SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Insignia Financial Group, Inc.
(Name of Registrant as Specified in its Charter)
Insignia Financial Group, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
N/A $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $500 per party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
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(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule, or registration statement no.:
(3) Filing party:
(4) Date filed:
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INSIGNIA FINANCIAL GROUP, INC.
One Insignia Financial Plaza, Post Office Box 1089
Greenville, South Carolina 29602
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 31, 1997
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Insignia Financial Group, Inc., a
Delaware corporation (the "Company"), will be held at the Hyatt Regency Hotel,
220 North Main Street, Greenville, South Carolina, on Wednesday, April 30, 1997,
at 10:00 a.m., local time, to consider and act upon the following matters:
(1) The election of seven (7) directors;
(2) The amendment of the Company's Certificate of Incorporation, as amended, to
authorize 50,000,000 additional shares of the Class A Common Stock, par
value $0.01 per share, of the Company ("Common Stock");
(3) The approval of an amendment to the Insignia 1992 Stock Incentive Plan
increasing the aggregate number of shares of Common Stock authorized from
4,666,666 to 5,250,000;
(4) The approval of bonus plans for two key executives;
(5) The ratification of the selection of Ernst & Young LLP as independent
auditors of the accounts of the Company for the year ending December 31,
1997; and
(6) The transaction of such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 10, 1997 are
entitled to notice of and to vote at the meeting. A complete list of such
stockholders will be available at the time and place of the meeting, and during
the ten days prior to the meeting at the principal executive offices of the
Company, located at One Insignia Financial Plaza, Greenville, South Carolina.
A copy of the Company's Annual Report for the year ended December 31, 1996
is enclosed.
/s/
--------------------
Andrew L. Farkas
Chairman, President and Chief
Executive Officer
WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
IN THE ENVELOPE ENCLOSED FOR THIS PURPOSE -- WHETHER YOU PLAN TO ATTEND THE
MEETING IN PERSON OR NOT. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE.
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INSIGNIA FINANCIAL GROUP, INC.
One Insignia Financial Plaza, Post Office Box 1089
Greenville, South Carolina 29602
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 30, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Insignia Financial Group, Inc. (the
"Company" or "Insignia") for the Annual Meeting of Stockholders to be held on
Wednesday, April 30, 1997, at 10:00 a.m., local time, at the Hyatt Regency
Hotel, 220 North Main Street, Greenville, South Carolina and any adjournments
thereof. This Proxy Statement and the enclosed form of proxy were first sent to
stockholders commencing on or about March 31, 1997.
The cost of this solicitation will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally, or by telephone or
telegram, by directors, officers and employees of the Company who will receive
no additional compensation therefor. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to beneficial owners of shares held of record by such persons, and the
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them in so doing. To assist in the solicitation of proxies, the
Company may, if necessary, engage [Beacon Hill Partners, Inc.] at a fee not to
exceed [$3,000] plus reimbursement of its out-of-pocket expenses.
A stockholder who executes the accompanying form of proxy may revoke it (i)
by written notice of revocation or a later dated proxy sent to the Company at
Post Office Box 1089, Greenville, South Carolina 29602, Attn: John K. Lines,
General Counsel and Secretary, and received by the Company prior to the vote, or
(ii) by personal attendance and withdrawal of the proxy at the Annual Meeting of
Stockholders. All shares represented by valid proxies received pursuant to the
solicitation and prior to the meeting and not revoked before they are exercised
will be voted, and, if a choice is specified with respect to any matter to be
acted upon, the shares will be voted in accordance with such specification.
All references to shares and prices of Common Stock throughout this proxy
statement have been restated where necessary to reflect the 2 for 1 stock split
effected as a stock dividend in January 1996.
VOTING SECURITIES OUTSTANDING
Only stockholders of record at the close of business on March 10, 1997 will
be entitled to vote at the Annual Meeting of Stockholders. As of March 10, 1997,
the Company had outstanding 29,006,911 shares of Class A Common Stock, par value
$0.01 per share ("Common Stock"), which are the only outstanding voting
securities of the Company.
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VOTING OF PROXIES
Each holder of Common Stock is entitled to cast, in person or by proxy, one
vote for each share of Common Stock held by such stockholder at the close of
business on March 10, 1997, on all matters submitted to a vote of the
stockholders. Stockholders do not have cumulative voting rights in the election
of directors.
On all matters submitted to the vote of the stockholders at the Annual
Meeting as described herein, (i) a plurality of the votes of the shares present
in person or represented by proxy and entitled to vote as to the election of
directors (ii) a majority of the votes of the shares present in person or
represented by proxy and entitled to vote as to the approval of the proposal to
amend the Company's Certificate of Incorporation and as to the amendment to the
Insignia 1992 Stock Option Plan (provided that the total vote cast on each such
proposal represents the majority in interest of all securities entitled to vote
on each such proposal) and (iii) a majority of the votes of the shares present
in person or represented by proxy and entitled to vote as to the approval of the
bonus plans for two key executives and the ratification of the appointment of
the auditors, will be determinative.
All proxies in the form enclosed received by the Company, including those
as to which no preference is indicated, will be voted, in the absence of
instructions to the contrary, (i) for the election of each of the nominees
listed under "Election of Directors" as a director of the Company to hold office
until the next Annual Meeting of Stockholders and until his successor shall be
elected and qualified, (ii) for the approval of the amendment to the Company's
Certificate of Incorporation, (iii) for the amendment to the Insignia 1992 Stock
Incentive Plan, (iv) for the approval of the bonus plans for two key executives,
(v) for ratification of the appointment of Ernst & Young LLP as independent
auditors for the Company for the year ending December 31, 1997, and (vi) with
respect to such other business as may properly come before the meeting (or any
adjournment thereof) in accordance with the judgment of the persons designated
in the proxy. In the unanticipated event that any person nominated as director
cannot be a candidate at the Annual Meeting, all such proxies received may be
voted in favor of such substituted nominee as shall be designated by the Board
of Directors.
Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. Abstentions
with respect to any matter (other than for elections of directors) will not be
voted; therefore, abstentions will have the effect of a vote against the matter
in question.
In accordance with the rules of the New York Stock Exchange, brokers and
nominees may be precluded from exercising their voting discretion with respect
to certain matters to be acted upon and thus, in the absence of specific
instructions from the beneficial owner of the shares, will not be empowered to
vote the shares on such matters and therefore will not be counted in determining
the number of shares necessary for approval. Shares represented by such broker
non-votes will, however, be counted for purposes of determining whether there is
a quorum.
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ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders seven directors are to be elected to
hold office for the ensuing year. Proxies in the accompanying form, including
those as to which no preference is indicated, will be voted at the Annual
Meeting, in absence of instructions to the contrary, for the election as
directors of the seven nominees named below, all of whom are currently directors
of the Company, to serve until the next Annual Meeting of Stockholders and until
their successors are elected.
In the event that a vacancy (which is not expected) arises among the
nominees prior to the meeting due to death or for some other reason, the proxy
will be voted for the remaining nominees and may be voted for a substitute
nominee designated by the Board of Directors.
As of March 10, 1997, Andrew L. Farkas beneficially owned 8,233,976 shares
or 27.9% of the outstanding Common Stock. As of that date, all directors and
officers as a group beneficially owned 11,251,683 shares or 35.6% of the
outstanding Common Stock.
All directors hold office until their successors have been elected and
qualified or until their earlier resignation or removal. Directors are elected
annually. There are no family relationships between any of the directors or
executive officers of Insignia, except that Robin L. Farkas is the father of
Andrew L. Farkas.
Opposite the name of each nominee for election as director is shown (i) his
age, (ii) his position with the Company, and (iii) the year in which he first
became a director of the Company.
<TABLE>
<CAPTION>
Beginning Year
of
Name Age Positions/Office Service as Director
<S> <C> <C> <C>
Andrew L. Farkas 36 Chairman of the Board 1990
of Directors, President and
Chief Executive Officer
of Insignia
Robert J. Denison 55 Director of Insignia 1996
Robin L. Farkas 63 Director of Insignia 1993
Merril M. Halpern 62 Director of Insignia 1993
Robert G. Koen 50 Director of Insignia 1993
Michael I. Lipstein 60 Director of Insignia 1993
Buck Mickel 71 Director of Insignia 1993
</TABLE>
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Andrew L. Farkas has been President of Metropolitan Asset Group, Ltd.
("MAG"), a real estate investment banking firm, since 1983, has been President
of Insignia from its inception until January 1991 and since January 1995. He has
been Chairman and Chief Executive Officer of Insignia since January 1991. He has
been Chairman of Insignia Properties Trust, a subsidiary of Insignia, since
January 1997.
Robert J. Denison has been a director of Insignia since May 1996. Mr.
Denison has been General Partner of First Security Company II, L.P., an
investment advisory firm, for more than the past five years.
Robin L. Farkas has been a director of Insignia since August 1993. Mr.
Farkas is the retired Chairman of the Board and Chief Executive Officer of
Alexander's Inc., a real estate company. He served in that capacity from 1984
until 1993. Alexander's Inc. filed a petition under Chapter 11 of the Federal
Bankruptcy Code in May 1992. He is also a director of Refac Technology
Development Corporation, Noodle Kiddoodle, Inc. and Containerways International,
Ltd..
Merril M. Halpern has been a director of Insignia since August 1993. Mr.
Halpern has been Chairman of the Board of Directors and chief executive officer
of Charterhouse Group International, Inc. ("Charterhouse"), a privately-owned
investment firm which, among other things, actively engages in making private
equity investments in a broad range of industrial and service companies located
primarily in the United States, for more than the past five years. Mr. Halpern
is also a director of Charter Power Systems, Inc., DMPF Corp., and Dreyer's
Grand Ice Cream, Inc.
Robert G. Koen has been a director of Insignia since August 1993. Since
February 1996, Mr. Koen has been a partner in the law firm of Akin, Gump,
Strauss, Hauer & Feld, which represents Insignia or certain of its affiliates
from time to time. From January 1991 to February 1996, Mr. Koen was a partner in
the law firm of LeBoeuf, Lamb, Greene & MacRae.
Michael I. Lipstein has been a director of Insignia since August 1993. Mr.
Lipstein is, and for more than the past five years has been, self-employed in
the real estate business, including ownership, management, and lending.
Buck Mickel has been a director of Insignia since August 1993. Mr. Mickel
has been Chairman of the Board and Chief Executive Officer of RSI Holdings, a
company offering distribution of outdoor equipment, for more than the past five
years. Mr. Mickel is also a director of Fluor Corporation, The Liberty
Corporation, NationsBank Corporation, Emergent Group, Inc., Delta Woodside
Industries, Inc., Duke Power Company, and Textile Hall Corporation.
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Insignia or Metropolitan Asset Enhancement, L.P. ("MAE"), a Delaware
limited partnership in which Insignia owns a 19.1% limited partnership interest,
from time to time acquires, and MAG from time to time has acquired, general
partner interests in or general partners of limited partnerships ("Troubled
Limited Partnerships") that are or were in default under mortgages encumbering
all or a portion of their assets. Andrew L. Farkas is the sole stockholder, a
director, and a corporate officer of the sole general partner of MAE. Such
defaults usually occur as a result of the inability of such assets to generate
sufficient cash flow to service such mortgages on a timely basis. In connection
with those activities, Insignia and MAE, and in the past MAG, typically attempt
to negotiate restructurings of the outstanding liabilities of a Troubled Limited
Partnership with creditors of such partnership. At times, it becomes desirable
to cause a Troubled Limited Partnership to seek protection under the Federal
bankruptcy law to expedite such negotiations. MAE, Insignia, MAG, their
affiliates, or Andrew L. Farkas (in his capacity as a senior officer of a
corporate general partner or as an individual general partner, as the case may
be), have caused approximately fifteen partnerships (not including lower tier
partnerships) to file for protection from creditors under Chapter 11 of the
Federal Bankruptcy Code within the past five years. In addition, William H.
Jarrard, Jr., Managing Director - Partnership Administration of Insignia, is an
executive officer of some of the general partners of the Troubled Limited
Partnerships. None of these Chapter 11 cases have been converted to cases under
Chapter 7 of the Federal Bankruptcy Code, which governs liquidations in
bankruptcy. Substantially all of such Chapter 11 cases have been resolved and/or
concluded. None of such entities were forced to seek protection from creditors
under the Federal Bankruptcy Code on an involuntary basis.
There are no arrangements or understandings between the Company and any
person as to his election as director, other than with Mr. Farkas as later
described under "Compensation of Directors and Executive Officers - Employment
Agreements."
The Company maintains standing Executive, Compensation, and Audit
Committees, but does not have a nominating committee. The Executive Committee,
whose members are Messrs. Andrew L. Farkas, Robin L. Farkas, Halpern, and
Lipstein, met four times during 1996. The Executive Committee meets on call and
has authority to act on most matters during intervals between Board meetings.
The Compensation Committee met nine times during 1996. Its members are Messrs.
Denison, Lipstein, and Mickel. The Compensation Committee reviews and approves
all compensation arrangements, including annual bonuses, for senior officers of
Insignia, and administers Insignia's 1992 Stock Incentive Plan. The Audit
Committee, whose members are Messrs. Denison, Halpern, and Koen, recommends
annually to the Board of Directors the engagement of the independent auditors of
the Company and reviews with the independent auditors the scope and results of
the audits, the internal accounting controls of the Company, audit practices,
and the professional services furnished by the independent auditors, and reviews
all transactions proposed to be entered into between the Company and any of its
affiliates. During 1996, the responsibilities of the Audit Committee were
fulfilled by the Board of Directors at its meetings.
The Board of Directors met seven times during 1996. No director attended
fewer than 75% of the total number of meetings of the Board of Directors and the
Committees on which he served.
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AMENDMENT OF CERTIFICATE OF INCORPORATION
On March 7, 1997, the Board of Directors adopted a resolution approving an
amendment to the Company's Certificate of Incorporation (as previously amended,
the "Certificate") to increase the number of authorized shares of Common Stock
from 50,000,000 to 100,000,000. The amendment is subject to stockholder
approval, and will be presented to the stockholders at the Annual Meeting for
consideration and approval. If approved by the stockholders, the proposed
amendment will become effective upon the filing of an amendment to the Company's
Certificate with the Secretary of State of Delaware, which will occur as soon as
reasonably practicable after approval.
As of December 31, 1996, 28,857,097 shares of Common Stock were issued and
outstanding and an additional 15,155,969 shares were reserved for issuance in
connection with outstanding stock options, warrants, convertible notes and
convertible preferred securities. The Board of Directors of the Company has
recommended the amendment to the Certificate in order to provide the Company
with a sufficient number of authorized shares of Common Stock for the Company's
general corporate needs. The Board of Directors believes that the availability
of additional shares will provide the Company with the flexibility to issue
Common Stock for possible future financings, stock dividends or distributions,
acquisitions, stock option plans or other proper corporate purposes that may be
identified in the future by the Board of Directors, without the possible expense
and delay of calling a special stockholders' meeting. The issuance of additional
shares of Common Stock may have a dilutive effect on earnings per share and, for
persons who do not acquire additional shares to maintain their pro rata interest
in the Company, on such stockholders' percentage voting power.
The authorized shares of Common Stock in excess of those issued will be
available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable, without further action by the Company's
stockholders, except as may be required by applicable law or by the rules of the
New York Stock Exchange or other stock exchange or national securities
association trading system on which the Common Stock may be listed or traded.
Upon issuance, such shares will have the same rights as the outstanding shares
of Common Stock. Holders of Common Stock have no preemptive rights.
The Company has no arrangements, agreements, understandings or plans at the
present time for the issuance or use of the additional shares of Common Stock
proposed to be authorized. The Board of Directors does not intend to issue any
Common Stock except on terms which the Board of Directors deems to be in the
best interests of the Company and its then existing stockholders. Any future
issuance of Common Stock will be subject to the rights of holders of outstanding
shares of any preferred stock which the Company may issue in the future.
Although the Company has no present intention to issue shares of Common
Stock in the future in order to make acquisition of control of the Company more
difficult, future issuances of Common Stock could have that effect. For example,
the acquisition of shares of the Common Stock by an entity in order to acquire
control of the Company might be discouraged through the public or private
issuance of additional shares of Common Stock, since such issuance would dilute
the stock ownership of the acquiring entity. Common Stock also could be
privately placed with purchasers who might side with the Board of Directors in
opposing a takeover bid, thus discouraging such a bid.
Vote Required
Approval of the amendment to the Company's Certificate requires the
affirmative vote of at least the majority of the votes of the shares present in
person or represented by proxy and entitled to vote on the proposal, provided
that the total vote cast on the proposal represents the majority in interest of
all securities entitled to vote on the proposal. The Board of Directors
recommends that stockholders vote their shares for approval of the amendment to
the Company's Certificate.
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APPROVAL OF AMENDMENT TO THE INSIGNIA 1992 STOCK INCENTIVE
PLAN
General
The Insignia 1992 Stock Incentive Plan was adopted by the Board of
Directors of the Company, and approved by the stockholders of the Company, in
order to give employees (including officers of, directors of, consultants and
advisors to, and prospective employees and directors of, the Company and its
present and future subsidiaries) an opportunity to acquire an investment in the
Company, thereby giving such persons additional incentives to commence their
employment by or service to the Company or any of its present or future
subsidiaries, remain in the employ or service of the Company or any of its
present or future subsidiaries, and/or to continue and increase their efforts
with respect to the Company and its present and future subsidiaries, as the case
may be. The Insignia 1992 Stock Incentive Plan was amended in 1994 and in 1996
(as amended, the "Existing Plan").
The 1994 amendments (i) increased the aggregate number of shares of Common
Stock subject to the Awards (as defined below) granted or to be granted pursuant
to the Existing Plan from 666,666 to 2,666,666, and (ii) provided that the
maximum number of shares of Common Stock with respect to which Awards could be
granted to any individual under the Existing Plan during any fiscal year of the
Company could not exceed 200,000. The 1996 amendments to the Existing Plan
provided (i) that the aggregate number of shares of Common Stock subject to
Awards granted or to be granted pursuant to the Existing Plan be increased from
2,666,666 to 4,666,666, (ii) that the maximum number of shares of Common Stock
with respect to which Awards could be granted to any individual under the
Existing Plan during any fiscal year of the Company could not exceed 400,000,
(iii) for certain technical amendments in order for the Existing Plan to satisfy
the requirements under the final regulations issued under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and (iv) clarification
that the Compensation Committee of the Board of Directors has the authority to
accelerate the vesting of Awards upon the occurrence of a Change of Control of
the Company (as defined in the Plan). The Board of Directors is submitting to
the stockholders for their approval an amendment to the Existing Plan.
Amendment To The Existing Plan and Reasons For Approval
On March 7, 1997, the Board of Directors amended the Existing Plan, subject
to the approval of the Company's stockholders, to provide that the aggregate
number of shares of Common Stock subject to Awards granted or to be granted
pursuant to the Existing Plan be increased from 4,666,666 to 5,250,000.
As of March 10, 1997, without giving effect to the proposed amendment to
the Existing Plan, there were 330,700 shares available under the Existing Plan
for additional grants. The 1996 increase of 2,000,000 shares in the aggregate
number of shares of Common Stock subject to Awards was required to provide for
grants totaling 1,064,850 previously made by the Board of Directors subject to
approval by the stockholders. In addition, grants totaling 400,000 shares were
made in connection with the acquisition of Edward S. Gordon Company, Inc. The
Board of Directors believes that the Company's ability to grant additional
Awards is important to the Company's ability to recruit and retain qualified
personnel and to structure competitive acquisitions transactions.
Material Features Of The Plan
The following description of the Existing Plan, giving effect to the
proposed amendment (the "Plan"), is a summary and is qualified in its entirety
by reference to the text of the Plan, which is attached hereto as Exhibit A.
Stock Subject To The Plan The Plan provides for the issuance of awards in
respect to a maximum of 5,250,000 shares of Common Stock (subject to certain
adjustments described below). Awards may be made by grants of restricted shares
("Restricted Shares") and stock options ("Options") (collectively "Awards"). As
of March 10, 1997, the closing price for the Common Stock on the New York Stock
Exchange was $20.625 per share.
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Administration The Plan is administered by the Compensation Committee of
the Board of Directors, which has plenary authority, in its discretion, to grant
Awards under the Plan and to determine the terms and conditions (which need not
be identical) of all Awards so granted. The Board of Directors has the right to
amend or terminate the Plan in certain circumstances, provided that any
amendment or modification must comply with applicable law, listing requirements,
the requirements of Rule 16b-3 under the Securities Exchange Act of 1934 and the
requirements under Code Section 162(m).
Eligibility Awards can be made only to (a) key employees (including
officers) of, directors of, and consultants and advisors to, the Company or any
of its present or future subsidiaries, and (b) prospective employees and
directors of the Company or any of its present or future subsidiaries. In
accordance with provisions included in the Plan, Awards have been made to
substantially all of the approximately [360] individuals currently eligible
under the Plan. In making determinations under the Plan, the Compensation
Committee may take into account the nature of the services rendered by the
respective employees, their present and potential contributions to the success
of the Company and its present and future subsidiaries, and such other factors
as the Compensation Committee deems relevant.
Options The purchase price per share of Common Stock under each Option will
be determined by the Compensation Committee and set forth in the applicable
agreement evidencing such Option, and will not be less than the par value of the
Common Stock. In the event the Compensation Committee grants an Option which is
intended to be an incentive stock option ("ISO") or grants an Option which is
not intended to be an ISO (a "Nonqualified Stock Option") and which is intended
to be "performance based" for purposes of Section 162(m) of the Code, the
purchase price per share of Common Stock under each such Option will be not less
than 100% of the fair market value of the Common Stock on the date of the grant,
and in no event less than the par value of the Common Stock. Fair market value
will be (A) the last sales price reported for the Common Stock on the applicable
date (i) as reported by the principal national securities exchange in the United
States on which it is then traded, or (ii) if not traded on any such national
securities exchange, as quoted by the National Association of Securities Dealers
(or on the first day prior thereto on which the Common Stock was reported or
quoted) or (B) if not so traded or quoted, as determined by the Compensation
Committee. The term of each Option will be for such period as the Compensation
Committee shall determine, as set forth in the applicable agreement evidencing
such Option, but not more than 10 years from the date of grant in the case of an
ISO. ISOs may be granted only to employees and prospective employees, however,
and no ISO can be granted to an employee who, at the time the ISO is granted,
owns, or is considered as owning within the meaning of Section 424(d) of the
Code, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or combined voting power of all classes of stock
of the Company or any of its present or future subsidiaries, unless at the time
the ISO is granted, the option price is at least 110% of such fair market value
of the Common Stock subject to the ISO and the ISO by its terms is not
exercisable after the expiration of 5 years from the date it is granted.
Subsequent to the grant of an Option but before its complete termination,
however, the Compensation Committee may accelerate the time or times at which
such Option may be exercised in whole or in part (without reducing the term of
such Option). Unless otherwise provided in the Plan, no Option will be
exercisable before 6 months after it is granted.
In general, payment of the Option purchase price will be made in cash or in
whole shares of Common Stock already owned by the holder or partly in cash and
partly in such Common Stock, as determined by the Compensation Committee when
granted.
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Restricted Shares and Cash Awards The Compensation Committee will determine
whether shares of Common Stock covered by Awards of Restricted Shares will be
issued at the beginning or end of a restriction period, whether an amount equal
to any regular cash dividends or any other distributions payable upon the Common
Stock covered by an Award of Restricted Shares that is issuable at the end of a
relevant restriction period ("Dividend Equivalents") will be paid during the
relevant restriction period, and will designate a valuation date with respect to
each Award of Restricted Shares that will constitute the end of the relevant
restriction period. The Compensation Committee may prescribe other restrictions,
terms and conditions applicable to the vesting of Restricted Shares in addition
to those provided in the Plan. The Compensation Committee will determine the
price, if any, to be paid by the holder for Restricted Shares, but the issuance
of Restricted Shares must be made for at least the minimum consideration
necessary to permit such shares to be deemed fully paid and nonassessable.
Restricted Shares issued at the beginning of the relevant restriction
period will constitute issued and outstanding shares of Common Stock for all
corporate purposes. The holder will have the right to vote such Restricted
Shares, to receive and retain all dividends and other distributions, as the
Compensation Committee may in its sole discretion designate, paid or distributed
on such Restricted Shares, and to exercise all other rights, powers and
privileges of a holder of Common Stock with respect to such Restricted Shares,
except, among other things, that (a) the holder will not be entitled to delivery
of the stock certificates representing such Restricted Shares until the relevant
restriction period has expired and unless all other vesting requirements with
respect thereto have been fulfilled or waived, (b) other than regular cash
dividends and such other distributions as the Compensation Committee in its sole
discretion may designate, the Company will retain custody of all distributions
made or declared with respect to the Restricted Shares during such restriction
period ("Retained Distributions") until such time, if ever, as the Restricted
Shares with respect to which such Retained Distributions have been made, paid or
declared shall become vested, and such Retained Distributions will be subject to
the same restrictions, terms, and vesting and other conditions as are applicable
to the Restricted Shares, and (c) the holder may not sell, assign, transfer,
pledge, exchange, encumber, or dispose of the Restricted Shares or any Retained
Distributions or his interest in any of them during the relevant restriction
period.
Restricted Shares issued at the end of the relevant restriction period
shall not constitute issued and outstanding shares of Common Stock, and the
holder will not have any of the rights of a stockholder with respect to the
shares of Common Stock covered by such an Award of Restricted Shares, until such
shares have been transferred to the holder at the end of the relevant
restriction period. If and to the extent that shares of Common Stock are to be
issued at the end of the relevant restriction period, the holder will be
entitled to receive Dividend Equivalents with respect to the shares of Common
Stock covered thereby either (a) during the restriction period, or (b) in
accordance with the rules applicable to Retained Distributions.
In connection with any Award of Restricted Shares, an agreement evidencing
such Award may provide for the payment of a cash amount (a "Cash Award") to the
holder of such Restricted Shares at any time after such Restricted Shares have
become vested. Such Cash Awards will be payable in accordance with such
additional restrictions, terms, and conditions as are prescribed by the
Compensation Committee in the relevant agreement and will be in addition to any
other salary, incentive, bonus, or other compensation payments which such holder
is otherwise entitled or eligible to receive from the Company.
Acceleration of Options and Restricted Shares If a holder's employment
terminates by reason of death or permanent and total disability, (a) each
outstanding Option granted to such employee under the Plan shall immediately
become exercisable in full in respect of the aggregate number of shares covered
thereby, and (b) the restriction period applicable to each Award of Restricted
Shares made to such employee under the Plan shall be deemed to have expired, and
all such Restricted Shares, any related Retained Distributions, and any unpaid
Dividend Equivalents shall be vested and any Cash Award payable shall be
adjusted as previously determined by the Compensation Committee.
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The Compensation Committee, at any time before complete termination of an
Option or the lapsing of restrictions on Restricted Shares, may, in its sole
discretion, accelerate the time or times at which such Option may be exercised
or accelerate the vesting on such Restricted Shares, as applicable. Except to
the extent provided in the applicable agreement, the holder's employment
agreement (as approved by the Compensation Committee) or any other agreement
approved by the Compensation Committee, outstanding unvested Awards shall not
become vested upon a Change of Control (as defined in the Plan).
Termination of Employment If a holder's employment terminates prior to the
complete exercise of an Option granted to him, then such Option shall thereafter
be exercisable solely as previously determined by the Compensation Committee;
provided, however, that no Option may be exercised after the scheduled
expiration of that Option, and if the holder's employment terminates by reason
of death or total and permanent disability, the Option will remain exercisable
for one year following such termination (but not later than the scheduled
expiration of such Option). Notwithstanding the foregoing, however, if a
holder's employment terminates for cause (defined as any meaning ascribed
thereto in any employment agreement to which the holder is a party, or in the
absence of such an employment agreement, as insubordination, dishonesty,
incompetence, moral turpitude, other misconduct of any kind, and the refusal to
perform duties and responsibilities for any reason other than illness or
incapacity), then (a) all Options held by such holder will immediately
terminate, and (b) such holder's rights to all Restricted Shares, Retained
Distributions, any unpaid Dividend Equivalents, and any Cash Awards will be
forfeited immediately.
Termination Awards may not be made under the Plan on or after the 10th
anniversary of its effectiveness, and the Board can terminate, modify, or amend
the Plan prior to such date, subject to compliance with applicable law,
applicable stock exchange listing requirements, applicable requirements for
exemption (to the extent necessary) under Rule 16b-3 under the Securities
Exchange Act of 1934 and applicable requirements under Section 162(m) of the
Code.
Additional Provisions In the event of a stock split, stock dividend, stock
distribution, combination, reclassification, recapitalization, merger,
consolidation or other similar transaction which affects the character or amount
of the outstanding Common Stock, the purchase price of each Award will be
equitably adjusted. The number of shares subject to such Award, and the number
of shares for which Awards may be granted under the Plan, also shall be
appropriately adjusted.
The Plan is not subject to any of the requirements of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan is not,
nor is it intended to be, qualified under Section 401(a) of the Code.
<PAGE>
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Certain Federal Income Tax Consequences
The rules concerning the Federal income tax consequences with respect to
Options and Restricted Shares granted and to be granted pursuant to the Plan are
quite technical. Moreover, the applicable statutory provisions are subject to
change, as are their interpretations and applications which may vary in
individual circumstances. Therefore, the following is designed to provide a
general understanding of the tax consequences. In addition, the following
discussion does not set forth any state or local tax consequences that may be
applicable.
Incentive Stock Options In general, an employee will not realize taxable
income upon either the grant or the exercise of an ISO and the Company will not
realize an income tax deduction at either such time. If the holder does not sell
the Common Stock received pursuant to the exercise of the ISO within either (i)
two years after the date of the grant of the ISO or (ii) one year after the date
of exercise, a subsequent sale of the Common Stock will result in long-term
capital gain or loss to the holder and will not result in a tax deduction to the
Company.
If the holder disposes of the Common Stock acquired upon exercise of the
ISO within either of the above mentioned time periods, the holder will generally
realize as ordinary income an amount equal to the lesser of (i) the fair market
value of the Common Stock on the date of exercise over the option price, or (ii)
the amount realized upon disposition over the option price. In such event, the
Company generally will be entitled to an income tax deduction equal to the
amount recognized as ordinary income. Any gain in excess of such amount realized
by the holder as ordinary income would be taxed as short- term or long-term
capital gain (depending on the applicable holding period).
In addition, (i) officers and directors of the Company subject to Section
16(b) of the Securities Exchange Act of 1934 may be subject to special rules
regarding the income tax consequences concerning their ISOs, (ii) any
entitlement to a tax deduction on the part of the Company is subject to the
applicable federal tax rules (including, without limitation, Code Section 162(m)
regarding the $1,000,000 limitation on deductible compensation), (iii) the
exercise of an ISO may have implications in the computation of alternative
minimum taxable income, and (iv) in the event that the exercisability or vesting
of any Award is accelerated because of a change of control, payments relating to
the Awards (or a portion thereof), either alone or together with certain other
payments, may constitute parachute payments under Section 280G of the Code,
which excess amounts may be subject to excise taxes.
Nonqualified Stock Options A holder will not realize any taxable income
upon the grant of a Nonqualified Stock Option and the Company will not receive a
deduction at the time of such grant unless such Option has a readily
ascertainable fair market value (as determined under applicable tax law) at the
time of grant. Upon exercise of a Nonqualified Stock Option, the holder
generally will realize ordinary income in an amount equal to the excess of the
fair market value of the Common Stock on the date of exercise over the exercise
price. Upon a subsequent sale of the Common Stock by the holder, the holder will
recognize short-term or long-term capital gain or loss depending upon his or her
holding period for the Common Stock. The Company will generally be allowed a
deduction equal to the amount recognized by the optionee as ordinary income.
<PAGE>
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In addition, (i) any officers and directors of the Company subject to
Section 16(b) of the Securities Exchange Act of 1934 may be subject to special
tax rules regarding the income tax consequences concerning their Nonqualified
Stock Options, (ii) any entitlement to a tax deduction on the part of the
Company is subject to the applicable tax rules (including, without limitation,
Code Section 162(m) regarding a $1,000,000 limitation on deductible
compensation), and (iii) in the event that the exercisability or vesting of any
Award is accelerated because of a change of control, payments relating to the
Awards (or a portion thereof), either alone or together with certain other
payments, may constitute parachute payments under Section 280G of the Code,
which excess amounts may be subject to excise taxes.
Restricted Shares In general, the holder of Restricted Shares will not
realize taxable income at the time a Restricted Share is awarded. In the year
the restrictions on the Restricted Shares lapse, the holder will generally
recognize ordinary income equal to the fair market value of the Common Stock on
the date the relevant restrictions lapse over the amount, if any, paid for such
Common Stock. Alternatively, the holder of Restricted Shares may elect to be
taxed in the year of issuance pursuant to Code Section 83(b). In the event of
such election the holder will recognize ordinary income equal to the fair market
value of the Common Stock on the date of issuance over the price, if any, paid
for such Common Stock.
Any gain or loss on the subsequent sale of Common Stock will generally be
either long-term capital gain or loss or short-term capital gain or loss
(depending on the applicable holding period). The Company will generally be
entitled to an income tax deduction equal to the amount recognized by the holder
as ordinary income at the time of such recognition.
In addition, (i) if the Common Stock transferred to the holder is not
subject to any restrictions, the holder generally will recognize ordinary income
at the time of transfer on the value of the Common Stock less any amounts paid
for the Common Stock and any cash dividends, Retained Distributions, Dividend
Equivalents and Cash Awards, (ii) officers and directors of the Company subject
to Section 16(b) of the Securities Exchange Act of 1934 may be subject to
special rules regarding the income tax consequences concerning their Restricted
Shares, (iii) any entitlement to a tax deduction on the part of the Company is
subject to the applicable Federal tax rules and (iv) in the event that the
exercisability or vesting of any Award is accelerated because of a change of
control, payments relating to the Awards (or a portion thereof), either alone or
together with certain other payments, may constitute parachute payments under
Section 280G of the Code, which excess amounts may be subject to excise taxes.
Awards of Restricted Shares, based on current regulations, generally do not
satisfy the exception for performance-based compensation under Code Section
162(m).
***
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In general, Section 162(m) of the Code denies a publicly held corporation a
deduction for Federal income tax purposes for compensation in excess of
$1,000,000 per year per person after January 1, 1994 to its chief executive
officer and four other officers whose compensation is disclosed in its proxy
statement, subject to certain exceptions. Options will generally qualify under
one of these exceptions if they are granted under a plan that states the maximum
number of shares with respect to which options may be granted to any employee
during a specified period and the plan under which the Options are granted is
approved by stockholders and is administered by a compensation committee
comprised of outside directors. The Plan is intended to satisfy these
requirements with respect to Options.
Vote Required
Approval of the amendment to the Existing Plan requires the affirmative
vote of at least the majority of the votes of the shares present in person or
represented by proxy and entitled to vote on the proposal, provided that the
total vote cast on the proposal represents the majority in interest of all
securities entitled to vote on the proposal. The Board of Directors recommends
that stockholders vote their shares for approval of the amendment to the
Existing Plan.
<PAGE>
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APPROVAL OF ANNUAL BONUS PLANS
FOR CERTAIN KEY EXECUTIVES
In general, Section 162(m) of the Code, which was implemented pursuant to
the Omnibus Budget Reconciliation Act of 1993, denies a publicly held
corporation a deduction for Federal income tax purposes for compensation in
excess of $1,000,000 per year per person after January 1, 1994 to its chief
executive officer and four other officers whose compensation is required to be
disclosed in its proxy statement, subject to certain exceptions. The Company's
stockholders approved the Insignia Financial Group, Inc. Annual Bonus Plan for
the Chief Executive Officer in 1994 and approved a modification to such plan in
1996 to preserve the Company's Federal income tax deduction for bonuses paid to
the Company's Chief Executive Officer
In June, 1996, the Board of Directors approved bonus plans for each of
Messrs. Gordon and Siegel as part of their respective employment agreements
which are expected to cause each individual's total compensation to exceed
$1,000,000 for 1997 and for the remaining terms of the employment agreements.
See "Compensation of Directors and Executive Officers -- Employment Agreements."
Since each of Messrs. Gordon and Siegel are reported as one of the Company's
four most highly compensated employees in this proxy statement, the bonus plans
for Messrs. Gordon and Siegel described below are subject to the approval of
stockholders in order to assure the Federal tax-deductibility of such bonus
payments. If stockholder approval is not obtained, each bonus plan will become
null and void.
Approval of Bonus Plan for Edward S. Gordon
The bonus plan for Edward S. Gordon (the "Gordon Plan") is included in his
employment agreement dated as of June 17, 1996 with Insignia and Insignia/Edward
S. Gordon Co., Inc., a wholly-owned subsidiary of Insignia ("Insignia/Gordon").
The Gordon Plan provides for an annual bonus for the year ending December 31,
1997 (or part thereof) and each subsequent year (or part thereof) during the
term of the employment agreement in an amount equal to 0.75% of
Insignia/Gordon's gross revenues for such year (or part thereof), if
Insignia/Gordon's earnings before interest, taxes, depreciation and amortization
("EBITDA"), after adjustment for any bonus payable under the Gordon Plan with
respect to such year (or part thereof), is not less than the Target Amount (as
defined below) for such year (or pro rata portion for partial years); provided,
however, that in the event Insignia/Gordon's EBITDA as so calculated is less
than the Target Amount (or pro rata portion for partial years), the amount of
such bonus shall be reduced by the amount of such deficiency. With respect to
any year "Target Amount" is defined as Insignia/Gordon's budgeted EBITDA for
such year as determined by Insignia'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 budgeted EBITDA for any year shall not be 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 if Insignia's Compensation Committee reasonably determines that
anticipated increases or decreases in Insignia/Gordon's EBITDA must be reflected
as a result of any acquisitions or dispositions, respectively, by
Insignia/Gordon. See "Compensation of Directors and Executive Officers --
Employment Agreements."
<PAGE>
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Approval of Bonus Plan for Stephen B. Siegel
As noted under "Compensation of Directors and Executive Officers -
Employment Agreements," the Company's employment agreement with Stephen B.
Siegel was amended effective January 1, 1997. The principal terms of the
employment agreement as amended are described under that caption. Two components
of the employment agreement as amended are subject to stockholder approval to
satisfy one of the requirements of Section 162(m) of the Code, in order to
permit the Company to deduct payments in excess of $1 million in any fiscal
year. The provisions requiring such approval are described below.
If these provisions are approved by the Company's stockholders, commencing
with the year ending December 31, 1997, Mr. Siegel will receive, for each year
or part thereof during the employment term, an amount equal to 0.6% of the gross
commissions earned, received and retained by Insignia/Gordon; provided, however,
if in any year Insignia/Gordon's gross commissions after reduction for amounts
payable to Mr. Siegel pursuant to this provision do not exceed a target amount
specified by the Company's Compensation Committee, the amount payable to Mr.
Siegel will be reduced by the amount of the deficiency. The target amount for
gross commissions for 1997 is $_________ and will increase for each subsequent
year to an amount not more than 110% of the target amount for the immediately
preceding year, as determined by the Company's Compensation Committee in its
sole discretion. Further, commencing with the year ending December 31, 1997, Mr.
Siegel will receive for each year in which "Adjusted Profits" of Insignia/Gordon
exceed a target amount specified by the Company's Compensation Committee a bonus
equal to 1.0% or less of such Adjusted Profits as determined by the Company's
Compensation Committee and approved by the Board of Directors, in its sole
discretion. Adjusted Profits means earnings before interest, taxes, depreciation
and amortization but after deduction of amounts payable to Mr. Siegel pursuant
to this provision. The target amount for Adjusted Profits for 1997 is
$15,000,000 and will increase for each subsequent year to an amount not more
than 110% of the target amount for the immediately preceding year, as determined
by the Company's Compensation Committee in its sole discretion.
Vote Required
The affirmative vote of at least a majority of the votes of the shares
present in person or represented by proxy and entitled to vote on this matter at
the meeting is required to approve the Gordon and Siegel Bonus Plans. The Board
of Directors recommends that stockholders vote their shares for approval of the
Gordon and Siegel Bonus Plans.
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RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent accountants, to be the independent auditors of the books, records
and accounts of the Company for the year ending December 31, 1997. Ernst & Young
LLP served as the Company's auditors for the seven fiscal years ended December
31, 1996. Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Vote Required
Ratification of the appointment of the independent accountants requires the
affirmative vote of a majority of the votes of the shares present in person or
represented by proxy and entitled to vote on this matter at the meeting. The
Board of Directors recommends that stockholders vote their shares for the
ratification of the appointment of the independent accountants.
<PAGE>
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PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock to the Dow Jones Global Index - U. S. and to the Dow Jones Real Estate
Investment Index assuming that $100 was invested on December 31, 1991, and
assuming the reinvestment of dividends. In October 1993 (indicated by the
"[OMICRON]" in the graph below), the Company completed its first underwritten
public offering in which 5,910,000 shares of Common Stock were sold by the
Company and 3,060,000 shares were sold by certain stockholders of the Company.
The initial offering price of the stock was $8.00 per share. Prior to the
offering, the Common Stock was traded in the over-the-counter market. The
Company believes that trading in the Common Stock prior to the offering was very
limited and the Company was not aware of any market price quotations.
A PEFORMANCE GRAPH REFLECTING THE INFORMATION STATED IN TABULAR FORMAT BELOW
APPEARS IN THIS AREA.
Dow Jones Dow Jones
Insignia Global Real Estate
Value At Common Stock Index - U.S. Investment Index
December 31, 1991 $100 $100 $100
December 31, 1992 125 109 90
October 13, 1993 533 96 80
December 31, 1993 766 97 79
December 31, 1994 670 95 73
December 31, 1995 1,283 128 85
December 31, 1996 1,500 154 109
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors
Each of Insignia's directors who is not an employee of Insignia received
during 1996, and currently receives, a fee of $10,000 per year for serving as a
director, plus $2,000 per meeting attended (up to a maximum of $10,000). Each
director who is not an employee of Insignia also received a bonus of $12,500
based on the Company's 1996 performance. Each director who is not an employee of
Insignia is eligible to participate in the Insignia 1995 Non- Employee Director
Stock Option Plan.
Summary Compensation Table
The following table sets forth the compensation of the Company's Chief
Executive Officer and the Company's four most highly compensated executive
officers, other than the Chief Executive Officer, who served as executive
officers at the end of 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- -------------------------------------------------------------------------------------------------------------------
Awards Payouts
--------------------------------------------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Compensation Awards Options/SARs Payout Compensation
Position Year Salary($) Bonus($) ($) ($) (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Andrew L. Farkas 1996 600,000 1,450,000 151,055(a) 300,000 58,500 (b)
Chairman, 1995 600,000 1,450,000 233,636(c) 628,000 48,000 (b)
President and 1994 600,000 1,000,000 124,000(d) --- 40,500 (b)
Chief Executive
Officer
Edward S. Gordon 1996(i) 505,130 ----- 83,377(e)(f) 250,000 (g) -----
Office of the
Chairman
Stephen B. Siegel 1996 303,333 ----- 584,117(e)(f) 75,000 (h) 6,000 (b)
Executive
Managing Director
Frank M. Garrison 1996 250,000 400,000 (f) ----- 3,000 (b)
Executive 1995 199,667 325,000 (f) 190,000 3,000 (b)
Managing Director 1994 169,373 200,000 (f) 90,000 3,000 (b)
James A. Aston 1996 250,000 400,000 (f) ---- 3,000 (b)
Office of the 1995 194,900 325,000 (f) 250,000 3,000 (b)
Chairman 1994 154,000 200,000 (f) 40,000 3,000 (b)
Chief Financial
Officer
- ----------------------------------
<FN>
(a) Represents forgiveness of $100,000 principal and $7,641 interest related to
a $400,000 loan in accordance with the Employment Agreement dated August 1,
1993. Perquisites totaled $43,414 including $30,267 for personal use of
leased aircraft.
(b) Represents Insignia's contribution under its 401(k) and 401(k) Restoration
Plans.
(c) Represents forgiveness of $100,000 principal and $18,000 interest related
to a $400,000 loan in accordance with the Employment Agreement dated August
1, 1993. Perquisites totaled $115,636 including $37,284 for personal use of
leased aircraft and $32,231 for personal tax return assistance.
(d) Represents forgiveness of $100,000 principal and $24,000 interest related
to $400,000 loan in accordance with the Employment Agreement dated August
1, 1993. Total perquisites were less than $50,000.
(e) Sales commissions. Does not reflect certain advance payments with respect
to a non-compete agreement. See "Compensation of Directors and Executive
Officers - Employment Agreements."
(f) Total perquisites were less than 10% of total salary and bonus.
(g) Does not include options to purchase 840,679 shares by the Company assumed
in the acquisition of Edward S. Gordon Company, Inc.
(h) Does not include options to purchase 146,680 shares by the Company assumed
in the acquisition of Edward S. Gordon Company, Inc..
(i) Employment began on July 1, 1996.
</FN>
</TABLE>
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information concerning stock options granted
by Insignia during 1996 to each of the executive officers (including the Chief
Executive Officer) named in the Summary Compensation Table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants For Option Terms (a)
- -----------------------------------------------------------------------------------------------------
% of Total
Options/
SARs
Granted to Exercise or
Options/ Employeesin Base Price
SARs Fiscal Year ($/Share) Expiration
Name Granted (#) (b) (c) Date 5% 10%
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Andrew L. Farkas 300,000(f) 37.5 $19.50 2/20/01 $1,616,243(d) $3,571,483(d)
Edward S. Gordon 250,000(f)(g) 31.2 $27.125 7/1/01 $1,873,529(e) $4,140,020(e)
Stephen B. Siegel 75,000(f)(h) 9.4 $27.125 7/1/01 $562,058(e) $1,242,005(e)
Frank M. Garrison none
James A. Aston none
<FN>
(a) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of
Common Stock price.
(b) During the year ended December 31, 1996, stock options representing an
aggregate of 801,000 shares of Common Stock were issued to all employees as
a group.
(c) Exercise prices represent the fair market value, as determined by the Board
of Directors, on the date of grant. The exercise price may be paid in cash,
in shares of Common Stock valued at fair market value on the date of
exercise, or a combination thereof.
(d) Represents gain before income taxes; the fair market value of the Common
Stock on February 20, 1995, (the date of the grant), as determined by the
Board of Directors, was $19.50 per share.
(e) Represents gain before income taxes; the fair market value of the Common
stock on July 1, 1995, (the date of the grant), as determined by the Board
of Directors, was $27.125 per share.
(f) All such options become exercisable in five equal annual installments, the
first installment becoming exercisable six months after the date of grant.
(g) Does not include options to purchase 840,679 shares by the Company assumed
in the acquisition of Edward S. Gordon Company, Inc.
(h) Does not include options to purchase 146,680 shares by the Company assumed
in the acquisition of Edward S. Gordon Company, Inc..
</FN>
</TABLE>
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Value Table
The following table sets forth information concerning the exercise of stock
options during fiscal 1996 by each of the executive officers (including the
Chief Executive Officer) set forth on the Summary Compensation Table and the
fiscal year-end value of unexercised options.
<TABLE>
<CAPTION>
=============================================================================================
Number of Securities Value of Unexercised In-The-
Underlying Unexercised Money Options/SARs at Fiscal
Options/SARs at Fiscal YearYear-End ($) (a)
End (#)
Shares Acquired
on Exercise ValuesRealized Exercisable (E)/ Exercisable (E)/
Name (#) ($) Unexercisable (U) Unexercisable(U)
=============================================================================================
<S> <C> <C> <C> <C>
Andrew L. Farkas none 521,333 (E) $4,156,830 (E)
406,667 (U) 2,107,919 (U)
928,000 $6,264,749
Edward S. Gordon none -0- (E)(b) $-0- (E)(b)
250,000 (U) -0- (U)
250,000 $-0-
Stephen B. Siegel none -0- (E)(c) $-0- (E)(c)
75,000 (U) -0- (U)
75,000 $-0-
Frank M. Garrison 52,236 $746,034 112,500 (E) $1,430,745 (E)
176,890 (U) 2,003,614 (U)
289,390 $3,434,359
James A. Aston 45,886 $705,793 159,666 (E) $1,759,535 (E)
158,224 (U) 1,750,220 (U)
317,890 $3,509,755
<FN>
(a) Based on the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1996 of $22.50 per share.
(b) Does not include options to purchase 840,679 shares by the Company assumed
in the acquisition of Edward S. Gordon Company, Inc.
(c) Does not include options to purchase 146,680 shares by the Company assumed
in the acquisition of Edward S. Gordon Company, Inc.
</FN>
</TABLE>
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has provided the
following report:
1996 executive compensation levels reflect a year where Insignia performed
well in light of the continuing consolidation of the real estate services
industry. Executive total compensation levels were, on average, consistent with
initial compensation targets. This mirrors Insignia's pay-for-performance
compensation philosophy.
Executive Compensation Policy - Insignia's overall compensation philosophy
is as follows:
-Provide a competitive compensation program in order to attract,
motivate, reward, and retain qualified personnel for positions of
substantial responsibility.
-Provide a management tool for focusing and directing the energies and
efforts of key executives toward achieving individual and corporate
objectives.
-Provide a long-term incentive for the executive to continue providing
service to Insignia by linking the success and prosperity of the
individual to the success and prosperity of Insignia.
-Provide compensation to key executives that has been and will
continue to be tax deductible by Insignia.
Base Compensation - The Compensation Committee's approach to base
compensation is to offer competitive salaries in comparison with market
practices. With certain exceptions, however, base salaries have become a
relatively smaller element in the total executive compensation package as
Insignia has introduced and refined pay-for- performance programs since its
inception.
The Compensation Committee annually examines market compensation levels and
trends observed in the labor market. For its purposes, the Committee has defined
the labor market as the pool of executives who are currently employed in real
estate management and real estate service companies. Market information is used
as a frame of reference for annual salary adjustments and starting salaries. The
Compensation Committee believes that base compensation for the named executive
officers listed in the Summary Compensation Table, as compared with the base
compensation for similar executives within the real estate management and
service industries, is in the mid-range of such industries.
The Compensation Committee makes salary decisions in a structured annual
review with input from the Chief Executive Officer. This annual review considers
the decision-making responsibilities of each position and the experience, work
performance, and team-building skills of position incumbents. The Compensation
Committee views work performance as the single most important measurement
factor, and places half of the weight in this area. The remaining measurement
factors, decision-making responsibilities and team-building skills, are weighted
equally at one-quarter of the total measure.
<PAGE>
Annual Bonuses - The Compensation Committee generally awards annual bonuses
to key executives and other management personnel to reward such personnel,
first, for accomplishing annual financial objectives, and second, for work
performance. The Committee generally does not award annual bonuses to such key
employees of Insignia unless Insignia meets or exceeds its targeted aggregate of
EBITDA (earnings before interest, taxes, depreciation, and amortization) and FFO
(funds from partnership operations) for the relevant year, which target is set
in November or December of the preceding year. Assuming that Insignia meets or
exceeds its targeted aggregate of EBITDA and FFO for the relevant year, thereby
generally determining the eligibility of such key employees for annual bonuses,
the Compensation Committee considers the performance of the specific areas of
Insignia under a particular employee's direct control. This balance supports the
accomplishment of overall objectives, and rewards individual contributions by
the management team. Individual annual bonus level targets are consistent with
market practices for positions with comparable decision-making responsibilities.
Target performance levels are based upon historic patterns of Insignia
performance and strategic objectives. All annual bonus-level performance targets
are set above normal expectations of performance. A performance measure
threshold for each measure ensures that bonuses are not paid for substandard
accomplishments. Each measure also has a cap to limit the potential compensation
expense of annual bonuses, and the Compensation Committee also establishes an
overall payout cap.
Long-Term Incentive Compensation - The Compensation Committee actively uses
the Insignia 1992 Stock Incentive Plan for long-term executive officer
compensation. Individual stock option grants are determined considering, in
equal measure, the nature of the services rendered by the respective employees,
their present and potential contributions to the success of the Company and its
present and future subsidiaries, and observed market practices for similar
positions in similar industries, with a particular emphasis on the practices of
other real estate management and service companies. The Compensation Committee
believes that such grants, as compared to grants made to similar executives
within the real estate management and service industries, are in the mid-range
of such industries.
Chief Executive Officer Compensation - As indicated in the discussion set
forth above, Insignia's total compensation program is largely based upon
business performance. An increasing amount of an executive's annual compensation
is dependent upon Insignia's performance for the fiscal year and over time. This
pay-for-performance program, initiated and refined since Insignia's inception,
is most clearly exemplified in the compensation of Insignia's Chief Executive
Officer.
Andrew L. Farkas organized Insignia, and has spearheaded Insignia's growth,
corporate strategy, and acquisition program. The value of a share of Insignia
Common Stock has increased 181% since Insignia's public offering in October
1993. The Dow Jones Global Index - U.S. and the Dow Jones Real Estate Investment
Index have shown increases over the same period of 60% and 36%, respectively.
Mr. Farkas's base salary was increased fifteen (15%) percent to $600,000 on
January 1, 1994 and remained the same during 1994, 1995 and 1996.
During 1993, Section 162(m) of the Code was enacted to limit the corporate
deduction for compensation paid to a public corporation's five most highly
compensated executive officers to $1 million per year per executive, unless
certain requirements are met. Accordingly, the Board of Directors proposed, and
the stockholders approved in 1994 and modified in 1995, an Annual Bonus Plan for
the Chief Executive Officer. The Annual Bonus Plan, as amended, includes a
performance payment of ten (10%) percent of the aggregate increase in the
Company's EBITDA and FFO. Such increase for 1996 was $29,533,000, thereby
entitling Mr. Farkas to a bonus of $2,953,300 for this portion of his total
compensation. Based on their conservative approach to compensation, the
Compensation Committee, the Board of Directors and Mr. Farkas agreed on an
actual bonus of $1,450,000 based on 1996 performance.
<PAGE>
It is the policy of the Compensation Committee to maximize the
effectiveness, as well as the tax efficiency, of the Company's executive
compensation plans. In that regard, the Compensation Committee intends to
maintain flexibility to take actions that it deems to be in the best interests
of the Company and its stockholders but that may not qualify for tax
deductibility under Section 162(m) or other sections of the Code.
The Compensation Committee believes that the amount of Mr. Farkas's
long-term compensation awards, which consist of certain options and warrants, is
in the median of the market practices observed by the Compensation Committee for
the real estate management and services industry and for Chief Executive
Officers. The ultimate value of these long-term compensation awards will be
determined by the actual performance of Insignia's stock price and returns on
investment capital over time.
Robert J. Denison
Michael I. Lipstein
Buck Mickel
<PAGE>
Employment Agreements
Andrew L. Farkas is employed pursuant to an agreement, dated August 1,
1993, as amended, which provides for a base salary that is currently $600,000
per year, subject to such discretionary increases as may be determined by the
Board of Directors, and a bonus to be determined annually by the Board of
Directors. Mr. Farkas has agreed not to compete with Insignia for one year after
the termination of his employment with Insignia. Insignia has loaned Mr. Farkas
$400,000, which loan bears interest at the rate of six percent per annum.
$100,000 of such loan and the interest-to-date on such loan was forgiven on each
of August 1, 1994, August 1, 1995, and August 1, 1996, and the remainder will be
forgiven on August 1, 1997, including accrued interest; provided, however, that
if Mr. Farkas is terminated for cause or violates his noncompetition agreement,
the then-outstanding portion of such loan shall immediately become due and
payable. Insignia is obligated to pay the premium for a $5 million term life
insurance policy on the life of Mr. Farkas, the beneficiaries of which are to be
designated by Mr. Farkas, but there is currently no such policy in effect. In
addition, Insignia currently maintains, and is the beneficiary of, a $10 million
key man term life insurance policy on the life of Mr. Farkas. Upon the
termination of Mr. Farkas's employment for any reason other than death or
disability, Insignia must transfer ownership of such policy to Mr. Farkas or a
trust for the family of Mr. Farkas, and Mr. Farkas must have the right to change
the beneficiary of such policy, after which Mr. Farkas will be responsible for
the premiums on such policy. Mr. Farkas's employment will be terminated in the
event that Mr. Farkas is disabled during his employment with Insignia, whereupon
Insignia will pay 75% of his salary for a period of time equal to twice the term
of his employment contract remaining immediately prior to his termination (but
not less than two years). If Mr. Farkas dies during the term of the agreement,
Insignia will pay to his estate his salary for the remainder of the term. If Mr.
Farkas is terminated without cause, Insignia will pay his salary through
September 1, 1999. Insignia has agreed that, so long as Mr. Farkas is employed
by Insignia, the Board of Directors will nominate Mr. Farkas for election as a
director and elect or appoint him as Chairman of the Board, as a member and
Chairman of the Executive Committee, and as an ex-officio member of the
Compensation Committee.
Upon the occurrence of (i) any change in the control of Insignia, as
defined in the agreement, or (ii) the election of a majority of directors of
Insignia for whom Mr. Farkas did not vote all shares of the voting stock of
Insignia which he is then entitled to vote (each a "Change In Control"), if both
Insignia and Mr. Farkas elect to continue Mr. Farkas's employment with Insignia,
Mr. Farkas will be obligated to continue his employment for the then-remaining
term of his employment contract at a base salary equal to 150% of his
then-current base salary. If either Mr. Farkas or Insignia does not elect to
continue Mr. Farkas's employment upon a Change In Control, Insignia will be
obligated to pay to Mr. Farkas an amount equal to his then-current annual
salary, multiplied by three (six if the Change In Control resulted from (a) the
acquisition by any person of more than 15% of Insignia's voting securities and
such person seeks to influence the management of Insignia, or (b) a diminution
in the powers or duties of Mr. Farkas other than for cause), plus, if such
payment is subject to any special excise tax, an amount sufficient to pay such
tax. In addition, upon a Change In Control or a Stock Change In Control (as
defined in Mr. Farkas's Employment Agreement), all options and warrants granted
to Mr. Farkas will vest immediately and be exercisable.
<PAGE>
Insignia, Insignia/Gordon, and Edward S. Gordon are parties to an
employment agreement dated as of June 17, 1996, which became effective on July
1, 1997 and expires on June 30, 2001, subject to earlier termination or
extension as provided for in the agreement. The agreement provides that Mr.
Gordon shall serve as Chairman and Chief Executive Officer of Insignia/Gordon,
among other duties, and shall be nominated as a director of Insignia/Gordon
during the term of the agreement. Mr. Gordon is to receive (i) an annual base
salary of $1,000,000 per annum, (ii) a one-time grant of options to purchase up
to 250,000 shares of Common Stock at $27.125 per share that vest in five equal
installments commencing on January 1, 1997, and (iii) the payment of commissions
earned on or prior to December 31, 1997, at certain rates and for certain
identified transactions, each as set forth in the agreement. The agreement also
provides for an annual bonus payment for the year ending December 31, 1997 and
each subsequent year or part thereof, which is subject to stockholder approval.
See "Approval of Annual Bonus Plans For Certain Key Executives." If such
approval is not obtained on or before December 31, 1997, the annual bonus
provisions of the agreement will be null and void. Mr. Gordon has agreed not to
compete with either Insignia or Insignia/Gordon for five years after the
termination of the agreement as compensation therefore, Mr. Gordon received a
$1,000,000 advance payment to be allocated over five years.
Upon Mr. Gordon's death, the agreement provides that Insignia/Gordon shall
pay Mr. Gordon's estate $1,200,000 per annum during the remaining term of the
agreement, not to exceed two years. If Mr. Gordon is terminated for cause (as
defined in the agreement), Insignia/Gordon shall pay Mr. Gordon his base salary,
as in effect, up to and including the date on which the termination occurred. If
Mr. Gordon is terminated without cause, Insignia/Gordon shall pay Mr. Gordon
$1,200,000 per year until June 30, 2001.
Insignia, Insignia/Gordon and Stephen B. Siegel are parties to an
employment agreement dated as of June 17, 1996, which became effective on July
1, 1997 and expires on June 30, 1999, subject to earlier termination or
extension as provided for in the agreement. The agreement provides that Mr.
Siegel shall serve as President of Insignia/Gordon, among other duties. Under
the agreement, as amended effective January 1, 1997, Mr. Siegel (i) receives a
base salary of $600,000 per annum, (ii) received a one- time grant of options to
purchase up to 75,000 shares of Common Stock at $27.125 per share that vest in
five equal installments commencing on January 1, 1997, (iii) receives 30% of all
promotional commission revenues earned, received and retained by Insignia/Gordon
in which Mr. Siegel has rendered services recognized by Insignia/Gordon, and
(iv) receives 50% of all net commission revenues earned, received and retained
by Insignia/Gordon in which Mr. Siegel has rendered services recognized by
Insignia/Gordon. The agreement as amended also provides that, subject to the
approval of the Company's
<PAGE>
stockholders, commencing with the year ending December 31, 1997, Mr. Siegel will
receive, for each year or part thereof during the employment term, an amount
equal to 0.6% of the gross commissions earned, received and retained by
Insignia/Gordon, provided, however, if in any year Insignia/Gordon's gross
commissions after reduction for amounts payable to Mr. Siegel pursuant to this
provision do not exceed a target amount specified by the Company's Compensation
Committee, the amount payable to Mr. Siegel will be reduced by the amount of the
deficiency. The target amount for gross commissions for 1997 is $____________
and will increase for each subsequent year to an amount not more than 110% of
the target amount for the immediately preceding year, as determined by the
Company's Compensation Committee in its sole discretion. The agreement as
amended further provides that, subject to the approval of the Company's
stockholders, commencing with the year ending December 31, 1997, Mr. Siegel will
receive for each year in which "Adjusted Profits" of Insignia/Gordon exceed a
target amount specified by the Company's Compensation Committee a bonus equal to
1.0% or less of such Adjusted Profits as determined by the Company's
Compensation Committee and approved by the Board of Directors, in its sole
discretion. Adjusted Profits means earnings before interest, taxes, depreciation
and amortization but after deduction of amounts payable to Mr. Siegel pursuant
to this provision. The target amount for Adjusted Profits for 1997 is
$15,000,000 and will increase for each subsequent year to an amount not more
than 110% of the target amount for the immediately preceding year, as determined
by the Company's Compensation Committee in its sole discretion. See "Approval of
Annual Bonus Plans For Certain Key Executives." If such approval is not obtained
on or before December 31, 1997, the two foregoing provisions of the agreement as
amended will be null and void.
Mr. Siegel has agreed not to compete with either Insignia or
Insignia/Gordon for two years after the termination of the agreement and as
compensation therefor, Mr. Siegel received a $300,000 advance payment to be
allocated over two years. Upon Mr. Siegel's death, the agreement as amended
provides that Insignia/Gordon shall pay Mr. Siegel's estate $1,200,000 per annum
during the remaining term of the agreement, not to exceed one year. If Mr.
Siegel is terminated for cause (as defined in the agreement as amended),
Insignia/Gordon shall pay Mr. Siegel his base salary, as in effect, up to and
including the date on which the termination occurred. If Mr. Siegel is
terminated without cause, Mr. Siegel shall, at his election, either observe the
non-compete agreement and receive the compensation provided for in the agreement
until June 30, 1999 or accept other employment that violates the non-compete and
receive $1,200,000 per year until June 30, 1999, less the aggregate amount of
compensation payable to him for such new employment.
Insignia is party to employment agreements dated August 1, 1993, with each
of Messrs. Aston and Garrison. The agreements, as amended, provide for an annual
base salary, which is currently $300,000 for each of Messrs. Aston and Garrison,
subject to additional increases in the discretion of the Board of Directors, and
the payment of bonus compensation as determined by the Board of Directors. Upon
the occurrence of a Change
<PAGE>
In Control, Insignia shall pay to each of Messrs. Aston and Garrison an amount
equal to his then current annual salary, in which event such employee will be
obligated to continue his employment for the then remaining term of his
employment agreement at a base salary equal to 150% of his then current base
salary. In addition, if prior to June 1998 Insignia engages in a Change In
Control or Stock Change In Control transaction (as defined in the agreements) or
Insignia materially changes its capital structure, each of Messrs. Aston and
Garrison will receive $250,000 upon such event, and an additional $250,000 24
months following such event, if such individual remains employed by Insignia. In
the event of a Change In Control or a Stock Change In Control, all options and
warrants then held by and granted to each of Messrs. Aston and Garrison will
vest immediately and be exercisable.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 10, 1997 by: (i) each stockholder
known by Insignia to beneficially own in excess of 5% of the outstanding shares
of Common Stock, (ii) each director, (iii) the Chairman, Chief Executive Officer
and President, and each of the other four most highly compensated executive
officers, and (iv) all directors and executive officers as a group. Except as
otherwise indicated in the footnotes to the table, the persons named below have
sole voting and investment power with respect to the shares beneficially owned
by such persons.
<TABLE>
<CAPTION>
Beneficial Ownership
Name and Address Shares Percent
<S> <C> <C>
Metropolitan Acquisition Partners IV, L.P. 1,762,577 6.1%
c/o Metro Shelter Directives, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Andrew L. Farkas 8,233,976 (1) 27.9%
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Apollo Real Estate Investment Fund, L.P. 3,721,318 (2) 12.2%
c/o Apollo Real Estate Fund, L.P.
2 Manhattanville Road
Purchase, New York 10577
Janus Capital Corporation(3) 4,236,300 14.6%
100 Filmore Street, Suite 300
Denver, Colorado 80206
The Capital Group Companies, Inc.(4) 1,980,040 6.7%
333 South Hope Street
Los Angeles, California 90071
Robert J. Denison(5)(6) 499,424 *
Robin L. Farkas(5)(7) 159,377 *
Merril M. Halpern(7)(8) 16,400 *
Robert G. Koen(7) 16,400 *
Michael Lipstein(5)(7) 117,107 *
Buck Mickel(5)(7) 70,068 *
James A. Aston(9) 213,294 *
Frank M. Garrison(10) 142,576 *
Edward S. Gordon(11) 890,879 3.0%
Stephen B. Siegel(12) 161,680 *
All directors and executive officers 11,251,683 35.6%
as a group (21 individuals)(1)(13)(14)
* Less than one percent.
<FN>
<PAGE>
(1) Includes shares owned by (i) Metropolitan Acquisition Partners IV, L.P.
("MAP IV"), (ii) Metropolitan Acquisition Partners V, L.P. ("MAP V"), (iii)
Metro Shelter Directives, Inc. and MV, Inc., the general partners of MAP IV
and MAP V, respectively, (iv) certain stockholders who have granted proxies
to MAP IV and MAP V, and (v) certain stockholders (including Charterhouse
Equity Partners, L.P. and affiliates of Apollo Real Estate Advisors, L.P.)
who are party to a stockholders agreement with Andrew L. Farkas. Includes
521,333 shares subject to options and warrants which are exercisable or
will become exercisable within 60 days.
(2) Includes securities owned by various affiliates of Apollo Real Estate
Investment Fund, L.P., including 1,392,916 shares subject to warrants which
are exercisable or will become exercisable within 60 days.
(3) Janus Capital Corporation ("Janus Capital") is a registered investment
advisor that furnishes investment advice to individual and institutional
clients (the "Janus Clients") and certain mutual funds (the "Funds"). Among
the Funds to which Janus Capital renders services is Janus Enterprise Fund,
direct beneficial owner of 1,470,000 shares of Common Stock [(6.1%)] as of
December 31, 1996, and certain other Janus Clients and Funds that
collectively own beneficially the remaining 2,766,300 shares of Common
Stock. Janus Capital has shared voting and dispositive power over shares
held by Janus Clients and Funds; however, Janus Capital disclaims
beneficial ownership of any such shares. The foregoing is based upon a
Schedule 13G, Amendment No. 3, filed by Janus Capital Corporation with the
Securities and Exchange Commission on or about February 10, 1997.
(4) The Capital Group Companies, Inc. ("Capital") is the parent holding company
of a group of investment management companies. Capital does not have
investment power or voting power over any of the securities reported
herein. Capital Guardian Trust Company, a bank as defined in Section 3(a)6
of the Securities Exchange Act of 1934 and a wholly owned subsidiary of
Capital, is the beneficial owner of the reported shares as a result of
serving as the investment manager of various institutional accounts. The
reported shares include 566,040 shares resulting from the assumed
conversion of 300,000 shares of the 6.5% Trust Convertible Preferred
Securities issued by Insignia Financing I, a subsidiary of the Company. The
foregoing is based upon a Schedule 13G filed by Capital with the Securities
and Exchange Commission on or about February 14, 1997.
(5) Messers. Denison, Lipstein, Mickel and Robin L. Farkas are each limited
partners in MAP IV.
(6) Includes 108,600 shares held by First Security Associates L.P., a limited
partnership of which Mr. Denison is the sole general partner, and 370,800
shares held by First Security Company II, L.P., a limited partnership of
which Mr. Denison is the sole general partner. Includes 4,000 shares
subject to options and warrants which are exercisable or will become
exercisable within 60 days, but excludes 13,600 shares held by First
Security International Fund, Ltd., a Cayman Islands company and 120,400
shares held by First Security Overseas, Ltd., a British Virgin Islands
company, for which First Security Management, Inc., a New York corporation,
serves as the investment advisor. Mr. Denison is the President of First
Security Management, Inc.
(7) Includes 16,400 shares subject to options which are exercisable or will
become exercisable within 60 days.
(8) Includes 16,400 shares subject to options which are exercisable or will
become exercisable within 60 days. Does not include 675,838 shares
beneficially owned by Charterhouse Equity Partners, L.P. ("CEP").
Charterhouse Group International, Inc. ("Charterhouse"), of which Mr.
Halpern is Chairman of the Board, indirectly controls CEP and may be deemed
to beneficially own such shares. Mr. Halpern disclaims beneficial ownership
of any shares beneficially owned by Charterhouse.
(9) Includes 159,666 shares subject to options and warrants which are
exercisable or will become exercisable within 60 days.
<PAGE>
(10) Includes 120,500 shares subject to options and warrants which are
exercisable or will become exercisable within 60 days.
(11) Includes 890,679 shares subject to options which are exercisable or will
become exercisable within 60 days.
(12) Includes 161,680 shares subject to options which are currently exercisable
or will become exercisable within 60 days.
(13) Includes 2,569,086 shares subject to options and warrants which are
exercisable or will become exercisable within 60 days.
(14) No directors or executive officers beneficially own any of the outstanding
6.5% Trust Convertible Preferred Securities issued by Insignia Financing I,
a subsidiary of the Company.
</FN>
</TABLE>
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
Andrew L. Farkas is the sole director and stockholder of the general
partner of MAE, which owns a one percent interest in MAE. Mr. Farkas is also the
sole stockholder and director, and the President, of MAG. Mr. Farkas is the sole
stockholder of the general partner of MAP IV; the general partner of MAP IV is
generally entitled to receive 50% of all distributions made by MAP IV, and Mr.
Farkas holds an additional 5% limited partnership interest in MAP IV. Mr. Farkas
is also the sole stockholder of the general partner of MAP V; the general
partner of MAP V is generally entitled to receive 30% of all distributions made
by MAP V. Mr. Farkas owned an equity interest in CEP's predecessor, which
dissolved in December 1995 and distributed 675,838 shares of Common Stock to CEP
and an associated entity and 426,788 shares of Common Stock to Mr. Farkas.
As of the date hereof, (i) Insignia owns a 19.13% limited partnership
interest in MAE, but has offered to transfer a 3% limited partnership interest
in MAE to certain creditors of U.S. Shelter Corporation, (ii) MAP IV owns a
64.5% limited partnership interest in MAE, and (iii) MAP V owns a 9.5% limited
partnership interest in MAE. Effective September 1993, the Compensation
Committee of the Board of Directors of Insignia authorized the assignment of a
one-half of one percent limited partnership interest in MAE to each of six
employees, including Messrs. Aston and Garrison and three other executive
officers of the Company. In addition, Metropolitan Partners I, L.P.
("Metropolitan"), a limited partnership in which a corporation owned by Mr.
Farkas is the general partner and Mr. Aston and one other executive officer of
the Company are the limited partners, owns a 1.05% limited partnership interest
in MAP IV.
Relationship with MAE
MAE was formed in December 1990 to be the principal vehicle for acquiring
direct or indirect control of interests in real property that would be managed
or serviced by the Company. In August 1993, the Company entered into an
agreement with MAE (the "MAE Agreement") whereby (i) the Company agreed to
assist MAE as its advisor and agent in connection with MAE's acquisition, asset
management, property management, and securitization activities and, in
connection therewith, to perform all related services, (ii) the Company agreed
to render to MAE full investment banking, financial advisory, recapitalization,
asset restructuring, securitization, and mortgage banking services (as sole
compensation for the provision of such services, the Company receives Incentive
Management Fees, Transaction Fees and Cost Reimbursements, as defined in the MAE
Agreement), and (iii) the Company and MAE agreed that, in the event either
obtains an opportunity to acquire interests in real estate or in entities which
own or control real estate, the Company will have the first right to acquire
such interests. The Company and MAE have also agreed in the MAE Agreement that
if the Company elects not to acquire any such interests, but MAE does elect to
acquire such interests and the Company elects to provide any financing to MAE
for such acquisition, then such financing will be by means of loans that will
bear interest at a rate equal to the rate then paid by the Company on
indebtedness under a revolving credit facility. If the Company is not a party to
a revolving credit facility, such rate will be the estimated rate the Company
would pay on indebtedness incurred under a revolving credit facility.
<PAGE>
Transactions with Affiliates of Apollo Real Estate Investment Fund, L.P.
As of August 17, 1995, the Company entered into agreements (the "Purchase
Agreements") to purchase National Property Investors, Inc., its property
management affiliates and certain limited partner interests in real estate
limited partnerships from a group of sellers including affiliates of Apollo. NPI
presently serves as the general partner of 28 public limited partnerships and 83
private limited partnerships with approximately 140,000 limited partners. NPI
provides property and asset management services to approximately 115 residential
properties containing approximately 38,000 apartment units. In the acquisition,
which was consummated in January 1997, the Company acquired (a) the limited
partner interests held by NPI in 14 real estate limited partnerships in which
NPI owns or controls the general partner and all of the outstanding common stock
of National Property Investors, Inc., which in turn owns or controls, directly
or indirectly, one or more of the general partners of the real estate limited
partnerships in NPI's portfolio, and (b) all of the equity interest in certain
affiliates of NPI which provide property management services. Apollo and its
affiliates, which together are the beneficial owners of 12.2% of Insignia's
Common Stock, were the owners of a 33 1/3% interest in NPI and were sellers in
the Purchase Agreements.
The aggregate purchase price was approximately $116 million consisting of
(i) approximately $76 million for the limited partner interests in the 14
partnerships and ownership of the entity which owns or controls the general
partner of the real estate limited partnerships in NPI's portfolio, and (ii)
approximately $40 million for all of the interests in certain affiliates of NPI
which provide property management services (including approximately $13 million
in cash). The limited partner interest in the NPI Partnerships were acquired by
NPI through tender offers in late 1994 and 1995 at an aggregate price
substantially lower than the price to be paid by the Company for the same
interests. Simultaneous with the execution of the Purchase Agreements, an
affiliate of the Company entered into a participation agreement with Paine
Webber pursuant to which it agreed to purchase from Paine Webber a subordinated
participation in the financing provided by Paine Webber to NPI for an aggregate
purchase price equal to approximately $16 million, which was credited towards
the NPI acquisition purchase price.
Services
Since January 1, 1992, Insignia has provided property management services
and other management and administrative services for essentially all properties
and other assets owned or otherwise controlled by MAE. Insignia was paid a total
of $38,100,000 in the year ended December 31, 1996, for such services.
Since the inception of Insignia, MAG has provided restructuring,
acquisition, and debt workout services to Insignia, MAE, and various
partnerships controlled by either Insignia or MAE. During the year ended
December 31, 1996, MAE paid Insignia investment banking fees in the amount of
$860,000 in connection with the services rendered to MAE and its various
subsidiaries.
<PAGE>
Loans and Guarantees
During the fiscal years 1994, 1995 and 1996, Insignia loaned MAE an
aggregate of $303,100,$69,000, and $50,000 respectively, which funds generally
were used in connection with the servicing and restructuring of pre-existing
obligations of certain apartment complexes controlled by MAE. Such loans bear
interest at the prime rate plus one percent per annum, are non-recourse to MAE,
and are repayable from the operations of the relevant properties. During the
fiscal years 1994, 1995 and 1996, MAE repaid an aggregate of $656,800, $167,300
, and $173,000 on such loans, respectively. As of December 31, 1996, an
aggregate of $529,000 in principal was outstanding.
The Company has guaranteed certain notes payable of MAE and its affiliates
totaling approximately $204,000. At December 31, 1996, $135,000 remained
outstanding under such notes. The Company has recorded this guarantee as a
liability.
In connection with the acquisition by an affiliate of MAE of certain
general partnership interests (pursuant to which Insignia received material
management rights), Insignia guaranteed, on behalf of an affiliate of MAE,
certain notes payable totaling $240,000 which now have a carrying value of
$23,000. Insignia has recorded a liability equal to its guarantee.
Registration Rights
Insignia has granted to MAP IV, MAP V, CEP, APTS Partners, L.P. (an
affiliate of Apollo) and certain of its affiliates ("APTS") and other persons
rights, subject to certain exceptions, to require Insignia to include, in any
registration statement filed by Insignia, any or all equity securities of
Insignia that each such person owns. In connection with the registration under
the Securities Act of 1933, as amended, of the 6.5% Trust Convertible Preferred
Securities of Insignia Financing I, a subsidiary of the Company, in January
1997, certain holders of registration rights, including APTS, CEP and Neil
Kreisel, an Executive Managing Director of the Company, exercised their rights
to have shares of Common Stock included in the registration statement. All
expenses incurred by Insignia in connection with such registration were paid by
Insignia.
Stockholders Agreements
Insignia, Andrew L. Farkas, MAP IV, MAP V, and CEP are parties to a
Stockholders Agreement (the "Stockholders Agreement") with respect to the
securities of Insignia. The Stockholders Agreement provides that at the request
of CEP, each of MAP IV, MAP V, CEP, and Andrew L. Farkas will vote their shares
for one director designated by CEP and CEP will vote its shares for such other
directors as may be designated by Mr. Farkas. In addition, pursuant to the
Stockholders Agreement, if Insignia sells or proposes to sell shares of its
capital stock, the holders of which are entitled to participate generally in the
election of members of Insignia's Board of Directors, other than in an
underwritten public offering or in certain other instances,
<PAGE>
CEP has a preemptive right to acquire, on the same terms and conditions, such
number of shares of capital stock being sold as will allow CEP, immediately
following such issuance or sale, to remain the owner, in the aggregate, of the
same percentage of issued and outstanding shares of capital stock owned by CEP
immediately prior to such issuance or sale by Insignia. The terms of the
Stockholders Agreement also apply to the permitted transferees of shares of the
parties to the Stockholders Agreement. The Stockholders Agreement will terminate
in May 2002 unless earlier terminated or extended.
Insignia, Andrew L. Farkas and APTS are parties to a Stock and Warrant
Purchase Agreement granting to APTS rights such that if Insignia sells or
proposes to sell shares of its capital stock, the holders of which are entitled
to participate generally in the election of members of Insignia's Board of
Directors, other than in an underwritten public offering or in certain other
instances, APTS has a preemptive right to acquire, on the same terms and
conditions, such number of shares of capital stock being sold as will allow
APTS, immediately following such issuance or sale, to remain the owner, in the
aggregate, of the same percentage of issued and outstanding shares of capital
stock owned by APTS immediately prior to such issuance or sale by Insignia.
PROPOSALS OF STOCKHOLDERS
Any holder of the Common Stock or Preferred Stock of the Company who
desires to present a proposal at the 1998 Annual Meeting of Stockholders for
inclusion in the proxy statement and form of proxy relating to that meeting must
submit the proposal to the Company at its principal executive offices on or
before December 31, 1997.
FINANCIAL INFORMATION
The Company will provide without charge to any stockholder of record of the
Common Stock as of the close of business on March 10, 1997 who so requests in
writing a copy of the Company's Annual Report on Form 10-K (without exhibits)
for the fiscal year ended December 31, 1996 as filed with the Securities and
Exchange Commission. Any such request should be directed to Insignia Financial
Group, Inc., Post Office Box 1089, Greenville, South Carolina 29602, Attention:
John K. Lines, General Counsel and Secretary.
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OTHER MATTERS
Management is not aware of any other matters to be brought before the
Annual Meeting of Stockholders. However, if other matters do come before the
meeting, it is the intention of the persons named in the accompanying form of
proxy to vote such proxy in accordance with their judgment on such matters.
By Order of the Board of Directors
/s/ Andrew L. Farkas
--------------------
Andrew L. Farkas
Chairman, President and
Chief Executive Officer
March 31, 1997
<PAGE>
EXHIBIT A
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES REGISTERED
UNDER THE SECURITIES ACT OF 1933.
INSIGNIA
1992 STOCK INCENTIVE PLAN
AS AMENDED MARCH 28, 1994, NOVEMBER 13 , 1995 AND MARCH 7, 1997
1. Purpose of the Plan
The purpose of the Insignia 1992 Stock Incentive Plan (hereinafter the
"Plan"), is to provide for the granting of stock options and restricted shares
to key employees (including officers) of, directors of, and consultants and
advisors to, the Company or its Subsidiaries. The general purpose of the Plan is
to promote the interests of the Company and its stockholders by providing to
certain employees, directors, consultants and advisors of the Company or its
Subsidiaries additional incentives to continue and increase their efforts with
respect to, and to remain in the employ or service of, the Company or its
Subsidiaries. The Plan was amended and restated effective March 28, 1994 and has
again been amended and restated effective November 13, 1995, and March 7, 1997.
2. Certain Definitions
The following terms (whether used in the singular or plural) have the
meanings indicated when used in the Plan:
(a) "Agreement" means the stock option agreement and the restricted
shares agreement specified in Section 12, both individually and
collectively, as the context so requires.
(b) "Award" means grants of Options and/or Restricted Shares under
this Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Cash Award" means the amount of cash, if any, to be paid to an
employee pursuant to Section 7.5.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute or statutes thereto. Reference to
any specific Code section shall include any successor section.
(f) "Committee" means the Committee of the Board appointed pursuant to
Section 4.
(g) "Common Stock" means the Class A common stock, par value $.01 per
share, of the Company.
(h) "Company" means Insignia Financial Group, Inc., a Delaware
corporation, and any successor thereto.
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(i) "Dividend Equivalents" means, with respect to the Restricted
Shares to be issued at the end of the Restriction Period, to the extent
specified by the Board only, an amount equal to the regular cash dividends
and all other distributions (or the economic equivalent thereof) which were
payable to stockholders of record during the Restriction Period on a like
number of shares of Common Stock.
(j) "Effective Date" means the date the Plan becomes effective
pursuant to Section 16.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto.
Reference to any specific Exchange Act section shall include any successor
section.
(l) "Fair Market Value" of a share of Common Stock shall be determined
by the Board, but in no case less than par value. Notwithstanding the
foregoing, in the event that the Committee grants an ISO or grants an
Option which is intended to be "performance based" for purposes of Section
162(m) of the Code, "Fair Market Value" means, for purposes of this Plan,
unless otherwise required by any applicable provision of the Code or any
regulation issued thereunder, as of any date, the last sales price reported
for the Common Stock on the applicable date, (i) as reported by the
principal national securities exchange in the United States on which it is
then traded, or (ii) if not on any such national securities exchange, as
quoted on an automated quotation system sponsored by the National
Association of Securities Dealers, or if the sale of the Common Stock shall
not have been reported or quoted on such date, on the first day prior
thereto on which the Common Stock was reported or quoted.
(m) "Holder" means an employee of the Company or a Subsidiary who has
received an Award under this Plan.
(n) "ISO" means an incentive stock option that meets the requirements
of Section 422(b) of the Code and that is designated by the Committee as an
ISO.
(o) "Nonqualified Stock Option" means a stock option other than an
ISO.
(p) "Plan" has the meaning ascribed thereto in Section 1.
(q) "Option" means any ISO or Nonqualified Stock Option.
(r) "Parent" means any parent corporation of the Company as such term
is defined in Section 424 of the Code.
(s) "Restricted Shares" means shares of Common Stock or the right to
receive shares of Common Stock, as the case may be, awarded to an employee
of the Company or a Subsidiary pursuant to Section 7.
(t) "Restriction Period" means a period of time beginning on the date
of each award of Restricted Shares and ending on the Valuation Date with
respect to such award.
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(u) "Retained Distributions" has the meanings ascribed thereto in
Section 7.3.
(v) "SEC" means the Securities and Exchange Commission.
(w) "Subsidiary" means any present or future subsidiary of the Company
as such term is defined in section 424 of the Code and any present or
future trade or business, whether or not incorporated, controlled by or
under common control with the Company. An entity shall be deemed a
Subsidiary of the Company only for such periods as the requisite ownership
or control relationship is maintained.
(x) "Total Disability" means a permanent and total disability as
defined in section 22(e)(3) of the Code.
(y) "Valuation Date" with respect to any Restricted Shares awarded
hereunder means the date designated as such in the Agreement with respect
to such award of Restricted Shares pursuant to Section 7.
3. Stock Subject to the Plan
3.1 Number of Shares. Subject to the provisions of Section 13 and this
Section 3, the maximum number of shares of Common Stock in respect of which
Awards may be granted is 5,250,000. If and to the extent that an Option
shall expire, terminate or be canceled for any reason without having been
exercised, the shares of Common Stock subject to such expired, terminated
or canceled portion of the Option shall again become available for purpose
of the Plan. In addition, any Restricted Shares which are forfeited under
the terms of the Plan or any Agreement shall again become available for
purposes of the Plan.
3.2 Character of Shares. Shares of Common Stock deliverable under the
terms of the Plan may be, in whole or in part, authorized and unissued
shares of Common Stock or issued shares of Common Stock held in the
Company's treasury, or both.
3.3 Reservation of Shares. The Company shall at all times reserve a
number of shares of Common Stock (authorized and unissued Common Stock,
issued Common Stock held in the Company's treasury, or both) equal to the
maximum number of shares that may be subject to outstanding Awards and
future Awards under the Plan.
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4. Administration
4,1 Powers. The Plan shall be administered by the Board. Subject to
the express provisions of the Plan, the Board shall have plenary authority,
in its discretion, to grant Awards under the Plan and to determine the
terms and conditions (which need not be identical) of all Awards so
granted, including without limitation, (a) the purchase price, if any, of
each Restricted Share, (b) the individuals to whom, and the time or times
at which, Awards shall be granted or awarded, (c) the number of shares to
be subject to each Award, (d) whether an Option shall be an ISO or a
Nonqualified Stock Option, (e) when and how an Option can be exercised and
whether in whole or in installments, (f) the time or times or conditions
subject to which Restricted Shares shall become vested and any Cash Awards
shall become payable, and (g) the form, terms and provisions of any
Agreement (which terms may be amended, subject to Section 15).
4.2 Factors to Consider. In making determinations hereunder, the Board
may take into account the nature of the services rendered by the respective
employees, their present and potential contributions to the success of the
Company and its Subsidiaries and such other factors as the Board in its
discretion shall deem relevant.
4.3 Interpretation. Subject to the express provisions of the Plan, the
Board shall have plenary authority to interpret the Plan, to prescribe,
amend and rescind the rules and regulations relating to it and to make all
other determinations deemed necessary or advisable for the administration
of the Plan. The determinations of the Board on the matters referred to in
this Section 4 shall be final, conclusive and binding on all parties.
4.4 Delegation to Committee. Notwithstanding anything to the contrary
contained herein, the Board may at any time, or from time to time, appoint
a Committee of at least two members, who shall be members of the
Compensation Committee of the Board (or such others persons as the Board
may designate), each of whom shall be a "disinterested party" within the
meaning of the rules and regulations of the SEC and an "outside director"
within the meaning of Section 162(m) of the Code, and delegate to such
Committee the authority of the Board to administer the Plan. Upon such
appointment and delegation, the Committee shall have all the powers,
privileges and duties of the Board, and shall be substituted for the Board,
in the administration of the Plan, except for the power to appoint members
of the Committee and to terminate, modify or amend the Plan. The Board may
from time to time appoint members of any such Committee in substitution for
or in addition to members previously appointed, may fill vacancies in the
Committee and may discharge the Committee. The Committee shall select one
of its members as its chairman and hold its meetings at such times and
places as it shall deem advisable. A majority of its members shall
constitute a quorum and all determinations shall be made by a majority of
such quorum. Any determination reduced to writing and signed by all of the
members shall be fully as effective as if it had been made by a majority
vote at a meeting duly called and held. Notwithstanding any of the
foregoing, the Board may designate one or more persons, who at the time of
such designation are not disinterested persons or outside directors, to
serve on the Committee effective upon the date such person or persons
qualify as disinterested persons and outside directors.
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5. Eligibility
5.1 General. Awards may be made only to (a) key employees (including
officers) of, directors of, and consultants and advisors to, the Company or
any of its Subsidiaries and (b) prospective employees and directors of the
Company or any of its Subsidiaries. The exercise of Options and the vesting
of Restricted Shares granted to a prospective employee or director shall be
conditioned upon such person becoming an employee or director of the
Company or any of its Subsidiaries. For purposes of the Plan, the term
"prospective employee" shall mean any person who holds an outstanding offer
of employment on specific terms from the Company or any of its
Subsidiaries. Awards may be made to employees who hold or have held Awards
under this Plan or any similar or other awards under any other plan of the
Company or its Subsidiaries. Notwithstanding any other provision of the
Plan, no person shall be granted Awards under the Plan in any calendar year
with respect to more than 400,000 shares of Common Stock, subject to
adjustment pursuant to Section 13. To the extent that shares of Common
Stock for which Awards are permitted to be granted to a person during a
calendar year are not covered by an Award to such person in a calendar
year, the number of shares of Common Stock available for Awards to such
person shall automatically increase in the subsequent calendar years during
the term of the Plan until used. Notwithstanding the foregoing, in order to
comply with Section 162(m) of the Code, the Committee shall take into
account that (a) if an Option is canceled, the canceled Option continues to
be counted against the maximum number of shares for which Options may be
granted to the employee under the Plan and (b) for purposes of Section
162(m) of the Code, if after the grant of an Option, the Committee or the
Board reduces the purchase price, the transaction is treated as a
cancellation of the Option and a grant of a new Option, and in such case,
both the Option that is deemed to be canceled and the Option that is deemed
to be granted reduce the maximum number of shares for which Options may be
granted to the employee under the Plan.
5.2 Ineligibility for Awards. No person designated by the Board to
serve on the Committee effective at such future time that he or she
qualifies as a disinterested person shall be eligible to receive any Awards
under the Plan during the period from the date such designation is made to
the date such designation becomes effective. Notwithstanding Section 5.1,
no member of the Committee, while serving as such, shall be eligible to
receive an Award under the Plan.
5.3 Special ISO Rule. ISOs may be granted only to employees or
prospective employees. No ISO shall be granted to an employee who, at the
time the ISO is granted, owns (or is considered as owning within the
meaning of section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or
any Subsidiary, unless at the time the ISO is granted the option price is
at least 110% of the Fair Market Value of the Common Stock subject to the
ISO and the ISO by its terms is not exercisable after the expiration of
five years from the date it is granted. To the extent that any Option does
not qualify as an ISO (whether because of its provisions or the time or
manner of its exercise or otherwise), such Option or the portion thereof
which does not qualify, shall constitute a separate Nonqualified Stock
Option.
4
<PAGE>
6. Options
6.1 Prices. The purchase price of the Common Stock under each Option
shall be determined by the Committee and set forth in the applicable
Agreement. Notwithstanding the foregoing, in the event that the Committee
grants an ISO or grants an Option that is intended to be "performance
based" for purposes of Section 162(m) of the Code, the purchase price of
the Common Stock under each option shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of grant.
6.2 Term of Options. The term of each Option shall be for such period
as the Board shall determine, as set forth in the applicable Agreement, but
not more than 10 years from the date of grant in the case of an ISO (except
as provided in Section 5.3).
6.3 Exercise of Options. An Option granted under the Plan shall become
(and remain) exercisable during the term of the Option to the extent
provided in the applicable Agreement and this Plan and, unless the
Agreement otherwise provides, may be exercised to the extent exercisable,
in whole or in part, at any time and from time to time during such term;
provided, however, that subsequent to the grant of an Option, the Committee
at any time before complete termination of such Option, may accelerate the
time or times at which such Option may be exercised in whole or in part
(without reducing the term of such Option). Except as otherwise provided in
Section 8.2, no Option shall be exercisable before six months after it is
granted.
6.4 Manner of Exercise. Payment of the Option purchase price shall be
made in cash or in whole shares of Common Stock already owned by the Holder
or, partly in cash and partly in such Common Stock; provided, however, that
such payment may be made in whole or in part in shares of Common Stock only
if and to the extent permitted by the applicable Agreement. An Option shall
be exercised by written notice to the Company upon such terms and
conditions as provided in the Agreement. The Company shall effect the
transfer of the shares of Common Stock purchased under the Option as soon
as practicable, and within a reasonable time thereafter such transfer shall
be evidenced on the books of the Company. No Holder or other person
exercising an Option shall have any of the rights of a stockholder of the
Company with respect to shares of Common Stock subject to an Option granted
under the Plan until due exercise and full payment has been made. No
adjustment shall be made for cash dividends or other rights for which the
record date is prior to the date of such due exercise and full payment.
6.5 Nontransferability of Options. Options shall not be transferable
other than by will or the laws of descent and distribution, and Options may
be exercised during the lifetime of the Holder thereof only by such Holder
(or his or her court appointed legal representative).
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7. Restricted Shares
7.1 Valuation Date, Issuance and Price. The Board shall determine
whether shares of Common Stock covered by awards of Restricted Shares will
be issued at the beginning or the end of the Restriction Period, whether
Dividend Equivalents will be paid during the Restriction Period in the
event shares of the Common Stock are to be issued at the end of the
Restriction Period and shall designate a Valuation Date with respect to
each award of Restricted Shares and may prescribe other restrictions, terms
and conditions applicable to the vesting of such Restricted Shares in
addition to those provided in the Plan. The Board shall determine the
price, if any, to be paid by the Holder for the Restricted Shares;
provided, however, that the issuance of Restricted Shares shall be made for
at least the minimum consideration necessary to permit such Restricted
Shares to be deemed fully paid and nonassessable. Additional determinations
made by the Board pursuant to this Section 7.1 shall be specified in the
Agreement.
7.2 Issuance of Restricted Shares at Beginning of the Restriction
Period. If shares of Common Stock are issued at the beginning of the
Restriction Period, the stock certificate or certificates representing such
Restricted Shares shall be registered in the name of the Holder to whom
such Restricted Shares shall have been awarded. During the Restriction
Period, certificates representing the Restricted Shares and any securities
constituting Retained Distributions shall bear a restrictive legend to the
effect that ownership of the Restricted Shares (and such Retained
Distributions), and the equivalent of all rights appurtenant thereto, are
subject to the restrictions, terms and conditions provided in the Plan and
the applicable Agreement. Such certificates remain in the custody of the
Company and the Holder shall deposit with the Company stock powers or other
instruments of assignment, each endorsed in blank, so as to permit
retransfer to the Company of all or any portion of the Restricted Shares
and any securities constituting Retained Distributions that shall be
forfeited or otherwise not become vested in accordance with the Plan and
the applicable Agreement.
7.3 Restrictions. Restricted Shares issued at the beginning of the
Restriction Period shall constitute issued and outstanding shares of Common
Stock for all corporate purposes. The Holder will have the right to vote
such Restricted Shares, to receive and retain all regular cash dividends
and such other distributions, as the Board may in its sole discretion
designate, paid or distributed on such Restricted Shares, and to exercise
all other rights, powers and privileges of a Holder of Common Stock with
respect to such Restricted Shares; except, that, (a) the Holder will not be
entitled to delivery of the stock certificate or certificates representing
such Restricted Shares until the Restriction Period shall have expired and
unless all other vesting requirements with respect thereto shall have been
fulfilled or waived; (b) the Company will retain custody of the stock
certificate or certificates representing the Restricted Shares during the
Restriction Period as provided in Section 7.2; (c) other regular cash
dividends and such other distributions as the Board may in its sole
discretion designate, the Company will retain custody of all distributions
("Retained Distributions") made or declared with respect to the Restricted
Shares (and such Retained Distributions will be subject to the same
restrictions, terms and vesting and other conditions as are applicable to
the Restricted Shares) until such time, if ever, as the Restricted Shares
with respect to which such Retained Distributions shall have been made,
paid or declared shall have become vested, and such Retained Distributions
shall not bear interest or be segregated in a separate account; (d) the
Holder may not sell, assign, transfer, pledge, exchange, encumber or
dispose of the Restricted Shares or any Retained distributions or his
interest in any of them during the Restriction Period; and (e) a breach of
any restrictions, terms or conditions provided in
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the Plan or established by the Board with respect to any Restricted Shares
or Retained Distributions will cause a forfeiture of such Restricted Shares
and any Retained Distributions with respect thereto.
7.4 Issuance of Stock at End of the Restriction Period. Restricted
Shares issued at the end of the Restriction Period shall not constitute
issued and outstanding shares of Common Stock and the Holder shall not have
any of the rights of a stockholder with respect to the shares of Common
Stock covered by such an award of Restricted Shares, in each case, until
such shares shall have been transferred to the Holder at the end of the
Restriction Period. If and to the extent that shares of Common Stock are to
be issued at the end of the Restriction Period, the Holder shall be
entitled to receive Dividend Equivalents with respect to the shares of
Common Stock covered thereby either (a) during the Restriction Period or
(b) in accordance with the rules applicable to Retained Distributions, as
the Board may specify in the Agreement.
7.5 Cash Awards. In connection with any award of Restricted Shares, an
agreement may provide for the payment of a cash amount to the Holder of
such Restricted Shares at any time after such Restricted Shares shall have
become vested. Such Cash Awards shall be payable in accordance with such
additional restrictions, terms and conditions as shall be prescribed by the
Board in the Agreement and shall be in addition to any other salary,
incentive, bonus or other compensation payments which such Holder shall be
otherwise entitled or eligible to receive from the Company.
7.6 Completion of Restriction Period. On the Valuation Date with
respect to each award of Restricted Shares, and the satisfaction of any
other applicable actions, terms and conditions (a) all or part of such
Restricted Shares shall become vested, (b) any Retained Distributions or
any unpaid Dividend Equivalents with respect to such Restricted Shares
shall become vested to the extent unpaid that the Restricted Shares related
thereto shall have become vested and (c) any Cash Award to be received by
the Holder with respect to such Restricted Shares shall have become
payable, all in accordance with the terms of the applicable Agreement. Any
such Restricted Shares, Retained Distributions and any unpaid Dividend
Equivalents that shall not become vested shall be forfeited to the Company
and the Holder shall not thereafter have any rights (including dividend and
voting rights) with respect to such Restricted Shares, Retained
Distributions and any unpaid Dividend Equivalents that have been so
forfeited.
8. Acceleration of Options and Restricted Shares
8.1 Death or Disability. If a Holder's employment shall terminate by
reason of death or Total Disability, notwithstanding any contrary waiting
period or installment period or Restriction Period in any Agreement or in
the Plan: (a) in the case of an Option, each such outstanding Option
granted under the Plan shall immediately become exercisable in full in
respect of the aggregate number of shares covered thereby; and (b) in the
case of Restricted Shares, the Restriction Period applicable to each such
award of Restricted Shares shall be deemed to have expired and all such
Restricted Shares, any related Retained Distributions and any unpaid
Dividend Equivalents shall be vested and any Cash Award payable pursuant to
the applicable Agreement shall be adjusted in such as provided in the
Agreement.
8.2 Change of Control. The Committee, at any time before complete
termination of an Option or the lapsing of restrictions on Restricted
Shares, may, in its sole discretion, accelerate the time or times at which
such Option may be exercised in whole or in part or accelerate the vesting
of such Restricted
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Shares, as applicable. Except to the extent provided in the applicable
Agreement, the Holder's Employment Agreement with the Company, a Subsidiary
or Parent, as approved by the Committee, or other written agreement
approved by the Committee (as such agreement may be amended from time to
time), Options granted and not previously exercisable shall not become
exercisable upon a Change of Control (as defined herein) and the
restrictions to which any Restricted Shares granted prior to the Change of
Control are subject shall not lapse upon such Change of Control.
For this purpose, a "Change of Control" shall have the meaning specified in
the applicable Agreement, the Holder's Employment Agreement with the
Company, a Subsidiary or Parent, as approved by the Committee, or other
written agreement approved by the Committee (as such agreement may be
amended from time to time).
9. Termination of Employment
9.1 General. If a Holder's employment shall terminate prior to the
complete exercise of an Option (or deemed exercise thereof), then such
Option shall thereafter be exercisable solely to the extent provided in the
applicable Agreement; provided, however, that (a) no Option may be
exercised after the scheduled expiration date of such Option; (b) if the
Holder's employment terminates by reason of death or Total Disability, the
Option shall remain exercisable for a period of one year following such
termination (but not later than the scheduled expiration of such Option);
and (c) any termination by the Company for cause will be treated in
accordance with the provisions of Section 9.2.
9.2 Termination by Company for Cause. If a Holder's employment with
the Company or a Subsidiary shall be terminated by the Company or such
Subsidiary during the Restriction Period with respect to any Restricted
Shares or prior to the exercise of any Option for cause (for these
purposes, cause shall have the meaning ascribed thereto in any employment
agreement to which such Holder is a party or, in the absence thereof, shall
mean insubordination, dishonesty, incompetence, moral turpitude, other
misconduct of any kind and the refusal to perform his duties and
responsibilities for any reason other than illness or incapacity) then (a)
all Options held by such Holder shall immediately terminate and (b) such
Holder's rights to all Restricted Shares, Retained Distributions, any
unpaid Dividend Equivalents and any Cash Awards shall be forfeited
immediately.
9.3 Miscellaneous. The Board may determine whether any given leave of
absence constitutes a termination of employment. Awards made under the Plan
shall not be affected by any change of employment so long as the Holder
continues to be an employee of the Company or a Subsidiary.
10. Right of Company to Terminate Employment
Nothing contained in the Plan or in any Award shall confer on any
Holder any right to continue in the employ of the Company or any of its
Subsidiaries or interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of the Holder at any time, with or
without cause; subject, however, to the provisions of any employment
agreement between the Holder and the Company or any Subsidiary.
11. Nonalienation of Benefits
No right or benefit under the Plan shall be subject to anticipation,
alienation, sale, assignment, hypothecation, pledge, exchange, transfer,
encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or charge the
same shall be void. No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such benefits.
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12. Written Agreement
Each award of Restricted Shares and any right to a Cash Award
hereunder shall be evidenced by a restricted shares agreement and each
grant of an Option shall be evidenced by a stock option agreement which
shall designate the Options granted thereunder as ISOs or Nonqualified
Stock Options, each in such form and containing such terms and provisions
not inconsistent with the provisions of the Plan as the Board from time to
time shall approve; provided however, that such Awards may be evidenced by
a single agreement. The effective date of the granting of an Award shall be
the date on which the Board approves such grant. Each grantee of an Option
or Restricted Shares shall be notified promptly of such grant and a written
Agreement shall be promptly executed and delivered by the Company and the
grantee, provided that such grant of Options or Restricted Shares shall
terminate if such written Agreement is not signed by such grantee and
delivered to the Company within 60 days after the date the Board approved
such grant or if the effectiveness of such grant is conditioned upon the
grantee becoming an employee of the Company or one of its subsidiaries, the
execution by the grantee of an employment agreement with the Company or one
of its subsidiaries or any other similar condition, within 60 days after
the occurrence of such condition, if later. Any such written Agreement may
contain (but shall not be required to contain) such provisions as the Board
deems appropriate.
13. Adjustment Upon Changes in Capitalization, Etc.
The Committee may make or provide for such adjustments in the maximum
number of shares of Common Stock specified in Section 3.1 and in Section
5.1, in the number of shares of Common Stock covered by outstanding Awards
granted hereunder and/or in the exercise price, grant price or purchase
price applicable to such Awards or such other adjustments in the number and
kind of securities received upon the exercise of Awards, as the Committee
in its sole discretion may determine is equitably required to prevent
dilution or enlargement of the rights of Holders or to otherwise recognize
the effect that otherwise would result from any stock split, stock
dividend, combination of shares, recapitalization or other change in the
capital structure of the Company, merger, consolidation, spin- off,
reorganization, partial or complete liquidation, issuance of rights or
warrants to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. If any merger,
consolidation or similar transaction affects the Common Stock subject to
any unexercised or unvested Award theretofore granted under the Plan, the
Committee or a committee of the board of directors of any surviving or
acquiring corporation shall take such action as is equitable and
appropriate to substitute a new award for such Award or to assume such
Award in order to make such new or assumed Award, as nearly as may be
practicable, equivalent to the old Award. If any such change or action
shall occur, the number and kind of shares for which Awards may be
thereafter granted under the Plan shall be adjusted to give effect thereto.
9
<PAGE>
14. Right of First Refusal
The Agreements may contain such provisions as the Board shall
determine to the effect that if a Holder elects to sell all or any shares
of Common Stock that such Holder acquired upon the exercise of an Option or
upon the vesting of Restricted Shares awarded under the Plan, then such
Holder shall not sell such shares unless such Holder shall have first
offered in writing to sell such shares to the Company at Fair Market Value
on a date specified in such offer (which date shall be at least three
business days and not more than 10 business days following the date of such
offer). In any such event, certificates representing shares issued upon
exercise of Options and the vesting of Restricted Shares shall bear a
restrictive legend to the effect that transferability of such shares are
subject to the restrictions contained in the Plan and the applicable
Agreement and the Company may cause the registrar of its Common Stock to
place a stop transfer order with respect to such shares.
15. Termination and Amendment
15.1 General. No Awards may be made under the Plan on or after the
tenth anniversary of the Effective Date. The Board may at any time prior to
the tenth anniversary of the Effective Date terminate the Plan, and the
Board may at any time modify or amend the Plan in such respects as it shall
deem advisable; provided, however, that any such modification or amendment
shall comply with all applicable laws, applicable stock exchange listing
requirements, applicable requirements for exemption (to the extent
necessary) under Rule 16b-3 under the Exchange Act and applicable
requirements under Section 162(m) of the Code.
15.2 Modification. No termination, modification or amendment of the
Plan may, without the consent of the person to whom any Award shall
theretofore have been granted, adversely affect the rights of such person
with respect to such Award. No modification, extension, renewal or other
change in any Award granted under the Plan shall be made after the grant of
such Award, unless the same is consistent with the provisions of the Plan.
With the consent of the Holder and subject to the terms and conditions of
the Plan (including Section 15.1), the Committee may amend outstanding
Agreements with any Holder, including, without limitation, any amendment
which would (a) accelerate the time or times at which the Award may be
exercised or vested and/or (b) extend the scheduled expiration date of the
Award. Without limiting the generality of the foregoing, the Committee may
but solely with the Holder's consent, agree to cancel any Award under the
Plan and issue a new Award in substitution therefor, provided that the
Award shall satisfy all of the requirements of the Plan as of the date such
new Award is made.
16. Effectiveness of the Plan
The Plan shall become effective upon approval by the vote of a
majority of the voting securities of the Company present, either in person
or by proxy, and entitled to vote at a duly called and held meeting of
stockholders of the Company. Prior to the Effective Date, the Board may, in
its discretion, grant or authorize the making of Awards under the Plan as
if the Effective Date had occurred, provided that the exercise of Options
and the vesting of Restricted Shares so granted or made shall be expressly
subject to the occurrence of the Effective Date.
<PAGE>
17. Government and Other Regulations
The obligation of the Company with respect to Awards shall be subject
to all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation,
the effectiveness of any registration statement required under the
Securities Act of 1933, and the rules and regulations of any securities
exchange on which the Common Stock may be listed. For so long as the Common
Stock is registered under the Exchange Act, the Company shall use its
reasonable efforts to comply with any legal requirements (a) to maintain a
registration statement in effect under the Securities Act of 1933 with
respect to all sales of Common Stock that may be issued to Holders under
the Plan and (b) to file in a timely manner all reports required to be
filed by it under the Exchange Act.
18. Withholding
The Company's obligation to deliver shares of Common Stock or pay cash
in respect of any Award or Cash Award under the Plan shall be subject to
applicable federal, state and local tax withholding requirements.
19. Separability
If any of the terms and provisions of this Plan conflict with the
requirements of Rule 16(b)-3 under the Exchange Act and/or section 422 of
the Code, then such terms and provisions shall be deemed inoperative to the
extent they so conflict with the requirements of Rule 16b-3, and/or with
respect to ISO, section 422 of the Code. With respect to ISO, if the Plan
does not contain any provision required to be included herein under section
422 of the Code, such provision shall be deemed to be incorporated herein
with the same force and effect as if such provision had been set out at
length herein; provided, further, that to the extent any Option which is
intended to qualify as an ISO cannot so qualify, such Option, to that
extent, shall be deemed to be a Nonqualified Stock Option for all purposes
of the Plan.
20. Nonexclusivity of the Plan
Neither the adoption of the Plan by the Board nor the submission of
the Plan to the stockholders of the Company for approval shall be construed
as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options and the awarding of stock and
cash otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
21. Exclusion from Pension and Profit-Sharing Computation
By acceptance of an Award or Cash Award, as applicable, each Holder
shall be deemed to have agreed that such Award or Cash Award, as
applicable, is special incentive compensation that it will not be taken
into account, in any manner, as salary, compensation or bonus in
determining the amount of any payment under any pension, retirement or
other employee benefit plan of the Company or Subsidiary. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that such
Award or Cash Award, as applicable, will not affect the amount of any life
insurance coverage, if any, provided by the Company on the life of the
Holder which is payable to such beneficiary under any life insurance plan
covering employees of the Company or any Subsidiary.
<PAGE>
22. Governing Law
The Plan shall be governed by, and construed in accordance with, the
laws of the state of Delaware.
<PAGE>
<PAGE>
INSIGNIA FINANCIAL GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Andrew L. Farkas and John K.
Lines, and each of them, proxies of the undersigned, with full power of
substitution, to vote all shares (unless a lesser number is specified on the
reverse side) of the Class A Common Stock, $0.01 par value, of Insignia
Financial Group, Inc. (the "Company") that the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the
Hyatt Regency Hotel, 220 North Main Street, Greenville, South Carolina at 10:00
a.m. on April 30, 1997, and at any adjournment thereof (the "Annual Meeting"),
and with discretionary authority to vote with respect to (i) matters which the
Board of Directors of the Company does not know a reasonable time before the
solicitation of this proxy are to be presented at the Annual Meeting, (ii) the
election of any person as a Director of the Company if any nominee for such
position named below is unable to serve or for good cause will not serve, and
(iii) matters incident to the conduct of the Annual Meeting, hereby revoking all
proxies heretofore given with respect to such shares, with all power that the
undersigned would possess if personally present, as follows:
<TABLE>
<S> <C> <C>
(1) ELECTION OF DIRECTORS FOR THE NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY TO VOTE FOR THE NOMINEES
BELOW) LISTED BELOW
</TABLE>
(INSTRUCTION: To withhold authority to vote for the nominee, strike the
nominee's name in the space provided below.)
<TABLE>
<S> <C> <C> <C>
Andrew L. Farkas Robert J. Denison Robin L. Farkas Merril M. Halpern
Robert G. Koen Michael I. Lipstein Buck Mickel
</TABLE>
(2) PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, TO
AUTHORIZE 50,000,000 ADDITIONAL SHARES OF COMMON STOCK.
FOR AGAINST ABSTAIN
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
PLEASE SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE>
(3) PROPOSAL TO APPROVE AMENDMENT TO THE
INSIGNIA 1992 STOCK INCENTIVE PLAN
INCREASING AGGREGATE SHARES OF COMMON STOCK
FROM 4,666,666 TO 5,250,000.
FOR AGAINST ABSTAIN
(4) PROPOSAL TO APPROVE BONUS PLANS FOR TWO KEY
EXECUTIVES.
FOR AGAINST ABSTAIN
(5) RATIFICATION OF THE SELECTION OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS OF THE
ACCOUNTS OF THE COMPANY FOR THE YEAR ENDING
DECEMBER 31, 1997.
FOR AGAINST ABSTAIN
(6) WITH DISCRETIONARY AUTHORITY TO VOTE UPON SUCH OTHER MATTERS AS MAY COME
BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT THEREOF.
A VOTE FOR PROPOSALS 2, 3, 4 AND 5 ARE UNANIMOUSLY RECOMMENDED BY THE BOARD OF
DIRECTORS.
This proxy will be voted in the
manner specified. If no
specification is made, this proxy
will be voted FOR each of the
nominees for director and FOR
Proposals 2, 3, 4 and 5.
PLEASE SIGN HERE AND RETURN
PROMPTLY
Dated , 1997
Please sign exactly as your name
appears at left. If the stock is
registered in the names of two or
more persons, each must sign.
Executors, administrators,
trustees, guardians, attorneys and
corporate officers must show their
full titles.
