SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
20549
________________________________________
FORM 8-K
________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 10, 1997
(Date of earliest event reported)
INSIGNIA FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19066 13-3591193
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification
Number)
One Insignia Financial Plaza
Post Office Box 1089
Greenville, South Carolina 29602
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (864) 239-1000
______________________________________
<PAGE>
Item 2. Acquisition or Disposition of Assets
Insignia Financial Group, Inc. (NYSE:IFS) has acquired Realty One and its
affiliated companies, including First Ohio Mortgage Company, for approximately
$39 million, with approximately $35 million paid in cash and the balance in IFS
stock, valued at $20 per share for the transaction.
Realty One, a full-service residential broker headquartered in Cleveland,
is the tenth largest residential real estate brokerage firm in the nation and
Ohio's largest. With more than 1,400 sales associates and 400 support staff
located in more than 45 offices throughout northern Ohio, it represents more
than 90 residential builders and handles more than 20,000 transactions valued at
more than $2.5 billion annually. First Ohio Mortgage (FOMC) originates single
family home mortgages for both Realty One clients and third parties.
Item 7. Financial Statement and Exhibits
(c) Exhibits
Exhibit No.
10.1 STOCK PURCHASE AGREEMENT by and among Insignia
Financial Group, Inc., Insignia RO, Inc., Joseph T. Aveni,
Vincent T. Aveni, James C. Miller, Richard A. Goldbach,
Joseph T. Aveni as Trustee of the Joseph T. Aveni
Declaration of Trust dated April 25, 1988), as amended on
August 10, 1995, Vincent T. Aveni as Trustee of the Vincent
T. Aveni Declaration of Trust dated February 11, 1988, as
restated on September 14, 1995, Joseph T. Aveni, as Trustee
of the Vincent T. Aveni Dynasty Trust, dated July 13, 1994,
and Vincent T. Aveni, as Trustee of the Joseph T. Aveni
Dynasty Trust, dated July 13, 1994, dated as of September
18, 1997.
10.2 SHAREHOLDERS' AGREEMENT dated as of October 7, 1997 by and
among INSIGNIA FINANCIAL GROUP, INC., a Delaware corporation
(the "Company"), and Joseph T. Aveni, individually a
resident of Gate Mills, Ohio ("J. Aveni"), Joseph T. Aveni
as Trustee of the Joseph T. Aveni Declaration of Trust dated
April 25, 1988, as amended on August 10, 1995 ("J. Aveni
1988 Trust"), Vincent T. Aveni, as Trustee of the Joseph T.
Aveni Dynasty Trust, dated July 12, 1994 ("J. Aveni 1994
Trust"), Vincent T. Aveni, Trustee of the Joseph T. Aveni
Dynasty Trust dated July 12, 1994 FBO Kristen Aveni
("Kristen Aveni Subtrust"), Vincent T. Aveni, Trustee of the
Joseph T. Aveni Dynasty Trust dated July 12, 1994 FBO Kerri
Aveni ("Kerri Aveni Subtrust"), Vincent T. Aveni, Trustee of
the Joseph T. Aveni Dynasty Trust dated July 12, 1994 FBO
Benjamin Aveni ("Benjamin Aveni Subtrust"), (collectively J.
Aveni, the J. Aveni 1988 Trust, the J. Aveni 1994 Trust, the
Kristen Aveni Subtrust, the Kerri Aveni Subtrust, and the
Benjamin Aveni Subtrust are "Holders".
99.1 Press Release dated September 30, 1997
99.2 Press Release dated October 13, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ John K. Lines
---------------------
John K. Lines
General Counsel
Date: October 22, 1997
STOCK PURCHASE AGREEMENT
by and among
Insignia Financial Group, Inc.
Insignia RO, Inc.
Joseph T. Aveni
Vincent T. Aveni
James C. Miller
Richard A. Goldbach
Joseph T. Aveni as Trustee of the Joseph T. Aveni Declaration
of Trust dated April 25, 1988), as amended on August 10, 1995
Vincent T. Aveni as Trustee of the Vincent T. Aveni Declaration
of Trust dated February 11, 1988, as restated on September 14, 1995
Joseph T. Aveni, as Trustee of the Vincent T. Aveni Dynasty Trust,
dated July 13, 1994
Vincent T. Aveni, as Trustee of the Joseph T. Aveni Dynasty Trust,
dated July 13, 1994
Dated as of September 18, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS 2
"1996 Balance Sheets" 2
"1996 Financial Statements" 2
"401(k) Plan" 2
"AAA" 2
"Accounts Payable" 2
"Accounts Receivable" 2
"Accredited Investor" 2
"Act" 2
"Adjustment Amount" 2
"Agreement" 2
"Allowance for Cancellations" 2
"Allowance for Cancellations Surplus" 2
"Applicable Contract" 3
"Arbitrator" 3
"Best Efforts" 3
"Breach" 3
"Cash Amount" 3
"Ciepiel" 3
"Ciepiel Acknowledgment" 3
"Closing" 3
"Closing Cash Amount" 3
"Closing Date" 3
"Closing Date Statement" 3
"Commercial Brokerage Division" 4
"Commercial Brokerage Division Services" 4
"Commercial Brokerage Division Allowance for
Uncollectibles" 4
"Commissions Payable" 4
"Commissions Receivable 4
"Consent" 4
"Contemplated Transactions" 4
"Continuing Liabilities" 5
"Continuing Ordinary Course Applicable Contracts" 5
"Contract" 5
"Controlling Sellers" 6
"Copyrights" 6
"CRM" 6
"CRM-Shares" 6
"Deferred Cash Amount" 6
"Disputed Matters" 6
"Effective Time" 6
"Employment Agreements" 6
"Employment Agreement Reaffirmation Certificates" 6
"Encumbrance" 6
"Environment" 6
"Environmental, Health, and Safety Liabilities" 6
"Environmental Law" 7
"ERISA" 8
"ERISA Affiliate" 8
"Exchange Act 8
"Excluded Assets" 8
"Excluded Liabilities" 8
"First Ohio Escrow" 8
"First Ohio Escrow-Shares" 8
"First Ohio Mortgage" 8
"First Ohio Mortgage-Shares" 8
"GAAP" 8
"Governmental Authorization" 8
"Governmental Body" 8
"Gross Commissions Receivable" 9
"Hazardous Activity" 9
"Hazardous Materials" 9
"HSR Act" 9
"IFG" 9
"IFG Common Stock" 9
"IFG Indemnified Persons" 9
"IFG Loss" 9
"IFG Purchase Shares" 9
"Independent Contractor Agreements" 9
"Indemnified Person" 9
"Insignia" 9
"Insignia's Advisors" 9
"Insignia's Closing Certificate" 10
"Insignia's Closing Documents" 10
"Intellectual Property Assets" 10
"Interim Balance Sheet" 10
"IRC" 10
"IFG Acquisition Subsidiary" 10
"IRS" 10
"Knowledge" 10
"Legal Requirement" 10
"Litigation Reserve" 10
"Marks" 10
"Material Adverse Effect" 10
"Modification Notice" 10
"Occupational Safety and Health Law" 11
"Order" 11
"Ordinary Course of Business" 11
"Organizational Documents" 11
"Patents" 11
"Permitted Encumbrances 11
"Person" 11
"Plan or Plans" 11
"Post-Closing Re/Max Costs" 11
"Post-Effective Time Realty One Employees" 11
"Pre-Closing Date Price of IFG Common Stock" 11
"Proceeding" 12
"Projected Closing Combined Balance Sheet" 12
"Proprietary Rights Agreement" 12
"Purchase Price" 12
"R-ONE" 12
"R-ONE Buyer Agency Agreement" or "R-ONE Buyer
Agency Agreements" 12
"R-ONE Property Management Employees" 12
"R-ONE Listing Agreement or R-ONE Listing Agreements" 12
"R-ONE-Shares" 12
"Realty One Companies" 12
"Realty One Companies Executive Officers" 12
"Realty One Company" 12
"Realty One Services Agreement" 12
"Related Person" 12
"Re/Max Litigation" 13
"Release" 14
"Representative" 14
"Residential Real Estate Services" 14
"Residential Sales Contracts" 14
"Securities Act" 14
"Sellers" 14
"Seller Loss" 14
"Sellers' Representative" 14
"Sellers' Closing Certificate" 14
"Sellers' Closing Documents" 14
"Shareholders' Agreement" 14
"Shares" 14
"Software Certificates" 14
"Subsidiary" 14
"Tax" or "Taxes" 14
"Tax Adjustment Amount" 15
"Tax Proceeding 15
"Tax Return" 15
"Threat of Release" 15
"Threatened" 15
"Trade Secrets" 15
"Unaudited Statements" 15
"Uncollected Gross Commissions Receivable" 15
2. SALE AND TRANSFER OF SHARES; CLOSING; AGREEMENTS 15
2.1 Shares; Effective Time 15
2.2 Purchase Price 16
2.3 Closing 17
2.4 Closing Obligations 17
2.5 Adjustment Amount 18
2.6 Adjustment Procedures 21
2.7 Balance Sheet at Effective Time 23
2.8 Tax Adjustment Amount 26
2.9 Sellers' Representative 26
2.10 Non-Competition 26
2.11 Tax Returns 29
2.12 Employment Agreements and Reaffirmation
Certificates 31
2.13 Tradenames 31
2.14 R-ONE Commercial Brokerage Division. 31
2.15 Continuing Liabilities 33
2.16 Certain Employment Matters 33
2.17 R-ONE Legal Department 33
2.18 Shareholders' Agreement 34
2.19 Information for SEC Filings 34
3. REPRESENTATIONS AND WARRANTIES OF SELLERS 35
3.1 Organization and Good Standing 35
3.2 Authority; No Conflict 35
3.3 Capitalization 37
3.4 Financial Statements 37
3.5 Books and Records 38
3.6 Title to Properties; Encumbrances 38
3.7 Ownership of Assets; Condition and
Sufficiency of Assets 39
3.8 Accounts Receivable 39
3.9 Accounts Payable 40
3.10 No Undisclosed Liabilities 40
3.11 Taxes 40
3.12 No Material Adverse Change 42
3.13 Employees and Employee Benefit Plans 42
3.14 Compliance With Legal Requirements;
Governmental Authorizations 44
3.15 Legal Proceedings; Orders 45
3.16 Absence of Certain Changes and Events 47
3.17 Contracts; No Defaults 48
3.18 Insurance 53
3.19 Environmental Matters 55
3.20 Employees 55
3.21 Labor Relations; Compliance 56
3.22 Intellectual Property 56
3.23 Certain Payments 60
3.24 Realty One Services Agreements 61
3.25 Disclosure and Investment Intent 61
3.26 Relations with Related Persons 61
3.27 Brokers or Finders 62
3.28 First Ohio Mortgage: Loan Purchase
Agreements 62
4. REPRESENTATIONS AND WARRANTIES OF INSIGNIA 62
4.1 Organization 62
4.2. Authority; No Conflict 63
4.3 Capitalization; Title to Interests 64
4.4 Authorization and Issuance of IFG Shares 64
4.5 Securities Act and Exchange Act Filings 65
4.6 Financial Statements 65
4.7 No Material Change 65
4.8 Taxes 65
4.9 Litigation; Legal and Governmental
Proceedings and Judgments;
Licenses and Permits 66
4.10 Subsidiaries 66
4.11 Investment Intent 66
4.12 Brokers or Finders 67
4.13 Representation As To Knowledge of
Timothy M. Grant and Frank M.Garrison 67
5. COVENANTS OF SELLERS AND THE REALTY ONE COMPANIES
PRIOR TO CLOSING DATE 67
5.1 Required Approvals 67
5.2 [Intentionally Omitted] 67
5.3 Current Information 67
5.4 Shareholders' Agreement 68
5.5 Operations Prior to Closing Date 68
5.6 Miscellaneous Agreements and Consents 71
5.7 Access and Investigation; Delivery 71
5.8 Notification 72
5.9 No Negotiation 72
5.10 Office Lease Agreements 72
5.11 Software 73
5.12 Employment Agreement Affirmation 73
5.13 No Other Interests in Realty One Companies 73
5.14 Excluded Assets/Related Liabilities 74
6. COVENANTS OF INSIGNIA PRIOR TO CLOSING DATE 74
6.1 Approvals of Governmental Bodies 74
6.2 Board Approval 74
6.3 Shareholders' Agreement 74
6.4 Miscellaneous Agreements and Consents 75
6.5 Notification 75
6.6 Office Lease Agreements 75
6.7 Employment Agreement Affirmation 76
7. CONDITIONS PRECEDENT TO INSIGNIA'S OBLIGATION TO
CLOSE 76
7.1 Accuracy of Representations 76
7.2 Performance 76
7.3 Consents 76
7.4 Additional Documents 77
7.5 No Proceedings 77
7.6 No Claim Regarding Stock Ownership or Sale
Proceeds 77
7.7 [Intentionally Omitted] 77
7.8 Accredited Investors 78
7.9 No Material Change 78
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE 78
8.1 Accuracy of Representations 78
8.2 Insignia's Performance 78
8.3 Consents 79
8.4 Additional Documents 79
8.5 No Proceedings 79
8.6 No Material Change 79
9. TERMINATION 80
9.1 Termination Events 80
9.2 Effect of Termination 81
10. INDEMNIFICATION; REMEDIES 81
10.1 Survival; Right to Indemnification Not
Affected By Knowledge 81
10.2 Indemnification by Sellers 82
10.3 Indemnification by Insignia 84
10.4 Procedure for Indemnification--Third Party
Claims 86
10.5 Procedure for Indemnification--Other Claims 90
10.6 Indemnity Limitations-- Sellers 90
10.7 Indemnity Limitations--Insignia 92
10.8 Effect of Insurance Proceeds
Received/Subrogation/Indemnification
Payment as Adjustment to Purchase Price 92
10.9 Certain Continuing Litigation 93
11. GENERAL PROVISIONS 93
11.1 Expenses 94
11.2 Mandatory Arbitration 94
11.3 Confidentiality/Public Announcement 95
11.4 Notices 95
11.5 Jurisdiction 98
11.6 Further Assurances 99
11.7 Waiver 99
11.8 Entire Agreement and Modification 99
11.9 [Intentionally Omitted] 100
11.10 Assignments, Successors, And No Third-Party
Rights 100
11.11 Severability 100
11.12 Section Headings; Construction 100
11.13 [Intentionally Omitted] 100
11.14 Governing Law 101
11.15 Counterparts 101
INDEX OF EXHIBITS 103
STOCK PURCHASE AGREEMENT This Stock Purchase Agreement ("Agreement") is
made and entered into September 18, 1997, by and among Insignia Financial Group,
Inc., a Delaware corporation ("IFG"), Insignia RO, Inc., a Delaware corporation
("IFG Acquisition Subsidiary") and Joseph T. Aveni, individually ("J. Aveni"),
Vincent T. Aveni, individually ("V. Aveni"), Joseph T. Aveni as Trustee of the
Joseph T. Aveni Declaration of Trust dated April 25, 1988), as amended on August
10, 1995 ("J. Aveni 1988 Trust"), Vincent T. Aveni as Trustee of the Vincent T.
Aveni Declaration of Trust dated February 11, 1988, as restated on September 14,
1995 ("V. Aveni 1988 Trust"), Joseph T. Aveni, as Trustee of the Vincent T.
Aveni Dynasty Trust, dated July 13, 1994 ("V. Aveni 1994 Trust"), Vincent T.
Aveni, as Trustee of the Joseph T. Aveni Dynasty Trust, dated July 13, 1994 ("J.
Aveni 1994 Trust"), James C. Miller ("Miller"), and Richard A. Goldbach
("Goldbach"). IFG and IFG Acquisition Subsidiary are referred to collectively
herein as "Insignia." J. Aveni, V. Aveni, J. Aveni 1988 Trust, V. Aveni 1988
Trust, V. Aveni 1994 Trust, J. Aveni 1994 Trust, Miller and Goldbach are
referred to collectively herein as "Sellers".
RECITALS
The Realty One Companies are engaged in the business of providing real
estate brokerage services, mortgage services, escrow services, relocation
services and related real estate services, primarily in the single family
residential real estate market in northeast Ohio.
IFG through one or more subsidiaries or affiliates operates a national real
estate services business, including property management, asset management,
investment sales, real estate acquisition, construction, real estate investment
banking, mortgage banking and other consulting and brokerage services and
engages in other real estate activities.
Sellers own all of the shares of the capital stock of Realty One, Inc., an
Ohio corporation ("R-ONE"), (the "R-ONE Shares"), of First Ohio Mortgage, Inc.,
an Ohio corporation ("First Ohio Mortgage") (the "First Ohio Mortgage-Shares"),
of First Ohio Escrow Corporation Inc., an Ohio corporation ("First Ohio Escrow")
(the "First Ohio Escrow-Shares") and of Corporate Relocation Management, Inc.
("CRM") (the "CRM-Shares"). The R-ONE Shares, the First Ohio Mortgage-Shares,
the First Ohio Escrow-Shares and the CRM-Shares are referred to collectively
herein as the "Shares". R-ONE, First Ohio Mortgage, First Ohio Escrow, and CRM
are referred to collectively herein as the "Realty One Companies."
IFG has heretofore formed IFG Acquisition Subsidiary as a wholly-owned
subsidiary corporation under the Delaware General Corporation Law (the "Act")
for the purpose of acquiring the Shares.
Sellers desire to sell, and IFG Acquisition Subsidiary desires to purchase,
the Shares for the consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"1996 Balance Sheets"--as defined in Section 3.4.
"1996 Financial Statements"--as defined in Section 3.4.
"401(k) Plan"--as defined in Section 2.16.
"AAA"--as defined in Section 2.6(c).
"Accounts Payable"--as defined in Section 3.9(a).
"Accounts Receivable"--as defined in Section 3.8(a).
"Accredited Investor"--as defined in Rule 501 of Regulation D promulgated
by the Securities and Exchange Commission under the Securities Act.
"Act"--as defined in the Recitals of this Agreement.
"Adjustment Amount"--as defined in Section 2.5 of this Agreement.
"Agreement"--this Stock Purchase Agreement.
"Allowance for Cancellations"-- with respect to the Gross Commissions
Receivable, the allowance or reserve for cancellations as of a certain date
and/or as set forth on a designated balance sheet.
"Allowance for Cancellations Surplus"--the positive amount, if any, of:
(i) the product of the Gross Commissions Receivable as of the Effective
Time times 0.10;
less
(ii) the amount, if any, by which the Uncollected Gross Commissions
Receivable exceeds the product of 0.11 times the Gross Commissions Receivable as
of the Effective Time.
"Applicable Contract"--any Contract, including any Realty One Services
Agreements presently in effect, (a) under which the Realty One Companies have or
may acquire any rights, or (b) under which the Realty One Companies have or may
become subject to any obligation or liability, or (c) by which the Realty One
Companies or any of the assets owned or used by them are or may become bound, or
(d) to which a Seller is a party that restricts the right or ability of such
Seller or any Realty One Company to engage in Residential Real Estate Services.
"Arbitrator"--as defined in Section 2.5(c).
"Best Efforts"--the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as soon as reasonably and practicably possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to incur any expense or liability or take actions
that would result in a materially adverse change in the benefits to such Person
of this Agreement and the Contemplated Transactions.
"Breach"--a "Breach" of a representation, warranty or covenant of this
Agreement or any instrument delivered pursuant to this Agreement will be deemed
to have occurred if there is or has been (a) any inaccuracy in or breach of,
such representation or warranty set forth in this Agreement or (b) failure to
perform or comply with any covenant or agreement set forth in this Agreement,
subject to applicable grace or cure periods, and the term "Breach" means any
such inaccuracy, breach or failure.
"Cash Amount"--as defined in Section 2.4(b)(1).
"Ciepiel"--as defined in Section 2.12.
"Ciepiel Acknowledgment"--as defined in Section 5.13.
"Closing"--as defined in Section 2.3(a).
"Closing Cash Amount"--as defined in Section 2.2(a).
"Closing Date"--the date and time as of which the Closing actually takes
place.
"Closing Date Statement"--as defined in Section 2.6(a).
"Commercial Brokerage Division"--as defined in Section 2.14.
"Commercial Brokerage Division Services"--the assets, liabilities,
goodwill, personnel and operations comprising the division of R-ONE engaged in
the commercial real estate brokerage business.
"Commercial Brokerage Division Allowance for Uncollectibles"-- with respect
to the Accounts Receivable of the Commercial Brokerage Division, as of a certain
date and/or as set forth on a designated balance sheet (the "Commercial
Brokerage Division Gross Receivables"), the allowance for uncollectibles and/or
cancellations as of a certain date and/or as set forth on a designated balance
sheet.
"Commissions Payable"--for purposes of Sections 2.5(b), 2.8 and 10.3(e), as
of any given date, the aggregate sales agents' commissions and commission
bonuses payable by R-ONE (net of any related allowance) in connection with the
real estate transactions reflected in Commissions Receivable.
"Commissions Receivable"--for purposes of Sections 2.5(b), 2.8 and 10.3(e),
as of any given date, the aggregate commission revenue related to real estate
transactions (net of the related allowance for cancellations) recorded as of the
date of execution of the applicable Realty One Services Agreement (but not
collected) by R-ONE and reflected in its financial statements in a manner
consistent with historical accounting practices.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale by Sellers to IFG Acquisition Subsidiary and the purchase by
IFG Acquisition Subsidiary from Sellers of the Shares and the exercise of
control by Insignia over R-ONE, First Ohio Mortgage, First Ohio Escrow and CRM;
(b) the delivery of the Closing Cash Amount, the Deferred Cash Amount and
the IFG Purchase Shares in accordance with the terms of this Agreement;
(c) the execution, delivery and performance of the Employment Agreements,
the Shareholders' Agreement, and the Employment Agreement Reaffirmation
Certificates;
(d) the performance by Insignia, Sellers, and the Realty One Companies of
their respective covenants and obligations under this Agreement;
(e) the satisfaction and discharge of the Continuing Liabilities by
Insignia as they become due and payable; and
(f) the performance (including performance by Persons who are not parties
hereto) or occurrence of the actions, transactions, events or obligations
necessary to satisfy the conditions set forth in Sections 7 and 8 hereof.
"Continuing Liabilities"--as defined in Section 2.7(b).
"Continuing Ordinary Course Applicable Contracts" -- any Applicable
Contract not listed in Exhibit 2.7 (b) in effect at the Effective Time that
satisfies all of the following criteria:
(a) was/is entered into prior to the Effective Time in the Ordinary Course
of Business;
(b) is, at any time after the Effective Time, terminable upon not greater
than 35 days notice by the Realty One Company which is a party thereto or bound
thereby;
(c) Insignia fails to determine by written notice to the Seller's
Representative prior to the earlier of October 1, 1998, or 120 days after the
Realty One Company makes its first payment after the Effective Time under such
Applicable Contract that such Applicable Contract is not necessary to the
operation of the business of the Realty One Company which is a party to or bound
by such Applicable Contract;
(d) the termination of which Applicable Contract by the applicable Realty
One Company, together with any other terminations of other Continuing Ordinary
Course Applicable Contracts, does not result in damages, penalties or
accelerated payments payable by the Realty One Company which is a party to or
bound by such Continuing Ordinary Course Applicable Contracts in the aggregate
exceeding $100,000;
(e) the aggregate payments due under such Applicable Contract by the Realty
One Company which is a party or bound thereby that will become due and payable
after the Effective Time in accordance with its terms and conditions, in the
absence of renewals, defaults, or Breaches by any party thereto, are not
material in amount considering all other liabilities and obligations of the
Realty One Companies taken as a whole; and
(f) default or Breach by any party to such Applicable Contract will not
cause a Material Adverse Effect after the Effective Time.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally binding
upon a Person.
"Controlling Sellers"-- J. Aveni, V. Aveni, the J. Aveni 1988 Trust, the V.
Aveni 1988 Trust, the V. Aveni 1994 Trust and the J. Aveni 1994 Trust.
"Copyrights"--as defined in Section 3.22(a)(iii).
"CRM"--as defined in the Recitals in this Agreement.
"CRM-Shares"--as defined in the Recitals to this Agreement.
"Deferred Cash Amount"--as defined in Section 2.2(c).
"Disputed Matters"--as defined in Section 2.6(c).
"Effective Time"--subject to the occurrence of the Closing, the beginning
of the day October 1, 1997.
"Employment Agreements"--as defined in Section 2.12.
"Employment Agreement Reaffirmation Certificates"--as defined in Section
2.12.
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental, Health, and Safety Liabilities"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) the regulation of any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended
or actual Releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the Release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the Release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the Environment
when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been Released, preventing the Threat
of Release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate"--as defined in Section 3.13(h).
"Exchange Act--the Securities Exchange Act of 1934 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"Excluded Assets"--as defined in Section 2.7(a).
"Excluded Liabilities"--all liabilities and obligations of the Realty One
Companies that are not Continuing Liabilities.
"First Ohio Escrow"--as defined in the Recitals in this Agreement.
"First Ohio Escrow-Shares"--as defined in the Recitals of this Agreement.
"First Ohio Mortgage"--as defined in the Recitals this Agreement.
"First Ohio Mortgage-Shares"--as defined in the Recitals of this Agreement.
"GAAP"--generally accepted United States accounting principles.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement, including any approval or waiver under the HSR Act.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or other
governmental jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or Taxing authority or
power of any nature.
"Gross Commissions Receivable"--as of any given date, the aggregate
commission revenue of R-ONE related to real estate transactions (not reduced for
Allowances for Cancellations) recorded as of the date of execution of the
applicable Realty One Services Agreement (but not collected) by R-ONE.
"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from a
property owned by one or more of the Realty One Companies or any part thereof
into the Environment, and any other act, business, operation, or thing that
materially increases the danger, or risk of danger, or poses an unreasonable
risk of harm to persons or property on or off a property owned by one or more of
the Realty One Companies, or that may affect the value of a property of the
Realty One Companies.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR Act"--The Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"IFG"--as defined in the first paragraph of this Agreement.
"IFG Common Stock"--Class A Common Voting Stock of IFG, $0.01 par value per
share.
"IFG Indemnified Persons"--as defined in Section 10.2.
"IFG Loss"--as defined in Section 10.2.
"IFG Purchase Shares"--as defined in Section 2.2.
"Independent Contractor Agreements"--as defined in Section 3.17(a)(vi).
"Indemnified Person"--an IFG Indemnified Person and/or an Sellers'
Indemnified Person, as the context shall apply.
"Insignia"--as defined in the first paragraph of this Agreement.
"Insignia's Advisors"--as defined in Section 5.7(a).
"Insignia's Closing Certificate"--as defined in Section 2.4(b)(iii).
"Insignia's Closing Documents"--as defined in Section 2.4(a).
"Intellectual Property Assets" --as defined in Section 3.22(a).
"Interim Balance Sheet"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IFG Acquisition Subsidiary"--as defined in the first paragraph of this
Agreement.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter; provided, however, that a Seller will be deemed to have
"Knowledge" of a particular fact or other matter if any of Realty One Companies
Executive Officers has Knowledge of such fact or other matter. A Person (other
than an individual) will be deemed to have "Knowledge" of a particular fact or
other matter if any individual who is serving as a director, executive officer,
partner, executor, or trustee of such Person (or in any similar capacity) has
Knowledge of such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, or other
administrative order, constitution, law, ordinance, principle of common law,
regulation, statute, or treaty.
"Litigation Reserve"--the allowance or reserve, as of a certain date and/or
as set forth on a designated balance sheet, for settlement or discharge of any
pending or Threatened claim, demand, cause of action, litigation, complaint or
other dispute or any other Proceeding, involving the business of R-ONE, of a
nature for which R-ONE has historically maintained such a reserve.
"Marks"-- as defined in Section 3.22(a)(i).
"Material Adverse Effect"--a material adverse effect on the financial
condition, business relationships or economic prospects of any of the Realty One
Companies or of the Realty One Companies taken as a whole.
"Modification Notice"--as defined in Section 5.8.
"Occupational Safety and Health Law"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
and
(b) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority).
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws or code of regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"Patents"-- as defined in Section 3.22(a)(ii).
"Permitted Encumbrances--as defined in Section 3.7.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan or Plans"--as defined in Section 3.13(a).
"Post-Closing Re/Max Costs"--as defined in Section 10.9.
"Post-Effective Time Realty One Employees"--Realty One Companies employees
who become employees of Insignia or a Related Person thereof.
"Pre-Closing Date Price of IFG Common Stock"-- the average of the daily
closing price of IFG Common Stock as traded on the New York Stock Exchange for
the ten consecutive trading days which end on (and include) the third business
day preceding the Closing Date.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Projected Closing Combined Balance Sheet"-- the pro forma combined balance
sheet of the Realty One Companies, projected as of the Effective Time, attached
hereto as Exhibit 2.5(a).
"Proprietary Rights Agreement"--as defined in Section 3.20(b).
"Purchase Price"--as defined in Section 2.2.
"R-ONE"--as defined in the Recitals to this Agreement.
"R-ONE Buyer Agency Agreement" or "R-ONE Buyer Agency Agreements"--as
defined in Section 3.17(a)(i)(A)
"R-ONE Property Management Employees"--as defined in Section 2.7(a)(iii).
"R-ONE Listing Agreement or R-ONE Listing Agreements"--as defined in
Section 3.17(a)(i)(A).
"R-ONE-Shares"--as defined in the Recitals of this Agreement.
"Realty One Companies"--as defined in the first paragraph of this
Agreement.
"Realty One Companies Executive Officers"--the individuals listed on
Exhibit 1.
"Realty One Company"--any one of the Realty One Companies.
"Realty One Services Agreement"--any Contract pursuant to which any of the
Realty One Companies receives revenues and/or provides or is obligated to
provide any Residential Real Estate Services or Commercial Brokerage Division
Services, including without limitation the Residential Sales Contracts.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such individual
or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) the individual's
parents, children and step-children, (iv) any other natural person who resides
with such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the 1934 Act and
Regulations of voting securities or other voting interests representing at least
5% (five percent) of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5% (five percent) of
the outstanding equity securities or equity interests in a Person.
"Re/Max Litigation"--the Proceedings of: (i) Re/Max International, Inc., et
al v. Realty One, Inc., et al, U.S. District Court, Northern District of Ohio,
Eastern Division, Case No. 1:94-CV-0062 (as appealed); and (ii) Thomas Hurd v.
Vincent Aveni, et al, Cuyahoga County, Ohio Court of Common Pleas, Case No.
CV299512; and (iii) the Ohio Attorney General's Office in connection with or
related to the subject matter of the foregoing cases based on the operation of
R-ONE's business in accordance with policies adopted and in effect prior to the
Effective Time.
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative"--with respect to a particular Person, any director,
officer, consultant, advisor, or other representative of such Person, including
legal counsel, accountants, and financial advisors.
"Residential Real Estate Services"--as defined in Section 2.10(a).
"Residential Sales Contracts"--as defined in Section 3.17(a)(i)(A).
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Sellers"--as defined in the first paragraph of this Agreement.
"Seller Loss"--as defined in Section 10.3.
"Sellers' Representative"--shall be Joseph T. Aveni.
"Sellers' Closing Certificate"--as defined in Section 2.4(a)(vii).
"Sellers' Closing Documents"--as defined in Section 2.4(a).
"Shareholders' Agreement"--as defined in Section 2.18.
"Shares"--as defined in the Recitals of this Agreement.
"Software Certificates"--as defined in Section 5.11(c).
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax" or "Taxes"--any or all U.S. federal, state, local or foreign Taxes,
including, but not limited to, income (whether net or gross), excise, property,
sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage,
unemployment, workers' compensation, social security, use, value added, capital,
gross receipts, franchise, license, severance stamp, premium, windfall profits,
environmental, capital stock, profits, withholding, disability, real property,
personal property, registration, customs duties, alternative or add-on minimum,
estimated or other Tax of any kind whatsoever (whether disputed or not) imposed
by any Governmental Body, including any related charges, fees, interest,
penalties, additions to Tax or other assessments.
"Tax Adjustment Amount"--an amount of adjustment to the Purchase Price
calculated in accordance with Section 2.8(a).
"Tax Proceeding"--any audit, other administrative proceeding or judicial
proceeding involving Taxes.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made or any
notice has been given (i) orally or in writing to Sellers or to the Realty One
Companies Executive Officers or (ii) in writing to a Realty One Companies
employee.
"Trade Secrets"--as defined in Section 3.22(a)(iv).
"Unaudited Statements"--as defined in Section 4.6.
"Uncollected Gross Commissions Receivable" -- the total amount of Gross
Commissions Receivable not collected in full, without any set-off, within ninety
days after the date on which a Gross Commission Receivable first becomes due and
payable.
2. SALE AND TRANSFER OF SHARES; CLOSING; AGREEMENTS
2.1Shares; Effective Time
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Shares to IFG Acquisition Subsidiary, and IFG
Acquisition Subsidiary will purchase the Shares from Sellers. The sale and
purchase of the Shares shall be effective as of the Effective Time.
2.2 Purchase Price
The total purchase price for the Shares is $39,800,000, subject to
adjustment as provided herein (the "Purchase Price"), paid as follows:
(a) $33,850,000 (Thirty Three Million Eight Fifty Thousand Dollars) paid in
cash at Closing (the "Closing Cash Amount") to be delivered at Closing as
described in Section 2.4(b); plus
(b) $4,200,000 (Four Million Two Hundred Thousand Dollars) of shares of IFG
Common Stock (the "IFG Purchase Shares") calculated in accordance with this
Section 2.2 and to be delivered at Closing pursuant to Section 2.4(b) ; plus
(c) $1,750,000 (One Million Seven Hundred Fifty Thousand Dollars) payable
in cash in accordance with Section 2.6(b) (the "Deferred Cash Amount"); plus
(d) the Adjustment Amount; plus
(e) the Tax Adjustment Amount calculated in accordance with Section 2.8
hereof.
Subparts (a), (b) and (c) of the Purchase Price described above
collectively consist of (i) an allocation of $36,800,000 of the Purchase Price
to R-ONE, (ii) an allocation of $1,750,000 of the Purchase Price to First Ohio
Mortgage, (iii) an allocation of $750,000 of the Purchase Price to First Ohio
Escrow, and (iv) an allocation of $500,000 of the Purchase Price to CRM.
Subparts (d) and (e) of the Purchase Price described above, when finally
determined, shall be allocated among the Realty One Companies pro rata based on
the amounts set forth in the immediately preceding sentence.
For purposes of this Agreement, the "IFG Purchase Shares" shall be a number
of shares of IFG Common Stock calculated as follows:
(A) 210,000 shares of IFG Common Stock if the Pre-Closing Date Price of IFG
Common Stock is equal to or greater than $20.00 per share up to but not greater
than $23.00 per share;
(B) if the Pre-Closing Date Price of IFG Common Stock is greater than
$23.00 per share, a number of shares of IFG Common Stock equal to $4,200,000
divided by the sum of:
(a) $20.00 plus
(b) the amount by which the Pre-Closing Date Price of IFG Common Stock
exceeds $23.00 per share;
(C) if the Pre-Closing Date Price of IFG Common Stock is less than $20.00
per share but not less than $17.00 per share, a number of shares of IFG Common
Stock equal to $4,200,000 divided by the Pre-Closing Date Price of IFG Common
Stock;
(D) if the Pre-Closing Date Price of IFG Common Stock is less than $17.00
per share, a number of shares of IFG Common Stock equal to $4,200,000 divided by
$17.00.
2.3 Closing
(a) Unless this Agreement is terminated in accordance with Section 9
hereof, the closing (the "Closing") of the Contemplated Transactions provided
for in this Agreement will take place at the offices of McDonald, Hopkins, Burke
& Haber Co., L.P.A., counsel to the Realty One Companies and the Sellers, 2100
Bank One Center, 600 Superior Avenue, E., Cleveland, OH 44114, at 10:00 a.m.
(local time):
(i) at the option of Insignia, on a date following the last to be fulfilled
or waived of the conditions set forth in Sections 7 and 8 that is no less than
three business days following notice by Insignia to R-ONE and the Sellers, but
in no event later than the earlier of: (1) the fifth day after obtaining all
necessary approvals of the expiration of applicable waiting periods under the
HSR Act, but in no event earlier than September 30, 1997; or (2) October 31,
1997.
(ii) at such other time and place as Insignia and Sellers may agree.
Subject to the provisions of Section 9, failure to consummate the purchase
and sale provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.3 will not result in the termination of
this Agreement and will not relieve any party of any obligation under this
Agreement.
2.4 Closing Obligations
(a) At the Closing Sellers will deliver to Insignia:
(i) certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers) for transfer to IFG Acquisition Subsidiary;
(ii) Employment Agreement Reaffirmation Certificates, executed by each of
J. Aveni and Ciepiel and any other person who has executed an Employment
Agreement prior to Closing;
(iii) the Shareholders' Agreement, executed by J. Aveni, the J. Aveni 1988
Trust, and the J. Aveni 1994 Trust;
(iv) the Ciepiel Acknowledgment;
(v) the Software Certificates;
(vi) [intentionally omitted];
(vii) a certificate executed by the Sellers representing and warranting to
Insignia that, except as otherwise stated in such certificate, each of the
Sellers' representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all material
respects as of the Closing Date as if made on the Closing Date (giving full
effect to any Modification Notices) and certifying to Insignia that Sellers have
performed their obligations under Section 5 hereof and that all conditions in
Section 7 hereof have been satisfied (the "Sellers' Closing Certificate") (the
documents referenced in (a)(i) through (a)(vii) are collectively the "Sellers'
Closing Documents").
(b) At the Closing, subject to the terms of Sections 2.1 and 2.2 hereof,
Insignia will deliver the following:
(i) the Closing Cash Amount and the IFG Purchase Shares in the following
form, to be distributed in the aggregate to Sellers in proportion to their
interest in each of the Realty One Companies and in accordance with the
allocation of the Purchase Price forth on Exhibit 2.4(b)(i):
(A) the Closing Cash Amount delivered to the Sellers' Representative
pursuant to wiring instructions from the Sellers' Representative, to be
distributed to Sellers after taking into account the distribution of the IFG
Purchase Shares described herein in accordance with Exhibit 2.4(b)(i); and
(B) the IFG Purchase Shares to the Sellers' Representative for distribution
to the applicable Seller(s) as shown on Exhibit 2.4(b)(i);
(ii) the Shareholders' Agreement executed by IFG;
(iii) a certificate executed by Insignia to the effect that, except as
otherwise stated in such certificate, each of Insignia's representations and
warranties in this Agreement was accurate in all material respects as of the
date of this Agreement and is accurate in all respects as of the Closing Date as
if made on the Closing Date and certifying to R-ONE and Sellers that Insignia
has performed its obligations under Section 6 hereof and that all conditions in
Section 8 hereof have been satisfied (the "Insignia's Closing Certificate");
(iv) Employment Agreement Reaffirmation Certificates executed by Insignia
or a Related Party thereof (the documents referenced in (b)(i) through (b)(iv)
are collectively "Insignia's Closing Documents").
2.5 Adjustment Amount
(a) The "Adjustment Amount" (which may be a positive or negative number)
will be equal to:
(i) the combined stockholders' equity of the Realty One Companies as of the
Effective Time determined in accordance with GAAP
minus
(ii) the sum of: (1) $3,702,407 (calculated as shown on the Projected
Closing Combined Balance Sheet attached as Exhibit 2.5(a)); and (2) all amounts
held as of the Effective Time (whether in cash, cash equivalents or immediately
available funds) in trust accounts or for the benefit of third parties or
payments or deposits for future work or services.
(b) Notwithstanding any other provision of this Agreement, solely for
purposes of calculating the combined stockholders' equity of the Realty One
Companies as of the Effective Time (which calculation shall be made in a manner
consistent with the Projected Closing Combined Balance Sheet attached as Exhibit
2.5(a), except as otherwise provided below):
(i) the amount of the following assets and liabilities of the Realty One
Companies as of the Effective Time shall be determined as follows:
(A) the liabilities set out below shall not be accrued as a liability of
the Realty One Companies for purposes of calculating the combined stockholders'
equity:
(1) accrued vacation pay, sick leave and personal leave;
(2) United States federal and Ohio state income Taxes;
(3) accrued real property lease expense, including any adjustment to real
property rental payments or lease expense on a straight line basis, up to an
amount of $225,000;
(B) deposits up to an amount of $25,000 in connection with capital leases
shall be deemed to be applied as a payment against such obligations and shall
also be included as an asset on the balance sheet;
(C) Commissions Receivable and Commissions Payable shall be recognized as
of the date of execution by all parties of a Contract giving rise to such
receivable;
(D) the Allowance for Cancellations with respect to the Gross Commissions
Receivable shall not be less than twenty-one percent of the Gross Commissions
Receivables and a corresponding allowance with respect to Commissions Payable
shall be maintained;
(E) the amount of the Litigation Reserve shall not be less than $150,000;
(F) the amount of the Commercial Brokerage Division Allowance for
Uncollectibles shall not be less than 26.10% of the Commercial Brokerage
Division Gross Receivables.
(G) the $30,000 investment by R-ONE in Realty Relocation Services shall be
listed as an asset of R-ONE;
(H) gain or loss on sale of the Shares for GAAP purposes shall not be
treated as an asset sale as of the Effective Time (i.e. no gain or loss in
connection with the Contemplated Transactions shall be reflected on the Closing
Date Statement)
(ii) any periodic rental payment paid by the Realty One Companies under
real property lease agreements described in Exhibit 3.6 hereof for any monthly
(or equivalent) period during which the Effective Time occurs shall be pro-rated
and the amount attributable as rent for the balance of such monthly (or
equivalent) period occurring after the Effective Time shall be treated as a
pre-Effective Time asset on the Closing Date Statement. (For example, if the
Realty One Companies have prepaid rent for the month of October, 1997, then all
such amounts shall be treated as an asset of the Realty One Companies as of the
Effective Date.)
2.6 Adjustment Procedures
(a) Delivery of Closing Date Statement. Within one hundred twenty (120)
days after the Effective Time, Insignia shall, at its expense, prepare and
deliver to the Sellers' Representative a combined balance sheet of the Realty
One Companies prepared in accordance with GAAP (as revised in accordance with
the adjustments set forth in Section 2.5(b) and in the manner in which such
adjustments are set forth in Exhibit 2.5(a)), showing the combined stockholders'
equity of the Realty One Companies as of the Effective Time (the "Closing Date
Statement"). The Closing Date Statement shall provide, in reasonable detail, an
explanation of the calculation of the Adjustment Amount.
(b) Calculation and Distribution of Deferred Cash Amount and Payment of
Adjustment Amount. Following delivery of the Closing Date Statement to the
Sellers' Representative, on the 155th day after the Effective Time IFG shall
deliver the amount owed to Sellers, if any, in accordance with the provisions
set forth below, and/or to the extent required below, Sellers shall deliver to
Insignia the amount, if any, in accordance with the provisions set out below:
(i) Insignia's Payment Obligation:
(A) If the Adjustment Amount is a positive number, Insignia will pay such
amount to the Sellers' Representative for the benefit of the Sellers in addition
to the Deferred Cash Amount.
(B) If the Adjustment Amount is a negative number but less than the
Deferred Cash Amount, Insignia will pay to the Sellers' Representative for the
benefit of the Sellers the difference between the Deferred Cash Amount and the
Adjustment Amount.
(ii) Sellers' Payment Obligation. If the Adjustment Amount is a negative
number greater than the Deferred Cash Amount, the Sellers will be liable,
jointly and severally, to, pay the balance to IFG, provided, however, that the
obligation of Miller and Goldbach shall be limited to a pro rata portion thereof
in accordance with their respective percentage interest in the Purchase Price.
(iii) Manner of Payment. All payments will be payable immediately when due
together with interest at the rate of 5% per annum for the period beginning at
the Effective Time and ending on the date of payment. Payments must be made in
immediately available funds by wire transfer as directed by Sellers
Representative or Insignia, as applicable. Payments to Sellers must be made in
the manner and will be allocated in the proportions set forth in Section 2.2.
Payments to IFG must be made by wire transfer to such bank account as IFG will
specify.
(iv) Payment of Undisputed Amount in Event of Dispute. In the event of a
dispute by the Sellers' Representative pursuant to Subsection (c) below,
Insignia or the Sellers, as the case may be, shall pay the undisputed amount of
the Adjustment Amount (plus any undisputed balance of the Deferred Cash Amount
if applicable) plus interest at the rate set forth in this Section 2.6 on the
155th day after the Effective Time.
(v) Payment Following Dispute Resolution. Following a decision by the
Arbitrator pursuant to Subsection (c) below, Insignia and/or Sellers, as
applicable, shall pay the balance, if any, within ten (10) days following the
Arbitrator's final determination of the portion, if any, of the disputed
Adjustment Amount required to be paid by Insignia or the Sellers, as the case
may be, together with interest thereon, or, if applicable, in accordance with
the decision of the Arbitrator. Insignia shall retain from the Deferred Cash
Amount, without encumbrance, any portion of such disputed amount due and owing
to Insignia.
(c) Dispute Resolution. The Sellers' Representative shall notify Insignia
within fifteen days after receipt of the Closing Date Statement that the
Sellers' Representative disputes any matter with respect to such Statement. In
such event any such matters (the "Disputed Matters") shall be submitted to
arbitration in Chicago, Illinois within 30 days after the notice of the Sellers'
Representative unless the parties agree in writing to extend such 30 day period
in an attempt to negotiate a settlement of such Disputed Matters. The Arbitrator
("Arbitrator") shall be any one of the nationally recognized independent
accounting firms (or any member or employee of such a firm who is a certified
public accountant designated by such firm) which is on the date hereof among the
ten largest such firms other than Ernst & Young mutually agreed to by the
Sellers' Representative and IFG. If the Sellers' Representative and IFG shall
have failed to agree upon the selection of the Arbitrator or any such Arbitrator
selected by them shall not have agreed to perform such services, the Arbitrator
shall thereupon be selected in accordance with the rules of the American
Arbitration Association ("AAA"), with preference being given to any nationally
recognized accounting firm (or CPA member or employee thereof) other than any
firm then employed by any of the Sellers or IFG. The Arbitrator shall consider
only the Disputed Matters and the arbitration shall be conducted in accordance
with the rules of the AAA then in effect. The Arbitrator shall act promptly to
resolve all Disputed Matters and its decision with respect to all Disputed
Matters shall be final and binding upon the parties hereto and shall not be
appealable to any court. The costs and expenses of the Arbitrator and reasonable
costs and expenses of all parties to such arbitration, including professional
fees, shall be borne by the party or parties determined by the Arbitrator, who
shall, in making such determination, take account of the relative merits of the
positions contended by the parties and the good faith efforts of the parties in
attempting to settle the matter without resort to arbitration, but the
Arbitrator shall not take into consideration the relative ability of the parties
to pay such fees, costs and expenses.
2.7 Balance Sheet at Effective Time.
(a) Excluded Assets. Notwithstanding anything to the contrary contained
herein, the following assets reflected on the Interim Balance Sheet shall, at or
prior to the Effective Time, be transferred, distributed, assigned or disposed
of by the Realty One Companies (the "Excluded Assets"):
(i) the real estate and improvements (but not the personal property) used
in connection with the branch offices commonly referred to as the Amherst
Office, the Avon Lake Office, the Brunswick Office, and the Shaker Heights
Office, each of which is described, including a property description, on Exhibit
2.7(a)(i);
(ii) the interest held by R-ONE in Realty One Land Co. Ltd., a limited
liability company, as described on Exhibit 2.7(a)(ii);
(iii) the personal property and other assets used solely in the operation
of the property management division of R-ONE, which division is described on
Exhibit 2.7(a)(iii), (including without limitation, the contracts, accounts
receivable, equipment, fixtures, business records, assets, obligations and
employees of the property management), provided, however, that any assets used
jointly by any of the Realty One Companies in the business of Residential Real
Estate Services and by the property management division of R-ONE shall not be
Excluded Assets, and provided further that all liabilities associated with the
property management division of R-ONE shall not be Continuing Liabilities;
(iv) all cash on hand, cash equivalents and immediately available funds on
the Closing Date, including funds in bank accounts and money market funds and
the like (except to the extent that such cash or funds in the possession or
control of the Realty One Companies represents deposits held for third parties
or payments or deposits for future work or services); and
(v) a certain life insurance policy insuring the life of James C. Miler, as
described on Exhibit 2.7(a)(v), provided however any liabilities associated with
such a policy shall not be Continuing Liability;
(vi) all claims or rights against third parties relating to liabilities and
obligations of the Realty One Companies that are not Continuing Liabilities;
(vii) loans or advances by any of the Realty One Companies to any other
Realty One Company or its shareholders, as described on Exhibit 2.7(a)(vii);
(viii) certain other assets (and associated liabilities) shown on Exhibit
2.7(a)(viii);
Prior to or at the Closing Sellers shall cause the Excluded Assets, and all
obligations arising out of or in connection with the Excluded Assets, to be
transferred by the Realty One Companies to a party designated by Sellers or
otherwise distributed or assigned and assumed. Sellers shall be responsible for
the payment of and shall promptly pay and discharge (and shall reimburse the
Realty One Companies after the Closing for) any and all costs, expenses, Taxes,
levies or similar charges incurred by the Realty One Companies or imposed at any
time on the Realty One Companies or Insignia or a Related Person thereof by
virtue of or resulting from such transfer or disposition of the Excluded Assets
and the assumption by others of liabilities arising out of or in connection with
Excluded Assets and the termination of the property management division,
including any severance compensation payable to persons employed in such
division; provided, however, Insignia shall cause R-ONE to provide COBRA
coverage to such employees to the extent of any Legal Requirement at no cost to
Sellers. Exhibit 2.7(a)-1 hereto contains a statement of the estimated value of
each of the Excluded Assets and a schedule of all liabilities and obligations
arising out of or in connection with the Excluded Assets. Sellers shall deliver
to Insignia Consents from all third party obligees and creditors in respect of
the assumption by Sellers of the obligations arising out of or in connection
with the Excluded Assets and releases from such third party creditors of the
Realty One Companies, Insignia and any Related Person thereof from all such
liabilities or obligations.
(b) Liabilities.
Other than:
(i) the liabilities and obligations existing as of the Effective Time
listed on Exhibit 2.7(b); and
(ii) liabilities and obligations arising under any Continuing Ordinary
Course Applicable Contract to the extent such liabilities and obligations are
payable or accrue after the Effective Time
(the foregoing (i) and (ii) are collectively the "Continuing Liabilities"),
the Realty One Companies shall have no other material (but in no event in
an aggregate amount exceeding $100,000) obligations or liabilities as of the
Effective Time. (Without limiting the foregoing, none of the obligations arising
in connection with the Excluded Assets shall be Continuing Liabilities, but
shall be assumed or discharged by Sellers prior to the Closing Date in
accordance with Subsection 2.7(a) above.)
(c) Pre-Closing Discharge, Assumption and Release of All Liabilities Not
Continuing Liabilities. Prior to the Effective Time, subject to the obligations
and restrictions of this Section 2.7 and Section 5 hereto, Sellers shall or
shall cause the Realty One Companies to pay in full and/or obtain a full release
and discharge of the Realty One Companies from any obligation for all
pre-Effective Time obligations and liabilities of the Realty One Companies that
are not Continuing Liabilities, including without limitation those liabilities
described on Exhibit 2.7(c).
(d) Interim Revenue and Loss
Subject to the effectiveness of the Closing, any revenue or income of the
Realty One Companies earned, or losses incurred, as determined in accordance
with GAAP (as consistently applied in accordance with the past practices of the
Realty One Companies), from and after the Effective Time shall inure (and be
allocated) to the benefit or detriment of IFG Acquisition Subsidiary. Subject to
adjustment to give effect to the preceding sentence, all but $1,000 of the cash
balance of the Realty One Companies as of the end of the day immediately
preceding the Closing Date (exclusive of cash held in escrow for the benefit of
third parties where Realty One has a liability to pay the escrow funds to a
third party) shall be remitted on the Closing Date to the Sellers.
2.8 Tax Adjustment Amount.
(a) The "Tax Adjustment Amount" (which may be a positive or negative
number) will be equal to the sum of the following:
(i) a negative number equal to the product of (x) the Commissions Payable
as of immediately before the Effective Time actually deducted on the final S
corporation federal income Tax Return (Form 1120S) of R-ONE, and (y) 0.10; and
(ii) [intentionally omitted]
(b) Sellers agree to provide a copy to IFG of the appropriate schedules and
excerpts of their respective 1997 calendar year Tax Returns, and any amendments
thereto, related to the Tax Adjustment Amount subject matters.
(c) The Tax Adjustment Amount shall be paid by the Sellers or Insignia, as
the case may be, within thirty days after the earlier of (a) October 15, 1998 or
(b) the filing of the latest to be filed of the 1997 calendar year Tax Returns
to be filed by Sellers or the IRS Form 8023-A to be filed by Insignia.
2.9 Sellers' Representative .
A decision, act, Consent or instruction of the Sellers' Representative with
respect to matters pertaining to any obligations of the Sellers' Representative
pursuant to this Agreement or to the Contemplated Transactions shall constitute
a decision of all the Sellers and shall be final, binding and conclusive upon
each Seller, and Insignia and any Related Person thereof may rely upon any
decision, act, Consent or instruction of the Sellers' Representative as being
the decision, act, Consent or instruction of each and every Seller. Insignia and
its Related Persons are hereby relieved from any liability to any Person for any
acts done by them in accordance with such decision, act, Consent or instruction
of the Sellers' Representative.
2.10 Non-Competition.
As an inducement for Insignia to enter into this Agreement and as
additional consideration for the consideration to be paid to Sellers hereunder,
the Sellers agree that:
(a) For a period of ten (10) years after the Closing Date, J. Aveni and V.
Aveni will not, for a period of five (5) years after the Closing Date, Miller
will not, for a period of two (2) years after the Closing Date, Goldbach will
not, directly or indirectly, provide, solicit or accept business involving
residential real estate brokerage services, mortgage services, escrow services,
multiple listing services, and relocation services in the one to four family
residential real estate market ("Residential Real Estate Services") from, or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend their name or any similar
name to, lend credit to, or render services or advice to any business that
provides Residential Real Estate Services to, any Person in the United States;
provided, however, that, notwithstanding the other provision of this Section
2.10(a): (1) Miller may: (i) at any time after the Effective Time engage in the
residential real estate brokerage business as an agent (but not as an owner or a
participant in management of such a business) in the states of Florida, North
Carolina and South Carolina; and (ii) beginning on the second anniversary of the
Closing Date, engage in any Residential Real Estate Services business, including
as an owner or a participant in management of such a business) in the states of
Florida, North Carolina and South Carolina; and (2) the restrictions as to
Goldbach shall be limited to the State of Ohio.
(b) For a period of ten (10) years after the Closing Date, J. Aveni and V.
Aveni will not, and for a period of five (5) years after the Closing Date,
Miller and Goldbach, will not, directly or indirectly, either for themselves or
any other Person, (i) induce or attempt to induce any Person who was an
employee, independent contractor, or sales agent or broker of the Realty One
Companies, Insignia or any Related Person thereof as of June 30, 1997 or at any
time thereafter until the expiration of the applicable restrictive period
herein, to leave such employment or relationship, (ii) in any way interfere with
the relationship between any of the Realty One Companies, Insignia or any
Related Person thereof and any Person employed by any of the Realty One
Companies, Insignia or any Related Person thereof as of June 30, 1997 or at any
time thereafter until the expiration of the applicable restrictive period
described herein, or (iii) employ, or otherwise engage as an employee,
independent contractor, sales agent or broker, or otherwise, any Person employed
by the Realty One Companies, Insignia or any Related Person thereof as of June
30, 1997 or at any time thereafter until the expiration of the applicable
restrictive period described herein.
(c) None of Sellers or their affiliates, beneficiaries, successors and
assigns will, directly or indirectly, either for themselves or any other Person,
disclose or use for their own benefit or for the benefit of any other Person any
Trade Secrets or any Intellectual Property Assets of the Realty One Companies,
Insignia or a Related Person thereof.
(d) None of Sellers or their affiliates, beneficiaries, successors and
assigns will, directly or indirectly, ever use the name, tradename or symbol
"Realty One", "Realty 1" or substantially similar derivative thereof in
connection with any Residential Real Estate Services other than as authorized by
R-ONE or Insignia after the Closing Date.
(e) Each Seller acknowledges that any violation of any of the restrictive
covenants contained in this Section 2.10 will cause continuing and irreparable
harm to Insignia for which monetary damages would not be adequate compensation.
Each Seller, therefore, agrees that, if he violates or threatens to violate any
of these restrictive covenants, Insignia shall be entitled, in addition to any
other legal or equitable remedies available to it, to entry of an injunction,
temporary and permanent, enjoining such breach and securing specific performance
of this Agreement.
If any term of this Section 2.10 is held to be unreasonable, arbitrary or
against public policy, such term will be considered divisible with respect to
scope, time, and geographic area, and in such lesser scope, time and geographic
area as may be determined to be reasonable in the circumstances of the
Contemplated Transactions, will be effective, binding and enforceable against
the Sellers pursuant to applicable Ohio law.
Notwithstanding any other terms of this Section 2.10 to the contrary,
nothing in this Section 2.10 precludes a Seller from:
(1) purchasing or otherwise acquiring up to (but not more than) 4.9% of any
class of securities of any enterprise (as a passive investor only and without
otherwise participating in any manner in the activities of such enterprise
(other than Insignia)) if such securities are listed on any national securities
exchange; or
(2) participating in the ownership of certain businesses identified with
respect to a designated Seller as set forth in Exhibit 2.10.
In the event that any Seller participates in the ownership, management or
operation of construction or development of residential real estate
developments/projects (which is not prohibited or restricted under Section
2.10(a) above), each of them shall exert their Best Efforts to direct to the
Realty One Companies the opportunity, under terms similar to the terms of the
Realty One Companies' ordinary business transactions, of acting as real estate
agents or brokers with respect to residential real estate sales of such projects
unless (w) such Best Efforts direction is precluded as a result of a contractual
obligation of a Seller to a third party with respect to such real estate sales,
which contractual obligation was entered into before September 1, 1997, or (x)
such participation is precluded by application of a Seller's fiduciary duty to a
co-owner of such real estate projects, or (y) he lacks the ability to
meaningfully or substantially influence such direction as a result of a small or
non-controlling ownership interest, or (z) all or a substantial portion of such
development is sold in a single or small number of transactions to an unrelated
third party.
To the extent that the restrictions in this Section 2.10 are different from
or inconsistent with the restrictive provisions in an applicable Employment
Agreement binding one or more of the Sellers, the more restrictive provision,
whether in this Agreement or in the applicable Employment Agreement, shall
control.
2.11 Tax Returns.
(a) The Sellers shall, at their expense, file or cause to be filed all
federal, state, local and foreign Tax Returns which are required to be filed by,
or with respect to, the Realty One Companies for the period immediately prior to
and ending with the Effective Time and shall pay all Taxes required to be paid
in accordance with such Tax Returns including, without limitation, any and all
Tax liabilities attributable to the making of the election under Section
338(h)(10) of the IRC as described below. Without in any way limiting the
generality of the immediately preceding sentence and/or in addition thereto, the
Sellers shall pay any and all Tax liabilities imposed on any of the Realty One
Companies (i) under Section 1374 of the IRC as a result of the consummation of
this Agreement and the Contemplated Transactions and (ii) arising from the
payment or series of payments, in connection with the Contemplated Transactions
other than the Employment Agreements, by any of the Realty One Companies to any
employee or other Person of an "excess parachute payment" within the meaning of
Section 280G of the IRC. Sellers will be responsible for the preparation (and
costs therefor) and filing of any Form 1099-DIV required to be filed by any of
the Realty One Companies for 1997 with respect to transactions occurring prior
to the Effective Time. Insignia shall file or cause to be filed such Tax Returns
for the Realty One Companies for the period after the Effective Time other than
in respect of Taxes arising out of this transaction. In the event that any state
or local Tax Return is required to be filed on behalf of any of the Realty One
Companies and such Tax Return is required to include periods ending both on and
after the Effective Time, Sellers and Insignia shall each pay a pro rata portion
of the liability shown on such Tax Return based on the relative income earned
during the two respective periods. Each of the parties to this Agreement
covenants and agrees that, at the option of Insignia, it will fully cooperate in
accordance with all reasonable directions provided by Insignia in the making and
filing of the election described in Section 338(h)(10) of the IRC with respect
to any one or more of the Realty One Companies as designated by Insignia,
thereby enabling Insignia to treat the purchase of the Realty One Companies (or
any one or more of them) as asset purchases for certain Tax and accounting
purposes. In furtherance thereof, Insignia shall prepare, execute and timely
file, and Sellers shall cooperate with Insignia in connection therewith, with
respect to each of the Realty One Companies designated by Insignia, IRS Form
8023-A and all schedules thereto in accordance with the instructions to that
Form. Any information on such Form 8023-A allocating the purchase price to
separately identifiable assets and categories thereof shall be consistent with
the method of purchase price/asset allocation set forth on Exhibit 2.11 hereof.
Upon the making of the Section 338(h)(10) election, Sellers covenant and agree
that, with respect to the preparation and filing of any federal, state, local or
foreign income Tax Return, Sellers shall prepare and file all such Tax Returns
on a basis consistent with the principles illustrated in Treas. Regs. Section
1.338(h)(10)-1 and the information contained in Exhibit 2.11 hereof. The Sellers
covenant and agree that except as set out on Exhibit 2.11, none of the Realty
One Companies will incur any Tax liability under Section 1374 of the IRC as a
result of the consummation of this Agreement and the Contemplated Transactions.
The Sellers will provide to Insignia, in form and medium satisfactory to
Insignia, all information necessary for the preparation of 1997 Tax Returns for
which Insignia will be responsible (including but not limited to Form
1099-MISC). The Sellers and Insignia will, no later than 15 days prior to the
due date for the filing of a Tax Return, subject to extensions permitted by
Legal Requirements required by this Section 2.11 to be filed by Sellers or
Insignia respecting any of the Realty One Companies, provide a copy to Insignia
or Sellers, as applicable, of the proposed completed form of Tax Return.
(b) Prior to and after the Closing Date, Insignia, the Realty One Companies
and Sellers and their respective affiliates shall cooperate (and make available
knowledgeable employees) in the preparation of all Tax Returns relating in whole
or in part to Taxable periods ending on or before or including the Effective
Time that are required to be filed after such date. Such cooperation shall
include, but not be limited to, furnishing prior years' Tax Returns or return
preparation packages illustrating previous reporting practices or containing
historical information relevant to the preparation of such Tax Returns, and
furnishing such other information within such parties' possession requested by
the party filing such Tax Returns as is relevant to their preparation. In the
case of any state, local or foreign joint, consolidated, combined, unitary or
group relief system Tax Returns, such cooperation shall also relate to any other
Taxable periods in which one party could reasonably require the assistance of
the other party in obtaining any necessary information.
(c) Without the prior written Consent of Insignia, which Consent shall not
be unreasonably withheld, neither Sellers nor any of the Realty One Companies
shall, to the extent it may affect or relate to the Realty One Companies or the
Sellers, make or change any Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitations period applicable to any Tax claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing the Tax liability or reducing any Tax asset of the Realty One
Companies.
(d) Without the prior written Consent of Sellers, which Consent shall not
be unreasonably withheld, neither Insignia nor any of the Realty One Companies
shall, to the extent it may affect or relate to the Realty One Companies or
Insignia, make or change any Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or assessment,
surrender any right to claim a Tax refund, consent to any extension or waiver of
the limitations period applicable to any Tax claim or assessment or take or omit
to take any other action, if any such action or omission would have the effect
of increasing the Tax liability of Sellers.
(e) The Sellers shall be liable for any state or local sales, use or other
transfer Taxes imposed as a result of the consummation of the Contemplated
Transactions.
(f) The Purchase Price shall be allocated and reported for income Tax
purposes by the parties as set forth on Exhibit 2.11(e).
2.12 Employment Agreements and Reaffirmation Certificates.
Each of J. Aveni and Anthony M. Ciepiel ("Ciepiel") will enter into an
employment agreement with R-ONE dated as of the date of this Agreement
(collectively with other substantially similar employment agreements entered
into in connection with this Agreement and of even date herewith, the
"Employment Agreements"), to be effective upon Closing, and each of J. Aveni,
Ciepiel and any other person who has executed an Employment Agreement prior to
Closing shall execute a certificate dated as of the Closing Date substantially
in the form of Exhibit 2.12 hereto (collectively, the "Employment Agreement
Reaffirmation Certificates") reaffirming his Employment Agreement.
2.13 Tradenames.
Sellers agree promptly, both before and after the Effective Time, to take
any action (including assigning any right, title and interest of Sellers to the
Realty One Companies), and to cooperate with Insignia in taking any action,
useful or necessary to establish and protect the interests of the Realty One
Companies (or any of them) in all trade names associated with the business of
the Realty One Companies, including without limitation the tradenames "Realty
One," "First Ohio Mortgage," "First Ohio Escrow," "Corporate Relocation
Management," "You're on Your Way Home," "HGM Hilltop Realtors," to the extent
any of the Realty One Companies has an interest in such tradenames. Sellers
further agree that following the Closing Date they shall not use or consent to
the use by any other Person to any of the tradenames associated with the
business of the Realty One Companies, including those specifically listed in
this Section 2.13.
2.14 R-ONE Commercial Brokerage Division.
(a) Sellers shall pay, indemnify, defend, hold harmless and promptly
reimburse Insignia for, all expenses, costs, liabilities and obligations
incurred by R-ONE, Insignia or any Subsidiary thereof related to or arising out
of the operation, existence, winding down and termination of the Commercial
Brokerage Division after the Effective Time to the extent they exceed the net
income of the Commercial Brokerage Division realized after the Effective Time
provided, however, Insignia shall cause R-ONE to provide COBRA coverage to such
employees of the Commercial Brokerage Division to the extent of any Legal
Request at no cost to Sellers. Insignia shall, if requested by the Sellers'
Representative, use its Best Efforts until December 31, 1997 to continue to
cause R-ONE to operate the Commercial Brokerage Division in a substantially
similar manner as conducted during the 90 day period preceding the Effective
Time. After January 1, 1998, Insignia shall, at the continuing net operating
cost of Sellers, proceed to promptly wind-down and liquidate the Commercial
Brokerage Division or any remaining assets and liabilities thereof.
(b) J. Aveni and V. Aveni agree to use their Best Efforts to arrange a sale
by R-ONE of the Commercial Brokerage Division prior to December 31, 1997, and
Insignia authorizes J. Aveni and V. Aveni to offer the Commercial Brokerage
Division for sale, without recourse or warranty, to, and to solicit offers to
purchase the Commercial Brokerage Division, or some or all of its assets and/or
liabilities, from, suitable purchasers on terms and conditions subject to the
approval of Insignia, which approval shall not be unreasonably withheld or
delayed. Sellers shall bear and pay all costs (and shall reimburse Insignia for
all such costs) incurred in connection with the sale and disposition of the
Commercial Brokerage Division, including any brokerage commission, marketing or
closing costs and related professional fees. To the extent that the proceeds of
the sale or other disposition of the Commercial Brokerage Division or all or any
of its assets thereof exceed the sum of:
(i) all expenses, costs, liabilities and obligations incurred by R-ONE,
Insignia or any Subsidiary thereof related to arising out of the operation and
existence of the Commercial Brokerage Division after the Effective Time (to the
extent not previously paid by Sellers or deducted from post-Effective Time
revenue of the Commercial Brokerage Division); and
(ii) all expenses, costs, liabilities and obligations incurred by R-ONE,
Insignia or any Subsidiary thereof related to arising out of the sale and
disposition or attempted sale or disposition of the Commercial Brokerage
Division (to the extent not previously paid by Sellers or deducted from
post-Effective Time revenue of the Commercial Brokerage Division); and
(iii) the net worth of the Commercial Property Division as of the Effective
Time as reflected on the Projected Closing Combined Balance Sheet, as adjusted
to give effect to any Effective Time assets or liabilities retained by R-ONE
Insignia shall pay such excess, if any, to the Sellers. Insignia shall
deliver any such excess proceeds to the Sellers' Representative for distribution
to the Sellers in proportion to their interest in R-ONE within twenty business
days of the closing of such sale.
(c) Insignia may deduct any expenses, costs, obligations or liabilities of
the Sellers under this Section 2.14 from the Deferred Cash Amount prior to its
scheduled distribution to the Sellers.
(d) To the extent that the Commercial Brokerage Division Allowance for
Uncollectibles as of the Effective Time (as set forth in Projected Closing
Combined Balance Sheet) exceeds that portion of the amount of Commercial
Brokerage Division Gross Receivables as of the Effective Time remaining
uncollected after the ninetieth day following the Effective Time, R-ONE (as a
post-Closing Subsidiary of Insignia) or Insignia shall pay such excess to the
Seller's Representative for distribution among the Sellers in accordance with
their relative ownership interest in R-ONE as set forth in Exhibit 2.4(b)(i),
and any such uncollected Accounts Receivable shall be assigned to such Sellers.
2.15 Continuing Liabilities.
The Realty One Companies shall retain after the Effective Time the
liability and responsibility for the payment and performance of the Continuing
Liabilities.
2.16 Certain Employment Matters.
Insignia shall cause IFG Acquisition Subsidiary and the Realty One
Companies to provide to Post-Effective Time Realty One Employees such employee
benefit plans as are generally comparable to their current standard benefits, or
such benefit plans as are generally comparable to those provided to persons
employed by IFG, subject to the right to add to, modify or change such policies
as determined by the Board of Directors of IFG from time to time. Nothing in
this Section 2.16 shall create any rights for any employees of the Realty One
Companies, IFG or any Related Person thereof, and no employees of the Realty One
Companies shall be entitled to rely upon this Agreement for any purpose
whatever. Sellers shall have no obligation prior to the Closing Date to cause
the Realty One Companies to terminate any Plans.
2.17 R-ONE Legal Department.
Insignia will, subject to the exercise of prudent business judgment (based
on such considerations as costs, successful performance, consistency with the
overall business strategy and objectives of IFG) and subject in all events to
the direction, supervision and oversight of the General Counsel of Insignia,
continue the operation of the R-ONE legal department in the Cleveland, Ohio area
for a period of eighteen months after the Closing Date in substantially the same
manner as it has been operated by R-ONE during the six month period preceding
the Effective Time, including the continued representation of R-ONE and its
officers, sales agents and employees of routine claims and Proceedings existing
as of the Effective Time or thereafter arising (to the extent Sellers have
indemnified Insignia against such matters) and the practice of placing the
responsibility for defense of routine litigation claims filed or Threatened
against R-ONE, its officers, sales agents and employees with the R-ONE legal
department. Neither Insignia nor the Realty One Companies will, after the
Closing Date, settle any Proceeding or other matter for which Sellers have
indemnified Insignia under Section 10 hereof without the prior written consent
of the Sellers' Representative, provided, however that in the event the Sellers'
Representative refuses to consent to a settlement of a Proceeding or claim
recommended for settlement by Insignia, Insignia may withdraw the representation
of the R-ONE legal department for such Proceeding or claim, in which event
defense and representation shall be governed by Section 10.4.
2.18 Shareholders' Agreement.
At or before the Closing, IFG and the Sellers to whom are allocated IFG
Purchase Shares will enter into an agreement substantially in the same form as
Exhibit 2.18 hereof (collectively, the "Shareholders' Agreement") with respect
to the IFG Purchase Shares.
2.19 Information for SEC Filings.
If requested in writing by Insignia to the Sellers before March 15, 1998,
J. Aveni and V. Aveni will, solely at Insignia's cost, cooperate and assist
Insignia in providing information respecting the pre-Effective Time activities
of the Realty One Companies necessary for the preparation of audited and pro
forma financial statements of the Realty One Companies by either Ernst & Young
or Plante & Moran, LLP, as selected at the reasonable option of Insignia, in the
form required by Items 2 and 7 of Form 8-K, as if the acquisition of the four
Realty One Companies, collectively treated as a single acquisition or aggregated
with any other acquisitions by Insignia during calendar year 1997, were
"significant" (as defined in Instructions to Item 2 of Form 8-K). Information
needed to prepare the pro forma financial statements as required by Regulation
S-X will be provided to Insignia personnel or their designee to the extent
reasonably possible. Insignia shall pay the cost of the preparation and issuance
of the audited and pro forma financial statements requested hereunder.
In connection with any Registration Statement proposed by IFG to be filed
with the Securities and Exchange Commission in connection with the proposed
issuance of securities of IFG or any Related Person thereof, if requested in
writing by Insignia before March 15, 1998, J. Aveni and V. Aveni will, solely at
Insignia's cost, cooperate and assist Insignia in obtaining a "comfort letter"
reasonably necessary in connection with such Registration Statement from Plante
& Moran, LLP in form and substance satisfactory to, and at the cost of,
Insignia, of the kind contemplated by the Statement of Auditing Standards with
respect to Letters to Underwriters promulgated by the American Institute of
Certified Public Accountants relating to the foregoing financial statements and
customarily included in comfort letters relating to similar transactions.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Insignia as follows:
3.1 Organization and Good Standing
(a) Exhibit 3.1(a) hereto contains a complete and accurate list for each of
the Realty One Companies of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the number of authorized shares, the par value, the number of shares
issued and outstanding, the identity of each stockholder and the number of
shares of R-ONE-Shares, First Ohio Escrow Shares, First Ohio Mortgage Shares and
CRM Shares held by each). Each of the Realty One Companies is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. Each of the Realty One Companies is duly qualified
to do business as a foreign corporation and is in good standing under the laws
of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(b) Sellers have delivered to Insignia copies of the Organizational
Documents of each of the Realty One Companies, as currently in effect.
3.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding obligation of
Sellers and each of the Realty One Companies, enforceable against Sellers and
each of the Realty One Companies in accordance with its terms. Except as set
forth in Exhibit 3.2(a) hereto, Sellers and the Realty One Companies have the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Sellers' Closing Documents and to perform their
respective obligations under this Agreement and the Sellers' Closing Documents.
(b) Except as set forth in Exhibit 3.2(b)-1 hereto, neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions by Sellers will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of any of the Realty One Companies or
(B) any resolution adopted by the board of directors or the stockholders of any
of the Realty One Companies;
(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any of the Realty One Companies or Sellers, or
any of the assets owned or used by any of the Realty One Companies or Sellers,
may be subject;
(iii) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by any of the Realty One Companies or that otherwise relates to the
business of, or any of the assets owned or used by, any of the Realty One
Companies;
(iv) [intentionally omitted]
(v) [intentionally omitted]
(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract or any Contract (including without
limitation any loan documents) to which any of the Realty One Companies or any
Seller is a party and which would have a Material Adverse Effect; or
(vii) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by any of the Realty One Companies,
except Permitted Encumbrances.
Except as set forth Exhibit 3.2(b)-2 hereof, none of the Sellers nor any of
the Realty One Companies is or will be required to give any notice to or obtain
any Consent from any Person, including without limitation, any owner, lender or
mortgage/lien holder in connection with the execution, delivery or performance
of this Agreement or the consummation or performance of any of the Contemplated
Transactions or for the transfer of the Excluded Assets and/or the assignment
and assumption of liabilities that are not Continuing Liabilities and which
would have a Material Adverse Effect if such Consent was not obtained.
3.3 Capitalization
Exhibit 3.1(a) hereto contains a complete and accurate list showing, for
each of the Realty One Companies with respect to the authorized equity
securities of each, the number of shares of common stock, the par value per
share, the number of shares issued and outstanding, and the shareholders of
record. Sellers are and will be on the Closing Date the record and beneficial
owners and holders of all of the capital stock of the Realty One Companies, free
and clear of all Encumbrances. As of the Closing Date, no legend or other
reference to any purported Encumbrance will appear upon any certificate
representing equity securities of any Realty One Company or if such legend
appears, Sellers will represent and warrant that such legends are no longer
applicable. The stock certificates listed on Exhibit 3.1(a) represent all of the
outstanding shares of the capital stock of any Realty One Company. Except as set
forth on Exhibit 3.1(a), all of the outstanding equity securities of each Realty
One Company have been duly authorized and validly issued and are fully paid and
nonassessable. As of the Closing Date, there will be no Contracts relating to
the issuance, sale, or transfer of any equity securities or other securities of
the Realty One Companies. No Person holds or is entitled to receive any stock
option, warrant or other right to purchase shares of capital stock of any of the
Realty One Companies, and none of the Realty One Companies has issued any
security or instrument convertible into its capital stock. Except as set forth
on Exhibit 3.1(a), to the Knowledge of Sellers, none of the outstanding equity
securities or other securities of the Realty One Companies was issued in
violation of the Securities Act or any other Legal Requirement. Except as set
forth on Exhibit 3.1(a), the Realty One Companies do not own, or have any
Contract to acquire, any equity securities or other securities of any Person or
any direct or indirect equity or ownership interest in any other business.
3.4 Financial Statements
Sellers and the Realty One Companies have delivered to Insignia: an audited
balance sheet of R-ONE and First Ohio Mortgage and an unaudited balance sheet of
First Ohio Escrow as at December 31, 1996 (the "1996 Balance Sheets") and the
related statements of income, changes in stockholders' equity, and cash flow for
the fiscal year then ended, together with, in the case of R-ONE and FOM, the
report thereon of Plante & Moran, LLP, independent certified public accountants
(together with the 1996 Balance Sheets, the "1996 Financial Statements"), and an
interim combined balance sheet of the Realty One Companies as at May 31, 1997
attached on Exhibit 3.4 (the "Interim Balance Sheet"). Such financial statements
and notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of each of the Realty One
Companies as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, in accordance with the same
accounting principles consistently applied by the Realty One Companies, subject,
in the case of the Interim Balance Sheets, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate,
have a Material Adverse Effect) and the absence of notes (that, if presented,
would not differ materially from those included in the 1996 Financial
Statements). To the Knowledge of Sellers, the financial statements referred to
in this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as expressly disclosed in the
notes to such financial statements. No financial statements of any Person are
required by GAAP to be consolidated with the financial statements of any of the
Realty One Companies.
3.5 Books and Records
The books of account, minute books, stock record books, and other records
of each of the Realty One Companies, all of which have been made available to
Insignia, are substantially complete in all material respects. At the Closing,
all of those books and records of each of the Realty One Companies will be in
the possession of the applicable Realty One Company.
3.6 Title to Properties; Encumbrances
Except for the fee simple interests in real property described on Exhibit
2.7(a)(i) hereof (which real property interests are Excluded Assets), none of
the Realty One Companies owns any fee simple interest in real estate or any
options to acquire such interests (other than options granted under leases
listed on Exhibit 3.6). Exhibit 3.6 hereof contains a complete Schedule of all
real property leaseholds held by the Realty One Companies, including the
property, the address, and, with respect to the lease agreement applicable to
such leasehold interest, the names of the parties, the date, and the termination
date. Sellers and/or the Realty One Companies have delivered to Insignia copies
of the leases by which the Realty One Companies hold real property interests in
the possession of Sellers or the Realty One Companies and relating to such
property or interests. The Realty One Companies hold good title subject only to
the matters permitted by the following sentence, in all of the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that are presently used in the operation of the business of the Realty One
Companies, including all of the properties and assets reflected in the 1996
Balance Sheets (except for real property and personal property disposed of since
the date of the 1996 Balance Sheets in the Ordinary Course of Business), and all
of the properties and assets purchased or otherwise acquired by the Realty One
Companies since the date of the 1996 Balance Sheets (except for personal
property acquired and sold since the date of the 1996 Balance Sheets in the
Ordinary Course of Business and except as set forth on Exhibit 3.16). All
material properties and assets reflected in the 1996 Balance Sheets are free and
clear of all Encumbrances except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the 1996 Balance Sheets as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists and which would have a Material Adverse Effect, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the 1996 Balance Sheets (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists and which would have a Material Adverse Effect, (c)
liens for current Taxes not yet due, and (d) with respect to real property, (i)
zoning laws and other land use restrictions that do not impair the present use
of the property subject thereto; (ii) easements, conditions, restrictions,
covenants and declarations of record or in any lease; and (iii) those matters
which would be disclosed by an accurate survey; and (e) Permitted Encumbrances.
3.7 Ownership of Assets; Condition and Sufficiency of Assets
Except for the leased property described on Exhibit 3.17(a)(iv), the Realty
One Companies own and have good title, without Encumbrance, except those
encumbrances listed on Exhibit 3.7 (collectively, the "Permitted Encumbrances")
to all of the assets currently used in conjunction with the operation of the
Realty One Companies' businesses.
3.8 Accounts Receivable
(a) All accounts receivable of the Realty One Companies that are reflected
on the 1996 Balance Sheets or on the accounting records of the Realty One
Companies as of the Effective Time including without limitation the Gross
Commissions Receivable and the Commercial Brokerage Division Gross Receivables
(collectively, the "Accounts Receivable") subject to the Allowance for
Cancellations and the Commercial Brokerage Division Allowance for Uncollectibles
for such Accounts Receivable represent or will represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. (Such Accounts Receivable that represent commission revenue
include that portion of the commission that will become due and owing, upon
collection, to third parties and to sales agents, such amount reflected by a
corresponding commission payable.) Unless paid prior to the Effective Time, the
Accounts Receivable are or will be as of the Effective Time collectible net of
the respective Allowance for Cancellations and Commercial Brokerage Division
Allowance for Uncollectibles shown on the Projected Closing Combined Balance
Sheet and on the accounting records of the Realty One Companies as of the
Effective Time. The Allowances for and Commercial Brokerage Division Allowance
for Uncollectibles are adequate and, in the case of the Allowance for
Cancellations and Commercial Brokerage Division Allowance for Uncollectibles,
respectively, as of the Effective Time, will represent an amount as of the
Effective Time not less than twenty-one percent of the Gross Commissions
Receivable nor less than 26.10% of the Commercial Brokerage Division Gross
Receivables, respectively, and will not represent a material adverse change in
the composition of such Accounts Receivable in terms of aging. There are no
reserves for Accounts Receivable arising from FOM, FOE and CRM. Subject to such
Allowance for Cancellations and Commercial Brokerage Division Allowance for
Uncollectibles, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, but subject to deductions for the
corresponding commissions payable, within ninety days after the day on which it
first becomes due and payable. To the Knowledge of the Sellers, there is no
contest, claim, or right of set-off under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. To the extent of any indemnity claims paid by Sellers under Article
10 arising upon from a Breach of the representations and warranties contained in
this Section 3.8, the Realty One Companies will transfer and assign to Sellers,
in accordance with their pre-Effective Time percentage interest in the payee,
without recourse, the uncollected Accounts Receivable the non payment of which
created the Breach.
(b) To the Knowledge of Sellers, Exhibit 3.8(b)-1 contains a materially
accurate summary list of all Accounts Receivable as of September 11, 1997, which
list sets forth the aging of such Accounts Receivable. Sellers will deliver at
Closing the Closing Exhibit 3.8(b)-2 containing, to the Knowledge of Sellers, a
materially accurate summary list, in form and substance satisfactory to
Insignia, of the Accounts Receivable as of a date no earlier than two business
days prior to the Closing Date.
3.9 Accounts Payable
(a) All accounts payable (including commissions, commission bonuses and
other bonuses of the Realty One Companies that are reflected on the 1996 Balance
Sheets or on the accounting records of the Realty One Companies as of the
Closing Date (collectively, the "Accounts Payable"), to the Knowledge of the
Sellers or the Realty One Companies, represent, as of the respective dates
thereof, valid obligations of the Realty One Companies arising in the Ordinary
Course of Business.
(b) To the Knowledge of Sellers or the Realty One Companies, Exhibit
3.9(b)-1 contains an approximate and materially accurate list of all Accounts
Payable as of September 11, 1997. Sellers shall deliver at Closing the Closing
Exhibit 3.9(b)-2 containing an approximate and materially accurate list, in form
and substance satisfactory to Insignia, of the Accounts Payable as of a date no
earlier than two business days prior to the Closing Date.
3.10 No Undisclosed Liabilities
Except as set forth in Exhibit 3.10 hereof, as of the Effective Time, the
Realty One Companies have no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or otherwise) except
for the Continuing Liabilities.
3.11 Taxes
(a) The Realty One Companies have filed or caused to be filed all Tax
Returns that are or were required to be filed by or with respect to any of them,
either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Sellers have made available to Insignia copies of
all such Tax Returns filed since December 31, 1993. The Realty One Companies
have paid, or made provision for the payment of, all Taxes that have or may have
become due as shown on those Tax Returns or otherwise, or pursuant to any
assessment received by the Realty One Companies, except such Taxes, if any, as
are listed in Exhibit 3.11(a) hereof and are being contested in good faith and
as to which adequate reserves (determined in accordance with GAAP) have been
provided in the 1996 Balance Sheets. R-ONE is and has been at all times since
January 1, 1986 an S Corporation for federal income Tax purposes (as defined in
Section 1361(a)(1) of the IRC). None of the Realty One Companies has experienced
a termination, as defined in Section 1362(d) of the IRC, of its S Corporation
status. None of the Realty One Companies have filed or been subject to a Legal
Requirement to file any Tax Returns with any Governmental Bodies outside the
United States of America.
(b) Exhibit 3.11(b) hereof contains a complete and accurate list of all
audits of all such Tax Returns since 1995, including a reasonably detailed
description of the nature and outcome of each audit. All deficiencies proposed
as a result of such audits have been paid, reserved against, settled, or, as
described in Exhibit 3.11(a) , are being contested in good faith by appropriate
proceedings. Exhibit 3.11(b) hereof describes all adjustments to the United
States federal income Tax Returns filed by the Realty One Companies or any group
of corporations including the Realty One Companies for all Taxable years since
1990, and the resulting deficiencies proposed by the IRS. Except as described in
Exhibit 3.11(b) hereof, no Seller nor any of the Realty One Companies has given
or been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of the Realty One Companies or for which the
Realty One Companies may be liable.
(c) To the Knowledge of Sellers, there exists no proposed Tax assessment
against the Realty One Companies except as disclosed in the 1996 Balance Sheets
or in Exhibit 3.11(c) hereof. No consent to the application of Section 341(f)(2)
of the IRC has been filed with respect to any property or assets held, acquired,
or to be acquired by the Realty One Companies. To the Knowledge of Sellers, all
Taxes that the Realty One Companies are or were required by Legal Requirements
to withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis) the
Realty One Companies have been accurately prepared. There is no Tax sharing
agreement that will require any payment by the Realty One Companies after the
date of this Agreement. During the consistency period (as defined in Section
338(h)(4) of the IRC with respect to the sale of the Shares to Insignia),
neither the Realty One Companies nor any target affiliate (as defined in Section
338(h)(6) of the IRC with respect to the sale of the Shares to Insignia) has
sold or will sell any property or assets to Insignia or to any member of the
affiliated group (as defined in Section 338(h)(5) of the IRC) that includes
Insignia. Exhibit 3.11(d) lists all such target affiliates.
(e) The Realty One Companies possess and maintain business records
containing all information necessary for the preparation of 1997 federal and
state information returns for the period through the Effective Time customarily
prepared by the Realty One Companies, including but not limited to Form
1099-MISC.
3.12 No Material Adverse Change
Except as set forth in Exhibit 3.16, since the date of the 1996 Balance
Sheet, there has not been any material adverse change in the business, client
relations, operations, properties, prospects, assets, or condition of any of the
Realty One Companies which has resulted in a Material Adverse Effect, and no
event has occurred or circumstance exists that could reasonably be expected to
result in a Material Adverse Effect.
3.13 Employees and Employee Benefit Plans
(a) To the Knowledge of Sellers, Exhibit 3.13(a) lists each employment,
bonus, deferred compensation, pension, stock option, stock appreciation right,
profit-sharing or retirement plan, arrangement or practice, each medical,
vacation, retiree medical, severance pay plan, and each other agreement or
fringe benefit plan, arrangement or practice, of any of the Realty One
Companies, whether legally binding or not, which affects one or more of its
employees, including all "employee benefit plans" as defined by Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(collectively, the "Plans").
(b) For each Plan which is an "employee benefit plan" under Section 3(3) of
ERISA, to the extent applicable, the Realty One Companies have delivered to the
Insignia correct and complete copies of the plan documents, plan amendments, and
summary plan descriptions, the determination letters received from the IRS, the
most recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts and funding agreements which implement each such Plan.
(c) Except as otherwise required by Legal Requirements, none of the Realty
One Companies has any commitment, whether formal or informal and whether legally
binding or not, (i) to create any additional such Plan; (ii) to modify or change
any such Plan; or (iii) to maintain for any period of time any such Plan.
Exhibit 3.13(c) contains a materially accurate description of the funding
policies (and commitments, if any) of the Realty One Companies with respect to
each such existing Plan.
(d) To the Knowledge of Sellers, except as set forth in Exhibit 3.13(e),
none of the Realty One Companies nor any Plan nor any trustee, administrator,
fiduciary or sponsor of any Plan has engaged in any prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the IRC for which there is no
exemption; all filings, reports and descriptions as to such Plans (including
Form 5500 Annual Reports, Summary Plan Descriptions, and Summary Annual Reports)
required to have been made or distributed to participants, the IRS, the United
States Department of Labor and other governmental agencies have been made in a
timely manner or will be made on or prior to the Closing Date; there is no
material litigation, disputed claim, governmental proceeding or investigation
pending or Threatened with respect to any of such Plans, the related trusts, or
any fiduciary, trustee, administrator or sponsor of such Plans; such Plans have
been established, maintained and administered in all material respects in
accordance with their governing documents and applicable provisions of ERISA and
the IRC and Treasury Regulations promulgated thereunder; and each Plan which is
intended to be a qualified plan under Section 401(a) of the IRC has received,
within the last three years, a favorable determination letter from the IRS.
(e) To the Knowledge of Sellers, except as set forth in Exhibit 3.13(e),
the Realty One Companies have performed all of their respective obligations
under all Plans which if not performed would have a Material Adverse Effect. To
the Knowledge of Sellers, except as set forth in Exhibit 3.13(e), the Realty One
Companies, with respect to all Plans, are, and each Plan, is in full compliance
with ERISA, the IRC, and other applicable Laws, and with any applicable
collective bargaining agreement.
(f) The consummation of the Contemplated Transactions will not (i) result
in the payment or series of payments by any of the Realty One Companies to any
employee or other Person of an "excess parachute payment" within the meaning of
Section 280G of the IRC, and (ii) to the Knowledge of Sellers, accelerate the
time of payment or vesting of any stock option, stock appreciation right,
deferred compensation, severance bonus or other employee benefits under any Plan
(including vacation and sick pay).
(g) To the Knowledge of Sellers, none of the Plans which are "welfare
benefit plans," within the meaning of Section 3(1) of ERISA, provide for
continuing benefits or coverage after termination or retirement from employment,
except for COBRA rights under a "group health plan" as defined in IRC Section
4980B(g) and ERISA Section 607.
(h) To the Knowledge of Sellers, none of the Realty One Companies nor any
entity which would be treated as a single employer with the Realty One Companies
under IRC Section 414 ("ERISA Affiliate") has ever participated in or withdrawn
from a multi-employer plan as defined in Section 4001(a)(3) of Title IV of
ERISA, and the Realty One Companies have not incurred and do not owe any
liability as a result of any partial or complete withdrawal by any employer from
such a multi-employer plan as described under Sections 4201, 4203, or 4205 of
ERISA.
(i) To the Knowledge of Sellers, none of the Realty One Companies nor any
ERISA Affiliate maintains or contributes or ever has maintained or contributed
to any Plan that is subject to Title IV of ERISA or the minimum funding
standards of Section 412 of the IRC.
3.14 Compliance With Legal Requirements; Governmental Authorizations
(a) Except as set forth in Exhibit 3.14(a) hereof:
(i) Each of the Realty One Companies is in compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets and which
non-compliance would have a Material Adverse Effect;
(ii) To the Knowledge of Sellers, no event has occurred or circumstance
exists that (with or without notice or lapse of time) constitutes or could
reasonably be expected to result in a violation by any of the Realty One
Companies of, or a failure on the part of the Realty One Companies to comply
with, any Legal Requirement and which violation or noncompliance would have a
Material Adverse Effect; and
(iii) To the Knowledge of Sellers, none of the Realty One Companies has
received at any time since January 1, 1994 any notice or other communication
(whether oral or written) from U. S. Department of Housing and Urban Development
or any other Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Legal Requirement which would have a Material Adverse Effect.
(b) Exhibit 3.14(b) hereof contains a complete and accurate list of each
Governmental Authorization that is held by each of the Realty One Companies and,
to the extent necessary to enable the Realty One Companies to operate their
businesses in the manner presently conducted, by (i) any of the Sellers and/or
(ii) any agents or sales associates or independent contractors affiliated with
the Realty One Companies. Each Governmental Authorization listed or required to
be listed in Exhibit 3.14(b) hereof is valid and in full force and effect.
Except as set forth in Exhibit 3.14(b) hereof:
(i) Each of the Realty One Companies is, and at all times since January 1,
1994 has been, in all material respects, in compliance with all of the material
terms and requirements of each Governmental Authorization identified or required
to be identified in Exhibit 3.14(b) hereof;
(ii) no event has occurred or circumstance exists that (with or without
notice or lapse of time) (A) constitutes or could reasonably be expected to
result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization listed or required to be
listed in Exhibit 3.14(b) hereof, or (B) could reasonably be expected to result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental Authorization listed
or required to be listed in Exhibit 3.14(b) hereof;
(iii) none of the Realty One Companies has received, at any time since
January 1, 1994 any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any material term
or requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for Governmental
Authorizations listed or required to be listed in Exhibit 3.14(b) hereof have
been duly filed on a timely basis with the appropriate Governmental Bodies, and
all other filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Exhibit 3.14(b) hereof
collectively constitute all of the Governmental Authorizations necessary to
permit each of the Realty One Companies to lawfully conduct and operate their
businesses in the manner they currently conduct and operate such businesses and
to permit the Realty One Companies to own and use their assets in the manner in
which they currently own and use such assets.
3.15 Legal Proceedings; Orders
(a) Exhibit 3.15(a) hereof sets forth all pending Proceedings: (i) that
have been commenced by or against any of the Realty One Companies; or (ii) that
have been commenced by or against any Sellers or, to the Knowledge of Sellers,
against any agents or independent contractors of any of the Realty One Companies
that otherwise relate to or could reasonably be expected to affect the business
of, or any of the assets owned or used by, the Realty One Companies; or (iii) to
the Knowledge of Sellers, that otherwise relate to or could reasonably be
expected to affect the business of, or any of the assets owned or used by, the
Realty One Companies; or (iv) to the Knowledge of Sellers, that challenges, or
that could reasonably be expected to have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
Except as set forth in Exhibit 3.15(a), to the Knowledge of Sellers, no
such Proceeding has been Threatened, and, to the Knowledge of any of the
Sellers, no event has occurred or circumstance exists that could reasonably be
expected to give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers and the Realty One Companies have made available to Insignia
copies of all pleadings, correspondence, and other documents relating to each
material Proceeding listed in Exhibit 3.15(a) hereof.
(b) Except as set forth in Exhibit 3.15(b) hereof:
(i) to the Knowledge of Sellers, there is no Order to which any of the
Realty One Companies, or any of the assets owned or used by any of the Realty
One Companies, is subject;
(ii) no Seller, Realty One Companies Executive Officer, or, to the
Knowledge of Sellers, no agent or independent contractor affiliated with the
Realty One Companies is subject to any Order that relates to the business of, or
any of the assets owned or used by, the Realty One Companies; and
(iii) no officer, director, or to the Knowledge of Sellers, no agent,
independent contractor or employee of any of the Realty One Companies is subject
to any Order that prohibits such officer, director, agent, independent
contractor or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of any of the Realty One Companies.
(c) Except as set forth in Exhibit 3.15(c) hereof:
(i) To the Knowledge of Sellers, each of the Realty One Companies is, and
at all times since January 1, 1994 has been, in, all material respects,
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;
(ii) to the Knowledge of Sellers, no event has occurred or circumstance
exists that constitutes or could reasonably be expected to result in (with or
without notice or lapse of time) a material violation of or failure to
materially comply with any term or requirement of any Order to which any of the
Realty One Companies, or any of the assets owned or used by any of the Realty
One Companies, is subject; and
(iii) none of the Sellers nor any of the Realty One Companies has received,
at any time since January 1, 1994, any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or failure to comply with,
any term or requirement of any Order to which any of the Realty One Companies,
or any of the assets owned or used by any the Realty One Companies, is or has
been subject.
(d) To the Knowledge of Sellers, the amount of Litigation Reserve set forth
on the Projected Closing Combined Balance Sheet is an adequate reserve in
consideration of the contingent claims filed or Threatened against the Realty
One Companies, exclusive of the Re/Max Litigation, and is consistent with past
accounting practices of the Realty One Companies.
3.16 Absence of Certain Changes and Events
Except as set forth in Exhibit 3.16 hereof, since the date of the 1996
Financial Statements, the Realty One Companies have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in the Realty One Companies' authorized or issued capital stock;
grant of any stock option, warrant or right to purchase shares of capital stock
of the Realty One Companies; issuance of any security or instrument convertible
into such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any of the Realty One Companies of any
shares of any such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any of the Realty One
Companies;
(c) except in the Ordinary Course of Business, a material increase by the
Realty One Companies of any bonuses, salaries, or other compensation to any
stockholder, director, officer, agent or independent contractor affiliated with
any of the Realty One Companies or employee, entry into any employment,
severance, or similar Contract with any director, officer, agent, independent
contractor or employee;
(d) except in the Ordinary Course of Business, adoption of, or increase in
the payments to or benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of the Realty One Companies;
(e) uninsured damage to or destruction or loss of any material asset or
property of the Realty One Companies, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of any one of
the Realty One Companies, taken as a whole;
(f) except in the Ordinary Course of Business, entry into, termination of,
or receipt of notice of termination of (i) any license, distributorship, dealer,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to any Realty One Company of at
least $75,000;
(g) except in the Ordinary Course of Business, sale, lease, or other
disposition of any asset or property of the Realty One Companies or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset or
property of the Realty One Companies (except for Permitted Encumbrances),
including the sale, lease, or other disposition of any of the Intellectual
Property Assets;
(h) except in the Ordinary Course of Business, cancellation or waiver of
any claims or rights with a value to the Realty One Companies in excess of
$75,000;
(i) material change in the accounting methods used by the Realty One
Companies; or
(j) agreement, whether oral or written, by any of Realty One Companies or
Sellers to do any of the foregoing.
3.17 Contracts; No Defaults
(a) The Sellers and the Realty One Companies have delivered to Insignia
standard form contracts in respect of certain Realty One Services Agreements
and, unless expressly required otherwise, true and complete copies of each of
the Applicable Contracts or other documents listed in Exhibits 3.17(a)(i)
through 3.17(a)(xv), and have set forth the name and date of and parties (where
available) to the Applicable Contracts for which they are providing copies, as
set out below.
(i) Realty One Services Agreements. Sellers have provided to Insignia (A)
in respect of R-ONE: (1) current standard form exclusive listing agreement under
which R-ONE contracts for the exclusive right to sell an owner's residential
property ("R-ONE Listing Agreement") attached hereto as Exhibit 3.17(a)(i)-1,
(2) a current standard form exclusive agency agreement under which R-ONE
contracts for the exclusive right to represent a potential purchaser of
residential property ("R-ONE Buyer Agency Agreement") attached hereto as Exhibit
3.17(a)(i)-2, and (3) a current standard form residential purchase contract
under which an owner of a residence contracts to sell a residence to a
purchaser, generating a fee for the R-ONE sales agent(s) representing the seller
and/or purchaser ("Residential Sales Contract"), attached hereto as Exhibit
3.17(a)(i)-3, and represent to Insignia that these are the forms generally used
in R-ONE's residential brokerage business, subject to form revisions in the
Ordinary Course of Business and subject to modifications negotiated in the
Ordinary Course of Business; (B) in respect of First Ohio Mortgage, as described
on Exhibit 3.17(a)(i)-4 (1) copies of all of the loan purchase contracts that
are currently in effect with purchasing lenders and under which it sells and
disposes of home mortgage loans to such purchasing lenders; and (2) all other
material Realty One Services Agreements applicable to its business, but
excluding all the documents that are part of each individual borrower's loan
file, and represent to Insignia that no other agreements with purchasing lenders
are currently in effect and that it generally uses standard form loan contracts
and disclosure forms as required by its purchasing lenders and or Governmental
Authorities in respect of the home mortgage business; (C) a list of the material
Applicable Contracts of First Ohio Escrow, as described on Exhibit 3.17(a)(i)-5;
and (2) copies of all its material standard form contracts and all its Realty
One Services Agreements except individual purchaser files; (D) in respect of
CRM, as described on Exhibit 3.17(a)(i)-6: a list of all its Realty One Services
Agreements currently in effect. Insignia acknowledges that the standard forms
referenced in this Section 3.17(a)(i) are used in conjunction with other
standard forms and are subject to modifications, updates, and negotiated changes
in the Ordinary Course of Business. Except as set forth in Exhibit 3.2(b)-1, the
sale of the Shares under this Agreement will not adversely the affect the rights
and obligations of the Realty One Companies under the Realty One Services
Agreements.
(ii) To the Knowledge of Sellers, each Applicable Contract that involves
performance of services or delivery of goods or materials to the Realty One
Companies with a cost or value in excess of $75,000 is listed on Exhibit
3.17(a)(ii).
(iii) To the Knowledge of Sellers, Sellers have provided copies of each
Applicable Contract that was not entered into in the Ordinary Course of Business
and that involves expenditures or receipts of the Realty One Companies with a
cost or value in excess of $75,000, and each such Applicable Contract is listed
on Exhibit 3.17(a)(iii).
(iv) Sellers have provided copies of each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property where the
total amount of lease or installment payments is in excess of $10,000 or real
property, and each such foregoing document is listed on Exhibit 3.17(a)(iv).
(v) To the Knowledge of Sellers, Sellers have provided copies of each
material licensing agreement or other Applicable Contract with respect to
patents, trademarks, copyrights, or other intellectual property, including
agreements with current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any of the Intellectual
Property Assets, all as listed on Exhibit 3.17(a)(v).
(vi) Sellers have provided (A) in respect of R-ONE, (1) copies of each
employment agreement to which R-ONE is a party, described on Exhibit
3.17(a)(vi)-1, which employment agreements are in full force and effect, and (2)
a copy of the current standard form contract entered into by the independent
contractor sales agents affiliated with R-ONE attached hereto as Exhibit
3.17(a)(vi)-2, and represent to Insignia that all such Independent Contractor
Agreements are in full force and effect, and no affiliated sales associates or
sales agent of the Realty One Companies has received or is to receive any
commission or other compensation in any form if such independent contractor or
sales agent has not executed an Independent Contractor Agreement; and (B) in
respect of all the Realty One Companies, (1) copies of any other Applicable
Contract relating to the provision of services, and compensation therefor, by
any employee, agent, director, officer, or consultant of any of the Realty One
Companies and for whom annualized salary or annualized commission compensation
exceeds $75,000, such employment agreements listed and described on Exhibit
3.17(a)(vi)-3; and (2) a list and description of any collective bargaining
agreement and other Applicable Contract to or with any labor union or other
employee representative of a group of employees on Exhibit 3.17(a)(vi)-4.
(vii) To the Knowledge of Sellers, each material joint venture,
partnership, and other Applicable Contract (however named) involving a sharing
of revenue, profits, losses, costs, or liabilities by the Realty One Companies
with any other Person is listed on Exhibit 3.17(a)(vii).
(viii) Sellers have provided copies of each Applicable Contract containing
covenants that in any way purport to restrict the business activity of the
Realty One Companies or any Affiliate of the Realty One Companies or limit the
freedom of the Realty One Companies or any affiliate of the Realty One Companies
to engage in any line of business or to compete with any Person, and each such
Applicable Contract is described and listed on Exhibit 3.17(a)(viii).
(ix) [intentionally omitted];
(x) To the Knowledge of Sellers, each power of attorney that is currently
effective and outstanding is described and listed on Exhibit 3.17(a)(x).
(xi) Sellers have provided copies of each Applicable Contract entered into
other than in the Ordinary Course of Business that contains or provides for an
express undertaking by the Realty One Companies to be responsible for
consequential damages, all as described and listed on Exhibit 3.17(a)(xi).
(xii) Each Applicable Contract for capital expenditures in excess of
$25,000 is described and listed on Exhibit 3.17(a)(xii).
(xiii) To the Knowledge of Sellers, each written warranty, guaranty, and or
other similar undertaking with respect to contractual performance extended by
the Realty One Companies other than in the Ordinary Course of Business is
described and listed on Exhibit 3.17(a)(xiii).
(xiv) To the Knowledge of Sellers, Sellers have provided copies of each
Applicable Contract evidencing the obligation of any of the Realty One Companies
to repay borrowed money, including any obligations as the maker or guarantor of
a promissory note, and each such Applicable Contract (including any such
promissory note is described and listed on Exhibit 3.17(a)(xiv).
(xv) Sellers have provided copies of each Applicable Contract since 1994
under which any of the Realty One Companies acquired assets in respect of any
residential real estate business pursuant to which any of the Realty One
Companies (A) may be required to render payment or services or fulfill any other
obligation, or (B) may receive future revenue or other benefit, and each such
Applicable Contract is listed and described (including the expiration date of
such Applicable Contract) on Exhibit 3.17(a)(xv).
(xvi) Each amendment, supplement, and modification (whether oral or
written) in respect of any material term of the foregoing Contracts is described
and listed on Exhibit 3.17(a)(xvi) and Sellers have provided copies of any
written amendment, supplement, and modification to any of the Contracts listed
or described in Exhibits 3.17(a)(v), 3.17(a)(viii), 3.17(a)(xi), 3.17(a)(xiv),
and 3.17(a)(xv).
(b) Except as required or contemplated by this Agreement or as set forth in
Exhibit 3.17(b) hereof:
(i) no Seller has or may acquire any rights under, and no Seller has or may
become subject to any obligation or liability under, any Contract that relates
to the business of, or any of the assets owned or used by, the Realty One
Companies; and
(ii) no officer, director, agent, employee, consultant, or contractor of
the Realty One Companies is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of the Realty One Companies, or (B) assign to the Realty One Companies
or to any other Person any rights to any invention, improvement, or discovery.
(c) To the Knowledge of Sellers, except as set forth in Exhibit 3.17(c)
hereof, each Contract identified or required to be identified in Exhibit
3.17(a)(i) through Exhibit 3.17(a)(xvi) hereof is in full force and effect and
is valid and enforceable in accordance with its terms.
(d) Except as set forth in Exhibit 3.17(d) hereof:
(i) each of the Realty One Companies is, and at all times since January 1,
1995 has been, in all material respects, in compliance with all applicable terms
and requirements of each material Contract under which each such of the Realty
One Companies has or had any obligation or liability or by which the Realty One
Companies or any of the assets owned or used by the Realty One Companies are or
were bound, except for non-compliance of non-material Contracts which
non-compliance in the aggregate does not have a Material Adverse Effect;
(ii) to the Knowledge of any of the Sellers, each other Person that has or
had any obligation or liability under any Contract under which the Realty One
Companies have or had any rights is, and at all times since January 1, 1995 has
been, in all material respects, in compliance with all applicable terms and
requirements of such Contract, except for any non-compliance which had or will
have a Material Adverse Effect;
(iii) no event has occurred or circumstance exists that (with or without
notice or lapse of time) may contravene, conflict with, or result in a violation
or breach of, or give the Realty One Companies or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any material Applicable
Contract; and
(iv) the Realty One Companies have not given to or received from any other
Person, at any time since January 1, 1997, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
material violation or breach of, or default under, any material Contract.
(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to the Realty One
Companies in excess of $50,000 under current or completed Contracts with any
Person and no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, or provision of services by
the Realty One Companies have been entered into in the Ordinary Course of
Business and have been entered into without the commission of any act alone or
in concert with any other Person, or any consideration having been paid or
promised, that is or would, to the Knowledge of Sellers, be in violation of any
Legal Requirement.
(g) Each Applicable Contract in effect at the Effective Time is necessary
to the operation of business of the Realty One Companies, as operated on the
Closing Date.
3.18 Insurance
(a) Sellers and the Realty One Companies have delivered or made available
to Insignia, and listed on Exhibit 3.18(a) hereof:
(i) copies of all policies of insurance to which the Realty One Companies
are a party or under which the Realty One Companies, or any director of the
Realty One Companies, are or were covered at or after January 1, 1995;
(ii) copies of all pending applications for policies of insurance; and
(iii) any written statement by the auditor of the Realty One Companies'
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) To the Knowledge of Sellers, Exhibit 3.18(b) hereof describes:
(i) any self-insurance arrangement by or affecting the Realty One
Companies, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk by the Realty One Companies; and
(iii) all obligations of the Realty One Companies to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) [intentionally omitted]
(d) Except as set forth on Exhibit 3.18(d) hereof, to the Knowledge of
Sellers:
(i) All policies to which the Realty One Companies are a party or that
provide coverage to any Seller, the Realty One Companies, or any director or
officer of the Realty One Companies:
(A) are valid, outstanding, and enforceable;
(B) taken together, except for the risks arising from the Re/Max Litigation
and risks which are self-insured, provide adequate insurance coverage for the
assets and the operations of the Realty One Companies for all risks normally
insured against by a Person carrying on the same business or businesses as the
Realty One Companies;
(C) are sufficient for compliance with all Legal Requirements and Contracts
to which the Realty One Companies are a party or by which any of them is bound;
(D) will continue in full force and effect following the consummation of
the Contemplated Transactions for the terms thereof and subject to conditions
for renewal.
(ii) To the Knowledge of Sellers, none of the Realty One Companies has
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(iii) Each of the Realty One Companies has paid all premiums due, and has
otherwise performed all of its respective material obligations, under each
policy to which any of the Realty One Companies is a party or that provides
coverage to the Realty One Companies or any director thereof. The aggregate
limits of none of the policies are impaired.
(iv) To the Knowledge of Sellers, the Realty One Companies have given
notice to the insurer of all claims that may be insured thereby.
3.19 Environmental Matters
Except as set forth in Exhibit 3.19, to the Knowledge of Sellers, none of
the Realty One Companies has any basis to expect, nor has any of them or any
other Person for whose conduct they are or may be held responsible, received,
any citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any real property owned by any of the Realty One Companies as of
June 1, 1997.
3.20 Employees
(a) Exhibit 3.20(a) hereof contains a materially accurate list of the
following information for each employee, sales agent, officer or director of
each of the Realty One Companies, including each employee on leave of absence or
layoff status: employer; name; job title; current compensation paid or payable
and any change in compensation since March 31, 1997; vacation accrued; and
service credited for purposes of vesting and eligibility to participate under
the pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan (as
defined in Section 3(2) of ERISA) or Employee Welfare Benefit Plan (as defined
in Section 3(1) of ERISA), or any other employee benefit plan or any Plan or
Plans for the benefit of non-employee directors or other non-employees of any of
the Realty One Companies.
(b) Except as set forth on Exhibit 3.20(b), no employee, officer, director,
agent or affiliated independent contractor of any of the Realty One Companies is
a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, non-competition, or proprietary rights agreement, between
such employee or director and any other Person ("Proprietary Rights Agreement")
that in any way materially adversely affects or will materially and adversely
affect (i) the performance of his or her duties as an employee, officer,
director, agent or affiliated independent contractor of the Realty One
Companies, or (ii) the ability of the Realty One Companies to conduct its
business, including any Proprietary Rights Agreement with Sellers or any of the
Realty One Companies by any such employee, officer, director, agent or
affiliated independent contractor. No Seller nor any of the Realty One Companies
has obtained Knowledge that any director, officer, or other key employee of the
Realty One Companies intends to terminate his or her employment with any of the
Realty One Companies other than as contemplated herein.
(c) Other than benefits due to retirees or R-ONE property management
employees under the 401(k) Plan or under COBRA, Exhibit 3.20(c) hereof also
contains a complete and accurate list of the following information for each
retired employee, officer or director of the Realty One Companies, or their
dependents, receiving benefits or scheduled to receive benefits in the future:
name, pension benefit, pension option election, retiree medical insurance
coverage, retiree life insurance coverage, and other benefits other than
Continuing Liabilities.
3.21 Labor Relations; Compliance
To the Knowledge of Sellers: since January 1, 1993, except as disclosed in
Exhibit 3.17(a)(vi), hereto, none of the Realty One Companies has been and none
is now a party to any collective bargaining or other labor Contract. Since
January 1, 1993, there has not been, there is not presently pending or existing,
and there is not Threatened, (a) any strike, slowdown, picketing, work stoppage,
or employee grievance process, (b) any Proceeding against or affecting the
Realty One Companies relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable Governmental
Body, organizational activity, or other labor or employment dispute against or
affecting any of the Realty One Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To the Knowledge
of any of the Sellers, no event has occurred or circumstance exists that could
reasonably be expected to provide the basis for any work stoppage or other labor
dispute. To the Knowledge of Sellers: there is no lockout of any employees by
any of the Realty One Companies, and no such action is contemplated by any of
the Realty One Companies; each of the Realty One Companies has complied in all
material respects with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar Taxes,
occupational safety and health, and plant closing; and the Realty One Companies
are not liable for the payment of any compensation, damages, Taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 Intellectual Property
(a) Intellectual Property Assets--The term "Intellectual Property Assets"
includes:
(i) all right, title and interest of Sellers and the Realty One Companies,
to the extent of such interest, to: (i) the use in the State of Ohio of the
names "Realty One, Inc.," "First Ohio Mortgage Corporation, Inc.," "First Ohio
Escrow Corporation, Inc.," and "Corporate Relocation Management, Inc.", (ii) all
fictional business names, trading names, in the State of Ohio, including without
limitation the tradenames "Realty One," "First Ohio Mortgage," "First Ohio
Escrow," and "Corporate Relocation Management," and "HGM Hilltop Realtors",
(iii) registered and unregistered trademarks, service marks (including the
service mark of First Ohio Mortgage described as the number "`1' + an outline of
Ohio with 13 horizontal lines through outline") and applications (collectively,
"Marks");
(ii) all patents, and pending patent applications (collectively,
"Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(iv) all know-how, trade secrets, confidential information, customer lists,
software, technical information, data, process technology, plans, drawings, and
blue prints (collectively, "Trade Secrets") owned, used, or licensed by the
Realty One Companies as licensee or licensor.
(b) Agreements-- To the Knowledge of Sellers: Exhibit 3.22(b) hereof
contains a complete and accurate list and summary description, including any
royalties paid or received by the Realty One Companies, of all Contracts
relating to the Intellectual Property Assets to which the Realty One Companies
are a party or by which the Realty One Companies are bound, except for any
license implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $10,000 under
which any of the Realty One Companies is the licensee; there are no outstanding
and no Threatened disputes or disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
To the Knowledge of Sellers:
(i) The Intellectual Property Assets are all those necessary for the
operation of the Realty One Companies' businesses as they are currently
conducted. Each of the Realty One Companies is the owner or licensee of all
right, title, and interest in and to each of the Intellectual Property Assets
applicable to its business, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims except Permitted
Encumbrances, and has the right to use without payment to a third party all of
the Intellectual Property Assets, except for payment of licensing fees in the
Ordinary Course of Business.
(ii) Except as set forth on Exhibit 3.20(b), no officer, director,
employee, agent or affiliated independent contractor of the Realty One Companies
has entered into any Contract that restricts or limits in any way the scope or
type of work in which such director, officer, employee, agent or affiliated
independent contractor may be engaged or requires such director, officer,
employee, agent or affiliated independent contractor to transfer, assign, or
disclose information concerning the employee's work to anyone other than the
Realty One Companies.
(d) Patents
To the Knowledge of Sellers, the Realty One Companies own no Patents.The
Realty One Companies have engaged counsel and are in the process of complying
with all requirements necessary to perfect and protect the exclusive interests
of the Realty One Companies (or R-ONE, as applicable) in the CARS system,
including the filing of a proper patent application, an excerpt of which has
been delivered to Insignia.
(e) Trademarks
To the Knowledge of Sellers, Exhibit 3.22(e) hereof contains a complete and
accurate list and summary description of all Marks, and except as described in
Exhibit 3.22(e):
(i) one or more of the Realty One Companies is the owner of all right,
title, and interest in and to each of the Marks, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims
except Permitted Encumbrances;
(ii) all Marks that have been registered with the United States Patent and
Trademark Office are currently in compliance with all formal legal requirements
(including the timely post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and enforceable, and are
not subject to any maintenance fees or Taxes or actions falling due within
ninety days after the Closing Date;
(iii) no Mark has been or is now involved in any opposition, invalidation,
or cancellation and no such action is Threatened with the respect to any of the
Marks;
(iv) there is no potentially interfering trademark or trademark application
of any third party;
(v) no Mark is infringed or has been challenged or threatened in any way.
None of the Marks used by any Realty One Company infringes or is alleged to
infringe any trade name, trademark, or service mark of any third party; and
(vi) all products and materials containing a Mark bear the proper federal
registration notice where permitted by law.
(f) Copyrights
To the Knowledge of Sellers:
(i) Exhibit 3.22(f) hereof contains a complete and accurate list of all
federally registered Copyrights. One or more of the Realty One Companies is the
owner of all right, title, and interest in and to each of the Copyrights, free
and clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims.
(ii) Except as set forth on Exhibit 3.22(f), all the Copyrights have been
registered and are currently in compliance with formal legal requirements, are
valid and enforceable, and are not subject to any maintenance fees or Taxes or
actions falling due within ninety days after the date of Closing.
(iii) Except as set forth on Exhibit 3.22(f), no Copyright is infringed or,
to the Knowledge of Sellers or any of the Realty One Companies, has been
challenged or Threatened in any way. None of the subject matter of any of the
Copyrights infringes or is alleged to infringe any copyright of any third party
or is a derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked with the
proper copyright notice.
(g) Trade Secrets
To the Knowledge of Sellers:
(i) With respect to each Trade Secret, the documentation relating to such
Trade Secret is current, accurate, and sufficient in detail and content to
identify and explain it and to allow its full and proper use without reliance on
the knowledge or memory of any individual.
(ii) Sellers and the Realty One Companies have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) One or more of the Realty One Companies has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and have not
been used, divulged, or appropriated either for the benefit of any Person (other
than one or more of the Realty One Companies) or to the detriment of the Realty
One Companies. No Trade Secret is subject to any adverse claim or has been
challenged or Threatened in any way.
(h) CARS System.
Except as set forth in Exhibit 3.22(h), R-ONE holds all right, title and
interest in and to the CARS System, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims except
Permitted Encumbrances, and no other Person has claimed or Threatened to claim
any right or interest therein.
(i) Tradename Rights in Ohio
Notwithstanding any other provision of this Section 3.22, R-ONE owns, as
licensee or otherwise, the exclusive right in the state of Ohio to the use of
the name "Realty One" in connection with a residential real estate brokerage
business subject to the terms of the license agreements for such name. To the
Knowledge of Sellers, the Realty One Companies are not prohibited from using, in
the State of Ohio, the names or marketing slogans "First Ohio Mortgage," "First
Ohio Escrow," and "Corporate Relocation Management," "You're on Your Way Home,"
and "HGM Hilltop Realtors".
3.23 Certain Payments
To the Knowledge of Sellers or the Realty One Companies since January 1,
1994, neither the Realty One Companies nor any director, or officer of the
Realty One Companies, or any other Person acting for or on behalf of the Realty
One Companies, has directly or indirectly made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
in violation of any Legal Requirement.
3.24 Realty One Services Agreements.
Except to the Knowledge of Sellers or the Realty One Companies, the Realty
One Services Agreements are in full force and effect and are valid and
enforceable according to their terms except as such enforcement may be limited
by applicable insolvency laws or laws affecting creditors' rights generally.
Except as set forth on Exhibit 3.24, to the Knowledge of Sellers, no material
default exists in respect of any of the Realty One Services Agreements, which
defaults could have a Material Adverse Effect. The Realty One Services
Agreements contain, to the Knowledge of Sellers, all the terms of agreement
between the Realty One Companies and the other party or parties thereto
respecting the parties' mutual rights and obligations related to the Residential
Real Estate Services of the Realty One Companies.
To the Knowledge of Sellers, none of the Realty One Companies has received
notice of any communication that any party (other than the Realty One Companies)
to a Realty One Services Agreement is considering terminating such agreement,
including any termination either prior to the expiration of their stated term or
as a result of effectuation of the Contemplated Transactions, or failure to
renew a Realty One Services Agreement, which termination or non-renewal has a
Material Adverse Effect.
3.25 Disclosure and Investment Intent
No representation or warranty of Sellers in this Agreement nor any
statement or certificate furnished or to be furnished by or on behalf of any
Seller to Insignia or its Representatives in connection herewith or pursuant
hereto contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading. Each Seller to whom is allocated any of the IFG Purchase
Shares: (i) will be acquiring the IFG Purchase Shares for investment and not
with a view to, or for sale or other disposition in connection with, any
distribution thereof, nor with any present intention of selling or otherwise
disposing of the same; (ii) is an Accredited Investor; and (iii) acknowledges
that the IFG Purchase Shares will be issued pursuant to a private offering
exemption under Rule 506 of Regulation D of the Securities and Exchange
Commission promulgated under Section 4(2) of the Securities Act and is not being
registered under the Securities Act or under the securities or blue sky laws of
any state or foreign jurisdiction and that such IFG Stock must be held
indefinitely unless it is subsequently registered under the Securities Act and
any applicable state securities or blue sky laws, or unless an exemption from
registration is available thereunder.
3.26 Relations with Related Persons
Except as set forth in Exhibit 3.26 hereof, no Seller or any Related Person
of any Sellers or any of the Realty One Companies is a party to any Contract
with, or has any claim or right against, any of the Realty One Companies.
3.27 Brokers or Finders
Sellers and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement except for the fee to
be paid to Brown, Gibbons, Lang & Co., as an expense of the Sellers, upon the
consummation of the Contemplated Transactions.
3.28 First Ohio Mortgage: Loan Purchase Agreements
(a) First Ohio Mortgage is in substantial compliance under its home
mortgage loan purchase contracts with lenders (including the applicable manuals
incorporated into such loan purchase contracts), and no lender has cancelled a
home mortgage loan purchase contract it entered into with First Ohio Mortgage.
(b) First Ohio Mortgage places all of the home mortgage loans it makes with
lenders under its home mortgage loan contracts and, following such sale, retains
no liability or obligation to the borrower, to the purchasing lender, to any
regulatory agency or any other Person in respect of such loans, subject to its
contractual repurchase and/or indemnification obligation to the applicable
purchasing lender.
(c) To the Knowledge of Sellers, First Ohio Mortgage has not been required
pursuant to any contracts with any lender for the sale of home mortgage loans to
repurchase any loan transferred to such lender.
(d) To the Knowledge of Sellers, after January 1, 1994 no claim for
indemnity has been made against First Ohio Mortgage in respect of its indemnity
obligation under any home mortgage loan purchase contract.
4. REPRESENTATIONS AND WARRANTIES OF INSIGNIA
Insignia jointly and severally represents and warrants to Sellers as
follows:
4.1 Organization
(a) Each of IFG and IFG Acquisition Subsidiary is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to own,
lease, license, and use its properties and assets and to carry on the business
in which it is now engaged and the business in which it contemplates engaging.
Each of IFG and IFG Acquisition Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by them, or the nature of the activities conducted by them, requires
such qualification.
(b) Insignia has delivered to Sellers copies of the Organizational
Documents of each of IFG and IFG Acquisition Subsidiary, as currently in effect.
4.2. Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding obligation of
Insignia, enforceable against Insignia in accordance with its terms. The
Employment Agreements constitute the legal, valid, and binding obligation of
Insignia, enforceable against Insignia in accordance with their terms. Insignia
has the absolute and unrestricted right, power, and authority to execute and
deliver this Agreement and the Insignia's Closing Documents and to perform its
obligations under this Agreement and the Insignia's Closing Documents.
(b) Except as set forth in Exhibit 4.2(b)-1 hereto, neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of IFG or IFG Acquisition Subsidiary
or (B) any resolution adopted by the board of directors or the stockholders of
IFG or IFG Acquisition Subsidiary;
(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which IFG or IFG Acquisition Subsidiary, or any of
the assets owned or used by IFG or IFG Acquisition Subsidiary, may be subject;
(iii) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by IFG and IFG Acquisition Subsidiary or that otherwise relates to
the business of, or any of the assets owned or used by, IFG or IFG Acquisition
Subsidiary;
(iv) [intentionally omitted];
(v) [intentionally omitted];
(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract (including without limitation any loan
documents) to which Insignia is a party;
(vii) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by Insignia; or
(viii) give any person the right to prevent, delay or otherwise interfere
with any of the Contemplated Transactions.
Except as set forth in Exhibit 4.2(b)-2 hereof, neither IFG or IFG
Acquisition Subsidiary is or will be required to give any notice to or obtain
any Consent from any Person, including without limitation, any owner or
mortgage/lien holder in connection with the execution, delivery or performance
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
4.3 Capitalization; Title to Interests
The entire authorized capital stock of IFG consists of 52,000,000 shares of
Common Stock and 1,000,000 shares of preferred stock, $0.01 par value, of which
(i) 50,000,000 shares are designated as Class A Common Stock, of which
29,165,441 shares were issued and outstanding and no shares were held in
treasury as of July 31, 1997; (ii) 2,000,000 shares are designated as Class B
Common Stock, $0.01 par value, of IFG, of which no shares were issued and
outstanding and no shares were held in treasury as of August 31, 1997; (iii)
1,000,000 shares are designated as preferred stock, $0.01 par value, of the
Company, of which no shares designated as 7.5% Step-Up Rate Cumulative
Convertible Preferred Stock were issued and outstanding and no shares were held
in treasury as of August 31, 1997, and 1,000,000 are designated as Series A
preferred stock, of which no shares were issued and outstanding and no shares
were held in treasury as of August 31, 1997. Since August 31, 1997 there has
been no change in the authorized shares of capital stock of IFG. All of the
issued and outstanding shares of IFG capital stock have been duly authorized,
validly issued, fully paid and non-assessable.
The entire authorized capital stock of IFG Acquisition Subsidiary consists
of 100 shares of Common Stock, of which 100 shares were issued and outstanding
and no shares were held in treasury as of September 12, 1997.
There are no pre-emptive rights that have not been waived or terminated
with respect to the IFG Purchase Shares.
4.4 Authorization and Issuance of IFG Shares
The IFG Purchase Shares have been duly authorized for issuance, and, when
issued as provided in this Agreement, such shares shall be validly issued, fully
paid and nonassessable and shall be free of restrictions on transfers other than
restrictions contained in this Agreement and under applicable United States
federal and state securities laws. The IFG Purchase Shares is of the same class
of shares as are currently traded on the New York Stock Exchange. No Seller
shall, solely by virtue of their acquisition of the IFG Purchase Shares, be
deemed an "insider" of IFG for purposes of the insider trading restrictions
contained in Section 16 of the Securities Exchange Act of 1934.
4.5 Securities Act and Exchange Act Filings
Insignia has filed all documents required to be filed by it pursuant to the
Securities Act and the Exchange Act and each such document when filed complied
as to form in all material respects with the requirements of the Securities Act
and the Exchange Act.
4.6 Financial Statements
Insignia has made available to Sellers copies of the audited consolidated
balance sheets of IFG and its consolidated subsidiaries as of December 31, 1996,
and the related consolidated statements of operations, shareholders equity and
cash flows for the fiscal year ended such date, certified by Ernst & Young LLP,
independent certified public accountants; and the unaudited consolidated balance
sheet of Insignia and its consolidated Subsidiaries as of March 31, 1997 and
June 30, 1997, and the related consolidated statements of operations,
shareholders equity and cash flows for the three months ended such date (the
"Unaudited Statements"). Such financial statements and balance sheets fairly
represent the financial condition of IFG and its consolidated subsidiaries as of
such date, and have been prepared in accordance with GAAP applied on a basis
consistent with that of prior periods (subject to normal year-end accruals, in
the case of the Unaudited Statements).
4.7 No Material Change
Since June 30, 1997, and except as otherwise disclosed in a filing under
the Securities Act, the Exchange Act, a press release or in this Agreement,
there has not been any material adverse change in the financial position,
operations, assets, liabilities, or the business of IFG and its consolidated
Subsidiaries taken as a whole.
4.8 Taxes
(a) IFG and each of its consolidated Subsidiaries (since it became part of
Insignia's consolidated group) have timely filed all federal, state, local and
foreign Tax returns and reports required to be filed by or with respect to IFG
and each of its consolidated Subsidiaries, taken as a whole. The returns and
information filed with respect to any Taxes are accurate in all respects, except
where any inaccuracy would not have a material adverse effect on IFG and its
consolidated Subsidiaries, taken as a whole.
(b) All Taxes for which IFG or any consolidated Subsidiary is or may be
liable (whether disputed, incurred or which may be incurred) in respect of
periods or portions thereof ending on or before the Closing Date shall have been
paid to the proper Taxing authority or an adequate reserve (in conformity with
GAAP) established therefor, and IFG and its consolidated Subsidiaries taken as a
whole do not have any material liability for Taxes in excess of the amounts so
paid or reserved. All Taxes that IFG and any consolidated Subsidiary has been
required to collect or withhold have been duly collected or withheld and, to the
extent required when due, have been or will be duly paid by IFG and such
consolidated Subsidiary to the proper Taxing authority, except where the failure
to so collect, withhold or pay such Taxes would not have a material adverse
effect on IFG and its consolidated Subsidiaries, taken as a whole.
4.9 Litigation; Legal and Governmental Proceedings and Judgments; Licenses
and Permits
(a) Except as set forth in Exhibit 4.9, (i) there is no litigation,
arbitration, claim, governmental or other proceeding (formal or informal), or
investigation pending (or any substantial basis therefor known to IFG) with
respect to any of IFG or any consolidated Subsidiary which could reasonably be
expected to have a material adverse effect on IFG and its consolidated
Subsidiaries, taken as a whole; (ii) to the Knowledge of IFG, none of IFG or any
of its consolidated Subsidiaries is in violation of, or in default with respect
to, any Legal Requirement or Order which has not been subsequently reversed,
suspended or vacated, which could reasonably be expected to have a material
adverse effect on IFG or its consolidated Subsidiaries, taken as a whole; nor is
any of them required to take any action in order to avoid such violation or
default; and (iii) the litigation listed on Exhibit 4.9 will not prohibit the
consummation of any of the Contemplated Transactions.
(b) To IFG's Knowledge, IFG and each of its consolidated Subsidiaries have
all Governmental Authorizations which are required in connection with their
businesses, including without limitation all necessary approvals from the United
States Department of Housing and Urban Development, where the failure to have
any such Governmental Authorization could reasonably be expected to have a
material adverse effect on IFG or its consolidated Subsidiaries, taken as a
whole.
4.10 Subsidiaries
IFG is the sole shareholder of IFG Acquisition Subsidiary.
4.11 Investment Intent
Insignia is acquiring the Shares for its own account and not with a view to
their distribution or distribution within the meaning of Section 2(11) of the
Securities Act.
4.12 Brokers or Finders
Insignia and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4.13 Representation As To Knowledge of Timothy M. Grant and Frank M.
Garrison
Timothy M. Grant and Frank M. Garrison have no actual knowledge of any
material fact that would constitute a material breach of any representation or
warranty by the Sellers in this Agreement. The preceding representation is made
by Insignia and shall not in any manner be construed to be a representation by
Timothy M. Grant and Frank M. Garrison. In the determination of the actual
knowledge of Timothy M. Grant and Frank M. Garrison, they shall not be deemed to
have knowledge of the documents provided to Insignia, which documents have not
been reviewed by Timothy M. Grant or Frank M. Garrison.
5. COVENANTS OF SELLERS AND THE REALTY ONE COMPANIES PRIOR TO CLOSING DATE
5.1 Required Approvals
As promptly as practicable after the date of this Agreement, Sellers and
the Realty One Companies will make all filings required by Legal Requirements to
be made by them in order to consummate the Contemplated Transactions (including
all filings under the HSR Act). Between the date of this Agreement and the
Closing Date, Sellers and the Realty One Companies will (a) cooperate with
Insignia with respect to all filings that Insignia elects to make or is required
by Legal Requirements to make in connection with the Contemplated Transactions,
and (b) cooperate with Insignia in obtaining all Consents identified in Exhibit
4.2(b)-2 (including taking all actions requested by Insignia to cause early
termination of any applicable waiting period under the HSR Act).
5.2 [Intentionally Omitted]
5.3 Current Information
During the period from the date of this Agreement to the Closing Date, the
Sellers and the Realty One Companies shall cause one or more of their
representatives to confer on a regular and frequent basis with representatives
of Insignia to report on the general status of the Realty One Companies' ongoing
operations. Sellers and the Realty One Companies shall promptly notify Insignia
of any material change in the normal course of the business of the Realty One
Companies or in the operation of the businesses of the Realty One Companies and
of any governmental complaints, investigations, or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving Sellers or the Realty One Companies, and will
keep Insignia fully informed with respect to such events.
5.4 Shareholders' Agreement.
At or prior to the Closing the Sellers to whom are allocated IFG Purchase
Shares shall enter into the Shareholders' Agreement.
5.5 Operations Prior to Closing Date
In addition to any other express obligation under this Agreement, between
the date of this Agreement and the Closing Date, the Sellers will:
(a) cause the Realty One Companies to conduct the businesses of the Realty
One Companies only in the Ordinary Course of Business, including the payment of
Ordinary Course of Business obligations when such obligations first become due
and payable, except as follows:
(i) as otherwise provided in Article 2 hereof, including Section 2.7(d)
hereof;
(ii) all mortgage liens encumbering the Excluded Assets described in
Exhibit 2.7(a)(i) will be released at Closing;
(iii) on or prior to the Closing Date, title to the Excluded Assets shall
be conveyed to the Sellers or their nominees;
(iv) Shareholder and/or close corporation agreements among the Realty One
Companies and the Sellers will be terminated in connection with the Contemplated
Transactions;
(v) on or prior to the Closing, Realty One Companies may pay attorney,
accounting, investment banking, appraisal and other professional fees in
connection with the Contemplated Transactions;
(vi) prior to the Closing Date, R-ONE has or will enter into the following
lease amendments: (A) First Amendment to Lease dated October 10, 1995 between
Aveni Bros. Development Co. and Realty One Relocation Services; (B) Second
Amendment to Lease dated March 21, 1996 between Aveni Bros. Development Co. And
Realty One; and (C) First Amendment to Lease dated April 9, 1997 between Aveni
Bros. Development Co. and CRM; and
(vii) amend the Realty One Companies' Articles of Incorporation to conform
to the requirements of Article 2 and the representations and warranties of
Article 3.
(b) use their Best Efforts to cause the Realty One Companies to preserve
intact the current residential real estate services organizations of the Realty
One Companies, keep available the services of the current officers, employees,
and agents of the Realty One Companies and maintain the relations and goodwill
with customers, landlords, creditors, employees, agents, and all others having
business relationships with the Realty One Companies;
(c) cause the Realty One Companies to own and have good title without
Encumbrance (except Permitted Encumbrances) to all of the assets, other than the
Excluded Assets and all other assets (other than Excluded Assets) currently used
and necessary or useful for the operation of the businesses of the Realty One
Companies (except for acquisitions or dispositions made in the Ordinary Course
of Business since the date of the Interim Balance Sheet) including without
limitation the following assets:
(i) all Realty One Services Agreements;
(ii) all furniture, fixtures, equipment, personalty, Intellectual Property
Assets of any kind, including without limitation policies and procedures
manuals, permits, licenses and lease and utility deposits;
(iii) Accounts Receivable;
(iv) except as otherwise excluded herein, receivables under any loan,
financing or any other agreements or any other investment assets; and
(v) all rights and claims for refunds of Taxes and other governmental
charges (other than refunds attributable to Taxes paid by Sellers due to S
corporation status).
(d) use their Best Efforts to cause the Realty One Companies to conduct the
business of the Realty One Companies so as to cause the Closing Date Statement
(consolidated balance sheet) to be materially similar to the Projected Closing
Combined Balance Sheet.
(e) During the period from the date hereof to and including the Closing
Date, except as expressly contemplated hereby, without the prior written Consent
of Insignia, except as provided in Section 5.5(a) hereof, none of the Realty One
Companies will have:
(i) incurred any liability or obligation of any material nature (whether
accrued, absolute, contingent or otherwise), except in the Ordinary Course of
Business;
(ii) permitted any of its assets to be subjected to any Encumbrance, except
Permitted Encumbrances;
(iii) sold, transferred or otherwise disposed of any assets except in the
Ordinary Course of Business;
(iv) made any capital expenditure or commitment therefor, except in the
Ordinary Course of Business;
(v) redeemed, purchased or otherwise acquired any shares of its capital
stock or any option, warrant or other right to purchase or acquire any such
shares;
(vi) borrowed money, except in the Ordinary Course of Business or as
reasonably necessary to cause the combined stockholders' equity of the Realty
One Companies as of the Effective Time to be similar to the Projected Closing
Combined Balance Sheet, or made any loan to any Person;
(vii) written off as uncollectible any note or accounts receivable, except
write-offs in the Ordinary Course of Business charged to applicable reserves,
none of which individually or in the aggregate is material to any of the Realty
One Companies;
(viii) granted any increase in the rate of wages, salaries, bonuses or
other remuneration of any executive employee or other employees or affiliated
sales agents other than the annual increase in wages and bonuses given in the
Ordinary Course of Business as shall have been approved by Insignia as of the
date hereof;
(ix) cancelled or waived any claims or rights of substantial value;
(x) made any change in any method of accounting or auditing practice;
(xi) agreed, whether or not in writing, to do any of the foregoing;
(xii) without the prior Consent of Insignia, taken any affirmative action,
or failed to take any reasonable action within their or its control, as a result
of which any of the changes or events listed in Section 3.16 is likely to occur.
5.6 Miscellaneous Agreements and Consents
The Sellers and the Realty One Companies shall use their Best Efforts to:
(a) satisfy all the conditions precedent to their own and all other parties'
obligations hereunder; and (b) obtain Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement. The Sellers and
the Realty One Companies agree promptly to execute at the reasonable request of
Insignia before, on or after the Closing Date any documents or materials related
to the transactions contemplated by this Agreement, including, without
limitation, information to auditors respecting the operations of the Realty One
Companies prior to the Closing Date, letters of authority on the Closing Date
and signature cards and other materials evidencing the transfer of the bank
accounts of the Realty One Companies.
5.7 Access and Investigation; Delivery
Between the date of this Agreement and the Closing Date, Sellers and the
Realty One Companies shall:
(a) afford Insignia and its Representatives and advisors (collectively,
"Insignia's Advisors") reasonable access to: (i) the Realty One Companies
Executive Officers, and (ii) at locations other than the offices of the Realty
One Companies, Applicable Contracts, books and records, and other documents and
data;
(b) shall promptly deliver to Insignia any Applicable Contracts, documents,
financial statements, instruments and any other information which is created
after the date of this Agreement (or was otherwise unavailable to or unknown to
any Seller or Realty One Company as of the date of this Agreement) that would
have been required by the terms of this Agreement to be delivered to Insignia by
any Seller or any Realty One Company if such Applicable Contract, document,
financial statements, instruments or other information had been available to or
known to any of the Sellers or any Realty One Company as of the date of this
Agreement, and Sellers shall describe on a series of Exhibits 5.7, each of which
shall be separately dated as of the date of delivery to Insignia, the
identification of the Applicable Contract, document, financial statements,
instruments or other information delivered in accordance with this Section 5.7
to the same extent as would be required by an applicable Exhibit to this
Agreement if such Applicable Contract, document, financial statements,
instruments or other information had been available to or known to any of the
Sellers or any of the Realty One Companies as of the date of this Agreement;
(c) promptly deliver to Insignia and Insignia's Advisors copies of all such
Contracts, books and records, and other existing documents and data as Insignia
may reasonably request; and
(d) promptly deliver to Insignia and Insignia's Advisors such additional
financial, operating, and other data and information as Insignia may reasonably
request.
5.8 Notification
Between the date of this Agreement and the Closing Date, each of the
Sellers will, and will cause the Realty One Companies to, promptly notify
Insignia in writing if any of the Sellers or any of the Realty One Companies
becomes aware of any fact or condition that causes or constitutes a Breach of
any of representations and warranties of Sellers as of the date of this
Agreement, or if any Seller or any of the Realty One Companies becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in any
representations or warranties of any Seller or of the Realty One Companies
herein if this Agreement were dated the date of the occurrence or discovery of
any such fact or condition, Sellers will promptly deliver to Insignia written
notice specifying such change (a "Modification Notice"). During the same period,
each Seller and each Realty One Company will promptly notify Insignia of the
occurrence of any Breach of any covenant of Sellers in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.9 No Negotiation
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Sellers will not, and will not permit the Realty One Companies or any
of their Representatives to, directly or indirectly solicit, initiate, respond
to or encourage any inquiries or proposals from, discuss or negotiate with,
provide any information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Insignia) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business and as required in Section 2.6 hereof) of the Realty One Companies,
or any of the capital stock of the Realty One Companies, or any merger,
consolidation, business combination, or similar transaction involving the Realty
One Companies.
5.10 Office Lease Agreements.
(a) Sellers shall cause R-ONE to enter into a lease agreement substantially
in the form of Exhibit 5.10(a) and on terms acceptable to Insignia in respect of
each of the R-ONE branch offices commonly referred to as the Amherst Office, the
Avon Lake Office, the Brunswick Office, and the Shaker Heights Office.
(b) Sellers shall cause R-ONE to enter into a lease agreement substantially
in the form of Exhibit 5.10(b) and on terms acceptable to Insignia in respect of
its corporate headquarters now located at 6000 Rockside Woods, Blvd., Cleveland,
Ohio.
5.11 Software .
(a) Sellers agree to take any action, and to cooperate with Insignia in
taking any action, useful or necessary to establish and protect the interests of
the Realty One Companies (or any of them) in all software and other Intellectual
Property Assets now used by the Realty One Companies and all software and other
Intellectual Property Assets being developed by one or more of the Realty One
Companies (or any employee or agent or affiliated independent contractor
thereof, in connection with the businesses of any of the Realty One Companies)
and to ensure that the rights in such Intellectual Property and software are
held by and in the name of the appropriate Realty One Company provided Sellers
shall not incur any material costs.
(b) Sellers further agree that to the extent that any one or all of them
hold any rights in software or other Intellectual Property Assets that they
shall take all steps to transfer and assign such rights to Insignia or a Related
Person thereof and that they shall not use or consent to the use by any other
Person to any of such software or other Intellectual Property Assets except for
the benefit of Insignia and its Related Persons provided Sellers shall not incur
any material costs..
(c) Prior to or at the Closing Sellers shall provide to Insignia a
certificate in the form of Exhibit 5.11 (the "Software Certificate") executed by
Stephen Verba acknowledging that R-ONE holds all rights to the CARS system, and
disclaiming, on behalf of himself and his successors, heirs and assigns, any
right or interest in the CARS system.
5.12 Employment Agreement Affirmation.
Sellers shall use Best Efforts to cause each of J. Aveni, Ciepiel and any
other person who has executed an Employment Agreement to execute an Employment
Agreement Reaffirmation Certificate.
5.13 No Other Interests in Realty One Companies.
Prior to or at the Closing Sellers shall provide to Insignia a certificate
in the form of Exhibit 5.13 (the "Ciepiel Acknowledgement") executed by Ciepiel
that he has no claim to and no right to receive any equity securities of the
Realty One Companies.
5.14 Excluded Assets/Related Liabilities.
Prior to the Closing:
(a) Sellers shall cause the Realty One Companies to transfer or assign or
otherwise dispose of the Excluded Assets and Sellers shall assume all
liabilities and obligations arising out of or in connection with the Excluded
Assets.
(b) Sellers shall cause the Realty One Companies to obtain any Consents
required for the transfer, assignment or other disposition of the Excluded
Assets and shall obtain from any applicable third parties releases of the Realty
One Companies from all liabilities and obligations arising out of or in
connection with the Excluded Assets.
6. COVENANTS OF INSIGNIA PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies.
As promptly as practicable after the date of this Agreement, Insignia will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, Insignia will, and will cause each Related
Person to, cooperate with Sellers with respect to all filings that Sellers are
required by Legal Requirements to make in connection with the Contemplated
Transactions, and cooperate with Sellers in obtaining all Consents identified in
Exhibit 3.2 hereof; provided that this Agreement will not require Insignia to
dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization under the HSR Act.
6.2 Board Approval.
Immediately following the execution of this Agreement by all of the parties
hereto, Insignia will deliver certified copies of the resolutions of the board
of directors of IFG authorizing the execution and delivery of this Agreement and
the Closing of the Contemplated Transactions.
6.3 Shareholders' Agreement.
At or prior to the Closing Insignia shall enter into a Shareholders'
Agreement with the Sellers to whom are allocated the IFG Purchase Shares.
6.4 Miscellaneous Agreements and Consents
Insignia shall use its Best Efforts to: (a) satisfy all the conditions
precedent to their own and all other parties' obligations hereunder; and (b)
obtain Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement. Insignia agrees promptly to execute at the
reasonable request of Sellers before, on or after the Closing Date any documents
or materials related to the transactions contemplated by this Agreement.
6.5 Notification
Between the date of this Agreement and the Closing Date, Insignia will
promptly notify the Sellers' Representative in writing if Insignia becomes aware
of any fact or condition that causes or constitutes a Breach of any of
representations and warranties of Insignia as of the date of this Agreement, or
if Insignia becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in any representations or warranties of Insignia herein if this
Agreement were dated the date of the occurrence or discovery of any such fact or
condition, Insignia will promptly deliver to the Sellers' Representative a
Modification Notice. During the same period, Insignia will promptly notify the
Sellers' Representative of the occurrence of any Breach of any covenant of
Insignia in this Section 6 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 8 impossible or unlikely.
Notwithstanding any other provision of this Section 6.5 or this Agreement, the
representation and warranty of Insignia set forth in Section 4.13 is made only
as of the date of execution of this Agreement, and Insignia shall have no
obligation to update such representation or warranty.
6.6 Office Lease Agreements.
(a) Insignia shall enter into a lease agreement substantially in the form
of Exhibit 5.10(a) and on terms acceptable to Insignia in respect of each of the
R-ONE branch offices commonly referred to as the Amherst Office, the Avon Lake
Office, the Brunswick Office, and the Shaker Heights Office.
(b) Insignia shall enter into a lease agreement substantially in the form
of Exhibit 5.10(b) and on terms acceptable to Insignia in respect of R-One's
corporate headquarters now located at 6000 Rockside Woods, Blvd., Cleveland,
Ohio.
6.7 Employment Agreement Affirmation.
Insignia shall execute an Employment Agreement Reaffirmation Certificate
with each of J. Aveni, Ciepiel and any other person who has executed an
Employment Agreement.
7. CONDITIONS PRECEDENT TO INSIGNIA'S OBLIGATION TO CLOSE
Insignia's obligation to purchase the Shares and to take the other actions
required to be taken by Insignia at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Insignia, in whole or in part):
7.1 Accuracy of Representations
Subject to the provisions of Section 8.6, all of the representations and
warranties of the Sellers in this Agreement (considered collectively), and each
of these representations and warranties (considered individually), must have
been accurate as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date, without
giving effect to any Modification Notice.
7.2 Performance
(a) Each of the covenants and obligations that Sellers and the Realty One
Companies are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing, must have been duly performed and complied with.
(b) Each document required to be delivered pursuant to Sections 2.4 and
Section 5 must have been delivered.
(c) All of the agreements, other documents or certificates, or actions
required to be entered into, delivered and/or taken at or prior to the Closing
in accordance with Section 2 and Section 5 hereof, including actions or
deliveries of Persons not a party hereto, shall have been entered into,
delivered and or taken, as applicable.
7.3 Consents
Each of the Consents identified or required to be identified pursuant to
Sections 3.2 and 4.2. must have been obtained and must be in full force and
effect, provided, however, unless the absence of any one or more of the
following Consents shall have a Material Adverse Effect, the obtaining of
Consents from the lessors of personalty (but exclusive of Consents of
intellectual property license holders) or from the lessors of any of the offices
of the Realty One Companies shall not be a condition precedent to Insignia's
obligations hereunder.
7.4 Additional Documents
(a) Each of the following documents must have been delivered to Insignia:
(i) an opinion of McDonald, Hopkins, Burke & Haber Co., L.P.A., dated the
Closing Date, in the form of Exhibit 7.4(a);
(ii) [intentionally omitted]
(iii) such other documents as Insignia may reasonably request for the
purpose of (A) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (B) evidencing the accuracy of any of Sellers' representations
and warranties, (C) evidencing the performance by each Seller of, or the
compliance by each Seller with, any covenant or obligation required to be
performed or complied with by such Seller, or (D) evidencing the satisfaction of
any condition referred to in this Section 7.
(b) Each of J. Aveni, Ciepiel, and any other person who has entered into an
Employment Agreement shall have entered into their respective Employment
Agreement Reaffirmation Certificates.
7.5 No Proceedings
There must not have been commenced or Threatened against Insignia, or
against any Person affiliated with Insignia, any Proceeding (a) involving any
bona fide challenge to, or seeking material damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that could
reasonably be expected have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Realty One Companies,
or (b) is entitled to all or any portion of the Purchase Price payable for the
Shares. Any corporate action of any of the Realty One Companies necessary to
effectuate the Contemplated Transactions shall have been taken.
7.7 [Intentionally Omitted]
7.8 Accredited Investors.
All Sellers to whom are allocated any portion of the IFG Purchase Shares
shall be Accredited Investors.
7.9 No Material Change
There shall not have occurred any material adverse change in the financial
position, operations, assets, liabilities, prospects or the business of any of
the Realty One Companies or of the Realty One Companies taken as a whole.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
The obligation of Sellers to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing are subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by the Sellers, in whole or in part):
8.1 Accuracy of Representations
All of Insignia's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and other than Section 4.13 (which is made only as
of the date of execution of this Agreement) must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.
8.2 Insignia's Performance
(a) Each of the covenants and obligations that Insignia is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with.
(b) Insignia must have delivered each of the documents required to be
delivered by Insignia pursuant to Section 2.4 and Section 6 and must have
delivered the Closing Date Cash and the IFG Purchase Shares as required of
Insignia pursuant to Sections 2.4(b)(i).
(c) All of the agreements, other documents or certificates, or actions
required to be entered into, delivered and/or taken at or prior to the Closing
in accordance with Section 2 and Section 6 hereof, including actions or
deliveries of Persons not a party hereto, shall have been entered into,
delivered and or taken, as applicable.
8.3 Consents
Each of the Consents identified in Exhibit 3.2 and Exhibit 4.2 hereof must
have been obtained and must be in full force and effect.
8.4 Additional Documents
Insignia must have caused the following documents to be delivered to
Sellers:
(a) an opinion of Farris, Warfield & Kanaday, PLC, dated the Closing Date,
in the form of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for the purpose
of (i) enabling their counsel to provide the opinion referred to in Section
7.4(a), (ii) evidencing the accuracy of any representation or warranty of
Insignia, (iii) evidencing the performance by Insignia of, or the compliance by
Insignia with, any covenant or obligation required to be performed or complied
with by Insignia, (ii) evidencing the satisfaction of any condition referred to
in this Section 8, or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5 No Proceedings
There must not have been commenced or Threatened against Sellers, or
against any Person affiliated with Sellers, any Proceeding (a) involving any
bona fide challenge to, or seeking material damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that could
reasonably be expected have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the Contemplated Transactions.
8.6 No Material Change
(a) Subject to the other provisions in this Section 8.6, there must not
have occurred an adverse change in the business, operations, assets, or
financial condition of the Realty One Companies taken as a whole, (a
"Pre-Closing Adverse Change"), provided that written notice of such Pre-Closing
Adverse Change has been provided to Insignia by the Sellers' Representative
prior to the Closing.
(b) Notwithstanding the foregoing, Sellers shall be obligated to close the
Contemplated Transactions if Insignia provides written notice to the Sellers'
Representative of its intent to close notwithstanding the occurrence of a change
or event characterized by the Sellers' Representative as a Pre-Closing Adverse
Change, which written notice must state either (i) that Insignia waives all its
indemnification rights under Section 10.2 with respect to the Pre-Closing
Adverse Change, or (ii) that Insignia disputes the Sellers' Representative's
characterization of any change or event as a Pre-Closing Adverse Change.
(c) If Insignia provides such written notice of its intent to close, the
parties shall proceed with the Closing as described herein, subject to the
following:
(i) If Insignia waives their indemnification rights under Section 10.2 with
respect to such Pre-Closing Adverse Change, Insignia may not pursue
indemnification hereunder with respect to such Pre-Closing Adverse Change or the
Breach of any representations, warranties or covenants of Sellers set forth in
this Agreement the Breach of which directly results from the existence of the
Pre-Closing Adverse Change.
(ii) If Insignia disputes Sellers' Representative's characterization of any
event or change as a Pre-Closing Adverse Change, the parties shall submit to
arbitration pursuant to the procedure described in Section 11.2 hereof, the
question whether such identified adverse change constituted a Pre-Closing
Adverse Change, and the dispute shall be resolved as follows:
(x) if the arbitrator selected in accordance with Section 11.2 hereof (the
"Dispute Arbitrator") determines that the change or event identified prior to
the Closing by the Sellers' Representative as a Pre-Closing Adverse Change
constituted a Pre-Closing Adverse Change, Insignia shall be deemed to have
waived any right to indemnification under Section 10.2 with respect to such
Pre-Closing Adverse Change;
(y) if the Dispute Arbitrator determines that the change or event
identified prior to the Closing by the Sellers' Representative as a Pre-Closing
Adverse Change did not constitute a Pre-Closing Adverse Change, Insignia may
pursue any remedy otherwise available under this Agreement.
9. TERMINATION
9.1 Termination Events
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Insignia or Sellers if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach has not
been waived;
(b) (i) by Insignia if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Insignia to comply with
its obligations under this Agreement) and Insignia has not waived such condition
on or before the Closing Date; provided, however, that Sellers' failure to
satisfy the conditions set forth in Section 7.3 shall not create a right of
Insignia to terminate this Agreement until Sellers have failed to cure such
non-satisfaction within seven (7) business following written notice of such
failure by Insignia to the Sellers' Representative; or (ii) by Sellers, if any
of the conditions in Section 8 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Sellers to comply with their obligations under this Agreement)
and Sellers have not waived such condition on or before the Closing Date;
(c) by mutual consent of Insignia and Sellers; or
(d) by either Insignia or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before December
31, 1997, or such later date as the parties may agree upon.
9.2 Effect of Termination
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1,
11.2 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification Not Affected By Knowledge
All representations and warranties in this Agreement and in any certificate
or document delivered pursuant to this Agreement will survive the Closing until
May 31, 1999 after the Closing Date, except as otherwise provided below.
(a) The representations and warranties of Sellers contained in the
following Sections of this Agreement shall survive until the applicable statute
of limitations:
3.11; and 3.13
(b) The representations and warranties of Sellers contained in the
following Sections of this Agreement shall indefinitely survive after the
Closing Date:
3.2(a); 3.3; 3.17(a)(viii); and 3.17(b)(ii)
(c) The representations and warranties of Insignia contained in Section
4.2(a), 4.3, 4.4, 4.11 and 4.12 of this Agreement shall indefinitely survive the
Closing Date.
Provided further that, if prior to the expiration of the survival period
with respect to any claim for indemnity hereunder, the indemnifying parties
shall have been notified of such claim with reasonable specificity, with an
estimate of the amount of the damages thereunder, if practicable, the claim
shall have been submitted to arbitration or filed as applicable within 90 days
after the otherwise applicable expiration date of the survival period, and such
claim shall not have been finally resolved before the expiration of such
survival period, any representation, warranty, covenant or agreement that is the
basis for such claim shall continue to survive as to such claim and shall remain
a basis for indemnity as to such claim until such claim is finally resolved. The
right to indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
10.2 Indemnification by Sellers
The Controlling Sellers will, jointly and severally, and Miller and
Goldbach will, severally but not jointly, indemnify, defend and hold harmless
Insignia, the Realty One Companies, and their respective officers, directors,
controlling persons, and affiliates (collectively, the "IFG Indemnified
Persons") for, and will pay to the IFG Indemnified Persons the amount of, any
loss, liability, claim, damage, expense (including reasonable costs of
investigation and defense and reasonable professional fees) or diminution of
value, whether or not involving a third-party claim (collectively, "IFG Loss"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by any of the Sellers
in this Agreement, the Exhibits hereof, the Modification Notices or any other
certificate or document delivered by any of the Sellers pursuant to or in
connection with this Agreement;
(b) any Breach of any representation or warranty made by Sellers in this
Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any Modification Notice;
(c) any Breach by any of the Sellers of any covenant or obligation of such
Seller in this Agreement;
(d) any conduct, action, or inaction of any Seller, the Realty One
Companies, any Related Person or Representative thereof, occurring, arising or
related to the period on or prior to the Effective Time (whether known or
unknown on the Closing Date or at the Effective Time) or any circumstances
related to the operation, management or ownership of the Realty One Companies by
any Seller, the Realty One Companies or Related Person or Representative thereof
occurring, arising or related to the period on or prior to the Effective Time
(whether known or unknown on the Closing Date or at the Effective Time) except
to the extent that any liability arising in connection with any of the above is
included in the Continuing Liabilities;
(e) any liabilities or obligations of any nature (whether known or unknown
and whether absolute, accrued, contingent, or otherwise) accruing, occurring,
arising or related to the period on or prior to the Effective Time except for
the Continuing Liabilities;
(f) [intentionally omitted];
(g) all liabilities, costs and expenses associated with the Commercial
Brokerage Division prior to the sale or other disposition of its business.
(h) [intentionally omitted];
(i) any amounts representing fees and expenses or other costs of any kind
of any of the Sellers and/or any of the Realty One Companies arising out of or
in connection with the Contemplated Transaction, to the extent that any Realty
One Company or Insignia or a related Person thereof shall become liable therefor
except to the extent that such amounts are expressly allocated under this
Agreement to Insignia or to the Realty One Companies as post-Effective Time
Subsidiaries of Insignia;
The indemnification obligations of the Sellers pursuant to Section 10.2 (d)
through (i) exist regardless of whether such obligations may also arise as a
Breach under Section 10.2 (a), (b) or (c) above. The remedies provided in this
Section 10.2 will not be exclusive of or limit any other remedies that may be
available to Insignia or the other IFG Indemnified Persons.
10.3 Indemnification by Insignia
Insignia will indemnify, defend and hold harmless Sellers and their
personal representatives, trustees, and executors,, and will pay to Sellers and
their personal representatives, trustees and executors the amount of, any loss,
liability, claim, damage, or expense (including the reasonable costs of
investigation and defense and reasonable attorney's fees) or diminution of
value, whether or not involving a third-party claim ("Seller Loss") arising,
directly or indirectly, from or in connection with
(a) any Breach of any representation or warranty made by Insignia in this
Agreement, the Exhibits hereof, Insignia's Modification Notices or any other
certificate or document delivered by Insignia pursuant to this Agreement;
(b) any Breach by Insignia of any covenant or obligation of Insignia in
this Agreement;
(c) [intentionally omitted]; or
(d) regardless of whether it may also constitute a Breach under Subsections
(a) or (b) above, any loss, liability, claim, damage, expense (including costs
of investigation and defense and reasonable attorneys' fees) arising from or
relating to: (i) any conduct, action, or inaction of the Realty One Companies,
any Related Person or Representative thereof, occurring, arising or related to
the period after the Effective Time; or (ii) the operation, management or
ownership of the Realty One Companies, arising or related to the period after
the Effective Time (whether known or unknown on the Closing Date) and including
liability arising in connection with the Continuing Liabilities (but excluding
the Excluded Liabilities), provided, however, that in the event that such loss,
liability, claim, damage or expense arises out of or in connection with or
results from either a (i) discretionary act of a Seller who is an executive
officer of one of the Realty One Companies or Insignia that contravenes an
established lawful policy adopted by the board of directors of IFG or any
Subsidiary thereof which is the employer of such Seller; or (ii) an act,
omission or failure to act by a Seller that constitutes a breach of fiduciary
duty owed to Insignia or any Subsidiary, a breach of any covenant under this
Agreement or any employment agreement with Insignia or any Subsidiary thereof,
or an act of bad faith against Insignia or any Subsidiary thereof, then
Insignia, whether or not it shall have indemnification liability to such Seller
under a Legal Requirement or its articles of organization or by-laws, shall have
no liability to such Seller under this Subsection (d).
(e) certain tax liability of Sellers arising out of this Agreement, if any,
as follows:
(i) Insignia hereby agrees to indemnify and hold harmless each Seller from
and against, for, and in respect of, in each case after giving effect to the
resolution of any Tax Proceeding, fifty percent (50%) of any and all liability
for Taxes of such Seller (excluding interest, penalties and professional fees
and expenses incurred in connection with any Tax Proceeding) resulting directly
and solely from (x) the deduction by such Seller on a Tax Return of any portion
of the Commissions Payable as described in Section 2.8(a)(i), and (y) any final
reallocation after the Closing Date by the IRS of the aggregate value of the
Class III assets (other than Commissions Receivable) to an amount higher than
the aggregate value for the Class III assets set forth in the Forms 8023-A
prepared as described in Section 2.11, but only after taking into account the
effect of any reallocation from any other Class of assets, provided, however,
that the indemnification obligations of Insignia in this 10.3(e)(i) are subject
to the following terms and conditions:
(A) Each Seller shall promptly deliver to Insignia a copy of any written
notice received by such Seller subsequent to the Closing Date regarding the
commencement of any Tax Proceeding which involves or could involve a matter with
respect to which indemnification might be claimed hereunder. No Seller shall
make payment of any asserted Tax deficiency for at least thirty days after
providing a copy of such notice to Insignia. No Seller shall extend the statute
of limitations for assessment of any Taxes relating to any matter described in
the preceding sentence without the prior written consent of Insignia, which
consent shall not be unreasonably withheld or delayed.
(B) Each Seller shall, at his expense, control the conduct and resolution
of any Tax Proceeding which involves a matter with respect to which
indemnification might be claimed hereunder; provided, however, that in the event
that a Tax Proceeding involves matters with respect to which indemnification
might be sought hereunder and other matters with respect to which there is no
indemnification obligation on the part of Insignia, such Seller may not enter
into a settlement or compromise of such Tax Proceeding without the prior written
approval of Insignia, which approval shall not be unreasonably withheld or
delayed.
(C) Each Seller shall promptly provide to Insignia copies of all
correspondence, workpapers, memoranda and other written documents relating to
any Tax Proceeding which involves or could involve a matter with respect to
which indemnification might be claimed hereunder. Each Seller shall frequently
consult with and advise Insignia or its designated representatives regarding the
conduct and progress of such Tax Proceeding. Insignia or its designated
representatives shall be entitled (at its own cost) to attend all meetings and
conferences relating to such Tax Proceeding.
(D) Each of the Sellers and Insignia agree that each party shall treat, and
shall cause its affiliates to treat, any and all indemnification payments made
pursuant to this Section 10.3(e)(i) as an adjustment to the Tax Adjustment
Amount and, correspondingly, as an adjustment to the Purchase Price.
(ii) Insignia hereby agrees to indemnify and hold harmless each Seller from
and against, for, and in respect of twenty and one-half percent (20.5%) of any
and all liability of such Seller for Taxes of such Seller resulting from the
imposition of Taxes on any portion of the taxable income of any of the Realty
One Companies for the period from the Effective Time through the Closing Date,
provided, however, that the indemnification obligations of Insignia in this
10.3(e)(ii) are subject to the following terms and conditions:
(A) Each Seller shall promptly provide to Insignia copies of all
correspondence, workpapers, memoranda and other written documents relating to
any Tax Proceeding which involves or could involve a matter with respect to
which indemnification might be claimed hereunder. Each Seller will consult with
and advise Insignia or its designated representatives regarding the conduct and
progress of any related Tax Proceeding.
(B) Each of the Sellers and Insignia agree that each party shall treat, and
shall cause its affiliates to treat, any and all indemnification payments made
pursuant to this Section 10.3(e)(ii) as an adjustment to the Tax Adjustment
Amount and, correspondingly, as an adjustment to the Purchase Price.
10.4 Procedure for Indemnification--Third Party Claims
(a) Promptly after receipt by an indemnified party under Section 10.2 or
10.3 of notice of the commencement of any demand, claim or Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim within twenty (20) days of the notice of such
demand, claim or Proceeding, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 10.4(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint representation
would be inappropriate), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Article 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any indemnified person and no effect on any other claims that
may be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within thirty (30) days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Subject to Section 11.2 hereof, Sellers hereby consent to the
non-exclusive jurisdiction of any court in which a Proceeding is brought against
any Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Sellers with respect to such a
claim anywhere in the world.
(e) Notwithstanding anything to the contrary in this Section 10.4, in the
event a claim is made or a deficiency alleged by the Internal Revenue Service or
any other taxing authority, which, if successful, would result in a cost,
expense, loss, damage or liability in respect of which indemnity properly may be
sought against Sellers pursuant to this Agreement, then the following
exclusively shall apply:
(i) Insignia shall, after Insignia and/or the Realty One Companies receives
actual notice of same, promptly notify Sellers in writing of such claim or
alleged deficiency and shall not make payment of the Tax claimed for at least
sixty (60) days after the giving of such notice;
(ii) Insignia and/or the Realty One Companies shall give to Sellers any
relevant information relating to such claim or alleged deficiency which may be
particularly within the Knowledge of Insignia and/or the Realty One Companies;
(iii) If Sellers desire that Insignia and/or the Realty One Companies
contest such claim or alleged deficiency, within thirty (30) days after receipt
of notice by Sellers from Insignia and/or the Realty One Companies of such claim
or alleged deficiency, Sellers jointly shall:
(A) request in writing that such claim or alleged deficiency be contested;
(B) if so requested by Insignia and/or the Realty One Companies, furnish
Insignia and/or the Realty One Companies with an opinion of independent tax
counsel selected by Sellers and approved by Insignia and/or the Realty One
Companies, at Sellers' expense, to the effect that a meritorious defense exists
with respect to such claim or alleged deficiency; and
(C) indemnify Insignia and/or the Realty One Companies in a manner
satisfactory to Insignia and/or the Realty One Companies and pay to Insignia
and/or the Realty One Companies on demand all liabilities and expenses
(including, without limitation, fees and disbursements of attorneys and
accountants and any interest, penalties or other additions to Tax) which may be
entailed in such defense, along with such security for such indemnification as
Insignia and/or the Realty One Companies reasonably may request;
(iv) On Sellers' furnishing Insignia and/or the Realty One Companies with
such items as are set forth above, Insignia and/or the Realty One Companies
shall take such legal or other action deemed reasonable by it in contesting such
claim or alleged deficiency, provided that:
(A) Insignia and/or the Realty One Companies, at its sole option, may
forego any and all administrative appeals, proceedings, hearings and conferences
with the Internal Revenue Service or other appropriate taxing authority in
respect of such claim or alleged deficiency; and
(B) Insignia and/or the Realty One Companies, at its sole option, may
either pay the Tax claimed (in which event Sellers shall promptly pay, on
written request from Insignia and/or the Realty One Companies, the amount of any
such deficiency to Insignia and/or the Realty One Companies) and sue for a
refund in the appropriate United States District Court and/or the United States
Court of Claims and/or other appropriate courts or forums, as Insignia and/or
the Realty One Companies may elect, or contest such claim or alleged deficiency
in the Tax Court of the United States and/or other appropriate courts or forums,
and/or may agree upon the prior written consent of Sellers, which consent will
not be unreasonably withheld or delayed, to a reasonable settlement of such
claims or deficiencies;
(v) If Sellers do not desire that Insignia and/or the Realty One Companies
contest such claim or alleged deficiency, or if Sellers decline or fail to
satisfy the requirements of subclause (iii) above, Sellers shall immediately pay
to Insignia or the Realty One Companies, as the case may be, the full amount of
the claim or alleged deficiency (including without limitation all fees and
disbursements of attorneys and accountants and any interest, penalties or other
additions to Tax).
(vi) If Sellers have paid amounts to Insignia and/or the Realty One
Companies pursuant to this Section 10.4(e) with respect to a Tax claim, action
or proceeding in respect of which indemnity properly may be sought against
Sellers pursuant to this Agreement, and such Tax claim shall be ultimately
recovered in whole or in party by Insignia and/or the Realty One Companies, by
reason of an agreement with the Internal Revenue Service, the United States or
other appropriate taxing authority, or any court decision (including a decision
of the Tax Court of the United States or other comparable court or forum) which
is not appealed, then Insignia and/or the Realty One Companies shall pay Sellers
the additional amounts previously paid by Sellers to Insignia and/or the Realty
One Companies (pursuant to this Section 10.4(e)) with respect to the Tax claimed
which was ultimately recovered plus any interest thereon received by Insignia
and/or the Realty One Companies, within fourteen (14) days after receipt thereof
by Insignia and/or the Realty One Companies.
10.5 Procedure for Indemnification--Other Claims
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
10.6 Indemnity Limitations-- Sellers
(a) The Sellers will have no liability (for indemnification or otherwise)
under Section 10.2(a), (b) or (c) until the total of all IFG Losses with respect
to such matters exceeds Two Hundred Fifty Thousand Dollars ($250,000.00),
provided, however, that if the total of the IFG Losses exceeds $250,000.00, the
Sellers shall be liable for the total amount of all IFG Losses. Notwithstanding
the foregoing general limitation or any other provision of this Agreement
seemingly to the contrary, this Section 10.6(a) shall not apply to a breach of a
representation or warranty set forth in Section 3.8 hereof or to the costs and
obligations allocated to Sellers under Sections 2.5, 2.6, 2.7, 2.8, 2.11, 2.14,
2.16, 10.2(d) through (i) and 10.9 hereof and shall not limit the liabilities
and obligations of the Sellers described therein. With respect to an IFG Loss
arising from a breach of Section 3.8 hereof relating to the collectibility of
Gross Commissions Receivable, the IFG Indemnified Persons shall not have an
indemnity claim under Section 10.2 until the amount of IFG Loss arising from
such breach shall exceed, first, the unused amount of the Allowance for
Cancellations (as of the Effective Time) for Gross Commissions Receivable (as of
the Effective Time), and, second, the unused amount of the Allowance for
Cancellations Surplus. With respect to an IFG Loss arising from a breach of
Section 3.8 hereof relating to the collectibility of accounts receivable arising
from the Commercial Brokerage Division, the IFG Indemnified Parties shall not
have an indemnity claim under Section 10.2 until the amount of IFG Loss arising
from such breach shall exceed the amount of the Commercial Brokerage Division
Allowance for Uncollectibles as of the Effective Time. Insignia further agrees
that in respect of an IFG Loss arising out of litigation matters (including the
claims and Proceedings in connection with which the R-ONE Legal Department
provides representation in accordance with Section 2.17 hereof) for which R-ONE
has historically maintained a reserve as self-insurance coverage of claims
against sales agents based on such agents' alleged errors and omissions, no IFG
Indemnified Parties shall have an indemnity claim hereunder until the amount of
such IFG Loss exceeds the Litigation Reserve set forth on the Projected Closing
Combined Balance Sheet.
(b) Notwithstanding anything in this Agreement to the contrary, the
aggregate IFG Losses for which the Controlling Sellers shall be liable under
this Section 10 shall be limited to the amount of Purchase Price received by
Sellers, provided further, however that the limitation in this sentence shall
not apply, as to any Controlling Seller, to any Breach by such Controlling
Seller of any of Sellers' representations and warranties of which such
Controlling Seller had actual and conscious personal knowledge at the time on
which such representation and warranty is made or any intentional Breach by any
of the Sellers of any covenant or obligation contained herein.
(c) Notwithstanding anything in this Agreement to the contrary neither
Miller nor Goldbach shall be liable to any IFG Indemnified Person under Section
10.2 or otherwise under this Agreement in an amount in excess of the portion of
the Purchase Price received by him. The rights and remedies contained in this
Article 10 shall be the sole and exclusive remedy of any IFG Indemnified Person
against Miller and Goldbach for any liability or cause of action arising from
the Breach by Miller or Goldbach of any representation or warranty or covenant
contained in this Agreement other than (but this provision shall not constitute
a waiver of any claims of any IFG Indemnified Person arising under Section 2.10
of this Agreement or under any employment or consulting agreement).
Notwithstanding any provisions herein to the contrary, Goldbach shall have no
liability or indemnity obligation with respect to any Breach of any
representation, warranty or covenant with respect to R-ONE (including the
Commercial Brokerage Division) and/or CRM.
(d) The employment costs and related overhead incurred by Insignia (or its
Subsidiaries, including the Realty One Companies) after the Effective Time in
the ordinary course of operating the R-ONE Legal Department in accordance with
the provisions and of during the period provided in Section 2.17 hereof shall
not be treated as an IFG Loss.
(e) To the extent that any IFG Loss shall arise on or before May 31, 1999
directly from any third party claim, which claim, or the facts and circumstances
which directly create the basis for such claim, was not known by Sellers or the
Realty One Companies as of the Closing Date, and is not of a nature of an
account payable, note payable, commission payable or rent, Sellers will not have
liability for indemnification for such IFG Loss under Section 10.2 until the
total amount of such IFG Loss exceeds, first, any unused Litigation Reserve,
and, second, any unused Allowance for Cancellations Surplus.
(f) Insignia agrees, unless it is administratively impracticable or unduly
burdensome based on the inter-relationship of multiple claims, to cause the IFG
Indemnified Persons to organize any indemnification claims on a separable claim
by claim basis and to seek indemnification against the Sellers on such an
individual claim basis. Insignia agrees that the IFG Indemnified Persons will
not seek, with respect to any single claim or any single set of related multiple
claims, to collect from either Miller or Goldbach a percentage of the amount of
such single claim or single set of related multiple claims in excess of the same
proportion that his portion of the Purchase Price bears to the entire Purchase
Price.
10.7 Indemnity Limitations--Insignia
(a) Insignia will have no liability (for indemnification or otherwise)
under Section 10.3(a) until the total of all Seller Losses with respect to such
matters exceeds One Hundred Thousand Dollars ($100,000.00), provided, however,
that if the total of the Seller Losses exceeds $100,000.00, Insignia shall be
liable for the total amount of all Seller Losses. Notwithstanding the foregoing
general limitation or any other provision of this Agreement seemingly to the
contrary, this Section 10.7(a) shall not apply to the obligations of Insignia
under Sections 2.2, 2.4, 2.5, 2.6, 2.7, 2.10, 2.11. 2.14(b) and (d), 2.15, 2.16,
2.17, 2.18 and 10.3(e)(i) hereof and shall not limit the liabilities and
obligations of Insignia described therein.
(b) Notwithstanding anything in this Agreement to the contrary, the
aggregate Damages for which Insignia shall be liable under this Section 10.7
shall be limited to the aggregate Purchase Price paid to the Sellers; provided,
however, that such limitations shall not apply to any Breach of any of
Insignia's representations and warranties of which Insignia had Knowledge at the
time at which such representation and warranty is made or for any intentional
Breach by Insignia of any of Insignia's covenants or obligations contained
herein.
10.8 Effect of Insurance Proceeds Received/Subrogation/Indemnification
Payment as Adjustment to Purchase Price
(a) The amount of any indemnification payable under this Article 10 shall
be net of the receipt of insurance proceeds to the extent that such proceeds are
paid without reservation and actually received and specifically related to the
claim otherwise covered by the indemnity provisions herein to the indemnified
party under a policy of insurance covering the loss giving rise to the claim.
The parties agree to respond within a reasonable time to any inquiry by the
other parties as to the status of any such insurance payment.
(b) An indemnifying party shall be subrogated to any claims or rights of
the indemnified parties as against any other Persons with respect to any IFG
Loss or Seller Loss, as applicable, paid by the indemnifying party under Section
10.2 or 10.3, as applicable. The indemnified parties shall cooperate with the
indemnifying parties to a reasonable extent, at the indemnifying parties'
expense, in the assertion by the indemnifying parties of any such claim against
such other Persons.
(c) If Insignia or any Seller makes any payment to an indemnified party
pursuant to this Article 10, then such amount shall be treated as an adjustment
to the Purchase Price.
10.9 Certain Continuing Litigation
Notwithstanding the provisions of Section 10.2, the first Five Hundred
Thousand Dollars ($500,000) (if any) of costs, expenses, legal fees, settlement
costs, losses, damages, and claims incurred or suffered after the Effective Time
by Insignia, the Realty One Companies or any Related Person of the foregoing in
connection with, arising under or related to the Re/Max Litigation or to the
subject matter thereof (the "Post-Closing Re/Max Costs"), shall be allocated
one-half to the Sellers and one-half to Insignia and its Subsidiaries (including
the Realty One Companies after the Effective Time). Any of the $250,000 of
Post-Closing Re/Max Costs (if any) paid by Sellers pursuant to the preceding
sentence shall not be deemed an IFG Loss for purposes of the calculation of the
threshold limitation set forth in Section 10.6(a). Post-Closing Re/Max Costs
shall not include any expenses for unbilled legal services rendered prior to the
Effective Time. Any Post-Closing Re/Max Costs in excess of $500,000 shall be
treated as an IFG Loss under Article 10 except that such IFG Losses shall not be
subject to the threshold limitation set forth in Section 10.6(a).
Notwithstanding any other provision of this Agreement, any proceeds realized by
the Realty One Companies in connection with the Re/Max Litigation will be
applied in the following priority: (i) first, to reimburse Insignia and its
Subsidiaries for any Post-Closing Re/Max Costs paid by them; (ii) second, the
next $250,000, if any, to Sellers pro rata in accordance with their
pre-Effective percentage interest in R-ONE; and (iii) any balance will be
allocated one-half to the Sellers, pro rata in accordance with their
pre-Effective Time interest in R-ONE, and one-half to Insignia and its
Subsidiaries.
The Sellers, through the Sellers' Representative, shall, subject to the
allocation of costs set forth in the preceding paragraph, cooperate and provide
assistance to R-ONE in the defense by R-ONE of the Re/Max Litigation. After the
Closing Date R-ONE will not settle the Re/Max Litigation without the prior
written consent of the Sellers' Representative, which consent will not be
unreasonably withheld or delayed, unless: (a) the settlement amount, together
with all other Post-Closing Re/Max Costs, is less than $500,000 or (b) R-ONE (or
Insignia) agrees to pay the entire portion of the Post-Closing Re/Max Costs
(inclusive of any settlement amounts) in excess of $500,000.
11. GENERAL PROVISIONS
11.1 Expenses
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Notwithstanding the foregoing, Insignia shall pay
one-half and Sellers shall pay one-half of the fees, expenses and costs
associated with any filings under the HSR Act. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a Breach of this Agreement by
another party.
11.2 Mandatory Arbitration
Any controversy or claim between or among the parties hereto including but
not limited to those arising out of or relating to this Agreement, including any
claim based on or arising from an alleged tort, (but excluding the enforcement
of specific relief under Section 2.10(e) hereof, which shall be resolved in the
manner prescribed therein and disputes under Section 2.10 hereof, and excluding
claims, controversies and disputes under the Employment Agreements, all of which
shall be governed by the terms thereof) shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or, if not
applicable, the applicable Ohio law), the rules of practice and procedure for
the arbitration of commercial disputes of the AAA, and the "Special Rules" set
forth below. In the event of any inconsistency, the Special Rules shall control.
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Agreement may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this Agreement applies in any court having jurisdiction over such
action.
Special Rules. The arbitration shall be conducted in Chicago, Illinois, and
administered by AAA, who will appoint an arbitrator. All arbitration hearings
will be commenced within ninety (90) days of the demand for arbitration.
Further, the arbitrator shall only, upon a showing of cause, be permitted to
extend the commencement of such hearing for an additional sixty (60) days. The
costs and expenses of the arbitrator and reasonable costs and expenses of all
parties to such arbitration, including professional fees, shall be borne by the
party or parties determined by the arbitrator, who shall, in making such
determination, take account of the relative merits of the positions contended by
the parties and the good faith efforts of the parties in attempting to settle
the matter without resort to arbitration, but the arbitrator shall not take into
consideration the relative ability of the parties to pay such fees, costs and
expenses.
No Person shall be entitled to pursue an indemnification claim arising
under Article 10 for resolution by arbitration unless and until: (i) such claim,
together with any other claims of such Person, involves one or more matters or
controversies aggregating $25,000 or more; or (ii) at least six months have
elapsed since such Person became aware of such claim; or (iii) the claim would
otherwise become subject to extinguishment within 180 days under Article 10
because of the lapse of time.
11.3 Confidentiality/Public Announcement
(a) [Intentionally omitted]
(b) Unless consented to by the Sellers' Representative in advance in
writing or required by applicable federal securities law or the rules of the New
York Stock Exchange, prior to the Closing Insignia shall, and shall cause its
Subsidiaries and Representatives to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person. No public
announcement or similar publicity with respect to this Agreement or the
Contemplated Transactions will be issued prior to the Closing, except as
required by applicable federal securities law or the rules of the New York Stock
Exchange, and such announcement will be made, if at all, at such time and in
such manner as Insignia or the Sellers' Representative jointly determine,
provided, however, that Insignia shall use its Best Efforts to provide to the
Sellers' Representative the opportunity to review such public announcement prior
to its being made. Unless consented to by Insignia in advance or required by
Legal Requirements, prior to the Closing Sellers shall, and shall cause the
Realty One Companies to, keep this Agreement strictly confidential and may not
make any disclosure of this Agreement to any Person. Sellers and Insignia will
consult with each other concerning the means by which the Realty One Companies'
employees, clients, customers and others having dealings with the Realty One
Companies will be informed of the Contemplated Transactions, and Insignia will
have the right to be present for any such communication. Insignia and Sellers
will cooperate with and assist each other in the preparation of anticipatory
press releases and public announcements.
11.4 Notices
All notices, Consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth within Section 11.4 (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties). Notice to any
and all Sellers shall be deemed to have been given when notice is given to
Sellers' Representative .
Sellers'
Representative: Joseph T. Aveni
c/o Realty One, Inc.
6000 Rockside Woods Boulevard
Independence, Ohio 44131
Telephone: (216) 328-2525
Facsimile: (216) 328-5022
with a copy to: McDonald, Hopkins, Burke & Haber Co., L.P.A.
2100 Bank One Center
600 Superior Avenue, E.
Cleveland, OH 44114
Telephone: (216) 348-5408
Facsimile: (216) 348-5474
Attention: Brian M. O'Neill
Sellers: Joseph T. Aveni
% Realty One, Inc.
6000 Rockside Woods Blvd.
Independence, Ohio 44131
Telephone: (216) 328-2525
Facsimile: (216) 328-5022
Vincent T. Aveni
1512 Parkside Circle
Lyndhurst, Ohio 44124
Telephone: (216) 328-2535
Facsimile: (216) 328-5022
the Joseph T. Aveni Trust
c/o Joseph T. Aveni Trustee
800 Meadowview
Gates Mills, Ohio 44040
Telephone: (216) 328-2525
Facsimile: (216) 328-5022
the Vincent T. Aveni Family Trust
c/o Vincent T. Aveni, Trustee
1512 Parkside Circle
Lyndhurst, Ohio 33124
Telephone: (216) 328-2535
Facsimile: (216) 328-5022
the Joseph T. Aveni Dynasty Trust
c/o Vincent T. Aveni, Trustee
1512 Parkside Circle
Lyndhurst, Ohio 33124
Telephone: (216) 328-2535
Facsimile: (216) 328-5022
the Vincent T. Aveni Dynasty Trust
c/o Joseph T. Aveni, Trustee
800 Meadowview
Gates Mills, Ohio 44040
Telephone: (216) 328-2525
Facsimile: (216) 328-5022
James C. Miller
2717 Tonawanda Drive
Rocky River, Ohio 44116
______________________________
Telephone:____________________
Facsimile: ___________________
with notice to: Stephen L. Kadish, Esq.
Kadish, Hinkel & Weibel
1717 E. 9th Street, Suite 2112
Cleveland, Ohio 44114
Telephone: (216) 696-3030
Facsimile: (216) 696-3492
Richard A. Goldbach
8153 Creekside Trace
Broadview Heights, Ohio 44147
______________________________
Telephone:____________________
Facsimile: ___________________
with notice to: James Mackey, Esq.
Chadman, Gaines & Stern
1350 Euclid Avenue, #1400
Cleveland, Ohio 44115
Telephone: (216) 781-1700
Facsimile: (216) 781-1972
with a copy to: McDonald, Hopkins, Burke & Haber Co., L.P.A.
(in event of 2100 Bank One Center
notice to any 600 Superior Avenue, E.
Seller) Cleveland, OH 44114
Telephone: (216) 348-5408
Facsimile: (216) 348-5474
Attention: Brian M. O'Neill
IFG: Insignia Financial Group, Inc.
102 Woodmont Boulevard, Suite 400
Nashville, Tennessee 37205
Telephone: (615) 783-1000
Facsimile: (615) 783-1099
Attention: Frank M. Garrison
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Telephone: (864) 239-1675
Facsimile: (864) 239-1096
Attention: John K. Lines,
General Counsel and Secretary
with copy to: Farris, Warfield & Kanaday, PLC
(with notice to 424 Church Street, Suite 1900
IFG) SunTrust Center
Nashville, Tennessee 37219
Telephone: (615) 244-5200
Facsimile: (615) 726-3185
Attention: B. Riney Green
11.5 Jurisdiction
Subject to the terms of Section 11.2, any action or proceeding seeking to
enforce any provision hereof, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Ohio, or, if it has or can acquire jurisdiction, in the United States
District Court for the Northern District of Ohio, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
11.6 Further Assurances
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the Contemplated Transactions and the
intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 Entire Agreement and Modification
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Insignia,
the Realty One Companies and Sellers dated June 25, 1997, as amended) other than
the Confidentiality Agreement executed by Insignia Financial Group, Inc. in
favor of Realty One, Inc. dated as of May 12, 1997, and the Confidentiality
Agreement executed by Realty One, Inc. in favor of Insignia Financial Group,
Inc. dated June 6, 1997 (the "Confidentiality Agreements") and together with the
Confidentiality Agreements constitute (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment. Upon Closing, the Confidentiality Agreements shall terminate
and be rendered null and void.
11.9 [Intentionally Omitted]
11.10 Assignments, Successors, And No Third-Party Rights
Neither Insignia nor any Seller may assign any of its/his rights under this
Agreement without the prior consent of the Sellers' Representative or Insignia,
as applicable, except that Insignia may assign any of its rights under this
Agreement to any Subsidiary of IFG, provided that all obligations of Insignia
under this Agreement are assumed by such Subsidiary and that no such assignment
or assumption shall release Insignia from its obligations hereunder. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the personal representatives, executors,
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.11 Severability
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 Section Headings; Construction
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms. The
parties, in acknowledgement that all of them have been represented by counsel
and that this Agreement has been carefully negotiated, agree that the
construction and interpretation of this Agreement and other documents entered
into in connection herewith shall be construed neutrally in accordance with
their plain meaning; and the construction and interpretation thereof shall not
be affected by the identity of the party or parties under whose direction or at
whose expense this Agreement and such documents were prepared or drafted.
11.13 [Intentionally Omitted]
11.14 Governing Law
This Agreement will be governed by the laws of the State of Ohio without
regard to conflicts of laws principles.
11.15 Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
[INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
INSIGNIA RO, INC.
By: /s/ Frank M. Garrison
-------------------------
FRANK M. GARRISON, PRESIDENT
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Frank M. Garrison
-------------------------
FRANK M. GARRISON,
EXECUTIVE MANAGING DIRECTOR
/s/ Joseph T. Aveni
-------------------
JOSEPH T. AVENI
/s/ Vincent T. Aveni
--------------------
VINCENT T. AVENI
/s/ James C. Miller
-------------------
JAMES C. MILLER
/s/ Richard A. Goldbach
-----------------------
RICHARD A. GOLDBACH
/s/ Joseph T. Aveni
-------------------
JOSEPH T. AVENI, TRUSTEE OF THE
JOSEPH T. AVENI DECLARATION OF TRUST
DATED APRIL 25, 1988, AS AMENDED ON
AUGUST 10, 1995
/s/ Vincent T. Aveni
--------------------
VINCENT T. AVENI, TRUSTEE OF THE
VINCENT T. AVENI DECLARATION OF
TRUST DATED FEBRUARY 11, 1988, AS
RESTATED ON SEPTEMBER 14, 1995
/s/ Joseph T. Aveni
-------------------
JOSEPH T. AVENI, TRUSTEE OF THE
VINCENT T. AVENI DYNASTY TRUST
DATED JULY 12, 1994
/s/ Vincent T. Aveni
--------------------
VINCENT T. AVENI, TRUSTEE OF THE
JOSEPH T. AVENI DYNASTY TRUST DATED
JULY 12, 1994
INDEX OF EXHIBITS
Exhibit 1-1: Realty One Companies Executive Officers
Exhibit 2.4(b)(i): Allocation of Purchase Price Among Sellers
Exhibit 2.5(a): Projected Closing Combined Balance Sheet
Exhibit 2.7(a)(i): Excluded Assets--Descriptions of Four Branch
Offices (including property descriptions)
Exhibit 2.7(a)(ii): Excluded Assets--Interests in Realty One
Land Company
Exhibit 2.7(a)(iii): Excluded Assets--Property Management
Division (description including assets,
obligations, and list of R-ONE property
management employees)
Exhibit 2.7(a)(v): Excluded Assets--Life Insurance Policy on
Life of Principals
Exhibit 2.7(a)(vii): Excluded Assets--Related Party Loans
Exhibit 2.7(a)(viii): Excluded Assets--Certain Additional
Excluded Assets
Exhibit 2.7(a)-1: Excluded Assets--Estimated Value
Exhibit 2.7(b): Continuing Liabilities
Exhibit 2.7(c): Certain Excluded Liabilities
Exhibit 2.10: Permitted Business Activities
Exhibit 2.11: Price/Asset Allocation of Purchase Price
Exhibit 2.12: Form of Employment Agreement Reaffirmation
Certificate
Exhibit 2.18: Form of Shareholders' Agreement
Exhibit 3.1(a): Corporate Information (separately listed for
each of Realty One Companies)
Exhibit 3.2(a): Restrictions re Rights, Power, Authority &
Capacity (Sellers or Realty One Companies)
Exhibit 3.2(b)-1: Conflicts/Liability Created by Entering Into
Agreement/Contemplated Transactions (Sellers
or Realty One Companies)
Exhibit 3.2(b)-2: Notice or Consent Required for Agreement or
Contemplated Transactions (Sellers or Realty
One Companies)
Exhibit 3.4: Interim Balance Sheet
Exhibit 3.6: Realty One Companies: Leasehold and Other
Interests in Property
Exhibit 3.7: Permitted Encumbrances
Exhibit 3.8(b)-1: Accounts Receivable as of September 11, 1997
Closing Exhibit 3.8(b)-2: Accounts Receivable (two business days
before Closing)
Exhibit 3.9(b)-1: Accounts Payable as of September 11, 1997
Closing Exhibit 3.9(b)-2: Accounts Payable (two business days before
Closing)
Exhibit 3.10: Disclosure of Liabilities
Exhibit 3.11(a): Contested Taxes
Exhibit 3.11(b): Tax Audits/Adjustments/Deficiencies/Other
Related Matters
Exhibit 3.11(c): Proposed Tax Assessment
Exhibit 3.11(d): Target Affiliates
Exhibit 3.13(a): Employee Benefit Plans
Exhibit 3.13(c): Funding Policies/Commitments
Exhibit 3.13(e): Outstanding Obligations Under Plans/
Compliance Exceptions
Exhibit 3.14(a): Matters Concerning Compliance/Obligations -
Legal Requirements
Exhibit 3.14(b): Governmental Authorizations
Exhibit 3.15(a): List/Description of Pending Proceedings
Exhibit 3.15(b): Orders Affecting Realty One Companies,
Sellers, Certain Individuals
Exhibit 3.15(c): Compliance With Orders Affecting Realty One
Companies
Exhibit 3.16: Certain Changes and Events Affecting Realty
One Companies
Exhibit 3.17(a)(i)-1: Realty One Services Agreements--Form of
R-ONE Listing Agreement
Exhibit 3.17(a)(i)-2: Realty One Services Agreements--Form of
R-ONE Buyer Agency Agreement
Exhibit 3.17(a)(i)-3: Realty One Services Agreements--Form of
Residential Sales Contract
Exhibit 3.17(a)(i)-4: Realty One Services Agreements--First Ohio
Mortgage
Exhibit 3.17(a)(i)-5: Realty One Services Agreements--First Ohio
Escrow
Exhibit 3.17(a)(i)-6: Realty One Services Agreements--CRM
Exhibit 3.17(a)(ii): Contracts for Services-Goods-Materials
Provided to Realty One Companies in Excess
of $75,000
Exhibit 3.17(a)(iii): Applicable Contracts Not In Ordinary Course
in Excess of $75,000
Exhibit 3.17(a)(iv): Contracts Concerning Real and/or Personal
Property in Excess of $10,000
Exhibit 3.17(a)(v): Applicable Contracts Concerning Intellectual
Property
Exhibit 3.17(a)(vi)-1: R-ONE--Employment Agreements
Exhibit 3.17(a)(vi)-2: R-ONE--Independent Contractor Agreement
(Form)
Exhibit 3.17(a)(vi)-3: Realty One Companies--Compensation
Agreements in Excess of $75,000
Exhibit 3.17(a)(vi)-4: Collective Bargaining Agreements
Exhibit 3.17(a)(vii): Applicable Contracts/Sharing of Profits,
Losses, Costs or Liabilities
Exhibit 3.17(a)(viii): Applicable Contracts/Restriction of Business
Activity
Exhibit 3.17(a)(x): Current Powers of Attorney
Exhibit 3.17(a)(xi): Contracts Not in Ordinary Course/Express
Liability for Consequential Damages
Exhibit 3.17(a)(xii): Contracts For Capital Expenditures in Excess
of $25,000
Exhibit 3.17(a)(xiii): Contractual Warranties/Guaranties by Realty
One Companies Not In Ordinary Course
Exhibit 3.17(a)(xiv): Obligations For Borrowed Money
Exhibit 3.17(a)(xv): Applicable Contracts/Asset Purchase
Agreements
Exhibit 3.17(a)(xvi): Description of Amendments to Contracts -
Exhibits 3.17(a)(v), 3.17(a)(viii),
3.17(a)(xi), 3.17(a)(xiv), and 3.17(a)(xv)
Exhibit 3.17(b): Contracts of Sellers or Related Persons
Affecting Realty One Companies
Exhibit 3.17(c): Contracts Not in Full Force and Effect or
Not Valid and Enforceable
Exhibit 3.17(d): Non-Compliance with Contracts to Which
Realty One Companies Are Parties
Exhibit 3.18(a): Insurance Policies/Applications/Statement
re Adequacy of Coverage
Exhibit 3.18(b): Self-Insurance/Risk Sharing/Obligations to
Third Parties Regarding Insurance
Exhibit 3.18(d): Certain Disclosures Concerning Insurance
Coverage for Sellers, Realty One Companies
or Officers or Directors of Realty One
Companies
Exhibit 3.19: Disclosure Concerning Environmental Matters
Exhibit 3.20(a): Information Concerning Current and Employees
and Directors
Exhibit 3.20(b): Persons Bound by Proprietary Rights
Agreement
Exhibit 3.20(c): Information Concerning Retired Employees
and Directors
Exhibit 3.22(b): Contracts Related to Intellectual Property
Assets
Exhibit 3.22(e): Marks
Exhibit 3.22(f): Copyrights
Exhibit 3.22(h): Exceptions - Interests In and To the CARS
System
Exhibit 3.24: Defaults/Realty One Services Agreements
Exhibit 3.26: Sellers and/or Related Persons - Contracts/
Rights Against Realty One Companies
Exhibit 4.2(b)-1: Restrictions re Rights, Powers,
Authorization & Capacity (Insignia)
Exhibit 4.2(b)-2: Notice or Consents Required for Agreement
of Contemplated Transaction (Insignia)
Exhibit 4.9: Litigation/Violations of Insignia
Exhibit 5.7: Applicable Contracts and Other Documents
Post-Signing - Pre-Closing
Exhibit 5.10(a): Form of Branch Office Lease
Exhibit 5.10(b): Form of Headquarters Office Lease
Exhibit 5.11: Form of Software Certificates
Exhibit 5.13: Form of Ciepiel Acknowledgement
Exhibit 7.4(a): Form of Opinion of Counsel to Sellers and
the Realty One Companies
Exhibit 8.4(a): Form of Opinion of Counsel to Insignia
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT is entered into as of October 7, 1997 by and
among INSIGNIA FINANCIAL GROUP, INC., a Delaware corporation (the "Company"),
and Joseph T. Aveni, individually a resident of Gate Mills, Ohio ("J. Aveni"),
Joseph T. Aveni as Trustee of the Joseph T. Aveni Declaration of Trust dated
April 25, 1988, as amended on August 10, 1995 ("J. Aveni 1988 Trust"), Vincent
T. Aveni, as Trustee of the Joseph T. Aveni Dynasty Trust, dated July 12, 1994
("J. Aveni 1994 Trust"), Vincent T. Aveni, Trustee of the Joseph T. Aveni
Dynasty Trust dated July 12, 1994 FBO Kristen Aveni ("Kristen Aveni Subtrust"),
Vincent T. Aveni, Trustee of the Joseph T. Aveni Dynasty Trust dated July 12,
1994 FBO Kerri Aveni ("Kerri Aveni Subtrust"), Vincent T. Aveni, Trustee of the
Joseph T. Aveni Dynasty Trust dated July 12, 1994 FBO Benjamin Aveni ("Benjamin
Aveni Subtrust"), (collectively J. Aveni, the J. Aveni 1988 Trust, the J. Aveni
1994 Trust, the Kristen Aveni Subtrust, the Kerri Aveni Subtrust, and the
Benjamin Aveni Subtrust are "Holders"; each of the Holders is a "Holder").
WHEREAS, the Company and the Holders and others have entered into a Stock
Purchase Agreement dated September 18, 1997 (the
"Purchase Agreement"); and
WHEREAS, in partial consideration for the Holders' agreement to sell all
their shares of the capital stock of Realty One, Inc., an Ohio corporation, to
Insignia RO, a subsidiary of the Company, the Company has agreed, in accordance
with the terms and conditions of the Purchase Agreement, on the Closing Date to
issue shares of its Common Stock to Holders in the following amounts
(collectively, the "Shares"):
NAME OF HOLDER NUMBER OF IFG PURCHASE SHARES Joseph T. Aveni 37,103.2Joseph
T. Aveni as Trustee of the Joseph T. Aveni Declaration of Trust dated April25,
1988, as amended on August 10, 1995 33,148.7 Vincent T. Aveni, Trustee of the
Joseph T. Aveni Dynasty Trust dated April 12, 1994 FBO Kristen Aveni 43,249.4
Vincent T. Aveni, Trustee of the Joseph T. Aveni Dynasty Trust dated Jyly 12,
1994 FBO Kerri Aveni 43,249.35 Vincent T. Aveni, Trustee of the Joseph T. Aveni
Dynasty Trust dated Jyly 12, 1994 FBO Kerri Aveni 43,249.35 WHEREAS, the parties
desire to enter into this Shareholders' Agreement to govern certain rights and
obligations of the parties with respect to the Shares (the "Agreement"); NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows: Definitions. As used herein, the following terms shall have the
following meanings (all terms defined in this Section 1 or in other provisions
of this Agreement in the singular shall have the same meanings when used in the
plural and vice versa):
"Affiliate" means any Person (a) which directly or indirectly controls, or
is controlled by, or is under common control with, another Person, (b) which
directly or indirectly beneficially owns or holds 10% or more of any class of
voting stock of another Person, or (c) 10% or more of the voting stock which is
directly or indirectly beneficially owned or held by another Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Business Day" means any day on which commercial banks are not authorized
or required to close in New York, New York, and shall also include any legal
holiday observed by the New York Stock Exchange.
"Closing Date" means October 10, 1997.
"Commission" means the Securities and Exchange Commission or any successor
thereto.
"Common Stock" means the Company's authorized Class A Common Stock, par
value $0.01 per share, as constituted on the Closing Date, and any other stock
of the Company into which such Common Stock may thereafter be changed or which
may be issued to the holders of shares of Common Stock upon any reclassification
thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the date hereof, applied on a basis consistent with
those used in the preparation of the financial statements for the first fiscal
year of the Company ending after the Closing Date (except for changes concurred
in by the Company's independent public accountants).
"Holders' Representative" means Joseph T. Aveni or such other individual
designated in writing (by notice to the Company) as the Holders' Representative
from time to time by Holders owning a majority of the Registerable Shares.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Piggyback Registration" has the meaning set forth in Section 2.
"Registerable Securities" means (i) all Shares, and (ii) all Common Stock
issued as a dividend or other distribution to the Holder with respect to, or in
exchange for, or in replacement of, any of the Shares held by the Holder,
including any other capital stock or other security issued by the Company in a
reclassification of the Common Stock of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) after the date of this
Agreement. As to any particular Registerable Securities, once issued such
Registerable Securities shall cease to be Registerable Securities when (i) a
registration statement with respect to the sale of such Registerable Securities
shall become effective under the Securities Act and such Registerable Securities
shall have been disposed of in accordance with such registration statement, (ii)
such Registerable Securities shall have been sold to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (iii) new
certificates for such Registerable Securities not bearing a legend restricting
further transfer shall have been delivered by the Company and subsequent
disposition of them shall not require registration or qualification for them
under the Securities Act or any similar state law then in force in the State of
Delaware or such other state in which the Company is domiciled, or (iv) such
Registerable Securities shall have ceased to be outstanding. Notwithstanding the
above, "Registrable Securities" shall not mean or include any securities
acquired by Holder in the public market or through any other source or
intermediary.
"Registration", "register", "registered" means a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act and the declaration or ordering of the effectiveness of such registration
statement.
"Registration Expenses" means any and all expenses incident to the
registration (including maintenance of the effectiveness of any registration, as
required under this Agreement) of the Registerable Securities pursuant to this
Agreement, including, without limitation, (a) all registration and filing fees
required by or payable to the Commission, any stock exchange or the National
Association of Securities Dealers, Inc., (b) all fees and expenses to comply
with state securities or blue sky laws (including reasonable fees and
disbursements of counsel for the underwriters, if any, in connection with blue
sky qualifications), (c) all printing, messenger and delivery expenses, (d) all
fees and disbursements of counsel for the Company and the Company's independent
public accountants, including the expenses of any special audits and/or "cold
comfort" or other accountants' letters required by or incident to such
registration, (e) fees and disbursements of underwriters imposed on the Company
by the underwriting agreements to which the Company is a party and the
reasonable fees and expenses of any special experts retained in connection with
the requested registration, and (f) the reasonable fees (not to exceed $2,500)
of one counsel for the Holders in connection with each such registration
retained by the Holders of a majority of the Registerable Securities being
registered. Notwithstanding the above, "Registration Expenses" does not mean or
include, and the Company shall not be liable under any circumstances for, the
following:
any expenses in connection with any amendment or supplement to the
Registration Statement or prospectus filed more than 180 days after the
effective date of such Registration Statement because any Holder of Registrable
Securities has not effected the disposition of the securities requested to be
registered. (Holder acknowledges that the Company shall have no obligation to
Holder to file any such amendment or supplement regardless of the obligation or
readiness of Holder to pay all expenses incurred in connection therewith.); or
any discounts, or commissions to any underwriter with respect to the
securities sold by a Holder of Registrable Securities.
"Resale Period Commencement" means the second anniversary of the Closing
Date.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar or
successor provision at any time in force.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Shares" means the shares of Common Stock issued to Holders as partial
consideration for the sale to Insignia RO, Inc., a subsidiary of the Company, by
the Holders of all their shares in Realty One, Inc. pursuant to the Purchase
Agreement and any other stock of the Company into which such Shares may
thereafter be changed or which may be issued to the holders of shares of Common
Stock upon any reclassification thereof.
"Subsidiary" of any Person means any corporation or other entity of which
at least a majority of the securities or other ownership interests having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by such Person.
All terms not defined in this Section 1 shall have the same meaning and
definition as in the Purchase Agreement.
Piggyback Registration.
Notice Of Registration. Subject to the provisions of Section 9(b) of this
Agreement, if the Company, at any time following the earlier of the death of J.
Aveni or the Resale Period Commencement and terminating on the date on which all
the Registerable Shares of all the Holders first become eligible to be sold in a
single transaction under Rule 144, proposes to register any Common Stock under
the Securities Act (other than pursuant to a registration statement on Form S-4
or S-8 or any successor form of securities to be offered in a transaction of the
type referred to in Rule 145 under the Securities Act or to employees of the
Company pursuant to any employee benefit plan, respectively) for its own
account, the Company will each such time promptly, but not less than thirty (30)
days prior to the filing date of such a registration statement (unless the
Company has filed a registration statement within thirty (30) days prior to the
date hereof, in which event, the Company will provide such notice on the date
hereof), give written notice to the Holder of its intention to effect that
registration and of the rights of the Holder under this Agreement to participate
therein ("Piggyback Registration"), which notice shall include a list of
jurisdictions in which the Company intends to qualify such securities under
applicable state securities laws or blue sky laws and the estimated filing date
for the registration statement. Upon the written request of one or more Holders,
if holding at least Fifty Thousand (50,000) shares of Registerable Securities,
made within ten (10) days after receipt of any such notice (which request shall
specify the number and class of Registerable Securities intended to be disposed
of by such Holder(s)), the Company will include in the Piggyback Registration
(and any related qualification under applicable state securities laws or blue
sky laws) all Registerable Securities which the Company has been so requested to
register; provided, however, that the Company shall not be required to include
any such Registerable Securities unless the Holder(s) shall request the
registration of a minimum of 25,000 shares of such Registerable Securities. The
Company shall be entitled, in its sole and absolute discretion, to terminate any
proposed registration initiated by it, to withdraw the registration statement
related to any such registration and to terminate any offering involved in such
terminated registration without the consent of the Holder. Such Holder shall be
permitted to withdraw all or part of such securities from a Piggyback
Registration at any time prior to the declaration of the effectiveness of such
registration statement by the Commission; provided, however, such Holder shall
reimburse the Company for any Registration Expenses incurred in connection with
or arising out of such Registerable Securities being withdrawn. For purposes of
this Section 2(a), in the event the Company changes the number of shares of
Common Stock issued and outstanding as a result of a stock split, stock
dividend, recapitalization, reorganization or any other transaction in which any
security of the Company or any other entity or cash is issued or paid in respect
of the outstanding shares of the Common Stock, the numbers 50,000 and 25,000
shall be proportionately adjusted.
Underwriting. If the registration for which the Company gives written
notice under Section 2(a) above is for a registered primary public offering
involving an underwriting, the Company shall so advise the Holder as part of
such written notice. All holders proposing to distribute their securities
through such underwriting (together with the Company and other holders, if any,
of securities of the Company participating therein) shall enter into an
underwriting agreement in customary form with the representative of the
underwriter(s) selected by the Company. After a registration statement covering
the securities to be sold in connection with such underwritten Piggyback
Registration has been declared effective by the Commission, such securities
shall be sold in accordance with the method of distribution described therein.
Cut Backs. If the managing underwriter for a Piggyback Registration advises
the Company that, in its opinion, the number of securities of a class sought to
be included in such registration exceeds the maximum number (the "Piggyback
Maximum Number") of securities of such class which can be sold in an orderly
manner in such offering within a price range reasonably acceptable to the
Company, the Company shall be entitled to reduce the aggregate number of
securities included in the registration based on requests by the holders of
Registerable Securities and like securities to an aggregate number equal to the
Piggyback Maximum Number, with participation in the offering being allocated (i)
first, among all holders for whom the Company is making a required demand
registration, if any, (ii) second, for the account of the Company; (iii) third,
pro rata among all holders requesting piggyback registration of such securities
(based upon the number of securities sought to be registered by each such
Holder) that either have been granted registration rights by the Company with
priority over the holders of certain other registration rights or have been
granted registration rights that are not subject to any "cut backs," and (iv)
fourth, pro rata among all other holders of Registerable Securities with
piggyback registration rights and with respect to whom the Company has consented
to register securities (based upon the number of securities sought to be
registered by each such Holder); provided, however, that, notwithstanding the
foregoing, the Company shall have first priority in any public offering of its
securities initiated by the Company and the participation of others otherwise
shall be in the order and based on the allocation set forth above.
Registration Procedures. If and whenever the Company is required by this
Agreement to notify holders of Registerable Securities of a proposed
registration of securities under the Securities Act, then, unless such offering
is terminated by the Company, the Company will:
with such information promptly and timely furnished by Holder regarding the
securities held by Holder and the intended method of disposition thereof as the
Company shall reasonably request and as shall be required in connection with the
action to be taken by the Company, the Company shall prepare and file with the
Commission a registration statement with respect to such securities and use
reasonable efforts to cause such registration statement to become and remain
effective until such securities have all been sold in accordance with the
intended methods of disposition disclosed in the registration statement;
furnish to each seller of securities and each underwriter, if any, of the
securities being sold by such seller such number of copies of such registration
statement and of each amendment and supplement therein, such number of copies of
the prospectus, including a preliminary prospectus and summary prospectus, and
such other documents, as such seller or underwriter may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such seller, including, prior to filing, drafts thereof;
use reasonable efforts to register or qualify the securities covered by
such registration statement under such other securities or blue sky laws of such
jurisdictions in the United States as a seller or underwriter shall reasonably
request, and do such other acts and things as may be necessary or advisable to
enable such seller and underwriter to consummate the public sale or other
disposition in such jurisdictions of the securities owned by such seller, except
that the Company shall not for any such purpose be required to execute or file
any general consent to service of process or be obligated to qualify to do
business under the laws of any jurisdiction where it has not previously done so;
notify each seller of any securities covered by such registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the Company's becoming aware that the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such seller promptly prepare and furnish to such seller a reasonable
number of copies of a prospectus supplemented or amended so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
otherwise to comply with all applicable rules and regulations of the
Commission;
use reasonable best efforts to list such securities on any securities
exchange on which the Common Stock of the Company is then listed, if the listing
of such securities is then permitted under the rules of such exchange;
provide a transfer agent and registrar for all the securities covered by
such registration statement not later than the effective date of such
registration statement;
enter into such underwriting, indemnity or similar agreements with the
underwriters in customary form and take such other actions as may be reasonably
necessary in order to expedite or facilitate the disposition of such securities;
and
permit any seller of the Registerable Securities included in such
registration statement to reasonably participate in the preparation of such
registration statement and to insert in such registration statement such
material in writing which in the reasonable judgment of such seller (which
judgment shall be reasonably concurred with by the Company) should be included
in such registration statement, including information regarding the securities
owned by such seller and the intended method of disposition;
(j) notify counsel for the Holders of Registerable Shares included in such
Piggyback Registration promptly and confirm the notice in writing when such
registration statement or any post-effective amendment to such registration
statement, shall have become effective, or any supplement to the prospectus or
any amendment prospectus shall have been filed.
Indemnification.
Indemnification by the Company. To the extent permitted by applicable law,
the Company will indemnify each Holder and such Holder's Affiliates
("Indemnified Person"), with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, against all claims,
losses, damages, costs, expenses and liabilities whatsoever (or actions in
respect thereof) arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other similar document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, or (ii) any violation by the Company
of the Securities Act or any state securities law or of any rule or regulation
promulgated under the Securities Act or any state securities law or any common
law or any other law applicable to the Company in connection with any such
registration, qualification or compliance, and will reimburse each Indemnified
Person, for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action unless such action arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by any Holder and stated to be specifically for use
therein or furnished in writing by any Holder to the Company in response to a
request by the Company stating specifically that such information will be used
by the Company therein. It is expressly acknowledged that the Company shall not
indemnify a Holder or a Holder's Affiliates, if such Holder, or its Affiliates
made an untrue statement or failed to state a material fact to the Company and
if the use of such information by the Company in connection with its
registration statement causes the claim, loss, damages, cost, expense or
liability for which indemnification is being sought. Notwithstanding the
foregoing, the liability of the Company shall not exceed an amount equal to the
net proceeds realized by each such Holder of Registerable Shares sold as
contemplated herein.
Indemnification by the Holder. To the extent permitted by applicable law,
each Holder will, if Registerable Securities held by or issuable to such Holder
are included in the securities to which such registration, qualification or
compliance is being effected, indemnify the Company, each of the directors and
officers of the Company, each Affiliate of the Company, each of the directors
and officers of each Affiliate of the Company, and each underwriter, if any, of
the Company's securities covered by such registration statement, and each person
who controls the Company within the meaning of the Securities Act against all
claims, losses, damages, costs, expenses and liabilities whatsoever (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other similar document (including
any related registration statement, notification or the like) incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and will reimburse the Company, such
directors, officers, persons or underwriters for any legal or other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, cost, expense, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in strict conformity with written information furnished to the Company by an
instrument duly executed by such Holder and stated to be specifically for use
therein or furnished by the Holder to the Company in response to a request by
the Company stating specifically that such information will be used by the
Company therein. Notwithstanding the foregoing, the liability of any such Holder
shall not exceed an amount equal to the net proceeds realized by each such
Holder of Registerable Shares sold as contemplated herein.
Indemnification Mechanics. Each party entitled to indemnification under
this Section 4 (the "Indemnified Party") shall give notice to the party or
parties required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld). The failure of any Indemnified Party to give
notice as provided herein shall relieve the Indemnifying Party of its
obligations under this Agreement only to the extent that such failure to give
notice shall materially adversely prejudice the Indemnifying Party in the
defense of any such claim or any such litigation. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. If any such Indemnified Party shall have
been advised by counsel chosen by it that there may be one or more legal
defenses available to such Indemnified Party that are different from or
additional to those available to the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party and will reimburse such Indemnified Party and any person
controlling such Indemnified Party for the reasonable fees and expenses of any
counsel retained by the Indemnified Party, it being understood that the
Indemnifying Party shall not, in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for such Indemnified Party
or controlling person, which firm shall be designated in writing by the
Indemnified Party to the Indemnifying Party.
Contribution. If the indemnification provided for in this Section 4 is
unavailable to an Indemnified Party (other than by reason of any exception
provided in Section 4(a) or 4(b) hereof) in respect of any losses, claims,
damages, costs, expenses or liabilities for which such Indemnified Party is
entitled to be indemnified hereunder, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages,
costs, expenses or liabilities in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions which resulted in such losses, claims, damages, costs, expenses
or liabilities, as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of losses, claims, damages, costs, expenses or liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Section 4(c), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 4(d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in this Section 4(d). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who is not guilty of such
fraudulent misrepresentation. If indemnification is available under this Section
4, the indemnifying parties shall indemnify each indemnified party to the full
extent provided for in this Section 4 without regard to the relative fault of
such Indemnifying Party or Indemnified Party or any other equitable
consideration provided for in this Section 4(d).
Registration Expenses. The Company shall pay all Registration Expenses in
connection with any Piggyback Registration requested by Holder pursuant to
Section 2.
Information Rights. Holder, if included in any Piggyback Registration,
shall furnish to the Company such written information regarding Holder as the
Company may request in writing and as shall be required in connection with any
registration, qualification, or compliance referred to in this Agreement.
8. Rule 144 Covenants. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of
restricted securities to the public without registration, the Company agrees to:
a. Make and keep available public information regarding the Company, as
those terms are understood and defined in Rule 144 under the Securities Act;
b. File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
c. Furnish to the Holder, as long as a Holder owns any Registrable
Securities, forthwith upon written request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company, and (iii) such other reports and documents so
filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
9. Sale Restrictions.
(a) Sales During Registration Periods.
Holder shall not sell any Common Stock of the Company under Rule 144 or
otherwise exempt from registration during the period beginning on the earlier
of:
(i) thirty (30) prior to the date any registration statement is filed with
the Commission by the Company (provided that the Company provides to Holder
written notice of the Company's good faith intention to file a registration
statement on the date specified in such notice, all of which information Holder
agrees to maintain in strict confidence until such registration shall be
declared effective by the Commission); or
(ii) the date of Holder's receipt of written notice from the Company of the
Company's good faith intention to file with the Commission within 30 days
following such notice a registration statement on the date specified in such
notice as the proposed filing date, all of which information Holder agrees to
maintain in strict confidence until such registration shall be declared
effective by the Commission; or
(iii) the date of Holder's receipt of written notice from the Company that
the Company has filed a registration statement with the Commission on the date
specified in such notice as the filing date;
and ending on the earlier of (i) ninety (90) days after the effective date
of such registration, or three hundred (300) days after the date of filing if
such registration has not become effective by that time, or (ii) the date when
any directors or executive officers of the Company sell Common Stock under Rule
144 or otherwise exempt from registration.
(b) Holding Period
Notwithstanding any other provision of this Agreement seemingly to the
contrary, without the consent of the Company (which may be withheld in its sole
discretion), none of the Shares may be sold, transferred, conveyed or assigned
until the earlier of: (i) the death of J. Aveni; or (ii) the Resale Period
Commencement. During the period between the Resale Period Commencement and the
third anniversary of the Closing Date, the Holders collectively may sell,
transfer, convey or assign up to one-half of the Shares. After the third
anniversary of the Closing Date, the Holders may sell, transfer, convey or
assign all the Shares. All the certificates evidencing the Shares shall bear a
legend setting forth the restriction contained in this Section 9(b). Each Holder
acknowledges that any sales, transfers, conveyances or assignments of the Shares
permitted by this Section 9(b) remain subject to compliance with the Securities
Act, including Rule 144, if applicable.
10. Notices. All notices and other communication provided for hereunder
shall be in writing and shall be sent by telex, telecopier or hand delivery: (a)
if to the Company, to:
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Attn: John K. Lines, Secretary & General Counsel
Tel: (803) 239-1000
Fax: (803) 239-1096
with copies to:
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Attn: Chief Financial Officer
Tel: (803) 239-1000
Fax: (803) 239-1096
Farris, Warfield & Kanaday, PLC
SunTrust Center, Suite 1900
424 Church Street
Nashville, Tennessee 37219
Attention: B. Riney Green, Esq.
Tel: (615) 544-5200
Fax: (615) 726-3185
and (b) if to Holder of the Registerable Securities, to the address of
Holder as shown in the stock record books of the Company, or to such other
address as any of the above shall have designated in writing to the Company,
with a copy to:
McDonald, Hopkins, Burke & Haber Co., L.P.A.
2100 Bank One Center
600 Superior Avenue, E.
Cleveland, OH 44114
Telephone: (216) 348-5408
Facsimile: (216) 348-5474
Attention: Brian M. O'Neill
All such notice and communication shall be deemed to have been given or
made (a) when delivered by hand, (b) when telexed, answer-back received, or (c)
when telecopied, receipt acknowledged.
11. Descriptive Headings. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect the interpretation or
construction of this Agreement.
12. Severability. If for any reason any provision of this Agreement shall
be held invalid or unenforceable in whole or in part in any jurisdiction, such
provisions shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
13. Amendments, Etc. No amendment or waiver of any provision of this
Agreement shall be effective unless the same shall be in writing and signed by
each of the parties to this Agreement. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose given. No
failure on the part of any party to this Agreement to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof or preclude
any other or further exercise thereof or the exercise of any other right.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute one and the same
instrument.
15. Assignment and Consolidation or Merger.
Assignment. This Agreement may be assigned, transferred or otherwise
conveyed by Holder; provided, however, in the event Holder assigns, transfers or
otherwise conveys his interest in this Agreement, the assignee, transferee or
recipient of said interest shall be subject to all restrictions and requirements
hereof. Any attempted assignment, transfer or conveyance in violation of the
provisions of this Agreement shall be void. The exercise of rights pursuant to
this Agreement is limited to the Holder hereof and those who obtained any
purported rights hereunder in compliance with all assignment, transfer or
conveyance restrictions contained in this Agreement. This Agreement shall be
binding upon and inure to the benefit of the respective successors and permitted
assigns of the Company and the Holder.
Merger or Consolidation. In the case of any consolidation or merger of the
Company with or into another corporation, the consolidation of the Company with
or the merger of the Company with or into any other person, or in the event of
the sale, lease or other transfer of all or substantially all of the assets of
the Company to any other person, then in each case the rights granted to Holder
by this Agreement shall survive such consolidation, merger, sale, lease or other
transfer and shall thereafter be enforce-able against the entity succeeding as
to the rights and obligations of Company hereunder.
16. Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Company and the Holder contained
herein or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement.
17. Attorneys' Fees. If any action or proceeding is brought to enforce the
terms of the Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees and costs.
18. Governing Law. This Agreement shall be governed by, and interpreted and
construed in accordance with, the laws of the State of Delaware. Venue for any
and all disputes arising out of or in connection with this Agreement shall be
exclusively in the federal and state courts in the State of Delaware. The
parties hereto consent and submit to the jurisdiction of such courts and waive
any objection to venue laid therein. Process in any action or proceeding
referred to in this Agreement may be served on any party anywhere in the world.
19. Waiver of Jury Trial. THE PARTIES WAIVE THE RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO,
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT,
INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT.
20. Time of the Essence. Time is of the essence in performing and
interpreting this Agreement.
21. Further Assurances. The Company and the Holder hereby agree promptly to
execute at the other's reasonable request after the date hereof any documents or
materials related to the transactions contemplated by this Agreement.
22. Specific Performance. Each of the parties shall be entitled to specific
performance in the event of a breach by the other party of their respective
obligations hereunder. Such remedy shall be in addition to, but shall not
replace, any other remedies which might be available under this Agreement, at
law or in equity, including without limitation, actions for attorney's fees.
23. Representations of Company. The Company represents and warrants to
Holder as follows:
(a) Corporate Organization and Good Standing. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, and is duly qualified and in good standing in all other
states where the nature of its business or operations or the ownership of its
property requires such qualification.
(b) Corporate Approval. The Company has full corporate power and authority
to execute and deliver this Agreement and all other documents and agreements to
be executed and delivered by it hereunder ("Transaction Documents") and to
consummate the transactions contemplated hereby. The board of directors of the
Company has duly and validly approved the execution, delivery, and performance
of this Agreement and the transactions contemplated herein. No other corporate
or legal proceedings on the part of the Company are necessary to approve and
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby. This Agreement constitutes, and the other
Transaction Documents, when executed, will constitute, the legal, valid, and
binding obligation and agreement of the Company enforceable against the Company
in accordance with its terms, subject only to the general law of creditors'
rights.
24. Termination. This Agreement shall terminate ten days after the third
anniversary of the Closing Date.
[REMAINER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
INSIGNIA FINANCIAL GROUP, INC.,
a Delaware corporation
/s/ Frank M. Garrison
---------------------
FRANK M. GARRISON,
EXECUTIVE MANAGING DIRECTOR
/s/ Joseph T. Aveni
-------------------
JOSEPH T. AVENI
JOSEPH T. AVENI, TRUSTEE OF THE
JOSEPH T. AVENI DECLARATION OF TRUST
DATED APRIL 25, 1988, AS AMENDED ON
AUGUST 10, 1995
/s/ Joseph T. Aveni
-------------------
JOSEPH T. AVENI, TRUSTEE
VINCENT T. AVENI, TRUSTEE OF THE
JOSEPH T. AVENI DYNASTY TRUST DATED
JULY 12, 1994
/s/ Vincent T. Aveni
--------------------
VINCENT T. AVENI, TRUSTEE
VINCENT T. AVENI, TRUSTEE OF THE
JOSEPH T. AVENI DYNASTY TRUST DATED
JULY 12, 1994 FBO KRISTEN AVENI
/s/ Vincent T. Aveni
--------------------
VINCENT T. AVENI, TRUSTEE
VINCENT T. AVENI, TRUSTEE OF THE
JOSEPH T. AVENI DYNASTY TRUST DATED
JULY 12, 1994 FBO KERRI AVENI
/s/ Vincent T. Aveni
--------------------
VINCENT T. AVENI, TRUSTEE
VINCENT T. AVENI, TRUSTEE OF THE
JOSEPH T. AVENI DYNASTY TRUST DATED
JULY 12, 1994 FBO BENJAMIN AVENI
/s/ Vincent T. Aveni
--------------------
VINCENT T. AVENI, TRUSTEE
Exhibit 99.1
FOR IMMEDIATE RELEASE FOR INFORMATION CONTACT:
James A. Aston
Office of the Chairman
Insignia Financial Group, Inc.
(864) 239-1661
Neil J. Kreisel
President
Insignia Residential Group, L.P.
(212) 370-9200
or
Anthony Ciepiel
Chief Operating Officer
Realty One
(216) 328-2657
INSIGNIA FINANCIAL ENTERS SINGLE FAMILY BROKERAGE
ACQUIRES TENTH LARGEST RESIDENTIAL FIRM IN U.S.
Greenville, SC, September 30 - Insignia Financial Group, Inc. (NYSE:IFS)
today announced it has agreed to acquire Realty One and its affiliated
companies, including First Ohio Mortgage Company, for approximately $39 million,
with approximately $35 million paid in cash and the balance in IFS stock, valued
at $20 per share for the transaction. According to the company, pricing of the
acquisition is within Insignia's normal investment parameters.
Realty One, a full-service residential broker headquartered in Cleveland,
is the tenth largest residential real estate brokerage firm in the nation and
Ohio's largest. With more than 1,400 sales associates and 400 support staff
located in more than 45 offices throughout northern Ohio, it represents more
than 90 residential builders and handles more than 20,000 transactions valued at
more than $2.5 billion annually. First Ohio Mortgage (FOMC) originates single
family home mortgages for both Realty One clients and third parties.
Realty One to serve as Insignia platform for national consolidation
"With Insignia's residential real estate heritage as a preeminent manager,
our entry into the single family home brokerage business was inevitable," said
Andrew L. Farkas, chairman and chief executive officer of Insignia Financial
Group. "We built on that experience in 1995 when we purchased two preeminent New
York City managers of cooperative and condominium apartments, with the long term
view of moving into the residential brokerage business in a market where we
could access a concentrated inventory. Since then, while better understanding
that business, we sought to identify a specific niche and secure the best
platform to launch our entry in this industry, and gain a competitive advantage.
With Realty One, we believe we can now substantially participate in what will
ultimately be significant consolidation within the home brokerage industry."
"This plan and acquisition precisely fits our core corporate strategy:
identify highly fragmented real estate industry segments; acquire strong
regional players; increase margins through improved management and systems;
then, over time, consolidate the market, gaining industry leadership and
generating significant returns on investment," Mr. Farkas added.
More than 50,000 residential brokerages in U.S.
The residential brokerage industry is comprised of more than 50,000
companies throughout the United States. These consist of independent brokerages
as well as franchise operations. No single independent broker commands more than
one percent of the national market, and no national franchise company maintains
more than an 11 percent market share, with only three franchise companies
holding more than three percent.
"Our strategic analysis demonstrates several key facts concerning the
residential brokerage industry. First, there are fundamental differences in
operating philosophies between franchises and independent operators. Second, in
virtually every US market, two or three brokers control the market by a wide
margin; and third, the only option available now to major independents who wish
to participate in the industry's consolidation is franchise operations,"
continued Mr. Farkas.
Insignia offers alternative
"While the franchise option can be attractive to some operators, in a
significant number of instances we have found at least one of the major area
brokers is fundamentally opposed to it, but is highly motivated to participate
in the industry consolidation. Because these operators are unlikely to ever join
a franchise system, offering a consolidation opportunity with a national,
independent company that does not operate in a franchise format, but as a
single, seamless unit, does not compete directly with the franchise format
offered by HFS and others. Insignia simply offers an alternative," Mr. Farkas
stated.
Realty One dominates region with unique strategies, tactics
"Because of its strategic approach coupled with its technological,
marketing and cultural tactics, Realty One possesses a distinct competitive
advantage that makes it a superior platform from which Insignia can launch this
strategy," explained Mr. Neil J. Kreisel, president of Insignia Residential
Group. "The combination of its management and systems, including its lead
generations system has actually proven to increase margins each year for the
last three consecutive years, reversing a trend that is pervasive in the
residential brokerage business," he concluded.
Realty One is a leading innovator in developing technology-based marketing
and lead-generation systems that provide more sales opportunities to its agents.
Its proprietary CARS (Customer Acquisition and Retention System) identifies
potential homebuyers and defines their "homebuying readiness." The company
integrates this information into a marketing program that goes beyond
traditional advertising and marketing methods to include a proprietary home
catalog, outbound and inbound telemarketing, educational seminars, websites and
an "800" hotline. In addition to the CARS technology, Realty One's innovative
marketing system provides a competitive advantage for both the consumer and the
agent.
"We've been consolidating our market for several years now and continue to
look for growth," explained Joseph T. Aveni, chairman and chief executive
officer of Realty One. "In fact, over the last 15 years Realty One has acquired
nearly 60 companies in our region. It was clear that the franchise alternative,
while productive for some operators, did not meet the needs of our business
model. In order to play nationally, though, we knew that we had to ally
ourselves with a major, financially able, national player. Insignia was
identified as an obvious lead candidate very early on. We, in fact, solicited
Insignia's interest, and are extremely excited by the prospects. We intend to
move aggressively now to become the independent alternative, and create a
national organization throughout the United States."
Realty One will retain its brand name and current management. Joseph Aveni
will continue as chairman and chief executive officer of Realty One, through at
least 2002. He will report to Mr. Kreisel. Vincent Aveni, chairman emeritus and
founder of the company will continue in that role. Anthony Cepiel, who has been
promoted to president of Realty One, will operate the day-to-day affairs of the
company.
Realty One acquisition typifies Insignia strategy
Insignia has undertaken similar strategies in the past. In June 1996 it
acquired the Edward S. Gordon Company (ESG), now called Insignia/ESG. At that
time Insignia indicated that a key part of its strategy was to acquire the best
company in the U.S. in a given business segment, and build a national
infrastructure and network around it, using the acquired firm's market
superiority as a model. Since the acquisition of ESG, Insignia has acquired
Rostenberg-Doern in Stamford, CT.; Frain Camins & Swartchild in Chicago; Forum
Properties in Portland, OR; and HMB Property Services in Denver. It has also
opened a 28 person Insignia/ESG office in Phoenix, AZ.
According to Mr. Farkas, Insignia anticipates utilizing the same basic
model in its single family home brokerage strategy.
First Ohio Mortgage Company contributes to integration
The inclusion of FOMC, Mr. Farkas added, will give Insignia the opportunity
to originate mortgage loans for its customers, and is consistent with Insignia's
objectives of full integration.
The total value of existing single-family homes sold in 1996 was $594
billion, based on National Association of Realtors figures showing that 4.08
million existing homes were sold at an average price of $145,500. With brokers
typically receiving a six-percent commission, annual industry revenues for 1996
are estimated at $35.62 billion. These figures do not include the value of new
home sales. Over the past two decades, the Midwest region, according to Realty
One, has been one of the most stable home sale regions, in both price and
volume.
Certain items in this press release may constitute forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995 and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such forward-looking
statements speak only as of the date of this press release. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any, such statement is
based.
Insignia Financial Group, Inc. is a fully integrated real estate services
company headquartered in Greenville, SC. Insignia is the largest manager of
multi-family residential properties in the United States and is also among the
largest managers of commercial properties. Insignia was founded in 1990 and has
since grown to provide property and/or asset management services for
approximately 2,600 properties in more than 500 cities in 48 states. Its
portfolio includes 285,000 residential units (including cooperative and
condominium units) and approximately 150 million square feet of retail,
commercial and industrial space.
# # #
Exhibit 99.2
FOR IMMEDIATE RELEASE Contact:
Insignia Financial Group, Inc.
James Aston - (864) 239-1661
(Investors and Analysts)
Insignia Residential Group, L.P.
Neil Kreisel - (212) 370-9200
INSIGNIA FINANCIAL CLOSES ON ACQUISITION
OF TENTH LARGEST RESIDENTIAL REALTY FIRM IN U.S.
Realty One Brokerage to Serve as Insignia Platform for National Consolidation
GREENVILLE, SC, October 13, 1997 - Insignia Financial Group, Inc.
(NYSE:IFS) today announced it has completed its acquisition of Realty One and
its affiliated companies, including First Ohio Mortgage Company, for
approximately $39 million, with approximately $35 million paid in cash and the
balance in IFS stock, valued at $20 per share for the transaction. The agreement
to acquire Realty One, a full-service residential broker headquartered in
Cleveland, was announced on September 30.
Realty One, a full-service residential broker headquartered in Cleveland,
is the tenth largest residential real estate brokerage firm in the nation and
Ohio's largest. With more than 1,400 sales associates and 400 support staff
located in more than 45 offices throughout northern Ohio, Realty One represents
more than 90 residential builders and handles more than 20,000 transactions
valued at more than $2.5 billion annually. First Ohio Mortgage (FOMC) originates
single family home mortgages for both Realty One clients and third parties.
"This acquisition precisely fits our core corporate strategy: identify
highly fragmented real estate industry segments; acquire strong regional
players; increase margins through improved management and systems; then, over
time, consolidate the market, gaining industry leadership and generating
significant returns on investment," said Andrew L. Farkas, Chairman, President
and Chief Executive Officer of Insignia Financial Group.
"With the purchase of Realty One, we have secured the best platform to
launch our entry in this industry and gain a competitive advantage," Mr. Farkas
added. "We believe we can now substantially participate in what will ultimately
be significant consolidation within the home brokerage industry. With Insignia's
heritage as a preeminent manager of multi-family residential real estate, our
entry into the single family home brokerage business was inevitable."
Certain items in this press release may constitute forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995 and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such forward-looking
statements speak only as of the date of this press release. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any, such statement is
based.
Realty One is a leading innovator in developing technology-based marketing
and lead-generation systems that provide more sales opportunities to its agents.
Its proprietary CARS (Customer Acquisition and Retention System) identifies
potential homebuyers and defines their "homebuying readiness." The company
integrates this information into a marketing program that goes beyond
traditional advertising and marketing methods to include a proprietary home
catalog, outbound and inbound telemarketing, educational seminars, websites and
an "800" hotline. In addition to the CARS technology, Realty One's innovative
marketing system provides a competitive advantage for both the consumer and the
agent.
Insignia Financial Group, Inc. is a fully integrated real estate services
company headquartered in Greenville, SC. Insignia is the largest manager of
multi-family residential properties in the United States and is also among the
largest managers of commercial properties. Insignia was founded in 1990 and has
since grown to provide property and/or asset management services for
approximately 2,600 properties in more than 500 cities in 48 states. Its
portfolio includes 285,000 residential units (including cooperative and
condominium units) and approximately 150 million square feet of retail,
commercial and industrial space.
# # #
