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: April 1, 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
______________________________________
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Item 5. Other Events
On April 1, 1997, Insignia Commercial Group, Inc., a wholly owned affiliate of
Insignia Financial Group, Inc., successfully completed the acquisition of a
leading full-service commercial, retail and industrial real estate brokerage
firm in the Chicago area. Insignia Commercial Group entered into a purchase
agreement with Frain Camins & Swartchild, Inc. ("FC&S") on March 19 to acquire
the outstanding stock in the Company. The total consideration paid by Insignia
Commercial Group for the purchase of FC&S includes $3.5 million in cash paid at
closing and up to an additional $4.5 million in contingent payments to be paid
based on certain future revenues.
FC&S provides services for over 10 million sq. ft. of space in the Chicago
metropolitan area, and offers a full range of services, including property
management and leasing, tenant representation, industrial sales and leasing,
land acquisition and disposition, consulting and construction services. FC&S is
the third commercial acquisition of 1997 for Insignia and affiliates. In
aggregate these acquisitions, which include Stamford, CT based Rostenberg-Doern
Company, Inc., Denver based HMB Property Services, and FC&S, generated more than
$18 million in revenues for 1996 and will increase Insignia's commercial real
estate management portfolio by more than 12 million sq. ft.
Item 7. Financial Statement and Exhibits
(c) Exhibits
Exhibit No.
10.1 Stock Purchase Agreement dated as of March 19, 1997, by and among
Insignia Commercial Group, Inc. Insignia Financial Group, Inc.
Kirkland B. Armour, Scott J. Brandwein, Harvey B. Camins, James
L. Dieter, Lyan Homewood Fender, Ronald T. Frain, Jay Hinshaw,
Thomas E. Moxley, Robert B. Rosen, James H. Swartchild, Jr.,
David Tropp, Gregg F. Witt, Frain Camins & Swartchild,
Incorporated, FC&S Management Company and Construction Interiors,
Inc.
99.1 Press Release dated March 19, 1997
99.2 Press Release dated April 1, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ John K. Lines
John K. Lines
General Counsel
Date: April 17, 1997
STOCK PURCHASE AGREEMENT
by and among
Frain, Camins & Swartchild Incorporated
FC&S Management Company
Construction Interiors, Inc.
Insignia Financial Group, Inc.
Insignia Commercial Group, Inc.
Kirkland B. Armour
Scott J. Brandwein
Harvey B. Camins
James L. Dieter
Lynn Homewood Fender
Ronald T. Frain
Jay Hinshaw
Thomas E. Moxley
Robert B. Rosen
James H. Swartchild, Jr.
David Tropp
Gregg F. Witt
Dated as of March 19, 1997
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TABLE OF CONTENTS
Page
1. DEFINITIONS............................................................. 2
"1996 Balance Sheets"................................................... 2
"1996 Financial Statements"............................................. 2
"AAA"................................................................... 2
"Adjusted First Post-Closing Annual Period
Deficiency Amount".............................. 2
"Agency Leasing Services"............................................... 2
"Aggregate Illinois Revenues"........................................... 2
"Agreement"............................................................. 2
"Allocated Owners and Tenants".......................................... 2
"Applicable Contract"................................................... 2
"Arbitrator"--as defined in Section 2.7(b).............................. 2
"Base Commission"........................................................ 3
"Best Efforts"........................................................... 3
"Bonus Commission"...................................................... 3
"Breach"................................................................ 3
"Buyer"................................................................. 3
"Buyer's Advisors"...................................................... 3
"Buyer's Closing Certificate"........................................... 3
"Buyer's Closing Documents"............................................. 3
"Cash Amount"........................................................... 3
"CII"................................................................... 3
"CII-Stock"............................................................. 3
"Closing"............................................................... 3
"Closing Date".......................................................... 3
"Closing Date Balance Sheets"........................................... 3
"Closing Date Statement"................................................ 4
"Closing Net Book Value"................................................ 4
"Cohen and Sherman Contracts"........................................... 4
"Commercial Property Services".......................................... 4
"Consent"............................................................... 4
"Construction Services"................................................. 4
"Consulting Services"................................................... 4
"Contact"............................................................... 4
"Contemplated Transactions.............................................. 4
"Contingent Payment".................................................... 5
"Contingent Payment I".................................................. 5
"Contingent Payment II"................................................. 5
"Contingent Payment III"................................................ 5
"Continuing Liabilities"................................................ 5
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"Contract".............................................................. 5
"Contract Restricted Period"............................................ 5
"Controlling Sellers"................................................... 5
"Copyrights"............................................................ 5
"Damages"............................................................... 5
"Deferred Cash Amount".................................................. 5
"Designated Employees".................................................. 5
"Disputed Matters"...................................................... 5
"Effective Time"........................................................ 5
"Employee Designation Date"............................................. 5
"Employment Agreements"................................................. 5
"Encumbrance"........................................................... 5
"Environment"........................................................... 5
"Environmental, Health, and Safety Liabilities"......................... 6
"Environmental Law"..................................................... 6
"ERISA"................................................................. 7
"ERISA Affiliate"....................................................... 7
"Existing FCS Client"................................................... 7
"FCS Brokers"........................................................... 7
"FCS Closing Payables".................................................. 7
"FCS Closing Receivables"............................................... 8
"FCS Companies"......................................................... 8
"FCS Company"........................................................... 8
"FCS Receivables at Closing Amount"..................................... 8
"FCS Services Agreement"................................................ 8
"FCSC".................................................................. 8
"FCSC-Stock"............................................................ 8
"FCSI".................................................................. 8
"FCSI-Stock"............................................................ 9
"First Post-Closing Annual Period Deficiency Amount".................... 9
"First Post-Closing Annual Period"..................................... 9
"GAAP"................................................................. 9
"Governmental Authorization"........................................... 9
"Governmental Body".................................................... 9
"Hazardous Activity"................................................... 9
"Hazardous Materials".................................................. 9
"IFG".................................................................. 9
"IFG Control Affiliate"................................................ 10
"IFG Indemnified Persons".............................................. 10
"IFG Subsequent Acquiree".............................................. 10
"Illinois IFG Properties".............................................. 10
"Illinois Office"...................................................... 10
"Indemnified Person"................................................... 10
"Intellectual Property Assets"......................................... 10
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"Investment Sales Services"............................................ 10
"IRC".................................................................. 10
"IRS".................................................................. 10
"Knowledge"............................................................ 10
"Legal Requirement".................................................... 10
"Managed Properties"................................................... 11
"Marks"................................................................ 11
"Material Adverse Effect".............................................. 11
"Modification Notice".................................................. 11
"Net Proceeds of the FCS Closing Receivables".......................... 11
"Non-Controlling Sellers".............................................. 11
"Non-Designated Employees"............................................. 11
"Non-Illinois Office".................................................. 11
"Non-Transition Employees"............................................. 11
"Occupational Safety and Health Law"................................... 11
"Order"................................................................ 11
"Ordinary Business Practices".......................................... 11
"Ordinary Course of Business".......................................... 11
"Organizational Documents"............................................. 12
"Owned Assets"......................................................... 12
"PBGC"................................................................. 12
"Patents".............................................................. 12
"Pension Plan"......................................................... 12
"Person"............................................................... 12
"Plan or Plans"........................................................ 12
"Post-Closing Annual Period"........................................... 12
"Pre-Closing FCS Revenue".............................................. 12
"Pre-Closing IFG Subsequent Acquiree Revenue".......................... 12
"Pre-Effective Time Broker Bonus Amount"............................... 12
"Pre-Effective Time Employee Bonus Amount"............................. 12
"Proceeding"........................................................... 12
"Property" or "Properties"............................................. 12
"Property Interest" or "Property Interests"............................ 12
"Property Management Services"......................................... 12
"Proprietary Rights Agreement"......................................... 13
"Purchase Price"....................................................... 13
"Qualified Revenue".................................................... 13
"Related Person"....................................................... 13
"Release".............................................................. 14
"Remaining Big Six Accounting Firms"................................... 14
"Representative"....................................................... 14
"Savings Plan"......................................................... 14
"Second Post-Closing Annual Period".................................... 14
"Second Post-Closing Annual Period Deficiency Amount".................. 14
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"Securities Act"..................................................... 14
"Sellers"............................................................ 14
"Sellers' Closing Certificate"....................................... 14
"Sellers' Closing Documents"......................................... 14
"Sellers' Control Environmental Liability"........................... 14
"Sellers' Representative"............................................ 15
"Shared IFG Client".................................................. 15
"Stock".............................................................. 15
"Subsidiary"......................................................... 15
"Surplus Third Post-Closing Annual Period Qualified Revenue I"....... 15
"Surplus Third Post-Closing Annual Period Qualified Revenue II"...... 15
"Tax Return"......................................................... 15
"Tenant Representation".............................................. 15
"Third Post-Closing Annual Period"................................... 15
"Threat of Release".................................................. 15
"Threatened"......................................................... 15
"Trade Secrets"...................................................... 16
"Transition Employees"............................................... 16
"Total 1997 Bonus Commissions"....................................... 16
2. SALE AND TRANSFER OF STOCK; CLOSING; AGREEMENTS...................... 16
2.1 Stock....................................................... 16
2.2 Purchase Price.............................................. 16
2.3 Closing..................................................... 17
2.4 Closing Obligations......................................... 18
2.5 Contingent Payments......................................... 19
2.6. FCS Closing Receivables..................................... 27
2.7. Closing Date Statement Dispute Resolution................... 29
2.8 Termination of FCS Plans.................................... 29
2.9 Allocation of Purchase Price................................ 30
2.10 Non-Competition Obligations of the Controlling Sellers...... 30
2.11 Tax Covenants............................................... 34
2.12 Employment Agreements....................................... 36
2.13 License to Use Tradename.................................... 36
2.14 Sellers' Cooperation........................................ 37
2.15 Certain Bonus Payments. . . . . . ........................ . 37
2.16 Payments Related to Software............................... 38
2.17 Certain Employment Matters................ ............... 39
3. EPRESENTATIONS AND WARRANTIES OF CONTROLLING SELLERS................. 41
3.1 Organization and Good Standing.............. .............. 41
3.2 Authority; No Conflict........................ ............ 41
3.3 Capitalization.................................. .......... 42
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3.4 Financial Statements.............................. ........ 43
3.5 Books and Records................................... ...... 43
3.6 Title to Properties; Encumbrances..................... .... 43
3.7 Ownership of Assets; Condition and Sufficiency of Assets.... 44
3.8 Accounts Receivable......................................... 44
3.9 Accounts Payable......................................... . 45
3.10 No Undisclosed Liabilities.................................. 45
3.11 Taxes....................................................... 45
3.12 No Material Adverse Change.................................. 47
3.14 Compliance With Legal Requirements; Governmental Authorizations..48
3.15 Legal Proceedings; Orders...................................... 50
3.16 Absence of Certain Changes and Events.......................... 52
3.17 Contracts; No Defaults......................................... 53
3.18 Insurance...................................................... 56
3.19 Environmental Matters.......................................... 58
3.20 Employees...................................................... 59
3.21 Labor Relations; Compliance.................................... 60
3.22 Intellectual Property.......................................... 61
3.23 Certain Payments............................................... 62
3.24 FCS Services Agreements........................................ 62
3.25 Disclosure..................................................... 63
3.26 Relations with Related Persons................................. 63
3.27 Brokers or Finders............................................. 63
4. REPRESENTATIONS AND WARRANTIES OF BUYER................................. 63
4.1 Organization and Good Standing................................. 63
4.2 Authority; No Conflict......................................... 63
4.3 Investment Intent.............................................. 64
4.4 Certain Proceedings............................................ 65
4.5 Brokers or Finders............................................. 65
4.6 IFG Financial Statements....................................... 65
4. Tax..................................................................... 65
5. COVENANTS OF SELLERS AND THE FCS COMPANIES PRIOR TO
CLOSING DATE............................................................ 65
5.1 Required Approvals............................................. 65
5.2 Shareholder Approval........................................... 66
5.3 Current Information............................................ 66
5.4 [Intentionally Omitted]........................................ 66
5.5 Operations Prior to Closing Date............................... 66
5.6 Miscellaneous Agreements and Consents.......................... 67
5.7 Access and Investigation; Delivery.................... 68
5.8 Notification................................................... 69
5.9 No Negotiation................................................. 69
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6. COVENANTS OF BUYER PRIOR TO CLOSING DATE................................ 69
6.1 Approvals of Governmental Bodies............................... 69
6.2 Miscellaneous Agreements and Consents.......................... 70
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE..................... 70
7.1 Accuracy of Representations.................................... 70
7.2 Performance.................................................... 70
7.3 Consents....................................................... 71
7.4 Additional Documents........................................... 71
7.5 No Proceedings................................................. 71
7.6 No Claim Regarding Stock Ownership or Sale Proceeds... ........ 71
7.7 [Intentionally Omitted].................................... 71
7.8 Release of Liens
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE................ 72
8.1 Accuracy of Representations................................ 72
8.2 Buyer's Performance........................................ 72
8.3 Consents................................................... 72
8.4 Additional Documents....................................... 72
8.5 No Injunction.............................................. 73
8.6 Release of Guaranties...................................... 73
8.7 No Material Adverse Change................................. 73
9. TERMINATION......................................................... 74
9.1 Termination Events......................................... 74
9.2 Effect of Termination...................................... 74
10.INDEMNIFICATION; REMEDIES........................................... 74
10.1 Survival; Right to Indemnification Not Affected By Knowledge... 74
10.2 Indemnification and Payment of Damages by Controlling Sellers.. 75
10.3 Indemnification and Payment of Damages by Non-Controlling Sellers;
Limitations Thereon............................................ 77
10.4 Indemnification and Payment of Damages of Buyer and IFG........ 77
10.5 Indemnity Limitations--Controlling Sellers..................... 78
10.6 Indemnity Limitations--Buyer and IFG........................... 79
10.7 Effect of Insurance Proceeds Received...........................80
10.8 Procedure for Indemnification--Third Party Claims...............80
10.9 Procedure for Indemnification--Other Claims.....................81
11.GENERAL PROVISIONS................................................ 82
11.1 Expenses................................................. 82
11.2 Mandatory Arbitration.................................... 82
11.3 Confidentiality/Public Announcement...................... 83
11.4 Notices.................................................. 83
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11.5 Jurisdiction............................................. 85
11.6 Further Assurances....................................... 85
11.7 Waiver................................................... 86
11.8 Entire Agreement and Modification........................ 86
11.9 Stock Options............................................ 86
11.10 Assignments, Successors, And No Third-Party Rights........... 86
11.11 Severability................................................. 87
11.12 Section Headings; Construction............................... 87
11.13 [Intentionally Omitted]...................................... 87
11.14 Governing Law................................................ 87
11.15 Counterparts................................................. 87
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Stock Purchase Agreement
This Stock Purchase Agreement ("Agreement") is made and entered into as of
March 19, 1997, by and among Insignia Commercial Group, Inc., a Delaware
corporation ("Buyer"), Insignia Financial Group, Inc., a Delaware corporation
("IFG") and Kirkland B. Armour ("Armour"), Scott J. Brandwein ("Brandwein"),
Harvey B. Camins ("Camins"), James L. Dieter ("Dieter"), Lynn Homewood Fender
("Fender"), Ronald T. Frain ("Frain"), Jay Hinshaw ("Hinshaw"), Thomas E. Moxley
("Moxley"), Robert B. Rosen ("Rosen"), James H. Swartchild, Jr. ("Swartchild"),
David Tropp ("Tropp"), Gregg F. Witt ("Witt"), Frain, Camins & Swartchild
Incorporated, an Illinois corporation ("FCSI"), FC&S Management Company, an
Illinois corporation ("FCSC"), and Construction Interiors, Inc., a Delaware
corporation ("CII"). Armour, Brandwein, Camins, Dieter, Fender, Frain, Hinshaw,
Moxley, Rosen, Swartchild, Tropp and Witt are referred to collectively herein as
"Sellers." FCSI, FCSI and CII are referred to collectively herein as the "FCS
Companies."
RECITALS
The FCS Companies are engaged in the business of providing commercial
property services, including commercial property management, investment sales,
tenant representation, construction, and other consulting and brokerage
services.
Sellers own all of the shares of the capital stock of FCSI (the
"FCSI-Stock"), of FCSC (the "FCSC-Stock"), and of CII (the "CII-Stock"). The
FCSI-Stock, the FCSC-Stock and the CII-Stock are referred to collectively herein
as the "Stock".
Buyer is an affiliate of Insignia Financial Group, Inc., which through one
or more subsidiaries or affiliates operates a national real estate services
business, including property management, asset management, investment sales,
tenant representation, construction, mortgage banking and other consulting and
brokerage services.
Sellers desire to sell, and Buyer desires to purchase, the FCS Companies
for the consideration and on the terms set forth in this Agreement and thereby
to acquire and to integrate the FCS Companies into the Buyer's existing
operations as a major provider of commercial property services.
<PAGE>
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.
"AAA"--as defined in Section 2.7(b).
"Adjusted First Post-Closing Annual Period Deficiency Amount"--as defined
in Section 2.5.
"Agency Leasing Services"--the services provided in connection with the
marketing and leasing of space in a commercial building by an agent for the
owner of such commercial building, to the extent agreed upon by such agent and
such owner, for the fee agreed upon by such agent and such owner, and may
include one or more of the following services: advertisement of the building and
space available in such building; preparation and securing of advertising signs,
space plans, circular matter and other forms of advertising; response to
inquiries concerning the leasing of space in such building; negotiation of the
terms of lease agreements; execution, delivery and renewal of lease agreements
on behalf of the owner; engagement on behalf of the owner, as appropriate, the
services of real estate brokers and leasing managers or agents; maintenance of
such records and creation of such reports as are agreed by the agent and owner
to be useful or necessary in connection with the leasing of the building; and
collection and disbursement of funds, as they are made available by the owner,
as required to carry out the obligations of the agreement between the agent and
the owner.
"Aggregate Illinois Revenues"--as defined in Section 2.5(b).
"Agreement"--this Stock Purchase Agreement.
"Allocated Owners and Tenants"--as defined in Section 2.5(b).
"Applicable Contract"--any Contract, including any FCS Services Agreements,
presently in effect, (a) under which the FCS Companies have or may acquire any
rights, or (b) under which the FCS Companies have or may become subject to any
obligation or liability, or (c) by which the FCS Companies or any of the assets
owned or used by it is or
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may become bound, or (d) to which a Seller is a party that relates to or may
affect the business of, or any of the assets owned or used by, the FCS
Companies.
"Arbitrator"--as defined in Section 2.7(b).
"Base Commission"--for the purposes of calculating the Pre-Effective Time
Broker Bonus Amount, the commission paid to an FCS Broker based on the minimum
commission percentage used to calculate that FCS Broker's portion of the gross
commission for the 1997 calendar year.
"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 expeditiously as possible; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement and the Contemplated Transactions.
"Bonus Commission"--for the purposes of calculating the Pre-Effective Time
Broker Bonus Amount, the commission paid to an FCS Broker based on such FCS
Broker's achieving, for the 1997 calendar year, certain gross commission
threshold levels above such FCS Broker's Base Commission.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence, or circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
"Buyer's Advisors"--as defined in Section 5.7.
"Buyer's Closing Certificate"--as defined in Section 2.4(b).
"Buyer's Closing Documents"--as defined in Section 4.2.
"Cash Amount"--as defined in Section 2.2(a).
"CII"--Construction Interiors, Inc., a Delaware corporation.
"CII-Stock"--as defined in the Recitals of this Agreement.
<PAGE>
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing actually takes
place.
"Closing Date Balance Sheets"--as defined in Section 2.7(b).
"Closing Date Statement"--as defined in Section 2.6(a).
"Closing Net Book Value"--as defined in Section 2.7(c).
"Cohen and Sherman Contracts"--as defined in Section 2.5(b).
"Commercial Property Services"--Agency Leasing Services, Construction
Services, Consulting Services, Investment Sales Services, Property Management
Services, Tenant Representation Services and other similar related real estate
services, but not including development services.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Construction Services"--the services provided in connection with the
overseeing and/or managing the completion of tenant finish work and construction
of capital improvements with respect to a commercial building or property by an
agent for the owner of such commercial building and/or property, to the extent
agreed upon by such agent and such owner, for the fee agreed upon by such agent
and such owner, and may include one or more of the following services: the
engagement of subcontractors; acquisition of materials; the procuring of
licenses and permits; the keeping of records and accounts in respect of such
construction; the collection and disbursement of funds in connection with such
construction; with all other tasks, and such other tasks as are necessary or
useful in connection with such construction.
"Consulting Services"--consulting services provided in connection with
commercial real estate matters.
"Contact"--as defined in Section 2.10(c).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale by Sellers to Buyer and the purchase by Buyer from
Sellers of the Stock;
(b) the execution, delivery, and performance of the Employment
Agreements;
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(c) the performance by Buyer and Sellers of their respective covenants
and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Stock and exercise of
control over the FCS Companies.
(e) the performance (including performance by Persons who are not
parties hereto) or occurrence of the actions, transactions, events or
obligations necessary to satisfy the conditions set forth in Sections 7 and
8 hereof.
"Contingent Payment"--as defined in Section 2.5.
"Contingent Payment I"--as defined in Section 2.5.
"Contingent Payment II"--as defined in Section 2.5.
"Contingent Payment III"--as defined in Section 2.5.
"Continuing Liabilities"--as defined in Section 2.6.
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that
is legally binding.
"Contract Restricted Period"--as defined in Section 2.10(c).
"Controlling Sellers"--means Camins, Rosen, Frain, Brandwein, and
Deiter.
"Copyrights"-- as defined in Section 3.22(a)(iii).
"Damages"--as defined in Section 10.2.
"Deferred Cash Amount"--as defined in Section 2.2.
"Designated Employees"--as defined in Section 2.17(a).
"Disputed Matters"--as defined in Section 2.7(b).
"Effective Time"--12:01 a.m. of the first business day following the
Closing Date.
"Employee Designation Date"-- as defined in Section 2.17(a).
"Employment Agreements"--as defined in Section 2.12(a).
<PAGE>
"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) 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
<PAGE>
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).
"Existing FCS Client"--as defined in Section 2.10(c).
"FCS Brokers"--as defined in Section 2.15(b).
"FCS Closing Payables"--
(i) any liabilities, accounts payables, obligations, expenses and
costs: (x) of any of the FCS Companies accruing (in accordance with
GAAP), related to, or arising during the period prior to the Effective
Time (and neither discharged nor paid as of the Effective Time),
including without limitation, the liabilities, accounts payables,
obligations, expenses and costs set out on the Closing Date Statement;
or (y) allocated to the Sellers pursuant to the express provisions of
this Agreement, including, without limitation, Section 2.17; and
241687.33 4/15/97
7
<PAGE>
(ii) commissions and obligations to brokers and to any other Person
(to the extent not included in (i) immediately above) that are
properly payable from proceeds of the FCS Closing Receivables; and
(iii) reasonable expenses and costs of collection and settlement
incurred in connection with the FCS Closing Receivables.
"FCS Closing Receivables"--
(i) the receivables of the FCS Companies as of the Effective Time, as
reflected on the Closing Date Statement in accordance with GAAP, and,
to the extent they become receivables, refundable premiums for
insurance of the FCS Companies for insurance policies to be cancelled
in connection with consummation of the Contemplated Transactions; plus
(ii) certain additional contingent rights and claims of the FCS
Companies, all of which are listed on Exhibit 1, provided, however,
that any of the FCS Closing Receivables which are leasing commissions
shall cease to be FCS Closing Receivables and shall be the sole
property of Buyer on the date after the Closing Date on which the
lease agreement giving rise to such leasing commission revenues is
amended by amendment which requires any material effort or expenditure
on the part of Buyer or an FCS Company, and provided further that any
leasing commissions derived in connection with options, renewals and
expansions under the leases described immediately above and listed on
Exhibit 1 shall not be classified as FCS Closing Receivables; plus
(iii) fifty percent (50%) of the net commission revenue (after
payments to "in-house" brokers and third parties) arising under FCS
Services Agreement for Investments Sales Services related to sales
transactions evidenced by contracts for sale of real estate executed
prior to the Closing Date, which transactions close prior to January
1, 1998, provided, however, that any of the FCS Closing Receivables
which represent rights to receive commission revenue in connection
with such contract for sale of real estate shall cease to be FCS
Closing Receivables and shall be the sole property of Buyer on the
date after the Closing Date on which the applicable FCS Services
Agreement or contract for sale of real estate giving rise to such
revenues is amended by amendment which requires any material effort or
expenditure on the part of Buyer or an FCS Company.
"FCS Companies"--as defined in the first paragraph of this Agreement.
"FCS Company"--any one of the FCS Companies.
"FCS Receivables at Closing Amount"--as defined in Section 2.2.
<PAGE>
"FCS Services Agreement"--any Contract pursuant to which any of the FCS
Companies provides or is obligated to provide any Commercial Property Services.
"FCSC"--FC&S Management Company, an Illinois corporation.
"FCSC-Stock"--as defined in the Recitals of this Agreement.
"FCSI"--Frain, Camins & Swartchild, Incorporated, an Illinois
corporation.
"FCSI-Stock"--as defined in the Recitals of this Agreement.
"First Post-Closing Annual Period Deficiency Amount"--as defined in
Section 2.5.
"First Post-Closing Annual Period"--as defined in Section 2.5(a)(i).
"GAAP"--generally accepted United States accounting principles,
applied on a consistent basis.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from a
property or any part thereof into the Environment, and any other act, business,
operation, or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off a property, or that
may affect the value of a property of the FCS Companies.
<PAGE>
"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.
"IFG"--Insignia Financial Group, Inc., a Delaware corporation.
"IFG Control Affiliate"-- any Person (other than an individual) of which
IFG owns, directly or through subsidiary relationships, a majority of the equity
ownership.
"IFG Indemnified Persons"--as defined in Section 10.2.
"IFG Subsequent Acquiree"--as defined in Section 2.5(b).
"Illinois IFG Properties"--as defined in Section 2.5(b).
"Illinois Office"--as defined in Section 2.5(b).
"Indemnified Person"--an IFG Indemnified Person and/or a Sellers'
Indemnified Person, as the context shall apply.
"Intellectual Property Assets" --as defined in Section 3.22.
"Investment Sales Services"--shall mean any and all professional services
provided in connection with the selling of commercial property by one or more
brokers or agents for an owner of such commercial Property at a price and under
the terms set by such owner or later accepted by such owner, for the fee agreed
upon by such brokers or agents and such owner.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"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 individual who is
serving, or who has at any time served, as a director, officer, broker or
employee who earns more than $45,000 in annualized salary and/or other
compensation (or in any similar capacity) of any of the FCS Companies has, or at
any time had, actual 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
<PAGE>
is serving, or who has at any time served, as a director, officer, employee,
partner, executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Managed Properties"--the Properties with respect to which the FCS
Companies provide or are obligated to provide any Commercial Property Services,
other than Tenant Representation, pursuant to an FCS Services Agreement.
"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 the FCS Companies
taken as a whole.
"Modification Notice"--as defined in Section 5.8.
"Net Proceeds of the FCS Closing Receivables"--as defined in Section
2.6(b).
"Non-Controlling Sellers"-- Armour, Fender, Hinshaw, Moxley, Swartchild,
Tropp, and Witt.
"Non-Designated Employees"-- as defined in Section 2.17(a).
"Non-Illinois Office"--as defined in Section 2.5.
"Non-Transition Employees"-- as defined in Section 2.17(a).
"Occupational Safety and Health Law"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"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 Business Practices"--as defined in Section 2.5(b).
"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:
<PAGE>
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter 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.
"Owned Assets"-- as defined in Section 3.7(a).
"PBGC"--as defined in Section 3.13.
"Patents"-- as defined in Section 3.22(a)(ii).
"Pension Plan"-- as defined in Section 3.13.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan or Plans"--as defined in Section 3.13.
"Post-Closing Annual Period"--as defined in Section 2.5.
"Pre-Closing FCS Revenue"--as defined in Section 2.5(b)
"Pre-Closing IFG Subsequent Acquiree Revenue"--as defined in Section
2.5(b).
"Pre-Effective Time Broker Bonus Amount"--as defined in Section 2.15(b).
"Pre-Effective Time Employee Bonus Amount"--as defined in Section 2.15(a).
"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.
<PAGE>
"Property" or "Properties"--one or more, as the case may be, (i) buildings
exclusively used for office, retail or industrial operations or purposes, or
(ii) that portion of any other building(s) used for office, retail or industrial
operations or purposes.
"Property Interest" or "Property Interests"--as defined in Section 3.19(a).
"Property Management Services"--the services provided with respect to a
commercial building or property by a manager and/or its agents to the owner of
such commercial building or property, to the extent agreed upon by such manager
and such owner, for the fee agreed upon by such manger and such owner, and may
include one or more of the following services: maintain and repair the building
or property; enter into contracts in the name of such owner or as agent for such
owner for the provision of services to the building or property deemed necessary
by the manager or the owner for the operation, maintenance, repair and security
of the building or property; engage, supervise and discharge the personnel
necessary to maintain, manage and operate the building or property; collect rent
and other charges due to the owner from the tenants of such building or property
and disburse such funds as are due and owing with respect to such building or
property, to the extent such funds are made available by the owner; prepare an
annual operating budget for the building or property for submission to the
owner; provide such reports and accounting with respect to the building or
property as the manager and owner agree are necessary or useful in connection
with the building or property; and generally to act as agent for such owner
"Proprietary Rights Agreement"--as defined in Section 3.20(b).
"Purchase Price"--as defined in Section 2.2.
"Qualified Revenue"-- as defined in Section 2.5.
"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:
<PAGE>
(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) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the 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.
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Remaining Big Six Accounting Firms"--as defined in Section 2.7(b).
"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Savings Plan"--as defined in Section 2.8.
"Second Post-Closing Annual Period"--as defined in Section 2.5(a)(i).
"Second Post-Closing Annual Period Deficiency Amount"--as defined in
Section 2.5.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
<PAGE>
"Sellers"--as defined in the first paragraph of this Agreement.
"Sellers' Closing Certificate"--as defined in Section 2.4(a).
"Sellers' Closing Documents"--as defined in Section 3.2(a).
"Sellers' Control Environmental Liability"--as defined in Section 10.5(a).
"Sellers' Representative"--Ronald T. Frain.
"Shared IFG Client"--as defined in Section 2.5(b).
"Stock"--as defined in the Recitals of this Agreement.
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the FCS Companies.
"Surplus Third Post-Closing Annual Period Qualified Revenue I"--as defined
in Section 2.5.
"Surplus Third Post-Closing Annual Period Qualified Revenue II"--as defined
in Section 2.5.
"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.
"Tenant Representation"--shall mean any services provided by an agent to a
prospective tenant in connection with the locating of available space in a
commercial building appropriate to the needs of such tenant and negotiation, on
behalf of the prospective tenant, with the owner of such building of the terms
and conditions of a lease or rental agreement with respect to such space, all as
agreed upon by such agent and such tenant, the fee for which may be paid by the
prospective tenant or by a third party
"Third Post-Closing Annual Period"--as defined in Section 2.5(a)(i).
<PAGE>
"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
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Trade Secrets"--as defined in Section 3.22(a)(v).
"Transition Employees"--as defined in Section 2.17(a).
"Total 1997 Bonus Commissions"--as defined in Section 2.15(b).
2. SALE AND TRANSFER OF STOCK; CLOSING; AGREEMENTS
2.1 Stock
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Stock to Buyer, and Buyer will purchase the
Stock from Sellers.
2.2 Purchase Price
The total purchase price (the "Purchase Price") for the Stock is:
(a) $3,350,000 paid in cash at Closing (the "Cash Amount"); and
(b) $150,000 payable in cash on the second business day following the
date of the Effective Time (the "Deferred Cash Amount");
(c) an amount payable in accordance with Section 2.6 hereof in
connection with the FCS Closing Receivables ("FCS Receivables at Closing
Amount");
(d) up to an additional Four Million Five Hundred Thousand Dollars
($4,500,000) in the form of Contingent Payments based on certain qualified
revenue, as more fully provided in and in accordance with Section 2.5
hereof.
Notwithstanding the other provisions of this Section 2.2, the Deferred Cash
Amount of the Purchase Price shall be adjusted downward or upward based on the
following allocations of expenses, cash and revenues to the Sellers on the one
hand and to the Buyer on the other hand as follows:
<PAGE>
(A) The following amounts shall increase the amount of the Deferred Cash
Amount:
(1) cash of the FCS Companies at the Effective Time (other than cash
held in escrow as earnest money deposit or other deposits payable for
post-Closing obligations);
(2) cash equivalents of the FCS Companies at the Effective Time less
any penalty or costs of withdrawal or liquidation resulting from converting
such cash equivalents into immediately available funds;
(3) a pro-rata share of pre-paid insurance premiums paid by the FCS
Companies provided that Buyer has notified Sellers in writing on or before
the Closing Date that the FCS Companies are to maintain such insurance
policy in place for the benefit of Buyer;
(4) a pro rata portion of the monthly lease payment paid by the FCS
Companies with respect to the leased office space at 300 West Washington,
Chicago, Illinois, and the leased office space at 8430 West Bryn Mawr,
Chicago, Illinois, in each case for the month during which the Effective
Time occurs based on the number of days remaining in such month following
the Effective Time.
(B) The following amount shall decrease the amount of the Deferred Cash
Amount: $90,000, an amount estimated, based on the records of the FCS Companies,
as sufficient to cover pre-Effective Time vacation accrual expenses of the FCS
Companies, in consideration for which Buyer shall cause the FCS Companies after
the Effective Time to pay such an amount to employees in order to discharge such
accrued vacation liability, provided, however, that if the actual pre-Effective
Time vacation accrual expenses are greater than the amount estimated in order to
calculate the Deferred Cash Amount, any remaining portion of such vacation
accrual expense shall be treated as an FCS Closing Payable and paid or deducted
against the FCS Closing Receivables in accordance with Section 2.6 hereof.
2.3 Closing
(a) Unless this Agreement is terminated in accordance with Section 9
hereof, the purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Gardner, Carton & Douglas,
counsel to the Sellers, 321 N. Clark Street, Chicago, Illinois 60610, at
10:00 a.m. (local time):
(i) at the option of Buyer, on a date following the last to be
fulfilled or waived of the conditions set forth in Sections 7 and 8
that is the third business day
<PAGE>
following notice by Buyer to Sellers, but in no event earlier than
March 31, 1997 nor later than April 15, 1997; or
(ii) at such other time and place as the Buyer and Sellers'
Representative 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
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Stock, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed
by a commercial bank or by a member firm of the New York Stock
Exchange, for transfer to Buyer;
(ii) Employment Agreements, executed by Camins, Rosen, Frain,
Brandwein, and Dieter;
(iii) certified copies of the resolutions of each of the boards
of directors of the FCS Companies authorizing and directing the
termination of the Savings Plan;
(iv) a certificate executed by the Sellers representing and
warranting to Buyer and IFG that, except as otherwise stated in such
certificate, each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date as if
made on the Closing Date (giving full effect to any Modification
Notices) (the "Sellers' Closing Certificate")
(v) Closing Exhibit 3.8(c) and Closing Exhibit 3.9-3.
(b) Buyer will deliver and IFG shall cause Buyer to deliver to
Sellers:
(i) the Cash Amount by wire transfer in immediately available
funds to an account specified by the Sellers' Representative;
<PAGE>
(ii) a certificate executed by Buyer and IFG to the effect that,
except as otherwise stated in such certificate, each of Buyer's and
IFG's representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date (the
"Buyer's Closing Certificate"); and
(iii) Employment Agreements executed by Buyer.
On the second business day following the date of the Effective Time: (A) if
the Deferred Cash Amount is a positive number, Buyer and IFG will deliver the
Deferred Cash Amount by wire transfer in immediately available funds to an
account specified by the Sellers' Representative; and (B) if the Deferred Cash
Amount is a negative number, such amount shall be treated as an FCS Closing
Payable and paid or deducted against FCS Closing Receivables in accordance with
Section 2.6 hereof.
2.5 Contingent Payments
(a) General Terms.
(i) Buyer and IFG, jointly and severally, agree to make a contingent
payment to Sellers after the end of each of the first three twelve (12)
month periods following Closing (each a "Post-Closing Annual Period"),
based on Qualified Revenue as defined herein. (Each such contingent payment
shall be called a "Contingent Payment," and collectively such contingent
payments shall be called the "Contingent Payments.") The Contingent
Payments shall be made as follows:
(A) Provided that Qualified Revenue in the first twelve-month
period following the Closing Date (the "First Post-Closing Annual
Period") equals at least Ten Million Five Hundred Thousand Dollars
($10,500,000), Buyer and IFG shall pay to Sellers a Contingent Payment
("Contingent Payment I") equal to 60% of Qualified Revenue in excess
of $10,500,000, up to a maximum Contingent Payment I of $1,500,000.
(B) Provided that Qualified Revenue in the second twelve-month
period following the Closing Date (the "Second Post-Closing Annual
Period") equals at least $10,500,000, Buyer and IFG shall pay to
Sellers a Contingent Payment ("Contingent Payment II") equal to the
sum of:
(a) 60% of the amount of Second Post-Closing Annual Period
Qualified Revenue in excess of $10,500,000 up to $13,000,000; and
(b) (1) if the amount of First Post-Closing Annual Period
Qualified Revenue is at least $9,000,000 but less than
$10,500,000 (such
<PAGE>
amount less than $10,500,000 being the "First Post-Closing Annual
Period Deficiency Amount")
60% of that portion of the Second Post-Closing Annual Period
Qualified Revenue in excess of the sum of $13,000,000 and the
product of:
(x) the First Post-Closing Annual Period Deficiency Amount
and
(y) 1.33;
up to a total of $1,500,000;
or
(2) if the amount of First Post-Closing Annual Period Qualified
Revenue is at least $10,500,000, 60% of the amount, if any, of
Second Post-Closing Annual Period Qualified Revenue in excess of
$13,000,000, up to a total maximum Contingent Payment II of the
sum of (i) $1,500,000, and (ii) the difference, if any, between
$1,500,000 and the amount of Contingent Payment I.
(C) Provided that Qualified Revenue in the third twelve-month period
following the Closing Date (the "Third Post-Closing Annual Period") equals
at least $10,500,000, Buyer and IFG shall pay to Sellers a Contingent
Payment ("Contingent Payment III") equal to the sum of:
(a) 60% of the amount of Third Post-Closing Annual Period Qualified
Revenue in excess of $10,500,000 up to $13,000,000; and
(b) (1) if the amount of Second Post-Closing Annual Period Qualified
Revenue is at least $9,000,000 but less than $10,500,000 (such amount less
than $10,500,000 being the "Second Post-Closing Annual Period Deficiency
Amount"):
60% of that portion of Third Post-Closing Annual Period Qualified Revenue
in excess of the sum of $13,000,000 and the product of:
<PAGE>
(x) the Second Post-Closing Annual Period
Deficiency Amount
and
(y) 1.33;
up to a total of $1,500,000 (Any amount of Third Post-Closing Annual Period
Qualified Revenue which would otherwise cause the payment under this
subsection 2.5(a)(i)(C)(b)(1) to exceed such limitation is referred to as
"Surplus Third Post-Closing Annual Period Qualified Revenue I".)
or
(2) if the amount of Second Post-Closing Annual Period Qualified Revenue is
at least $10,500,000, 60% of the amount, if any, of Third Post-Closing
Annual Period Qualified Revenue in excess of $13,000,000, up to a total of
the difference, if any, between $1,500,000 and the amount paid under
subsection 2.5(a)(i)(B)(a). (Any amount of Third Post-Closing Annual Period
Qualified Revenue which would otherwise cause the payment under this
subsection 2.5(a)(i)(C)(b)(2) to exceed such limitation is referred to as
"Surplus Third Post-Closing Annual Period Qualified Revenue II".)
If the sum of Contingent Payment I and Contingent Payment II and the
amounts paid under subsections 2.5(a)(i)(C)(a) and 2.5(a)(i)(C)(b) is less
than $4,500,000, then
(a) if the amount of First Post-Closing Annual Period Qualified Revenue is
at least $10,500,000, Sellers may receive as an additional Contingent
Payment III 60% of the amount, if any, of Surplus Third Post-Closing Annual
Period Qualified Revenue I or Surplus Third Post-Closing Annual Period
Qualified Revenue II, as the case may be, up to a maximum, when combined
with the amounts, if any, paid under subsections 2.5(a)(i)(A) and
2.5(a)(i)(B)(b)(2), of $1,500,000;
or
(b) if the amount of First Post-Closing Annual Period Qualified Revenue is
at least $9,000,000 but less than $10,500,000 and amounts were paid under
subsection 2.5(a)(i)(B)(b)(1), Sellers
<PAGE>
may receive as an additional Contingent Payment III 60% of the amount, if
any, of either Surplus Third Post-Closing Annual Period Qualified Revenue I
or Surplus Third Post-Closing Annual Period Qualified Revenue II, as the
case may be, up to a maximum, when combined with the amounts paid under
subsection 2.5(a)(i)(B)(b)(1), of $1,500,000;
or
(c) if the amount of First Post-Closing Annual Period Qualified Revenue is
at least $9,000,000 but less than $10,500,000 and amounts were not paid
under subsection 2.5(a)(i)(B)(b)(1), Sellers may receive as an additional
Contingent Payment III 60% of the amount, if any, of
either Surplus Third Post-Closing Annual Period Qualified Revenue I or
Surplus Third Post-Closing Annual Period Qualified Revenue II, as the case
may be,
minus the product of
(x) the Adjusted First Post-Closing Annual Period Deficiency Amount
and
(y) 1.33
up to a maximum of $1,500,000,
where "Adjusted First Post-Closing Annual Period Deficiency Amount" equals
the First Post-Closing Annual Deficiency Amount minus the product of:
(x) the amount, if any, by which Second Post-Closing Annual Period
Qualified Revenue exceeded $13,000,000
and
(y) 0.75
(ii) Any Contingent Payment due to Sellers shall be paid by wire
transfer in immediately available funds to an account specified by the
Sellers' Representative within sixty (60) days following the end of the
applicable Post-Closing Annual Period
<PAGE>
for which such Contingent Payment is calculated, provided, however, that
any portion of an applicable Contingent Payment related to Qualified
Revenue that is accrued during the corresponding Post-Closing Annual Period
but not actually received by any of the FCS Companies, Buyer, IFG, or any
IFG Control Affiliate prior to the fiftieth (50th) day after the end of
such Post-Closing Annual Period shall thereafter be paid to Sellers within
sixty (60) days after the next calendar quarterly period in which the
corresponding Qualified Revenue is actually received. For each Post-
Closing Annual Period, Buyer shall provide to Sellers a certificate from an
appropriate representative of Buyer, such certificate to contain (x) a
statement of, and basis for, the calculation of Qualified Revenue for such
Post-Closing Annual Period, (y) a statement of the amount, if any, of the
Contingent Payment for such Post-Closing Annual Period, and (z) reasonable
documentation showing the basis for the calculation of the Contingent
Payment, if any.
(iii) Notwithstanding any other provision to the contrary herein, in
no event shall the total Contingent Payments made hereunder be greater than
$4,500,000 for all three Post-Closing Annual Periods, nor shall any
Contingent Payment or portion thereof be made pursuant to this Section 2.5
after December 31, 2002 even if otherwise eligible Qualified Revenues are
received thereafter.
(b) "Qualified Revenue".
The term "Qualified Revenue" means an amount of revenue represented by
the following formula:
The sum of A, B, and C minus the sum of (v), (w), (x), (y), (z) and
(zz)
where "A" is:
the amount of revenues for Commercial Property Services accrued during
the applicable Post-Closing Annual Period in accordance with GAAP by
the FCS Companies, Buyer, or IFG or any IFG Control Affiliate and
earned either:
(i) with respect to Properties located in the State of Illinois; or
(ii) in connection with Commercial Property Services provided to any
Person by an FCS Company or an Illinois office of Buyer, IFG or any
IFG Control Affiliate (an "Illinois Office"); or
(iii) in connection with any referrals made by an FCS Company or an
Illinois Office;
<PAGE>
(collectively, (i), (ii) and (iii) are "Aggregate Illinois Revenues");
provided, however, that if Commercial Property Services are provided
by an FCS Company or an Illinois Office with participation of and/or
referral from an office of Buyer, IFG or any IFG Control Affiliate
located outside the State of Illinois (a "Non-Illinois Office"), or
Commercial Property Services are provided by a Non-Illinois Office
with participation of and/or referral from an FCS Company and/or an
Illinois Office, Aggregate Illinois Revenues earned in connection
therewith shall be allocated on a reasonable basis between an FCS
Company and/or an Illinois Office, on the one hand, and IFG and its
affiliates on the other hand, not inconsistent with the business
practices that, when viewed as a whole, are customarily or generally
followed by Persons within the commercial property services industry
(including IFG and its affiliates), as those practices may change from
time to time and further subject to the facts and circumstances of
each particular situation (e.g., for example, without limitation, the
relative experience, expertise, performance, and/or client
relationships of officers and personnel of the FCS Companies and an
Illinois Office, on the one hand, and of officers and personnel of
other divisions and offices of IFG and its affiliates on the other
hand) ("Ordinary Business Practices").
where "B" is:
the following amount of unpaid/imputed revenues:
with respect to revenues derived from FCS Services Agreements in
effect on the Closing Date or during any Post-Closing Annual Period
which are subsequently terminated without cause as a result of either:
(1) a post-Closing acquisition by IFG or an IFG Control Affiliate
thereof of a Property located in the State of Illinois or of a Person; or
(2) a post-Closing bona fide investment by IFG or an IFG Control
Affiliate in a Property located in the State of Illinois or in the owner of
such a Property,
the imputed amount of revenues for Property Management Services and Agency
Leasing Services that would have accrued (in the absence of such
termination), in accordance with GAAP, during the applicable Post-Closing
Annual Period or Periods (or portion thereof) following such termination,
to the FCS
<PAGE>
Companies, Buyer, IFG or any IFG Control Affiliate pursuant to the basic
terms of such FCS Services Agreement, excluding, however, any imputed
revenues: (i) accruing during any renewal periods; and (ii) accrued during
any period following the sale of the Property subject to the FCS Services
Agreement by the owner/FCS client who terminated such FCS Services
Agreement);
provided, however, that the amount of unpaid/imputed revenues under this
category "B" for any single Post- Closing Annual Period shall never exceed
the average of amount of revenues for Property Management Services and
Agency Leasing Services actually received with respect to such Property by
the FCS Companies, Buyer, IFG, or any IFG Control Affiliate during each of
the consecutive twelve-month periods (up to a maximum of three) preceding
the date of termination of such FCS Services Agreement in which the FCS
Companies, Buyer, IFG or any IFG Control Affiliate actually received such
revenues for the full twelve month period.
where "C" is:
in the event that the FCS Companies, Buyer, or IFG or any IFG Control
Affiliate acquires Contracts for Property Management Services and for
Agency Leasing Services with respect to the portfolio of management and
agency leasing contracts referred to in the letters attached hereto as
Exhibit 2.5(b)-1 (the "Cohen and Sherman Contracts") on or before September
30, 1997, fifteen percent (15%) of the amount of revenues accrued during
the applicable Post-Closing Annual Periods in accordance with GAAP by the
FCS Companies, Buyer, or IFG or any IFG Control Affiliate pursuant to the
Cohen and Sherman Contracts;
where (v) is:
to the extent revenue arising from a transaction is included as Qualified
Revenue under categories "A", "B" or "C" above, the amount of bona fide
earned brokerage fees paid to Persons unaffiliated with IFG to the extent
such brokerage fees were incurred directly in connection with the
transaction from which the item of Qualified Revenue arose;
<PAGE>
where (w) is:
that portion of Aggregate Illinois Revenues earned during the applicable
Post-Closing Annual Period with respect to any Property located in the
State of Illinois that immediately prior to the Effective Time is subject
to an agreement pursuant to which IFG or an IFG Control Affiliate provides
Commercial Property Services, other than Tenant Representation, to such
Property and which is listed on Exhibit 2.5(b)-2 (the "Illinois IFG
Properties");
where (x) is:
that portion of Aggregate Illinois Revenues derived during the applicable
Post-Closing Annual Period from the Persons listed on Exhibit 2.5(b)-3 (the
"Allocated Owners and Tenants") multiplied by the fraction designated in
Exhibit 2.5(b)-3 as applicable to each of the respective Allocated Owners
and Tenants);
where (y) is:
that portion of Aggregate Illinois Revenues, originated after the IFG
Subsequent Acquiree Acquisition Date (defined below) arising from Contracts
for Commercial Properties Services, that is derived during the applicable
Post-Closing Annual Period from any Person who is an Existing FCS Client
and who is also a client of a Person (the "IFG Subsequent Acquiree")
subsequently acquired by IFG or an IFG Control Affiliate (such client being
a "Shared IFG Client") multiplied by a fraction where the numerator is the
amount of Aggregate Illinois Revenues earned by the IFG Subsequent Acquiree
from such Shared IFG Client and actually received during the twelve- month
period preceding the closing date (the "IFG Subsequent Acquiree Acquisition
Date") of such subsequent acquisition (the "Pre-Closing IFG Subsequent
Acquiree Revenue"); and
where the denominator is the sum of (x) the Pre-Closing IFG Subsequent
Acquiree Revenue and (y) the amount of revenue earned from the Shared IFG
Client and actually received by the FCS Companies, IFG or any IFG Control
Affiliate during the twelve month period preceding the closing date of such
subsequent acquisition with respect to FCS Services Agreements in effect at
the time of the Closing;
<PAGE>
where (z) is:
for each Post-Closing Annual Period during which an IFG Subsequent Acquiree
is acquired and for any Post-Closing Annual Period thereafter, an amount
equal to the gross revenues for Commercial Property Services earned by the
Illinois offices of an IFG Subsequent Acquiree during the twelve-month
period preceding the IFG Subsequent Acquiree Acquisition Date multiplied by
a fraction the numerator of which is the number of days remaining in such
Post- Closing Annual Period following the IFG Subsequent Acquiree
Acquisition Date and the denominator of which is 365;
where (zz) is:
any revenue described in categories "A" or "B" above that is derived from
Commercial Property Services related to Properties acquired by IFG or a
Related Person thereof or in which IFG or a Related Person thereof makes a
bona fide investment, in connection with such Property, in the owner of
such Property, but only to the extent of revenue derived after the date of
such acquisition or investment.
(c) Additional Qualified Revenue Provisions.
(i) Notwithstanding any other provision of this Section 2.5,
(1) for purposes of calculating the amount of Qualified Revenue accrued by
an IFG Control Affiliate under category "A" above or imputed to any IFG Control
Affiliate under category "B" above, each such amount of Qualified Revenue shall
be calculated by multiplying it, at the time of accrual or imputation,
respectively, by the then current percentage ownership by IFG or any
wholly-owned subsidiary thereof of the outstanding equity securities or equity
interests in such IFG Control Affiliate; and
(2) any revenues realized from FCS Closing Receivables shall be excluded
from Qualified Revenue.
(ii) Buyer and IFG shall use reasonable efforts to operate the
business acquired by purchase of the Stock in a commercially reasonable
manner making good faith efforts to collect Qualified Revenue and to cause
their affiliates to do so. Notwithstanding anything seemingly to the
contrary contained in this Agreement, Buyer, IFG and their affiliates,
including but not limited to the FCS Companies, shall have the right to
decline, reject or allocate any business made available to any of such
entities and to allocate revenues resulting from such business provided
those entities act in good faith in any such decision, such decision is
based upon reasonably prudent business standards not inconsistent with
IFG's corporate plans and strategies, and such decision is not based upon a
bad faith
<PAGE>
attempt to reduce Qualified Revenue; and, further, that all such decisions
are subject to the facts and circumstances of each particular situation
(e.g., for example, without limitation, the relative experience, expertise,
performance, and/or client relationships of officers and personnel of the
FCS Companies and an Illinois Office, on the one hand, and of officers and
personnel of other divisions and offices of IFG and its affiliates on the
other hand).
2.6. FCS Closing Receivables.
(a) Within 30 days after the Closing Date, Buyer shall prepare a statement
detailing the FCS Closing Receivables and FCS Closing Payables as of the
Effective Time (the "Closing Date Statement"). The Closing Date Statement shall,
to the extent applicable, be prepared in accordance with GAAP, using the same
methods and criteria employed by the FCS Companies in connection with its
preparation of the Balance Sheets. Upon completion of the Closing Date
Statement, a copy thereof shall promptly be provided to the Sellers'
Representative.
(b) The FCS Receivables at Closing Amount of the Purchase Price shall be
payable by Buyer and IFG solely from the net proceeds realized from the FCS
Closing Receivables as and when collected by the FCS Companies, the Buyer, IFG
or any Related Person thereof after the Closing Date pursuant to this Section
2.6 after deduction for the FCS Closing Payables ("Net Proceeds of the FCS
Closing Receivables"). Buyer and IFG agree, and after the Closing Date will
cause the FCS Companies to, diligently collect, using commercially reasonable
best efforts, the FCS Closing Receivables and pay the FCS Closing Payables in
order to maximize the realization of the Net Proceeds of the FCS Closing
Receivables. The Controlling Sellers shall cooperate with IFG and Buyer in the
collection of the FCS Closing Receivables, but no Seller shall, without the
consent of the Sellers' Representative and the Buyer, settle or compromise any
accounts. Sellers shall promptly remit to Buyer any proceeds of any of the FCS
Closing Receivables realized after the Closing by any such Seller. Buyer may,
using commercially reasonable standards, settle or compromise any FCS Closing
Receivables and any obligations, expenses and costs (and reserves therefor)
related, arising under, or otherwise payable in connection with the FCS Closing
Receivables, including, without limitation, costs of collection and commissions
and obligations to brokers, provided, however, that Buyer shall obtain the
consent of the Sellers' Representative, which consent will not be unreasonably
withheld or delayed, before settling or compromising an account involving more
than $5,000. If the amount of FCS Closing Payables exceeds the amount of FCS
Closing Receivables, Sellers shall pay or discharge the remaining unpaid FCS
Closing Payables.
(c) As Net Proceeds of the FCS Closing Receivables are realized by the FCS
Companies, Buyer, IFG or a Related Person thereof after the Closing Date, Buyer
and IFG shall remit such Net Proceeds of the FCS Closing Receivables to the
Sellers' Representative for such Representative's distribution to the Sellers in
accordance with their respective interest on the tenth day of each month through
December 31, 1997 and thereafter on the tenth day following each calendar
quarter (commencing April 10, 1998). Buyer shall deliver
<PAGE>
at the time of each remittance a report to the Sellers' Representative detailing
the calculation of the amount of, and basis for, the payment. If the amount of
Net Proceeds of the FCS Closing Receivables available to be remitted is less
than $5,000 as of the date of any scheduled remittance, Buyer and IFG may, upon
written notice to the Sellers' Representative setting forth the calculation of
the deficiency, combine such Net Proceeds of the FCS Closing Receivables with
subsequently received Net Proceeds of the FCS Closing Receivables until the
aggregate of retained Net Proceeds of the FCS Closing Receivables as of any
scheduled remittance equals $5,000. In any event, Buyer and IFG shall remit any
amounts of such retained Net Proceeds of the FCS Closing Receivables no less
than annually.
(d) Other than the liabilities and obligations listed on Exhibit 2.6(d) or
specifically allocated by the terms of this Agreement to Buyer or to the FCS
Companies as post-Closing IFG Control Affiliates (including without limitation
the FCS Closing Payables, but subject to the obligation of the Sellers set forth
in the last sentence of Section 2.6(b)) (collectively, the "Continuing
Liabilities"), the FCS Companies shall have no other material (but in no event
in an aggregate amount exceeding $50,000) obligations or liabilities as of the
Effective Time . The Controlling Sellers on or before the Closing Date shall
cause the FCS Companies to pay and/or discharge all liabilities and obligations
of the FCS Companies existing on the Closing Date, other than (i) the Continuing
Liabilities and (ii) those liabilities and obligations existing on the Closing
Date the discharge or payment of which are not administratively feasible or
practicable on or before the Closing Date. The FCS Companies as post-Closing IFG
Control Affiliates shall have continuing liability for the Continuing
Liabilities. Without limitation, the liabilities of the FCS Companies with
respect to all real or personal property leases shall be current through the
Closing Date.
2.7. Closing Date Statement Dispute Resolution. If the Sellers'
Representative shall notify the Buyer within 15 days after the receipt of the
Closing Date Statement that the Sellers' Representative disputes any matter with
respect to such Closing Date Statement, then any such matters (the "Disputed
Matters") shall be submitted to arbitration in Wilmington, Delaware within 30
days after such notice 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 (the "Arbitrator") shall be any one of the nationally recognized
independent accounting firms which is on the date hereof among the eight largest
such firms other than Ernst & Young and KPMG Peat Marwick (the "Remaining Big
Six Accounting Firms") mutually agreed to by the Sellers' Representative and the
Buyer. Any reference herein to the Remaining Big Six accounting firms shall be
deemed to include a reference to any member or employee thereof (who is a
certified public accountant) which any such firm may designate as the Arbitrator
on its behalf. If within 20 days following the expiration of the 30-day period
referred to above or any extension thereof the Sellers' Representative and the
Buyer shall have failed to agree upon the selection of the Arbitrator or any
such Arbitrator selected by them shall not have agreed to perform the services
called for hereunder, the Arbitrator shall thereupon be selected in accordance
with the rules of the American Arbitration Association ("AAA"), with preference
being given to any one of the
<PAGE>
Remaining Big Six accounting firms or any member or employee thereof (who is a
certified public accountant) which or who may be willing to perform such
services, other than any such firm which is then employed by any of the Sellers
or Buyer. 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 attorneys' fees, shall be borne solely by the party
(either the Buyer on the one hand or Sellers on the other) whose proposed
resolution of the Disputed Matter has the largest dollar amount of discrepancy
(collectively, if there is more than one disputed item) from the final dollar
amount stated in the decision of the Arbitrator.
2.8 Termination of FCS Plans. Notwithstanding any other provision of this
Agreement to the contrary, the FCS Companies shall, and Sellers shall cause the
FCS Companies to, initiate the termination of the Frain, Camins & Swartchild
Incorporated Profit Sharing and Incentive Savings Plan ("Savings Plan"). After
the Effective Time, the FCS Companies shall undertake and perform in an
expeditious manner all acts required to accomplish the termination of the
Savings Plan. With respect to the Savings Plan, the FCS Companies shall, (i) by
proper corporate resolution and plan amendments, if necessary, cease all
contributions to and participation in the Savings Plan and establish an
effective date of plan termination prior to the Effective Time, and (ii) file an
application with the IRS to obtain a final determination upon termination of the
qualified status of the Savings Plan. Buyer and IFG shall pay the administrative
costs of termination of the Savings Plan and the administrative costs of any
"roll-overs" or transfers into any pension plan of IFG to the extent such
"roll-overs" or transfers are permitted by Buyer, but Sellers shall pay all
costs other than those expressly allocated to Buyer in this Section 2.8,
contributions or liabilities of the Savings Plan arising with respect to or
related to the period prior to the Effective Time and/or from the vesting or
acceleration of benefits resulting from such termination.
Except as otherwise provided in the first paragraph of this Section 2.8 or
as otherwise provided in Section 2.17, Sellers shall cause the FCS Companies to
terminate all Plans prior to the Effective Time.
2.9 Allocation of Purchase Price. The Purchase Price shall be allocated and
reported for income tax purposes by the parties as set forth on Exhibit 2.9.
<PAGE>
2.10 Non-Competition Obligations of the Controlling Sellers.
As an inducement for Buyer to enter into this Agreement and as additional
consideration for the consideration to be paid to the Controlling Sellers
hereunder, the Controlling Sellers agree that:
(a) General Provisions.
(i) For the duration of the Contract Restricted Period, as defined herein,
the Controlling Sellers will not, directly or indirectly,
(A) solicit, accept an engagement for, or provide Property Management
Services, Investment Sales Services, Agency Leasing Services, or Construction
Services with respect to; or
(B) except as otherwise provided in Section 2.10(b), solicit or provide
Tenant Representation Services to the tenants of; or
any Properties subject as of the Closing Date to an FCS Services Agreement.
(ii) For the duration of the Contract Restricted Period, as defined herein,
the Controlling Sellers will not, directly or indirectly,
(A) interfere with or disturb, or seek to interfere with or disturb, the
contractual relation under; or
(B) provide or seek to provide to the party to such FCS Services Agreement
(other than the FCS Companies) the same or similar services provided under;
either a written FCS Services Agreement in effect on the Closing Date or an
oral FCS Services Agreement in effect on the Closing Date under which the
FCS Companies received, accrued or were entitled to receive or accrue any
payment at some time during the twelve-month period before the Closing
Date, in either case for the provision of one or more of (x) Tenant
Representation Services, and/or (y) Consulting Services.
(iii) For a period of three (3) years after the Closing Date, the
Controlling Sellers will not, directly or indirectly, provide, or solicit
to provide, Commercial Property Services to any Existing FCS Client.
(iv) For a period of three (3) years after the Closing Date, the
Controlling Sellers will not, directly or indirectly, either for themselves
or any other Person,
<PAGE>
(A) induce or attempt to induce any Person employed by any of the FCS
Companies, Buyer or any Related Person thereof as of November 15, 1996 or
as of the Closing Date to leave such employment;
(B) in any way interfere with the relationship between any of the FCS
Companies, Buyer or any Related Person thereof and any Person employed by
any of the FCS Companies, Buyer or any Related Person thereof as of
November 15, 1996 or as of the Closing Date; or
(C) employ, or otherwise engage as an employee, independent
contractor, or otherwise, any Person employed by the FCS Companies, Buyer
or any Related Person thereof as of November 15, 1996 or as of the Closing
Date, other than a Person whose employment with the FCS Companies, Buyer or
any Related Person thereof was involuntarily terminated after the Closing
Date;
(v) In the event that more than one of the subsections of this Section
2.10(a) shall apply, the more restrictive provision shall control.
(b) Notwithstanding the provisions of Subsection 2.10(a) above, a
Controlling Seller may, without violating the terms of this Section 2.10,
(i) purchase or otherwise acquire up to (but not more than) five (5)
percent of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934;
and/or
(ii) in connection with the purchase and sale of a Property:
(1) represent any purchaser (whether or not such purchaser is an
Existing FCS Client) in a transaction involving the sale of property, other
than pursuant to a prior Contract with such purchaser (A) to solicit offers
from sellers of Properties for purchase by such purchaser or (B) to provide
consulting services in connection with such prospective purchases by a
seller if either the seller is not an Existing FCS Client or the seller is
an Existing FCS Client who is subject to an exclusive "listing" agreement
respecting such Property (provided, however, that a Controlling Seller may
not during the three year restrictive period represent any purchaser who is
not an Existing FCS Client if the seller is an Existing FCS Client who is
not a party to an exclusive "listing" agreement); or
<PAGE>
(2) provide Investment Sales Services to a seller who is not an
Existing FCS Client regardless of whether the purchaser is or is not an
Existing FCS Client;
and/or
(iii) be employed by or affiliated with a Person that provides
Commercial Property Services: (1) to an Existing FCS Client; or (2) with
respect to a Property that is subject to, or, for a Person who is a party
to, an FCS Services Agreement as of the Closing Date, only if;
(A) such Controlling Seller has no Contact with such Property and/or
Person during the course of employment by or affiliation with such
subsequent employer so long as any applicable restriction in this Section
2.10 applies; and
(B) such Controlling Seller receives no direct financial benefit from
the provision of Commercial Property Services to such Property and/or
Person by such subsequent employer for so long as any applicable
restriction in Section 2.10 applies.
(iv) notwithstanding the restrictions on Tenant Representation
Services set forth in Section 2.10(a)(i)(B) above:
(A) a Controlling Seller may provide Tenant Representation Services to
a tenant so long as such services are not intended to cause and do not
directly result in the termination of occupancy by such tenant of a
Property subject as of the Closing Date to an FCS Services Agreement;
(B) the Controlling Seller may provide any Tenant Representation
Services to a tenant, including Tenant Representation Services that are
intended to cause and/or directly results in the termination of occupancy
by such tenant of a Property subject as of the Closing Date to an FCS
Services Agreement, if the aggregate square footage of the space leased by
such tenant in Properties subject, as of the Closing Date, to the FCS
Services Agreements is less than 10% of the aggregate square footage of the
space to be leased to such restricted tenant in connection with the Tenant
Representation Services proposed to be provided by the Controlling Seller.
(c) Definitions.
<PAGE>
(i) The term "Contact" with any Person or Property shall mean any one
or more of the following:
(A) the direct performance of any Commercial Property Services with
respect to such Person or Property;
(B) direct participation in the solicitation or performance of
Commercial Property Services with respect to such Person or Property;
and/or
(C) direct receipt of payment or other financial benefit for the
performance of Commercial Property Services in connection with such Person
or Property.
(ii) The term "Contract Restricted Period" as used in Section
2.10(a)(ii) hereof shall mean that period during which the applicable FCS
Services Agreement for the provision of one or more of Commercial Property
Services is in effect (including continuing extensions and renewals) and
for eighteen months following the termination of such FCS Services
Agreement.
(iii) The term "Existing FCS Client" as used in this Agreement shall
mean (A) any Person who is a party to an FCS Services Agreement on the
Closing Date or who has been a party to an FCS Services Agreement at any
time during the twelve-month period preceding the Closing Date, or from
whom the FCS Companies received, accrued or were entitled to receive or
accrue any payment at some time during the twelve-month period before the
Closing Date as consideration for the rendering by an FCS Company of
Commercial Property Services, including but not limited to: (y) , in
connection with an Investment Sales transaction with respect to which an
FCS Company served as a co-broker, Persons, whether or not in privity of
contract with an FCS Company, who received Investment Sales Services from
an FCS Company; (z) the Persons listed on Exhibit 2.10(c)-1 and their
successors and control affiliates; and (B) certain additional Persons
listed on Exhibit 2.10(c)- 2.
(d) 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, will be effective, binding and enforceable
against the Controlling Sellers pursuant to applicable Delaware law.
(e) Each Controlling Seller acknowledges that any violation of any of
the restrictive covenants contained in this Section 2.10 will cause
continuing and irreparable harm to Buyer and IFG for which monetary damages
would not be
<PAGE>
adequate compensation. Each Controlling Seller, therefore, agrees that, if
he violates or threatens to violate any of these restrictive covenants, IFG
and Buyer 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.
2.11 Tax Covenants.
(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 FCS Companies for the period immediately
prior to and ending with the Closing Date and, except as provided below,
shall pay all taxes required to be paid in accordance with such Tax Returns
including, without limitation, any and all tax liabilities imposed on the
FCS Companies attributable to the making of the election under Section
338(h)(10) of the IRC as described below. Buyer shall file or cause to be
filed such Tax Returns for the FCS Companies for the period after the
Closing Date. In the event that any state or local Tax Return is required
to be filed on behalf of any of the FCS Companies and such Tax Return is
required to include periods ending both on and after the Closing Date,
Sellers and Buyer shall each pay a pro rata portion of the liability shown
on such Tax Return. Each of the parties to this Agreement covenants and
agrees that, at the option of Buyer, it will fully cooperate, in accordance
with all reasonable directions provided by Buyer, in the making and filing
of the election described in Section 338(h)(10) of the IRC. In furtherance
thereof, Buyer and the Sellers shall prepare, execute and timely file 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
conform with the purchase price/asset allocation set forth on Exhibit 2.9
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 information
contained in Exhibit 2.9 hereof. The Sellers covenant and agree that none
of the FCS 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 shall not be responsible for any taxes resulting
from any election under Section 338 of the IRC other than one under Section
338(h)(10) of the IRC. The Sellers will, no later than 15 days prior to the
due date for the filing of a Tax Return required by this Section 2.11 to be
filed by Sellers respecting any of the FCS Companies, provide a copy to
Buyer of the proposed completed form of Tax Return. Buyer covenants that
the FCS Companies will become members of the affiliated group of
corporations of which IFG is the common parent and, for the period
beginning the day after the Closing Date, will be properly included in the
calendar 1997 consolidated federal income tax return filed by IFG. Sellers
shall not be responsible for any taxes for any C short year as defined
<PAGE>
in Section 1361(e)(1)(B) of the IRC resulting from the termination of the S
election due to the transactions contemplated in this Agreement.
(b) As soon as practicable, but in any event within 30 days after
Sellers' request, from and after the Closing Date, Buyer shall provide
Sellers with such cooperation and shall deliver to Sellers such information
and data concerning the operations of the FCS Companies prior to the
Closing Date and make available such knowledgeable employees of the FCS
Companies as Sellers may reasonably request, including providing the
information and data required to complete and file all Tax Returns which
they may be required to file with respect to the operations and business of
the FCS Companies through the Closing Date or to respond to audits by any
taxing authorities with respect to such operations. Such cooperation and
information shall include promptly forwarding copies of appropriate notices
and other forms or other communications received from or sent to any taxing
authority which relates to the operations and business of any of the FCS
Companies conducted prior to the Closing Date, and providing copies of all
relevant Tax Returns together with accompanying schedules and related
workpapers, documents relating to rulings or other determinations by any
taxing authority and records concerning the ownership and tax basis of
property which Buyer may possess. Sellers shall have the right, at their
expense, to conduct and, subject to this Section 2.11, settle or contest
all examinations of Tax Returns of the FCS Companies relating to all
periods ending on or before the Closing Date.
(c) For a period of ten years after the Closing Date, Buyer shall, and
shall cause the FCS Companies to, retain, and neither destroy nor dispose
of, all Tax Returns, books and records (including computer files) of, or
with respect to, the activities of the FCS Companies for all taxable
periods ending on or prior to the Closing Date and to make such books and
records available to Sellers on a reasonable basis.
(d) Buyer 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 Closing Date 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.
<PAGE>
(e) Without the prior written consent of Buyer, which consent shall
not be unreasonably withheld, neither Sellers nor any of the FCS Companies
shall, to the extent it may affect or relate to the FCS 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 FCS Companies.
(f) Without the prior written consent of Sellers, which consent shall
not be unreasonably withheld, neither Buyer nor the FCS Companies or any
subsidiary or any affiliate of Buyer shall, to the extent it may affect or
relate to the FCS Companies, 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 Sellers' tax
liability or obligation to indemnify Buyer.
(g) The Controlling 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.
2.12 Employment Agreements.
Subject to effectuation of a Closing, at the Closing, each of Camins,
Frain, Dieter, Rosen and Brandwein will enter into an employment agreement
with Buyer and IFG in the form of Exhibit 2.12 hereof (collectively, the
"Employment Agreements"), to be delivered effective upon Closing.
2.13 License to Use Tradename.
Subject to the effectiveness of a Closing, Frain and Camins each
hereby: (a) grants to Buyer the right and license, in connection with the
business of Buyer and its Related Persons, to use the names "Frain" and/or
"Camins" in connection with any business or enterprise other than: (i) any
business or enterprise unrelated to real estate; or (ii) after the fifth
anniversary of the Closing, any real estate related business or enterprise
that does not engage in business in the State of Illinois. Frain and Camins
agree to cooperate with Buyer and its Related Persons in protecting Buyer's
rights and license. The Sellers agree, for a period of five years, not to
use (or grant a license to any other Person to use) the names of "Frain"
and/or "Camins" and/or "Swartchild" or any combination thereof, or the
tradename
<PAGE>
"FC&S" in connection with any business or enterprise related to real estate
that does business in the State of Illinois, provided, however, that
Swartchild shall be free to use the name "Swartchild" in connection with
any business, so long as he does not use it combination with "Frain" or
"Camins" or "FC&S" or any derivative thereof nor authorize such use by any
other Person.
2.14 Sellers' Cooperation. The Sellers agree promptly to execute at
the reasonable request of Buyer 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 FCS 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 FCS Companies. If
requested by Buyer, the Controlling Sellers will use their Best Efforts to
cause KPMG to issue, at the cost and expense of Buyer, no later than 74
days following the Closing Date, audited financial statements of the FCS
Companies as of December 31, 1996 and for the one year period then ended;
provided, however, that nothing herein shall relieve Sellers from paying
the cost of the compiled 1996 Financial Statements.
2.15 Certain Bonus Payments
(a) The Controlling Sellers shall be liable for payment of and shall,
through the Sellers' Representative, remit to Buyer, in accordance with
this Section 2.15, an amount equal to twenty-five percent (25%) of the
bonus amounts actually paid or to be paid to employees of the FCS Companies
and attributable to the 1997 calendar year, together with an amount equal
to the employer portion of tax and withholding liabilities, provided,
however, that the total amount of such employee bonus liability shall not
exceed $40,000 (the "Pre-Effective Time Employee Bonus Amount.") Within
ninety (90) days after December 31, 1997, Buyer shall provide to Sellers'
Representative a billing statement stating the Pre-Effective Time Employee
Bonus Amount, to which statement Buyer shall attach a list of the employees
who have earned such a bonus payment and the amount of such bonus payment
for each employee. Within 30 days from the date of such billing statement,
Sellers' Representative shall remit in cash to Buyer the full amount of the
Pre-Effective Time Employee Bonus Amount due to Buyer pursuant to this
Section 2.15(a).
(b) The Controlling Sellers shall be liable for a portion of the Bonus
Commissions to be paid to the brokers receiving Bonus Commissions from the
FCS Companies ("FCS Brokers") for the 1997 calendar year (the total of such
Bonus Commissions for the 1997 calendar year shall be referred to as the
"Total 1997 Bonus Commissions"), such portion ("Pre-Effective Time Broker
Bonus Amount") to be calculated according to the following formula:
The sum of a and b, divided by c, multiplied by (d),
<PAGE>
where "a" is:
an amount equal to the brokerage commissions collected during calendar year
1997 by the FCS Companies before the Effective Time, net of Base
Commissions paid to "in-house" brokers;
where "b" is:
an amount equal to the portion of the FCS Closing Receivables collected by
Buyer in 1997 that is attributable to brokerage commissions, net of Base
Commissions paid to "in-house" brokers;
where "c" is:
an amount equal to the total brokerage commissions collected by the FCS
Companies during the 1997 calendar year (including the FCS Companies as an
IFG Control Affiliate), net of Base Commissions to "in-house" brokers;
and where "d" is:
a number representing the Total 1997 Bonus Commissions.
Within thirty (30) days after December 31, 1997, Buyer and/or the FCS
Companies shall provide to the Sellers' Representative a billing statement
showing (i) the amount of Bonus Commissions to be paid to FCS Brokers; (ii)
the basis for calculation of such Bonus Commissions; and (iii) the
Pre-Effective Time Broker Bonus Amount. Sellers' Representative shall remit
in cash to Buyer within thirty days from the date of the billing statement
the full amount of the Pre-Effective Time Broker Bonus Amount owed pursuant
to this Section 2.15(b).
2.16 Payments Related to Software
Prior to the Closing Date, the Controlling Sellers will deliver to
Buyer a list setting out the following information concerning the software
used by the FCS Companies in the operation of their business: (i) the name
of the software; (ii) the number of users of each such software; (iii)
whether the software is used in connection with a server. As soon as
practicable but in no event later than fifteen days (15) days after the
Closing Date, the Controlling Sellers shall provide to Buyer evidence of
the licensing agreements or other arrangements granting to the FCS
Companies the right to use such software. To the extent that the
Controlling Sellers are unable to provide evidence of the right to use such
software for the number of FCS Companies' users of such software, the
Controlling Sellers shall be liable for an amount equal to the amount
required to provide the appropriate licensing and other arrangements for
use of such software or its functional equivalent. The Controlling
<PAGE>
Sellers will pay in cash to Buyer, within 30 days from the date of the
billing statement from Buyer, all amounts owed to Buyer with respect to
software licenses pursuant to this Section 2.16, such amounts to be
refunded to Controlling Sellers in the event that Buyer does not use such
amounts for licenses or other arrangements for such software or its
functional equivalent.
2.17 Certain Employment Matters
(a) Categorization of the FCS Companies Employees
Buyer will provide written notice, no later than March 24, 1997 (the
"Employee Designation Date") to Sellers, of the names of employees and
independent contractors of the FCS Companies that Buyer intends to (subject
at all times to employment at will in the absence of a written agreement
effective at or after the Closing Date between such person and the FCS
Companies (or a Related Party designee of Buyer)) engage as employees or
independent contractors of IFG for the purpose of continuing the business
of the FCS Companies (or a Related Party designee of Buyer) after the
Closing Date (the "Designated Employees"). The notice of Designated
Employees will categorize the Designated Employees into two divisions: (x)
Transition Employees (employees that Buyer intends will have a short
employment duration not intended to exceed 180 days) (the "Transition
Employees"); and (y) Non-Transition Employees (employees that Buyer
presently intends, but without obligation, to employ for longer than a
transition period) ("Non-Transition Employees"). The FCS Companies shall
deliver to Buyer no later than March 28, 1997 a Certificate stating the
employment commencement date with the FCS Companies of all the Designated
Employees.
(b) Non-Designated Employees
The Buyer shall immediately after the Effective Time cause the FCS
Companies to cease the employment of, and Sellers shall pay and discharge
any and all employment- related liabilities, benefits and costs, including,
without limitation, wages, benefits, insurance, pension, profit-sharing,
any Plan benefits, accrued vacation (but only to the extent that, when
combined with any such accrued vacation liability to the Designated
Employees, such amount exceeds the amount subtracted from the Deferred Cash
Amount pursuant to Section 2.2 hereof), sick leave of the FCS Companies
for, any employees or independent contractors of the FCS Companies who are
not Designated Employees ("Non-Designated Employees") accruing or related
to the period prior to the Effective Time. Sellers will pay and indemnify
and reimburse the FCS Companies for any and all claims for wages, benefits,
insurance, pension, profit-sharing, any Plan benefits, accrued vacation
(but only to the extent that, when combined with any such accrued vacation
liability to the Designated Employees, such amount exceeds the amount
subtracted from the Deferred Cash Amount pursuant to Section 2.2 hereof) or
sick leave for all such Non-Designated Employees accruing or related to the
period prior to the Effective Time. (c) Designated Employees
<PAGE>
Sellers shall be solely responsible for (and shall reimburse Buyer for
any claims paid or incurred by IFG or any Related Person thereof, Buyer or
the FCS Companies in connection with) all the costs of Designated
Employees' wages, withholding taxes, accrued sick leave, accrued vacation
(but only to the extent that, when combined with any such accrued vacation
liability to the Non-Designated Employees, such amount exceeds the amount
subtracted from the Deferred Cash Amount pursuant to Section 2.2 hereof) ,
pension, any Plan benefits, and health insurance costs, accruing or related
to the period prior to the Effective Time, as if all such Designated
Employees had their employment irrevocably terminated by the FCS Companies
immediately prior to the Effective Time, regardless of any actual date of
vesting or payment. All additional costs of such Designated Employees'
wages, withholding taxes, accrued sick leave, accrued vacation, pension,
and health insurance costs, accruing or related exclusively to the
additional incremental period after the Effective Time shall remain the
liability and obligation of the FCS Companies as an IFG Control Affiliate.
Neither Buyer, IFG nor any Related Person thereof shall have any obligation
to provide any vacation, health, insurance, pension, insurance or other
welfare benefits to Transition Employees.
(d) Post-Closing Benefits for Non-Transition Employees Generally
IFG shall provide to Non-Transition Employees employee benefit plans
that are generally comparable to those provided to other persons employed
by IFG of generally similar levels of responsibility, compensation,
seniority and performance. For purposes of their right to vacation time and
sick leave, and participation in, but not vesting with respect to, any IFG
pension plan after the Effective Time as employees of IFG, the Designated
Employees shall receive full credit for their employment tenure with the
FCS Companies, subject, however, to the limitation that no employee of FCS
who becomes an employee of IFG may accrue vacation beyond periods permitted
in accordance with the standard policies of IFG and further subject to the
limitation that no employee shall receive or be credited with employer
matching contributions to any pension plan with respect to any commission
compensation.
(e) Certain Severance Payments
Notwithstanding any other provision of this Agreement, including this
Section 2.17, to the contrary, with respect to Non-Designated Employees and
Transition Employees who immediately prior to the Effective Time would have
had a right, if involuntarily terminated, to receive severance payments
from the FCS Companies, the costs to satisfy and discharge such severance
obligations arising from the involuntary termination and/or negotiated
termination of employment of any Non-Designated Employee or Transition
Employee occurring on a date between the Effective Time and 180 days
thereafter shall be borne and allocated between the Sellers on the one hand
and Buyer and the FCS Companies on the other as follows:
<PAGE>
(1) the first $60,000 of such costs (including retention bonuses paid
by the FCS Companies or Buyer after the Effective Time) shall be borne and
allocated equally between the Sellers on the one hand and the Buyer on the
other hand;
(2) the excess over $60,000 shall be borne and allocated exclusively
to the Sellers.
(f) Nothing in this Section 2.17 shall create any rights for any
employees of the FCS Companies, IFG or any Related Person thereof, and no
employees of the FCS Companies shall be entitled to rely upon this
Agreement for any purpose whatsoever. 3. REPRESENTATIONS AND WARRANTIES OF
CONTROLLING SELLERS
Controlling Sellers represent and warrant to Buyer and IFG as follows:
3.1 Organization and Good Standing
(a) Exhibit 3.1(a) hereto contains a complete and accurate list for
each of the FCS Companies of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder and the number
of shares of FCSC-Stock, CII-Stock and FCSI- Stock held by each). Each of
the FCS 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 FCS 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, except where the failure to be so qualified
would not have a Material Adverse Effect.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of each of the FCS Companies, as currently in effect.
3.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the FCS Companies, enforceable against Sellers
and the FCS Companies in accordance with its terms. Upon the execution and
delivery by applicable Sellers of the Employment Agreements, (collectively,
the "Sellers' Closing Documents") to which each is a party, the Sellers'
Closing Documents will constitute the legal, valid, and binding obligations
of Sellers, enforceable against Sellers in accordance with their respective
terms. Sellers and the FCS Companies have the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement
and the
<PAGE>
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 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 the FCS Companies or (B) any
resolution adopted by the board of directors or the stockholders of the FCS
Companies currently in effect;
(ii) contravene, conflict with, or result in a violation of, any Legal
Requirement or any Order to which any of the FCS Companies or Sellers, or
any of the assets owned or used by any of the FCS Companies or Sellers, may
be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, any Governmental Authorization that is held
by the FCS Companies or that otherwise relates to the business of, or any
of the assets owned or used by, the FCS Companies;
(iv) 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 FCS
Companies or any Seller is a party or, to the Knowledge of any of the
Sellers, to which any of their property is subject; or
(vii) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by the FCS Companies.
Except as set forth Exhibit 3.2(b)-2 hereof, none of the Sellers nor any of
the FCS Companies 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.
3.3 Capitalization
Exhibit 3.1(a) hereto contains a complete and accurate list showing,
for each of the FCS Companies with respect to the authorized equity
securities of each, the number of
<PAGE>
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 FCS Companies, free and clear of all
Encumbrances. The stock certificates listed on Exhibit 3.1(a) represent all
of the outstanding shares of the capital stock of the FCS Companies. All of
the outstanding equity securities of the FCS Companies have been duly
authorized and validly issued and are fully paid and nonassessable. There
are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the FCS Companies. None of the
outstanding equity securities or other securities of the FCS Companies was
issued in violation of the Securities Act or any other Legal Requirement.
Except for the equity securities of Oncor International held by FCSI, the
FCS 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 FCS Companies have delivered to Buyer: (a) unaudited
balance sheets of each of the FCS Companies as at December 31 in each of
the years 1991 through 1995, and the related unaudited statements of
income, changes in stockholders' equity, and cash flow for each of the
fiscal years then ended, and (b) a balance sheet of each of the FCS
Companies 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 the compilation report
thereon of KPMG Peat Marwick, independent certified public accountants
("KPMG") (together with the 1996 Balance Sheets, the "1996 Financial
Statements"). Such financial statements and notes fairly present in all
material respects the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of each of the FCS Companies
as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP. 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.
3.5 Books and Records
The books of account, minute books, stock record books, and other
records of the FCS Companies, all of which have been made available to
Buyer, are complete and correct in all material respects and have been
maintained in accordance with sound business practices. The minute books of
the FCS Companies contain in all material respects accurate records of all
meetings held of, and corporate action taken by, the stockholders, the
Boards of Directors, and committees of the Boards of Directors of the FCS
Companies, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are
not contained in such minute books. At the Closing, all of those books and
records will be in the possession of the FCS Companies.
<PAGE>
3.6 Title to Properties; Encumbrances
Exhibit 3.6 hereof contains a complete and accurate list of all real
property leaseholds, or other interests therein owned by the FCS Companies.
None of the FCS Companies owns any fee simple interest in real estate or
any options to acquire the same. Sellers and/or the FCS Companies have
delivered or made available to Buyer copies of the leases and other
instruments (as recorded) by which the FCS Companies hold real property
interests, and copies of all title insurance policies, opinions, abstracts,
and surveys in the possession of Sellers or the FCS Companies and relating
to such property or interests. The FCS 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 presently are used in the operation of the
business of the FCS Companies, including all of the properties and assets
reflected in the 1996 Balance Sheets (except for 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 FCS 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 consistent with past
practice). All material properties and assets reflected in the 1996 Balance
Sheets are free and clear of all Encumbrances and are not, in the case of
real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except,
with respect to all such properties and assets, (a) mortgages or security
interests shown on the 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, (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,
(c) liens for current taxes not yet due, and (d) with respect to real
property, (i) minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the
use of the property subject thereto, or impairs the operations of the FCS
Companies, and (ii) zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject thereto.
3.7 Ownership of Assets; Condition and Sufficiency of Assets
(a) Owned Assets. Except as described on Exhibit 3.17(a)(iv), the FCS
Companies own and have good title, without Encumbrance, to all of the
assets currently used in conjunction with the operation of the FCS
Companies' business, which assets are described on Exhibit 3.7(a) and are
reflected in the 1996 Balance Sheets of the FCS Companies (the "Owned
Assets"), except for dispositions of assets in the Ordinary Course of
Business since December 31, 1996.
<PAGE>
(b) Condition and Sufficiency of Assets. To the Knowledge of any of
the Sellers, the buildings, structures, and equipment used by the FCS
Companies are structurally sound and in good operating condition and
repair, and are adequate for the uses to which they are being put, and, to
the Knowledge of any of the Sellers, none of such buildings, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
3.8 Accounts Receivable
(a) All accounts receivable of the FCS Companies that are reflected on
the 1996 Balance Sheets or on the accounting records of the FCS Companies
as of the Closing Date, to the Knowledge of any of the Sellers, represent,
as of the respective dates thereof, valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of
Business. To the Knowledge of any of the Sellers, except as reflected in
the 1996 Financial Statements, 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.
(b) The FCS Closing Receivables, other than (i) those listed on
Exhibit 1 and (ii) those derived from certain Applicable Contracts for
Investment Sales described in the definition of FCS Closing Receivables in
Section 1 hereof, will be as of the Effective Time properly classified
under GAAP as accounts receivable of the FCS Companies.
(c) Sellers shall deliver at Closing Closing Exhibit 3.8(c),
containing a complete and accurate list, in form and substance satisfactory
to Buyer, of the accounts receivable as of a date no earlier than two
business days prior to the Closing Date.
3.9 Accounts Payable
All accounts payable of the FCS Companies that are reflected on the
1996 Balance Sheets or on the accounting records of the FCS Companies as of
the Closing Date, to the Knowledge of any of the Sellers, represent, as of
the respective dates thereof, valid obligations of the FCS Companies
arising in the Ordinary Course of Business. To the Knowledge of any of the
Sellers, (i) Exhibit 3.9-1 contains a complete and accurate list of all
accounts payable of the FCS Companies as of the date of the 1996 Balance
Sheets; and (ii) Exhibit 3.9-2 contains a complete and accurate list of all
accounts payable as of March 10, 1997 of which any of the Sellers has
Knowledge. Sellers shall deliver at Closing Closing Exhibit 3.9-3,
containing a complete and accurate list, in form and substance satisfactory
to the Buyer, of accounts payable as of a date no earlier than two business
days prior to the Closing Date.
<PAGE>
3.10 No Undisclosed Liabilities
Except as set forth in Exhibit 3.10 hereof, the FCS Companies have no
liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities
or obligations reflected or reserved against in the 1996 Balance Sheets,
without regard to the Notes thereto, and current liabilities incurred in
the Ordinary Course of Business since the respective dates thereof.
3.11 Taxes
(a) The FCS 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 or pursuant to any FCS Services Agreement.
Sellers have made available to Buyer copies of all such Tax Returns filed
since 1990. The FCS Companies have paid, or made provision for the payment
of, all taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Sellers or
the FCS 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. Each of the FCS Companies has been at all times
an S Corporation for federal income tax purposes (as defined in Section
1361(a)(1) of the IRC). None of the FCS 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. None of the FCS Companies
has experienced a termination, as defined in Section 1362(d) of the IRC, of
its S Corporation status. None of the FCS 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) The United States federal and state income Tax Returns of the FCS
Companies subject to such taxes have been audited by the IRS or relevant
state tax authorities or the applicable statute of limitations for the
assessment of taxes has closed. Exhibit 3.11(b) hereof contains a complete
and accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit.
All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Exhibit 3.11(b), 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 FCS Companies or any group of corporations including the FCS
Companies for all taxable years since 1985, and the resulting deficiencies
proposed by the IRS. Except as described in Exhibit 3.11(b) hereof, no
Seller nor any of the FCS 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
<PAGE>
to the payment of taxes of the FCS Companies or for which the FCS Companies
may be liable.
(c) The charges, accruals, and reserves with respect to taxes on the
respective books of the FCS Companies are adequate (determined in
accordance with GAAP). There exists no proposed tax assessment against the
FCS 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 FCS Companies. All taxes that the FCS 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 FCS Companies are true, correct, and complete. There is no tax sharing
agreement that will require any payment by the FCS 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 Stock to
Buyer), neither the FCS Companies nor any or target affiliate (as defined
in Section 338(h)(6) of the IRC with respect to the sale of the Stock to
Buyer) has sold or will sell any property or assets to Buyer or to any
member of the affiliated group (as defined in Section 338(h)(5) of the IRC)
that includes Buyer.
3.12 No Material Adverse Change
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 the FCS Companies, and no
event has occurred or circumstance exists that could reasonably be expected
to result in such a material adverse change that has specific application
to the FCS Companies (other than general economic or industry conditions).
3.13 Employees and Employee Benefit Plans
(a) 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 FCS 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, the FCS Companies delivered to the Buyer correct and
complete copies
<PAGE>
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) None of the FCS Companies have 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.
(d) None of the FCS 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 statutory exemption in Section 408 of
ERISA or Section 4975 of the IRC; 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) The FCS Companies have performed all of their respective
obligations under all Plans. The FCS Companies, with respect to all Plans,
are, and each Plan, is in compliance, in all material respects, with ERISA,
the IRC, and other applicable Laws, and with any applicable collective
bargaining agreement.
(f) The consummation of the Contemplated Transactions will not, except
as otherwise provided in Section 2.8 and Section 2.17 hereof, (i) result in
the payment or series of payments by any of the FCS Companies to any
employee or other Person of an "excess parachute payment" within the
meaning of Section 280G of the IRC, and (ii) 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) 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
<PAGE>
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) None of the FCS Companies or any entity which would be treated as
a single employer with the FCS 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 FCS
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 multiemployer
plan as described under Sections 4201, 4203, or 4205 of ERISA.
(i) None of the FCS Companies or 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.
(j) Each Plan can be terminated within thirty days, without payment of
any additional contribution or amount and without the vesting or
acceleration of any benefits promised by such Plan other than any
contribution, vesting or acceleration for which Sellers shall have sole
responsibility.
3.14 Compliance With Legal Requirements; Governmental Authorizations
(a) Except as set forth in Exhibit 3.14(a) hereof:
(i) Each of the FCS Companies is, and at all times has been, in full
material compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership or
use of any of its assets;
(ii) 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 in a violation by the FCS Companies of, or a failure on
the part of the FCS Companies to comply with, any Legal Requirement, except
for any one or more violations or failures which singularly or in the
aggregate do not have or could not reasonably be expected to have a
Material Adverse Effect or (B) may give rise to any obligation on the part
of the FCS Companies to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and
(iii) none of the FCS Companies has received at any time since
January 1, 1993 any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential material violation of, or failure to
materially comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or
<PAGE>
potential obligation on the part of any of the FCS Companies to undertake,
or to bear all or any portion of the cost of, any remedial action of any
nature.
(b) Exhibit 3.14(b) hereof contains a complete and accurate list of
each Governmental Authorization that is held by the FCS Companies or, to
the extent necessary to enable the FCS Companies to operate their
businesses in the manner presently conducted, by any of the Sellers. 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 FCS Companies is, and at all times since January 1,
1993 has been, in full material 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, except for any
one or more violations or failures which singularly or in the aggregate did
not or will not have a Material Adverse Effect, 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 FCS Companies has received, at any time since
January 1, 1993, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of 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 the renewal of
the 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 the FCS
<PAGE>
Companies to lawfully conduct and operate their businesses in the manner
they currently conduct and operate such businesses and to permit the FCS
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 the FCS Companies; or (ii) that have
been commenced by or against any 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 FCS 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 FCS 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.
Exhibit 3.15(a) describes for each such Proceeding, to the Knowledge of
Sellers, the following information: (i) the style of the Proceeding,
including the identification of all parties to such Proceeding, of the
court or body claiming jurisdiction of such Proceeding, and of the number
assigned to such Proceeding by such court or body; (ii) a summary of the
issues/matters which are the subject of the Proceeding; (iii) the amount of
damages or claims asserted by any party; (iv) the identification and
telephone numbers of any attorneys of record respecting such Proceeding;
and (v) a statement of the availability of insurance to cover any judgments
and expenses incurred in connection therewith and any declared objection or
reservation to such coverage.
No such Proceeding has been Threatened, and, to the Knowledge of any
of the Sellers, except as set out on Exhibit 3.15(a), 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 FCS Companies have made available to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Exhibit 3.15(a) hereof. The Proceedings listed in Exhibit 3.15(a) hereof
will not have a Material Adverse Effect.
(b) Except as set forth in Exhibit 3.15(b) hereof:
(i) there is no Order to which any of the FCS Companies, or any of the
assets owned or used by the FCS Companies, is subject;
(ii) no Seller is subject to any Order that relates to the business
of, or any of the assets owned or used by, the FCS Companies; and
<PAGE>
(iii) no officer, director, agent, or employee of the FCS Companies is
subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the FCS Companies.
(c) Except as set forth in Exhibit 3.15(c) hereof:
(i) each of the FCS Companies is, and at all times since January 1,
1993 has been, in full material 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) 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 FCS Companies, or any
of the assets owned or used by the FCS Companies, is subject; and
(iii) none of the Sellers nor any of the FCS Companies has received,
at any time since January 1, 1993 any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which any
of the FCS Companies, or any of the assets owned or used by any the FCS
Companies, is or has been subject.
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 FCS Companies have conducted their businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in the FCS Companies' authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of
the FCS Companies; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement,
or other acquisition by the FCS 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 the FCS Companies;
(c) increase by the FCS Companies of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the
Ordinary Course
<PAGE>
of Business) employee or entry into any employment, severance, or similar
Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
FCS Companies;
(e) damage to or destruction or loss of any material asset or property
of the FCS Companies, whether or not covered by insurance, which has
resulted in a Material Adverse Effect;
(f) entry (other than in the Ordinary Course of Business) into,
termination of, or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit, or
similar agreement, or (ii) any FCS Services Agreement or any other Contract
or transaction, the termination of which could reasonably be expected to
have a Material Adverse Effect;
(g) sale, lease, or other disposition of any material asset or
property of the FCS Companies or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of the FCS
Companies, including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to the
FCS Companies in excess of $5,000;
(i) material change in the accounting methods used by the FCS
Companies; or
(j) agreement, whether oral or written, by any of FCS Companies or
Sellers to do any of the foregoing.
3.17 Contracts; No Defaults
(a) Exhibit 3.17(a)(i) through Exhibit 3.17(a)(xv) hereof set forth
reasonably complete details concerning the Contracts described in this
Section 3.17(a), including the parties to the Contracts, the dollar amount
of the remaining commitment to or of the FCS Companies under the Contracts,
the duration, a summarized description of any services to be provided by or
to any of the FCS Companies, and the FCS Companies' office where details
relating to the Contracts are located. The Sellers and the FCS Companies
have delivered or made available to Buyer 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):
<PAGE>
(i) Each FCS Services Agreement is described and listed on Exhibit
3.17(a)(i);
(ii) Each Applicable Contract that involves performance of services or
delivery of goods or materials to the FCS Companies is described and listed
on Exhibit 3.17(a)(ii);
(iii) Each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
the FCS Companies is described and listed on Exhibit 3.17(a)(iii);
(iv) 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 is described and listed on
Exhibit 3.17(a)(iv);
(v) Each licensing agreement or other Applicable Contract with respect
to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets is to be described and listed on Closing
Exhibit 3.17(a)(v);
(vi) Each employment agreement to which an FCS Company is a party and
any other Applicable Contract relating to the provision of services, and
compensation therefor, by any employee, agent, director, independent
contractor, or consultant of any of the FCS Companies is described and
listed on Exhibit 3.17(a)(vi); any collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees is described and listed on Exhibit
3.17(a)(vi);
(vii) Each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities by the FCS Companies with any other Person is described and
listed on Exhibit 3.17(a)(vii);
(viii) Each Applicable Contract containing covenants that in any way
purport to restrict the business activity of the FCS Companies or any
Affiliate of the FCS Companies or limit the freedom of the FCS Companies or
any Affiliate of the FCS Companies to engage in any line of business or to
compete with any Person is described and listed on Exhibit 3.17(a)(viii);
<PAGE>
(ix) Each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits in excess of $10,000, other
than direct payments for goods is described and listed on Exhibit
3.17(a)(ix);
(x) Each power of attorney that is currently effective and outstanding
is described and listed on Exhibit 3.17(a)(x);
(xi) Each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by
the FCS Companies to be responsible for consequential damages, is described
and listed on Exhibit 3.17(a)(xi);
(xii) Each Applicable Contract for capital expenditures in excess of
$2,500 is described and listed on Exhibit 3.17(a)(xii);
(xiii) Each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the FCS
Companies other than in the Ordinary Course of Business is described and
listed on Exhibit 3.17(a)(xiii);
(xiv) Each Applicable Contract evidencing the obligation of any of the
FCS Companies to repay borrowed money, including any obligations as the
maker or guarantor of a promissory note is described and listed on Exhibit
3.17(a)(xiv);
(xv) Each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing Contracts is described and
listed on Exhibit 3.17(a)(xv).
(b) Except 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
FCS Companies; and
(ii) no officer, director, agent, employee, consultant, or contractor
of the FCS 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 FCS Companies, or (B) assign to the FCS
Companies or to any other Person any rights to any invention, improvement,
or discovery.
<PAGE>
(c) 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)(xv) 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) the FCS Companies are, and at all times since January 1, 1993 have
been, in full compliance with all applicable terms and requirements of each
Contract under which the FCS Companies have or had any obligation or
liability or by which the FCS Companies or any of the assets owned or used
by the FCS Companies are or were bound, except for any non-compliance which
did not have or will not have a Material Adverse Effect;
(ii) to the Knowledge of any of the Sellers or any of the FCS
Companies, each other Person that has or had any obligation or liability
under any Contract under which the FCS Companies have or had any rights is,
and at all times since January 1, 1996 has been, in full compliance with
all applicable terms and requirements of such Contract, except for any non-
compliance which did not have or will not have a Material Adverse Effect;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) contravenes, conflicts with, or could
reasonably be expected to result in a violation or breach of, or give the
FCS 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 Applicable Contract; and
(iv) the FCS Companies have not given to or received from any other
Person, at any time since January 1, 1993, 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 Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
the FCS Companies under current or completed Contracts with any Person and
no such Person has made written demand for such renegotiation.
3.18 Insurance
(a) Sellers and the FCS Companies have delivered to Buyer, and
provided a reasonable summarized description thereof on Exhibit 3.18(a)
hereof:
<PAGE>
(i) true and complete copies of all policies of insurance to which the
FCS Companies are a party or under which the FCS Companies, or any director
of the FCS Companies, in such director's capacity as a director, are or
were covered at or after January 31, 1997;
(ii) true and complete copies of all pending applications for policies
of insurance; and
(iii) any statement by the auditor of the FCS Companies' financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Exhibit 3.18(b) hereof describes:
(i) any self-insurance arrangement by or affecting the FCS Companies,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
entered into for the purpose of transferring or sharing of any risk by the
FCS Companies; and
(iii) all obligations of the FCS 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) Exhibit 3.18(c) hereof sets forth, for the period beginning
January 1, 1996:
(i) a summary of the loss experience under each such policy;
(ii) a statement describing each claim or series of claims under any
single insurance policy for amounts in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance, and
period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Exhibit 3.18(d) hereof:
<PAGE>
(i) All such policies to which the FCS Companies are a party or that
provide coverage to any Seller, the FCS Companies, or any director or
officer of the FCS Companies:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is, to the Knowledge of Sellers,
financially sound and reputable;
(C) taken together, provide adequate insurance coverage for the assets
and the operations of the FCS Companies for all risks normally insured
against by a Person carrying on the same business or businesses as the FCS
Companies;
(D) are sufficient for compliance with all Legal Requirements and
Contracts to which the FCS Companies are a party or by which any of them is
bound;
(E) are not cancelable by the insurer as a result of the consummation
of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of the FCS Companies.
(ii) No Seller (with respect to the FCS Companies) nor any of the FCS
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 FCS Companies has paid all premiums due, and has
otherwise performed all of its respective obligations, under each policy to
which any of the FCS Companies is a party or that provides coverage to the
FCS Companies or any director thereof.
(iv) The FCS 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, hereof, to the Knowledge of any
of the Sellers:
<PAGE>
(a) The FCS Companies are, and at all times have been, in material
compliance with, and have not been and are not in violation of or liable
under, any Environmental Law. No Seller nor any of the FCS Companies has
any basis to expect, nor has any of them or any other Person for whose
conduct they are or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any Governmental
Body or private citizen acting in the public interest, or (ii) the current
or prior owner or operator of any property, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual
or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any
properties or assets (whether real, personal, or mixed) in which Sellers or
the FCS Companies have or had an interest (singularly, a "Property Interest
and, collectively, the "Property Interests"), or with respect to any
Property Interests at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by
Sellers, the FCS Companies, or any other Person for whose conduct they are
or may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and
Safety Liabilities or arising under or pursuant to any Environmental Law,
with respect to or affecting any Property Interests.
(c) No Seller nor any of the FCS 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
Property Interests, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by Sellers, the FCS Companies, or any other
Person for whose conduct they are or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) No Seller nor any of the FCS Companies, or any other Person for
whose conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to any Property Interests, or
at any property geologically or hydrologically adjoining any such property
or assets.
(e) There are no Hazardous Materials present on or in the Environment
at any Property Interests, or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in barrels,
above or underground
<PAGE>
storage tanks, landfills, land deposits, dumps, equipment (whether moveable
or fixed) or other containers, either temporary or permanent, and deposited
or located in land, water, sumps, or any other part of such properties or
such adjoining property, or incorporated into any structure therein or
thereon. No Seller, none of the FCS Companies, any other Person for whose
conduct they are or may be held responsible, or any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted
with respect to any Property Interests except in full compliance with all
applicable Environmental Laws.
(f) There has been no Release or Threat of Release of any Hazardous
Materials at or from any Property Interests, or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the Property
Interests, or any geologically or hydrologically adjoining property,
whether by Sellers, the FCS Companies, or any other Person.
(g) Sellers and the FCS Companies have delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Sellers or the FCS Companies
pertaining to Hazardous Materials or Hazardous Activities in, on, or under
the Property Interests, or concerning compliance by Sellers, the FCS
Companies, or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.
3.20 Employees
(a) Exhibit 3.20(a) hereof contains a complete and accurate list of
the following information for each employee or director of each of the FCS
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 January 1, 1996; 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 or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan of any of the FCS Companies.
(b) No employee or director of any of the FCS 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 adversely affects or will affect (i) the
performance of his or her duties as an employee or director of the FCS
Companies, or (ii) the ability of the FCS Companies to conduct its
business, including any Proprietary Rights Agreement with Sellers or
<PAGE>
any of the FCS Companies by any such employee or director. No Seller nor
any of the FCS Companies has obtained Knowledge that any director, officer,
or other key employee of the FCS Companies intends to terminate his or her
employment with any of the FCS Companies.
(c) Exhibit 3.20(c) hereof also contains a complete and accurate list
of the following information for each retired employee or director of the
FCS 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.
3.21 Labor Relations; Compliance
Since January 1, 1993, except as disclosed in Exhibit 3.17(a)(vi),
hereto, none of the FCS 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 FCS
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 FCS 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. There is no
lockout of any employees by any of the FCS Companies, and no such action is
contemplated by any of the FCS Companies. Each of the FCS Companies has
complied in all material respects with all material 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. The FCS Companies are not liable for the payment of any
material 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) the names "Frain, Camins & Swartchild," "FC&S Management Company,
Inc." and "Construction Interiors, Inc.," all fictional business names,
trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
<PAGE>
(ii) all patents, patent applications, and inventions and discoveries
that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(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 FCS 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 FCS Companies, of all Contracts
relating to the Intellectual Property Assets to which the FCS Companies are
a party or by which the FCS 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 $2,500 under
which any of the FCS Companies is the licensee. There are no outstanding
and, to the Knowledge of any of the Sellers, no Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
(i) To the Knowledge of Sellers, the Intellectual Property Assets are
all those necessary for the operation of the FCS Companies' businesses as
they are currently conducted. To the Knowledge of the Sellers, each of the
FCS Companies is the owner 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, and has the right to use without payment to a
third party all of the Intellectual Property Assets.
(ii) Except as set forth in Exhibit 3.22(c) hereof, no employee of the
FCS Companies has entered into any Contract that restricts or limits in any
way the scope or type of work in which the employee may be engaged or
requires the employee to transfer, assign, or disclose information
concerning the employee's work to anyone other than the FCS Companies.
(d) Trademarks and Copyrights--To the Knowledge of Sellers:
(i) Exhibit 3.22(d) hereof contains a complete and accurate list and
summary description of all Copyrights and Marks of any of the FCS
Companies.
<PAGE>
(ii) None of the subject matter of any of the Copyrights or Marks
infringes or is alleged to infringe any copyright protected Mark of any
third party or is a derivative work based on the work of a third party.
(e) Trade Secrets
The FCS Companies have taken all reasonable precautions to protect the
secrecy, confidentiality, and value of their Trade Secrets, if any.
3.23 Certain Payments
Since January 1, 1993, neither the FCS Companies nor any director, officer,
agent, or employee of the FCS Companies, or any other Person acting for or on
behalf of the FCS Companies, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the FCS Companies or any Affiliate of an the FCS Companies, or (iv)
in violation of any Legal Requirement, (b) established or maintained any fund or
asset that has not been recorded in the books and records of the FCS Companies.
3.24 FCS Services Agreements.
The FCS Services Agreements in effect are listed on Exhibit 3.17(a)(i)
hereof. All such listed FCS 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, there is no default in existence
in regard to any listed FCS Services Agreements or event of default or event,
occurrence, condition or act which, with the giving of notice or the lapse of
time, would become a default or event of default thereunder. Such listed FCS
Services Agreements contain all the terms of agreement between the FCS Companies
and such owner respecting the parties' mutual rights and obligations related to
the Commercial Property Services of the FCS Companies.
None of the Sellers nor any of the FCS Companies has received notice or
otherwise has Knowledge of any communication that any party (other than the FCS
Companies) to an FCS 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 an FCS Services Agreement.
3.25 Disclosure
<PAGE>
No representation or warranty of Sellers in this Agreement omits to state a
material fact necessary to make the statements herein, in light of the
circumstances in which they were made, not misleading.
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 FCS Companies is a party to any Contract with, or
has any claim or right against, any of the FCS 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.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization and Good Standing
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Employment
Agreements and Buyer's Closing Certificate (collectively, the "Buyer's
Closing Documents"), the Buyer's Closing Documents will constitute the
legal, valid, and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms. Buyer has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and the Buyer's Closing Documents and to perform its obligations
under this Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Exhibit 4.2 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 Buyer or IFG or (B) any
<PAGE>
resolution adopted by the board of directors or the stockholders of Buyer
or IFG;
(ii) contravene, conflict with, or result in a violation of, any Legal
Requirement or any Order to which Buyer or IFG, or any of the assets owned
or used by either Buyer or IFG, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, any Governmental Authorization that is held
by either Buyer or IFG or that otherwise relates to the business of, or any
of the assets owned or used by, either Buyer or IFG;
(iv) 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 Buyer or IFG is a party or, to the
Knowledge of IFG or Buyer, to which any of their property is subject; or
(vii) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by either Buyer or IFG.
Except as set forth Exhibit 4.2 hereof, neither Buyer or IFG 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 Investment Intent
Buyer is acquiring the Stock 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. Buyer or IFG is an Accredited Investor (as that term is defined in
Rule 501 promulgated by the Securities and Exchange Commission under the
Securities Act), and acknowledges that the Stock is being sold pursuant to
a private offering exemption 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 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.
4.4 Certain Proceedings
<PAGE>
There is no pending or Threatened Proceeding that has been commenced
against Buyer and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
4.5 Brokers or Finders
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of
Buyer or its officers or agents.
4.6 IFG Financial Statements
The financial statements and any accompanying notes contained in the
annual report of IFG filed with the Securities and Exchange Commission on
Form 10-K for the year ended December 31, 1995 and in the quarterly reports
on Form 10-Q filed with the Securities and Exchange Commission after the
filing of the annual report fairly present in all material respects the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow of IFG and its subsidiaries on a consolidated basis
as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, in all material
respects.
4.7 Tax
Buyer is a member of an affiliated group of corporations as defined in
Section 1504 of the IRC of which IFG is the common parent and which files a
consolidated federal income tax return.
5. COVENANTS OF SELLERS AND THE FCS COMPANIES PRIOR TO CLOSING
DATE
5.1 Required Approvals
As promptly as practicable after the date of this Agreement, Sellers
and the FCS Companies will make all filings required by Legal Requirements
to be made by them in order to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Sellers and the
FCS Companies will (a) cooperate with Buyer with respect to all filings
that Buyer elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate with Buyer
in obtaining all Consents identified in Exhibit 4.2.
5.2 Shareholder Approval
<PAGE>
Sellers and the FCS Companies shall as soon as practicable after the date
of this Agreement take any necessary action, whether as a shareholder, officer,
director or otherwise, to vote upon and approve this Agreement and the
Contemplated Transactions.
5.3 Current Information
During the period from the date of this Agreement to the Closing Date, the
Sellers and the FCS Companies shall cause one or more of their representatives
to confer on a regular and frequent basis with representatives of Buyer to
report on the general status of the FCS Companies' ongoing operations. Sellers
and the FCS Companies shall promptly notify Buyer of any material change in the
normal course of the business of the FCS Companies or in the operation of its
properties of the FCS 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 FCS Companies, and will keep Buyer fully informed with respect to
such events.
5.4 [Intentionally Omitted]
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 FCS Companies will, and the
Controlling Sellers shall cause the FCS Companies to:
(a) conduct the business of the FCS Companies only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current commercial
property services organizations of the FCS Companies, keep available the
services of the current officers, employees, and agents of the FCS
Companies and maintain the relations and good will with owners and tenants
of Properties, suppliers, customers, landlords, creditors, employees,
agents, and others having business relationships with the FCS Companies.
During the period from the date hereof to and including the Closing Date, except
as expressly contemplated hereby, without the prior written consent of Buyer,
none of the FCS Companies will have:
(a) incurred any liability or obligation of any material nature
(whether accrued, absolute, contingent or otherwise), except in the
Ordinary Course of Business;
(b) permitted any of its assets to be subjected to any Encumbrance;
<PAGE>
(c) sold, transferred or otherwise disposed of any assets except in
the Ordinary Course of Business, provided, however, that Sellers may
dispose of a certain automobile, a 1994 Honda Accord listed as an Owned
Asset, so long as the FCS Companies shall have no liability in respect of
such automobile or any lien related thereto as of the Closing Date, and
such lien shall be released prior to the Closing Date;
(d) made any capital expenditure or commitment therefor, except in the
Ordinary Course of Business;
(e) redeemed, purchased or otherwise acquired any shares of its
capital stock or any option, warrant or other right to purchase or acquire
any such shares;
(f) borrowed money or made any loan to any Person;
(g) written off as uncollectible any note or accounts receivable,
except write-offs in the Ordinary Course of Business charged to applicable
reserves, none of which individually or in the aggregate is material to any
of the FCS Companies;
(h) granted any increase in the rate of wages, salaries, bonuses or
other remuneration of any executive employee, affiliated brokers, or other
employees;
(i) cancelled or waived any claims or rights of substantial value;
(j) made any change in any method of accounting or auditing practice;
(k) hired any additional or replacement employees or engaged
additional or replacement independent contractors;
(l) entered into any modification of any Contracts except in the
Ordinary Course of Business;
(m) agreed, whether or not in writing, to do any of the foregoing;
(n) caused the Sellers or the FCS Companies to, without the prior
consent of Buyer, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of
the changes or events listed in Section 3.16 is likely to occur.
5.6 Miscellaneous Agreements and Consents
The Sellers and the FCS Companies shall use their Best Efforts to: (a)
satisfy all the conditions precedent to their own and all other parties'
obligations hereunder; (b) obtain Consents necessary or desirable for the
consummation of the transactions contemplated by
<PAGE>
this Agreement; and (c) remove any condition or state of facts pertaining to any
of them or their respective subsidiaries, as applicable, that otherwise would
make consummation of the transactions contemplated hereby a violation of
applicable law or a breach of a Contract (including any FCS Services Agreement)
to which any of the FCS Companies or any Seller is a party. The Sellers and the
FCS Companies agree promptly to execute at the reasonable request of Buyer
before, on or after the Closing Date any documents or materials reasonably
necessary to effect the transactions contemplated by this Agreement, including,
without limitation, information to auditors respecting the operations of the FCS
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 FCS Companies.
5.7 Access and Investigation; Delivery
Between the date of this Agreement and the Closing Date, Controlling
Sellers and the FCS Companies shall:
(a) afford Buyer and its Representatives and advisors (collectively,
"Buyer's Advisors") full and free access to the FCS Companies' personnel,
(and will use their Best Efforts to afford Buyer and Buyer's Advisors
reasonable access to the Managed Properties) and to Applicable Contracts,
books and records, and other documents and data;
(b) shall promptly deliver to Buyer 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 FCS Company as of the date of
this Agreement) that would have been required by the terms of this
Agreement to be delivered to Buyer by any Seller or any FCS 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 FCS
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 Buyer, 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 FCS Companies as
of the date of this Agreement;
(c) promptly deliver to Buyer and Buyer's Advisors copies of all such
Contracts, books and records, and other existing documents and data as
Buyer may reasonably request; and
(d) promptly deliver to Buyer and Buyer's Advisors such additional
financial, operating, and other data and information as Buyer may
reasonably request.
<PAGE>
5.8 Notification
Between the date of this Agreement and the Closing Date, each of the
Controlling Sellers will promptly notify Buyer in writing if any of the Sellers
or any of the FCS 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 FCS 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 FCS Companies
herein if this Agreement were dated the date of the occurrence or discovery of
any such fact or condition, the Controlling Sellers will promptly deliver to
Buyer written notice specifying such change (a "Modification Notice"). During
the same period, each Controlling Seller will promptly notify Buyer of the
occurrence of any Breach of any covenant of Sellers in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.9 No Negotiation
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Sellers will not, and will not permit the FCS 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 non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of the FCS Companies, or any of the capital stock
of the FCS Companies, or any merger, consolidation, business combination, or
similar transaction involving the FCS Companies.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Buyer
will, and will cause each Related Person to, cooperate with Sellers with respect
to all filings that Sellers are required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Sellers
in obtaining all consents identified in Exhibit 3.2 hereof; provided
<PAGE>
that this Agreement will not require Buyer to dispose of or make any change in
any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
6.2 Miscellaneous Agreements and Consents
Each of Buyer and IFG shall use its Best Efforts to: (a) satisfy all the
conditions precedent to its own and all other parties' obligations hereunder;
(b) obtain Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement; and (c) remove any condition or
state of facts pertaining to it or its subsidiaries, as applicable, that
otherwise would make consummation of the transactions contemplated hereby a
violation of applicable law or a breach of a Contract to which Buyer is a party.
Buyer agrees promptly to execute at the reasonable request of Sellers'
Representative before, on or after the Closing Date any documents or materials
reasonably necessary to effect the transactions contemplated by this Agreement.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Stock and to take the other actions
required to be taken by Buyer 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 Buyer, in whole or in part):
7.1 Accuracy of Representations
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 as of the Closing Date as if made on the Closing
Date, without giving effect to any Modification Notice.
7.2 Performance
(a) All of the covenants and obligations that Sellers and the FCS
Companies are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been
duly performed and complied with.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered.
(c) All of the agreements, other documents or certificates, or actions
required to be entered into, delivered and/or taken at or prior to the
Closing in accordance with Section 2 hereof, including actions or
deliveries of Persons not a party hereto, shall have been entered into,
delivered and or taken, as applicable.
<PAGE>
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.
7.4 Additional Documents
(a) Each of the following documents must have been delivered to Buyer:
(i) an opinion of Gardner, Carton & Douglas, dated the Closing Date,
in a form mutually agreed upon by the parties;
(ii) such other documents as Buyer 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 Camins, Rosen, Frain, Brandwein and Dieter shall have
entered into their respective Employment Agreements, to be effective upon
the Closing.
7.5 No Proceedings
There must not have been commenced or Threatened against Buyer, or against
any Person affiliated with Buyer, 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 FCS Companies, or
(b) is entitled to all or any portion of the Purchase Price payable for the
Stock.
7.7 [Intentionally Omitted]
<PAGE>
7.8 Release of Liens
On or before the Closing Date, the FCS Companies shall have and the Sellers
shall have caused the FCS Companies to obtain a release of all Encumbrances on
any assets of the FCS Companies, including any liens or security interests
granted to American National Bank and LaSalle National Bank.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Stock and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
8.1 Accuracy of Representations
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects 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.
8.2 Buyer's Performance
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and
complied with in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4 and must have made the cash
payments required to be made by Buyer pursuant to Sections 2.4(b)(i) and
2.4(b)(ii).
(c) All of the agreements, other documents or certificates, or actions
required to be entered into, delivered and/or taken at or prior to the
Closing in accordance with Section 2 hereof, including actions or
deliveries of Persons not a party hereto, shall have been entered into,
delivered and or taken, as applicable.
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
Buyer must have caused the following documents to be delivered to Sellers:
<PAGE>
(a) an opinion of Farris, Warfield & Kanaday, PLC, dated the Closing
Date, in the form mutually agreed upon by the parties; 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 Buyer, (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (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 Injunction
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 Release of Guaranties
IFG shall have either (a) obtained the release of the guaranties of the
Controlling Sellers in favor of LaSalle National Bank under a line of credit
from such bank as security for the obligations of the FCS Companies under their
lease of certain office space at 300 West Washington, Chicago, Illinois, or (b)
indemnified the Controlling Sellers for their obligations and liabilities as
guarantors under such guaranties.
8.7 No Material Adverse Change
There must not have occurred any material adverse change in the business,
client relations, operations, properties, prospects, assets, or condition of the
FCS Companies, and no event shall have occurred or circumstance shall exist that
has specific application to the FCS Companies (other than general economic or
industry conditions) that could reasonably be expected to result in such a
material adverse change .
<PAGE>
9. TERMINATION
9.1 Termination Events
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Sellers if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has
not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply
with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; 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 Buyer and Sellers' Representative; or
(d) by either Buyer or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before
April 15, 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 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
<PAGE>
All representations and warranties in this Agreement and in any certificate
or document delivered pursuant to this Agreement will survive the Closing until
a date 30 months 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; 3.13; 3.19
(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); 3.17(b)(ii); the first paragraph of
3.24
(c) The representations and warranties of Buyer contained in
Section 4.2(a) 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 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 and Payment of Damages by Controlling Sellers
Subject to Section 10.5, the Controlling Sellers will indemnify and hold
harmless Buyer, the FCS Companies, and their respective Representatives,
stockholders, 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 costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
<PAGE>
(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 or any of
the FCS Companies pursuant to 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 or any of the FCS Companies of
any covenant or obligation of such Seller or such FCS Company in this
Agreement;
(d) any conduct, action, or inaction of any Seller, the FCS Companies,
any Related Person or Representative thereof, occurring, arising or related
to the period on or prior to the Closing Date (whether known or unknown on
the Closing Date) or any circumstances related to the operation, management
or ownership of the FCS Companies or any Properties by any Seller, the FCS
Companies or Related Person or Representative thereof occurring, arising or
related to the period on or prior to the Closing Date (whether known or
unknown on the Closing Date);
(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 Closing
Date, except for liabilities or obligations reflected or reserved against
in the 1996 Balance Sheets;
(f) [intentionally omitted];
(g) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any of the Sellers or any
of the FCS Companies (or any Person acting on their behalf) in connection
with any of the Contemplated Transactions;
(h) any claim by any Person against IFG or any Related Person thereof
for payment to or allocation among any Person other than the Sellers of all
or a portion of the Purchase Price or in connection with any claim that IFG
or any Related Person thereof induced (in connection with the effectuation
of the Contemplated Transactions) any Seller or any of the FCS Companies to
breach any Contract in effect prior to the Closing Date to which any Seller
or any of the FCS Companies is a party or by which any of them is bound;
and
(i) any costs arising in respect of the FCS Closing Payables for which
any Person seeks reimbursement from the FCS Companies, IFG and/or a Related
Party thereof and any obligations, expenses and costs related thereto,
unless the FCS
<PAGE>
Companies, IFG or a Related Party thereof were grossly negligent in payment
of such FCS Closing Payables; and the collection, compromising or other
settlement after the Closing of the FCS Closing Receivables and any
obligations, expenses and costs (and reserves therefor) related, arising
under, or otherwise payable in connection with the FCS Closing Receivables,
including, without limitation, costs of collection and commissions and
obligations to brokers.
The indemnification obligations of the Controlling Sellers pursuant to
Section 10.2 (c) through (i) exist regardless of whether such obligations
may also arise as a Breach under Section 10.2 (a), (b) or (c) above.
10.3 Indemnification and Payment of Damages by Non-Controlling Sellers;
Limitations Thereon
Each of the Non-Controlling Sellers will indemnify and hold harmless the
IFG Indemnified Persons for, and will pay to the IFG Indemnified Persons any
Damages arising, directly or indirectly, from or in connection with any Breach
of the following representation and warranty as to himself only and not as to
any other Seller (but for no other Breach of any other provision of this
Agreement, including any other representation or warranty of any of the Sellers
under this Agreement):
Each Non-Controlling Seller is and will be on the Closing Date the record
and beneficial owner and holder of, and has good title to, the shares, listed on
Exhibit 3.1(a) as owned by such Non-Controlling Seller, of the capital stock of
the FCS Companies free and clear of all Encumbrances.
The foregoing representation and warranty shall survive the Closing
indefinitely.
Notwithstanding anything in this Agreement to the contrary:
(a) No Non-Controlling Seller shall be liable to any IFG Indemnified
Person under this Section 10.3 in an amount in excess of the portion of the
Purchase Price (including any Contingent Payment) received by such
Non-Controlling Seller; and
(b) The remedies provided in this Section 10.3 shall be the exclusive
remedies that may be available to Buyer or the other IFG Indemnified
Persons against any of the Non- Controlling Sellers in connection with or
related to this Agreement or the Contemplated Transactions.
10.4 Indemnification and Payment of Damages of Buyer and IFG
Buyer and IFG will indemnify and hold harmless Sellers, and will pay to
Sellers the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any
<PAGE>
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions, provided, however, that in no event shall Buyer
or IFG or any of the FCS Companies provide indemnification to the Controlling
Sellers for actions or inactions of the Controlling Sellers after the Closing
Date except as required by applicable law.
10.5 Indemnity Limitations--Controlling Sellers
(a) The Controlling Sellers will have no liability (for
indemnification or otherwise) under Section 10.2 until the total of all
Damages with respect to such matters exceeds Twenty-Five Thousand Dollars
($25,000.00), provided, however, that if the total of the Damages exceeds
$25,000.00, the Controlling Sellers shall be liable for the total amount of
all Damages. Notwithstanding the foregoing general limitation or any other
provision of this Agreement seemingly to the contrary, this Section 10.5(a)
shall not apply to Section 2.6, Section 2.15, Section 2.16 or Section 2.17
and shall not limit the liabilities and obligations of the Controlling
Sellers described therein.
Notwithstanding anything in this Agreement to the contrary,
(i) the aggregate Damages for which the Controlling Sellers shall be
liable under this Section 10 shall be limited to the amount of Purchase
Price (including any Contingent Payments) received by Sellers;
(ii) the Damages for which any single Controlling Seller shall be
liable under this Section 10 shall be limited to an amount equal to the
amount of the Purchase Price (including Contingent Payments) received by
such Controlling Seller;
provided, however, that the limitation in (i) and (ii) immediately preceding
shall not apply to:
(1) any payment of note payables of any FCS Companies as of the time
immediately preceding the Closing Date of which any FCS Company or any
Seller has Knowledge;
(2) payments required to be made by, or obligations allocated to, the
Sellers pursuant to Section 2.6, Section 2.15, Section 2.16, or Section
2.17;
(3) payments made by a Seller for a liability of a Seller arising
under Environmental Laws as a result of Sellers' ownership of or control
over one or more of the FCS Companies during any period prior to the
Closing Date
<PAGE>
("Sellers' Control Environmental Liability") (and Buyer shall have the
right to cross claim or otherwise assert against the Controlling Sellers
claims related to Sellers' Control Environmental Liability);
(4) an indemnity claim against Controlling Sellers for payment after
the Closing of an indemnification obligation by an FCS Company to a Person
who was a Controlling Seller of an FCS Company prior to the Closing who is
entitled to indemnification from an FCS Company, which indemnity claim
arises under applicable statutory law, Organizational Documents of an FCS
Company or otherwise;
(5) as to any Controlling Seller, any Breach by such Controlling
Seller of any of Sellers' representations and warranties of which such
Controlling Seller had actual knowledge at any time prior to the date on
which such representation and warranty is made or any intentional Breach by
any of the Sellers or any of the FCS Companies of any covenant or
obligation.
(6) any reimbursement or other claim brought against the FCS
Companies, IFG or a Related Party thereof by a third party, seeking to
recoup amounts previously paid by the FCS Companies in connection with the
FCS Closing Payables, unless the FCS Companies, IFG or a Related Party
thereof acted with gross negligence in respect of the FCS Closing Payables.
(b) The remedies provided in Section 10, Section 11.2, Section 2.7 and
Section 2.10 shall be the exclusive remedies available to Buyer or the
other IFG Indemnified Persons against any of the Controlling Sellers in
connection with or related to this Agreement or the Contemplated
Transactions.
(c) IFG agrees, unless it is administratively impracticable or unduly
burdensome based on the inter-relationship of multiple claims, to cause the
IFG Indemnified Parties to organize any indemnification claims on a
separable claim by claim basis and to seek indemnification against the
Controlling Sellers (or Sellers, if applicable under Section 10.3) on such
an individual claim basis. IFG and Buyer agree that the IFG Indemnified
Parties will not seek, with respect to any single claim or any single set
of related multiple claims, to collect from any single Controlling Seller
(or Seller, if applicable under Section 10.3) an amount in excess of one
hundred fifty percent (150%) of the amount of the single claim or single
set of related multiple claims.
10.6 Indemnity Limitations--Buyer and IFG
(a) Buyer and IFG will have no liability (for indemnification or
otherwise) under Section 10.4 until the total of all Damages with respect
to such matters exceeds Twenty-Five Thousand Dollars ($25,000.00),
provided, however, that if the total of the Damages exceeds $25,000.00,
Buyer and IFG shall be liable for the total amount of all Damages.
<PAGE>
(b) Notwithstanding anything in this Agreement to the contrary, the
aggregate Damages for which Buyer, IFG or any Related Person thereof shall
be liable under this Section 10.4 shall be limited to the aggregate
purchase price (including Contingent Payments) paid to the Sellers;
provided, however, that such limitations shall not apply to any Breach of
any of Buyer's representations and warranties of which Buyer or IFG had
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by Buyer of any of the Buyer's
or IFG's covenants or obligations.
(c) Other than as provided in Section 9.2, the remedies provided in
Section 10, Section 11.2, Section 2.7 and Section 2.10 shall be the
exclusive remedies available to Sellers or any Sellers' Indemnified Persons
against Buyer, IFG or any Related Person thereof in connection with or
related to this Agreement or the Contemplated Transactions.
10.7 Effect of Insurance Proceeds Received
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.
10.8 Procedure for Indemnification--Third Party Claims
(a) Promptly after receipt by an indemnified party under Sections
10.2, 10.3 or 10.4, of notice of the commencement of any 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, 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 10.8(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 be
entitled to participate in such Proceeding and, to the extent that it
wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails
to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect
to such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the
<PAGE>
indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of
such Proceeding, in each case subsequently incurred by the indemnified
party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no
effect on any other claims that may be made against the indemnified party,
and (B) the sole relief provided is monetary damages that are paid in full
by the 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 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) 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.
10.9 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.
10.10 Treatment of Indemnification Payment
If Buyer, IFG 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.
<PAGE>
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. Sellers will cause the FCS Companies not to incur any
out-of-pocket expenses in connection with this Agreement. In the event of
termination of this Agreement, the obligation of each party to pay its own
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 (other than a
Disputed Matter under Section 2.7 and the enforcement of specific relief under
Section 2.10(e) hereof, which shall be resolved in the manner prescribed
therein), including but not limited to those arising out of or relating to this
Agreement, including any claim based on or arising from an alleged tort, (but
excluding claims, controversies and disputes under the 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 Delaware 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 Wilmington, Delaware,
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. Notwithstanding any other term of this Agreement, (i) the party
seeking and initiating the arbitration shall advance funds, as necessary, to
institute and conduct the arbitration procedure; and (ii) following a final
determination of the matter submitted to arbitration, the losing party shall
bear, and shall promptly pay, the cost of the arbitration procedure and of the
reasonable costs and expenses, including attorneys' fees, of the prevailing
party.
<PAGE>
11.3 Confidentiality/Public Announcement
Between the date of this Agreement and the Closing Date, Buyer, Sellers and
the FCS Companies will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer and the FCS Companies to
maintain in confidence, any confidential or proprietary information obtained in
confidence from another party in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is necessary or
appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
On the day of or on the first business day after the execution of this
Agreement and on the day of or the first business day after the Closing Date,
Buyer may issue press releases concerning the transactions effected by this
Agreement. Any other public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines. Unless consented to by Buyer
in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the FCS Companies to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Sellers and Buyer will consult with each other concerning the means by which the
FCS Companies' employees, clients, customers and others having dealings with the
FCS Companies will be informed of the Contemplated Transactions, and Buyer will
have the right to be present for any such communication.
The Controlling Sellers acknowledge that certain of the terms and
conditions of this Agreement contain important confidential information the
disclosure of which could result in a competitive disadvantage to Buyer and IFG.
Accordingly, each Controlling Seller agrees never to disclose to any Person the
terms and provisions of his or any other Controlling Sellers' Employment
Agreement or of Sections 2.5 and 2.10 of this Agreement except (a) to his legal
or tax advisors, (b) to officers or employees of IFG, (c) when disclosure of
such information is necessary in connection with legal proceedings, (d) to other
Sellers, or (e) with the prior written consent of Buyer, which consent will not
be unreasonably withheld.
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
<PAGE>
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: Ronald T. Frain
% Frain, Camins & Swartchild Incorporated
300 West Washington
Chicago, Illinois 60606
Telephone: 312-444-9797
Facsimile: 312-444-9398
with a copy to: Gardner, Carton, & Douglas
Suite 3400, Quaker Tower
321 N. Clark Street
Chicago, Illinois 60610
Telephone: (312) 644-3000
Facsimile: (312) 644-3381
Attention: Dennis J. Carlin
FCS (Pre-Closing): Frain, Camins & Swartchild, Incorporated
300 West Washington
Chicago, Illinois 60606
Telephone: 312-444-9797
Facsimile: 312-444-9398
Scott J. Brandwein
FC&S Management Company
300 West Washington
Chicago, Illinois 60606
Telephone: 312-444-9797
Facsimile: 312-444-9398
Attention: Harvey Camins
Construction Interiors, Inc.
300 West Washington
Chicago, Illinois 60606
Telephone: 312-444-9797
Facsimile: 312-444-9398
Attention: Robert B. Rosen
<PAGE>
with a copy to: Gardner, Carton & Douglas
Suite 3400, Quaker Tower
321 N. Clark Street
Chicago, Illinois 60610
Telephone: (312) 644-3000
Facsimile: (312) 644-3381
Attention: Dennis J. Carlin
If to Buyer: Insignia Commercial Group, Inc.
c/o Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Telephone: (864) 239-1675
Facsimile: (864) 239-1096
Attention: John K. Lines, General Counsel
and Secretary
If to 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,
Executive Managing Director
With a copy to: Farris, Warfield & Kanaday, PLC
SunTrust Center, Suite 1900
424 Church Street
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 Delaware, or, if it has or can acquire jurisdiction, in the United States
District Court for the District of Delaware, 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
<PAGE>
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 Waiver
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 Entire Agreement and Modification
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between Buyer, the
FCS Companies and Sellers dated January 24, 1997) and constitutes (along with
the documents referred to in this Agreement) a complete and exclusive statement
of the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.9 Stock Options
After the Effective Time, IFG will award to the Sellers and certain key
employees of the FCS Companies stock options to purchase an aggregate of 25,000
shares of the Class A common stock of IFG in a manner consistent with IFG's
normal practices and its 1992 Stock Incentive Plan, as amended.
11.10 Assignments, Successors, And No Third-Party Rights
Neither Buyer nor any of the Sellers may assign any of its rights under
this Agreement without the prior consent of Buyer and the Sellers'
Representative, as applicable, except that Buyer may assign any of its rights
(but not its obligations) under this Agreement to any Subsidiary of IFG. Subject
to the preceding sentence, this Agreement will apply to,
<PAGE>
be binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
11.11 Severability
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 Section Headings; Construction
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
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 Delaware
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.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Asset
Purchase Agreement as of the date first written above.
BUYER:
INSIGNIA COMMERCIAL GROUP, INC.
By:
FRANK M. GARRISON
Title:
IFG:
INSIGNIA FINANCIAL GROUP, INC.
By:
FRANK M. GARRISON, Executive Managing Director
SELLERS:
KIRKLAND B. ARMOUR
SCOTT J. BRANDWEIN
HARVEY B. CAMINS
JAMES L. DEITER
LYNN HOMEWOOD FENDER
<PAGE>
RONALD T. FRAIN
JAY HINSHAW
THOMAS E. MOXLEY
ROBERT B. ROSEN
JAMES H. SWARTCHILD, JR.
DAVID TROPP
GREGG F. WITT
<PAGE>
FCS COMPANIES:
FC&S MANAGEMENT COMPANY
By:
HARVEY B. CAMINS
Title:
CONSTRUCTION INTERIORS, INC.
By:
HARVEY B. CAMINS
Title:
FRAIN, CAMINS & SWARTCHILD, INC.
By:
HARVEY B. CAMINS
Title:
<PAGE>
INDEX OF EXHIBITS
Exhibit 1: FCS Closing Receivables (Additional Transactions Portion)
Exhibit 2.5(b)-1: Letter describing portfolio of contracts (Cohen and Sherman
Contracts)
Exhibit 2.5(b)-2: Illinois IFG Properties
Exhibit 2Allocated Owners and Tenants
Exhibit 2Continuing Liabilities
Exhibit 2.9: Allocation of Purchase Price
Exhibit 2.10(c)-1: Existing FCS Client - (Closing Date/12 Month Look-back)
Exhibit 2.10(c)-2: Existing FCS Client - (Additional Persons)
Exhibit 2.12: Form of Employment Agreement
Exhibit 3 Corporate Information (separately listed for each of FCS Companies)
Exhibit 3 Conflicts/Liability Created by Entering Into Agreement/Contemplated
Transactions (Sellers or FCS Companies)
Exhibit 3 Notice or Consent Required for Agreement or Contemplated
Transactions (Sellers or FCS Companies)
Exhibit 3.6: FCS Companies: Leasehold and Other Interests in Property
Exhibit 3 Owned Assets
Closing Exhibit 3.8(c): FCS Closing Receivables (Effective Time)
Exhibit 3.9-1: Accounts Payable (as of date of 1996 Balance Sheets)
Exhibit 3.9-2: Accounts Payable (as of March 10, 1997)
Closing Exhibit 3.9-3: Accounts Payable (as of 2 business days before the
Closing Date)
Exhibit 3 Liabilities
Exhibit 3 Tax Returns/Contested Taxes
Exhibit 3 Tax Audits/Adjustments/Deficiencies/Other Related Matters
<PAGE>
Exhibit 3 Proposed Tax Assessment
Exhibit 3 Plans):
Exhibit 3 Matters Concerning Compliance/Obligations - Legal Requirements
Exhibit 3 Governmental Authorizations
Exhibit 3 List/Description of Pending Proceedings
Exhibit 3 Orders Affecting FCS Companies, Sellers, Certain Individuals
Exhibit 3 Compliance With Orders Affecting FCS Companies
Exhibit 3 Certain Changes and Events Affecting FCS Companies
Exhibit 3 FCS Services Agreements
Exhibit 3 Applicable Contracts/Services-Goods-Materials Provided to FCS
Companies
Exhibit 3.17(a)(iii): Applicable Contracts Not In Ordinary Course
Exhibit 3 Applicable Contracts Concerning Real and/or Personal Property
Closing E Applicable Contracts Concerning Intellectual Property
Exhibit 3 Applicable Contracts/Labor Union or Other Employee Representative
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 Applicable Contracts/Payments Other Than Direct Payments For
Goods
Exhibit 3 Current Powers of Attorney
Exhibit 3 Applicable Contracts Not in Ordinary Course/Consequential Damages
Exhibit 3.17(a)(xii): Applicable Contracts For Capital Expenditures
Exhibit 3.17(a)(xiii): Contractual Warranties/Guaranties by FCS Companies
Not In Ordinary Course
<PAGE>
Exhibit 3.17(a)(xiv): Obligations For Borrowed Money
Exhibit 3 Description of Amendments to Contracts
Exhibit 3 Contracts of Sellers or Related Parties Affecting FCS Companies
Exhibit 3 Contracts Not in Full Force and Effect or Not Valid and Enforceable
Exhibit 3 Compliance (Contracts to Which FCS Companies Are Parties)
Exhibit 3 Insurance Policies
Exhibit 3 Self-Insurance/Risk Sharing/Obligations to Third Parties Regarding
Insurance
Exhibit 3 Insurance Loss Experience and Claims/Self-Insurance Loss Experience
Exhibit 3 Certain Disclosures Concerning Insurance Coverage for Sellers, FCS
Companies or Officers or Directors of FCS Companies
Exhibit 3 Disclosure as to Environmental Matters
Exhibit 3.20(a): Information Concerning Current Employees and Directors
Exhibit 3 Information Concerning Retired Employees and Directors
Exhibit 3 Contracts Related to Intellectual Property Assets
Exhibit 3 Current and Former Employees/Restrictions by Persons Other Than
FCS Companies
Exhibit 3 Copyrights and Marks
Exhibit 3 Defaults/FCS Services Agreements
Exhibit 3 Sellers and/or Related Parties - Contracts/Rights Against FCS
Companies
Exhibit 4.2: Buyer's Consents
Exhibit 5.7: Applicable Contracts and Other Documents Post-Signing
- Pre-Closing
For Immediate Release Contact: Stephen B. Siegel
(212) 984-8100
James A. Aston
(864) 239-1661
INSIGNIA FINANCIAL GROUP, INC. ENTERS AGREEMENT
TO ACQUIRE CHICAGO'S FRAIN CAMINS & SWARTCHILD
Greenville, SC, March 19, 1997 -- Insignia Financial Group, Inc. (NYSE: IFS)
today announced that it has entered into a definitive agreement to acquire Frain
Camins & Swartchild, Inc. ("FC&S"). FC&S is one of the premier full-service
commercial, retail and industrial real estate brokerage and management firms in
Chicago. The purchase price was not disclosed.
FC&S, which had 1996 revenues in excess of $14 million, will change its
name to Insignia/Frain Camins & Swartchild ("Insignia/FC&S") and operate as a
subsidiary of Insignia Commercial Group, Inc.
"The acquisition of FC&S is the next vital step in our plans to build the
premier commercial real estate services provider on a national basis," said
Andrew L. Farkas, Insignia Financial Group's Chairman, President & Chief
Executive Officer. "Our strategy has been to selectively acquire the finest
firms in key markets in order to allow us to offer first-class services to our
commercial clients across the country. FC&S fits perfectly with this strategy,
providing us with a substantial platform from which to grow our business in the
Chicago marketplace."
One of the largest fully-integrated real estate service providers in the
country, Insignia launched its commercial expansion program in earnest in 1996,
with the acquisition of Paragon Commercial Group, a real estate management and
development company, and Edward S. Gordon Company (now operating as
Insignia/Edward S. Gordon Co., Inc.), the leading full-service commercial real
estate brokerage firm in New York City.
FC&S is the third commercial acquisition by Insignia thus far in 1997. In
early March, the Company announced the acquisition of Rostenberg-Doern Company,
Inc., a leading full-service firm serving Westchester County, NY and Fairfield
County, CT. The combination of Insignia/ESG's Westchester/Fairfield operations
and Rostenberg-Doern has created the largest firm serving these two
marketplaces. Also in early March, Insignia acquired HMB Property Services, a
service provider that gives Insignia control over long- term management and
leasing rights with respect to 1.1 million sq. ft. of prime office space in the
Denver market.
In aggregate, the three acquisitions increase Insignia's commercial real
estate management portfolio by more than 12 million sq. ft, and, on an
annualized basis, add more than $18 million to the Company's revenues.
"Even with the growing strength of the commercial real estate recovery, the
pricing for the three acquisitions this year has been well within our
parameters," Mr. Farkas said. "We have the ability to provide other companies
with an opportunity to be an integral component in our long-term strategy. This
gives us a major advantage in pursuing acquisitions." Chicago Gateway to Midwest
"Chicago is a linchpin in our national strategy," said Insignia Commercial
Group President Stephen B. Siegel, "and in FC&S, we have one of the foremost
firms serving both the industrial and office markets. We see an opportunity to
grow our local market- share substantially, and to use the Chicago office as a
gateway to other major cities in the Midwest."
FC&S, founded in 1978, serves leading owners and users of office, retail
and industrial property and vacant land in the Midwest. The firm provides
services for over 10 million sq. ft. of space in the Chicago metropolitan area,
and offers a full range of services, including property management and leasing,
tenant representation, industrial sales and leasing, land acquisition and
disposition, property, investment, retail, consulting and construction services.
The ESG and FC&S acquisitions give Insignia Commercial Group a potent
corporate and tenant representation practice to complement its property
management and agency leasing business. The company provides services for more
than 149 million sq. ft. of office, industrial and retail properties nationwide,
including FC&S's portfolio.
"Insignia/ESG is widely considered the preeminent firm in our industry when
it comes to helping major clients address their real estate needs. They have
sophisticated methodologies and an approach to client representation that no
other firm has been able to match," said Harvey B. Camins, FC&S Vice Chairman.
"Our clients will benefit significantly from the more sophisticated services we
will offer as well as from our ability to leverage Insignia's and Insignia/ESG's
extensive corporate and institutional relationships."
Mr. Camins will assume the role of President of Insignia Commercial Group's
Midwest Region. FC&S's other senior principals will also join Insignia/FC&S:
Ronald T. Frain, FC&S Chairman; Robert B. Rosen, FC&S Vice Chairman, Scott J.
Brandwein, FC&S President, James L. Dieter, FC&S Executive Vice President, and
James H. Swartchild, FC&S Senior Vice President.
FC&S recently concluded one of the largest building sales in Downtown
Chicago, representing Overseas Partners Capital Corporation in its acquisition
of 333 West Wacker Drive. FC&S also has a stable of corporate services clients
for whom it provides services on a national basis, including United Airlines,
Cottel/TruValue, Quill and Tellabs.
FC&S has a 50-person stable of brokers in two offices, one in Downtown
Chicago and another in the Northwest suburbs near O'Hare Airport.
With corporate headquarters in Greenville, SC, Insignia Financial Group,
Inc. is a fully-integrated real estate services company. Insignia is the largest
manager of multifamily residential properties in the United States and is also
among the largest managers of commercial properties. Insignia Financial Group,
Inc. commenced operations in December 1990 and has since grown to provide
services for over 2,500 properties, which include approximately 283,000
residential units (including cooperative and condominium units) and in excess of
149 million sq. ft. of retail, commercial and industrial space.
For Immediate Release Contact: Stephen B. Siegel
(212) 984-8100
James A. Aston
(864) 239-1661
INSIGNIA FINANCIAL GROUP, INC. COMPLETES ACQUISITION
OF CHICAGO'S FRAIN CAMINS & SWARTCHILD, INC.
Greenville, SC, April 1, 1997 -- Insignia Financial Group, Inc. (NYSE: IFS)
today announced that it has completed its acquisition of Frain Camins &
Swartchild, Inc. ("FC&S"), a leading full-service commercial, retail and
industrial real estate brokerage and management firms in Chicago. On March 19,
Insignia had announced an agreement to acquire FC&S, which had 1996 revenues in
excess of $14 million.
FC&S will change its name to Insignia/Frain Camins & Swartchild
("Insignia/FC&S") and operate as a subsidiary of Insignia Commercial Group, Inc.
"The acquisition of FC&S is the next vital step in our plans to build the
premier commercial real estate services provider on a national basis," said
Andrew L. Farkas, Insignia Financial Group's Chairman, President & Chief
Executive Officer.
"Our strategy has been to selectively acquire the finest firms in key
markets in order to allow us to offer first-class services to our commercial
clients across the country. FC&S fits perfectly with this strategy, providing us
with a substantial platform from which to grow our business in the Chicago
marketplace," he said.
<PAGE>
- - 2 -
"Chicago is a linchpin in our national strategy," added Insignia Commercial
Group President Stephen B. Siegel, "and in FC&S, we have one of the foremost
firms serving both the industrial and office markets. We see an opportunity to
grow our local market- share substantially, and to use the Chicago office as a
gateway to other major cities in the Midwest."
FC&S, founded in 1978, serves leading owners and users of office, retail
and industrial property and vacant land in the Midwest. The firm provides
services for over 10 million sq. ft. of space in the Chicago metropolitan area,
and offers a full range of services, including property management and leasing,
tenant representation, industrial sales and leasing, land acquisition and
disposition, property, investment, retail, consulting and construction services.
FC&S is the third commercial acquisition by Insignia thus far in 1997. In
aggregate, these acquisitions, which include Stamford, CT-based Rostenberg-Doern
Company, Inc., Denver-based HMB Property Services, and FC&S, will increase
Insignia's commercial real estate management portfolio by more than 12 million
sq. ft, and add more than $18 million to the Company's revenues on an annual
basis.
"Even with the growing strength of the commercial real estate recovery, the
pricing for the three acquisitions this year has been well within our
parameters," Mr. Farkas said. "We have the ability to provide other companies
with an opportunity to be an integral component in our long-term strategy. This
gives us a major advantage in pursuing acquisitions."
<PAGE>
- - 3 -
With corporate headquarters in Greenville, SC, Insignia Financial Group,
Inc. is a fully-integrated real estate services company. Insignia is the largest
manager of multifamily residential properties in the United States and is also
among the largest managers of commercial properties. Insignia Financial Group,
Inc. commenced operations in December 1990 and has since grown to provide
services for over 2,500 properties, which include approximately 265,000
residential units (including cooperative and condominium units) and in excess of
149 million sq. ft. of retail, commercial and industrial space.
