Affiliated Entities have no accounts or notes
receivable.
(b) No real property leased, or licensed by the Sellers or the
Affiliated Entities lies in an area which is, or to the knowledge of any of
the Sellers, the Affiliated Entities or ESG will be, subject to zoning,
use, or building code restrictions which would prohibit, and no state of
facts relating to the actions or inaction of another person or entity or
his or its leasing, licensing, or use of any real or personal property
exists or will exist which would prevent, the continued effective
ownership, leasing, licensing, or use of such real property in the business
in which each of the Sellers is now engaged or the business in which it
contemplates engaging.
Section 6.20 Intellectual Property
------------ ---------------------
Except as described on Schedule 6.20 hereto, each of the Sellers and the
Affiliated Entities owns, or has the contractual right to use, and in the case
of the Affiliated Entities will after the Closing own or have the contractual
right to use, data processing and management information systems adequate to
conduct all aspects of their respective businesses, including, without
limitation, managing accounts receivable and billings, accounts payable, and
payroll. There is no right under any patent, patent application, trademark,
service mark,
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trademark or service mark application, trade name, service mark, copyright,
franchise, or other intangible property or asset (all of the foregoing being
hereinafter referred to as "Intangibles") necessary to the Business as presently
conducted or as it is currently contemplated to be conducted, except such as are
so designated on Schedule 6.20. None of the Sellers or the Affiliated Entities
has infringed, is infringing, or has received notice of infringement asserted
with respect to any Intangibles of others. There are no Intangibles of others
which may materially adversely affect the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
any of the Sellers or the Affiliated Entities. Each of Sellers and Affiliated
Entities is, and has at all times been, in compliance with the terms of each
license to use computer software to which it is a party and each such license is
assignable to Buyer without the consent of or any payment to the licensor
thereof of any third party.
Section 6.21 Certain Payments
------------ ----------------
None of ESG, the Sellers, the Affiliated Entities or any shareholder of any
of them, nor, to the knowledge of ESG, Sellers and the Affiliated Entities, any
director, officer, partner, agent, employee, or other person associated with or
acting on behalf of any of them, has, directly or indirectly: used any of its
funds for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political
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activity; made any unlawful payment to foreign or domestic government officials
or employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; made any false or fictitious entry on its
books or records; made any bribe, improper rebate, payoff, influence payment,
kickback, or other unlawful payment; given any favor or gift which is not
deductible for federal income tax purposes; or made any bribe, kickback, or
other unlawful payment of a similar or comparable nature, to any person or
entity, private or public, regardless of form, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained. None of ESG, Sellers, the Affiliated
Entities, or the Business or, to the knowledge of ESG, Sellers and the
Affiliated Entities, any employee of any of them is the subject of any
investigation by the District Attorney for the County of New York or any other
governmental agency or authority.
Section 6.22 Books and Records
------------ -----------------
The books and records of Sellers and the Affiliated Entities are
substantially complete and correct in all material respects, and contain
substantially accurate and complete records
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of all material actions taken by Sellers and the Affiliated Entities.
Section 6.23 Completeness of Disclosure
------------ --------------------------
All of Sellers' Schedules referred to in this Agreement are true, complete
and correct. No representation or warranty by Sellers or ESG in this Agreement
contains or on the Closing Date will contain an untrue statement of material
fact or omits or on the Closing Date will omit to state a material fact required
to be stated therein or necessary to make the statements made therein not
misleading.
Section 6.24 Solvency
------------ --------
For purposes of applicable federal and state laws governing determinations
of the insolvency of debtors, or relating to fraudulent conveyance, or otherwise
with respect to creditors' rights, or similar judicial doctrines: on the Closing
Date after giving effect to the transactions contemplated hereby, (i) the amount
of the "present fair saleable value" of the assets of each of Sellers will, as
of such date, exceed the amount of all "liabilities of such Person, contingent
or otherwise", as of such date, as such quoted terms are determined in
accordance with such laws and doctrines, (ii) the present fair saleable value of
the assets of each of Sellers will, as of such date, be greater than the amount
that will be required to pay such Person's liability on its debts (defined
below) as such debts become
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absolute and matured, (iii) none of Sellers will have, as of such date, an
unreasonably small amount of capital with which to conduct its business, (iv)
each of Sellers will be able to pay its debts as they mature and (v) the
consideration to be received by each Seller hereunder for the assets to be sold
by such Seller hereunder for the assets to be sold by such Seller hereunder is
not less than the "present fair saleable value" of such assets. For purposes of
this Section 6.24, "debt" means "liability on a claim", "claim" means any (x)
right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured, and (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed or undisputed,
secured or unsecured.
Section 6.25 Absence of Inducement
------------ ---------------------
In entering into this Agreement, none of ESG or the Sellers has been
induced by, or relied upon, any representations, warranties or statements by
Insignia or Buyer not set forth or referred to in this Agreement, the Schedules
hereto or the other documents required to be delivered hereby, whether or not
such representations, warranties or statement have actually been made, in
writing or orally, and each of ESG and the Sellers
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acknowledges that, in entering into this Agreement, Insignia and Buyer have been
induced by and relied upon the representations and warranties of ESG and the
Sellers herein and therein set forth. ESG and Sellers have made their own
investigation of Insignia prior to execution of this Agreement and have not been
induced by or relied upon by any representations, warranties or statements as to
the advisability of entering into this Agreement other than as set forth above.
Section 6.26 No Knowledge of Breach
------------ ----------------------
None of ESG or the Sellers has any knowledge on the date hereof of any fact
or circumstances which would cause any representation or warranty of Insignia or
Buyer in this Agreement to be misleading or incorrect in any respect or is aware
of any statement which was omitted from any such representation or warranty
which is necessary to make the statements made in any such representation or
warranty not misleading.
Section 6.27 Customer Data
------------ -------------
ESG, Sellers and the Affiliated Entities have not at any time sold or
rented customer data of any of them.
VII. Representations and Warranties of Buyer.
----------------------------------------
Buyer and Insignia each, jointly and severally, represents and warrants to
ESG and Sellers as of the date hereof and as of the Closing Date as follows:
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Section 7.01 Organization
----------- ------------
Each of Insignia and Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation or formation, as the case may be, with all requisite power and
authority to own, lease, license, and use its properties and assets and to carry
on the business in which it is now engaged and the business in which it
contemplates engaging.
Section 7.02 Authority
----------------------
Each of Insignia and Buyer has all requisite power and authority to
execute, deliver, and perform this Agreement and the other documents required to
be delivered hereby. All necessary corporate proceedings of Insignia and Buyer
have been duly taken to authorize the execution, delivery, and performance of
this Agreement and the other documents required to be delivered hereby by
Insignia and Buyer. This Agreement and the other documents required to be
delivered hereby have been (or when delivered will be) duly authorized,
executed, and delivered by each of Insignia and Buyer, constitute (or will
constitute when executed and delivered) the legal, valid, and binding obligation
of each of them and is enforceable as to each of them in accordance with their
terms. Each of Insignia and Buyer has full corporate power to carry on the
business in which it is currently engaged, and to own and use the properties
owned and used by it.
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Section 7.03 Capitalization; Title to Interests
-----------------------------------------------
The entire authorized capital stock of Insignia consists of 52,000,000
shares of Common Stock and 1,000,000 shares of preferred stock, $0.01 par value,
of which (i) 50,000,000 shares are designated as Class A Common Stock, of which
26,012,326 shares were issued and outstanding and no shares were held in
treasury as of March 31, 1996, (ii) 2,000,000 shares are designated as Class B
Common Stock, $0.01 par value, of Insignia, of which no shares were issued and
outstanding and no shares were held in treasury as of March 31, 1996; (iii)
1,000,000 shares are designated as preferred stock, $0.01 par value, of the
Company, of which 15,000 shares designated as 7.5% Step-Up Rate Cumulative
Convertible Preferred Stock were issued and outstanding and no shares were held
in treasury as of March 31, 1996, and 3,150 are designated as Series A preferred
stock, of which no shares were issued and outstanding and no shares were held in
treasury as of March 31, 1996. Since March 31, 1996 there has been no change in
the authorized shares of capital stock of Insignia. As of April 30, 1996, there
were 28,644,920 shares of Class A Common Stock outstanding and no shares were
held in treasury, and no shares of Class B Common Stock or preferred stock were
outstanding. All of the issued and outstanding shares of Class A Common Stock
have been duly authorized, validly issued, fully paid and nonassessable. There
are no preemptive rights that have not been waived or terminated
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with respect to the Options to be assumed by Insignia hereunder, and to the
Class A Common Stock to be issued pursuant to the terms and conditions of such
Options. Except as set forth on Schedule 7.03, as of the date hereof there are
no outstanding or authorized options, warrants, rights, contracts, rights to
subscribe, conversion rights or other agreements or commitments to which
Insignia was a party or which were binding upon Insignia providing for the
issuance or acquisition of any of Insignia's capital stock. Except as set forth
on Schedule 7.03, as of the date hereof there are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to Insignia.
Section 7.04 Validity of Interests
------------ ---------------------
Assuming the validity of the Options (as amended by the Option Amendments),
the shares of Insignia Class A Common Stock to be issued upon exercise thereof,
when issued in accordance with the terms and provisions thereof, will be duly
authorized, validly issued, fully paid, and nonassessable.
Section 7.05 Securities Act and Exchange Act Filings
------------ ---------------------------------------
Since December 31, 1994, Insignia has filed all documents required to be
filed by it pursuant to the Securities Act of 1933 (the "Securities Act") and
the Securities Exchange Act of 1934 (the "Exchange Act") and each such document
when filed complied as to form in all material respects with the
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requirements of the Securities Act and the Exchange Act. Such documents and all
press releases issued since December 31, 1994 taken together with all
information in this Agreement, do not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein not misleading as of the date hereof.
Section 7.06 No Conflicts or Defaults; No Violations
------------ ---------------------------------------
Neither the execution, delivery or performance of this Agreement and the
other documents required to be delivered hereby nor the consummation of the
transactions contemplated hereby or thereby by Insignia and Buyer will (with or
without the giving of notice, lapse of time or both): (a) contravene any
provisions of any law, statute, rule or regulation or any order, writ, judgment,
injunction or decree of any court or governmental instrumentality; or (b) except
as set forth on Schedule 7.06 hereto conflict with or result in any breach of,
or constitute a default under, or result in the creation or imposition (or the
obligation to create or impose) any Lien upon any of the property or assets of
any of Insignia or Buyer pursuant to the terms of any note, bond, indenture,
mortgage, deed of trust, loan agreement, credit agreement, lease, franchise, or
any other agreement, contract or instrument to which any of them is a party or
to which any of their respective properties or assets is subject; or (c) violate
any provision of their respective Organizational Documents. Neither Insignia nor
any of its
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consolidated subsidiaries is (x) in violation of, or default under, any term or
provision of its Organizational Documents which would have a material adverse
effect upon Insignia and its consolidated subsidiaries, taken as a whole or (y)
to Insignia's knowledge, in violation of, or default under, any note, bond,
indenture, mortgage, deed of trust, loan agreement, credit agreement, license or
any other agreement, contract or instrument, or any order, judgment, decree or
law, to which any of them is a party or to which any of their respective
properties or assets is subject, the violation of or default under which would
have a material adverse effect upon Insignia and its consolidated subsidiaries,
taken as a whole.
Section 7.07 Consents
------------ --------
Except the filings under the HSR Act described in Section 1.05, the filings
with the state real estate brokerage licensing authorities identified on
Schedule 6.10, and the filings with the United States Patent and Trademark
Office as necessary, no approval or consent of, notice to, or filing or
registration with, or authorization, order, license, certificate, or permit of
or from, any federal, state or local government or any agency or subdivision
thereof ("Governmental Authority") or any other notice to or consent of any
third party is required in connection with (a) the execution, delivery and
performance of, (b) the legality, validity, binding effect or enforceability of
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or (c) the consummation of the transactions contemplated by this Agreement.
Section 7.08 Financial Statements
---------------------------------
Insignia has delivered to ESG and Sellers copies of the audited
consolidated balance sheets of Insignia and its consolidated subsidiaries as of
December 31, 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for the fiscal year ended such date,
certified by Ernst & Young LLP, independent certified public accountants; and
the unaudited consolidated balance sheet of Insignia and its consolidated
subsidiaries as of March 31, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for the three months ended such
date (the "Unaudited Statements"). Such financial statements and balance sheets
fairly represent the financial condition of Insignia and its consolidated
subsidiaries as of such date, and have been prepared in accordance with GAAP
applied on a basis consistent with that of prior periods (subject to normal
year-end accruals, in the case of the Unaudited Statements).
Section 7.09 No Material Change
------------ ------------------
Since December 31, 1995, and except as otherwise disclosed in a filing
under the Securities Act, the Exchange Act, a press release or in this
Agreement, there has not been any
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material adverse change in the financial position, operations, assets,
liabilities or the business of Insignia and its consolidated subsidiaries taken
as a whole.
Section 7.10 Taxes
------------ -----
(a) Insignia and each of its consolidated subsidiaries (since it became
part of Insignia's consolidated group) have timely filed all federal, state,
local and foreign tax returns and reports required to be filed by or with
respect to Insignia and each of its consolidated subsidiaries, taken as a whole.
The returns and information filed with respect to any Taxes are accurate in all
respects, except where an inaccuracy would not have a material adverse effect on
Insignia and its consolidated subsidiaries, taken as a whole.
(b) All Taxes for which Insignia or any consolidated subsidiary is or may
be liable (whether disputed, incurred or which may be incurred) in respect of
periods or portions thereof ending on or before the Closing Date shall have been
paid to the proper taxing authority or an adequate reserve (in conformity with
generally accepted accounting principles) established therefor, and Insignia and
its consolidated subsidiaries taken as a whole do not have any material
liability for Taxes in excess of the amounts so paid or reserved. All Taxes that
Insignia and any consolidated subsidiary has been required to collect or
withhold have been duly collected or withheld and, to the extent required
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when due, have been or will be duly paid by Insignia and such consolidated
subsidiary to the proper taxing authority, except where the failure to so
collect, withhold or pay such Taxes would not have a material adverse effect on
Insignia and its consolidated subsidiaries, taken as a whole.
Section 7.11 Intentionally Omitted
------------ ---------------------
Section 7.12 Litigation; Legal and Governmental Proceedings and
------------ --------------------------------------------------
Judgments; Licenses and Permits
-------------------------------
(a) Except as set forth in Schedule 7.12, (i) there is no litigation,
arbitration, claim, governmental or other proceeding (formal or informal), or
investigation pending (or any substantial basis therefor known to Insignia or
Buyer) with respect to any of Insignia or any consolidated subsidiary which
could reasonably be expected to have a material adverse effect on Insignia and
its consolidated subsidiaries, taken as a whole, (ii) to the knowledge of
Insignia and Buyer, none of Insignia or any of its consolidated subsidiaries is
in violation of, or in default with respect to, any law, rule, regulation,
order, judgment or decree which has not been subsequently reversed, suspended or
vacated, which could reasonably be expected to have a material adverse effect on
Insignia or its consolidated subsidiaries, taken as a whole; nor is any of them
required to take any action in order to avoid such violation or default, and
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(iii) the litigation listed on Schedule 7.12 will not prohibit the consummation
of any of the transactions contemplated hereby.
(b) To the best of Insignia's and Buyer's knowledge, Insignia and each of
its consolidated subsidiaries have all licenses, permits and similar
authorizations from all federal, state and local and all foreign authorities
which are required in connection with their businesses, including without
limitation all necessary approvals from the United States Department of Housing
and Urban Development, where the failure to have any such license, permit or
similar authorization could reasonably be expected to have a material adverse
effect on Insignia or its consolidated subsidiaries, taken as a whole.
Section 7.13 Absence of Inducement
------------ ---------------------
In entering into this Agreement, none of Insignia or Buyer has been induced
by, or relied upon, any representations, warranties or statements by ESG or
Sellers not set forth or referred to in this Agreement, the Schedules hereto or
the other documents required to be delivered hereby, whether or not such
representations, warranties or statement have actually been made, in writing or
orally, and each of Insignia and Buyer acknowledges that, in entering into this
Agreement, ESG and Sellers have been induced by and relied upon the
representations and warranties of Insignia and the Buyer herein and therein set
forth. Insignia and the Buyer have made their own investigation of Sellers and
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the Affiliated Entities prior to the execution of this Agreement and have not
been induced by or relied upon any representations, warranties or statements as
to the advisability of entering into this Agreement other than as set forth
above.
Section 7.14 No Knowledge of Breach
------------ ----------------------
None of Insignia or Buyer has any knowledge on the date hereof of any fact
or circumstances which would cause any representation or warranty of ESG or
Seller in this Agreement to be misleading or incorrect in any respect or is
aware of any statement which was omitted from any such representation or
warranty which is necessary to make the statements made in any such
representation or warranty not misleading.
VIII. Additional Agreements.
- ----- ----------------------
Section 8.01 General
------------ -------
Sellers and ESG will use their reasonable best efforts to take all action
and to do all things necessary, proper or advisable in order to consummate and
make effective the transactions contemplated by this Agreement (including,
without limitation, satisfaction of the Closing conditions set forth in Article
X) and cause their representations and warranties to be true and their covenants
and agreements to be performed as of the Closing Date. Buyer and Insignia will
use their reasonable best efforts to take all action and to do all things
necessary, proper
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or advisable in order to consummate and make effective the transaction
contemplated by this Agreement (including, without limitation, satisfaction of
the Closing conditions set forth in Article XI) and cause their representations
and warranties to be true and their covenants and agreements to be performed as
of the Closing Date.
Section 8.02 Conduct of Business
------------ -------------------
Until the Closing Date, each of the Sellers and ESG will, and will cause
each of the Affiliated Entities to:
(a) conduct its affairs so that at the Closing no representation or
warranty of any of the Sellers or ESG concerning a matter within the
control of any of the Sellers, ESG or any of the Affiliated Entities will
be inaccurate, no covenant or agreement of any of the Sellers or ESG will
be breached in any material respect, and no condition in this Agreement
that is reasonably within the control of any of the Sellers, ESG or any of
the Affiliated Entities will remain unfulfilled by reason of the actions or
omissions of any of the Sellers or ESG; and
(b) except as otherwise requested by Buyer in writing, use its best
efforts to preserve intact the business organization and operations of the
Sellers and the Affiliated Entities, to keep available the services of
their present officers and employees, to preserve in full force and effect
their contracts, agreements, instruments, leases, licenses, arrangements,
and
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understandings, and to preserve the present business relationships and good
will of their suppliers, customers, and others having business relations
with any of them; and
(c) conduct the business and operations of the Sellers and the
Affiliated Entities in all respects only in the ordinary course consistent
with past practices;
(d) record its revenues for the period beginning on April 30, 1996 and
ending on the Closing Date in the same manner as for the four month period
ended April 30, 1996, as set forth on Schedule 1.06(a)(1), and during such
period ending on the Closing Date shall incur only expenses which are
reasonable, necessary and consistent in nature, amount and type as those
expenses incurred in the four month period ended April 30, 1996 and
included in Schedule 1.06(a)(1) other than the payment of certain bonuses
to employees of Sellers; and
(e) not amend any existing Plan or make any promises or commitments to
amend any existing Plan, or create or agree to create any new compensation
or benefit plan or arrangement, or increase or agree to increase the
compensation rate of any employee or director.
Section 8.03 Confidentiality
------------ ---------------
Each of the Sellers and ESG shall insure that all confidential information
which any of the Sellers or ESG or their
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affiliates, or any of their respective officers, directors, employees, counsel,
agents, investment bankers, or accountants, may now possess or may hereafter
create or obtain relating to the condition (financial or otherwise), results of
operations, business, properties, assets, liabilities, or future prospects of
any Seller or any Affiliated Entity, or any customer of any of them or of any
Affiliated Entity, shall not be published, disclosed, or made accessible by any
of them to any other person or entity at any time or used by any of them, in
each case without the prior written consent of Buyer. Each of Buyer and Insignia
shall insure that prior to the Closing Date all confidential information which
either Buyer or Insignia or their affiliates, or any of their respective
officers, directors, employees, counsel, agents, investment bankers, or
accountants, may now possess or may hereafter create or obtain relating to the
condition (financial or otherwise), results of operations, business, properties,
assets, liabilities, or future prospects of any Seller or any Affiliated Entity,
or any client of any of them or of any Affiliated Entity, shall not be
published, disclosed, or made accessible by any of them to any other person or
entity at any time or used by any of them, in each case without the prior
written consent of Sellers. Notwithstanding anything to the contrary contained
in this Section 8.03, the restrictions of this Section 8.03 shall not apply (a)
to the extent any such disclosure may otherwise be required by law, (b) may be
necessary in connection with the enforcement of this Agreement, or (c) to
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the extent such information shall have otherwise become publicly available
without any breach of this Agreement or any other confidentiality obligations of
any Person. Sellers and ESG shall, and shall cause all other such persons and
entities to, deliver to Buyer at the Closing all tangible evidence of such
confidential information to which the restrictions of this Section 8.03 apply,
and Buyer and Insignia shall, and shall cause all other such persons and
entities to, deliver to Sellers at such time as this Agreement is terminated
pursuant to Section 14.01 hereof all tangible evidence of such confidential
information to which the restrictions of this Section 8.03 apply.
Section 8.04 Public Statements
------------ -----------------
Between the date of this Agreement and the Closing, Sellers, ESG, and the
Affiliated Entities, on the one hand, and Buyer and Insignia, on the other,
shall discuss and coordinate with respect to any public filing or announcement
required concerning any of the transactions contemplated by this Agreement. No
public filing or announcement concerning any of the transactions contemplated by
this Agreement shall be made by Sellers or ESG without the consent of Insignia.
Attached hereto as Exhibit K is a form of joint press release which the parties
shall issue following the execution of this Agreement.
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Section 8.05 Access
------------ ------
(a) Between the date of this Agreement and the Closing or the termination
of this Agreement, as the case may be, Sellers and ESG shall, and shall cause
the Affiliated Entities to, (i) give Insignia, Buyer and their authorized
representatives full access to all offices and other facilities and properties
of Sellers and the Affiliated Entities and to the books and records of Sellers
(and permit Insignia, Buyer and their authorized representatives to make copies
thereof), (ii) permit Insignia, Buyer and their authorized representatives to
make inspections thereof, (iii) cause their respective officers and advisers
(including, without limitation, their auditors, attorneys, financial advisors
and other consultants, agents and advisors) to furnish Insignia, Buyer and their
authorized representatives with such financial and operating data and other
information with respect to the business and properties of Sellers and the
Affiliated Entities, and to discuss with Insignia, Buyer and their authorized
representatives the affairs of Sellers and the Affiliated Entities, and (iv)
permit Insignia, Buyer and their authorized representatives to contact current
and former employees and clients of the Sellers and the Affiliated Entities, all
as Insignia or Buyer may from time to time reasonably request in order to
confirm the accuracy of the representations and warranties of ESG and the
Sellers herein.
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(b) Between the date of this Agreement and the Closing or the
termination of this Agreement, as the case may be, Buyer and Insignia shall
(i) give Sellers and ESG and their authorized representatives such access
to the offices and other facilities and properties of Buyer and Insignia
and to the books and records of Buyer and Insignia (and permit Seller, ESG
and authorized representatives to make copies thereof) as Sellers and ESG
shall reasonably require in order to confirm the accuracy of the
representations and warranties of Buyer and Insignia herein; (ii) permit
Sellers, ESG and their authorized representatives to make inspections
thereof, and (iii) cause their respective officers and advisors (including,
without limitation, their auditors, attorneys, financial advisors and other
consultants, agents and advisors) to furnish Sellers, ESG and their
authorized representatives with such financial and operating data and other
information with respect to the business and properties of Insignia, and to
discuss with Sellers, ESG and their authorized representatives the affairs
of Insignia, all as Sellers and ESG shall reasonably request in order to
confirm the accuracy of the representations and warranties of Buyer and
Insignia herein.
Section 8.06 No Disposition
------------ --------------
ESG and New York Corp. shall not, directly or indirectly, sell, assign,
gift, pledge, or otherwise transfer or encumber any capital stock of, or limited
liability company
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membership interest in, Sellers or the Affiliated Entities before the Closing.
Section 8.07 Notice of Certain Events
------------ ------------------------
Until the Closing, each of Sellers and ESG, on the one hand, and Buyer and
Insignia, on the other, shall immediately give the other written notice of the
occurrence, or failure to occur, of any event or state of facts that would cause
any representation and warranty made by it in this Agreement to be untrue or
inaccurate or any covenant, condition or agreement which is to be performed or
satisfied by it impossible to be so complied with or satisfied or make such
performance or satisfaction materially more difficult than in the absence of
such fact or occurrence or which (if existing and known at the date of the
execution of this Agreement) would have been required to be set forth or
disclosed in or pursuant to this Agreement or a Schedule or Exhibit hereto.
Until the Closing, Sellers and ESG shall immediately give Buyer and Insignia (a)
copies of all notices of default or other notices given to any Seller,
Affiliated Entity or ESG with respect to any Management Agreement, Commission
Agreement, Representation Agreement, Employment Agreement or Material Agreement;
(b) copies of any new contract or agreement entered into by any of the Sellers
or the Affiliated Entities; and (c) copies of all reports and other documents
prepared for the stockholders or members of any of the Sellers or the Affiliated
Entities and copies of the minutes of
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all meetings of, and actions taken (with or without a meeting), by the
stockholders or members of any of the Sellers or the Affiliated Entities. No
notification under this Section 8.07 shall affect the representations,
warranties or covenants of any of the parties hereto or the conditions to the
respective obligations of the parties hereunder.
Section 8.08 Tax Matters
------------ -----------
Between the date hereof and the Closing Date, Sellers and the Affiliated
Entities shall file on a timely basis all Tax Returns required to be filed by or
with respect to any of them.
Section 8.09 Delivery of Financial Statements
------------ --------------------------------
To the extent not heretofore furnished to Buyer, on or prior to the last
business day which is not more than 30 days after the Closing Date, ESG and
Sellers shall, at their own expense, deliver to Insignia (i) Seller's combined
unaudited balance sheets as of March 31, 1996 and 1995 and June 30, 1996 and
1995 and unaudited statements of operations, statements of stockholders' equity
and statements of cash flows for the three and six month periods then ended;
(ii) Sellers' combined unaudited balance sheet as of the Closing Date (prior to
giving effect to the transactions contemplated by this Agreement) and unaudited
statements of operations, statements of stockholders' equity and statements of
cash flows for the period beginning January 1, 1996 and ending on the Closing
Date; and (iii) such
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other financial statements and financial information, with respect to such
accounting periods of such of the Sellers and the Affiliated Entities as shall
be required for financial statements of acquired businesses as prescribed by
Regulation S-X in connection with any filings of Insignia and Buyer with the
Securities and Exchange Commission (the "SEC"). The financial statements shall
contain such information, and be in such form, and shall be delivered with such
reports of certified public accountants thereon and such consents of such
certified public accountants, if any, as shall be required by the SEC or other
regulatory authority.
Section 8.10 Furniture, Fixtures and Equipment
------------ ---------------------------------
ESG and Sellers shall deliver to Buyer and Insignia not later than five
business days prior to the Closing Date a schedule identifying in reasonable
detail each item of furniture, fixtures, equipment, art work, computer software
and similar assets and property included in the Assets and the assets and
property of the Affiliated Entities.
IX. Covenants.
----------
Section 9.01 Termination of Agreements
----------- -------------------------
Without the prior written consent of Buyer, the Sellers shall not, and ESG
and the Sellers shall cause the Affiliated Entities not to, terminate, or
encourage any other Person to
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terminate, any Commission Agreement, Management Agreement, Representation
Agreement, Employment Agreement or Material Agreement.
Section 9.02 New Lines of Business
------------ ---------------------
Except as set forth on Schedule 9.02 hereto, none of the Sellers shall, and
ESG and the Sellers shall cause the Affiliated Entities not to, enter into any
line of business other than its business on the date hereof, or make any
material change in the scope or nature of its business, purposes or operations,
or undertake or participate in activities other than the continuance of its
present business.
Section 9.03 Liens
------------ -----
Except as set forth on Schedule 9.03 (as to which ESG and Sellers covenant
and agree to cause to be terminated and released prior to Closing), prior to the
Closing, Sellers shall not, and Sellers and ESG shall not permit any of the
Affiliated Entities to, create, incur, assume or suffer to exist any Lien upon
or with respect to any of the Assets or any property or assets (real or
personal, tangible or intangible) of any of the Affiliated Entities, whether now
owned or hereafter acquired, or sell any of the Assets or any such property or
assets of the Affiliated Entities subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable with recourse to the
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Affiliated Entities), or assign any right to receive income or permit the filing
of any financing statement under the Uniform Commercial Code or any other
similar notice of Lien under any similar recording or notice statute, or grant
rights with respect to, or otherwise encumber or create a security interest in,
the Assets or such property or assets of the Affiliated Entities or any portion
thereof or any other revenues therefrom or the proceeds payable upon the sale,
transfer or other disposition of the Assets or such property or assets of the
Affiliated Entities or any portion thereof, or permit or suffer any such action
to be taken, except the following:
(a) Liens for taxes, assessments or other governmental charges not yet
delinquent or which are being diligently contested in good faith and by
appropriate proceedings, if (i) reasonable reserves in an amount not less
than the tax, assessment or governmental charge being so contested shall
have been included in the Most Recent Balance Sheet, or such contested
amount shall have been duly bonded in accordance with applicable law, (ii)
no risk of sale, forfeiture or loss of any of the Assets or any property or
assets of the Affiliated Entities arises during the pendency of such
contest and (iii) such contest does not have a materially adverse effect on
Sellers and the Affiliated Entities, taken as a whole; and
(b) Liens in respect of the Assets or of property or assets of any of
the Affiliated Entities imposed by law, which
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were incurred in the ordinary course of business and do not secure any
indebtedness (e.g., carriers', warehousemen's, materialmen's, and
mechanics' liens and other similar Liens arising in the ordinary course of
business) and (i) which do not in the aggregate materially detract from the
value of any of the Assets or assets of the Affiliated Entities, taken as a
whole, or materially impair the use thereof in the operation of the
Business or (ii) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or assets subject to any such Lien.
Section 9.04 Affiliate Transactions
------------ ----------------------
Prior to the Closing Date, none of the Sellers or the Affiliated Entities
shall enter into, or be a party to, any transaction with ESG or any Affiliate of
ESG or cause any compensation to be payable to any such Person, except
transactions described on Schedule 9.04 hereto or otherwise required by
agreements listed on Schedule 9.04 hereto, and except for cash bonuses paid
prior to the Closing, unless such transaction or compensation is in the ordinary
course of business consistent with past practice and on terms which are no less
favorable to the Sellers or the Affiliated Entities than would be obtained in a
comparable arm's length transaction with an unrelated third party.
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Section 9.05 Assets
------------ ------
Sellers and Affiliated Entities shall not acquire or dispose of any assets
except in the ordinary course of business consistent with past practice.
Section 9.06 Advances, Investments and Loans
------------ -------------------------------
None of the Sellers or the Affiliated Entities, directly or indirectly,
shall lend money or credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any limited or general
partnership or membership interests or any other interest in, or make any
capital contribution to, any other Person, or purchase or own a futures contract
or otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, except that
any of the Sellers or the Affiliated Entities may acquire and hold accounts
receivable owing to any of them, if created or acquired in the ordinary course
of business and payable or dischargeable in accordance with customary terms,
including loans to employees.
Section 9.07 No Contrary Agreements
------------ ----------------------
Prior to the Closing Date, none of Sellers shall, and ESG and Sellers shall
not permit the Affiliated Entities to, agree or otherwise commit to do anything
which would not be permitted to be done under this Agreement.
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Section 9.08 Reserved Interests
------------ ------------------
Insignia will reserve, and covenants to continue to reserve, for issuance a
sufficient number of shares of Insignia Class A Common Stock to satisfy the
rights of exercise of the holders of Options assumed by Insignia pursuant to the
terms of this Agreement.
Section 9.09 Registration of Interests
------------ -------------------------
Prior to the Closing Date, Insignia, at its sole expense, shall authorize
and cause to be filed with the SEC and use its reasonable best efforts to cause
to become effective and to maintain (for the term of the Options assumed by
Insignia pursuant to the terms of this Agreement) the effectiveness of a
Registration Statement on Form S-8 registering the sale by Insignia of shares of
Insignia Class A Common Stock upon exercise of such Options.
Section 9.10 Maintenance of Insurance
------------ ------------------------
(a) Sellers shall each maintain at their own expense their current
liability insurance policies for the remaining term of such policies, as set
forth on Schedule 6.07. Effective as of the Closing Date, Sellers shall cause
Buyer to be added to such policies as an additional insured and shall cause
Insignia to be so added if there is no additional premium cost to Sellers or if
Insignia agrees to reimburse Sellers for such additional premium
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cost. Sellers shall notify Insignia and Buyer not less than one week prior to
the Closing Date of the amount of any such additional premium cost and the
policy to which it relates. Such policies shall provide that they cannot be
cancelled and Insignia and Buyer cannot be removed therefrom as additional
insureds on less than 30 days' prior written notice to Insignia and Buyer.
(b) Insignia shall add Sellers as additional insureds on Insignia's
liability policies and shall maintain them as such for a period ending six years
after the Closing Date, provided that Sellers shall pay Insignia upon demand the
incremental premium cost to Insignia of complying with such request.
Section 9.11 Owner's Insurance
------------ -----------------
ESG and Sellers shall use their reasonable best efforts to have Insignia
and Buyer added to all liability policies maintained by each property owner who
is party to a Management Agreement. Promptly after execution of this Agreement,
ESG and Sellers shall send to each such owner a written request to the foregoing
effect and shall at the same time provide copies of such requests to Insignia
and Buyer.
Section 9.12 Section 338 and Section 754 Elections
------------ -------------------------------------
ESG shall cooperate with Buyer to cause an election to be made under
Section 338 or Section 754 of the Code with respect to those Affiliated Entities
that are corporations, partnerships
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or limited liability companies selected by Buyer as corporations, partnerships
or limited liability companies for which such elections shall be made. ESG also
shall cooperate with Buyer to cause an election to be made for such designated
Affiliated Entities under any state or local law equivalent to Section 338 or
Section 754 of the Code. ESG shall be responsible for the payment of all Taxes
resulting from the elections described in the first two sentences of this
paragraph, and shall indemnify Buyer, the Affiliated Entities and Buyer's other
Affiliates against such Taxes.
Section 9.13 Use of Aircraft
------------ ---------------
ESG understands and agrees that the use of all aircraft owned or leased by
Insignia, Buyer and their Affiliates by employees of Insignia, Buyer and their
Affiliates and the payment of expenses incurred in connection therewith shall be
determined by the chief executive officer of Insignia in his sole discretion.
Section 9.14 Certain Employment Matters
------------ --------------------------
(a) Effective as of the Closing Date, Buyer shall offer employment to all
nonrepresented employees of Seller and the Affiliated Entities (the "Employees")
and shall provide to Employees who become employees of Buyer (the "Transferred
Employees") substantially the same base salary that was provided to each such
Transferred Employee prior to the Closing.
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Notwithstanding the foregoing, nothing herein shall prohibit Buyer, as it may
decide in its sole discretion, from thereafter terminating a Transferred
Employee or changing any of the terms of a Transferred Employee's employment.
(b) In the event that (i) an Employee does not accept Buyer's offer of
employment, or (ii) a Transferred Employee is discharged or terminated (whether
actually or constructively) for any reason within the 120-day period following
the Closing Date, Seller shall be responsible for all severance obligations
under Sellers' severance policy relating to such Employees and Transferred
Employees and shall make payments to them in a manner consistent with the salary
continuation and severance policy of Seller or the Affiliated Entities, as in
effect on the Closing Date. Sellers shall retain all liabilities for, and Buyer
shall not be liable for, any severance obligations under Sellers' severance
policy relating to any Employees or Transferred Employees for any service prior
to the Closing Date.
(c) Prior to the Closing, with respect to any Plan maintained, sponsored,
or contributed to by any corporation or limited liability company listed on
Schedule 1.01 that covers any employee, director, shareholder or partner of any
of the Sellers or Affiliated Entities (whether current, former or retired) or
any of their beneficiaries (other than employees represented by a union or
covered by a collective bargaining agreement) (the "Nonrepresented Plans"),
Sellers and the Affiliated Entities
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shall take all actions necessary (i) to the extent applicable to cause the
Nonrepresented Plans to be transferred to Sellers including without limitation,
causing the Affiliated Entities to no longer be the Plan sponsor of any of the
Nonrepresented Plans or a participating employer with respect to any
Nonrepresented Plan, and (ii) for Sellers to retain all liabilities and
obligations relating to or arising from the Nonrepresented Plans. Without
limiting the generality of the foregoing, with respect to the Nonrepresented
Plans, Sellers shall be responsible for any claims incurred under the
Nonrepresented Plans prior to the Closing Date, but regardless of whether
arising before, on or after the Closing Date. Buyer shall not have any
obligations or liabilities of any kind whatsoever with respect to the
Nonrepresented Plans.
(d) Represented employees of Edward S. Gordon Management Corp.
("Management") shall continue in such capacity immediately following the
Closing, provided, however, that nothing herein shall prohibit Buyer and
Management, as either of them may decide, from thereafter terminating or
changing any of the terms of employment of any such employee.
Section 9.15 Cooperation Regarding Licensing
------------ -------------------------------
In the event Buyer shall not have received on or before the Closing all
real estate brokerage licenses necessary to conduct the Business as it has been
conducted by Sellers, ESG and Sellers shall cooperate with the Buyer following
the closing to
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act as co-brokers without further compensation to facilitate the conduct of the
Business by Buyer.
Section 9.16 Non-Competition and Confidentiality Agreement
------------ ---------------------------------------------
ESG and Sellers, jointly and severally, each covenant and agree:
(a) for a period of five (5) years from the Closing Date none of them will
compete with or be engaged in the same business as, or "Participate In" (as
hereinafter defined) any other business or organization which competes with or
is engaged in the Business or the same business as the Buyer or Insignia, with
respect to any product or service sold or activity engaged in by the Buyer or
Insignia in any geographical area in which on the Closing Date (after giving
effect to the consummation of the transactions contemplated by the Agreement)
such product or service is sold or activity is engaged in by the Buyer or
Insignia; provided, however, that the provisions hereof shall not be interpreted
to preclude any of them, at any time and from time to time, from (i)
participating in any other organization if approved by a majority of the
Directors of Insignia, or (ii) owning not more than five percent (5%) of the
outstanding capital stock of any publicly-traded person, or (iii) collecting
Accounts Receivable of Sellers existing on the Closing Date and the liquidation
of certain assets of the Sellers, or (iv) as set forth on Schedule 9.16(a). The
terms "Participate In" and
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"Participating In" shall mean: "directly or indirectly, for any of their own
benefit or for, with, or through any other person, own or owning, manage or
managing, operate or operating, control or controlling, loan money to or lending
money to, or participate in or participating in, as the case may be, the
ownership, management, operation, or control of, or be connected or being
connected, as the case may be, as a director, officer, employee, partner,
consultant, agent, independent contractor, or otherwise with, or acquiesce or
acquiescing, as the case may be, in the use of his name in." Each of ESG and
Sellers will not directly or indirectly employ any person who, at any time up to
the Closing Date, was an employee of the Sellers, Affiliated Entities, Buyer or
Insignia, within a period of two years after such person leaves the employ of
the Buyer or Insignia or any of its affiliates, other than ESG's personal
secretary. In addition, each of them agrees that following the Closing Date,
they will not solicit anyone for the purpose of providing management, leasing or
related real estate services with respect to the properties managed by the Buyer
or Insignia on the Closing Date (after giving effect to the transactions
contemplated by the Agreement).
(b) all confidential information which any of them may now possess or may
hereafter obtain relating to the Business or the business of the Buyer or
Insignia or any of their subsidiaries or affiliates or of any customer or
supplier of any
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of them shall not be published, disclosed, or made accessible by any of them to
any other person, except in the business and for the benefit of the Buyer,
Insignia and their subsidiaries and affiliates. In the event that any of ESG,
the Sellers, the Affiliated Entities, or their respective directors, officers,
employees, or agents becomes legally compelled to disclose any of the
confidential information, ESG and the Sellers will provide Insignia and Buyer
with prompt notice so that Insignia and Buyer may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Agreement and in the event that such protective order or other remedy is not
obtained, or should Insignia and Buyer waive compliance with the provisions of
this Agreement, ESG and Sellers will furnish only that portion of the
confidential information which is so legally required and will exercise their
best efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the confidential information. Each of
ESG and Sellers shall return all tangible evidence of such confidential
information to the Buyer and Insignia promptly upon their request.
(c) For so long as the Business remains in operation and continues to
conduct business under the trademarks, service marks, trade names or personal
names which are the subject of this Agreement, ESG and the Sellers shall refrain
from making any use of the marks or names, or any marks or names derivative or
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confusingly similar thereto in connection with the sale, offering for sale or
promotion of any goods or services that would otherwise appear to be in
competition with, endorsed by, authorized by, sponsored by or affiliated with
the Business.
(d) Since a breach of the provisions of this Section 9.16 could not
adequately be compensated by money damages, the Buyer or Insignia shall be
entitled, in addition to any other right and remedy available to them, to seek
an injunction restraining such breach and Insignia and the Buyer shall not be
required to post a bond in any proceeding brought for such purpose. Each of ESG
and Sellers agrees that the provisions of this Section 9.16 are necessary and
reasonable to protect the Buyer and Insignia in the conduct of their respective
businesses and the Business. If any restriction contained in this Section 9.16
shall be deemed to be invalid, illegal, or unenforceable by reason of the
extent, duration, or geographical scope thereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form such
restriction shall then be enforceable in the manner contemplated hereby. Nothing
herein shall be construed as prohibiting the Buyer or Insignia from pursuing any
other remedies, at law or in equity, for such breach or threatened breach.
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X. Conditions to Obligations of Buyer.
-----------------------------------
The obligations of Insignia and Buyer under this Agreement are subject to
the following conditions (unless waived by Insignia and Buyer in writing at the
Closing):
Section 10.0 Accuracy of Representations and Compliance with Conditions
------------ ----------------------------------------------------------
All representations and warranties of Sellers and ESG contained in this
Agreement shall be accurate in all material respects as of the Closing with the
same effect as if made on and as of such date; as of the Closing, Sellers and
ESG shall have performed and complied in all material respects with all
covenants and agreements and satisfied all conditions required to be performed
and complied with by any of them at or before such time; and Buyer shall have
received certificates to that effect executed by the chief executive officer of
each Seller and of ESG dated as of the Closing Date in form and substance
satisfactory to Buyer.
Section 10.0 Sellers' Deliveries
------------ -------------------
Sellers shall have delivered to Buyer the documents set forth in Section
5.02(a).
Section 10.0 Legal Action
------------ ------------
There shall not have been instituted or threatened any legal proceeding (a)
seeking to prohibit or otherwise challenge
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the consummation of this Agreement or the transactions contemplated by this
Agreement, or to obtain from Buyer, Insignia or any Person that is an affiliate
of either substantial damages with respect thereto, or (b) which Buyer shall
reasonably determine could have a material adverse affect on the business,
assets, liabilities, condition (financial or otherwise) or prospects of Sellers
and the Affiliated Entities, taken as a whole.
Section 10.04 No Material Change
------------- ------------------
None of the following shall have occurred unless in any individual case
specifically waived by Insignia and Buyer in writing:
(a) None of the Sellers or the Affiliated Entities shall have (i)
entered into or be subject to any Commission Agreement, Management
Agreement, Representation Agreement or Employment Agreement not listed on
Schedules 6.13(b), 6.13(c), 6.13(d) and 6.16(a) hereto other than in the
ordinary course of business on commercially reasonable terms with customary
provisions, or (ii) breached or made a material amendment to or
modification of any such listed agreement or terminated any such listed
agreement, except terminations resulting from the sale of any property
listed on Schedule 10.04 hereto, amendments or modifications that are
beneficial to such Seller or Affiliated Entity, and breaches, amendments or
terminations which do not and
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will not have a material adverse effect on the Business or the Sellers and
the Affiliated Entities taken as a whole.
(b) There shall not have been a material adverse change in the
condition (financial or otherwise), results of operations, business,
properties, assets, nature of assets, liabilities, or future prospects of
any of the Sellers, the Affiliated Entities and the Business, taken as a
whole, since December 31, 1995.
Section 10.0 No Governmental Action
------------ ----------------------
There shall not have been any action taken, or any law, rule, regulation,
order, judgment, or decree proposed, promulgated, enacted, entered, enforced, or
deemed applicable to the transactions contemplated by this Agreement by any
federal, state, local, or other governmental authority or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the reasonable judgment of Buyer, (a) makes any of the transactions
contemplated by this Agreement illegal, (b) results in a delay beyond August 3,
1996 in the ability of Buyer to consummate any of the transactions contemplated
by this Agreement, (c) requires the divestiture by Buyer of any of the Assets to
be sold pursuant to this Agreement or of a material portion of the business of
the Sellers, (d) imposes material limitations on the ability of Buyer
effectively to exercise full rights of ownership of such Assets, or (e)
otherwise prohibits,
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restricts, or delays consummation of any of the transactions contemplated by
this Agreement or impairs the contemplated benefits to Buyer of any of the
transactions contemplated by this Agreement.
Section 10.06 Key Man Insurance
------------- -----------------
ESG and Sellers have obtained a term life insurance policy, a copy of which
is annexed hereto as Schedule 10.06 (the "Key Man Policy") and shall assign and
convey ownership of such insurance policy to Insignia, and Insignia shall be
designated as sole beneficiary thereunder, at the Closing. At the Closing,
Insignia shall reimburse New York Corp. for premiums paid on the Key Man Policy.
Section 10.07 Hart-Scott-Rodino Waiting Period
------------ --------------------------------
All applicable waiting periods in respect of the transactions contemplated
by this Agreement under the HSR Act shall have expired at or prior to the
Closing.
Section 10.08 Governmental Consents
------------- ---------------------
Sellers shall have complied with Section 1.05 without any of the Sellers
having made any agreement or reached any understanding not approved in writing
by Buyer as a condition for obtaining any such consent, authorization, approval,
order, license, certificate or permit.
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Section 10.09 Contractual Consents Needed; Estoppels
------------ --------------------------------------
Except as set forth on Schedule 10.09, and except for the consent of the
parties to the Commission Agreements, Management Agreements, Representation
Agreements and the real property leases and personal property leases listed on
Schedule 6.19 hereto, and except for the consent of not more than 10% of the
senior management and brokers employed by the Sellers on the date hereof to the
assignment of their Employment Agreements hereunder, Sellers shall have obtained
at or prior to the Closing all consents required for the consummation of the
transactions contemplated by this Agreement from any party to any Material
Agreement, Employment Agreement, contract, other agreement or mortgage,
instrument, lease, license, arrangement, or understanding to which any of them
is a party, or to which any of them or any of their respective businesses,
properties, or assets are subject, in each case without any of the Sellers
having made an agreement or reached any understanding not approved in writing by
Buyer as a condition for obtaining such consent.
Section 10.10 Absence of Certain Events
------------ -------------------------
On the Closing Date no event shall have occurred which would cause (a) any
merger, consolidation, reorganization, other business combination, or
recapitalization involving any of the Sellers or the Affiliated Entities, (b)
any dissolution,
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liquidation, or termination of any of the Sellers or the Affiliated Entities,
(c) any sale of any assets of any of the Sellers or any of the Affiliated
Entities, other than in the ordinary course of business, or (d) the amendment of
the certificate of incorporation or articles of organization of any of the
Sellers or the Affiliated Entities.
Section 10.11 Other Closing Documents
------------------------------------
ESG and Sellers shall have delivered to Buyer at or prior to the Closing
such other documents as Buyer may reasonably request in form and substance
satisfactory to Buyer.
XI. Conditions to the Obligations of ESG and Sellers.
-------------------------------------------------
The obligations of ESG and Sellers under this Agreement are subject to the
following conditions (unless waived by ESG and Sellers in writing at the
Closing):
Section 11.01 Accuracy of Representations and Compliance with Conditions
------------ ----------------------------------------------------------
All representations and warranties of Insignia and Buyer contained in this
Agreement shall be accurate in all material respects as of the Closing Date with
the same effect as if made on and as of such date; as of the Closing, Insignia
and Buyer shall have performed and complied in all material respects with all
covenants and agreements and satisfied all conditions required to be performed
and complied with at or before such
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time; and Sellers shall have received certificates to that effect executed by
the chief executive officer and the chief financial officer of each of Insignia
and Buyer, dated as of the Closing Date, in form and substance satisfactory to
Sellers.
Section 11.02 Buyer's Deliveries
------------ ------------------
Buyer and Insignia shall have delivered to ESG and Sellers the funds and
documents set forth in Section 5.02(b).
Section 11.03 Legal Action
------------ ------------
There shall not have been instituted or threatened any legal proceeding
relating to, or seeking to prohibit or otherwise challenge the consummation of
this Agreement or the transactions contemplated by this Agreement, or to obtain
substantial damages from Sellers, Affiliated Entities or ESG with respect
thereto.
Section 11.04 No Material Change
------------- ------------------
There shall not have been a material adverse change in the condition
(financial or otherwise), results of operations, business, properties, assets,
nature of assets, liabilities, or future prospects of Insignia and its
consolidated subsidiaries, taken as a whole, since March 31, 1996.
Section 11.05 No Governmental Action
------------ ----------------------
There shall not have been any action taken, or any law, rule, regulation,
order, judgment, or decree proposed,
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promulgated, enacted, entered, enforced, or deemed applicable to the
transactions contemplated by this Agreement by any federal, state, local, or
other governmental authority or by any court or other tribunal, including the
entry of a preliminary or permanent injunction, which, in the reasonable
judgment of Sellers, (a) makes any of the transactions contemplated by this
Agreement illegal, (b) results in a delay in the ability of Sellers to
consummate any of the transactions contemplated by this Agreement, or (c)
otherwise prohibits, restricts, or delays consummation of any of the
transactions contemplated by this Agreement or impairs the contemplated benefits
to Sellers of any of the transactions contemplated by this Agreement.
Section 11.06 Hart-Scott-Rodino Waiting Period
------------ --------------------------------
All applicable waiting periods in respect of the transactions contemplated
by this Agreement under the HSR Act shall have expired at or prior to the
Closing.
Section 11.07 Other Closing Documents
------------- -----------------------
Buyer shall have delivered to ESG and Sellers at or prior to the Closing
such other documents of officers of Insignia and Buyer as ESG and Sellers may
reasonably request.
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XII. Survival of Representations and Warranties.
-------------------------------------------
Section 12.01 Survival
------------- --------
Except as provided in Section 12.03, all representations, warranties and
agreements contained in this Agreement or in any certificate delivered pursuant
to this Agreement shall survive the Closing notwithstanding any investigation
conducted by or on behalf of any party with respect thereto.
Section 12.02 Intentionally Omitted
------------- ---------------------
Section 12.03 Indemnification and Related Matters
------------- -----------------------------------
(A) Indemnification
(a) Subject to the provisions of this Section 12.03, ESG and Sellers,
jointly and severally, agree to defend, indemnify and hold Insignia, Buyer
and their respective officers, directors, employees, stockholders,
partners, agents, advisors and Affiliates (the "Insignia Group") harmless
from and against:
(i) any and all claims, obligations, losses, liabilities,
damages, deficiencies, costs and expenses (including but not limited
to reasonable attorneys' fees and disbursements and any and all
expenses whatsoever incurred in investigating, preparing, or defending
against any claims, litigation, commenced or threatened, and any and
all amounts paid in settlement of any claim or litigation) as and when
incurred and whether or not
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involving a third party (collectively, "Liabilities") resulting from
any misrepresentation, breach of warranty or non-fulfillment of any
agreement on the part of ESG or either Seller under the terms of this
Agreement;
(ii) any and all Liabilities arising out of or resulting from the
ownership of the Assets, the ownership by the Affiliated Entities of
their respective assets or the operation of the Business on or before
the Determination Time or resulting from the Closing (including,
without limitation, worker's compensation claims, retrospective
insurance premiums resulting from worker's compensation claims, claims
arising under any law, rule or regulation relating to employment)
other than in respect of the Assumed Liabilities arising after the
Closing;
(iii) any and all Liabilities arising out of the failure to
comply with the provisions of any applicable bulk sales laws;
(iv) any and all Liabilities arising out of or relating to the
Multiemployer Plans for withdrawal liability (whether with respect to
a complete or partial withdrawal) under ERISA attributable in whole or
part to periods during which Sellers, any Affiliated Entity or any
ERISA Affiliate had or have any obligation relating to any such
Multiemployer Plan, solely to the extent of the amount of the
withdrawal liability that Sellers, any Affiliated Entity or any ERISA
Affiliate would have
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had on the Closing Date assuming a complete withdrawal occurred on the
Closing Date;
(v) any and all Liabilities arising out of or relating to the
obligations of Buyer under Section 2.03;
(vi) any and all Liabilities (but only to the extent that the
property owner has agreed to indemnify any of Sellers or the
Affiliated Entities under a Management Agreement with respect to such
liabilities) arising out of or relating to each Management Agreement
or the Employee Leasing Agreement on or after the Closing Date and
prior to the earlier of (i) the time when Sellers deliver to Buyer all
necessary written consents to permit assignment of such Management
Agreement to the Buyer and (ii) December 31, 1996;
(vii) the Excluded Liabilities; and
(viii) any and all claims, actions, suits, proceedings and
demands incident to the foregoing.
(b) Subject to the provisions of this Section 12.03, Insignia and
Buyer, jointly and severally, agree to defend, indemnify and hold ESG,
Sellers and their respective officers, directors, employees, stockholders,
partners, agents, advisors and Affiliates (the "Seller Group") harmless
from and against:
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(i) any and all Liabilities resulting from any misrepresentation,
breach of warranty or non-fulfillment of any agreement on the part of
Insignia or Buyer under the terms of this Agreement;
(ii) any and all Liabilities arising out of, related to or
resulting from the ownership of the Assets, the ownership by the
Affiliated Entities of their respective assets or the operation of the
Business after the Determination Time (including, without limitation,
worker's compensation claims, and claims arising under any law, rule
or regulation relating to employment) other than in respect of the
Excluded Liabilities;
(iii) with respect to ESG only, any and all Liabilities arising
out of third party claims against ESG in connection with the Buyer's
operation of the Business after the Determination Time; and
(iv) any and all claims, actions, suits, proceedings and demands
incident to the foregoing.
(B) Calculation of Damages In calculating any amounts payable to Insignia
Group pursuant to Section 12.03(A)(a) or payable to the Seller Group pursuant to
Section 12.03(A)(b), (a) the indemnifying party shall not be required to
indemnify to the extent of any insurance recoveries by the indemnified parties
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and (b) no amount shall be included for special or consequential damages, other
than amounts paid to third parties.
(C) Limitation on Amount; Threshold ESG and Sellers, on the one hand, and
Insignia and Buyer, on the other hand, shall have no liability under this
Section 12.03 (i) in excess of $20 million after the application for the benefit
of the indemnitees of any insurance proceeds received by the indemnitors with
respect to such liability, except as to claims under Section 12.03(A)(a)(iv) and
claims under Section 12.03(A)(a)(ii) for ordinary course payables of Sellers and
the Affiliated Entities which arise on or before the Determination Time, for
which there shall be no limitation on the liability of ESG and Sellers under
this Section 12.03, and any amounts paid by ESG or either Seller with respect to
any such claims shall not reduce the maximum liability ESG and Sellers shall
have under this Section 12.03, or (ii) with respect to breaches of
representations and warranties unless the aggregate amount of the losses to
Insignia Group, on the one hand, or the Seller Group, on the other hand, from
all such claims under this Section 12.03 exceeds $250,000 and, in such event,
ESG and Sellers, on the one hand, and Insignia and Buyer, on the other hand,
shall be required to pay only the amount by which the aggregate amount of such
claims exceeds $250,000.
(D) Limitation on Indemnification The indemnification provided for in this
Section 12.03 shall, from and after the
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Closing, be the sole remedy for any of the matters referred to herein in this
Section 12.03.
(E) Time and Manner of Certain Claims Except as otherwise expressly
provided herein, the representations and warranties set forth in this Agreement
shall survive only until the close of business on the date which is two years
after the Closing Date. Insignia, Buyer, ESG and Sellers shall be liable for
damages under Sections 12.03(A)(a) and 12.03(A)(b) hereof arising from their
respective misrepresentations or breaches of their warranties only to the extent
that notice of a claim therefor is asserted by the other in writing and
delivered on or prior to the close of business on such date, except that the
representations and warranties with respect to (i) the absence of certain
restrictions contained in Section 6.13(e) shall survive until the date which is
six years after the Closing Date, and (ii) ESG, Sellers' and the Affiliated
Entities' title contained in Section 6.01, employment and non-compete agreements
contained in Section 6.16(a), and customer data contained in Section 6.27 shall
survive until the expiration of the applicable statute of limitation. Insignia,
Buyer, ESG and Sellers shall be liable for damages under Section 12.03(A)(a) and
12.03(A)(b) hereof arising other than from their respective misrepresentations
or breaches of their warranties only to the extent that notice of a claim
therefor is asserted by the other in writing and delivered on or prior to the
close of business on the date which is five years
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after the Closing Date, except that (i) claims for damages for environmental
liabilities may be so asserted on or prior to the close of business on the date
which is seven years after the Closing Date, (ii) claims pursuant to Section
12.03(A)(a)(iv) and claims pursuant to Section 12.03(A)(a)(ii) for ordinary
course payables of Sellers and the Affiliated Entities which arise on or before
the Determination Time and claims pursuant to Section 12.03(A)(b)(iii) may be
asserted at any time, (iii) claims pursuant to Section 12.03(A)(a)(v) may be
asserted as to any Account Receivable or the related Pre-Closing Brokers Notes
Payable until three years after such Account Receivable is collected and (iv)
claims pursuant to Section 12.03(A)(a)(vi) may be asserted until December 31,
2002.
(F) Defense of Claims by Third Parties If any claim is made against
Insignia Group, on the one hand, or the Seller Group, on the other hand, by a
third party that, if sustained, would give rise to a liability of the other
under this Agreement, Insignia and Buyer or ESG and Sellers, as the case may be,
shall promptly cause notice of the claim to be delivered to the other and shall
afford the other and its counsel, at the other's sole expense, the opportunity
to defend or settle the claim; provided, however, that neither the Insignia
Group, on the one hand, nor the Seller Group, on the other hand, may settle
claims as to which the indemnifying party shall have the opportunity to defend
without the consent of the other, which consent shall not be unreasonably
withheld. If such notice and opportunity are not
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given to the other to the extent required herein, or if any claim is compromised
or settled without its consent to the extent required herein, no liability shall
be imposed upon the other by reason of such claim; provided, however, that the
failure of the indemnified party to give such notice promptly shall not relieve
the indemnifying party from liability hereunder except to the extent that the
indemnifying party has actually been prejudiced by such failure.
(G) Certain Obligations Excluded From Limitations Notwithstanding anything
to the contrary contained in this Article XII, the obligations of the parties
hereto pursuant to the provisions of Articles I, II, III, IV, V and XIII of this
Agreement shall not be subject to any limitation that might otherwise be
applicable to such obligation pursuant to this Article XII.
XIII. Miscellaneous.
--------------
Section 13.01 Brokerage Fees
------------- --------------
Each party hereto represents and warrants to the other parties that it has
not engaged a broker or finder in connection with or as a result of any of the
transactions contemplated by this Agreement, except that ESG and Sellers have
retained, and will be solely responsible for, all compensation and expenses owed
to, Gleacher NatWest Inc.
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Section 13.02 Further Actions
------------- ---------------
At any time and from time to time before and after the Closing, each party
agrees, at its expense, to take such actions and to execute and deliver such
documents as may be reasonably requested by any other party to effectuate the
purposes of this Agreement.
Section 13.03 Availability of Equitable Remedies
------------- ----------------------------------
Since a breach of the provisions of this Agreement could not adequately be
compensated by money damages, any party shall be entitled, after the Closing, in
addition to any other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific performance of
any such provision of this Agreement, and in either case no bond or other
security shall be required in connection therewith, and the parties hereby
consent to the issuance of such an injunction and to the ordering of specific
performance.
Section 13.04 Notices
------------- -------
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, by Federal Express, Express Mail, or similar overnight
delivery or courier service, or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to
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whom it is to be given at the address of such party set forth below (or to such
other address as the party shall hereafter furnish in writing in accordance with
the provisions of this Section 13.04). Any notice or other communication given
by certified mail shall be deemed given three days after the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 13.04 shall be deemed given at the time of receipt
thereof.
If to Sellers or ESG:
Mr. Edward S. Gordon
200 East 65th Street
Apt. 46S
New York, New York 10021
with copies to:
Edward S. Gordon Company Incorporated
200 Park Avenue
New York, New York 10166
Attention: Senior Vice President and General Counsel
and
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Attention: Howard L. Shecter, Esq.
If to Buyer or Insignia:
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Attention: John K. Lines, General Counsel
with a copy to:
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Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Arnold S. Jacobs, Esq.
Section 13.05 Waiver
------------- ------
Any waiver by any party of a breach of any term of this Agreement shall not
operate as or be construed to be a waiver of any other breach of that term or of
any breach of any other term of this Agreement. The failure of a party to insist
upon strict adherence to any term of this Agreement on one or more occasions
will not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any waiver must be in writing.
Section 13.06 Binding Effect
------------- --------------
The provisions of this Agreement shall be binding upon and inure to the
benefit of Sellers, ESG, Insignia, Buyer, and their respective successors and
assigns.
Section 13.07 No Third-Party Beneficiaries
------------- ----------------------------
Except as provided in Article XII, this Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
Section 13.08 Severability
------------- ------------
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If any provision of this Agreement is invalid, illegal, or unenforceable,
the balance of this Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
Section 13.09 Headings
------------- --------
The headings in this Agreement are solely for convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement.
Section 13.10 Arbitration
------------- -----------
Any dispute which this Agreement provides shall be resolved by arbitration
shall be referred to a panel of three arbitrators. ESG and Sellers shall
promptly designate one such arbitrator and Insignia and Buyer shall promptly
designate one such arbitrator. The two arbitrators so selected shall designate a
third arbitrator; provided, that in the event they are unable to agree upon a
third arbitrator, Insignia, Buyer, ESG or either Seller may apply to the Supreme
Court of New York, New York County for an appointment of a third arbitrator.
Each party hereto consents to the jurisdiction and venue of such Court for such
purpose. Each party to the arbitration shall specify the relief it seeks (which
shall not be in the alternative) and the arbitrators' determination shall be
limited to choosing one of the two parties' positions, and this restriction is a
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jurisdictional limitation on the arbitrators' power. The panel of arbitrators
shall act by majority vote, and its determination shall be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrators' decision in any court having jurisdiction. Each of the parties
shall bear the fees and expenses of the arbitrator appointed by them and shall
share equally the fees and expenses of the third arbitrator.
Section 13.11 Counterparts; Governing Law
------------- ---------------------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. It shall be governed by and construed in accordance with
the laws of New York, without giving effect to conflict of laws rules. The
parties agree that any action, suit, or proceeding arising out of, based on, or
in connection with this Agreement or the transactions contemplated hereby may be
brought only in the United States District Court for the Southern District of
New York or the Supreme Court of New York, New York County, and each party
covenants and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such action, suit, or proceeding, any claim that it is not
subject personally to the jurisdiction of such court, that its property is
exempt or immune from attachment or execution, that the action, suit, or
proceeding is brought in an inconvenient forum, that the venue of
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the action, suit, or proceeding is improper, or that this Agreement or the
subject matter hereof may not be enforced in or by such court.
Section 13.12 Attorneys' Fees
------------- ---------------
In any action or proceeding brought by a party to enforce any provision of
this Agreement, the prevailing party shall be entitled to recover the reasonable
costs and expenses incurred by it in connection with that action or proceeding
(including, but not limited to, attorneys' fees).
Section 13.13 Waiver of Trial by Jury
------------- -----------------------
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS
INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND
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REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 13.14 No Joint Venture or Partnership
------------- -------------------------------
Sellers, ESG, Insignia and Buyer intend that the relationships created
hereunder be solely that of buyer and seller. Nothing herein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between any of the parties.
Section 13.15 Construction of Documents
------------- -------------------------
The parties hereto acknowledge that they were represented by counsel in
connection with the negotiation and drafting of this Agreement and the documents
to be delivered pursuant hereto, none of which shall be subject to the principle
of construing their meaning against the party which drafted the document.
Section 13.16 Whole Agreement; Exhibits and Schedules; Amendments
------------- ---------------------------------------------------
This Agreement and the documents required to be delivered hereby together
with the letter agreement dated May 21,
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1996 between Insignia and New York Corp. contain the entire agreement of the
parties hereto in respect of the transactions contemplated hereby, and all prior
agreements among or between such parties, whether oral or written are superseded
by the terms of this Agreement. Exhibits and Schedules attached hereto or
referred to herein, shall be deemed as fully a part of this Agreement as if set
forth herein in full. This Agreement may be amended only in a writing signed by
the party to be bound thereby.
Section 13.17 Retention of Records and Access Thereto
------------- ---------------------------------------
For a period of seven years after the Closing Date, the parties shall
retain all books or records relating to the Business, and any party, wishing to
dispose or destroy books or records, shall provide not less than thirty days
prior written notice to the other parties of such proposed action. If the
recipient of such notice desires to obtain any of such documents, it may do so
by notifying the other party in writing at any time prior to the scheduled date
for such destruction or disposal. Such notice must specify the documents which
the requesting party wishes to obtain. The parties shall then promptly arrange
for the delivery of such documents. All out-of-pocket costs associated with the
delivery of the requested documents shall be paid by the requesting party. Buyer
shall, subject to such reasonable limitations as may be necessary to protect
proprietary information, at the expense of ESG and Sellers, and on reasonable
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prior notice to Buyer, (a) afford ESG and Sellers, and their counsel,
accountants, consultants and other representatives reasonable access during
normal business hours to examine and copy the books, tax returns, records and
files of Sellers and the Affiliated Entities which relate to periods prior to
the Closing Date and (b) cooperate with reasonable requests of ESG and Sellers
with respect to gathering information contained therein which may be necessary
to respond to inquiries or requests made by the proper governmental or
regulatory bodies or courts which relate to any tax returns or other documents
filed by or on behalf of Sellers or the Affiliated Entities prior to or relating
to the periods prior to the Closing Date. ESG and Sellers shall, at Buyer's sole
expense, during normal business hours, afford Buyer and its agents reasonable
access to and the opportunity to review and make copies of, all canceled checks
and other records of Sellers relating to the Business in connection with any
reasonable request of Buyer. The parties acknowledge that ESG maintains certain
personal files unrelated to the Business in the offices to be conveyed to Buyer
pursuant to this Agreement, that ESG may continue to so maintain such files
while he is employed by Buyer, that Insignia and Buyer shall not have access to
such files, and that ESG may remove such files at any time without notice.
Section 13.18 Knowledge
------------- ---------
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As used in this Agreement, the term "knowledge," with respect to ESG,
Sellers and the Affiliated Entities, means the actual knowledge after due
inquiry of any of Edward S. Gordon, Stephen B. Siegel, Anthony Saytanides, Stacy
L. Wallach and Roger Kahn, and with respect to Insignia and Buyer, means the
actual knowledge after due inquiry of any of Andrew L. Farkas, James A. Aston,
Frank M. Garrison, Ronald Uretta and John K. Lines.
XIV. Termination.
------------
Section 14.01 Bases for Termination
------------- ---------------------
This Agreement and the transactions contemplated hereby may be terminated
at any time on or prior to the Closing Date:
(a) by the mutual written consent of the parties hereto;
(b) by Buyer:
(i) if any representation or warranty of Sellers and ESG made in
this Agreement was untrue in any material respect when made or is
untrue in any material respect on the Closing Date; or
(ii) if Sellers or ESG shall have defaulted in any material
respect in the performance of any covenant, agreement or obligation
under this Agreement, and such default is
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not cured within ten days after Sellers' receipt of written notice
from Buyer that such default exists or has occurred; or
(iii) if the conditions to Buyer's obligations to consummate the
transactions contemplated hereby are not or cannot be satisfied on or
before August 31, 1996 for any reason other than a breach by Buyer.
(c) by Sellers and ESG:
(i) if any representation or warranty of Buyer and Insignia made
in this Agreement was untrue in any material respect when made or is
untrue in any material respect on the Closing Date; or
(ii) if Buyer shall have defaulted in any material respect in the
performance of any covenant, agreement or obligation under this
Agreement, and such default is not cured within ten days after Buyer's
receipt of written notice from Seller that such default exists or has
occurred; or
(iii) if the conditions to Sellers' obligations to consummate the
transactions contemplated hereby are not or cannot be satisfied on or
before August 31, 1996 for any reason other than a breach by Sellers
and ESG.
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<PAGE>
Section 14.02 Manner of Exercise
------------- ------------------
In the event of the termination of this Agreement prior to the Closing
pursuant to Section 14.01 written notice thereof shall forthwith be given to the
non-terminating parties, and this Agreement shall terminate and the transactions
contemplated hereunder shall be abandoned without further action by any party
hereto.
Section 14.03 Effect of Termination
------------- ---------------------
In the event of the termination of this Agreement prior to the Closing
pursuant to Section 14.01, all rights and obligations of the parties hereunder
shall terminate, except for the rights and obligations of any of the parties
under Section 8.03 and Article XII hereof including, without limitation, the
right of the non-breaching party to seek damages from a breaching party pursuant
to Article XII.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
INSIGNIA FINANCIAL GROUP, INC.
By /s/ Andrew L. Farkas
-----------------------
Name: Andrew L. Farkas
Title: Chairman, President and
Chief Executive Officer
INSIGNIA BUYER CORPORATION
By /s/ Frank M. Garrison
------------------------
Name: Frank M. Garrison
Title: President
/s/ Edward S. Gordon
--------------------
EDWARD S. GORDON
EDWARD S. GORDON COMPANY
INCORPORATED
By /s/ Anthony M. Saytanides
----------------------------
Name: Anthony M. Saytanides
Title: Executive Vice President
EDWARD S. GORDON COMPANY OF
NEW JERSEY, INC.
By /s/ Anthony M. Saytanides
----------------------------
Name: Anthony M. Saytanides
Title: Executive Vice President
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EXHIBIT 10.1
PROMISSORY NOTE
---------------
$5,000,000 July 1, 1996
FOR VALUE RECEIVED, Edward S. Gordon Company Incorporated, a New York
corporation, with its principal place of business at 200 Park Avenue, New York,
New York 10166, and Edward S. Gordon Company of New Jersey, Inc., a New Jersey
corporation, with its principal place of business at Park 80 West Plaza One,
Saddle Brook, New Jersey 07633 (together, the "Makers"), hereby jointly and
severally promise to pay to the order of Insignia Financial Group, Inc., a
Delaware corporation with its principal place of business at One Insignia
Financial Plaza, P.O. Box 1089, Greenville, South Carolina 29602 ("Holder") the
principal sum of Five Million ($5,000,000) dollars (the "Principal Amount"),
together with Interest (as defined below) on the unpaid Principal Amount from
the date hereof. The unpaid Principal Amount together with all unpaid Interest
thereon shall be due and payable on June 30, 1997, subject to mandatory
prepayment as provided below. Interest shall be payable on the last day of each
September, December, March and June, commencing September 30, 1996. Payments
shall be made in lawful money of the United States of America in immediately
available funds and shall be made at the address of Holder set forth above or
such other place as may be designated in writing from time to time by Holder.
This Note is the Note referred to in the Asset and Stock Purchase
Agreement, dated as of June 17, 1996, among the Holder, Insignia Buyer
Corporation, Edward S. Gordon, and the Makers (the "Purchase Agreement").
If any Interest on or any installment of the Principal Amount of this Note
becomes due and payable on a day that is not a business day in the State of New
York, the relevant payment obligation shall be extended to the next succeeding
business day and Interest shall be payable at the rate prescribed during such
extension.
"Interest" as used herein shall be (i) prior to an Event of Default (as
defined below), at a rate equal to the rate as in effect from time to time under
Holder's revolving credit facility under a Credit Agreement, dated December 11,
1995, by and among the Holder, the Lenders referred to therein, First Union
National Bank of South Carolina, as administrative agent, and Lehman Commercial
Paper, Inc., as syndication agent, but not less than the "prime rate" announced
by First Union National Bank of South Carolina from time to time and (ii) after
an Event of Default, a rate equal to 3% per annum above the rate provided in
(i); and (iii) in no event, more than the maximum rate permitted by applicable
law.
This Note may, at the option of Makers, be prepaid, in whole or in part, at
any time and any such prepayment shall be applied to the repayment of the
Principal Amount. Any such prepayment shall be without premium or penalty.
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The unpaid Principal Amount, together with all accrued Interest thereon,
shall, at the option of Holder, by written demand to Makers, become immediately
due and payable, without presentment for payment, demand, protest and notice of
protest or any further notice or demand of any kind, all of which are hereby
expressly waived, if any of the following events shall occur (such events
hereinafter referred to as "Events of Default"):
(1) Makers shall fail to pay, when due, any installment of Principal
Amount (whether at maturity or by mandatory prepayment) or Interest on this
Note;
(2) Either Maker or Edward S. Gordon makes an assignment for the
benefit of creditors or admits in writing its or his inability to pay its
or his debts generally as they become due;
(3) Either Maker or Edward S. Gordon applies to any tribunal for the
appointment of a custodian of any substantial part of its or his assets,
respectively, or commences any proceedings relating to it or him under any
bankruptcy, insolvency, reorganization or moratorium law or any other law
for the relief of debtors of any jurisdiction;
(4) Any application described in paragraph (3) is filed, or any such
proceedings are commenced, against either Maker or Edward S. Gordon and
either Maker or Edward S. Gordon, as the case may be, indicates its or his
approval, consent or acquiescence;
(5) A court of competent jurisdiction enters an order, judgment or
decree appointing, without the consent of either Maker or Edward S. Gordon,
as the case may be, a custodian for the whole or substantially all of
either Maker's or Edward S. Gordon's property, or approving a petition
filed against either Maker or Edward S. Gordon seeking reorganization or
arrangement of either Maker or Edward S. Gordon under any bankruptcy or
insolvency laws or any other law for the relief of debtors of any
jurisdiction, and such order, judgment or decree shall not be vacated or
set aside or stayed within 30 days from the date of entry thereof.
(6) Either Maker winds up its affairs, dissolves or liquidates, or
takes corporate action to effect any of the foregoing, or enters into or be
a party to any merger, consolidation or reorganization with an entity of
which Holder determines in its reasonable discretion has financial
attributes less favorable than those of such Maker at the time of such
merger, consolidation or reorganization, or sells, transfers or conveys,
leases or otherwise disposes of, or contracts to dispose of, all or
substantially all of such Maker's assets or business, other than pursuant
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<PAGE>
to the Purchase Agreement, provided, however, that a merger of Makers with
each other shall not be an Event of Default;
(7) Either Maker enters into or be a party to any merger,
consolidation or reorganization in which Edward S. Gordon is not the
majority shareholder of the surviving entity;
(8) Edward S. Gordon dies or ceases to be the majority shareholder of
either Maker;
(9) Either Maker fails to timely pay to Holder any amount due under
the Purchase Agreement other than an amount contested in good faith
pursuant to the procedures therein provided and such amount or any portion
thereof remains unpaid five business days after notice is given to the
Makers;
(10) One or more judgments, decrees or orders is entered against
either Maker which total $50,000 or more (in excess of insurance coverage),
which judgments or decrees are not vacated, discharged, stayed or bonded
pending appeal within 30 days from the later of date of entry or the date
upon which such Maker or Edward S. Gordon receives notice of same; or
(11) Either Maker breaches any terms or provisions of this Note (other
than a breach of a payment provision) or the Purchase Agreement, which
breach is not cured within 5 days after written notice thereof has been
given by Holder to such Maker.
(12) An Event of Default occurs under any of the Loan Documents (as
defined below).
(13) Any attachment, lien or additional security interest is placed
upon any of the property which is security for this Note.
Upon the occurrence of an Event of Default under this Note, in addition to
any rights or remedies specifically expressed herein, Holder may exercise any
and all rights and remedies available under the Loan Documents or applicable
law, either by suit in equity or by action at law, or both, all rights and
remedies being cumulative and not exclusive of each other. Holder shall not be
required to look first to any collateral for the payment of this Note, but may
proceed against Makers in such manner as it deems desirable. If Holder must
institute legal proceedings to enforce this Note, Makers agree to pay Holder, in
addition to any indebtedness due and unpaid, all reasonable costs and expenses
of such proceedings including reasonable attorneys' fees, expenses and
disbursements.
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<PAGE>
The nonexercise or delay in exercise by Holder of any of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.
This Note is the Note referred to in, and is subject to the provisions of,
a Guaranty Agreement (the "Guaranty"), of even date herewith, of Edward S.
Gordon in favor of Holder (all documents and instruments referred to in this
paragraph being collectively referred to as the "Loan Documents"). The terms,
covenants, conditions, provisions, stipulations and agreements of the Loan
Documents are hereby made a part of this Note, to the same extent and with the
same effect as if they were fully set forth herein and Makers do hereby covenant
to abide by and to comply with each and every term, covenant, provision,
stipulation, promise, agreement and condition set forth in the Loan Documents.
This Note and the rights and obligations of the parties hereunder shall be
construed and interpreted in accordance with the internal laws of the State of
New York without regard to its conflict of laws rules. The provisions of this
Note may not be changed orally. In any suit, action or proceeding in connection
with, or enforcement of, this Note, each Maker submits to the non-exclusive
jurisdiction of the courts of the State of New York and the Federal courts of
the United States located in the State of New York, and expressly waives all
objections it may have as to venue in any of such courts or any claim of
inconvenient forum. Each Maker consents to service of process by mailing a copy
thereof by registered or certified mail, return receipt requested, to such Maker
at its address set forth above or of which such Maker has advised the Holder in
writing, as indicated in the records of the Holder, with a copy to Howard L.
Shecter, Esq., Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY
10178-0060, and agrees that such service shall be deemed in every respect
effective service of process five (5) business days after the same shall have
been posted. Within thirty (30) calendar days after such mailing, such Maker
shall appear in answer to such process or notice of motion or other application
to said Courts, failing which such Maker shall be deemed in default and judgment
may be entered by the Holder against such Maker for the amount of the claim and
other relief requested therein.
EACH MAKER HEREBY VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT WITH RESPECT
TO ANY DISPUTE ARISING OUT OF OR RELATING TO THIS NOTE OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS OR ACTIONS OF ANY OF MAKERS OR HOLDER. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER TO EXTEND CREDIT TO MAKERS.
Any notice provided for in this Note shall be given by registered or
certified mail addressed to either Maker or Holder, as the case may be, at its
respective address set
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<PAGE>
forth above and if to either Maker, attention: Senior Vice President and General
Counsel, with a copy to Howard L. Shecter, Esq., Morgan, Lewis, & Bockius LLP,
101 Park Avenue, New York, NY 10178-0060, and if to Holder, attention: General
Counsel, with a copy to Arnold S. Jacobs, Esq., Proskauer Rose Goetz &
Mendelsohn LLP, 1585 Broadway, New York, NY 10036.
The obligations of Makers hereunder shall not be subject to any defense,
setoff, counterclaim, recoupment or termination whatsoever based upon the
invalidity, illegality or unenforceability of any other agreements between
Makers and Holder or otherwise.
This Note shall be binding upon Makers and their respective successors or
assigns provided that neither Maker shall assign its obligations under this Note
without the express written consent of Holder.
The invalidity or unenforceability of any provision of this Note shall not
affect the other provisions hereof and the remaining provisions of this Note
shall remain operative and in full force and effect.
EDWARD S. GORDON COMPANY
INCORPORATED
By: /s/ Edward S. Gordon
-----------------------
Edward S. Gordon, Chairman
5
<PAGE>
Attest: /s/ Anthony M. Saytanides [SEAL]
-------------------------
Anthony M. Saytanides, Secretary
EDWARD S. GORDON COMPANY OF
NEW JERSEY, INC.
By: /s/ Edward S. Gordon
--------------------
Edward S. Gordon, Chairman
Attest: /s/ Anthony M. Saytanides [SEAL]
------------------------- ------
Anthony M. Saytanides, Secretary
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<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this ____ day of July, 1996 before me personally came Edward S. Gordon
to me known, who being by me duly sworn, did depose and say that he is the
Chairman of Edward S. Gordon Company Incorporated, the corporation described by
and which executed the foregoing instrument as Maker; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereby by like order.
Notary Public
<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this day of July, 1996 before me personally came Edward S. Gordon to me
known, who being by me duly sworn, did depose and say that he is the Chairman of
Edward S. Gordon Company of New Jersey, Inc., the corporation described by and
which executed the foregoing instrument as Maker; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereby by like order.
Notary Public
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of June 17, 1996, is
by and among INSIGNIA FINANCIAL GROUP, INC., a Delaware corporation with an
office at One Insignia Financial Plaza, Post Office Box 1089, Greenville, South
Carolina 29602 (the "Parent Company"), INSIGNIA BUYER CORPORATION, a Delaware
corporation with an office at One Insignia Financial Plaza, Post Office Box
1089, Greenville, South Carolina 29602 (the "Company"), and EDWARD S. GORDON, an
individual with an office c/o Edward S. Gordon Company Incorporated, 200 Park
Avenue, New York, New York 10166 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to assure itself of the services of the
Executive for the period provided in this Agreement, and the Executive is
willing to serve in the employ of the Company for such period upon the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on the date of the
closing (the "Closing") of the transactions contemplated by the Asset and Stock
Purchase Agreement, dated as of June 17, 1996, among the Parent Company, the
Company, Edward S. Gordon, Edward S. Gordon Company Incorporated and Edward S.
Gordon Company of New Jersey, Inc. (the "Purchase Agreement") and ending on June
30, 2001 (the "Expiration Date"), subject to earlier termination as set forth
herein (such period, as it may be so terminated, being referred to herein as the
"Employment Period"). In the event (i) the Closing does not occur for any reason
on or prior to August 31, 1996 or such later date as the parties to the Purchase
Agreement shall agree upon, or (ii) on or prior to the date of the Closing the
Executive dies or becomes physically or mentally incapacitated or disabled or
otherwise unable to fully discharge his duties as contemplated by this
Agreement, then this Agreement shall automatically terminate ab initio and be of
no further force and effect.
SECTION 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve
as Chairman and Chief Executive Officer of the Company. In the performance
of his duties hereunder, the Executive shall report to and shall be
responsible only to the Chairman, Chief Executive Officer or President of
the Parent Company (as may be determined by the Board
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of Directors of the Parent Company from time to time). The Executive agrees
to his employment as described in this Section 2, and agrees to devote
substantially all of his time and efforts to the performance of his duties
hereunder. The Executive shall be available to travel as the needs of the
business of the Company require and as reasonably directed by the Chairman,
Chief Executive Officer or President of the Parent Company and the Boards
of Directors of the Parent Company and the Company.
(b) Location of Office. During the Employment Period, the Executive's
office shall be located in the principal executive offices of the Company,
which shall be in New York City, New York. The Company will provide the
Executive with a suitable office, an executive secretary reasonably
acceptable to him, and other support appropriate to his duties hereunder.
(c) Primary Responsibilities. During the Employment Period, the
Executive shall have responsibility for the financial and operational
affairs of the Company and its subsidiaries, in each case as directed by
the Chairman, Chief Executive Officer or President of the Parent Company
and the Boards of Directors of the Parent Company and the Company.
(d) Permitted Activities. Notwithstanding anything to the contrary
herein provided, the Executive (i) may make certain real estate and other
investments and hold positions as officers, directors and/or partners
thereof in so far as such positions and investments do not conflict with
the Executive's duties and loyalties to the Parent Company and the Company,
and (ii) may continue to hold all positions and operate businesses and/or
receive compensation and profit in accordance with Exhibit A annexed hereto
and incorporated herein and (iii) may hold such other positions, in
charitable and other organizations, as may be appropriate to his duties
hereunder and (iv) shall be permitted to devote a reasonable portion of his
time to the collection of accounts receivable of Edward S. Gordon Company
Incorporated and Edward S. Gordon of New Jersey, Inc. existing on the date
of the Closing, (collectively, the "Permitted Activities").
(e) Board of Directors of the Company. At the first meeting of the
Board of Directors of the Company following the Closing, the Company shall
cause the Executive to be elected to its Board of Directors and shall
renominate him to serve each year during the Employment Period, and if so
elected or appointed, the Executive agrees to serve as a director of the
Company. The Executive will serve in such capacity with no further
compensation except that the Executive shall be entitled to receive the
same director's fee, if any, payable by the Company to its other
employee-directors. Throughout the term of this Agreement, the Company's
Board of Directors shall consist of no more than seven individuals,
including the Executive and the Chairman, Chief Executive Officer and
President of the Parent Company. Executive acknowledges that the
stockholders of the Company have the sole right to elect all directors of
the Company. Executive agrees to resign from the Company's Board of
Directors immediately if his employment by the Company is terminated for
any reason.
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(f) Licensing. The Executive shall comply with the requirements of the
New York State Real Property Law (Broker's License Law) and New York
State's Rules for the Guidance of Real Estate Brokers and Salespersons and
shall maintain his real estate brokers license in effect at all times
during the Employment Period. If the Executive is not duly licensed as a
real estate broker or salesperson in New York at any time during the term
of this Agreement, the Executive will immediately notify the Chairman, the
President, and the General Counsel of the Company and of the Parent Company
of that fact, in writing. During such period the Executive will not engage
in any activities in violation of the applicable licensing laws, or any
other applicable law; and the Executive will diligently take all actions
necessary to obtain such license as soon as practicable thereafter. The
failure of the Executive (i) to maintain his real estate brokers license or
(ii) to allow the Company to rely on it for the Company's license during
the Employment Period shall constitute a material breach of this Agreement
which shall entitle the Company to terminate the Executive's employment for
cause.
(g) Membership. The Executive shall, at the Company's request and
expense, maintain a membership in the Real Estate Board of New York, Inc.
The Executive will at all times adhere to the Code of Ethics and
Professional Practices of said Board and to the requirements of all
applicable laws and governmental regulations.
(h) Other Duties. In addition to his duties with respect to the
Company, the Executive shall be appointed a member of the Office of the
Chairman of the Parent Company and shall serve on the Executive Management
Committee and the Senior Executive Management Committee of the Parent
Company. In such capacities, the Executive shall report directly to the
Chief Executive Officer of the Parent Company or such other individual as
may be designated by the Board of Directors of the Parent Company. The
Executive will also serve on the Management Committee of Insignia
Management Services-New York, Inc., a subsidiary of the Parent Company. The
Executive shall serve as a director and/or officer of any of the Parent
Company's subsidiaries or affiliates if the Parent Company so requests.
Executive shall not be entitled to receive any compensation for the
performance of the duties provided for in this Section 2(h) in addition to
the compensation expressly provided in this Agreement. Executive shall
endeavor to participate in all meetings of the Executive Management
Committee and the Senior Executive Management Committee. Executive shall
attend, participate in, and be the senior representative of the Company at
all monthly operations review meetings. It is acknowledged by Executive
that recurring failure of Executive to attend such meetings shall be a
material breach of this Agreement.
(i) The Executive shall confirm or execute new consents as necessary
to allow the use and registration of his personal name as provided in the
Purchase Agreement.
SECTION 3. Compensation. As full compensation for his services hereunder,
the Company shall pay, grant, issue, or give, as the case may be, to the
Executive the following:
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(a) Base Salary. Subject to the provisions of Section 6, a base salary
at the rate of $1,000,000 per annum (the "Base Salary"), payable in equal
bi-weekly installments or in such other installments consistent with the
policy of the Parent Company as it may be amended from time to time.
(b) Annual Bonus.
(i) Subject to the approval of the stockholders of Parent Company
as provided below, an annual bonus for the year ending December 31,
1997 or part thereof, and each subsequent year or part thereof during
the Employment Period in an amount equal to 0.75% of the Company's
gross revenues for such year or part thereof, if the Company's
earnings before interest, taxes, depreciation and amortization
(calculated in a manner consistent with that used by the Parent
Company historically for its public reporting, "EBITDA")) after
adjustment for any bonus payable pursuant to this Section 3(b)(i) with
respect to such year or part thereof is not less than the "Target
Amount" for such year or pro rata portion of the Target Amount for
partial years; provided, however, that in the event the Company's
EBITDA as so calculated is less than the Target Amount (pro rated for
partial years), the amount of such bonus shall be reduced by the
amount of such deficiency. For purposes of this Agreement, "Target
Amount" with respect to any year shall mean the Company's budgeted
EBITDA for such year as determined by the Parent Company's
Compensation Committee prior to the commencement of such year (and
which is $14 million for the year ending December 31, 1997), provided,
however, that the budgeted EBITDA for any year shall be not more than
110% of the budgeted EBITDA for the immediately preceding year, and
provided further, that the Target Amount may be increased or decreased
from time to time by such amount as the Parent Company's Compensation
Committee shall reasonably determine to reflect anticipated increases
or decreases in the Company's EBITDA as a result of any acquisitions
or dispositions, respectively, by the Company. Any such bonus shall be
paid to the Executive within one-hundred twenty (120) days after the
end of the year (or part thereof) in which it was earned.
(ii) Executive understands the bonus plan set forth in this
Section 3(b) is subject to the approval of the stockholders of the
Parent Company at a meeting of the stockholders of the Parent Company.
In the event such approval is not obtained on or before December 31,
1997, the provisions of this Section 3(b) shall be void ab initio, but
the other provisions of this Agreement that remain in full force and
effect provided this Agreement has not been earlier terminated in
accordance with its terms.
(c) Options. Options granted pursuant to the Parent Company's 1992 Stock
Incentive Plan, as amended, to purchase two hundred fifty thousand (250,000)
shares of the Class A Common Stock, par value $0.01 per share, of the Parent
Company (the "Parent Company Stock") at a price equal to the closing price of
the Parent Company Stock on the New York Stock Exchange on the last trading day
prior to the Closing which shall vest in five equal installments commencing on
the date six months after the Closing Date and each of the next four
anniversaries of such date.
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(d) Commissions. Exhibit B hereto sets forth certain potential transactions
(the "Identified Transactions") in which ABC has a personal involvement as a
broker, identifying the proposed parties to such transactions, the nature of or
properties involved in such transactions, the amount or percent of the proposed
commission, to the extent now known or determined, and Executive's percentage
split of any such commission. In the event any commission is earned by the
Company on or prior to December 31, 1996 with respect to any Identified
Transaction, Executive shall be entitled to an amount equal to his percentage
split of such commission if the Company's EBITDA for the period ended December
31, 1996 after adjustment for any such bonus is not less than $7 million;
provided, however, that in the event the Company's EBITDA as so calculated is
less than $7 million, the amount of such commission payable to Executive shall
be reduced by the amount of such deficiency. Any such amount payable to
Executive shall be paid to him on the later of (i) April 30, 1997 or (ii) thirty
(30) days after the date the Company receives payment of such commission.
Executive understands and agrees that he will not share in any commissions
earned by the Company other than commissions earned with respect to the
Identified Transactions.
(e) Fringe Benefit Programs. In addition to the other benefits provided to
the Executive hereunder, the right to participate in the fringe benefit programs
now or hereafter maintained by the Company or the Parent Company during the
Employment Period and offered by the Company or the Parent Company to its
managing directors. Such fringe benefit program may include, but not be limited
to, pension, profit sharing, stock purchase, stock option, savings, bonus,
disability, life insurance, health insurance, hospitalization, dental, and other
plans and policies authorized on the date hereof (collectively, "Company Benefit
Plans").
(f) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of
duties hereunder, including professional activities and membership fees and dues
relating to professional organizations of which the Executive currently is a
member or is directed to be a member by the Chairman or Chief Executive Officer
of the Parent Company, upon the presentation of appropriate documentation
therefor in accordance with the then regular policies and procedures of the
Company. The Executive's current professional activities and memberships are set
forth on Exhibit C, attached hereto and made a part hereof. The Executive shall
not engage in or apply for any other professional activity or memberships
without the prior written consent of the Chairman, Chief Executive Officer or
President of the Parent Company.
(g) Vacations. Paid vacation consisting of twenty (20) days during each
calendar year during the Employment Period, to be taken at such time as is
consistent with the needs of the Company as reasonably determined by the
Executive.
(h) License Back. The Executive shall be permitted only for the period of
his employment by the Company pursuant to this Agreement or otherwise to
continue to make use of the trademarks, servicemarks, trade names or logos of
the Company as they now appear or have been used and have appeared on aircraft
and related aircraft furnishings,
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fixtures and equipment used in connection with the Business (as defined in the
Purchase Agreement). This license back shall not be construed as a grant of
right or assignment to continue such use beyond the term of the Executive's
employment by the Company pursuant to this Agreement or otherwise. Any use other
than those now approved and as heretofore used is not contemplated by this
Agreement and requires the express written consent of the Company.
SECTION 4. Representations and Warranties of the Executive.
The Executive represents and warrants to the Parent Company and the Company
as follows:
(i) He is acquiring the securities represented by the Options and,
upon exercise of the Options, will acquire the underlying Parent Company
Stock, for his own account, for investment purposes only, and not with a
view toward the sale or other distribution thereof;
(ii) Other than the Permitted Activities, he is under no contractual
or other restriction or obligation which is inconsistent with the execution
of this Agreement, the performance of his duties hereunder, or the other
rights of the Parent Company or the Company hereunder; and
(iii) To the best of his knowledge, he is under no physical or mental
disability that would hinder his performance of his duties under this
Agreement.
SECTION 5. Non-Competition; Confidentiality.
(a) Non-Competition. In view of the unique and valuable services it is
expected the Executive will render to the Company and the Parent Company, the
Executive's knowledge of the customers, trade secrets, and other proprietary
information relating to the business of the Company and its customers and
suppliers, and similar knowledge regarding the Parent Company it is expected the
Executive will obtain, the Executive agrees that (i) so long as the Executive is
employed by the Company pursuant to this Agreement or otherwise and (ii) for a
period of five (5) years after the termination of such employment, he will not
compete with or be engaged in the same business as, or "Participate In" (as
hereinafter defined) any other business or organization which, at the time of
the cessation of the Employment Period, competes with or is engaged in the
Business (as defined in the Agreement) or the same business as the Company or
the Parent Company, with respect to any product or service sold or activity
engaged in by the Company or the Parent Company in any geographical area which
at the time of such cessation such product or service is sold or activity is
engaged in by the Company or the Parent Company; provided, however, that the
provisions of this Section 5 shall not be interpreted to preclude the Executive,
at any time and from time to time, from (i) Participating In any other
organization if approved by a majority of the Directors of the Parent Company,
or (ii) owning not more than five percent (5%) of the outstanding capital stock
of any publicly-traded person, or (iii) collecting
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Accounts Receivable (as defined in the Agreement) of the Sellers (as defined in
the Agreement) existing on the date of the Closing and the liquidation of
certain of the assets of the Sellers, or (iv) as set forth on Exhibit A. The
terms "Participate In" and "Participating In" shall mean: "directly or
indirectly, for his own benefit or for, with, or through any other person, own
or owning, manage or managing, operate or operating, control or controlling,
loan money to or lending money to, or participate in or participating in, as the
case may be, the ownership, management, operation, or control of, or be
connected or being connected, as the case may be, as a director, officer,
employee, partner, consultant, agent, independent contractor, or otherwise with,
or acquiesce or acquiescing, as the case may be, in the use of his name in." The
Executive will not directly or indirectly employ any person who, at any time up
to such cessation, was an employee of the Company or the Parent Company, within
a period of two years after such person leaves the employ of the Company or the
Parent Company or any of its affiliates other than his personal secretary and
the pilot assigned to pilot the Aircraft owned by Edward S. Gordon Company
Incorporated (referred to in the Purchase Agreement as New York Corp.). In
addition, the Executive agrees that following the Employment Period, he will not
solicit anyone for the purpose of providing management, leasing or related real
estate services with respect to the properties then managed and the clients then
served by the Company or the Parent Company.
(b) Confidentiality. All confidential information which the Executive may
now possess, may obtain during or after the Employment Period, or may create
prior to the end of the Employment Period or otherwise relating to the business
of the Company or the Parent Company or any of their subsidiaries or affiliates
or of any customer or supplier of any of them shall not be published, disclosed,
or made accessible by him to any other person, either during or after the
termination of his employment, or used by him except during the Employment
Period in the business and for the benefit of the Company, the Parent Company
and their subsidiaries and affiliates. In the event that the Executive becomes
legally compelled to disclose any of the confidential information, the Executive
will provide the Parent Company and the Company with prompt notice so that the
Parent Company and the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 5(b) and in
the event that such protective order or other remedy is not obtained, or should
the Parent Company and the Company waive compliance with the provisions of this
Section 5(b), the Executive will furnish only that portion of the confidential
information which is so legally required. The Executive shall return all
tangible evidence of such confidential information to the Company and the Parent
Company prior to or at the termination of his employment hereunder.
(c) Marks and Names. For so long as the Business remains in operation and
continues to conduct business under the trademarks, service marks, trade names
or personal names which are the subject of the Purchase Agreement, the Executive
shall refrain from making any use of the marks or names, or any marks or names
derivative or confusingly similar thereto in connection with the sale, offering
for sale or promotion of any goods or services that would otherwise appear to be
in competition with, endorsed by, authorized by, sponsored by or affiliated with
the Business.
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(d) Non-Competition Compensation. In consideration of Executive's
performance of the agreements set forth in Sections 5(a)(ii) above, Executive
shall be paid $1,000,000 in advance upon the commencement of the Employment
Period, to be allocated as $200,000 per year for each of the five years
contemplated by Section 5(a)(ii). Such $1,000,000 is acknowledged by Executive
to be full and adequate compensation for the restrictions on the conduct of the
Executive to which he has voluntarily consented in Section 5(a)(ii).
(e) Interpretation. Since a breach of the provisions of this Section 5
could not adequately be compensated by money damages, the Company or the Parent
Company shall be entitled, in addition to any other right and remedy available
to it, to seek an injunction restraining such breach and the Parent Company and
the Company shall not be required to post a bond in any proceeding brought for
such purpose. The Executive agrees that the provisions of this Section 5 are
necessary and reasonable to protect the Company and the Parent Company in the
conduct of their respective businesses. If any restriction contained in this
Section 5 shall be deemed to be invalid, illegal, or unenforceable by reason of
the extent, duration, or geographical scope thereof, or otherwise, then the
court making such determination shall have the right to reduce such extent,
duration, geographical scope, or other provisions hereof, and in its reduced
form such restriction shall then be enforceable in the manner contemplated
hereby. Nothing herein shall be construed as prohibiting the Company or the
Parent Company from pursuing any other remedies, at law or in equity, for such
breach or threatened breach.
SECTION 6. Termination.
(a) Definitions.
(i) Death Termination Event. As used herein, "Death Termination Event"
shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable to
fully discharge his duties hereunder for a period of 100 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the event
that the last will and testament of the Executive has not been probated at
the time of determination, the estate of the Executive, and (B) in the
event that the last will and testament of the Executive has been probated
at the time of determination, the legatees or the Executor who are entitled
under such will to the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term "Termination For
Cause" shall mean the termination by the Company of the Executive's
employment hereunder upon a good faith determination by a majority vote of
the members of the Board of Directors of the Parent Company that
termination of this Agreement is necessary by
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reason of (A) the conviction of the Executive of a felony under state or
federal law, unless in any such case the Executive performed such act in
good faith and in a manner the Executive reasonably believed to be in or
not opposed to the best interests of the Company or the Parent Company, (B)
the continued material breach by the Executive of any of the material
provisions of this Agreement for a period of thirty days after written
notice of such breach is given to the Executive by the Company or the
Parent Company, (C) failure by the Executive to comply with any material
directive of the Board of Directors of the Company or the Parent Company
which shall continue for ten days after written notice thereof is given to
the Executive, (D) a violation of the confidentiality provisions of
Sections 5 and 10 of this Agreement by the Executive, (E) the taking by the
Executive of any action on behalf of the Company or the Parent Company
knowingly without the possession by the Executive of the appropriate
authority to take such action, provided that Executive shall have five (5)
days after written notice thereof to cure such breach, (F) the taking by
the Executive of actions (other than Permitted Activities) in conflict of
interest with the Company, the Parent Company or their subsidiaries or
affiliates, given the Executive's positions with the Company, the Parent
Company and their subsidiaries and affiliates, provided that Executive
shall have five (5) days after written notice thereof to cure such breach,
(G) the usurpation of a corporate opportunity of the Company, the Parent
Company or their subsidiaries or affiliates by the Executive; provided,
however, the parties acknowledge and agree that no Permitted Activity shall
constitute a corporate opportunity, and further provided that Executive
shall have five (5) days after written notice thereof to cure such breach,
(H) the recurring failure to attend and participate in (x) Executive
Management Committee Meetings, (y) Senior Executive Management Committee
Meetings and (z) Monthly Operations Review Meetings, provided that the
Executive shall have five (5) days after written notice thereof to cure
such breach, (I) a failure as provided in the last sentence of Section
2(f), provided that Executive shall have five (5) days after written notice
thereof to cure such breach, or (J) a material breach or default of any of
the representations, warranties, covenants or agreements contained in the
Purchase Agreement which continues for a period of not less than five days
after Executive has received notice thereof, which (i) shall have been
asserted within twenty- four (24) months after the Closing and (ii) results
in aggregate losses, liabilities, costs, and/or damages in excess of Four
Hundred Thousand ($400,000) Dollars.
(v) Termination Without Cause. As used herein, "Termination Without
Cause" shall mean any termination of the Executive's employment hereunder
by the Company or the Parent Company that is not a Termination For Cause, a
Death Termination Event, or a Disability Termination Event.
(b) Death Termination Event. Upon the occurrence of a Death Termination
Event, this Agreement shall terminate automatically upon the date that such
Death Termination Event occurred (subject to the last sentence of this Section
6), whereupon the Company shall pay to the Estate compensation at the annual
rate of One Million Two Hundred Thousand ($1,200,000) Dollars for a period equal
to the remaining term of the Employment Period (determined upon the assumption
that the Employment Period will not be terminated prior to the Expiration Date),
but in no event longer than two (2) years.
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(c) Disability Termination Event. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 6).
(d) Termination For Cause. The Executive and the Company and the Parent
Company agree that the Company and the Parent Company shall have the right to
effectuate a Termination For Cause prior to the Expiration Date. Upon the
occurrence of a Termination For Cause, this Agreement shall terminate upon the
date that such Termination For Cause occurs (subject to the last sentence of
this Section 6), whereupon the Executive shall be entitled to receive the Base
Salary, as then in effect, to and including the date that such Termination For
Cause occurs.
(e) Termination Without Cause. Upon the occurrence of a Termination Without
Cause, this Agreement shall terminate upon the date that such Termination
Without Cause occurs (subject to the last sentence of this Section 6), whereupon
the Company shall pay to the Executive compensation at the annual rate of One
Million Two Hundred Thousand ($1,200,000) Dollars until the Expiration Date.
(f) Sports Tickets. Upon termination or expiration of the Employment Period
for any reason, the Company shall assign and transfer to Executive all tickets
to Mets baseball games and subscription right thereto acquired upon the
consummation of the Agreement.
Notwithstanding anything in this Agreement to the contrary, Sections 3 (as to
compensation, commissions, fringe benefits and expense reimbursements to which
Executive became entitled prior to termination of this Agreement), 3(f), 4, 5,
6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17 of this Agreement shall survive
any termination of this Agreement or of the Executive's employment hereunder
until the expiration of the statute of limitations applicable hereto.
SECTION 7. Indemnification. Simultaneously with the Closing, the Parent
Company and the Executive shall enter into an Indemnification Agreement in the
form annexed hereto as Exhibit D.
SECTION 8. Key Man Life Insurance. The Company and/or the Parent Company
shall have the right to place a "key man" life insurance policy, providing a
death benefit of $20,000,000 (or such greater or lesser amount as the Company
and/or the Parent Company shall determine from time to time) upon the life of
the Executive, for which the Company and/or the Parent Company shall be the
beneficiary (the "Key Man Insurance Policy"). In connection therewith, the
Executive hereby authorizes the Company and/or the Parent Company, at their sole
cost and expense, to purchase and maintain upon the life of the Executive such
insurance policy, and agrees to submit to such medical examinations, and to
provide and/or consent to the release of such medical information, as may be
necessary or desirable in order to secure the issuance thereof.
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SECTION 9. Withholding. The Company and the Parent Company shall be
entitled to withhold from amounts payable to the Executive hereunder such
amounts as may be required by applicable law to be so withheld.
SECTION 10. Survival. Subject to the provisions of the last sentence of
Section 1 of this Agreement, the covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive the
termination of this Agreement, irrespective of any investigation made by or on
behalf of any party hereto. All confidential information which the Executive may
now possess, may obtain during or after the Employment Period, or may create
prior to the end of the Employment Period or otherwise relating to the business
of the Company, the Parent Company or any of their subsidiaries or affiliates or
of any customer or supplier of any of them shall not be published, disclosed, or
made accessible by him to any other person, either during or after the
termination of his employment, or used by him except during the Employment
Period in the business and for the benefit of the Company, the Parent Company
and their subsidiaries and affiliates. The Executive shall return all tangible
evidence of such confidential information to the Company and the Parent Company
prior to or at the termination of his employment hereunder.
SECTION 11. Modification. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified or terminated only by a written instrument duly executed by
each party. Executive acknowledges and agrees that neither the Company, the
Parent Company nor its subsidiaries or affiliates has or will assume or become
obligated under any existing employment agreements or arrangements between the
Executive and any of Edward S. Gordon Company Incorporated, Edward S. Gordon
Company of New Jersey, Inc., or the Affiliated Entities (as defined in the
Purchase Agreement).
SECTION 12. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 12.)
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 12. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 13. Waiver. Any waiver by either party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter
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to insist upon strict adherence to that term or any other term of this
Agreement. Any waiver must be in writing.
SECTION 14. Binding Effect. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance, or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company, the Parent Company and
their successors.
SECTION 15. Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
SECTION 16. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company, the Parent
Company and their respective representatives have participated in the
preparation hereof.
SECTION 17. Headings. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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SECTION 19. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to the conflict of law provisions thereof.
SECTION 20. Waiver of Trial by Jury.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO
ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS
AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT
IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
---------------------
Name: Frank M. Garrison
Title: Executive Managing Director
INSIGNIA BUYER CORPORATION
By: /s/ Frank M. Garrison
---------------------
Name: Frank M. Garrison
Title: President
/s/ Edward S. Gordon
--------------------
EDWARD S. GORDON
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of June 17, 1996, is
by and among INSIGNIA FINANCIAL GROUP, INC., a Delaware corporation with an
office at One Insignia Financial Plaza, Post Office Box 1089, Greenville, South
Carolina 29602 (the "Parent Company"), INSIGNIA BUYER CORPORATION, a Delaware
corporation with an office at One Insignia Financial Plaza, Post Office Box
1089, Greenville, South Carolina 29602 (the "Company") and STEPHEN B. SIEGEL, an
individual with an office c/o Edward S. Gordon Company Incorporated, 200 Park
Avenue, New York, New York 10166 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to assure itself of the services of the
Executive for the period provided in this Agreement, and the Executive is
willing to serve in the employ of the Company for such period upon the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on the date of the
closing (the "Closing") of the transactions contemplated by the Asset and Stock
Purchase Agreement, dated as of June 17, 1996, among the Parent Company, the
Company, Edward S. Gordon, Edward S. Gordon Company Incorporated and Edward S.
Gordon Company of New Jersey, Inc. (the "Purchase Agreement") and ending on June
30, 1999 (the "Expiration Date"), subject to earlier termination as set forth
herein (such period, as it may be so terminated, being referred to herein as the
"Employment Period"). In the event (i) the Closing does not occur for any reason
on or prior to August 31, 1996 or such later date as the parties to the Purchase
Agreement shall agree upon or (ii) on or prior to the date of the Closing the
Executive dies or becomes physically or mentally incapacitated or disabled or
otherwise unable to fully discharge his duties as contemplated by this
Agreement, then this Agreement shall automatically terminate ab initio and be of
no further force and effect.
SECTION 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve
as President of the Company. In the performance of his duties hereunder,
the Executive shall report to and shall be responsible only to the
Chairman, Chief Executive Officer or President of the Parent Company or the
Chairman of the Company (as may be determined by the
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Board of Directors of the Parent Company from time to time). The Executive
agrees to his employment as described in this Section 2, and agrees to
devote substantially all of his time and efforts to the performance of his
duties hereunder. The Executive shall be available to travel as the needs
of the business of the Company require and as reasonably directed by the
Chairman, Chief Executive Officer or President of the Parent Company and
the Boards of Directors of the Parent Company and the Company.
(b) Location of Office. During the Employment Period, the Executive's
office shall be located in the principal executive offices of the Company,
which shall be in New York City, New York. The Company will provide the
Executive with a suitable office, an executive secretary reasonably
acceptable to him, and other support appropriate to his duties hereunder.
(c) Primary Responsibilities. During the Employment Period, the
Executive shall have responsibility for the financial and operational
affairs of the Company and its subsidiaries, in each case as directed by
the Chairman of the Company and the Boards of Directors of the Parent
Company and the Company.
(d) Permitted Activities. Notwithstanding anything to the contrary
herein provided, the Executive (i) may make certain real estate and other
investments and hold positions as officers, directors and/or partners
thereof in so far as such positions and investments do not conflict with
the Executive's duties and loyalties to the Parent Company and the Company,
and (ii) may continue to hold all positions and operate businesses and/or
receive compensation in accordance with Exhibit A annexed hereto and
incorporated herein and (iii) may hold such other positions, in charitable
and other organizations, as may be appropriate to his duties hereunder,
(collectively, the "Permitted Activities").
(e) Licensing. The Executive shall comply with the requirements of the
New York State Real Property Law (Broker's License Law) and New York
State's Rules for the Guidance of Real Estate Brokers and Salespersons and
shall maintain his real estate brokers license in effect at all times
during the Employment Period. If the Executive is not duly licensed as a
real estate broker or salesperson in New York at any time during the term
of this Agreement, the Executive will immediately notify the Chairman, the
President, and the General Counsel of the Company and of the Parent Company
of that fact, in writing. During such period the Executive will not engage
in any activities in violation of the applicable licensing laws, or any
other applicable law; and the Executive will diligently take all actions
necessary to obtain such license as soon as practicable thereafter. The
failure of the Executive to maintain his real estate brokers license during
the Employment Period shall constitute a material breach of this Agreement
which shall entitle the Company to terminate the Executive's employment for
cause.
(f) Membership. The Executive shall, at the Company's request and
expense, maintain a membership in the Real Estate Board of New York, Inc.
The Executive will at all times adhere to the Code of Ethics and
Professional Practices of said Board and to the requirements of all
applicable laws and governmental regulations.
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(g) Other Duties. In addition to his duties with respect to the
Company, the Executive shall serve on the Executive Management Committee of
the Parent Company. In such capacities, the Executive shall report directly
to the Chief Executive Officer of the Company or such other individual as
may be designated by the Board of Directors of the Parent Company. The
Executive shall serve as a director and/or officer of any of the Parent
Company's subsidiaries or affiliates if the Parent Company so requests.
Executive shall not be entitled to receive any compensation for the
performance of the duties provided for in this Section 2(g) in addition to
the compensation expressly provided in this Agreement. Executive shall
endeavor to participate in all meetings of the Executive Management
Committee. Executive shall attend, participate in, and be a representative
of the Company at all monthly operations review meetings of the Parent
Company. It is acknowledged by Executive that recurring failure of
Executive to attend such meetings shall be a material breach of this
Agreement.
SECTION 3. Compensation. As full compensation for his services hereunder,
the Company shall pay, grant, issue, or give, as the case may be, to the
Executive the following:
(a) Base Salary. Subject to the provisions of Section 6, a base salary
at the rate of $600,000 per annum (the "Base Salary"), payable in equal
bi-weekly installments or in such other installments consistent with the
policy of the Parent Company as it may be amended from time to time.
(b) Override. An override equal to 0.6% of the gross commissions
received (as defined below) by the Company in each calendar year or part
thereof during the Employment Period. The Company shall advance to the
Executive an amount equal to $50,000 less withholding permitted by Section
8 on the first day of each month (such amounts including the related
withholding are referred to as the "Advances"). Not later than March 31
following each year (or 90 days following the termination of the Employment
Period, if earlier), the Company shall deliver to the Executive a
calculation of the amount of override payable to him pursuant to this
Section 3(b) for the preceding year (or portion thereof if the Employment
Period has terminated during such year). In the event the Advances for any
such period exceed the override earned for such period, the Executive shall
repay such excess to the Company within 15 days of receipt of such
calculation. In the event the override earned for such period exceeds the
Advances for such period, the Company shall pay such excess less
withholding to the Executive within 15 days of delivery of such
calculation.
(c) Commissions. A commission equal to a percentage (as determined
below) of the commissions earned, received and retained (collectively,
"received") by the Company upon transactions as to which the Executive has
rendered services recognized by the Company. The Executive's share of all
promotional commission revenues described above shall be thirty (30%)
percent, and the Company's share shall be seventy (70%) percent; and the
Executive's share of all net commission (e.g. arising from a transaction
where the Company is agent for the owner of the leased premises) revenues
described above
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shall be fifty (50%) percent and the Company's share shall be fifty (50%)
percent. Such compensation shall be earned by the Executive only when such
commissions have been received by the Company and shall be payable to the
Executive at the time and in the manner that commissions are paid to other
real estate salespersons/brokers of the Company in accordance with the then
current Company policy.
(d) Annual Bonus. An annual bonus for the year ending December 31,
1997 and subsequent years in an amount determined by the Compensation
Committee and approved by the Board of Directors of the Parent Company, in
its sole discretion; provided and on condition that the "Adjusted Profits"
(as hereinafter defined) of the Company shall equal or exceed $15,000,000
for the year ending December 31, 1997, which threshold shall increase for
each subsequent year to an amount equal to not more than 110% of the
budgeted amount for the immediately preceding year (the "Target Amount").
Such bonus shall be paid to the Executive within one-hundred-twenty (120)
days after the end of the Company's fiscal year. For purposes of this
Agreement, "Adjusted Profits" shall mean the earnings before interest,
taxes, depreciation, and amortization of the Company (and all wholly-owned
subsidiaries of the Company) computed in accordance with generally accepted
accounting principles, consistently applied, but increased by any bonus
paid to the Executive pursuant to this Section 3(c); provided, however,
that the Target Amount may be increased or decreased from time to time by
such amount as the Parent Company's Compensation Committee shall reasonably
determine to reflect anticipated increases and decreases in Adjusted
Profits as a result of any acquisitions or dispositions, respectively, by
the Company.
(e) Options. Options granted pursuant to the Parent Company's 1992
Stock Incentive Plan, as amended, to purchase seventy-five thousand
(75,000) shares of the Class A Common Stock, par value $0.01 per share, of
the Parent Company (the "Parent Company Stock") at a price equal to the
closing price of the Parent Company Stock on the New York Stock Exchange on
the last trading day prior to the Closing which shall vest in five equal
installments commencing on the date six months after the Closing Date and
each of the next four anniversaries of such date.
(f) Fringe Benefit Programs. In addition to the other benefits
provided to the Executive hereunder, the right to participate in the fringe
benefit programs now or hereafter maintained by the Company or the Parent
Company during the Employment Period and offered by the Company or the
Parent Company to its managing directors. Such fringe benefit program may
include, but not be limited to, pension, profit sharing, stock purchase,
stock option, savings, bonus, disability, life insurance, health insurance,
hospitalization, dental, and other plans and policies authorized on the
date hereof (collectively, "Company Benefit Plans").
(g) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance
of duties hereunder, including professional activities and membership fees
and dues relating to professional organizations of which the Executive
currently is a member or is directed to be a member by the Chairman or
Chief Executive Officer of the Parent Company, upon the
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presentation of appropriate documentation therefor in accordance with the
then regular policies and procedures of the Company. The Executive's
current professional activities and memberships are set forth on Exhibit B,
attached hereto and made a part hereof. The Executive shall not engage in
or apply for any other professional activity or membership without the
prior written consent of the Chairman, Chief Executive Officer or President
of the Parent Company.
(h) Vacations. Paid vacation consisting of twenty (20) days during
each calendar year during the Employment Period, to be taken at such time
as is consistent with the needs of the Company as reasonably determined by
the Executive.
SECTION 4. Representations and Warranties of the Executive.
The Executive represents and warrants to the Parent Company and the Company
as follows:
(i) He is acquiring the securities represented by the Options and,
upon exercise of the Options, will acquire the underlying Parent Company
Stock, for his own account, for investment purposes only, and not with a
view toward the sale or other distribution thereof;
(ii) Other than the Permitted Activities, he is under no contractual
or other restriction or obligation which is inconsistent with the execution
of this Agreement, the performance of his duties hereunder, or the other
rights of the Parent Company or the Company hereunder; and
(iii) To the best of his knowledge, he is under no physical or mental
disability that would hinder his performance of his duties under this
Agreement.
SECTION 5. Non-Competition; Confidentiality.
(a) Non-Competition. In view of the unique and valuable services it is
expected the Executive will render to the Company and the Parent Company,
the Executive's knowledge of the customers, trade secrets, and other
proprietary information relating to the business of the Company and its
customers and suppliers, and similar knowledge regarding the Parent Company
it is expected the Executive will obtain, the Executive agrees that (i) so
long as he is employed by the Company pursuant to this Agreement or
otherwise and (ii) for a period of two (2) years after the Termination for
Cause (as hereinafter defined) of such employment or the Executive's
termination of such employment during the Employment Period, he will not
compete with or be engaged in the same business as, or "Participate In" (as
hereinafter defined) any other business or organization which, at the time
of the cessation of the Employment Period, competes with or is engaged in
the Business (as defined in the Agreement) or the same business as the
Company or the Parent Company, with respect to any product or service sold
or activity engaged in by the Company or the Parent Company in any
geographical area which at the time of such cessation such product or
service is sold or
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activity is engaged in by the Company or the Parent Company; provided,
however, that the provisions of this Section 5 shall not be interpreted to
preclude the Executive, at any time and from time to time, from (i)
Participating In any other organization if approved by a majority of the
Directors of the Parent Company, or (ii) owning not more than five percent
(5%) of the outstanding capital stock of any publicly-traded person or
(iii) as set forth on Exhibit A. In the event of a Termination Without
Cause (as hereinafter defined) of Executive's employment the Executive
shall, at his election, either (i) observe the non- competition agreement
set forth in the first sentence of this Section 5(a) for the remainder of
the Employment Period and continue to receive the compensation provided for
herein, or (ii) accept other employment (the "Competing Employment") in the
real estate industry which violates the non-competition agreement set forth
in the first sentence of this Section 5(a) and receive compensation at the
annual rate of $1,200,000 less the aggregate amount of compensation payable
to him from the Competing Employment for the remainder of the Employment
Period. In the event this Agreement is not extended beyond the Employment
Period, the Executive shall not be bound by the non-competition agreement
set forth in the first sentence of this Section 5(a). The terms
"Participate In" and "Participating In" shall mean: "directly or
indirectly, for his own benefit or for, with, or through any other person,
own or owning, manage or managing, operate or operating, control or
controlling, loan money to or lending money to, or participate in or
participating in, as the case may be, the ownership, management, operation,
or control of, or be connected or being connected, as the case may be, as a
director, officer, employee, partner, consultant, agent, independent
contractor, or otherwise with, or acquiesce or acquiescing, as the case may
be, in the use of his name in." Notwithstanding the termination or failure
to extend the term of this Agreement for any reason, the Executive will not
directly or indirectly employ any person who, at any time up to such
cessation of Executive's employment, was an employee of the Company or the
Parent Company, within a period of two years after such person leaves the
employ of the Company or the Parent Company or any of its affiliates other
than his personal secretary. In addition, notwithstanding the termination
or failure to extend the term of this Agreement for any reason, the
Executive agrees that following the Employment Period, he will not solicit
anyone for the purpose of providing management, leasing or related real
estate services with respect to the properties then managed and the clients
then served by the Company or the Parent Company.
(b) Confidentiality. All confidential information which the Executive
may now possess, may obtain during or after the Employment Period, or may
create prior to the end of the Employment Period or otherwise relating to
the business of the Company or the Parent Company or any of their
subsidiaries or affiliates or of any customer or supplier of any of them
shall not be published, disclosed, or made accessible by him to any other
person, either during or after the termination of his employment, or used
by him except during the Employment Period in the business and for the
benefit of the Company, the Parent Company and their subsidiaries and
affiliates. In the event that the Executive becomes legally compelled to
disclose any of the confidential information, the Executive will provide
the Parent Company and the Company with prompt notice so that the Parent
Company and the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 5(b) and
in the event that such protective order
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or other remedy is not obtained, or should the Parent Company and the
Company waive compliance with the provisions of this Section 5(b), the
Executive will furnish only that portion of the confidential information
which is so legally required. The Executive shall return all tangible
evidence of such confidential information to the Company and the Parent
Company prior to or at the termination of his employment hereunder.
(c) Non-Competition Compensation. In consideration of Executive's
performance of the agreements set forth in Sections 5(a)(ii) above,
Executive shall be paid $300,000 in advance upon the commencement of the
Employment Period, to be allocated to the non-competition agreement in
Section 5(a)(ii). Such $300,000 is acknowledged by Executive to be full and
adequate compensation for the restrictions on the conduct of the Executive
to which he has voluntarily consented in Section 5(a)(ii).
(d) Interpretation. Since a breach of the provisions of this Section 5
could not adequately be compensated by money damages, the Company or the
Parent Company shall be entitled, in addition to any other right and remedy
available to it, to seek an injunction restraining such breach and the
Parent Company and the Company shall not be required to post a bond in any
proceeding brought for such purpose. The Executive agrees that the
provisions of this Section 5 are necessary and reasonable to protect the
Company and the Parent Company in the conduct of their respective
businesses. If any restriction contained in this Section 5 shall be deemed
to be invalid, illegal, or unenforceable by reason of the extent, duration,
or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form
such restriction shall then be enforceable in the manner contemplated
hereby. Nothing herein shall be construed as prohibiting the Company or the
Parent Company from pursuing any other remedies, at law or in equity, for
such breach or threatened breach.
SECTION 6. Termination.
(a) Definitions.
(i) Death Termination Event. As used herein, "Death Termination Event"
shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable to
fully discharge his duties hereunder for a period of 100 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the event
that the last will and testament of the Executive has not been probated at
the time of determination, the estate of the Executive, and (B) in the
event that the last will and testament of the Executive has been probated
at the time of determination, the legatees or the Executor who are entitled
under such will to the assets or payments at issue.
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(iv) Termination For Cause. As used herein, the term "Termination For
Cause" shall mean the termination by the Company of the Executive's
employment hereunder upon a good faith determination by a majority vote of
the members of the Board of Directors of the Parent Company that
termination of this Agreement is necessary by reason of (A) the conviction
of the Executive of a felony under state or federal law, unless in any such
case the Executive performed such act in good faith and in a manner the
Executive reasonably believed to be in or not opposed to the best interests
of the Company or the Parent Company, (B) the continued material breach by
the Executive of any of the material provisions of this Agreement for a
period of thirty days after written notice of such breach is given to the
Executive by the Company or the Parent Company, (C) failure by the
Executive to comply with any material directive of the Board of Directors
of the Company or the Parent Company which shall continue for ten days
after written notice thereof is given to the Executive, (D) a violation of
the confidentiality provisions of Sections 5 or 9 of this Agreement by the
Executive, (E) the taking by the Executive of any action on behalf of the
Company or the Parent Company knowingly without the possession by the
Executive of the appropriate authority to take such action, provided that
Executive shall have five (5) days after written notice thereof to cure
such breach, (F) the taking by the Executive of actions (other than
Permitted Activities) in conflict of interest with the Company, the Parent
Company or their subsidiaries or affiliates, given the Executive's
positions with the Company, the Parent Company and their subsidiaries and
affiliates, provided that Executive shall have five (5) days after written
notice thereof to cure such breach, (G) the usurpation of a corporate
opportunity of the Company, the Parent Company or their subsidiaries or
affiliates by the Executive; provided, however, the parties acknowledge and
agree that no Permitted Activity shall constitute a corporate opportunity,
and further provided that the Executive shall have five (5) days after
written notice thereof to cure such breach, (H) the recurring failure to
attend and participate in (x) Executive Management Committee Meetings, and
(y) Monthly Operations Review Meetings, provided that the Executive shall
have five (5) days after written notice thereof to cure such breach, (I) a
failure as provided in the last sentence of Section 2(e), provided that the
Executive shall have five (5) days after written notice thereof to cure
such breach, or (J) a material breach or default of any of the
representations, warranties, covenants or agreements contained in the
Purchase Agreement which continues for a period of not less than five days
after Executive has received notice thereof, which (i) shall have been
asserted within twenty-four (24) months after the Closing and (ii) results
in aggregate losses, liabilities, costs, and/or damages in excess of Four
Hundred Thousand ($400,000) Dollars.
(v) Termination Without Cause. As used herein, "Termination Without
Cause" shall mean any termination of the Executive's employment hereunder
by the Company or the Parent Company that is not a Termination For Cause, a
Death Termination Event, or a Disability Termination Event.
(b) Death Termination Event. Upon the occurrence of a Death Termination
Event, this Agreement shall terminate automatically upon the date that such
Death Termination Event occurred (subject to the last sentence of this Section
6), whereupon the Company shall pay to the Estate compensation at the annual
rate of One Million Two
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Hundred Thousand ($1,200,000) Dollars for a period equal to the remaining term
of the Employment Period (determined upon the assumption that the Employment
Period will not be terminated prior to the Expiration Date), but in no event
longer than one (1) year.
(c) Disability Termination Event. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 6).
(d) Termination For Cause. The Executive and the Company and the Parent
Company agree that the Company and the Parent Company shall have the right to
effectuate a Termination For Cause prior to the Expiration Date. Upon the
occurrence of a Termination For Cause, this Agreement shall terminate upon the
date that such Termination For Cause occurs (subject to the last sentence of
this Section 6), whereupon the Executive shall be entitled to receive the Base
Salary, as then in effect, to and including the date that such Termination For
Cause occurs.
(e) Termination Without Cause. Upon the occurrence of a Termination Without
Cause, this Agreement shall terminate upon the date that such Termination
Without Cause occurs (subject to the last sentence of this Section 6), whereupon
the Executive shall make the election provided for in the second sentence of
Section 5(a) and shall be compensated in accordance with such election.
Notwithstanding anything in this Agreement to the contrary, Sections 3 (as
to compensation, overrides, commissions, fringe benefits and expense
reimbursements to which Executive became entitled prior to termination of this
Agreement), 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17 of this
Agreement shall survive any termination of this Agreement or of the Executive's
employment hereunder until the expiration of the statute of limitations
applicable hereto.
SECTION 7. Indemnification. The Company and the Parent Company hereby
agree, jointly and severally, to indemnify the Executive (and his successors,
legatees, estate, administrators, executors, and legal representatives) and to
advance monies to such persons to pay expenses relating to indemnifiable events
to the fullest extent permitted by the laws of the State of Delaware, and the
Executive shall be entitled to the protection of any insurance policies the
Company or the Parent Company may elect to maintain generally for the benefit of
their directors and officers, against all costs, charges, and expenses
whatsoever incurred or sustained by him or his successors, legatees, estate,
administrators, executors, and legal representatives in connection with any
action, suit, or proceeding to which any of such persons may be a party by
reason of the Executive being or having been a director or officer of the
Company, the Parent Company or any of their subsidiaries or affiliates.
SECTION 8. Withholding. The Company and the Parent Company shall be
entitled to withhold from amounts payable to the Executive hereunder such
amounts as may be required by applicable law to be so withheld.
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SECTION 9. Survival. Subject to the provisions of the last sentence of
Section 1 of this Agreement, the covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive the
termination of this Agreement, irrespective of any investigation made by or on
behalf of any party hereto. All confidential information which the Executive may
now possess, may obtain during or after the Employment Period, or may create
prior to the end of the Employment Period or otherwise relating to the business
of the Company, the Parent Company or any of their subsidiaries or affiliates or
of any customer or supplier of any of them shall not be published, disclosed, or
made accessible by him to any other person, either during or after the
termination of his employment, or used by him except during the Employment
Period in the business and for the benefit of the Company, the Parent Company
and their subsidiaries and affiliates. The Executive shall return all tangible
evidence of such confidential information to the Company and the Parent Company
prior to or at the termination of his employment hereunder.
SECTION 10. Modification. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified or terminated only by a written instrument duly executed by
each party. Executive acknowledges and agrees that neither the Company, the
Parent Company nor its subsidiaries or affiliates has or will assume or become
obligated under any existing employment agreements or arrangements between the
Executive and any of Edward S. Gordon Company Incorporated, Edward S. Gordon
Company of New Jersey, Inc., or the Affiliated Entities (as defined in the
Purchase Agreement).
SECTION 11. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11.)
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 12. Waiver. Any waiver by either party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
SECTION 13. Binding Effect. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be
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subject to commutation, encumbrance, or the claims of the Executive's creditors,
and any attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Executive and
his heirs and personal representatives, and shall be binding upon and inure to
the benefit of the Company, the Parent Company and their successors.
SECTION 14. Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
SECTION 15. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company, the Parent
Company and their respective representatives have participated in the
preparation hereof.
SECTION 16. Headings. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to the conflict of law provisions thereof.
SECTION 19. Waiver of Trial by Jury.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO
ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
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INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS
AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT
IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
---------------------
Name: Frank M. Garrison
Title: Executive Managing Director
INSIGNIA BUYER CORPORATION
By: /s/ Frank M. Garrison
---------------------
Name: Frank M. Garrison
Title: President
/s/ Stephen B. Siegel
---------------------
STEPHEN B. SIEGEL
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of June 17, 1996, is
by and among INSIGNIA FINANCIAL GROUP, INC., a Delaware corporation with an
office at One Insignia Financial Plaza, Post Office Box 1089, Greenville, South
Carolina 29602 (the "Parent Company"), INSIGNIA BUYER CORPORATION, a Delaware
corporation with an office at One Insignia Financial Plaza, Post Office Box
1089, Greenville, South Carolina 29602 (the "Company") and ANTHONY M.
SAYTANIDES, an individual with an office c/o Edward S. Gordon Company
Incorporated, 200 Park Avenue, New York, New York 10166 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to assure itself of the services of the
Executive for the period provided in this Agreement, and the Executive is
willing to serve in the employ of the Company for such period upon the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on the date of the
closing (the "Closing") of the transactions contemplated by the Asset and Stock
Purchase Agreement, dated as of June 17, 1996, among the Parent Company, the
Company, Edward S. Gordon, Edward S. Gordon Company Incorporated and Edward S.
Gordon Company of New Jersey, Inc. (the "Purchase Agreement") and ending on June
30, 1999 (the "Expiration Date"), subject to earlier termination as set forth
herein (such period, as it may be so terminated, being referred to herein as the
"Employment Period"). In the event (i) the Closing does not occur for any reason
on or prior to August 31, 1996 or such later date as the parties to the Purchase
Agreement shall agree upon or (ii) on or prior to the date of the Closing the
Executive dies or becomes physically or mentally incapacitated or disabled or
otherwise unable to fully discharge his duties as contemplated by this
Agreement, then this Agreement shall automatically terminate ab initio and be of
no further force and effect.
SECTION 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve as
Executive Vice President and Chief Operating Officer of the Company. In the
performance of his duties hereunder, the Executive shall report to and shall be
responsible only to the Chairman, Chief Executive Officer or President of the
Parent Company or the Chairman or President of the Company (as may be determined
by the Board of Directors of the Parent
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Company from time to time). The Executive agrees to his employment as described
in this Section 2, and agrees to devote substantially all of his time and
efforts to the performance of his duties hereunder. The Executive shall be
available to travel as the needs of the business of the Company require and as
reasonably directed by the Chairman, Chief Executive Officer or President of the
Parent Company and the Boards of Directors of the Parent Company and the
Company.
(b) Location of Office. During the Employment Period, the Executive's
office shall be located in the principal executive offices of the Company, which
shall be in New York City, New York. The Company will provide the Executive with
a suitable office, an executive secretary reasonably acceptable to him, and
other support appropriate to his duties hereunder.
(c) Primary Responsibilities. During the Employment Period, the Executive
shall have responsibility for the financial and operational affairs of the
Company and its subsidiaries, in each case as directed by the Chairman or
President of the Company and the Boards of Directors of the Parent Company and
the Company.
(d) Permitted Activities. Notwithstanding anything to the contrary herein
provided, the Executive (i) may make certain real estate and other investments
and hold positions as officers, directors and/or partners thereof in so far as
such positions and investments do not conflict with the Executive's duties and
loyalties to the Parent Company and the Company, and (ii) may continue to hold
all positions and operate businesses and/or receive compensation in accordance
with Exhibit A annexed hereto and incorporated herein and (iii) may hold such
other positions, in charitable and other organizations, as may be appropriate to
his duties hereunder, (collectively, the "Permitted Activities").
(e) Licensing. The Executive shall comply with the requirements of the New
York State Real Property Law (Broker's License Law) and New York State's Rules
for the Guidance of Real Estate Brokers and Salespersons and shall maintain his
real estate brokers license in effect at all times during the Employment Period.
If the Executive is not duly licensed as a real estate broker or salesperson in
New York at any time during the term of this Agreement, the Executive will
immediately notify the Chairman, the President, and the General Counsel of the
Company and of the Parent Company of that fact, in writing. During such period
the Executive will not engage in any activities in violation of the applicable
licensing laws, or any other applicable law; and the Executive will diligently
take all actions necessary to obtain such license as soon as practicable
thereafter. The failure of the Executive to maintain his real estate brokers
license during the Employment Period shall constitute a material breach of this
Agreement which shall entitle the Company to terminate the Executive's
employment for cause.
(f) Membership. The Executive shall, at the Company's request and expense,
maintain a membership in the Real Estate Board of New York, Inc. The Executive
will at all times adhere to the Code of Ethics and Professional Practices of
said Board and to the requirements of all applicable laws and governmental
regulations.
(g) Other Duties. The Executive shall serve as a director and/or officer of
any of the Parent Company's subsidiaries or affiliates if the Parent Company so
requests.
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Executive shall not be entitled to receive any compensation for the performance
of the duties provided for in this Section 2(g) in addition to the compensation
expressly provided in this Agreement.
SECTION 3. Compensation. As full compensation for his services hereunder,
the Company shall pay, grant, issue, or give, as the case may be, to the
Executive the following:
(a) Base Salary. Subject to the provisions of Section 6, a base salary at
the rate of $600,000 per annum (the "Base Salary"), payable in equal bi-weekly
installments or in such other installments consistent with the policy of the
Parent Company as it may be amended from time to time.
(b) Annual Bonus. An annual bonus for the year ending December 31, 1997 and
subsequent years in an amount determined by the Compensation Committee and
approved by the Board of Directors of the Parent Company, in its sole
discretion.
(c) Fringe Benefit Programs. In addition to the other benefits provided to
the Executive hereunder, the right to participate in the fringe benefit programs
now or hereafter maintained by the Company or the Parent Company during the
Employment Period and offered by the Company or the Parent Company to its
managing directors. Such fringe benefit program may include, but not be limited
to, pension, profit sharing, stock purchase, stock option, savings, bonus,
disability, life insurance, health insurance, hospitalization, dental, and other
plans and policies authorized on the date hereof (collectively, "Company Benefit
Plans").
(d) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of
duties hereunder, including professional activities and membership fees and dues
relating to professional organizations of which the Executive currently is a
member or is directed to be a member by the Chairman or Chief Executive Officer
of the Parent Company, upon the presentation of appropriate documentation
therefor in accordance with the then regular policies and procedures of the
Company. The Executive's current professional activities and memberships are set
forth on Exhibit B, attached hereto and made a part hereof. The Executive shall
not engage in or apply for any other professional activity or membership without
the prior written consent of the Chairman, Chief Executive Officer or President
of the Parent Company.
(e) Vacations. Paid vacation consisting of twenty (20) days during each
calendar year during the Employment Period, to be taken at such time as is
consistent with the needs of the Company as reasonably determined by the
Executive.
SECTION 4. Representations and Warranties of the Executive.
The Executive represents and warrants to the Parent Company and the Company
as follows:
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(i) Other than the Permitted Activities, he is under no contractual or
other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other
rights of the Parent Company or the Company hereunder; and
(ii) To the best of his knowledge, he is under no physical or mental
disability that would hinder his performance of his duties under this
Agreement.
SECTION 5. Non-Competition; Confidentiality.
(a) Non-Competition. In view of the unique and valuable services it is
expected the Executive will render to the Company and the Parent Company,
the Executive's knowledge of the customers, trade secrets, and other
proprietary information relating to the business of the Company and its
customers and suppliers, and similar knowledge regarding the Parent Company
it is expected the Executive will obtain, the Executive agrees that (i) so
long as he is employed by the Company pursuant to this Agreement or
otherwise and (ii) for a period of two (2) years after the Termination for
Cause (as hereinafter defined) of such employment or the Executive's
termination of such employment during the Employment Period, he will not
compete with or be engaged in the same business as, or "Participate In" (as
hereinafter defined) any other business or organization which, at the time
of the cessation of the Employment Period, competes with or is engaged in
the Business (as defined in the Agreement) or the same business as the
Company or the Parent Company, with respect to any product or service sold
or activity engaged in by the Company or the Parent Company in any
geographical area which at the time of such cessation such product or
service is sold or activity is engaged in by the Company or the Parent
Company; provided, however, that the provisions of this Section 5 shall not
be interpreted to preclude the Executive, at any time and from time to
time, from (i) Participating In any other organization if approved by a
majority of the Directors of the Parent Company, or (ii) owning not more
than five percent (5%) of the outstanding capital stock of any
publicly-traded person or (iii) as set forth on Exhibit A. In the event of
a Termination Without Cause (as hereinafter defined) of Executive's
employment, the Executive shall, at his election, either (i) observe the
non- competition agreement set forth in the first sentence of this Section
5(a) for the remainder of the Employment Period and continue to receive the
compensation provided for herein, or (ii) accept other employment (the
"Competing Employment") in the real estate industry which violates the
non-competition agreement set forth in the first sentence of this Section
5(a) and receive compensation at the annual rate of $600,000 less the
aggregate amount of compensation payable to him from the Competing
Employment for the remainder of the Employment Period. In the event this
Agreement is not extended beyond the Employment Period, the Executive shall
not be bound by the non-competition agreement set forth in the first
sentence of this Section 5(a). The terms "Participate In" and
"Participating In" shall mean: "directly or indirectly, for his own benefit
or for, with, or through any other person, own or owning, manage or
managing, operate or operating, control or controlling, loan money to or
lending money to, or participate in or participating in, as the case may
be, the ownership, management, operation, or control of, or be connected or
being connected, as the case may be, as a director, officer, employee,
partner, consultant, agent, independent contractor, or otherwise with, or
acquiesce or acquiescing, as the case may be, in the use of his name in."
Notwithstanding the termination or failure to extend the term of this
Agreement for any reason, the Executive will not directly or indirectly
employ any person
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who, at any time up to such cessation of Executive's employment, was an
employee of the Company or the Parent Company, within a period of two years
after such person leaves the employ of the Company or the Parent Company or
any of its affiliates other than his personal secretary. In addition,
notwithstanding the termination or failure to extend the term of this
Agreement for any reason, the Executive agrees that following the
Employment Period, he will not solicit anyone for the purpose of providing
management, leasing or related real estate services with respect to the
properties then managed and the clients then served by the Company or the
Parent Company.
(b) Confidentiality. All confidential information which the Executive
may now possess, may obtain during or after the Employment Period, or may
create prior to the end of the Employment Period or otherwise relating to
the business of the Company or the Parent Company or any of their
subsidiaries or affiliates or of any customer or supplier of any of them
shall not be published, disclosed, or made accessible by him to any other
person, either during or after the termination of his employment, or used
by him except during the Employment Period in the business and for the
benefit of the Company, the Parent Company and their subsidiaries and
affiliates. In the event that the Executive becomes legally compelled to
disclose any of the confidential information, the Executive will provide
the Parent Company and the Company with prompt notice so that the Parent
Company and the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 5(b) and
in the event that such protective order or other remedy is not obtained, or
should the Parent Company and the Company waive compliance with the
provisions of this Section 5(b), the Executive will furnish only that
portion of the confidential information which is so legally required. The
Executive shall return all tangible evidence of such confidential
information to the Company and the Parent Company prior to or at the
termination of his employment hereunder.
(c) Interpretation. Since a breach of the provisions of this Section 5
could not adequately be compensated by money damages, the Company or the
Parent Company shall be entitled, in addition to any other right and remedy
available to it, to seek an injunction restraining such breach and the
Parent Company and the Company shall not be required to post a bond in any
proceeding brought for such purpose. The Executive agrees that the
provisions of this Section 5 are necessary and reasonable to protect the
Company and the Parent Company in the conduct of their respective
businesses. If any restriction contained in this Section 5 shall be deemed
to be invalid, illegal, or unenforceable by reason of the extent, duration,
or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form
such restriction shall then be enforceable in the manner contemplated
hereby. Nothing herein shall be construed as prohibiting the Company or the
Parent Company from pursuing any other remedies, at law or in equity, for
such breach or threatened breach.
SECTION 6. Termination.
(a) Definitions.
(i) Death Termination Event. As used herein, "Death Termination Event"
shall mean the death of the Executive.
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(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable to
fully discharge his duties hereunder for a period of 100 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the event
that the last will and testament of the Executive has not been probated at
the time of determination, the estate of the Executive, and (B) in the
event that the last will and testament of the Executive has been probated
at the time of determination, the legatees or the Executor who are entitled
under such will to the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term "Termination For
Cause" shall mean the termination by the Company of the Executive's
employment hereunder upon a good faith determination by a majority vote of
the members of the Board of Directors of the Parent Company that
termination of this Agreement is necessary by reason of (A) the conviction
of the Executive of a felony under state or federal law, unless in any such
case the Executive performed such act in good faith and in a manner the
Executive reasonably believed to be in or not opposed to the best interests
of the Company or the Parent Company, (B) the continued material breach by
the Executive of any of the material provisions of this Agreement for a
period of thirty days after written notice of such breach is given to the
Executive by the Company or the Parent Company, (C) failure by the
Executive to comply with any material directive of the Board of Directors
of the Company or the Parent Company which shall continue for ten days
after written notice thereof is given to the Executive, (D) a violation of
the confidentiality provisions of Sections 5 or 9 of this Agreement by the
Executive, (E) the taking by the Executive of any action on behalf of the
Company or the Parent Company knowingly without the possession by the
Executive of the appropriate authority to take such action, provided that
Executive shall have five (5) days after written notice thereof to cure
such breach, (F) the taking by the Executive of actions (other than
Permitted Activities) in conflict of interest with the Company, the Parent
Company or their subsidiaries or affiliates, given the Executive's
positions with the Company, the Parent Company and their subsidiaries and
affiliates, provided that Executive shall have five (5) days after written
notice thereof to cure such breach, (G) the usurpation of a corporate
opportunity of the Company, the Parent Company or their subsidiaries or
affiliates by the Executive; provided, however, the parties acknowledge and
agree that no Permitted Activity shall constitute a corporate opportunity,
and further provided that the Executive shall have five (5) days after
written notice thereof to cure such breach, (H) a failure as provided in
the last sentence of Section 2(e), provided that the Executive shall have
five (5) days after written notice thereof to cure such breach, or (I) a
material breach or default of any of the representations, warranties,
covenants or agreements contained in the Purchase Agreement which continues
for a period of not less than five days after Executive has received notice
thereof, which (i) shall have been asserted within twenty-four (24) months
after the Closing and (ii) results in aggregate losses, liabilities, costs,
and/or damages in excess of Four Hundred Thousand ($400,000) Dollars.
(v) Termination Without Cause. As used herein, "Termination Without
Cause" shall mean any termination of the Executive's employment hereunder
by the Company or the Parent Company that is not a Termination For Cause, a
Death Termination Event, or a Disability Termination Event.
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(b) Death Termination Event. Upon the occurrence of a Death Termination
Event, this Agreement shall terminate automatically upon the date that such
Death Termination Event occurred (subject to the last sentence of this Section
6), whereupon the Company shall pay to the Estate compensation at the annual
rate of Six Hundred Thousand ($600,000) Dollars for a period equal to the
remaining term of the Employment Period (determined upon the assumption that the
Employment Period will not be terminated prior to the Expiration Date), but in
no event longer than one (1) year.
(c) Disability Termination Event. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 6).
(d) Termination For Cause. The Executive and the Company and the Parent
Company agree that the Company and the Parent Company shall have the right to
effectuate a Termination For Cause prior to the Expiration Date. Upon the
occurrence of a Termination For Cause, this Agreement shall terminate upon the
date that such Termination For Cause occurs (subject to the last sentence of
this Section 6), whereupon the Executive shall be entitled to receive the Base
Salary, as then in effect, to and including the date that such Termination For
Cause occurs.
(e) Termination Without Cause. Upon the occurrence of a Termination Without
Cause, this Agreement shall terminate upon the date that such Termination
Without Cause occurs (subject to the last sentence of this Section 6), whereupon
the Executive shall make the election provided for in the second sentence of
Section 5(a) and shall be compensated in accordance with such election.
Notwithstanding anything in this Agreement to the contrary, Sections 3 (as
to compensation, fringe benefits and expense reimbursements to which Executive
became entitled prior to termination of this Agreement), 4, 5, 6, 7, 8, 9, 10,
11, 12, 13, 14, 15, 16 and 17 of this Agreement shall survive any termination of
this Agreement or of the Executive's employment hereunder until the expiration
of the statute of limitations applicable hereto.
SECTION 7. Indemnification. The Company and the Parent Company hereby
agree, jointly and severally, to indemnify the Executive (and his successors,
legatees, estate, administrators, executors, and legal representatives) and to
advance monies to such persons to pay expenses relating to indemnifiable events
to the fullest extent permitted by the laws of the State of Delaware, and the
Executive shall be entitled to the protection of any insurance policies the
Company or the Parent Company may elect to maintain generally for the benefit of
their directors and officers, against all costs, charges, and expenses
whatsoever incurred or sustained by him or his successors, legatees, estate,
administrators, executors, and legal representatives in connection with any
action, suit, or proceeding to which any of such persons may be a party by
reason of the Executive being or having been a director or officer of the
Company, the Parent Company or any of their subsidiaries or affiliates.
SECTION 8. Withholding. The Company and the Parent Company shall be
entitled to withhold from amounts payable to the Executive hereunder such
amounts as may be required by applicable law to be so withheld.
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SECTION 9. Survival. Subject to the provisions of the last sentence of
Section 1 of this Agreement, the covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive the
termination of this Agreement, irrespective of any investigation made by or on
behalf of any party hereto. All confidential information which the Executive may
now possess, may obtain during or after the Employment Period, or may create
prior to the end of the Employment Period or otherwise relating to the business
of the Company, the Parent Company or any of their subsidiaries or affiliates or
of any customer or supplier of any of them shall not be published, disclosed, or
made accessible by him to any other person, either during or after the
termination of his employment, or used by him except during the Employment
Period in the business and for the benefit of the Company, the Parent Company
and their subsidiaries and affiliates. The Executive shall return all tangible
evidence of such confidential information to the Company and the Parent Company
prior to or at the termination of his employment hereunder.
SECTION 10. Modification. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified or terminated only by a written instrument duly executed by
each party. Executive acknowledges and agrees that neither the Company, the
Parent Company nor its subsidiaries or affiliates has or will assume or become
obligated under any existing employment agreements or arrangements between the
Executive and any of Edward S. Gordon Company Incorporated, Edward S. Gordon
Company of New Jersey, Inc., or the Affiliated Entities (as defined in the
Purchase Agreement).
SECTION 11. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11.)
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
SECTION 12. Waiver. Any waiver by either party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
SECTION 13. Binding Effect. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance, or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal
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representatives, and shall be binding upon and inure to the benefit of the
Company, the Parent Company and their successors.
SECTION 14. Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
SECTION 15. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company, the Parent
Company and their respective representatives have participated in the
preparation hereof.
SECTION 16. Headings. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
SECTION 17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to the conflict of law provisions thereof.
SECTION 19. Waiver of Trial by Jury.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN OR AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO
ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS
AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT
IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
---------------------
Name: Frank M. Garrison
Title: Executive Managing Director
INSIGNIA BUYER CORPORATION
By: /s/ Frank M. Garrison
---------------------
Name: Frank M. Garrison
Title: President
/s/ Anthony M. Saytanides
-------------------------
ANTHONY M. SAYTANIDES
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EXHIBIT 99.1
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
Edward S. Gordon Company, Inc.
Edward S. Gordon
Chairman
(212) 984-8000
INSIGNIA ANNOUNCES CLOSING OF ACQUISITION OF
THE EDWARD S. GORDON COMPANY, INC. AND
PARAGON COMMERCIAL GROUP
Greenville, SC, July 2, 1996---Insignia Financial Group, Inc. (NYSE:IFS)
announced today that it has closed its previously announced acquisition of
substantially all of the assets of The Edward S. Gordon Company, Inc. and its
affiliates ("ESG") and the Paragon Commercial property services operation
("Paragon Commercial"). ESG is the nation's fourth largest commercial and real
estate firm and the dominant one in its New York headquarters market. The
purchase price for ESG is approximately $74 million, paid approximately $50
million in cash at closing, with the balance paid by assumption of existing
stock options.
As previously disclosed, it is anticipated that ESG will add revenues of
approximately $90 million per year to IFS. ESG generated an average annual
EBITDA of $15 million over the past two years. As IFS is currently in the
process of integrating the Paragon Commercial Group acquisition into IFS'
commercial property services subsidiary, Insignia Commercial Group, Inc.
("ICG"), ESG will operate as a wholly owned, independent subsidiary of IFS. This
is primarily to insure the ability of ICG and ESG to independently continue to
provide continuity and quality services to their clients. Nevertheless, IFS and
ESG do anticipate realizing immediately on certain economies of scale and
synergies, including the ability to make ESG's capabilities available to the
IFS' portfolio.
Edward S. Gordon, Founder and Chairman of ESG, has signed a long-term
employment agreement with IFS. Pursuant to this agreement, Mr. Gordon will
continue as Chairman of ESG, and will serve on the executive committee of
Insignia Management Services - New York, Inc., ("IMS-NY"). Stephen Siegel,
currently President of ESG, has also signed a long-term employment agreement
with IFS, will continue in his role as President of ESG, and will become a
Managing Director of IFS.
ESG provides commercial property management services for approximately 27
million square feet of office space, primarily in the New York metropolitan
area. The company also provides commercial leasing, tenant representation, and
corporate consulting services for properties and tenants primarily in the New
York, New Jersey and Connecticut markets, as well as investment sales of
commercial properties nationally. The acquisition of ESG, long a dominant player
in the New York City commercial real estate market, combined with IFS'
acquisitions in 1995 of the cooperative and condominium management divisions of
Douglas Elliman - Gibbons &
<PAGE>
Ives and Kreisel Company, Inc. (operating under the name of Insignia Management
Services - New York, Inc.), makes IFS a powerhouse in the New York residential
management and New York commercial leasing and property management businesses.
The combined operations will include the management of approximately 56,000
cooperative and condominium units and approximately 27 million square feet of
commercial space in the New York area. Further, the addition of the ESG
management portfolio to the existing ICG management portfolio, including the
recently announced acquisition of Paragon Commercial Group, increases IFS'
overall national commercial property services operations to in excess of 105
million square feet of commercial, retail and industrial space.
"ESG is an exceptional organization. We continue to be impressed by the
incremental synergies between IFS and ESG. I am certain that our ability to
apply their skills across our commercial portfolio will create revenue
opportunities well beyond those enjoyed by ESG while it was independent. In
fact, I am confident that ESG's ability to lever off of the IFS network and its
economies of scale will produce results from this particular acquisition well in
excess of our initial expectations" said Andrew L. Farkas, Chairman, President
and Chief Executive Officer of IFS. Regarding the Paragon acqusition Farkas
added, "I have been pursuing Bill Cooper to permit us to acquire paragon
Commercial Group since 1992. I am extremely excited about the incremental
capability inherent in the Paragon organization. Thius is an exceptional group
of professional real estate people who will help Insignia take its commercial
property services unit to the next plateau."
<PAGE>
Henry Horowitz, President of ICG commented "ESG is a strategic acquisition
that provides us with a strong and dominant presence in the New York,
Connecticut and New Jersey market and a platform for expansion of the commercial
property services delivery in the Northeast area of the United States. In
addition, their exceptionally strong transactional experience will be of a great
benefit to our current organization and our clients. As for Paragon, we have
already begun the process of integrating Paragon and Insignia's executive level
teams in order to provide uninterrupted, consistent and quality services to our
institutional clients across the United States. Our firm provides for a
complementary fit in which Paragon's expertise in the areas of development,
acquistions and dispositions will add to our already considerable skill set
including property management, leasing and special value-added services."
Edward S. Gordon, Chairman of ESG added, "We are filled with energy and
enthusiasm as ESG enters this exciting new stage in its history. We expect to
play an integral role in Insignia's move to dominance in commercial real
estate."
Stephen Siegel, President of ESG further stated, "We are now part of a
company that, by any measure, has been phenomenally successful. We will have
access to capital and resources that will enable us to grow in ways that would
take us years to accomplish on our own. Our future looks brighter than ever."
Paragon Comercial will operate as a subsidiary of Insignia Financial Group's
commercial property services subsidiary, Insignia Commercial Group, Inc.
("ICG"). The consideration for the Paragon trasnaction is approximately $18.2
million, paid 100% in cash.
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
<PAGE>
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.
Doug Knaus, President of Paragon Commercial, said, "We are particularly
excited to have the opportunity to become part of the most dynamic company in
the real estate industry. Paragon's senior commercial executives have worked
together for more than a decade. We will integrate our national/local expertise
and our long-term client relationships with Insignia's impressive vision for the
future."
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.
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 2,400 properties which
include approximately 300,000 residential units (including cooperative and
condominium units), and after giving effect to both ESG and Paragon Commercial
Group afquisitions, in excess of 105 million square feet of retail, commercial
and industrial space.
###
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.
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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
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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.
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