UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
{X} Annual Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act
of 1934 (Fee Required)
For the fiscal year ended December 31, 1997
or
{ } Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from ............... to ...............
Commission file number 0-19066
INSIGNIA FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3591193
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No. 1)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (864) 239-1000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Class A Common Stock, $.01 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or any amendment to this
Form 10-K.
As of February 28, 1998 there were outstanding 30,511,431 shares of Class A
Common Stock. Based on the closing price of $23.375 per share of Class A Common
Stock as of such date, the aggregate market value of Registrant's Shares held by
non-affiliates was approximately $508 million.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Annual Meeting of Stockholders in Part III of this Form
10-K.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The following tables sets forth certain information as of February 28, 1998
about the Company's directors. Information about the Company's executive
officers is contained in Part I of this Annual Report.
Beginning Year of
Name Age Positions/Office Service as Director
Andrew L. Farkas 37 Chairman of the Board 1990
of Directors, President and
Chief Executive Officer
of Insignia
Robert J. Denison 56 Director of Insignia 1996
Robin L. Farkas 64 Director of Insignia 1993
Merril M. Halpern 63 Director of Insignia 1993
Robert G. Koen 51 Director of Insignia 1993
Michael I. Lipstein 61 Director of Insignia 1993
Buck Mickel 72 Director of Insignia 1993
Andrew L. Farkas has been President of Metropolitan Asset Group, Ltd.
("MAG"), a real estate investment banking firm, since 1983, has been President
of Insignia from its inception until January 1991 and since January 1995. He has
been Chairman and Chief Executive Officer of Insignia since January 1991. He has
been Chairman of Insignia Properties Trust, a subsidiary of Insignia, since
January 1997.
Robert J. Denison has been a director of Insignia since May 1996. Mr.
Denison has been General Partner of First Security Company II, L.P., an
investment advisory firm, for more than the past five years.
Robin L. Farkas has been a director of Insignia since August 1993. Mr.
Farkas is the retired Chairman of the Board and Chief Executive Officer of
Alexander's Inc., a real estate company. He served in that capacity from 1984
until 1993. He is also a director of Refac Technology Development Corporation,
Noodle Kiddoodle, Inc. and Containerways International, Ltd..
Merril M. Halpern has been a director of Insignia since August 1993. Mr.
Halpern has been Chairman of the Board of Directors and chief executive officer
of Charterhouse Group International, Inc. ("Charterhouse"), a privately-owned
investment firm which, among other things, actively engages in making private
equity investments in a broad range of industrial and service companies located
primarily in the United States, for more than the past five years. Mr. Halpern
is also a director of American Disposal Services, Inc., Designer Holdings Ltd.
and Microwave Power Devices, Inc.
Robert G. Koen has been a director of Insignia since August 1993. Since
February 1996, Mr. Koen has been a partner in the law firm of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., which represents Insignia or certain of its
affiliates from time to time. From January 1991 to February 1996, Mr. Koen was a
partner in the law firm of LeBoeuf, Lamb, Greene & MacRae.
Michael I. Lipstein has been a director of Insignia since August 1993. Mr.
Lipstein is, and for more than the past five years has been, self-employed in
the real estate business, including ownership, management, and lending.
Buck Mickel has been a director of Insignia since August 1993. Mr. Mickel
has been Chairman of the Board and Chief Executive Officer of RSI Holdings, a
company offering distribution of outdoor equipment, for more than the past five
years. Mr. Mickel is also a director of Fluor Corporation, The Liberty
Corporation, Emergent Group, Inc., Delta Woodside Industries, Inc., Duke Power
Company, and Textile Hall Corporation.
All directors hold office until their successors have been elected and
qualified or until their earlier resignation or removal. Directors are elected
annually. There are no family relationships between any of the directors or
executive officers of Insignia, except that Robin L. Farkas is the father of
Andrew L. Farkas.
Insignia or Metropolitan Asset Enhancement, L.P. ("MAE"), a Delaware
limited partnership in which Insignia owns a 19.1% limited partnership interest
(as of January 1, 1998, this interest was transferred to Andrew L. Farkas under
his amended employment agreement), from time to time acquires, and MAG from time
to time has acquired, general partner interests in or general partners of
limited partnerships ("Troubled Limited Partnerships") that are or were in
default under mortgages encumbering all or a portion of their assets. Andrew L.
Farkas is the sole stockholder, a director, and a corporate officer of the sole
general partner of MAE. Such defaults usually occur as a result of the inability
of such assets to generate sufficient cash flow to service such mortgages on a
timely basis. In connection with those activities, Insignia and MAE, and in the
past MAG, typically attempt to negotiate restructurings of the outstanding
liabilities of a Troubled Limited Partnership with creditors of such
partnership. At times, it becomes desirable to cause a Troubled Limited
Partnership to seek protection under the Federal bankruptcy law to expedite such
negotiations. MAE, Insignia, MAG, their affiliates, or Andrew L. Farkas (in his
capacity as a senior officer of a corporate general partner or as an individual
general partner, as the case may be), have caused approximately fifteen
partnerships (not including lower tier partnerships) to file for protection from
creditors under Chapter 11 of the Federal Bankruptcy Code within the past five
years. None of these Chapter 11 cases have been converted to cases under Chapter
7 of the Federal Bankruptcy Code, which governs liquidations in bankruptcy.
Substantially all of such Chapter 11 cases have been resolved and/or concluded.
None of such entities were forced to seek protection from creditors under the
Federal Bankruptcy Code on an involuntary basis.
There are no arrangements or understandings between the Company and any
person as to his election as director, other than with Mr. Farkas and Mr.
Halpern as later described under "Item 11 - Executive Compensation -
Compensation of Directors and Executive Officers - Employment Agreements" and
"Item 13 - Certain Relationships and Related Transactions - Stockholders
Agreements."
The Company maintains standing Executive, Compensation, and Audit
Committees, but does not have a nominating committee. The Executive Committee,
whose members are Messrs. Andrew L. Farkas, Robin L. Farkas, Halpern, and
Lipstein, met five times during 1997. The Executive Committee meets on call and
has authority to act on most matters during intervals between Board meetings.
The Compensation Committee met seven times during 1997. Its members are Messrs.
Denison, Lipstein, and Mickel. The Compensation Committee reviews and approves
all compensation arrangements, including annual bonuses, for senior officers of
Insignia, and administers Insignia's 1992 Stock Incentive Plan and the Insignia
1995 Non-Employee Director Stock Option Plan. The Audit Committee, whose members
are Messrs. Denison, Halpern, and Koen, met three times during 1997. The Audit
Committee recommends annually to the Board of Directors the engagement of the
independent auditors of the Company and reviews with the independent auditors
the scope and results of the audits, the internal accounting controls of the
Company, audit practices, and the professional services furnished by the
independent auditors, and reviews all transactions proposed to be entered into
between the Company and any of its affiliates.
The Board of Directors met nine times during 1997. No director attended
fewer than 75% of the total number of meetings of the Board of Directors and the
Committees on which he served.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and holders of more
than 10% of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Such
officers, directors and 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based on its review of such forms that it received, the Company believes
that, during 1997, all Section 16(a) filing requirements were satisfied on a
timely basis with the exception of a filing required to report a purchase by
Joseph T. Aveni, an executive officer of the Company. The filing delinquency was
due to an administrative misunderstanding and corrected within 30 days.
<PAGE>
<TABLE>
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth the compensation of the Company's Chief
Executive Officer and the Company's four most highly compensated executive
officers, other than the Chief Executive Officer, who served as executive
officers at the end of 1997:
<CAPTION>
- ---------------------- ------- --------------------------------------- -------------------------------------- -------------
Annual Compensation Long Term Compensation
--------------------------------------- --------------------------------------
- ---------------------- ------- ----------- ----------- --------------- ---------------------------- --------- -------------
Awards Payouts
---------------------------- ---------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Compensation Awards ($) Options/SARs Payout Compen-sation
Position Year Salary ($) Bonus ($) ($) (#) ($) ($)
- ---------------------- ------- ----------- ----------- --------------- ----------- ---------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Andrew L. Farkas 1997 600,000 2,000,000 153,329 (a) ----- 61,500 (b)
Chairman, President, 1996 600,000 1,450,000 151,055 (c) 300,000 (j) 58,500 (b)
and Chief Executive 1995 600,000 1,450,000 233,636 (d) 628,000 48,000 (b)
Officer
Edward S. Gordon 1997 1,000,000 1,334,000 ---- (f) ----- 3,200 (b)
Office of the 1996 (i) 505,130 ----- 83,377 (e)(f) 250,000 (g) -----
Chairman
Stephen B. Siegel 1997 1,000,613 2,000,000 400,000 (e)(f) $374,063 (k) 50,000 (l) 4,056 (b)
President and CEO 1996 (i) 303,333 ----- 584,117 (e)(f) 75,000 (h) 6,000 (b)
of Insignia/ESG, Inc.
Frank M. Garrison 1997 300,000 500,000 ----- (f) ----- 21,000 (b)
Executive 1996 250,000 400,000 (f) ----- 3,000 (b)
Managing Director 1995 199,667 325,000 (f) 190,000 3,000 (b)
James A. Aston 1997 300,000 500,000 ----- (f) ----- 3,200 (b)
Office of the 1996 250,000 400,000 (f) ----- 3,000 (b)
Chairman and Chief 1995 194,900 325,000 (f) 250,000 3,000 (b)
Financial Officer
- ---------------------- ------- -----------
</TABLE>
(a) Represents forgiveness of $77,350 principal and $1,875 interest related to a
$400,000 loan in accordance with the Employment Agreement dated August 1, 1993.
Prerequisites totaled $74,104 including $58,633 for personal tax return
assistance.
(b) Represents Insignia's contribution under its 401(k) Plan and 401(k)
Restoration Plan.
(c) Represents forgiveness of $100,000 principal and $7,641 interest related to
a $400,000 loan in accordance with the Employment Agreement dated August 1,
1993. Perquisites totaled $43,414 including $30,267 for personal use of leased
aircraft.
(d) Represents forgiveness of $100,000 principal and $18,000 interest related to
a $400,000 loan in accordance with the Employment Agreement dated August 1,
1993. Perquisites totaled $115,636 including $37,284 for personal use of leased
aircraft and $32,231 for personal tax return assistance.
(e) Sales commissions. Does not include certain advance payments with respect to
a non-compete agreement. See "Compensation of Directors and Executive Officers -
Employment Agreements."
(f) Total perquisites did not exceed the lesser of $50,000 or 10% of total
salary and bonus.
(g) Does not include options to purchase 840,679 shares assumed by the Company
in the acquisition of Edward S. Gordon Company, Incorporated.
(h) Does not include options to purchase 146,680 shares assumed by the Company
in the acquisition of Edward S. Gordon Company, Incorporated.
(i) Employment began on July 1, 1996.
(j) Granted on February 20, 1996 and disclosed in the Proxy Statement for the
Annual Meeting of Stockholders held on May 23, 1996.
(k) Restricted stock award for 17,500 shares. Valuation based on $21.375 per
share, the fair market value on the date of the award. The restrictions lapse
for 25% of the award after 18 months, 25% after 36 months and 50% after 60
months.
(l) Does not include repriced options replacing those originally granted in
1996.
<PAGE>
<TABLE>
Compensation of Directors
Each of Insignia's directors who is not an employee of Insignia received
during 1997, and currently receives, a fee of $10,000 per year for serving as a
director, plus $2,000 per meeting attended (up to a maximum of $10,000). Each
director who is not an employee of Insignia also received a bonus of $30,000
based on the Company's 1997 performance. Each director who is not an employee of
Insignia is eligible to participate in the Insignia 1995 Non-Employee Director
Stock Option Plan, which provides for each Non-Employee Director to receive at
the time of his initial election an option to purchase 20,000 shares of Common
Stock and to receive an additional option each year thereafter to purchase 2,000
shares, in each case at the then fair market value of the Common Stock.
Option/SAR Grants in Last Fiscal Year
The following table sets forth information concerning stock options granted
by Insignia during 1997 to each of the executive officers (including the Chief
Executive Officer) named in the Summary Compensation Table:
<CAPTION>
- ------------------------------------------------------------------------------- -------------------------------------
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants For Option Terms (a)
- ------------------------------------------------------------------------------- -------------------------------------
- -------------------------- ------------- ------------- ------------ ----------- ------------------ ------------ -----
% of Total
Options/
SARs
Granted to Exercise
Options/ Employees or Base
SARs in Fiscal Price Expiration
Name Granted (#) Year (b) ($/Share) Date 5% 10%
(c)
- -------------------------- ------------- ------------- ------------ ----------- ------------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Andrew L. Farkas none
Edward S. Gordon none
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen B. Siegel 125,000 (d) 13.4% $16.4375 7/21/02 $567,675 (e) $1,254,413 (e)
Frank M. Garrison none
James A. Aston none
</TABLE>
(a) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the Securities and Exchange Commission and therefore are
not intended to forecast possible future appreciation, if any, of Common Stock
price.
(b) During the year ended December 31, 1997, stock options representing an
aggregate of 935,250 shares of Common Stock were issued to all employees as a
group.
(c) Exercise prices represent the fair market value, as determined by the Board
of Directors, on the date of grant. The exercise price may be paid in cash, in
shares of Common Stock valued at fair market value on the date of exercise, or a
combination thereof.
(d) Includes options to purchase 75,000 shares repriced to replace options
originally issued July 1, 1996 and options to purchase 25,000 shares repriced to
replace options originally issued February 21, 1997. All such options become
exercisable in five equal annual installments, the first installment becoming
exercisable six months after the date of grant.
(e) Represents gain before income taxes; the fair market value of the Common
stock on July 21, 1997, (the date of the grant), as determined by the Board of
Directors, was $16.4375 per share.
<PAGE>
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Value Table
The following table sets forth information concerning the exercise of stock
options during fiscal 1997 by each of the executive officers (including the
Chief Executive Officer) set forth on the Summary Compensation Table and the
fiscal year-end value of unexercised options.
<CAPTION>
============ =========================== =============== =============================== ============================
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options/SARs
Options/SARs at Fiscal at Fiscal Year-End ($) (a)
Year-End (#)
Shares Acquired on Value Exercisable (E)/ Exercisable (E)/
Name Exercise (#) Realized ($) Unexercisable (U) Unexercisable(U)
============ =========================== =============== =============================== ============================
<S> <C> <C>
Andrew L. Farkas none 748,000 (E) $6,330,750 (E)
180,000 (U) 630,000 (U)
928,000 $6,960,750
Edward S. Gordon 840,679 (b) $12,921,473 50,000 (E) $-0- (E)
200,000 (U) -0- (U)
250,000 $-0-
Stephen B. Siegel none 146,680 (E)(c) $2,470,332 (E)(c)
125,000 (U) 820,313 (U)
271,680 $3,290,645
Frank M. Garrison 8,890 $166,132 168,500 (E) $2,195,742 (E)
112,000 (U) 1,277,863 (U)
280,500 $3,473,605
James A. Aston none 239,890 (E) $2,836,800 (E)
78,000 (U) 911,375 (U)
317,890 $3,748,175
</TABLE>
(a) Based on the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1997 of $23.00 per share.
(b) Includes options to purchase 840,679 shares assumed by the Company in the
acquisition of Edward S. Gordon Company, Incorporated.
(c) Includes options to purchase 146,680 shares assumed by the Company in the
acquisition of Edward S. Gordon Company, Incorporated.
<PAGE>
Compensation Committee Interlocks and Insider Participation
During 1997, Messrs. Denison, Lipstein and Mickel (non-employee directors)
served as members of the Compensation Committee. None of the Compensation
Committee members or executive officers of the Company have any relationships
which must be disclosed under this caption.
Employment and Consulting Agreements
Andrew L. Farkas
Andrew L. Farkas is employed by Insignia pursuant to an employment
agreement by and between Mr. Farkas and Insignia, dated as of January 1, 1998
(the "Farkas Employment Agreement"), which provides for him to serve as chief
executive officer and a director of Insignia until December 31, 2000, or such
earlier date as provided therein. Mr. Farkas is to receive a base salary of
$1,000,000 per year, subject to such discretionary increases as may be
determined by the Board of Directors, and a bonus to be determined annually by
the Board of Directors. Mr. Farkas has agreed that for one year after the
termination of the Farkas Employment Agreement, he will not solicit business
from any of Insignia's customers or clients with whom he has had "material
contact" (as defined in the Farkas Employment Agreement) during the twelve month
period preceding the date of cessation of his employment with Insignia, and he
will neither solicit employees of Insignia to work for any competitor of
Insignia nor purchase any limited partner units of partnerships controlled
directly or indirectly by Insignia for two years after the termination of the
Farkas Employment Agreement. In 1993, Insignia loaned Mr. Farkas $400,000, which
loan bore interest at the rate of six percent per annum. $100,000 of such loan
and the interest-to-date on such loan was forgiven on August 1 of 1994, 1995,
1996 and 1997. Pursuant to the Farkas Employment Agreement, Mr. Farkas has
borrowed $1,500,000 from Insignia at an interest rate of 6.5% per annum. The
principal of and interest on such loan will be forgiven by Insignia subject to
the terms and conditions of the Farkas Employment Agreement. Insignia is
obligated to pay the premium for a $5 million term life insurance policy on the
life of Mr. Farkas, the beneficiaries of which are to be designated by Mr.
Farkas. Upon the termination of Mr. Farkas's employment for any reason other
than death, Insignia must transfer ownership of such policy to Mr. Farkas or his
designee. Insignia has agreed that, so long as Mr. Farkas is employed by
Insignia, the Board of Directors will nominate Mr. Farkas for election as a
director and elect or appoint him as Chairman of the Board, as a member and
Chairman of the Executive Committee and as an ex officio member of the
Compensation Committee. Upon the execution of the Farkas Employment Agreement,
Insignia paid Mr. Farkas a signing bonus consisting of (a) the grant to Mr.
Farkas of Insignia's 19.1% interest in Metropolitan Asset Enhancement, L.P. and
(b) a cash payment of $2,000,000.
Mr. Farkas's employment will be terminated in the event that Mr. Farkas is
disabled during his employment with Insignia, whereupon Insignia will pay 75% of
his salary for a period of time equal to twice the term of his employment
contract remaining immediately prior to his termination (but not less than two
years). If Mr. Farkas dies during the term of the Farkas Employment Agreement,
Insignia will pay to his estate his salary for the remainder of the term of the
Farkas Employment Agreement. If Mr. Farkas is terminated without cause and such
termination is not in connection with a Significant Transaction (as defined
below), Insignia will pay his salary through the term of the Farkas Employment
Agreement.
The Farkas Employment Agreement provides that upon the occurrence of any
one of several events or transactions involving Insignia set forth in the Farkas
Employment Agreement (each, a "Significant Transaction"), including, but not
limited to, any change of control of Insignia, Insignia shall pay to Mr. Farkas
an amount equal to (i) the discretionary bonus he received with respect to the
year prior to the year in which the Significant Transaction occurred, plus (ii)
(a) $5 million if the Significant Transaction occurs in the first 12 months of
the term of the Farkas Employment Agreement (the "Employment Period"), (b) $6
million if the Significant Transaction occurs in the second 12 months of the
Employment Period, or (c) $7 million if the Significant Transaction occurs in
the third 12 months of the Employment Period. Although the execution and
delivery of the Agreement and Plan of Merger, dated as of March 17, 1998 (the
"Merger Agreement"), by and among Insignia, Insignia/ESG Inc., a Delaware
corporation ("Insignia/ESG"), Apartment Investment and Management Company, a
Maryland corporation ("AIMCO"), and AIMCO Properties, L.P., a Delaware limited
partnership, which provides for the proposed merger (the "Merger") of Insignia
with and into AIMCO, constituted a Significant Transaction under the Farkas
Employment Agreement, any right to payment triggered by that Significant
Transaction will not apply unless the transactions contemplated by the Merger
Agreement are consummated. Upon the occurrence of a Significant Transaction
and/or upon termination without cause, all options, warrants and restricted
stock in both Insignia and Insignia Properties Trust granted to Mr. Farkas will
vest immediately and be exercisable, although such vesting will not occur in
connection with the execution of the Merger Agreement until the consummation of
the Merger. In addition, upon the occurrence of a Significant Transaction, Mr.
Farkas may elect to convert his employment agreement into a consulting agreement
with the same terms and conditions as the Farkas Employment Agreement. The
Farkas Employment Agreement also provides that in the event that Insignia enters
into a transaction resulting in (i) a majority of the equity interest in
Insignia being beneficially owned by a person who is not an affiliate of
Insignia, or (ii) the sale or other disposition to a third party of one or more
of Insignia's subsidiaries, divisions or operating businesses (including
Holdings) representing in the aggregate 20% or more of Insignia's 1998 budgeted
earnings before interest, taxes, depreciation and amortization ("EBITDA") (each,
a "Material Asset Disposition"), Insignia shall pay to Mr. Farkas a cash bonus
equal to 1% of the consideration received by Insignia and its shareholders as a
result of such Material Asset Disposition.
To the extent Mr. Farkas would be subject to the excise tax under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), on amounts
or benefits to be received from Insignia required to be included in the
calculation of parachute payments for purposes of Sections 280G and 4999 of the
Code, the amounts of any such payments will be automatically reduced to an
amount one dollar less than an amount that would subject Mr. Farkas to the
excise tax under Section 4999 of the Code, provided that the automatic reduction
shall apply only if the reduced payments received by Mr. Farkas (after taking
into account further reductions for applicable taxes) would be greater than his
unreduced payments, after applicable taxes.
As a result of the execution of the Merger Agreement, Mr. Farkas can
convert the Farkas Employment Agreement into a consulting agreement. Mr. Farkas
has agreed to make such a conversion upon consummation of the Merger. AIMCO has
agreed to pay Mr. Farkas his salary from the date of consummation of the Merger
until December 31, 2000. Upon consummation of the proposed pro rata distribution
(the ADistribution@) by Insignia to its stockholders of all of the outstanding
common stock, par value $.01 per share of Insignia/ESG, ("Insignia/ESG Common
Stock"), of Holdings, Insignia will purchase Mr. Farkas's options and warrants
to purchase Insignia Common Stock for a payment equal to the difference between
the exercise price of such option or warrant and $25.00 per share.
Stephen B. Siegel
Insignia, Insignia/ESG, Inc. ("Insignia/ESG") and Stephen B. Siegel are
parties to an employment agreement which expires on December 31, 2002, subject
to earlier termination or extension as provided for in the agreement. The
agreement provides that Mr. Siegel shall serve as President of Insignia/ESG,
among other duties. Under the agreement, Mr. Siegel (i) receives a base salary
of $1,000,000 per annum, (ii) received grants of options to purchase up to
75,000 shares of Insignia Common Stock at $27.125 per share and 25,000 shares of
Insignia Common Stock at $21.375 per share and a one-time restricted stock award
of 17,500 shares of Insignia Common Stock , each of which vests in five equal
installments, (iii) receives 30% of all promotional commission revenues earned,
received and retained by Insignia/ESG in which Mr. Siegel has rendered services
recognized by Insignia/ESG, and (iv) receives 50% of all net commission revenues
earned, received and retained by Insignia/ESG in which Mr. Siegel has rendered
services recognized by Insignia/ESG. The agreement also provides that,
commencing with the year ending December 31, 1997, Mr. Siegel will receive, for
each year or part thereof during the employment term, an amount up to a maximum
of $400,000 annually equal to 0.6% of the gross commissions earned, received and
retained by Insignia/ESG, but only to the extent that Insignia/ESG and all of
its wholly owned subsidiaries meets or exceeds its annual EBITDA budget, as
established by Insignia's Compensation Committee, after reduction for all bonus
compensation paid to employees of Insignia/ESG (including the imputed bonus of
Mr. Siegel), all Insignia/ESG overhead allocations and all other compensation
paid to Mr. Siegel, which annual EBITDA budget shall be increased by Insignia=s
Compensation Committee for each subsequent year by an amount of no more than 10%
of the annual EBITDA budget for the immediately preceding year. The agreement as
amended further provides that, commencing with the year ending December 31,
1997, Mr. Siegel will receive for each year an annual bonus of 10%, or such
lesser percentage as Insignia's Compensation Committee, in its sole and absolute
discretion, shall determine, of the increase in annual EBITDA reduced by all
bonus compensation paid to the employees of Insignia/ESG (including the imputed
bonus of Mr. Siegel), all Insignia/ESG overhead allocations and all compensation
paid to Mr. Siegel over the annual EBITDA for the immediately preceding year.
Such bonus shall be paid to the Executive within one-hundred-twenty (120) days
after the end of Insignia's fiscal year.
The employment agreement as amended also provides for Insignia to loan Mr.
Siegel $1,000,000 with the principal and interest thereon forgiven on December
31, 2002 if on such date Mr. Siegel's employment with Insignia has not been
terminated for any valid reason, and Insignia to purchase at its expense term
life insurance on the life of Mr. Siegel with a death benefit of $5,000,000, the
beneficiaries of which are to be designated by Mr. Siegel.
Mr. Siegel has agreed not to compete with either Insignia or Insignia/ESG
for two years after the termination of the agreement and as compensation
therefor, Mr. Siegel received a $300,000 advance payment to be allocated over
two years. Upon Mr. Siegel's death, the agreement, as amended, provides that
Insignia/ESG shall pay Mr. Siegel's estate $1,000,000 per annum during the
remaining term of the agreement, not to exceed one year. If Mr. Siegel is
terminated for cause (as defined in the agreement, as amended), Insignia/ESG
shall pay Mr. Siegel his base salary, as in effect, up to and including the date
on which the termination occurred. If Mr. Siegel is terminated without cause,
Mr. Siegel shall, at his election, either observe the non-compete agreement and
receive the compensation provided for in the agreement until December 31, 1999
or accept other employment that violates the non-compete and receive $1,000,000
per year until December 31, 1999, less the aggregate amount of compensation
payable to him for such new employment.
Upon the consummation of the Distribution, Mr. Siegel's options to purchase
Insignia Common Stock will be (i) in the case of options granted to Mr. Siegel
by Insignia after Insignia purchased Edward S. Gordon Company, Inc. ("ESG"),
assumed by Holdings at a price subject to adjustment of the exercise price in
connection with the Distribution; and (ii) in the case of options granted by
Insignia to Mr. Siegel by ESG that Insignia assumed when Insignia purchased ESG,
purchased by Insignia for a per option cash payment equal to the spread between
the exercise price of such option and the per share consideration for Insignia
Common Stock paid by AIMCO in the Merger.
Edward S. Gordon
Insignia, Insignia/ESG, and Edward S. Gordon are parties to an employment
agreement dated as of June 17, 1996, as amended, which became effective on July
1, 1996 and expires on June 30, 2001, subject to earlier termination or
extension as provided for in the agreement. Mr. Gordon (i) receives an annual
base salary of $1,000,000 per annum, (ii) received a one-time grant of options
to purchase up to 250,000 shares of Insignia Common Stock at $27.125 per share
that vest in five equal installments commencing on January 1, 1997 (the AGordon
Options"), and (iii) received the payment of commissions earned on or prior to
December 31, 1996, at certain rates and for certain identified transactions,
each as set forth in the agreement. The agreement also provides for an annual
bonus payment for the year ending December 31, 1997 and each subsequent year or
part thereof, which is subject to a bonus plan (the "Gordon Bonus Plan")
approved by stockholders on April 30, 1997. The Gordon Bonus Plan provides for
an annual bonus for the year ending December 31, 1997 (or part thereof) and each
subsequent year (or part thereof) during the term of the employment agreement in
an amount equal to 0.75% of Insignia/ESG's gross revenues for such year (or part
thereof), if Insignia/ESG's EBITDA, after adjustment for any bonus payable under
the Gordon Bonus Plan with respect to such year (or part thereof), is not less
than the Target Amount (as defined below) for such year (or pro rata portion for
partial years); provided, however, that in the event Insignia/ESG's EBITDA as so
calculated is less than the Target Amount (or pro rata portion for partial
years), the amount of such bonus shall be reduced by the amount of such
deficiency. With respect to any year "Target Amount" is defined as
Insignia/ESG's budgeted EBITDA for such year as determined by Insignia's
Compensation Committee prior to the commencement of such year (and which was $14
million for the year ended December 31, 1997) provided, however, that budgeted
EBITDA for any year shall not be more than 110% of the budgeted EBITDA for the
immediately preceding year, and provided further, that the Target Amount may be
increased or decreased from time to time if Insignia=s Compensation Committee
reasonably determined that anticipated increases or decreases in Insignia/ESG's
EBITDA must be reflected as a result of any acquisitions or dispositions,
respectively, by Insignia/ESG.
Mr. Gordon has agreed not to compete with either Insignia or Insignia/ESG
for five years after the termination of the agreement. As compensation
therefore, Mr. Gordon received a $1,000,000 advance payment on July 1, 1996 to
be allocated over five years. Mr. Gordon's options to purchase shares of
Insignia Common Stock will convert to options to purchase shares of Holdings
Common Stock upon the consummation of the Distribution.
If Mr. Gordon is terminated for cause (as defined in the agreement),
Insignia/ESG shall pay Mr. Gordon his base salary, as in effect, up to and
including the date on which the termination occurred. Upon termination without
cause or due to death, Insignia/ESG, Inc. shall pay Mr. Gordon $1,200,000 per
year until June 30, 2001, if Mr. Gordon is terminated without cause, or pay Mr.
Gordon's estate $1,200,000 per annum during the remaining term of the agreement,
not to exceed two years.
The Gordon Options will be assumed by Holdings at the time at which the
Distribution is effective, and the exercise price will be adjusted to an amount
equal to the average closing price of Insignia/ESG Common Stock during its first
three trading days.
James A. Aston and Frank M. Garrison
Messrs. James A. Aston and Frank M. Garrison are employed by Insignia
pursuant to separate employment agreements with Insignia, dated as of January 1,
1998 (the "Executive Employment Agreements"), which provide for Mr. Aston to
serve as Office of the Chairman and Chief Financial Officer of Insignia and for
Mr. Garrison to serve as Executive Managing Director and President of the
Financial Services Division of Insignia until December 31, 2000, or such earlier
date as provided therein. Messrs. Aston and Garrison each are to receive a base
salary of $400,000 per year, subject to such discretionary increases as may be
determined by the Board of Directors, and a bonus to be determined annually by
the Board of Directors. Messrs. Aston and Garrison each have agreed that for one
year after the termination of his Executive Employment Agreement he will not
solicit business from any of Insignia's customers or clients with whom he has
had "material contact" (as defined in the Executive Employment Agreements)
during the twelve month period preceding the date of cessation of his employment
with Insignia, and he will neither solicit employees of Insignia to work for any
competitor of Insignia nor purchase any limited partner units of partnerships
controlled directly or indirectly by Insignia for two years after the
termination of his Executive Employment Agreement. Pursuant to the Executive
Employment Agreements, Messrs. Aston and Garrison each have borrowed $500,000
from Insignia at an interest rate of 6.5% per annum. The principal of and
interest on such loans will be forgiven by Insignia subject to the terms and
conditions of the Executive Employment Agreements. Insignia is obligated to pay
the premium for a $5 million term life insurance policy on the life of each of
Messrs. Aston and Garrison, the beneficiaries of which are to be designated by
Messrs. Aston and Garrison, respectively. Upon termination of Mr. Aston's or Mr.
Garrison's employment for any reason other than death, Insignia must transfer
ownership of such policy to him or his designee.
Each of the Executive Employment Agreements provides that it will be
terminated in the event that Messrs. Aston or Garrison, as applicable, is
disabled during his employment with Insignia, whereupon Insignia will pay 75% of
his salary for the remaining term of his Executive Employment Agreement. If
Messrs. Aston or Garrison dies during the term of his Executive Employment
Agreement, Insignia will pay to his estate his salary for the remainder of the
term of his Executive Employment Agreement. If Messrs. Aston or Garrison is
terminated without cause, Insignia will pay his salary through the term of his
Executive Employment Agreement. Upon termination without cause, all options and
warrants granted to Messrs. Aston and Garrison will vest immediately and be
exercisable.
The Executive Employment Agreements provide that upon the occurrence of a
Significant Transaction, Insignia shall pay to each of Messrs. Aston and
Garrison an amount equal to (i) the discretionary bonus he received with respect
to the year prior to the year in which the Significant Transaction occurred,
plus (ii) $33,333 per month for each month or part thereof after June 30, 1998
if the Significant Transaction occurs after June 30, 1998. Although the
execution and delivery of the Merger Agreement constituted a Significant
Transaction under the each of the Executive Employment Agreements, any right to
payment under the Executive Employment Agreements will not apply unless the
transactions contemplated by the Merger Agreement are consummated. In addition,
upon the occurrence of a Significant Transaction, Messrs. Aston and Garrison
each may elect to convert his employment agreement into a consulting agreement
with the same terms and conditions as his Executive Employment Agreement. The
Executive Employment Agreements also provide that upon the occurrence of a
Material Asset Disposition, Insignia will pay each of Messrs. Aston and Garrison
a cash bonus equal to 0.25% of the consideration received by Insignia and its
shareholders as a result of such Material Asset Disposition.
To the extent Messrs. Aston or Garrison would be subject to the excise tax
under Section 4999 of the Code on amounts or benefits to be received from
Insignia required to be included in the calculation of parachute payments for
purposes of Sections 280G and 4999 of the Code, the amounts of any such payments
will be automatically reduced to an amount one dollar less than an amount that
would subject Messrs. Aston or Garrison to the excise tax under Section 4999 of
the Code, provided that the automatic reduction shall apply only if the reduced
payments received by Messrs. Aston or Garrison (after taking into account
further reductions for applicable taxes) would be greater than the unreduced
payments to be received by Messrs. Aston or Garrison, after applicable taxes.
As a result of the execution of the Merger Agreement, Messrs. Aston and
Garrison each can convert his Executive Employment Agreement into a consulting
agreement. Messrs. Aston and Garrison have agreed to make such a conversion upon
consummation of the Merger. AIMCO has agreed to pay Messrs. Aston and Garrison
their salaries from the date of consummation of the Merger until December 31,
2000. Upon the consummation of the Distribution, Insignia will purchase Mr.
Aston=s and Mr. Garrison=s options and warrants to purchase Insignia Common
Stock for a payment equal to the difference between the exercise price of such
option or warrant and $25.00 per share.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 28, 1998 by: (i) each stockholder
known by Insignia to beneficially own in excess of 5% of the outstanding shares
of Common Stock, (ii) each director, (iii) the Chairman, Chief Executive Officer
and President, and each of the other four most highly compensated executive
officers, and (iv) all directors and executive officers as a group. Except as
otherwise indicated in the footnotes to the table, the persons named below have
sole voting and investment power with respect to the shares beneficially owned
by such persons.
Beneficial
Ownership
Name and Address Shares Percent
Metropolitan Acquisition Partners IV, L.P. 2,237,258 7.3%
c/o Metro Shelter Directives, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Andrew L. Farkas 5,760,499 (1) 18.4%
Insignia Financial Group, Inc.
One Insignia Financial Plaza
Greenville, South Carolina 29602
Apollo Real Estate Investment Fund, L.P. 3,944,686 (2) 12.4%
c/o Apollo Real Estate Fund, L.P.
2 Manhattanville Road
Purchase, New York 10577
Janus Capital Corporation(3) 2,206,700 7.2%
100 Filmore Street, Suite 300
Denver, Colorado 80206
The Capital Group Companies, Inc. (4) 3,274,230 10.6%
333 South Hope Street
Los Angeles, California 90071
Perkins Capital Management, Inc. 2,580,100 (5) 8.3%
730 East Lake Street
Wayzata, Minnesota 55391
Palisade Capital Management, L.L.C. 1,787,862 (6) 5.7%
1 Bridge Plaza, Suite 695
Fort Lee, New Jersey 07024
Robert J. Denison(7)(8) 403,724 1.3%
Robin L. Farkas(7)(9) 166,777 *
Merril M. Halpern(10) 24,000 *
Robert G. Koen(11) 24,000 *
Michael Lipstein(7)(11) 124,707 *
Buck Mickel(7)(11) 77,668 *
James A. Aston(12) 304,983 1.0%
Frank M. Garrison(13) 217,139 *
Edward S. Gordon(14) 695,879 2.3%
Stephen B. Siegel(15) 171,680 *
All directors and executive officers 9,181,138 27.9%
as a group (23 individuals)(1)(16)(17)
* Less than one percent.
(1) Includes shares owned by (i) Metropolitan Acquisition Partners IV, L.P.
("MAP IV"), (ii) Metropolitan Acquisition Partners V, L.P. ("MAP V"), (iii)
Metro Shelter Directives, Inc. and MV, Inc., the general partners of MAP IV
and MAP V, respectively, (iv) certain stockholders who have granted proxies
to MAP IV and MAP V, and (v) certain stockholders (including Charterhouse
Equity Partners, L.P. ("CEP") and affiliates of Apollo Real Estate
Advisors, L.P.) who are party to a stockholders agreement with Andrew L.
Farkas. Includes 748,000 shares subject to options and warrants which are
or will become exercisable within 60 days. Includes 3,333 shares of
restricted stock which will vest within 60 days, the remaining 93,333
shares will vest ratably over the next 56 months.
(2) Includes securities owned by various affiliates of Apollo Real Estate
Investment Fund, L.P., including 1,392,916 shares subject to warrants which
are or will become exercisable within 60 days.
(3) Janus Capital Corporation is a registered investment advisor that furnishes
investment advice to individual and institutional clients and certain
mutual funds. The foregoing is based upon a Schedule 13G, Amendment No. 7,
filed by Janus Capital Corporation with the Securities and Exchange
Commission on or about February 13, 1998.
(4) The Capital Group Companies, Inc. ("Capital") is the parent holding company
of a group of investment management companies. Capital does not have
investment power or voting power over any of the securities reported
herein. Capital Guardian Trust Company, a bank as defined in Section 3(a)6
of the Securities Exchange Act of 1934 and a wholly owned subsidiary of
Capital, is the beneficial owner of the reported shares as a result of
serving as the investment manager of various institutional accounts. The
reported shares include 424,530 shares resulting from the assumed
conversion of 225,000 shares of the 6 1/2% Trust Convertible Preferred
Securities issued by Insignia Financing I, a subsidiary of the Company. The
foregoing is based upon a Schedule 13G filed by Capital with the Securities
and Exchange Commission on or about February 10, 1998.
(5) Perkins Capital Management, Inc. is a registered investment advisor that
furnishes investment advice to individual and institutional clients and to
certain mutual funds. The reported shares include 1,870,000 shares and
210,000 warrants (exercisable within 60 days) owned by clients of Perkins
Capital Management, Inc. and 500,000 warrants (exercisable within 60 days)
owned by Perkins Opportunity Fund. The foregoing is based upon a Schedule
13G, Amendment No. 9, filed by Perkins Capital Management, Inc. on or about
January 30, 1998.
(6) Palisade Capital Management, L.L.C. is a registered investment advisor that
furnishes investment advice to individual and institutional clients and to
certain mutual funds. The reported shares include 683,965 shares resulting
from the assumed conversion of 362,501 shares of the 6 1/2% Trust
Convertible Preferred Securities issued by Insignia Financing I, a
subsidiary of the Company. The foregoing is based upon a Schedule 13G filed
by Palisade Capital Management, L.L.C. on or about February 9, 1998.
(7) Messrs. Denison, Lipstein, Mickel and Robin L. Farkas are each limited
partners in MAP IV.
(8) Includes 133,600 shares held by First Security Associates L.P., a limited
partnership of which Mr. Denison is the sole general partner, and 246,100
shares held by First Security Company II, L.P., a limited partnership of
which Mr. Denison is the sole general partner. Includes 10,000 shares
subject to options and warrants which are exercisable or will become
exercisable within 60 days, but excludes 43,600 shares held by First
Security International Fund, Ltd., a Cayman Islands company, for which
First Security Management, Inc., a New York corporation, serves as the
investment advisor. Mr. Denison is the President of First Security
Management, Inc.
(9) Includes 24,000 shares subject to options which are or will become
exercisable within 60 days, and 88,129 shares owned by a general
partnership for which Mr. Farkas shares voting power.
(10) Includes 24,000 shares subject to options which are or will become
exercisable within 60 days. Does not include 675,838 shares beneficially
owned by CEP and an associated entity. Charterhouse Group International,
Inc. ("Charterhouse"), of which Mr. Halpern is Chairman of the Board,
indirectly controls CEP and may be deemed to beneficially own such shares.
Mr. Halpern disclaims beneficial ownership of any shares beneficially owned
by Charterhouse.
(11) Includes 24,000 shares subject to options which are or will become
exercisable within 60 days.
(12) Includes 233,000 shares subject to options and warrants which are or will
become exercisable within 60 days. Includes 834 shares of restricted stock
which will vest within 60 days and the remaining 23,333 shares vest ratably
over the next 56 months.
(13) Includes 176,500 shares subject to options and warrants which are or will
become exercisable within 60 days. Includes 834 shares of restricted stock
which will vest within 60 days and the remaining 23,333 shares vest ratably
over the next 56 months.
(14) Includes 100,000 shares subject to options which are or will become
exercisable within 60 days.
(15) Includes 171,680 shares subject to options which are or will become
exercisable within 60 days.
(16) Includes 2,353,900 shares subject to options and warrants which are or will
become exercisable within 60 days. Includes 5,835 shares of restricted
stock which will vest within 60 days and the remaining 163,332 shares will
vest ratably over the next 56 months.
(17) No directors or executive officers beneficially own any of the outstanding
6 1/2% Trust Convertible Preferred Securities issued by Insignia Financing
I, a subsidiary of the Company.
Item 13. Certain Relationships and Related Transactions
General
Andrew L. Farkas is the sole director and stockholder of the general
partner of MAE, which owns a one percent interest in MAE. Mr. Farkas is also the
sole stockholder and director, and the President, of MAG. Mr. Farkas is the sole
stockholder of the general partner of MAP IV; the general partner of MAP IV is
generally entitled to receive 50% of all distributions made by MAP IV, and Mr.
Farkas holds an additional 5% limited partnership interest in MAP IV. Mr. Farkas
is also the sole stockholder of the general partner of MAP V; the general
partner of MAP V is generally entitled to receive 30% of all distributions made
by MAP V. Mr. Farkas owned an equity interest in CEP's predecessor, which
dissolved in December 1995 and distributed 675,838 shares of Common Stock to CEP
and an associated entity and 426,788 shares of Common Stock to Mr. Farkas.
As of the date hereof, (i) Insignia owns a 19.13% limited partnership
interest in MAE (as of January 1, 1998, this interest was transferred to Andrew
L. Farkas under his amended employment agreement), (ii) MAP IV owns a 64.5%
limited partnership interest in MAE, and (iii) MAP V owns a 9.5% limited
partnership interest in MAE. Effective September 1993, the Compensation
Committee of the Board of Directors of Insignia authorized the assignment of a
one-half of one percent limited partnership interest in MAE to each of six
employees, including Messrs. Aston and Garrison and three other executive
officers of the Company. In addition, Metropolitan Partners I, L.P.
("Metropolitan"), a limited partnership in which a corporation owned by Mr.
Farkas is the general partner and Mr. Aston and one other executive officer of
the Company are the limited partners, owns a 1.05% limited partnership interest
in MAP IV.
Relationship with MAE
MAE was formed in December 1990 to be the principal vehicle for acquiring
direct or indirect control of interests in real property that would be managed
or serviced by the Company. In August 1993, the Company entered into an
agreement with MAE (the "MAE Agreement") whereby (i) the Company agreed to
assist MAE as its advisor and agent in connection with MAE's acquisition, asset
management, property management, and securitization activities and, in
connection therewith, to perform all related services, (ii) the Company agreed
to render to MAE full investment banking, financial advisory, recapitalization,
asset restructuring, securitization, and mortgage banking services (as sole
compensation for the provision of such services, the Company receives Incentive
Management Fees, Transaction Fees and Cost Reimbursements, as defined in the MAE
Agreement), and (iii) the Company and MAE agreed that, in the event either was
to obtain an opportunity to acquire interests in real estate or in entities
which own or control real estate, the Company would have the first right to
acquire such interests. The Company and MAE did also agree in the MAE Agreement
that if the Company were to elect not to acquire any such interests, but MAE did
elect to acquire such interests and the Company elected to provide any financing
to MAE for such acquisition, then such financing would be by means of loans that
would bear interest at a rate equal to the rate then paid by the Company on
indebtedness under a revolving credit facility. If the Company was not a party
to a revolving credit facility, such rate would be the estimated rate the
Company would pay on indebtedness incurred under a revolving credit facility. As
a result of the merger of MAE GP Corporation (described below) with and into
Insignia Properties Trust (defined below), the MAE Agreement has been
terminated.
MAE GP Merger
Effective as of March 7, 1998, MAE GP Corporation ("MAE GP"), which until
then was a wholly-owned subsidiary of MAE, was merged with and into Insignia
Properties Trust, a real estate investment trust controlled by Insignia ("IPT"),
with IPT surviving the merger (the "MAE GP Merger"). As consideration for the
MAE GP Merger, IPT issued 332,300 shares of the common stock of IPT to MAE
valued for purposes of the MAE GP Merger at $10.53 per share.
MAE GP owned or controlled equity interests in entities which comprised or
controlled the general partners of 29 public and 76 private real estate limited
partnerships (collectively, the "MAE Partnerships"). The MAE Partnerships own,
in the aggregate, 169 properties containing approximately 32,000 residential
apartment units and approximately 2.3 million square feet of commercial space.
In connection with the MAE GP Merger, all of the shares of Class B common
stock of Angeles Mortgage Investment Trust, a real estate investment trust that
has entered into a definitive agreement to be merged with IPT, which were until
then owned by MAE GP, were transferred by dividend to MAE prior to the MAE GP
Merger.
Also in connection with the MAE GP Merger, on February 17, 1998, Insignia
Properties, L.P., which is the operating partnership of IPT ("IPLP"), purchased
certain assets described below from MAE for approximately $596,000. The assets
purchased by IPLP from MAE consisted of (i) a 99% limited partner interest in
Insignia Jacques Miller, L.P. ("IJM"), which in turn owns non-controlling equity
interests in entities that comprise or control the general partners of 30 of the
MAE Partnerships and various notes receivable (the 1% general partner interest
in IJM was acquired by IPT from MAE GP in the MAE GP Merger), and (ii) a 6.557%
limited partner interest in Buccaneer Trace Limited Partnership, which owns a
208-unit residential apartment complex located in Savannah, Georgia.
Also in connection with the MAE GP Merger, on February 17, 1998, Insignia
contributed all of the limited partner interests it owned in the MAE
Partnerships to IPLP in exchange for units of limited partnership in IPLP ("OP
Units"). The value of the interests contributed was approximately $5,460,000,
for which Insignia received 518,528 OP Units (based on a value of $10.53 per
unit).
<PAGE>
Winthrop Transaction
On October 27, 1997, Insignia consummated a transaction with Winthrop
Financial Associates, a Limited Partnership ("WFA"), which is controlled by
Apollo Real Estate Investment Fund, L.P., and certain affiliates of WFA whereby
Insignia acquired, among other things, limited partner interests in, or the
right to acquire units of limited partner interests in (together, the "Winthrop
Units"), two public and 11 private real estate limited partnerships (the
"Winthrop Partnerships"), which own, in the aggregate, 29 properties containing
approximately 12,100 residential apartment units, and the right to receive
certain asset management, investor services and partnership management fees from
ten of the Partnerships which totaled $987,602 in 1996 (the base upon which the
purchase price paid by Insignia was calculated) (the "Winthrop Fees," and
together with the Winthrop Units, the "Winthrop Interests").
The Winthrop Partnerships are controlled by WFA. In connection with the
foregoing transaction, IPT I LLC, a Delaware limited liability company which is
owned 90.1% by Insignia and 9.9% by IPT, acquired an associate general partner
interest in WFA, as a result of which IPT I LLC has the power to effectively
control all property management decisions relating to the properties owned by
six of the Winthrop Partnerships. Insignia also acquired all of the newly-issued
Class B stock of First Winthrop Corporation ("FWC"), which immediately prior
thereto was a wholly-owned subsidiary of WFA, as a result of which Insignia has
the right to appoint the two Class B directors of FWC, who in turn have the
power to effectively control all property management decisions relating to the
properties owned by the other seven Winthrop partnerships. In addition, IPT I
LLC and Insignia caused the respective general partners of the Winthrop
Partnerships to subcontract with IPGP Corporation, a wholly-owned subsidiary of
Insignia ("IFGP"), to perform the asset management and other services in respect
of which the Winthrop Fees are payable on behalf of such general partners, in
exchange for which IFGP was assigned the rights to receive the Winthrop Fees.
On February 17, 1998, Insignia granted IPLP an option (the "Winthrop
Option") to acquire all but not less than all of the Winthrop Interests at any
time on or before December 31, 1998. The Winthrop Option is exercisable by IPLP
for an aggregate cash amount of approximately $46 million, plus varying amounts
of interest on approximately $40 million of such amount at a rate equal to
Insignia's cost of funds (based on the interest rate in effect from time to time
under Insignia's revolving credit facility) and a ratable portion of the
transaction costs incurred by Insignia in connection with the acquisition. Upon
exercise of the Winthrop Option, the Operating Agreement of IPT I LLC will be
amended to make IPT the sole managing member of IPT I LLC, with the sole
authority to manage the business and affairs of IPT I LLC, and Insignia will
cause the persons designated by IPLP from time to time to be appointed as the
Class B directors of FWC.
Services
Since January 1, 1992, Insignia has provided property management services
and other management and administrative services for essentially all properties
and other assets owned or otherwise controlled by MAE. Insignia was paid a total
of $29,600,000 in the year ended December 31, 1997, for such services.
Since the inception of Insignia, MAG has provided restructuring,
acquisition, and debt workout services to Insignia, MAE, and various
partnerships controlled by either Insignia or MAE. During the year ended
December 31, 1997, MAE paid Insignia investment banking fees in the amount of
$2,041,000 in connection with the services rendered to MAE and its various
subsidiaries.
<PAGE>
Loans and Guarantees
During the fiscal years 1995 and 1996, Insignia loaned MAE an aggregate of
$69,000, and $50,000, respectively, which funds generally were used in
connection with the servicing and restructuring of pre-existing obligations of
certain apartment complexes controlled by MAE. During the fiscal years 1995,
1996 and 1997, MAE repaid an aggregate of $167,300, $173,000 and $287,000 on
these and previous similar loans, respectively. As of December 31, 1997, an
aggregate of $166,000 in principal was outstanding. Such loans bear interest at
the prime rate plus one percent per annum, are non-recourse to MAE, and are
repayable from the operations of the relevant properties.
The Company guaranteed certain notes payable of MAE and its affiliates
totaling approximately $204,000. During 1997, the notes were deemed to be
uncollectible and $129,000 was written off.
In connection with the acquisition by an affiliate of MAE of certain
general partnership interests (pursuant to which Insignia received material
management rights), Insignia guaranteed, on behalf of an affiliate of MAE,
certain notes payable totaling $240,000. Final payment to repay such notes in
full was made during 1997.
During 1997 a loan in the amount of $150,000 was made by the Company to
Henry Horowitz, an executive officer. The loan bears interest at the rate of ten
percent per annum. $75,000 of such loan and the interest to date will be
forgiven on August 30, 1998 with the remaining principal and interest forgiven
on August 30, 1999 as long as his employment has not been terminated for cause
or because of his voluntary resignation. See "Compensation of Directors and
Executive Officers - Employment Agreements" for a description of loans made to
Andrew L. Farkas and Stephen B. Siegel.
Registration Rights
Insignia has granted to MAP IV, MAP V, CEP, APTS Partners, L.P. (an
affiliate of Apollo) and certain of its affiliates ("APTS") and other persons
rights, subject to certain exceptions, to require Insignia to include, in any
registration statement filed by Insignia, any or all equity securities of
Insignia that each such person owns. In connection with the registration under
the Securities Act of 1933, as amended, of the 6 1/2% Trust Convertible
Preferred Securities of Insignia Financing I, a subsidiary of the Company, in
January 1997, certain holders of registration rights, including APTS, CEP and
Neil Kreisel, an Executive Managing Director of the Company, exercised their
rights to have shares of Common Stock included in the registration statement.
All expenses incurred by Insignia in connection with such registration were paid
by Insignia.
Stockholders Agreements
Insignia, Andrew L. Farkas, MAP IV, MAP V, CEP and certain other
stockholders are parties to a Stockholders Agreement (the "Stockholders
Agreement") with respect to the securities of Insignia. The Stockholders
Agreement provides that at the request of CEP, each of MAP IV, MAP V, CEP,
Andrew L. Farkas and the other parties to the agreement will vote their shares
for one director designated by CEP (currently Mr. Halpern) and CEP will vote its
shares for such other directors as may be designated by Mr. Farkas. The terms of
the Stockholders Agreement also apply to the permitted transferees of shares of
the parties to the Stockholders Agreement. The Stockholders Agreement will
terminate in May 2002 unless earlier terminated or extended.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/Ronald Uretta
----------------------
Ronald Uretta
Chief Operating Officer
<PAGE>
EXHIBIT INDEX
NUMBER EXHIBIT
3.1 Certificate of Incorporation of Insignia Financial Group, Inc., as
amended.(i)
3.2 By-Laws of Insignia Financial Group, Inc.(i)
4.1 Certificate of Designation of Series A Preferred Stock Par Value $.01 Per
Share of Insignia Financial Group, Inc.(iii)
4.2 Certificate of Correction to Certificate of Designation of Series A
Preferred Stock Par Value $.01 Per Share of Insignia Financial Group,
Inc.(iii)
4.3 Securities Purchase Agreement dated as of May 27, 1992 by and among
Insignia Financial Group, Inc., Metropolitan Acquisition Partners V, L.P.
and IFG Limited Liability Company. Incorporated by reference to Exhibit
28.3 to Form 8-K of Registrant dated June 2, 1992.
4.4 Warrant Agreement dated as of January 17, 1995 between Insignia Financial
Group, Inc. and APTS Partners, L.P.(vi)
4.5 Certificate of Designation, Preferences and Rights of the 7.5% Step-Up Rate
Cumulative Convertible Preferred Stock of Insignia Financial Group,
Inc.(vi)
4.6 Warrant No. 32 to purchase 50,000 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to Marvin Chudnoff (vii)
4.7 Warrant issued to APTS Partners, L.P. to purchase 300,000 shares of
Insignia Financial Group, Inc. Class A Common Stock. (vii)
4.8 Warrant issued to APTS Partners, L.P. to purchase 137,500 shares of
Insignia Financial Group, Inc. Class A Common Stock. (vii)
4.9 Warrant No. 12 to purchase 46,800 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to The J & P O'Donnell Revocable Trust. (vii)
4.10 Warrant No. 13 to purchase 23,400 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to The D & S Grant Revocable Trust. (vii)
4.11 Warrant No. 14 to purchase 23,400 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to The J & C Westling Revocable Trust. (vii)
4.12 Warrant No. 15 to purchase 23,400 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to Douglas C. Neff. (vii)
4.13 Warrant No. 16 to purchase 13,000 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to John G. Combs. (vii)
4.14 Convertible Promissory Note from Insignia Financial Group, Inc. to Douglas
C. Neff in the amount of $400,000. (vii)
4.15 Convertible Promissory Note from Insignia Financial Group, Inc. to The J &
C Westling Revocable Trust in the amount of $400,000. (vii)
4.16 Convertible Promissory Note from Insignia Financial Group, Inc. to The D &
S Grant Revocable Trust in the amount of $400,000. (vii)
4.17 Convertible Promissory Note from Insignia Financial Group, Inc. to The J &
P O'Donnell Revocable Trust in the amount of $800,000. (vii)
4.18 Warrant No. 33 to purchase 63,750 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to Gotham Partners, L.P. (vii)
4.19 Warrant No. 34 to purchase 38,958 shares of Insignia Financial Group, Inc.
Class A Common Stock issued to APTS V, L.L.C. (vii)
4.20 Declaration of Trust of Insignia Financing I, dated as of October 4, 1996,
among First Union Bank of Delaware, as Delaware Trustee, and John K. Lines
and Ronald Uretta, Trustees incorporated herein by reference to Exhibit 4.1
of Form S-3 of the Registrant filed on December 10, 1996.
4.21 Amended and Restated Declaration of Trust of Insignia Financial I, dated as
of November 1, 1996, among Insignia Financial Group, Inc., as Sponsor,
First Union National Bank of South Carolina, as Property Trustee, First
Union Bank of Delaware, as Delaware Trustee and Andrew L. Farkas, John K.
Lines and Ronald Uretta as Regular Trustees incorporated herein by
reference to Exhibit 4.2 of Form S-3 of the Registrant filed on December
10, 1996.
4.22 Indenture for the 6.5% Convertible Subordinated Debentures, dated as of
November 1, 1996, between Insignia Financial Group, Inc., as Issuer, and
First Union National Bank of South Carolina, as Trustee incorporated herein
by reference to Exhibit 4.3 of Form S-3 of the Registrant filed on December
10, 1996.
4.23 Warrant Agreement dated as of June 30, 1996 by and between Paragon Group,
L.P. and Insignia Financial Group, Inc. incorporated herein by reference to
Exhibit 4.1 of Form 8-K of Registrant filed on July 15, 1996.
4.24 Warrant No. 38 to Purchase up to 50,000 Shares of Class A Common Stock of
Insignia Financial Group, Inc. issued to Paragon Group, L.P. incorporated
herein by reference to Exhibit 4.2 of Form 8-K of Registrant filed on July
15, 1996.
10.1 Insignia 1992 Stock Incentive Plan, as amended through March 28, 1994 and
November 13, 1995, incorporated by reference to Exhibit B to Proxy
Statement of Registrant filed on April 22, 1996.
10.2 Employment Agreement dated as of July 20, 1995 by and between Insignia
Financial Group, Inc. and Thomas R. Shuler. (vii)
10.3 Amendment No. 1 dated as of February 19, 1996 to the Employment Agreement
by and between Insignia Financial Group, Inc. and Thomas R. Shuler. (vii)
10.4 Amendment No. 1 dated as of April 1, 1995 to the Employment Agreement by
and between Insignia Financial Group, Inc. and James A. Aston. (vii)
10.5 Amendment No. 1 dated as of June 20, 1995 to the Employment Agreement by
and between Insignia Financial Group, Inc. and Andrew L. Farkas. (vii)
10.6 Amendment No. 1 dated as of April 1, 1995 to the Employment Agreement by
and between Insignia Financial Group, Inc. and Frank M. Garrison. (vii)
10.7 Amendment No. 1 dated as of April 1, 1995 to the Employment Agreement by
and between Insignia Financial Group, Inc. and Ronald Uretta. (vii)
10.8 Amendment No. 2 dated as of March 1, 1996 to the Employment Agreement by
and between Insignia Financial Group, Inc. and Andrew L. Farkas. (viii)
10.9 Amendment No. 2 dated as of February 20, 1996 to the Employment Agreement
by and between Insignia Financial Group, Inc. and James A. Aston. (viii)
10.10Amendment No. 2 dated as of February 20, 1996 to the Employment Agreement
by and between Insignia Financial Group, Inc. and Frank M. Garrison. (viii)
10.11Amendment No. 2 dated as of February 20, 1996 to the Employment Agreement
by and between Insignia Financial Group, Inc. and Ronald Uretta. (viii)
10.12Purchase Agreement dated as of December 31, 1996 between GSSW-REO
Ownership Corporation, GSSW Limited Partnership and Southwest Associates,
L.P. with respect to all of the General Partnership and Limited Partnership
Interests of Certain Limited Partnerships. (viii)
10.13Agreement of Limited Partnership of Southwest Associates, L.P. dated as of
the 31st day of December 1996. (viii)
10.14Registration Rights Agreement, dated November 1, 1996, among Insignia
Financing I, and Insignia Financial Group, Inc. and Lehman Brothers, Inc.,
Dillon, Read & Co., Inc. Goldman, Sachs & Co., and A.G. Edwards & Sons,
Inc., as Initial Purchasers incorporated herein by reference to Exhibit
10.1 to Form S-3 of Registrant filed on December 10, 1996.
10.15Asset and Stock Purchase Agreement dated as of June 17, 1996 among
Insignia Financial Group, Inc., Insignia Buyer Corporation, Edward S.
Gordon Company Incorporated, Edward S. Gordon Company of New Jersey, Inc.
and Edward S. Gordon incorporated herein by reference to Exhibit 2.1 of
Form 8-K of Registrant dated July 1, 1996.
10.16Employment Agreement dated as of June 17, 1996 by and among Insignia
Financial Group, Inc., Insignia Buyer Corporation and Edward S. Gordon
incorporated herein by reference to Exhibit 10.2 of Form 8-K of Registrant
dated July 1, 1996.
10.17Employment Agreement dated as of June 17, 1996 by and among Insignia
Financial Group, Inc., Insignia Buyer Corporation and Anthony M. Saytanides
incorporated herein by reference to Exhibit 10.3 of Form 8-K of Registrant
dated July 1, 1996.
10.18Employment Agreement dated as of June 17, 1996 by and among Insignia
Financial Group, Inc., Insignia Buyer Corporation and Stephen B. Siegel
incorporated herein by reference to Exhibit 10.4 of Form 8-K of Registrant
dated July 1, 1996.
10.19Agreement dated as of May 31, 1996 among Paragon Group, L.P., Texas
Paragon Management Partners, L.P., Paragon Group Property Services, Inc.
and Insignia Commercial Group, Inc. incorporated herein by reference to
Exhibit 10.1 of Form 8-K of Registrant dated July 1, 1996.
10.20Amended and Restated Employment Agreement, dated January 1, 1997, by and
among Insignia Financial Group, Inc., Insignia Commercial Group, Inc.,
Insignia/Edward S. Gordon Co., Inc. and Stephen B. Siegel. (ix)
10.21Amendment No. 1 to Amended and Restated Employment Agreement, dated
December 18, 1997, by and among Insignia Financial Group, Inc., Insignia
Commercial Group, Inc., Insignia/Edward S. Gordon Co., Inc. and Stephen B.
Siegel. (ix)
10.22Stock Purchase Agreement, dated 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. Deiter, 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, Incorporated, incorporated herein by reference to Exhibit 10.1
to Form 8-K of Registrant filed April 17, 1997.
10.23Amended and Restated Credit Agreement dated March 19, 1997, by and among
Insignia Financial Group, Inc., as Borrower, the Lenders referred to
therein, First Union National Bank of South Carolina, as Administrative
Agent, and Lehman Commercial Paper, Inc., as Syndication Agent,
incorporated herein by reference to Exhibit 10.1 to Form 8-K of Registrant
dated March 19, 1997.
10.24Amendment No. 1 to Employment Agreement, made April 1, 1997, by and among
Insignia Financial Group, Inc., Insignia/Edward S. Gordon Co., Inc. and
Edward S. Gordon. (ix)
10.25Amended and Restated Employment Agreement, made as of May 1, 1997, by and
among Insignia Financial Group, Inc., Insignia Commercial Group, Inc.,
Insignia/Edward S. Gordon Co., Inc. and Henry Horowitz. (ix)
10.26Amendment dated April 30, 1997, to the 1992 Stock Incentive Plan, as
amended. (ix)
10.27Stock Purchase Agreement, dated as of September 18, 1997, by and among
Insignia Financial Group, Inc., Insignia RO, Inc., Joseph T. Aveni, Vincent
T. Aveni, James C. Miller, Richard A. Golbach, Joseph T. Aveni as Trustee
of the Joseph T. Aveni Declaration of Trust dated April 25, 1988, as
amended on August 10, 1995, Vincent T. Aveni as Trustee of the Vincent T.
Aveni Declaration of Trust dated February 11, 1988, as restated on
September 14, 1995, Joseph T. Aveni as Trustee of the Vincent T. Aveni
Dynasty Trust, dated July 13, 1994, and Vincent T. Aveni as Trustee of the
Joseph T. Aveni Dynasty Trust, dated July 13, 1994, incorporated herein by
reference to Exhibit 10.1 to Form 8-K of Regsitrant filed October 21, 1997.
10.28Shareholders' Agreement dated as of October 7, 1997, by and among Insignia
Financial Group, Inc., and Joseph T. Aveni, Joseph T. Aveni as Trustee of
the Joseph T. Aveni Declaration of Trust dated April 25, 1988, as amended
on August 10, 1995, Vincent T. Aveni as Trustee of the Joseph T. Aveni
Dynasty Trust, dated July 12, 1994, Vincent T. Aveni as Trustee of the
Joseph T. Aveni Dynasty Trust dated July 12, 1994 FBO Kristen Aveni,
Vincent T. Aveni as Trustee of the Joseph T. Aveni Dynasty Trust dated July
12, 1994 FBO Kerri Aveni, Vincent T. Aveni as Trustee of the Joseph T.
Aveni Dynasty Trust dated July 12, 1994 FBO Benjamin Aveni, incorporated
herein by reference to Exhibit 10.2 to Form 8-K of Registrant filed October
21, 1997.
10.29Subscription and Purchase Agreement dated as of October 27, 1997, among
Insignia Financial Group, Inc., IPT I LLC, and Winthrop Financial
Associates, First Winthrop Corporation and certain additional entities,
incorporated herein by reference to Exhibit 10.1 to Form 8-K of Registrant
filed November 10, 1997.
10.30Stockholders' Agreement dated as of October 27, 1997, between Winthrop
Financial Associates and Insignia Financial Group, Inc, Incorporated herein
by reference to Exhibit 10.2 to Form 8-K of Registrant filed November 10,
1997.
10.31Amended and Restated Employment Agreement, dated January 1, 1998, by and
among Insignia Financial Group, Inc. and Andrew Lawrence Farkas included
elsewhere herein.
10.32Amended and Restated Employment Agreement, dated January 1, 1998, by and
among Insignia Financial Group, Inc. and Frank M. Garrison included
elsewhere herein.
10.33Amended and Restated Employment Agreement, dated January 1, 1998, by and
among Insignia Financial Group, Inc. and James A. Aston included elsewhere
herein.
10.34Amended and Restated Employment Agreement, dated January 1, 1998, by and
among Insignia Financial Group, Inc. and Ronald Uretta included elsewhere
herein.
21. List of Subsidiaries. (vii)
23. Consent of Independent Auditors to Annual Report on Form 10-K for the year
ended December 31, 1996. (viii)
99. Form 11-K Re: Insignia Financial Group, Inc. 401(k) Retirement Savings Plan
for year ended December 31, 1996.
(i) Filed as an exhibit to Registration Statement on Form S-4 of Insignia
Financial Group, Inc. (then MetSouth Financial Corporation), Registration
No. 33-38094, on December 7, 1990, and incorporated herein by reference.
(iii)Filed as an Exhibit to Annual Report on Form 10-K of Insignia Financial
Group, Inc. for the year ended December 31, 1991, and incorporated herein
by reference.
(iv) Filed as an Exhibit to Registration Statement on Form S-1 of Insignia
Financial Group, Inc., Registration No. 33-67486, on October 13, 1993 and
incorporated herein by reference.
(v) Filed as an Exhibit to Annual Report on Form 10-K of Insignia Financial
Group, Inc. for the year ended December 31, 1993, and incorporated herein
by reference.
(vi) Filed as an Exhibit to Annual Report on Form 10-K of Insignia Financial
Group, Inc. for the year ended December 31, 1994, and incorporated herein
by reference.
(vii)Filed as an Exhibit to Annual Report on Form 10-K of Insignia Financial
Group, Inc. for the year ended December 31, 1995, and incorporated herein
by reference.
(viii) Filed as an Exhibit to Annual Report on Form 10-K of Insignia Financial
Group, Inc. for the year ended December 31, 1996, and incorporated herein
by reference.
(ix) Filed as an Exhibit to Annual Report on Form 10-K/A of Insignia Financial
Group, Inc. for the year ended December 31, 1997, and incorporated herein
by reference.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement"), is entered
into as of January 1, 1998, by and between Insignia Financial Group, Inc., a
Delaware corporation with an office at One Insignia Financial Plaza, Greenville,
South Carolina (the "Company"), and Andrew Lawrence Farkas an individual with an
office at 375 Park Avenue, New York, N.Y. (the "Executive ").
Background
The Company and the Executive have previously entered into an Employment
Agreement, which agreement has been previously amended. The Company desires to
assure itself of the services of the Executive for the additional period
provided in this Agreement, and the Executive is willing to serve in the employ
of the Company for such period upon the terms and conditions provided in this
Agreement.
Statement of Agreement
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on January 1, 1998 (the
"Commencement Date") and ending on December 31, 2000 or such earlier date as
provided herein (the "Expiration Date") (such period, as it may be so
terminated, being referred to herein as the "Employment Period").
Section 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve
as Chief Executive Officer of the Company and, at the Company=s request, as
an officer or director of one or more of its subsidiaries. In the
performance of his duties hereunder, the Executive shall report to and
shall be responsible only to the Board of Directors of the Company. The
Executive agrees to his employment as described in this Section 2, and
agrees to devote substantially all of his working time and efforts to the
performance of his duties hereunder. The parties hereto understand and
agree that the Executive has business interest outside of the scope of this
Agreement, including, without limitation, at Metropolitan Asset
Enhancement, L.P. ("MAE"), as a strategic partner at Charterhouse, and as a
director of Northstar Bank. The parties hereto hereby agree that,
notwithstanding any provision of this Agreement to the contrary, (i) the
Executive shall be entitled to devote up to fifteen percent (15%) of his
working time to the performance of duties in connection with MAE, its
general partner, and its subsidiaries, and (ii) the Executive shall not be
entitled to pursue any other business interests outside of the scope of
this Agreement without the prior consent of the Company, which consent
shall not be unreasonably delayed or withheld. The Executive shall be
available to travel as the needs of the business of the Company reasonably
require.
(b) Nomination To The Board of Directors and Committees Thereof. The
Company agrees that the Executive shall be nominated by its Board of
Directors to be elected to such Board of Directors as a Director of the
Company at each meeting of its stockholders at which Directors of the
Company are to be elected for so long as the Executive shall be employed by
the Company. The Company further agrees that, for so long as the Executive
shall be employed by the Company and shall be a Director of the Company, he
shall be elected or appointed, as the case may be, to serve (i) as Chairman
of the Board of Directors of the Company, (ii) on the Executive Committee
of the Board of Directors of the Company as the Chairman thereto, and (iii)
on the Compensation Committee of the Board of Directors as an ex officio
member thereof (collectively, the "Board Positions ").
(c) Location of Office. During the Employment Period, the Executive
shall have an office in both the principal executive offices of the Company
in Greenville, South Carolina, and at the Company's offices in New York
City, New York or, at the Executive's sole option, in only one of such
locations. The Company will provide the Executive with two (2) executive
secretaries acceptable to him, and other support appropriate to his duties
hereunder in the sole discretion of the Executive.
(d) Primary Responsibilities. During the Employment Period, the
Executive shall have primary responsibility for the business of the Company
and its subsidiaries, including, without limitation, the following areas:
(i) Underwriting decisions;
(ii) Securitization decisions;
(iii) Acquisition and disposition decisions;
(iv) Hiring and termination of employees;
(v) Setting executive and other employee compensation;
(vi) Setting the location of the Company=s principal executive
offices at any time and from time to time; and
(vii)Other similar general management decisions affecting the
operations of the Company, in each case subject to the
approval of the Board of Directors of the Company or the
appropriate committee thereof to the extent required by the
laws of the State of Delaware or the By-Laws of the Company.
(e) Consulting. Upon an Influence Change Event (as defined in Section
8(a)(iv)) after or in connection with an Extraordinary Transaction (as
defined in Section 4(d)), an Extraordinary Stock Event (as defined in
Section 8(a)(v)), or a Material Asset Disposition (as defined in Section
4(e)), other than as a result of a Termination For Cause (as defined in
Section 7(a)(iv)), without the prior written consent of Executive, then
Executive can elect in writing to convert this Agreement into a consulting
agreement. Under the terms of the consulting agreement, the Executive shall
consult with respect to the assets and liabilities of the Company as they
existed immediately before the Extraordinary Transaction or the Material
Asset Disposition. Such consultation shall be at the reasonable times
convenient to the Executive on no less than five business days' notice, the
parties recognizing that the Executive during the consulting period will
have significant other business interests. The terms and conditions of this
Agreement (including all rights hereunder of the Executive as to salary,
bonus, payments and benefits) shall continue unabridged during the period
of consulting. The other provisions of this Agreement also shall remain in
effect except for Section 2 as modified by this Section 2(d) and except
that Section 7(a)(iv)(B) and Section 7(a)(iv)(C) shall be deleted. The
"Employment Period " shall be deemed to include the period during which the
Executive is obligated to provide consulting services hereunder and
therefore, to the extent permitted by law, the conversion shall not be
deemed a termination for any purpose and, if the law requires that the
conversion be treated as a termination, then the Company must provide the
Executive with benefits equivalent to those he would have received had
there been no termination.
Section 3. Key Man Life Insurance. The Company shall have the right to
place a "key man" life insurance policy, providing a death benefit of up to
$15,000,000 upon the life of the Executive, for which the Company is the
beneficiary (the "Key Man Insurance Policy "). In connection therewith, the
Executive hereby authorizes the Company, at its sole cost and expense, to
purchase and maintain upon the life of the Executive such insurance policy, and
agrees to submit to such reasonable medical examinations, and to provide and/or
consent to the release of such medical information, as may be necessary or
desirable in order to secure the issuance thereof. Except as may be required in
order to obtain insurance coverage as described in this Section 3, any and all
information about Employee's health or medical records shall be kept
confidential by the Company and shall not be disclosed by the Company to any
party without the Executive's prior written consent.
Section 4. Compensation. As full compensation for his services hereunder,
the Company shall pay, grant, issue or give, as the case may be, to the
Executive the compensation and benefits specified below:
(a) Base Salary. Subject to the provisions of Sections 7 and 8, a base
salary at the rate of $1, 000,000 per annum ("Base Salary"), which Base
Salary shall be paid to the Executive in accordance with the customary
executive payroll policy of the Company as in effect from time to time;
provided, however, that the Base Salary, as in effect at any time and from
time to time, may be further increased by action of the Board of Directors;
and further provided, however, that in no event shall the Base Salary be
decreased at any time or from time to time without the prior consent of the
Executive, which consent may be granted or withheld in the Executive's sole
discretion.
(b) Annual Discretionary Bonus. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined
by the Board of Directors of the Company in its sole and absolute
discretion, which shall be paid to the Executive, with respect to any
fiscal year of the Company, before the expiration of 74 days after the end
of such fiscal year. In making bonus determinations, the Company shall
evaluate the Executive's performance in accordance with the standard bonus
guidelines used by the Company for the Chief Executive Officer of the
Company and shall follow the plan approved by stockholders. If an
Extraordinary Transaction, an Influence Change Event, or an Extraordinary
Stock Event (all as defined in Section 8(a)) takes place in any year, then
the Company shall, promptly after the Extraordinary Transaction, the
Influence Change Event, or the Extraordinary Stock Event, pay an amount
equal to the discretionary bonus the Executive received with respect to the
year prior to the year in which the Extraordinary Transaction, the
Influence Change Event, or the Extraordinary Stock Event occurred,
multiplied by a fraction the numerator of which is the number of days
between the beginning of the year and the occurrence of the Extraordinary
Transaction, the Influence Change Event, or the Extraordinary Stock Event
and the denominator of which is 365.
(c) Loan. The Company will, upon written request from the Executive,
provide a loan to the Executive in a principal amount not to exceed
$1,500,000 (the "Loan"). Interest on the Loan shall accrue at a rate of
6.5% per annum and shall be payable at maturity. The Loan shall mature on
January 6, 2001. Subject to the other terms of this paragraph, the Loan
will be forgiven pro-rata over five years beginning January 1, 1998. All
accrued interest on the Loan shall be forgiven on the same basis as set
forth in this Section 4(c). In the event of a Death Termination Event or a
Disability Termination Event (both as hereinafter defined), all outstanding
principal of and accrued interest on the Loan shall be forgiven. In the
event of a Termination for Cause of the Executive or the voluntary
resignation by Executive prior to December 31, 2000, any and all amounts
outstanding under the Loan, including accrued and unpaid interest, shall be
due and payable to the Company within 20 business days of such event. In
the event the Executive is Terminated Without Cause or remains employed by
the Company through December 31, 2000, the Loan will continue thereafter to
be forgiven as provided above over such five-year period.
(d) Extraordinary Transaction, Influence Change Event, or
Extraordinary Stock Event. Upon the occurrence of an Extraordinary
Transaction, an Influence Change Event, or an Extraordinary Stock Event,
whether or not the Executive elects to convert this Agreement into a
consulting agreement, the Company shall, in addition to remaining obligated
under the terms of this Agreement, pay the Executive a payment (the
"Extraordinary Transaction Payment") equal to (i) an amount equal to the
difference between the discretionary bonus the Executive received from the
Company with respect to the year prior to the year in which the
Extraordinary Transaction, the Influence Change Event, or the Extraordinary
Stock Event occurred, and the amount paid pursuant to the last sentence of
Section 4(b), since the Executive may be forfeiting the right to receive
the balance of such bonus, and (ii) $5,000,000 if the Extraordinary
Transaction, the Influence Change Event, or the Extraordinary Stock Event
occurs in the first 12 months of the Employment Period, $6,000,000 if the
Extraordinary Transaction, the Influence Change Event, or the Extraordinary
Stock Event occurs in the second 12 months of the Employment Period, and
$7,000,000 if the Extraordinary Transaction, the Influence Change Event, or
the Extraordinary Stock Event occurs in the third 12 months of the
Employment Period. In addition, the Company shall pay the Executive the
amounts and benefits contemplated in Section 7(e).
(e) Material Asset Disposition Bonus. In the event of a Material Asset
Disposition, as defined below, in consideration of the services performed
by the Executive and consistent with the prior terms of the Executive=s
employment, the Company (or, in the case of clause (iii) below, the
spin-off entity or, in default thereof, the Company) shall pay to the
Executive within 15 days of the consummation of such Material Asset
Disposition, a cash bonus equal to 1.00% of the consideration (valued as
set forth below) received by the Company or its shareholders as a result of
such Material Asset Disposition. A "Material Asset Disposition" as used
herein means, without duplication for the same matter: (i) a transaction
which results in a majority of the equity interest in the Company being
beneficially owned by any "person," including any "group " (as such terms
are used in Section 13(d) and 14(d) of the Exchange Act), other than any of
the Company=s present Affiliates; (ii) a sale or series of sales by the
Company of subsidiaries, divisions, assets (other than marketable
securities), or operating businesses representing in the aggregate 20% or
more of the Company's 1998 budgeted EBITDA and each such sale after such
threshold has been reached; (iii) a spin off, or series of spin offs, of
any of the Company's divisions, operating businesses or subsidiaries that
meet the 1998 budgeted EBITDA threshold set forth in (ii) above which is
followed by a subsequent Extraordinary Transaction (as defined above, but
with reference to the spun off entity rather than the Company) of the
subsidiary, division or business spun off within five years following such
spin off; or (iv) any transaction which results in any one or more of the
Company's divisions, subsidiaries or operating businesses, representing in
the aggregate 20% or more of the Company's EBITDA, being owned by a third
party. In the event a Material Asset Disposition is consummated in one or
more steps, including, without limitation, by way of second-step merger,
any additional consideration paid or to be paid in any subsequent step in
the Material Asset Disposition in respect of (x) subsidiaries, divisions,
assets (other than marketable securities), or operating businesses of the
Company and (y) capital stock of the Company (and any securities
convertible into, or options, warrants or other rights to acquire, such
capital stock) shall be included for purposes of calculating the bonus
payable pursuant to this Section 4(e). "Consideration" shall not include
the assumption, directly or indirectly, or repayment of indebtedness or
other liabilities of the Company but shall include the assumption, directly
or indirectly, or repayment of the Trust Convertible Preferred Securities
presently outstanding or any similar securities. If all or a portion of the
consideration paid in the Material Asset Disposition is other than cash or
securities, then the value of such non-cash consideration shall be the fair
market value thereof on the date the Material Asset Disposition is
consummated as mutually agreed upon in good faith by the Company's Board of
Directors and the Executive. If such non-cash consideration consists of
common stock, options, warrants or rights for which a public trading market
existed prior to the consummation of the Material Asset Disposition, then
the value of such securities shall be determined by the closing or last
sales price thereof on the date of the consummation of the Material Asset
Disposition; provided, however, that if such non-cash consideration
consists of newly-issued, publicly-traded common stock, options, warrants
or rights for which no public trading market existed prior to the
consummation of the Material Asset Disposition, then the value thereof
shall be the average of the closing prices for the 20 trading days
subsequent to the fifth trading day after the consummation of the Material
Asset Disposition. In such event, the portion of the bonus payable to the
Executive pursuant to this Section 4(e) attributable to such securities
shall be paid on the 30th trading day subsequent to consummation of the
Material Asset Disposition. If no public market exists for the common
stock, options, warrants or other rights issued in the Material Asset
Disposition, then the value of thereof shall be as mutually agreed upon in
good faith by the Company=s Board of Directors and the Executive. If the
non-cash consideration paid in the Material Asset Disposition consists of
preferred stock or debt securities (regardless of whether a public trading
market existed for such preferred stock or debt securities prior to
consummation of the Material Asset Disposition or exists thereafter), the
value hereof shall be the face or principal amount, as the case may be. Any
amounts payable by a purchaser to the Company, any shareholder of the
Company or any Affiliate of either the Company or any shareholder of the
Company in connection with a non-competition, employment, consulting,
licensing, supply or other agreement shall be deemed to be part of the
consideration paid in the Material Asset Disposition. If all or a portion
of the consideration payable in connection with the Material Asset
Disposition includes contingent future payments, then the Company shall pay
to the Executive, upon consummation of such Material Asset Disposition, an
additional cash fee, determined in accordance with this Section 4(e) as,
when and if such contingency payments are received. However, in the event
of an installment purchase at a fixed price and a fixed time schedule, the
Company agrees to pay the Executive, upon consummation of the Material
Asset Disposition, a cash fee determined in accordance with this Section
4(e) based on the present value of such installment payments using a
discount rate of 6.5%.
(f) Fringe Benefit Programs. In addition to the other benefits
provided to the Executive hereunder and to the extent he satisfies the
eligibility requirements thereof and to the extent permitted by law,
participation in fringe benefit programs made available generally to
employees of the Company, including, without limitation, pension, profit
sharing, stock purchase, savings, bonus, disability, life insurance, health
insurance, hospitalization, dental, deferred compensation and other plans
and policies authorized on the date hereof or in the future.
(g) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance
of his duties hereunder, including professional activities and membership
fees and dues relating to professional organizations of which the Executive
currently is a member or of which he becomes a member and including,
without limitation, expenses required for professional licensing of the
Executive, and business related mobile or cellular phone expense in
accordance with the Company's written policies and procedures, all upon the
presentation of appropriate documentation therefore in accordance with the
then regular procedures of the Company.
(h) Perquisites. In addition to the other benefits provided to the
Executive hereunder, and at the sole cost and expense of the Company except
as otherwise provided herein:
(i) Memberships at The Harvard Club, New York City, New York,
and Beachfront Club, Mamaroneck, New York;
(ii) Membership in the Greenville Country Club, Greenville, South
Carolina;
(iii)All other club dues for clubs and other similar
organizations of which the Executive is currently a member
and which he uses primarily for business purposes;
(iv) An annual physical examination;
(v) Reasonable consultations with financial and tax advisors or
counselors, including annual income tax return preparation
and audits relating to the period during which the Executive
was employed by the Company (whether or not under this
Agreement) and whether such audit expense is incurred during
or after the Employment Period;
(vi) Unlimited access to, consultations with, and financial and
legal services and advice provided by, the Chief Financial
Officer of the Company and the General Counsel of the
Company, in each case with respect to the interests of the
Executive and the members of the his family and regardless
of whether or not such interests are related to the business
and affairs of the Company, at the Company=s sole cost and
expense;
(vii)Reimbursement for the fees and expenses of counsel chosen
by the Executive incurred in connection with the negotiation
of this Employment Agreement, determined at such counsel's
regular hourly rate, plus an amount equal to any tax payable
by the Executive upon such amount taking into account that
such amount, in and of itself, may be taxable;
(viii) During the Employment Period, so long as the Executive
shall travel more than eight (8) days per month (average
during the course of a calendar year), the Company shall
maintain a corporate jet aircraft no smaller than a Citation
VII such as that in use by the Company as of the date of
this Agreement. The Executive shall have unlimited use of
the Company's aircraft during his employment by the Company.
The aircraft shall also be available for use by the other
executives and directors of the Company, subject to
availability. In addition, the Company shall provide the
Executive with the use of the aircraft (or a similar
chartered aircraft in the event that the Company no longer
has full time use of the aircraft) for fifty (50) hours per
year for two (2) years subsequent to the Executive=s
termination by the Company for any reason other than a
Termination for Cause or voluntary resignation by the
Executive. To the extent the Executive uses the aircraft for
personal use, the cost of such use shall be added to and
included in the Executive=s compensation for federal, state
and local income tax purposes;
(ix) The cost of term life insurance, providing a death benefit
of up to five million dollars ($5,000,000) upon the life of
the Executive, the beneficiaries and owner of which shall be
designated by the Executive and which term insurance shall
be upon terms and conditions, and in form and substance
available at the time, and otherwise reasonably satisfactory
to the Executive in his sole discretion and which term life
insurance shall be paid for by the Company during the
Employment Period at the Company's sole cost and expense. If
the Company is the owner of such policy, upon termination of
the Executive's employment by the Company, the ownership of
such term life insurance shall be transferred to the
Executive or his designee. At Executive's option, Executive
may apply the cost of such a policy to some other benefit of
Executive's choice; and
(x) Use of a full time car and driver both in Greenville, South
Carolina and New York City, New York, which car and driver
shall also be available for use by all other executives of
the Company as the need shall arise.
(i) Disability Protection Underwriting. Subject to the provisions of
Sections 7 and 8 hereof, the Company will underwrite and provide to the
Executive disability insurance coverage identical to the disability
insurance coverage provided to senior executives of the Company from time
to time at the Company=s sole cost and expense.
(j) Vacations, etc. Leaves-of-absence in accordance with the then
regular procedures of the Company governing senior executives, and four
weeks of paid vacation per year on a non-cumulative basis.
(k) Parachute Limit. Notwithstanding anything else herein, to the
extent the Executive would be subject to the excise tax under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), on such
amounts or benefits received from the Company required to be included in
the calculation of parachute payments for purposes of Sections 280G and
4999 of the Code (the "Parachute Payments "), the amounts of any Parachute
Payments shall be automatically reduced as described herein to an amount
one dollar less than an amount that would subject the Executive to the
excise tax under Section 4999 of the Code (the "Parachute Limit ");
provided, however, that this Section 4(k) shall apply only if the reduced
Parachute Payments received by the Executive (after taking into account
further reductions for applicable federal, state and local income, social
security and other taxes) would be greater than the unreduced Parachute
Payments to be received by the Executive minus (i) the excise tax payable
under Section 4999 of the Code with respect to such Parachute Payments and
(ii) all applicable federal, state and local income, social security and
other taxes on such Parachute Payments. The foregoing reduction shall be
applied to the Parachute Payments as follows: (i) first by reducing the
amounts payable under Section 4(d) (if such amounts are included in such
computation) until such amounts have been exhausted up to the Parachute
Limit, (ii) then by reducing any such other amounts and benefits (other
than awards described in (iii) below) as determined by the Company, and
(iii) notwithstanding anything contained herein or in an option, warrant or
restricted stock agreement, award or plan relating to the Executive then,
on a pro-rata basis up to the Parachute Limit, by failing to accelerate the
vesting (without affecting the right to vest) upon a change in ownership or
effective control or change in ownership of a substantial portion of assets
(as described in Code Section 280G(b)(2)(A)(i)) of any unvested awards of
shares of restricted stock of the Company previously granted to Executive
and options or warrants to purchase shares of the Company previously
granted to Executive. Notwithstanding the foregoing, the Company shall
treat any of the amounts described in (i) through (iii) above as a
Parachute Payment solely to the extent required under applicable law.
(l) Registration Rights. The Company hereby ratifies the Executive=s
registration rights with respect to all of the securities of the Company
beneficially owned by the Executive as set forth in the Registration Rights
Agreement heretofore executed by the Executive and the Company.
(m) Vesting. In the event of (a) a termination of Executive's
employment for any reason other than a Termination for Cause or voluntary
termination by the Executive, including, but not limited to a Death
Termination Event, Disability Termination Event, Termination Without Cause
or in the event of (b) the occurrence of an Extraordinary Transaction, an
Influence Change Event, or an Extraordinary Stock Event (whether or not
resulting in a termination of Executive=s employment), all options and
warrants then held by and/or granted to the Executive will immediately vest
and be exercisable by the Executive.
(n) Signing Bonus. The Company shall transfer its interest in
Metropolitan Asset Enhancement L.P. to Executive and pay the Executive
$2,000,000 upon execution of this Agreement.
Section 5. Representations, Warranties and Covenants of the Executive.
The Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation
which is inconsistent with the execution of this Agreement, the performance
of his duties hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties
hereunder with or without reasonable accommodations.
Section 6. Non-Solicitation; Confidentiality.
(a) Non-Solicitation.
(1) In recognition of the close personal contact the Executive
has or will have with the Company's and its affiliates' trade secrets,
confidential information, records and business relationships, and the
position of trust in which the Company holds the Executive, the
Executive further covenants and agrees that while the Executive is
employed by the Company and for a period lasting for one (1) year
following the date of cessation of the Executive's employment with the
Company, the Executive will not, either for himself or an officer,
director, employee, agent, representative, independent contractor or
in any relationship to any person, partnership, corporation, or other
entity (except the Company or its Affiliates or subsidiaries),
solicit, directly or by assisting others, business from any of the
Company's customers or clients with whom the Executive has had
material contact (as defined below) during the twelve (12) month
period preceding the date of cessation of the Executive's employment
with the Company, for the purpose of providing goods or services to
said customers and clients. For purposes of this Agreement, "material
contact" exists between the Executive and any of the Company's
customers or clients (i) with whom the Executive actually dealt; or
(ii) whose dealings with the Company were handled, coordinated or
supervised by the Executive; or (iii) about whom the Executive
obtained confidential information in the ordinary course of business
through the Executive's association with the Company.
(2) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not solicit,
employ, engage or in any manner encourage any employee, broker or
sales person of the Company, or any of its respective subsidiaries or
affiliates to leave their employ for the employ of a person or entity
which directly or indirectly competes with the Company, or any of its
respective subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not purchase
for his own account any limited partnership units of partnerships
that, on the date of purchase, are controlled directly or indirectly
by the Company, except that the provisions of this sentence shall not
be deemed breached merely because the Executive owns, immediately
after a purchase, not more than one percent of the outstanding units.
Should the Executive breach the foregoing sentence, all his options
issued by the Company or any of its subsidiaries shall be cancelled
and all of his restricted stock issued by the Company or any of its
subsidiaries (whether or not then vested) which he then owns shall be
forfeited. For purposes of this Section 6(a)(3), "purchase" shall mean
the payment of cash only for such limited partnership units and shall
not include payment of cash for interests in an entity whose assets
consist in whole or in part of such limited partnership units.
The Executive acknowledges that the foregoing provisions are intended
to protect the Company's and its subsidiaries' and Affiliates' business and
customer contacts, not to prevent the Executive from pursuing a livelihood
in the general area of his previous training, and they should be
interpreted accordingly.
(b) Confidentiality. All confidential information which the Executive
may now possess, may obtain during or after his employment with Company, or
may create prior to the end of his employment with the Company or otherwise
relating to the business of the Company or any of its subsidiaries or
affiliates or of any customer or supplier of any of them shall not be
published, disclosed, or made accessible by him to any other person, either
during or after the cessation of his employment, or used by him except
during his employment with the Company in the business and for the benefit
of the Company and its subsidiaries and Affiliates. In addition, the
Executive agrees not to disclose, publish or make accessible to any other
person, from and after the date of this Agreement, during the Employment
Period or at any time thereafter, any of the terms or provisions of this
Agreement, except the Executive's accountants or legal counsel who need
such information to advise him, prepare his tax returns, make required
filings, represent him and the like; provided, however, that the Executive
will be responsible for causing any such accountants and legal counsel to
be aware of and to abide by the obligations contained in this Section 6(b)
and will be responsible for any breach of such obligations by any of them.
In the event that the Executive becomes legally compelled to disclose any
of the confidential information, the Executive will provide the Company
with prompt written notice so that the Company may seek a protective order
or other appropriate remedy and/or waive in writing compliance with the
provisions of this Section 6(b) and in the event that such protective order
or other remedy is not obtained, or should the Company waive in writing
compliance with the provisions of this Section 6(b), the Executive will
furnish only that portion of the confidential information which is so
legally required. The Executive shall return all tangible evidence of such
confidential information to the General Counsel of the Company prior to or
at the cessation of his employment.
(c) Interpretation. Since a breach of the provisions of this Section 6
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach and the Company shall not be required to
post a bond in any proceeding brought for such purpose. The Executive
agrees that the provisions of this Section 6 are necessary and reasonable
to protect the Company in the conduct of its businesses. If any restriction
contained in this Section 6 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope
thereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced form such restriction shall then be
enforceable in the manner contemplated hereby. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies, at
law or in equity, for such breach or threatened breach.
Section 7. Termination.
(a) Definitions.
(i) Death Termination Event. As used herein, "Death
Termination Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein,
"Disability Termination Event" shall mean a circumstance where
the Executive is physically or mentally incapacitated or disabled
or otherwise unable to fully discharge his duties hereunder for a
period of 185 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the
event that the last will and testament of the Executive has not
been probated at the time of determination, the estate of the
Executive and (B) in the event that the last will and testament
of the Executive has been probated at the time of determination,
the legatees of the Executive who are entitled under such will to
the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term
"Termination For Cause" shall mean the termination by the Company
of the Executive's employment hereunder upon a good faith
determination by a majority vote of the members of the Board of
Directors of the Company that termination of this Agreement is
necessary by reason of (A) the Executive shall be convicted of a
felony, unless in any such case the Executive performed such act
in good faith and in a manner the Executive reasonably believed
to be in or not opposed to the best interests of the Company, (B)
the Executive shall commit any act or omit to take any action in
bad faith and to the material detriment of the Company and
Executive shall not have cured the same within 30 days after the
Company sends written notice thereof, or (C) Executive shall
breach in a material way any material term of this Agreement and
fail to correct such breach within 30 days after the Company
sends written notice thereof; provided, however, that if any such
breach is capable of being cured, but a reasonable person of
sound mind and business judgment could not reasonably expect such
breach to be cured within 30 days, such breach shall not
constitute a basis for a Termination For Cause unless the
Executive does not diligently prosecute such cure to completion.
(v) Termination Without Cause. As used herein, "Termination
Without Cause" shall mean any termination of the Executive=s
employment hereunder that is not a Termination For Cause, a Death
Termination Event, or a Disability Termination Event, and shall
include, without limitation, a termination of the Executive=s
employment hereunder due to the scheduled expiration of the
Employment Period on December 31, 2000 or (as contemplated by
Section 8(b)(i)), an Extraordinary Transaction, an Influence
Change Event, or an Extraordinary Stock Event but not a
conversion to a consulting agreement.
(b) Death Termination Event. Upon the occurrence of a Death
Termination Event, this Agreement shall terminate automatically upon
the date that such Death Termination Event occurred (subject to the
last sentence of this Section 7), whereupon (i) the Company shall
continue to pay the then-current Base Salary to the Estate for a
period equal to the remaining term of the Employment Period
(determined upon the assumption that the Employment Period will not be
terminated prior to December 31, 2000), and (ii) the Company will
continue to provide health insurance to the surviving spouse and
surviving issue of the Executive, at their sole cost and expense but
otherwise upon terms and conditions identical to the terms and
conditions upon which health insurance is provided to the spouses and
issue of employees of the Company at such time, until such time as
such surviving spouse and surviving issue elect to terminate such
health insurance coverage.
(c) Disability Termination Event. Upon the occurrence of a
Disability Termination Event, this Agreement shall terminate
automatically upon the date that such Disability Termination Event
occurred (subject to the last sentence of this Section 7), whereupon
(i) the Company shall continue to pay seventy-five percent (75%) of
the then-current Base Salary to the Executive for twice the period
equal to the remaining term of the Employment Period (determined upon
the assumption that the Employment Period will not be terminated prior
to December 31, 2000, and will not in any event be less than two years
for purposes of such calculation), (ii) the Company shall continue to
provide to the Executive the disability protection contemplated by
Section 4(i) of this Agreement until such time as the Executive elects
to discontinue such coverage, (iii) the Company will continue to
provide health insurance to the Executive, his spouse, and his issue,
at the Executive=s sole cost and expense and otherwise upon terms and
conditions identical to the terms and conditions upon which health
insurance is provided to employees of the Company and their spouses
and issue, the Company will arrange for the Executive (x) to have the
ability to maintain the Key Man Insurance Policy thereafter at the
sole expense of the Executive, and (y) to designate the beneficiaries
thereof, in each case to the exclusion of the Company and as promptly
as practicable after such termination.
(d) Termination For Cause. The Executive and the Company agree
that the Company shall have the right to effectuate a Termination for
Cause prior to December 31, 2000. Upon the occurrence of a Termination
For Cause, this Agreement shall terminate upon the date of that such
Termination For Cause occurs (subject to the last sentence of this
Section 7), whereupon (i) the Executive shall be entitled to receive
the Base Salary, as then in effect, to and including the date that
such Termination for Cause occurs, and (ii) the Company will arrange
for the Executive (x) to have the ability to maintain the Key Man
Insurance Policy thereafter at the sole expense of the Executive, and
(y) to designate the beneficiaries thereof, in each case to the
exclusion of the Company and as promptly as practicable after such
termination.
(e) Termination Without Cause. Upon the occurrence of a
Termination Without Cause, this Agreement shall terminate upon the
date that such Termination Without Cause occurs (subject to the last
sentence of this Section 7), whereupon (i) the Company shall (A) in
the event that such Termination Without Cause is not an Extraordinary
Transaction, an Influence Change Event, or an Extraordinary Stock
Event, continue to pay the then-current Base Salary to the Executive
until December 31, 2000, and (B) in the event that such Termination
Without Cause is an Extraordinary Transaction, an Influence Change
Event, or an Extraordinary Stock Event, the Company shall pay to the
Executive the Extraordinary Transaction Payment (as defined in Section
4(d)) in accordance with the provisions of Section 8, (ii) the Company
shall continue to provide to the Executive the disability protection
contemplated by Section 4(i) of this Agreement until such time as the
Executive elects to discontinue such coverage, (iii) the Company will
continue to provide health insurance to the Executive, his spouse, and
his issue, at the Executive=s sole cost and expense and otherwise upon
terms and conditions identical to the terms and conditions upon which
health insurance is provided to employees of the Company and their
spouses and issue, until such time as the Executive elects to
terminate such health insurance coverage, and (iv) the Company will
arrange for the Executive (x) to have the ability to maintain the Key
Man Insurance Policy thereafter at the sole expense of the Executive,
and (y) to designate the beneficiaries thereof, in each case to the
exclusion of the Company and as promptly as practicable after such
termination. In addition, the Company shall pay the Executive the
amounts and benefits contemplated by Section 4(d).
Notwithstanding anything in this Agreement to the contrary, (i) Sections 3,
4(g), 4(l), 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 and 19 of this
Agreement shall survive any termination of this Agreement or of the Executive=s
employment hereunder until the expiration of the statute of limitations
applicable hereto, and (ii) Section 7 of this Agreement shall survive any
termination of this Agreement or of the Executive=s employment hereunder other
than a Termination Without Cause, it being understood and agreed by the parties
hereto that in the event of a Termination Without Cause, Section 7 of this
Agreement shall be terminated in its entirety as of the date of such Termination
Without Cause.
Section 8. Extraordinary Transaction.
(a) Definitions.
(i) Extraordinary Transaction. As used herein, "Extraordinary
Transaction" shall mean the occurrence of any one or more of the following:
(1) the Company ceases to be required to file reports under Section 13
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor to that Section;
(2) a majority of the members of the Board of Directors of the Company
are not persons who (a) had been directors of the Company for at least the
preceding 12 consecutive months or (b) when they initially were elected to
the Board (x) were nominated (if they were elected by the stockholders) or
elected (if they were elected by the directors) with the affirmative vote
of two-thirds of the directors who were Continuing Directors at the time of
the nomination or election by the Board and (y) were not elected as a
result of an actual or threatened solicitation of proxies or consents by a
person other than the Board of Directors of the Company or an agreement
intended to avoid or settle such a proxy solicitation (the directors
described in clauses (a) and (b) being "Continuing Directors");
(3) any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company,
any of its present affiliates (as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as amended) ("Affiliates"),
or any employee benefit plan of the Company or any of its present
Affiliates) is or becomes the "beneficial owner" (as defined in Rule 13(d)
(3) under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities;
(4) the purchase of Class A Common Stock of the Company ("Common
Stock") pursuant to any tender or exchange offer or otherwise made by any
"person," including a "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than the Company, any of its present
Affiliates, or any employee benefit plan of the Company or any of its
present Affiliates, which results in "beneficial ownership" (as so defined)
of 30% or more of the outstanding Common Stock;
(5) the execution and delivery of a definitive agreement by the
Company that provides for a merger or consolidation, or a transaction
having a similar effect (unless such merger, consolidation or similar
action is with a subsidiary of the Company or with another company, a
majority of whose outstanding capital stock is owned by the same persons or
entities who own a majority of the Company's outstanding Common Stock at
such time), where (A) the Company is not the surviving corporation, (B) the
majority of the Common Stock of the Company is no longer held by the
persons who were the stockholders of the Company immediately prior to the
transaction, (C) the sale, lease, exchange or other disposition of all or
substantially all of the assets of the Company but not the spin off of one
division, the sale of one division, or both (where "division" means the
present residential business (including IPT) and the present commercial
business), and not the trading of marketable securities held as portfolio
securities or (D) the Company's Common Stock is converted into cash,
securities or other property (other than the common stock of a company into
which the Company is merged), provided, however, that, in the event that
the contemplated merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this paragraph (v) by
virtue of such Change of Control shall not apply;
(6) upon the consummation of any transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the
Company or a subsidiary through purchase of assets, or by merger, or
otherwise but not the spin off of one division, the sale of one division,
or both;
(7) the election to the Board of Directors of the Company, by vote of
the stockholders of the Company, of one individual under circumstances
where (A) the Board of Directors of the Company, after such election, is
comprised of one individual, and (B) all of the Farkas Shares (as defined
in Section 8(a)(iii)) at the time of such election were not voted for such
election to the Board of Directors of the Company of such individual;
(8) the appointment to the Board of Directors of the Company, by vote
of the Board of Directors of the Company, of one individual under
circumstances where (A) the Board of Directors of the Company, after such
appointment, is comprised of one individual, and (B) the Executive did not
so vote for such appointment to the Board of Directors of the Company of
such individual, either because the Executive was not a Director of the
Company at such time or because the Executive did not vote affirmatively
for the appointment to the Board of Directors of the Company of such
individual;
(9) the election to the Board of Directors of the Company, by the
stockholders of the Company, of one or more individuals under circumstances
where (A) the Board of Directors of the Company, after such election, is
comprised of more than one individual under the By-Laws of the Company, as
then in effect, and (B) a majority of the Directors of the Company in
office after such election did not receive Executive Approval (as defined
in Section 8(a)(ii)); or
(10) the appointment to the Board of Directors of the Company, by vote
of the Board of Directors of the Company, of one or more individuals under
circumstances where (A) the Board of Directors of the Company, after such
appointment, is comprised of more than one individual under the By-Laws of
the Company, as then in effect, and (B) a majority of the Directors of the
Company in office after such appointment did not receive Executive
Approval.
(ii) Executive Approval. As used herein, the term "Executive Approval"
shall mean, with respect to any member of the Board of Directors of the Company
in office at the time of determination, (A) if such individual is not then a
member of the Board of Directors of the Company by virtue of election to the
Board of Directors of the Company by vote of the stockholders of the Company,
the Executive, as a Director of the Company, voted for the appointment of such
individual to the Board of Directors of the Company pursuant to which such
individual is then a member of the Board of Directors of the Company, and (B) if
such individual is then a member of the Board of Directors of the Company by
virtue of election to the Board of Directors of the Company by vote of the
stockholders of the Company, all of the Farkas Shares at the time of such
election were voted in favor of the election of such individual to the Board of
Directors of the Company pursuant to which such individual is then a member of
the Board of Directors of the Company.
(iii) Farkas Shares. As used herein, the term "Farkas Shares," as of any
time, shall mean the securities of the Company entitled to vote generally in the
election of Directors of the Company as to which, at such time, the Executive
had the sole power to vote or to direct the voting of.
(iv) Influence Change Event. As used herein "Influence Change Event" shall
mean the occurrence of the loss by the Executive of any of the Board Positions
or if the Executive=s title, powers and duties within the Company or the Board
of Directors of the Company have been diminished, in each case other than as a
result of a Termination For Cause, without the prior written consent of the
Executive.
(v) Extraordinary Stock Event. As used herein "Extraordinary Stock Event"
shall mean either (i) the occurrence of more than fifteen (15%) percent of the
outstanding securities of the Company entitled to vote in the election of
directors of the Company being owned (by beneficial ownership, as such term is
used in Section 13(d) of the Exchange Act, and the rules and regulations
thereunder or otherwise) or acquired by any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Executive, a
person over whom the Executive has the power to exercise a controlling influence
exclusive of any other person, or a person whose beneficial ownership has been
approved by the Executive in writing (such person being referred to herein as
the "Acquiror") and the Acquiror either describes, is required to describe, or
would be required to describe in the event that the Acquiror was subject to
Section 13(d) of the Exchange Act, as in effect on the date hereof, any plans or
proposals which it may have which relate to or would result in any of the events
described in paragraphs (a) through (j) of Item 4 of Schedule 13D, as in effect
on the date hereof, in a Schedule 13D, or amendments thereto, filed with the
Securities and Exchange Commission with respect to such ownership or acquisition
or (ii) the occurrence of more than forty (40%) percent of the outstanding
securities of the Company entitled to vote in the election of directors of the
Company being owned (by beneficial ownership, as such term is used in Section
13(d) of the Exchange Act and the rules and regulations thereunder, or
otherwise) or acquired by any person (as such term is used in Sections 13(d) and
14(d) of the Exchange Act, whether or not such ownership has been consented to
by the Executive.
(b) Extraordinary Transaction; Influence Change Event; Extraordinary Stock
Event. Upon the occurrence of either an Extraordinary Transaction, an Influence
Change Event, or an Extraordinary Stock Event, (i) this Agreement may, at
Executive=s option exercised in writing, be terminated as of the date of such
Extraordinary Transaction, Influence Change Event, or Extraordinary Stock Event,
as the case may be (an "Extraordinary Transaction Termination"), (ii) this
Agreement may, at Executive's option exercised in writing, be converted into a
consulting agreement pursuant to Section 2(e) as of the date of an Influence
Change Event, the Extraordinary Transaction, or the Extraordinary Stock Event,
as the case may be, (iii) in the event of such termination contemplated by
Section 8(b)(i), the provisions of Section 7(e) of this Agreement shall be in
effect as of the date of such Extraordinary Transaction, Influence Change Event,
or Extraordinary Stock Event, as the case may be, and title to the car referred
to in Section 4(h)(x) shall be transferred to him, and (iv) whether or not there
is such termination or conversion, the Company shall pay to the Executive, in
immediately available funds, the Extraordinary Transaction Payment, as described
in Section 4(d), on the date of the occurrence of such Extraordinary
Transaction, Influence Change Event, or Extraordinary Stock Event, as the case
may be.
Section 9 Indemnification. The Company hereby ratifies the indemnification
of the Executive pursuant to the terms of an Indemnification Agreement
heretofore executed by the Executive and the Company.
Section 10 Withholding. The Company shall be entitled to withhold from
amounts payable to the Executive hereunder such amounts as may be required by
applicable law to be so withheld.
Section 11 Modification. This Agreement sets forth the entire understanding
of the parties hereto with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter, and may be
modified only by a written instrument duly executed by each party.
Section 12 Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given, at the address of such party set forth in the preamble to this
Agreement (or to such other address as such party shall have furnished in
writing in accordance with the provisions of this Section 12). Notice to the
Estate shall be sufficient if addressed to the Executive as provided in this
Section 12. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address which shall be deemed given at the time of receipt thereof.
Section 13 Waiver. Any waiver by either party of a breach of any provision
of Agreement shall not operate as a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
Section 14 Binding Effect. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors.
Section 15 Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement; provided, however, that notwithstanding any provision
of this Agreement to the contrary, each of the successors, spouse, issue,
legatees, estate, administrators, executors, and legal representatives of the
Executive shall be entitled to rely upon and to enforce this Agreement as a
third party beneficiary hereof.
Section 16 Headings. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
Section 17 Enforcement. Should the Executive sue to enforce any of his
rights under this Agreement and should the Executive prevail on any issue in
such suit, then the Company shall pay all the Executive's costs of such suit
(including attorneys fees and disbursements). If any taxes are imposed on such
payment, the Company shall make such additional payments to the Executive as may
be necessary, so that after deducting the taxes imposed on all payments made to
the Executive pursuant to this paragraph, the Executive is left on an after tax
basis with an amount equal to his claim for indemnification prior to the
payments described in this sentence.
Section 18 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 19 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina, without reference to
the conflict of law provisions thereof.
Section 20 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO THE TRIAL BY THE
COURT.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/Frank M. Garrison
----------------------------------------------------------
Name: /s/Frank M. Garrison
------------------------------------------------------------
Its: Executive Managing Director
-----------------------------------------------------------
EXECUTIVE
/s/Andrew Lawrence Farkas
------------------------------------------------
Name: Andrew Lawrence Farkas
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement"), is entered
into as of January 1, 1998, by and between Insignia Financial Group, Inc., a
Delaware corporation with an office at One Insignia Financial Plaza, Greenville,
South Carolina (the "Company"), and Frank M. Garrison, an individual with an
office at 102 Woodmont Boulevard, Suite 400, Nashville TN, 37205 (the
"Executive").
Background
The Company and the Executive have previously entered into an Employment
Agreement, which agreement has been previously amended. The Company desires to
assure itself of the services of the Executive for the additional period
provided in this Agreement, and the Executive is willing to serve in the employ
of the Company for such period upon the terms and conditions provided in this
Agreement.
Statement of Agreement
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on January 1, 1998 (the
"Commencement Date") and ending on December 31, 2000 or such earlier date as
provided herein (the "Expiration Date") (such period, as it may be so
terminated, being referred to herein as the "Employment Period").
Section 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve as
Executive Managing Director and President of the Financial Services of the
Company and, at the Company=s request, as an officer or director of one or more
of its subsidiaries. In the performance of his duties hereunder, the Executive
shall report to and shall be responsible only to the Chief Executive Officer and
the Board of Directors of the Company. The Executive agrees to his employment as
described in this Section 2, and agrees to devote substantially all of his
working time and efforts to the performance of his duties hereunder. The
Executive shall be available to travel as the needs of the business of the
Company reasonably require.
(b) Location of Office. During the Employment Period, the Executive's
office shall be located at 102 Woodmont Boulevard, Suite 400, Nashville, TN
37205 or at such other location as the Company and the Executive shall mutually
agree. The Company will provide the Executive with his current office, an
executive secretary reasonably acceptable to him, and other reasonable support
appropriate to his duties hereunder.
(c) Primary Responsibilities. Subject to Section 2(a), during the
Employment Period, the Executive shall have such responsibilities as are
assigned to him by the Chief Executive Officer and the Board of Directors of the
Company. The Executive shall comply with all written policies and procedures of
the Company.
(d) Consulting. If the Executive=s title, powers or duties within the
Company have been diminished after or in connection with an Extraordinary
Transaction (as defined in Section 4(d)) or a Material Asset Disposition (as
defined in Section 4(e)), other than as a result of a Termination For Cause (as
defined in Section 7(a)(iv)), without the prior written consent of Executive,
then Executive can elect in writing to convert this Agreement into a consulting
agreement. Under the terms of the consulting agreement, the Executive shall
consult with respect to the assets and liabilities of the Company as they
existed immediately before the Extraordinary Transaction or the Material Asset
Disposition. Such consultation shall be at the reasonable times convenient to
the Executive on no less than five business days= notice, the parties
recognizing that the Executive during the consulting period likely will have
significant other business interests. The terms and conditions of this Agreement
(including all rights hereunder of the Executive as to salary, bonus, payments
and benefits) shall continue unabridged during the period of consulting. The
other provisions of this Agreement also shall remain in effect except for
Section 2 as modified by this Section 2(d) and except that Section 7(a)(iv)(B)
and Section 7(a)(iv)(C) shall be deleted. The "Employment Period" shall be
deemed to include the period during which the Executive is obligated to provide
consulting services hereunder and therefore, to the extent permitted by law, the
conversion shall not be deemed a termination for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits equivalent to those he would have received
had there been no termination.
Section 3. Key Man Life Insurance. The Company shall have the right to
place a "key man" life insurance policy, providing a death benefit of up to
$15,000,000 upon the life of the Executive, for which the Company is the
beneficiary. In connection therewith, the Executive hereby authorizes the
Company, at its sole cost and expense, to purchase and maintain upon the life of
the Executive such insurance policy, and agrees to submit to such reasonable
medical examinations, and to provide and/or consent to the release of such
medical information, as may be necessary or desirable in order to secure the
issuance thereof. Except as may be required in order to obtain insurance
coverage as described in this Section 3, any and all information about
Employee's health or medical records shall be kept confidential by the Company
and shall not be disclosed by the Company to any party without the Executive's
prior written consent.
Section 4. Compensation. As full compensation for his services hereunder,
the Company shall pay, grant, issue or give, as the case may be, to the
Executive the compensation and benefits specified below:
(a) Base Salary. Subject to the provisions of Section 7, a base salary at
the rate of $400,000 per annum ("Base Salary"), which Base Salary shall be paid
to the Executive in accordance with the customary executive payroll policy of
the Company as in effect from time to time; provided, however, that the Base
Salary, as in effect at any time and from time to time, may be further increased
by action of the Board of Directors; and further provided, however, that in no
event shall the Base Salary be decreased at any time or from time to time
without the prior consent of the Executive, which consent may be granted or
withheld in the Executive's sole discretion.
(b) Annual Discretionary Bonus. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined by the
Board of Directors of the Company in its sole and absolute discretion, which
shall be paid to the Executive, with respect to any fiscal year of the Company,
before the expiration of 74 days after the end of such fiscal year. In making
bonus determinations, the Company shall evaluate the Executive's performance in
accordance with the standard bonus guidelines used by the Company for executives
of the Company in the same or a similar position as the Executive. In the event
of an Extraordinary Transaction, as defined herein, in any year, then the
Company shall, promptly after the Extraordinary Transaction, pay an amount equal
to the discretionary bonus the Executive received with respect to the year prior
to the year in which the Extraordinary Transaction occurred multiplied by a
fraction the numerator of which is the number of days between the beginning of
the year and the occurrence of the Extraordinary Transaction and the denominator
of which is 365.
(c) Loan. The Company will, upon written request from the Executive,
provide a loan to the Executive in a principal amount not to exceed $500,000
(the "Loan"). Interest on the Loan shall accrue at a rate of 6.5% per annum and
shall be payable at maturity. The Loan shall mature on January 6, 2003. Subject
to the other terms of this paragraph, the loan will be forgiven pro-rata over
five years beginning January 1, 1998. All accrued interest on the Loan shall be
forgiven on the same basis as set forth in this Section 4(c). In the event of a
Death Termination Event or a Disability Termination Event (both as hereinafter
defined), all outstanding principal of and accrued interest on the Loan shall be
forgiven. In the event of a Termination for Cause of the Executive or the
voluntary resignation by Executive prior to December 31, 2000, any and all
amounts outstanding under the Loan, including accrued and unpaid interest, shall
be due and payable to the Company within 20 business days of such event. In the
event the Executive is Terminated Without Cause or remains employed by the
Company through December 31, 2000, the Loan will continue thereafter to be
forgiven as provided above over such five-year period.
(d) Extraordinary Transaction. In the event of an Extraordinary
Transaction, whether or not the Executive elects to convert this Agreement into
a consulting agreement, the Company shall, in addition to remaining obligated
under the terms of this Agreement, immediately after the Extraordinary
Transaction pay the Executive a payment equal to (i) the difference between the
discretionary bonus the Executive received from the Company with respect to the
year prior to the year in which the Extraordinary Transaction occurred and the
amount paid pursuant to the last sentence of Section 4(b), since the Executive
may be forfeiting the right to receive the balance of such bonus, and (ii)
$33,333 per month for each month or part thereof after June 30, 1998 in which
the Extraordinary Transaction occurs. Thus should an Extraordinary Transaction
occur on August 15, 1998, the payment pursuant to Section 4(d)(ii) would be
$66,666.
An "Extraordinary Transaction" as used herein means the occurrence of
any one or more of the following:
(i) the Company ceases to be required to file reports under Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor to that Section;
(ii) a majority of the members of the Board of Directors of the Company are
not persons who (a) had been directors of the Company for at least the preceding
12 consecutive months or (b) when they initially were elected to the Board (x)
were nominated (if they were elected by the stockholders) or elected (if they
were elected by the directors) with the affirmative vote of two-thirds of the
directors who were Continuing Directors at the time of the nomination or
election by the Board and (y) were not elected as a result of an actual or
threatened solicitation of proxies or consents by a person other than the Board
of Directors of the Company or an agreement intended to avoid or settle such a
proxy solicitation (the directors described in clauses (a) and (b) being
"Continuing Directors");
(iii) any "person," including a "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act, but excluding the Company, any of its
present affiliates (as such term is defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) ("Affiliates"), or any employee benefit plan
of the Company or any of its present Affiliates) is or becomes the "beneficial
owner" (as defined in Rule 13(d) (3) under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities;
(iv) the purchase of Class A Common Stock of the Company ("Common Stock")
pursuant to any tender or exchange offer or otherwise made by any "person,"
including a "group" (as such terms are used in Sections 13 (d) and 14 (d) of the
Exchange Act), other than the Company, any of its present Affiliates, or any
employee benefit plan of the Company or any of its present Affiliates, which
results in "beneficial ownership" (as so defined) of 30% or more of the
outstanding Common Stock;
(v) the execution and delivery of a definitive agreement by the Company
that provides for a merger or consolidation, or a transaction having a similar
effect (unless such merger, consolidation or similar action is with a subsidiary
of the Company or with another company, a majority of whose outstanding capital
stock is owned by the same persons or entities who own a majority of the
Company's outstanding Common Stock at such time), where (A) the Company is not
the surviving corporation, (B) the majority of the Common Stock of the Company
is no longer held by the persons who were the stockholders of the Company
immediately prior to the transaction, (C) the sale, lease, exchange or other
disposition of all or substantially all of the assets of the Company but not the
spin off of one division, the sale of one division, or both (where "division"
means the present residential business (including IPT) and the present
commercial business), and not the trading of marketable securities held as
portfolio securities or (D) the Company's Common Stock is converted into cash,
securities or other property (other than the common stock of a company into
which the Company is merged), provided, however, that, in the event that the
contemplated merger, consolidation or similar transaction is not consummated,
then any rights that may arise under this paragraph (v) by virtue of such Change
of Control shall not apply; and
(vi) upon the consummation of any transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a subsidiary through purchase of assets, or by merger, or otherwise but not
the spin off of one division, the sale of one division, or both.
(e) Material Asset Disposition Bonus. In the event of a Material Asset
Disposition, as defined below, in consideration of the services performed by the
Executive and consistent with the prior terms of the Executive=s employment, the
Company (or, in the case of clause (iii) below, the spin-off entity or, in
default thereof, the Company) shall pay to the Executive within 15 days of the
consummation of such Material Asset Disposition, a cash bonus equal to .25% of
the consideration (valued as set forth below) received by the Company or its
shareholders as a result of such Material Asset Disposition. A "Material Asset
Disposition" as used herein means, without duplication for the same matter: (i)
a transaction which results in a majority of the equity interest in the Company
being beneficially owned by any "person," including any "group" (as such terms
are used in Section 13(d) and 14(d) of the Exchange Act), other than any of the
Company=s present Affiliates; (ii) a sale or series of sales by the Company of
subsidiaries, divisions, assets (other than marketable securities), or operating
businesses representing in the aggregate 20% or more of the Company's 1998
budgeted EBITDA and each such sale after such threshold has been reached; (iii)
a spin off, or series of spin offs, of any of the Company's divisions, operating
businesses or subsidiaries that meet the 1998 budgeted EBITDA threshold set
forth in (ii) above which is followed by a subsequent Extraordinary Transaction
(as defined above, but with reference to the spun off entity rather than the
Company) of the subsidiary, division or business spun off within five years
following such spin off; or (iv) any transaction which results in any one or
more of the Company's divisions, subsidiaries or operating businesses,
representing in the aggregate 20% or more of the Company's EBITDA, being owned
by a third party. In the event a Material Asset Disposition is consummated in
one or more steps, including, without limitation, by way of second-step merger,
any additional consideration paid or to be paid in any subsequent step in the
Material Asset Disposition in respect of (x) subsidiaries, divisions, assets
(other than marketable securities), or operating businesses of the Company and
(y) capital stock of the Company (and any securities convertible into, or
options, warrants or other rights to acquire, such capital stock) shall be
included for purposes of calculating the bonus payable pursuant to this Section
4(e). "Consideration" shall not include the assumption, directly or indirectly,
or repayment of indebtedness or other liabilities of the Company but shall
include the assumption, directly or indirectly, or repayment of the Trust
Convertible Preferred Securities presently outstanding or any similar
securities. If all or a portion of the consideration paid in the Material Asset
Disposition is other than cash or securities, then the value of such non-cash
consideration shall be the fair market value thereof on the date the Material
Asset Disposition is consummated as mutually agreed upon in good faith by the
Company=s Board of Directors and the Executive. If such non-cash consideration
consists of common stock, options, warrants or rights for which a public trading
market existed prior to the consummation of the Material Asset Disposition, then
the value of such securities shall be determined by the closing or last sales
price thereof on the date of the consummation of the Material Asset Disposition;
provided, however, that if such non-cash consideration consists of newly-issued,
publicly-traded common stock, options, warrants or rights for which no public
trading market existed prior to the consummation of the Material Asset
Disposition, then the value thereof shall be the average of the closing prices
for the 20 trading days subsequent to the fifth trading day after the
consummation of the Material Asset Disposition. In such event, the portion of
the bonus payable to the Executive pursuant to this Section 4(e) attributable to
such securities shall be paid on the 30th trading day subsequent to consummation
of the Material Asset Disposition. If no public market exists for the common
stock, options, warrants or other rights issued in the Material Asset
Disposition, then the value of thereof shall be as mutually agreed upon in good
faith by the Company=s Board of Directors and the Executive. If the non-cash
consideration paid in the Material Asset Disposition consists of preferred stock
or debt securities (regardless of whether a public trading market existed for
such preferred stock or debt securities prior to consummation of the Material
Asset Disposition or exists thereafter), the value hereof shall be the face or
principal amount, as the case may be. Any amounts payable by a purchaser to the
Company, any shareholder of the Company or any Affiliate of either the Company
or any shareholder of the Company in connection with a non-competition,
employment, consulting, licensing, supply or other agreement shall be deemed to
be part of the consideration paid in the Material Asset Disposition. If all or a
portion of the consideration payable in connection with the Material Asset
Disposition includes contingent future payments, then the Company shall pay to
the Executive, upon consummation of such Material Asset Disposition, an
additional cash fee, determined in accordance with this Section 4(e) as, when
and if such contingency payments are received. However, in the event of an
installment purchase at a fixed price and a fixed time schedule, the Company
agrees to pay the Executive, upon consummation of the Material Asset
Disposition, a cash fee determined in accordance with this Section 4(e) based on
the present value of such installment payments using a discount rate of 6.5%.
(f) Fringe Benefit Programs. In addition to the other benefits provided to
the Executive hereunder and to the extent he satisfies the eligibility
requirements thereof and to the extent permitted by law, participation in fringe
benefit programs made available generally to employees of the Company,
including, without limitation, pension, profit sharing, stock purchase, savings,
bonus, disability, life insurance, health insurance, hospitalization, dental,
deferred compensation and other plans and policies authorized on the date hereof
or in the future.
(g) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, including professional activities and membership fees and dues
relating to professional organizations of which the Executive currently is a
member or is directed in writing to be a member by the Chief Executive Officer
of the Company and including, without limitation, expenses required for
professional licensing of the Executive, and business related cell phone expense
in accordance with the Company's written policies and procedures, all upon the
presentation of appropriate documentation therefore in accordance with the then
regular procedures of the Company.
(h) Perquisites. In addition to the other benefits provided to the
Executive hereunder, and at the sole cost and expense of the Company except as
otherwise provided herein:
(i) A membership and annual dues at the city or country club of the
Executive's choice, subject to approval by the Chief Executive Officer of
the Company;
(ii) Reasonable consultations with financial and tax advisors or
counselors, including annual income tax preparation and audits relating to
the period during which the Executive was employed by the Company (whether
or not under this Agreement) and whether such audit expense is incurred
during or after the Employment Period;
(iii) The cost of term life insurance, providing a death benefit of up
to five million dollars ($5,000,000) upon the life of the Executive, the
beneficiaries and owner of which shall be designated by the Executive and
which term insurance shall be upon terms and conditions, and in form and
substance available at the time, and otherwise reasonably satisfactory to
the Executive in his sole discretion and which term life insurance shall be
paid for by the Company during the Employment Period at the Company's sole
cost and expense. If the Company is the owner of such policy, upon
termination of the Executive=s employment by the Company, the ownership of
such term life insurance shall be transferred to the Executive or his
designee. At Executive's option, Executive may apply the cost of such a
policy to some other benefit of Executive's choice;
(iv) The Executive shall be entitled to reasonable business usage of
aircraft owned or leased by the Company as determined by the Chief
Executive Officer of the Company. With prior consent from the Chief
Executive Officer of the Company, the Executive may utilize such aircraft
for personal use and in such event the cost of such use shall be added to
and included in the Executive's compensation for federal, state and local
income tax purposes; and
(v) The Executive shall be entitled to an annual automobile allowance
of up to one thousand dollars ($1,000), payable monthly in arrears.
(i) Vacations, etc. Leaves-of-absence in accordance with the then regular
procedures of the Company governing senior executives, and four weeks of paid
vacation per year on a non-cumulative basis.
(j) Parachute Limit. Notwithstanding anything else herein, to the extent
the Executive would be subject to the excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments"), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit"); provided, however, that this Section 4(j)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable federal, state and
local income, social security and other taxes) would be greater than the
unreduced Parachute Payments to be received by the Executive minus (i) the
excise tax payable under Section 4999 of the Code with respect to such Parachute
Payments and (ii) all applicable federal, state and local income, social
security and other taxes on such Parachute Payments. The foregoing reduction
shall be applied to the Parachute Payments as follows: (i) first by reducing the
amounts payable under Section 4(d) (if such amounts are included in such
computation) until such amounts have been exhausted up to the Parachute Limit,
(ii) then by reducing any such other amounts and benefits (other than awards
described in (iii) below) as determined by the Company, and (iii)
notwithstanding anything contained herein or in an option, warrant or restricted
stock agreement, award or plan relating to the Executive then, on a pro-rata
basis up to the Parachute Limit, by failing to accelerate the vesting (without
affecting the right to vest) upon a change in ownership or effective control or
change in ownership of a substantial portion of assets (as described in Code
Section 280G(b)(2)(A)(i)) of any unvested awards of shares of restricted stock
of the Company previously granted to Executive and options or warrants to
purchase shares of the Company previously granted to Executive. Notwithstanding
the foregoing, the Company shall treat any of the amounts described in (i)
through (iii) above as a Parachute Payment solely to the extent required under
applicable law.
Section 5. Representations, Warranties and Covenants of the Executive. The
Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his duties
hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties hereunder
with or without reasonable accommodations.
Section 6. Non-Solicitation; Confidentiality.
(a) Non-Solicitation.
(1) In recognition of the close personal contact the Executive has or
will have with the Company's and its affiliates' trade secrets,
confidential information, records and business relationships, and the
position of trust in which the Company holds the Executive, the Executive
further covenants and agrees that while the Executive is employed by the
Company and for a period lasting for one (1) year following the cessation
of the Executive's employment with the Company, the Executive will not,
either for himself or an officer, director, employee, agent,
representative, independent contractor or in any relationship to any
person, partnership, corporation, or other entity (except the Company or
its Affiliates or subsidiaries), solicit, directly or by assisting others,
business from any of the Company's customers or clients with whom the
Executive has had material contact (as defined below) during the twelve
(12) month period preceding the date of cessation of the Executive's
employment with the Company, for the purpose of providing goods or services
to said customers and clients. For purposes of this Agreement, "material
contact" exists between the Executive and any of the Company's customers or
clients (i) with whom the Executive actually dealt; or (ii) whose dealings
with the Company were handled, coordinated or supervised by the Executive;
or (iii) about whom the Executive obtained confidential information in the
ordinary course of business through the Executive's association with the
Company.
(2) The Executive covenants and agrees that, for a period ending on
the second anniversary of the date on which the Executive's employment with
the Company ceases, the Executive will not solicit, employ, engage or in
any manner encourage any employee, broker or sales person of the Company,
or any of its respective subsidiaries or affiliates to leave their employ
for the employ of a person or entity which directly or indirectly competes
with the Company, or any of its respective subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for a period ending on
the second anniversary of the date on which the Executive's employment with
the Company ceases, the Executive will not purchase for his own account any
limited partnership units of partnerships that, on the date of purchase,
are controlled directly or indirectly by the Company, except that the
provisions of this sentence shall not be deemed breached merely because the
Executive owns, immediately after a purchase, not more than one percent of
the outstanding units. Should the Executive breach the foregoing sentence,
all his options issued by the Company or any of its subsidiaries shall be
cancelled and all of his restricted stock issued by the Company or any of
its subsidiaries (whether or not then vested) which he then owns shall be
forfeited. For purposes of this Section 6(a)(3), "purchase" shall mean the
payment of cash only for such limited partnership units and shall not
include payment of cash for interests in an entity whose assets consist in
whole or in part of such limited partnership units.
The Executive acknowledges that the foregoing provisions are intended to
protect the Company's and its subsidiaries' and Affiliates' business and
customer contacts, not to prevent the Executive from pursuing a livelihood in
the general area of his previous training, and they should be interpreted
accordingly.
(b) Confidentiality. All confidential information which the Executive may
now possess, may obtain during or after his employment with Company, or may
create prior to the end of his employment with the Company or otherwise relating
to the business of the Company or any of its subsidiaries or affiliates or of
any customer or supplier of any of them shall not be published, disclosed, or
made accessible by him to any other person, either during or after the cessation
of his employment, or used by him except during his employment with the Company
in the business and for the benefit of the Company and its subsidiaries and
Affiliates. In addition, the Executive agrees not to disclose, publish or make
accessible to any other person, from and after the date of this Agreement,
during the Employment Period or at any time thereafter, any of the terms or
provisions of this Agreement, except the Executive's accountants who need such
information to advise him, prepare his tax returns, make required filings and
the like; provided, however, that the Executive will be responsible for causing
any such accountants to be aware of and to abide by the obligations contained in
this Section 6(b) and will be responsible for any breach of such obligations by
any of them. In the event that the Executive becomes legally compelled to
disclose any of the confidential information, the Executive will provide the
Company with prompt written notice so that the Company may seek a protective
order or other appropriate remedy and/or waive in writing compliance with the
provisions of this Section 6(b) and in the event that such protective order or
other remedy is not obtained, or should the Company waive in writing compliance
with the provisions of this Section 6(b), the Executive will furnish only that
portion of the confidential information which is so legally required. The
Executive shall return all tangible evidence of such confidential information to
the General Counsel of the Company prior to or at the cessation of his
employment.
(c) Interpretation. Since a breach of the provisions of this Section 6
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach and the Company shall not be required to post
a bond in any proceeding brought for such purpose. The Executive agrees that the
provisions of this Section 6 are necessary and reasonable to protect the Company
in the conduct of its businesses. If any restriction contained in this Section 6
shall be deemed to be invalid, illegal, or unenforceable by reason of the
extent, duration, or geographical scope thereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form such
restriction shall then be enforceable in the manner contemplated hereby. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies, at law or in equity, for such breach or threatened breach.
Section 7. Termination.
(a) Definitions.
(i) Death Termination Event. As used herein, "Death Termination Event"
shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable to
fully discharge his duties hereunder for a period of 185 consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the event
that the last will and testament of the Executive has not been probated at
the time of determination, the estate of the Executive and (B) in the event
that the last will and testament of the Executive has been probated at the
time of determination, the legatees of the Executive who are entitled under
such will to the assets or payments at issue.
(iv) Termination For Cause. As used herein, the term "Termination For
Cause" shall mean the termination by the Company of the Executive's
employment hereunder upon a good faith determination by a majority vote of
the members of the Board of Directors of the Company that termination of
this Agreement is necessary by reason of (A) the Executive shall be
convicted of a felony, (B) the Executive shall commit any act or omit to
take any action in bad faith and to the material detriment of the Company
and Executive shall not have cured the same within 30 days after the
Company sends written notice thereof, or (C) Executive shall breach in a
material way any material term of this Agreement and fail to correct such
breach within 30 days after the Company sends written notice thereof.
(v) Termination Without Cause. As used herein, "Termination Without
Cause" shall mean any termination of the Executive's employment by the
Company hereunder that is not a Termination For Cause, a Death Termination
Event, or a Disability Termination Event but not a conversion to a
consulting agreement.
(b) Death Termination Event. Upon the occurrence of a Death Termination
Event, this Agreement will terminate automatically upon the date that such Death
Termination Event occurred (subject to the last sentence of this Section 7),
whereupon the Company shall continue to pay the then current Base Salary to the
Estate of the Executive for a period equal to the remaining term of the
Employment Period.
(c) Disability Termination Event. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the date
that such Disability Termination Event occurred (subject to the last sentence of
this Section 7), whereupon the Company shall continue to pay the then-current
Base Salary to the Executive for the period equal to the remaining term of the
Employment Period (determined on the assumption that the Employment Period will
not be terminated prior to December 31, 2000).
(d) Termination For Cause. The Executive and the Company agree that the
Company shall have the right to effectuate a Termination For Cause in accordance
with the terms of this Agreement at any time. Upon the occurrence of a
Termination For Cause, this Agreement will terminate upon the date that such
Termination For Cause occurs (subject to the provisions of Section 9), whereupon
(i) the Executive shall not be entitled to receive any additional payments
hereunder other than the Base Salary, as then in effect, to and including the
date that such Termination For Cause occurs and (ii) the Company shall be
entitled to any and all remedies and damages available to it.
(e) Termination Without Cause. Upon the occurrence of a Termination Without
Cause, this Agreement shall terminate upon the date that such Termination
Without Cause occurs (subject to the provisions of Section 9), whereupon the
Executive shall continue to receive the consideration set forth in Sections 4(a)
through (e) and Section 4(h)(i), (ii), (iii) and (v) through December 31, 2000.
In the event of a termination of Executive's employment for any reason
other than a Termination for Cause or voluntary termination by the Executive,
including, but not limited to a Death Termination Event, Disability Termination
Event, Termination Without Cause, all options, warrants and restricted stock
then held by and/or granted to the Executive will immediately vest and be
exercisable by the Executive but in the event of the occurrence of an
Extraordinary Transaction, no options, warrants or restricted stock then held by
and/or granted to the Executive will immediately vest as a result thereof.
Section 8. Withholding. The Company shall be entitled to withhold from
amounts payable to the Executive hereunder such amounts as may be required by
applicable law to be so withheld.
Section 9. Survival. Notwithstanding anything in this Agreement to the
contrary, Section 6 of this Agreement shall survive any termination of this
Agreement or cessation of the Executive's employment hereunder for the periods
stated therein.
Section 10. Modification. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
Section 11. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11).
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
Section 12. Waiver. Any waiver by either party of a breach of any provision
of Agreement shall not operate as a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
Section 13. Binding Effect. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors.
Section 14. Headings. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
Section 15. Enforcement. Should the Executive sue to enforce any of his
rights under this Agreement and should the Executive prevail on any issue in
such suit, then the Company shall pay all the Executive's costs of such suit
(including attorneys fees and disbursements). If any taxes are imposed on such
payment, the Company shall make such additional payments to the Executive as may
be necessary, so that after deducting the taxes imposed on all payments made to
the Executive pursuant to this paragraph, the Executive is left on an after tax
basis with an amount equal to his claim for indemnification prior to the
payments described in this sentence.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina, without
reference to the conflict of law provisions thereof.
Section 18. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company and their
respective attorneys and representatives have participated in the preparation
hereof.
Section 19. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO THE TRIAL BY THE
COURT.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/Andrew L. Farkas
----------------------------------------------------------
Name: /s/Andrew L. Farkas
----------------------------------------------------------
Its: Chairman and Chief Executive Officer
-----------------------------------------------------------
EXECUTIVE
/s/Frank M. Garrison
-----------------------------------------------
Name: Frank M. Garrison
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement"), is entered
into as of January 1, 1998, by and between Insignia Financial Group, Inc., a
Delaware corporation with an office at One Insignia Financial Plaza, Greenville,
South Carolina (the "Company"), and James A. Aston, an individual with an office
at One Insignia Financial Plaza, Greenville, SC 29062 (the "Executive").
Background
The Company and the Executive have previously entered into an Employment
Agreement, which agreement has been previously amended. The Company desires to
assure itself of the services of the Executive for the additional period
provided in this Agreement, and the Executive is willing to serve in the employ
of the Company for such period upon the terms and conditions provided in this
Agreement.
Statement of Agreement
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on January 1, 1998 (the
"Commencement Date") and ending on December 31, 2000 or such earlier date as
provided herein (the "Expiration Date") (such period, as it may be so
terminated, being referred to herein as the "Employment Period").
Section 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve as
Office of the Chairman and Chief Financial Officer of the Company and, at the
Company's request, as an officer or director of one or more of its subsidiaries.
In the performance of his duties hereunder, the Executive shall report to and
shall be responsible only to the Chief Executive Officer and the Board of
Directors of the Company. The Executive agrees to his employment as described in
this Section 2, and agrees to devote substantially all of his working time and
efforts to the performance of his duties hereunder. The Executive shall be
available to travel as the needs of the business of the Company reasonably
require.
(b) Location of Office. During the Employment Period, the Executive's
office shall be located at One Insignia Financial Plaza, Greenville, SC 29062 or
at such other location as the Company and the Executive shall mutually agree.
The Company will provide the Executive with his current office, an executive
secretary reasonably acceptable to him, and other reasonable support appropriate
to his duties hereunder.
(c) Primary Responsibilities. Subject to Section 2(a), during the
Employment Period, the Executive shall have such responsibilities as are
assigned to him by the Chief Executive Officer and the Board of Directors of the
Company. The Executive shall comply with all written policies and procedures of
the Company.
(d) Consulting. If the Executive's title, powers or duties within the
Company have been diminished after or in connection with an Extraordinary
Transaction (as defined in Section 4(d)) or a Material Asset Disposition (as
defined in Section 4(e)), other than as a result of a Termination For Cause (as
defined in Section 7(a)(iv)), without the prior written consent of Executive,
then Executive can elect in writing to convert this Agreement into a consulting
agreement. Under the terms of the consulting agreement, the Executive shall
consult with respect to the assets and liabilities of the Company as they
existed immediately before the Extraordinary Transaction or the Material Asset
Disposition. Such consultation shall be at the reasonable times convenient to
the Executive on no less than five business days' notice, the parties
recognizing that the Executive during the consulting period likely will have
significant other business interests. The terms and conditions of this Agreement
(including all rights hereunder of the Executive as to salary, bonus, payments
and benefits) shall continue unabridged during the period of consulting. The
other provisions of this Agreement also shall remain in effect except for
Section 2 as modified by this Section 2(d) and except that Section 7(a)(iv)(B)
and Section 7(a)(iv)(C) shall be deleted. The "Employment Period" shall be
deemed to include the period during which the Executive is obligated to provide
consulting services hereunder and therefore, to the extent permitted by law, the
conversion shall not be deemed a termination for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits equivalent to those he would have received
had there been no termination.
Section 3. Key Man Life Insurance. The Company shall have the right to
place a "key man" life insurance policy, providing a death benefit of up to
$15,000,000 upon the life of the Executive, for which the Company is the
beneficiary. In connection therewith, the Executive hereby authorizes the
Company, at its sole cost and expense, to purchase and maintain upon the life of
the Executive such insurance policy, and agrees to submit to such reasonable
medical examinations, and to provide and/or consent to the release of such
medical information, as may be necessary or desirable in order to secure the
issuance thereof. Except as may be required in order to obtain insurance
coverage as described in this Section 3, any and all information about
Employee's health or medical records shall be kept confidential by the Company
and shall not be disclosed by the Company to any party without the Executive's
prior written consent.
Section 4. Compensation. As full compensation for his services hereunder,
the Company shall pay, grant, issue or give, as the case may be, to the
Executive the compensation and benefits specified below:
(a) Base Salary. Subject to the provisions of Section 7, a base salary at
the rate of $400,000 per annum ("Base Salary"), which Base Salary shall be paid
to the Executive in accordance with the customary executive payroll policy of
the Company as in effect from time to time; provided, however, that the Base
Salary, as in effect at any time and from time to time, may be further increased
by action of the Board of Directors; and further provided, however, that in no
event shall the Base Salary be decreased at any time or from time to time
without the prior consent of the Executive, which consent may be granted or
withheld in the Executive's sole discretion.
(b) Annual Discretionary Bonus. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined by the
Board of Directors of the Company in its sole and absolute discretion, which
shall be paid to the Executive, with respect to any fiscal year of the Company,
before the expiration of 74 days after the end of such fiscal year. In making
bonus determinations, the Company shall evaluate the Executive's performance in
accordance with the standard bonus guidelines used by the Company for executives
of the Company in the same or a similar position as the Executive. In the event
of an Extraordinary Transaction, as defined herein, in any year, then the
Company shall, promptly after the Extraordinary Transaction, pay an amount equal
to the discretionary bonus the Executive received with respect to the year prior
to the year in which the Extraordinary Transaction occurred multiplied by a
fraction the numerator of which is the number of days between the beginning of
the year and the occurrence of the Extraordinary Transaction and the denominator
of which is 365.
(c) Loan. The Company will, upon written request from the Executive,
provide a loan to the Executive in a principal amount not to exceed $500,000
(the "Loan"). Interest on the Loan shall accrue at a rate of 6.5% per annum and
shall be payable at maturity. The Loan shall mature on January 6, 2003. Subject
to the other terms of this paragraph, the loan will be forgiven pro-rata over
five years beginning January 1, 1998. All accrued interest on the Loan shall be
forgiven on the same basis as set forth in this Section 4(c). In the event of a
Death Termination Event or a Disability Termination Event (both as hereinafter
defined), all outstanding principal of and accrued interest on the Loan shall be
forgiven. In the event of a Termination for Cause of the Executive or the
voluntary resignation by Executive prior to December 31, 2000, any and all
amounts outstanding under the Loan, including accrued and unpaid interest, shall
be due and payable to the Company within 20 business days of such event. In the
event the Executive is Terminated Without Cause or remains employed by the
Company through December 31, 2000, the Loan will continue thereafter to be
forgiven as provided above over such five-year period.
(d) Extraordinary Transaction. In the event of an Extraordinary
Transaction, whether or not the Executive elects to convert this Agreement into
a consulting agreement, the Company shall, in addition to remaining obligated
under the terms of this Agreement, immediately after the Extraordinary
Transaction pay the Executive a payment equal to (i) the difference between the
discretionary bonus the Executive received from the Company with respect to the
year prior to the year in which the Extraordinary Transaction occurred and the
amount paid pursuant to the last sentence of Section 4(b), since the Executive
may be forfeiting the right to receive the balance of such bonus, and (ii)
$33,333 per month for each month or part thereof after June 30, 1998 in which
the Extraordinary Transaction occurs. Thus should an Extraordinary Transaction
occur on August 15, 1998, the payment pursuant to Section 4(d)(ii) would be
$66,666.
An "Extraordinary Transaction" as used herein means the occurrence of any
one or more of the following:
(i) the Company ceases to be required to file reports under Section 13
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor to that Section;
(ii) a majority of the members of the Board of Directors of the
Company are not persons who (a) had been directors of the Company for at
least the preceding 12 consecutive months or (b) when they initially were
elected to the Board (x) were nominated (if they were elected by the
stockholders) or elected (if they were elected by the directors) with the
affirmative vote of two-thirds of the directors who were Continuing
Directors at the time of the nomination or election by the Board and (y)
were not elected as a result of an actual or threatened solicitation of
proxies or consents by a person other than the Board of Directors of the
Company or an agreement intended to avoid or settle such a proxy
solicitation (the directors described in clauses (a) and (b) being
"Continuing Directors");
(iii) any "person," including a "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company,
any of its present affiliates (as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as amended) ("Affiliates"),
or any employee benefit plan of the Company or any of its present
Affiliates) is or becomes the "beneficial owner" (as defined in Rule 13(d)
(3) under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities;
(iv) the purchase of Class A Common Stock of the Company ("Common
Stock") pursuant to any tender or exchange offer or otherwise made by any
"person," including a "group" (as such terms are used in Sections 13 (d)
and 14 (d) of the Exchange Act), other than the Company, any of its present
Affiliates, or any employee benefit plan of the Company or any of its
present Affiliates, which results in "beneficial ownership" (as so defined)
of 30% or more of the outstanding Common Stock;
(v) the execution and delivery of a definitive agreement by the
Company that provides for a merger or consolidation, or a transaction
having a similar effect (unless such merger, consolidation or similar
action is with a subsidiary of the Company or with another company, a
majority of whose outstanding capital stock is owned by the same persons or
entities who own a majority of the Company's outstanding Common Stock at
such time), where (A) the Company is not the surviving corporation, (B) the
majority of the Common Stock of the Company is no longer held by the
persons who were the stockholders of the Company immediately prior to the
transaction, (C) the sale, lease, exchange or other disposition of all or
substantially all of the assets of the Company but not the spin off of one
division, the sale of one division, or both (where "division" means the
present residential business (including IPT) and the present commercial
business), and not the trading of marketable securities held as portfolio
securities or (D) the Company's Common Stock is converted into cash,
securities or other property (other than the common stock of a company into
which the Company is merged), provided, however, that, in the event that
the contemplated merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this paragraph (v) by
virtue of such Change of Control shall not apply; and
(vi) upon the consummation of any transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the
Company or a subsidiary through purchase of assets, or by merger, or
otherwise but not the spin off of one division, the sale of one division,
or both.
(e) Material Asset Disposition Bonus. In the event of a Material Asset
Disposition, as defined below, in consideration of the services performed by the
Executive and consistent with the prior terms of the Executive's employment, the
Company (or, in the case of clause (iii) below, the spin-off entity or, in
default thereof, the Company) shall pay to the Executive within 15 days of the
consummation of such Material Asset Disposition, a cash bonus equal to .25% of
the consideration (valued as set forth below) received by the Company or its
shareholders as a result of such Material Asset Disposition. A "Material Asset
Disposition" as used herein means, without duplication for the same matter: (i)
a transaction which results in a majority of the equity interest in the Company
being beneficially owned by any "person," including any "group" (as such terms
are used in Section 13(d) and 14(d) of the Exchange Act), other than any of the
Company's present Affiliates; (ii) a sale or series of sales by the Company of
subsidiaries, divisions, assets (other than marketable securities), or operating
businesses representing in the aggregate 20% or more of the Company's 1998
budgeted EBITDA and each such sale after such threshold has been reached; (iii)
a spin off, or series of spin offs, of any of the Company's divisions, operating
businesses or subsidiaries that meet the 1998 budgeted EBITDA threshold set
forth in (ii) above which is followed by a subsequent Extraordinary Transaction
(as defined above, but with reference to the spun off entity rather than the
Company) of the subsidiary, division or business spun off within five years
following such spin off; or (iv) any transaction which results in any one or
more of the Company's divisions, subsidiaries or operating businesses,
representing in the aggregate 20% or more of the Company's EBITDA, being owned
by a third party. In the event a Material Asset Disposition is consummated in
one or more steps, including, without limitation, by way of second-step merger,
any additional consideration paid or to be paid in any subsequent step in the
Material Asset Disposition in respect of (x) subsidiaries, divisions, assets
(other than marketable securities), or operating businesses of the Company and
(y) capital stock of the Company (and any securities convertible into, or
options, warrants or other rights to acquire, such capital stock) shall be
included for purposes of calculating the bonus payable pursuant to this Section
4(e). "Consideration" shall not include the assumption, directly or indirectly,
or repayment of indebtedness or other liabilities of the Company but shall
include the assumption, directly or indirectly, or repayment of the Trust
Convertible Preferred Securities presently outstanding or any similar
securities. If all or a portion of the consideration paid in the Material Asset
Disposition is other than cash or securities, then the value of such non-cash
consideration shall be the fair market value thereof on the date the Material
Asset Disposition is consummated as mutually agreed upon in good faith by the
Company's Board of Directors and the Executive. If such non-cash consideration
consists of common stock, options, warrants or rights for which a public trading
market existed prior to the consummation of the Material Asset Disposition, then
the value of such securities shall be determined by the closing or last sales
price thereof on the date of the consummation of the Material Asset Disposition;
provided, however, that if such non-cash consideration consists of newly-issued,
publicly-traded common stock, options, warrants or rights for which no public
trading market existed prior to the consummation of the Material Asset
Disposition, then the value thereof shall be the average of the closing prices
for the 20 trading days subsequent to the fifth trading day after the
consummation of the Material Asset Disposition. In such event, the portion of
the bonus payable to the Executive pursuant to this Section 4(e) attributable to
such securities shall be paid on the 30th trading day subsequent to consummation
of the Material Asset Disposition. If no public market exists for the common
stock, options, warrants or other rights issued in the Material Asset
Disposition, then the value of thereof shall be as mutually agreed upon in good
faith by the Company's Board of Directors and the Executive. If the non-cash
consideration paid in the Material Asset Disposition consists of preferred stock
or debt securities (regardless of whether a public trading market existed for
such preferred stock or debt securities prior to consummation of the Material
Asset Disposition or exists thereafter), the value hereof shall be the face or
principal amount, as the case may be. Any amounts payable by a purchaser to the
Company, any shareholder of the Company or any Affiliate of either the Company
or any shareholder of the Company in connection with a non-competition,
employment, consulting, licensing, supply or other agreement shall be deemed to
be part of the consideration paid in the Material Asset Disposition. If all or a
portion of the consideration payable in connection with the Material Asset
Disposition includes contingent future payments, then the Company shall pay to
the Executive, upon consummation of such Material Asset Disposition, an
additional cash fee, determined in accordance with this Section 4(e) as, when
and if such contingency payments are received. However, in the event of an
installment purchase at a fixed price and a fixed time schedule, the Company
agrees to pay the Executive, upon consummation of the Material Asset
Disposition, a cash fee determined in accordance with this Section 4(e) based on
the present value of such installment payments using a discount rate of 6.5%.
(f) Fringe Benefit Programs. In addition to the other benefits provided to
the Executive hereunder and to the extent he satisfies the eligibility
requirements thereof and to the extent permitted by law, participation in fringe
benefit programs made available generally to employees of the Company,
including, without limitation, pension, profit sharing, stock purchase, savings,
bonus, disability, life insurance, health insurance, hospitalization, dental,
deferred compensation and other plans and policies authorized on the date hereof
or in the future.
(g) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, including professional activities and membership fees and dues
relating to professional organizations of which the Executive currently is a
member or is directed in writing to be a member by the Chief Executive Officer
of the Company and including, without limitation, expenses required for
professional licensing of the Executive, and business related cell phone expense
in accordance with the Company's written policies and procedures, all upon the
presentation of appropriate documentation therefore in accordance with the then
regular procedures of the Company.
(h) Perquisites. In addition to the other benefits provided to the
Executive hereunder, and at the sole cost and expense of the Company except as
otherwise provided herein:
(i) A membership and annual dues at the city or country club of the
Executive's choice, subject to approval by the Chief Executive Officer of
the Company;
(ii) Reasonable consultations with financial and tax advisors or
counselors, including annual income tax preparation and audits relating to
the period during which the Executive was employed by the Company (whether
or not under this Agreement) and whether such audit expense is incurred
during or after the Employment Period;
(iii) The cost of term life insurance, providing a death benefit of up
to five million dollars ($5,000,000) upon the life of the Executive, the
beneficiaries and owner of which shall be designated by the Executive and
which term insurance shall be upon terms and conditions, and in form and
substance available at the time, and otherwise reasonably satisfactory to
the Executive in his sole discretion and which term life insurance shall be
paid for by the Company during the Employment Period at the Company's sole
cost and expense. If the Company is the owner of such policy, upon
termination of the Executive's employment by the Company, the ownership of
such term life insurance shall be transferred to the Executive or his
designee. At Executive's option, Executive may apply the cost of such a
policy to some other benefit of Executive's choice;
(iv) The Executive shall be entitled to reasonable business usage of
aircraft owned or leased by the Company as determined by the Chief
Executive Officer of the Company. With prior consent from the Chief
Executive Officer of the Company, the Executive may utilize such aircraft
for personal use and in such event the cost of such use shall be added to
and included in the Executive's compensation for federal, state and local
income tax purposes; and
(v) The Executive shall be entitled to an annual automobile allowance
of up to one thousand dollars ($1,000), payable monthly in arrears.
(i) Vacations, etc. Leaves-of-absence in accordance with the then regular
procedures of the Company governing senior executives, and four weeks of paid
vacation per year on a non-cumulative basis.
(j) Parachute Limit. Notwithstanding anything else herein, to the extent
the Executive would be subject to the excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments"), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit"); provided, however, that this Section 4(j)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable federal, state and
local income, social security and other taxes) would be greater than the
unreduced Parachute Payments to be received by the Executive minus (i) the
excise tax payable under Section 4999 of the Code with respect to such Parachute
Payments and (ii) all applicable federal, state and local income, social
security and other taxes on such Parachute Payments. The foregoing reduction
shall be applied to the Parachute Payments as follows: (i) first by reducing the
amounts payable under Section 4(d) (if such amounts are included in such
computation) until such amounts have been exhausted up to the Parachute Limit,
(ii) then by reducing any such other amounts and benefits (other than awards
described in (iii) below) as determined by the Company, and (iii)
notwithstanding anything contained herein or in an option, warrant or restricted
stock agreement, award or plan relating to the Executive then, on a pro-rata
basis up to the Parachute Limit, by failing to accelerate the vesting (without
affecting the right to vest) upon a change in ownership or effective control or
change in ownership of a substantial portion of assets (as described in Code
Section 280G(b)(2)(A)(i)) of any unvested awards of shares of restricted stock
of the Company previously granted to Executive and options or warrants to
purchase shares of the Company previously granted to Executive. Notwithstanding
the foregoing, the Company shall treat any of the amounts described in (i)
through (iii) above as a Parachute Payment solely to the extent required under
applicable law.
Section 5. Representations, Warranties and Covenants of the Executive. The
Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation
which is inconsistent with the execution of this Agreement, the performance
of his duties hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties
hereunder with or without reasonable accommodations.
Section 6. Non-Solicitation; Confidentiality.
(a) Non-Solicitation.
(1) In recognition of the close personal contact the Executive
has or will have with the Company's and its affiliates' trade secrets,
confidential information, records and business relationships, and the
position of trust in which the Company holds the Executive, the
Executive further covenants and agrees that while the Executive is
employed by the Company and for a period lasting for one (1) year
following the cessation of the Executive's employment with the
Company, the Executive will not, either for himself or an officer,
director, employee, agent, representative, independent contractor or
in any relationship to any person, partnership, corporation, or other
entity (except the Company or its Affiliates or subsidiaries),
solicit, directly or by assisting others, business from any of the
Company's customers or clients with whom the Executive has had
material contact (as defined below) during the twelve (12) month
period preceding the date of cessation of the Executive's employment
with the Company, for the purpose of providing goods or services to
said customers and clients. For purposes of this Agreement, "material
contact" exists between the Executive and any of the Company's
customers or clients (i) with whom the Executive actually dealt; or
(ii) whose dealings with the Company were handled, coordinated or
supervised by the Executive; or (iii) about whom the Executive
obtained confidential information in the ordinary course of business
through the Executive's association with the Company.
(2) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not solicit,
employ, engage or in any manner encourage any employee, broker or
sales person of the Company, or any of its respective subsidiaries or
affiliates to leave their employ for the employ of a person or entity
which directly or indirectly competes with the Company, or any of its
respective subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not purchase
for his own account any limited partnership units of partnerships
that, on the date of purchase, are controlled directly or indirectly
by the Company, except that the provisions of this sentence shall not
be deemed breached merely because the Executive owns, immediately
after a purchase, not more than one percent of the outstanding units.
Should the Executive breach the foregoing sentence, all his options
issued by the Company or any of its subsidiaries shall be cancelled
and all of his restricted stock issued by the Company or any of its
subsidiaries (whether or not then vested) which he then owns shall be
forfeited. For purposes of this Section 6(a)(3), "purchase" shall mean
the payment of cash only for such limited partnership units and shall
not include payment of cash for interests in an entity whose assets
consist in whole or in part of such limited partnership units.
The Executive acknowledges that the foregoing provisions are
intended to protect the Company's and its subsidiaries' and
Affiliates' business and customer contacts, not to prevent the
Executive from pursuing a livelihood in the general area of his
previous training, and they should be interpreted accordingly.
(b) Confidentiality. All confidential information which the Executive
may now possess, may obtain during or after his employment with Company, or
may create prior to the end of his employment with the Company or otherwise
relating to the business of the Company or any of its subsidiaries or
affiliates or of any customer or supplier of any of them shall not be
published, disclosed, or made accessible by him to any other person, either
during or after the cessation of his employment, or used by him except
during his employment with the Company in the business and for the benefit
of the Company and its subsidiaries and Affiliates. In addition, the
Executive agrees not to disclose, publish or make accessible to any other
person, from and after the date of this Agreement, during the Employment
Period or at any time thereafter, any of the terms or provisions of this
Agreement, except the Executive's accountants who need such information to
advise him, prepare his tax returns, make required filings and the like;
provided, however, that the Executive will be responsible for causing any
such accountants to be aware of and to abide by the obligations contained
in this Section 6(b) and will be responsible for any breach of such
obligations by any of them. In the event that the Executive becomes legally
compelled to disclose any of the confidential information, the Executive
will provide the Company with prompt written notice so that the Company may
seek a protective order or other appropriate remedy and/or waive in writing
compliance with the provisions of this Section 6(b) and in the event that
such protective order or other remedy is not obtained, or should the
Company waive in writing compliance with the provisions of this Section
6(b), the Executive will furnish only that portion of the confidential
information which is so legally required. The Executive shall return all
tangible evidence of such confidential information to the General Counsel
of the Company prior to or at the cessation of his employment.
(c) Interpretation. Since a breach of the provisions of this Section 6
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach and the Company shall not be required to
post a bond in any proceeding brought for such purpose. The Executive
agrees that the provisions of this Section 6 are necessary and reasonable
to protect the Company in the conduct of its businesses. If any restriction
contained in this Section 6 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope
thereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced form such restriction shall then be
enforceable in the manner contemplated hereby. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies, at
law or in equity, for such breach or threatened breach.
Section 7. Termination.
(a) Definitions.
(i) Death Termination Event. As used herein, "Death Termination
Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable
to fully discharge his duties hereunder for a period of 185
consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the
event that the last will and testament of the Executive has not been
probated at the time of determination, the estate of the Executive and
(B) in the event that the last will and testament of the Executive has
been probated at the time of determination, the legatees of the
Executive who are entitled under such will to the assets or payments
at issue.
(iv) Termination For Cause. As used herein, the term "Termination
For Cause" shall mean the termination by the Company of the
Executive's employment hereunder upon a good faith determination by a
majority vote of the members of the Board of Directors of the Company
that termination of this Agreement is necessary by reason of (A) the
Executive shall be convicted of a felony, (B) the Executive shall
commit any act or omit to take any action in bad faith and to the
material detriment of the Company and Executive shall not have cured
the same within 30 days after the Company sends written notice
thereof, or (C) Executive shall breach in a material way any material
term of this Agreement and fail to correct such breach within 30 days
after the Company sends written notice thereof.
(v) Termination Without Cause. As used herein, "Termination
Without Cause" shall mean any termination of the Executive's
employment by the Company hereunder that is not a Termination For
Cause, a Death Termination Event, or a Disability Termination Event
but not a conversion to a consulting agreement.
(b) Death Termination Event. Upon the occurrence of a Death
Termination Event, this Agreement will terminate automatically upon the
date that such Death Termination Event occurred (subject to the last
sentence of this Section 7), whereupon the Company shall continue to pay
the then current Base Salary to the Estate of the Executive for a period
equal to the remaining term of the Employment Period.
(c) Disability Termination Event. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the
date that such Disability Termination Event occurred (subject to the last
sentence of this Section 7), whereupon the Company shall continue to pay
the then-current Base Salary to the Executive for the period equal to the
remaining term of the Employment Period (determined on the assumption that
the Employment Period will not be terminated prior to December 31, 2000).
(d) Termination For Cause. The Executive and the Company agree that
the Company shall have the right to effectuate a Termination For Cause in
accordance with the terms of this Agreement at any time. Upon the
occurrence of a Termination For Cause, this Agreement will terminate upon
the date that such Termination For Cause occurs (subject to the provisions
of Section 9), whereupon (i) the Executive shall not be entitled to receive
any additional payments hereunder other than the Base Salary, as then in
effect, to and including the date that such Termination For Cause occurs
and (ii) the Company shall be entitled to any and all remedies and damages
available to it.
(e) Termination Without Cause. Upon the occurrence of a Termination
Without Cause, this Agreement shall terminate upon the date that such
Termination Without Cause occurs (subject to the provisions of Section 9),
whereupon the Executive shall continue to receive the consideration set
forth in Sections 4(a) through (e) and Section 4(h)(i), (ii), (iii) and (v)
through December 31, 2000.
In the event of a termination of Executive's employment for any reason
other than a Termination for Cause or voluntary termination by the
Executive, including, but not limited to a Death Termination Event,
Disability Termination Event, Termination Without Cause, all options,
warrants and restricted stock then held by and/or granted to the Executive
will immediately vest and be exercisable by the Executive but in the event
of the occurrence of an Extraordinary Transaction, no options, warrants or
restricted stock then held by and/or granted to the Executive will
immediately vest as a result thereof.
Section 8. Withholding. The Company shall be entitled to withhold from
amounts payable to the Executive hereunder such amounts as may be required
by applicable law to be so withheld.
Section 9. Survival. Notwithstanding anything in this Agreement to the
contrary, Section 6 of this Agreement shall survive any termination of this
Agreement or cessation of the Executive's employment hereunder for the
periods stated therein.
Section 10. Modification. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter
hereof, supersedes all existing agreements between them concerning such
subject matter, and may be modified only by a written instrument duly
executed by each party.
Section 11. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to
the party to whom it is to be given, at the address of such party set forth
in the preamble to this Agreement (or to such other address as such party
shall have furnished in writing in accordance with the provisions of this
Section 11). Notice to the Estate shall be sufficient if addressed to the
Executive as provided in this Section 11. Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address which shall be
deemed given at the time of receipt thereof.
Section 12. Waiver. Any waiver by either party of a breach of any
provision of Agreement shall not operate as a waiver of any other breach of
such provision or of any breach of any other provision of this Agreement.
The failure of a party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement. Any waiver must be in
writing.
Section 13. Binding Effect. The Executive's rights and obligations
under this Agreement shall not be transferable by assignment or otherwise,
such rights shall not be subject to commutation, encumbrance or the claims
of the Executive's creditors, and any attempt to do any of the foregoing
shall be void. The provisions of this Agreement shall be binding upon and
inure to the benefit of the Executive and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors.
Section 14. Headings. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction
or interpretation of this Agreement.
Section 15. Enforcement. Should the Executive sue to enforce any of
his rights under this Agreement and should the Executive prevail on any
issue in such suit, then the Company shall pay all the Executive's costs of
such suit (including attorneys fees and disbursements). If any taxes are
imposed on such payment, the Company shall make such additional payments to
the Executive as may be necessary, so that after deducting the taxes
imposed on all payments made to the Executive pursuant to this paragraph,
the Executive is left on an after tax basis with an amount equal to his
claim for indemnification prior to the payments described in this sentence.
Section 16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina,
without reference to the conflict of law provisions thereof.
Section 18. Construction and Interpretation. Should any provision of
this Agreement require judicial interpretation, the parties hereto agree
that the court interpreting or construing the same shall not apply a
presumption that the terms hereof shall be more strictly construed against
one party by reason of the rule of construction that a document is to be
more strictly construed against the party that itself, or through its
agent, prepared the same, and it is expressly agreed and acknowledged that
the Executive, the Company and their respective attorneys and
representatives have participated in the preparation hereof.
Section 19. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO
WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG
THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS
BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO THE TRIAL BY THE COURT.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/Andrew L. Farkas
-----------------------------------------------------------
Name: /s/Andrew L. Farkas
------------------------------------------------------------
Its: Chairman and Chief Executive Officer
-----------------------------------------------------------
EXECUTIVE
/s/James A. Aston
--------------------------------------------------
Name: James A. Aston
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement"), is entered
into as of January 1, 1998, by and between Insignia Financial Group, Inc., a
Delaware corporation with an office at One Insignia Financial Plaza, Greenville,
South Carolina (the "Company"), and Ronald Uretta, an individual with an office
at One Insignia Financial Plaza, Greenville, SC 29062 (the "Executive").
Background
The Company and the Executive have previously entered into an Employment
Agreement, which agreement has been previously amended. The Company desires to
assure itself of the services of the Executive for the additional period
provided in this Agreement, and the Executive is willing to serve in the employ
of the Company for such period upon the terms and conditions provided in this
Agreement.
Statement of Agreement
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, in each case upon the terms
and conditions set forth herein, for a period commencing on January 1, 1998 (the
"Commencement Date") and ending on December 31, 2000 or such earlier date as
provided herein (the "Expiration Date") (such period, as it may be so
terminated, being referred to herein as the "Employment Period").
Section 2. Duties and Services.
(a) Offices. During the Employment Period, the Executive shall serve as
Chief Operating Officer and Treasurer of the Company and, at the Company's
request, as an officer or director of one or more of its subsidiaries. In the
performance of his duties hereunder, the Executive shall report to and shall be
responsible only to the Chief Executive Officer and the Board of Directors of
the Company. The Executive agrees to his employment as described in this Section
2, and agrees to devote substantially all of his working time and efforts to the
performance of his duties hereunder. The Executive shall be available to travel
as the needs of the business of the Company reasonably require.
(b) Location of Office. During the Employment Period, the Executive's
office shall be located at One Insignia Financial Plaza, Greenville, SC 29062 or
at such other location as the Company and the Executive shall mutually agree.
The Company will provide the Executive with his current office, an executive
secretary reasonably acceptable to him, and other reasonable support appropriate
to his duties hereunder.
(c) Primary Responsibilities. Subject to Section 2(a), during the
Employment Period, the Executive shall have such responsibilities as are
assigned to him by the Chief Executive Officer and the Board of Directors of the
Company. The Executive shall comply with all written policies and procedures of
the Company.
(d) Consulting. If the Executive's title, powers or duties within the
Company have been diminished after or in connection with an Extraordinary
Transaction (as defined in Section 4(d)) or a Material Asset Disposition (as
defined in Section 4(e)), other than as a result of a Termination For Cause (as
defined in Section 7(a)(iv)), without the prior written consent of Executive,
then Executive can elect in writing to convert this Agreement into a consulting
agreement. Under the terms of the consulting agreement, the Executive shall
consult with respect to the assets and liabilities of the Company as they
existed immediately before the Extraordinary Transaction or the Material Asset
Disposition. Such consultation shall be at the reasonable times convenient to
the Executive on no less than five business days' notice, the parties
recognizing that the Executive during the consulting period likely will have
significant other business interests. The terms and conditions of this Agreement
(including all rights hereunder of the Executive as to salary, bonus, payments
and benefits) shall continue unabridged during the period of consulting. The
other provisions of this Agreement also shall remain in effect except for
Section 2 as modified by this Section 2(d) and except that Section 7(a)(iv)(B)
and Section 7(a)(iv)(C) shall be deleted. The "Employment Period" shall be
deemed to include the period during which the Executive is obligated to provide
consulting services hereunder and therefore, to the extent permitted by law, the
conversion shall not be deemed a termination for any purpose and, if the law
requires that the conversion be treated as a termination, then the Company must
provide the Executive with benefits equivalent to those he would have received
had there been no termination.
Section 3. Key Man Life Insurance. The Company shall have the right to
place a "key man" life insurance policy, providing a death benefit of up to
$15,000,000 upon the life of the Executive, for which the Company is the
beneficiary. In connection therewith, the Executive hereby authorizes the
Company, at its sole cost and expense, to purchase and maintain upon the life of
the Executive such insurance policy, and agrees to submit to such reasonable
medical examinations, and to provide and/or consent to the release of such
medical information, as may be necessary or desirable in order to secure the
issuance thereof. Except as may be required in order to obtain insurance
coverage as described in this Section 3, any and all information about
Employee's health or medical records shall be kept confidential by the Company
and shall not be disclosed by the Company to any party without the Executive's
prior written consent.
Section 4. Compensation. As full compensation for his services hereunder,
the Company shall pay, grant, issue or give, as the case may be, to the
Executive the compensation and benefits specified below:
(a) Base Salary. Subject to the provisions of Section 7, a base salary
at the rate of $400,000 per annum ("Base Salary"), which Base Salary shall
be paid to the Executive in accordance with the customary executive payroll
policy of the Company as in effect from time to time; provided, however,
that the Base Salary, as in effect at any time and from time to time, may
be further increased by action of the Board of Directors; and further
provided, however, that in no event shall the Base Salary be decreased at
any time or from time to time without the prior consent of the Executive,
which consent may be granted or withheld in the Executive's sole
discretion.
(b) Annual Discretionary Bonus. An annual discretionary bonus
("Discretionary Bonus"), the amount of which, if any, shall be determined
by the Board of Directors of the Company in its sole and absolute
discretion, which shall be paid to the Executive, with respect to any
fiscal year of the Company, before the expiration of 74 days after the end
of such fiscal year. In making bonus determinations, the Company shall
evaluate the Executive's performance in accordance with the standard bonus
guidelines used by the Company for executives of the Company in the same or
a similar position as the Executive. In the event of an Extraordinary
Transaction, as defined herein, in any year, then the Company shall,
promptly after the Extraordinary Transaction, pay an amount equal to the
discretionary bonus the Executive received with respect to the year prior
to the year in which the Extraordinary Transaction occurred multiplied by a
fraction the numerator of which is the number of days between the beginning
of the year and the occurrence of the Extraordinary Transaction and the
denominator of which is 365.
(c) Loan. The Company will, upon written request from the Executive,
provide a loan to the Executive in a principal amount not to exceed
$500,000 (the "Loan"). Interest on the Loan shall accrue at a rate of 6.5%
per annum and shall be payable at maturity. The Loan shall mature on
January 6, 2003. Subject to the other terms of this paragraph, the loan
will be forgiven pro-rata over five years beginning January 1, 1998. All
accrued interest on the Loan shall be forgiven on the same basis as set
forth in this Section 4(c). In the event of a Death Termination Event or a
Disability Termination Event (both as hereinafter defined), all outstanding
principal of and accrued interest on the Loan shall be forgiven. In the
event of a Termination for Cause of the Executive or the voluntary
resignation by Executive prior to December 31, 2000, any and all amounts
outstanding under the Loan, including accrued and unpaid interest, shall be
due and payable to the Company within 20 business days of such event. In
the event the Executive is Terminated Without Cause or remains employed by
the Company through December 31, 2000, the Loan will continue thereafter to
be forgiven as provided above over such five-year period.
(d) Extraordinary Transaction. In the event of an Extraordinary
Transaction, whether or not the Executive elects to convert this Agreement
into a consulting agreement, the Company shall, in addition to remaining
obligated under the terms of this Agreement, immediately after the
Extraordinary Transaction pay the Executive a payment equal to (i) the
difference between the discretionary bonus the Executive received from the
Company with respect to the year prior to the year in which the
Extraordinary Transaction occurred and the amount paid pursuant to the last
sentence of Section 4(b), since the Executive may be forfeiting the right
to receive the balance of such bonus, and (ii) $33,333 per month for each
month or part thereof after June 30, 1998 in which the Extraordinary
Transaction occurs. Thus should an Extraordinary Transaction occur on
August 15, 1998, the payment pursuant to Section 4(d)(ii) would be $66,666.
An "Extraordinary Transaction" as used herein means the occurrence of
any one or more of the following:
(i) the Company ceases to be required to file reports under
Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor to that Section;
(ii) a majority of the members of the Board of Directors of the
Company are not persons who (a) had been directors of the Company for
at least the preceding 12 consecutive months or (b) when they
initially were elected to the Board (x) were nominated (if they were
elected by the stockholders) or elected (if they were elected by the
directors) with the affirmative vote of two-thirds of the directors
who were Continuing Directors at the time of the nomination or
election by the Board and (y) were not elected as a result of an
actual or threatened solicitation of proxies or consents by a person
other than the Board of Directors of the Company or an agreement
intended to avoid or settle such a proxy solicitation (the directors
described in clauses (a) and (b) being "Continuing Directors");
(iii) any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act, but excluding the
Company, any of its present affiliates (as such term is defined in
Rule 405 promulgated under the Securities Act of 1933, as amended)
("Affiliates"), or any employee benefit plan of the Company or any of
its present Affiliates) is or becomes the "beneficial owner" (as
defined in Rule 13(d) (3) under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding
securities;
(iv) the purchase of Class A Common Stock of the Company ("Common
Stock") pursuant to any tender or exchange offer or otherwise made by
any "person," including a "group" (as such terms are used in Sections
13 (d) and 14 (d) of the Exchange Act), other than the Company, any of
its present Affiliates, or any employee benefit plan of the Company or
any of its present Affiliates, which results in "beneficial ownership"
(as so defined) of 30% or more of the outstanding Common Stock;
(v) the execution and delivery of a definitive agreement by the
Company that provides for a merger or consolidation, or a transaction
having a similar effect (unless such merger, consolidation or similar
action is with a subsidiary of the Company or with another company, a
majority of whose outstanding capital stock is owned by the same
persons or entities who own a majority of the Company's outstanding
Common Stock at such time), where (A) the Company is not the surviving
corporation, (B) the majority of the Common Stock of the Company is no
longer held by the persons who were the stockholders of the Company
immediately prior to the transaction, (C) the sale, lease, exchange or
other disposition of all or substantially all of the assets of the
Company but not the spin off of one division, the sale of one
division, or both (where "division" means the present residential
business (including IPT) and the present commercial business), and not
the trading of marketable securities held as portfolio securities or
(D) the Company's Common Stock is converted into cash, securities or
other property (other than the common stock of a company into which
the Company is merged), provided, however, that, in the event that the
contemplated merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this paragraph (v)
by virtue of such Change of Control shall not apply; and
(vi) upon the consummation of any transaction requiring
stockholder approval for the acquisition of the Company by an entity
other than the Company or a subsidiary through purchase of assets, or
by merger, or otherwise but not the spin off of one division, the sale
of one division, or both.
(e) Material Asset Disposition Bonus. In the event of a Material Asset
Disposition, as defined below, in consideration of the services performed
by the Executive and consistent with the prior terms of the Executive's
employment, the Company (or, in the case of clause (iii) below, the
spin-off entity or, in default thereof, the Company) shall pay to the
Executive within 15 days of the consummation of such Material Asset
Disposition, a cash bonus equal to .25% of the consideration (valued as set
forth below) received by the Company or its shareholders as a result of
such Material Asset Disposition. A "Material Asset Disposition" as used
herein means, without duplication for the same matter: (i) a transaction
which results in a majority of the equity interest in the Company being
beneficially owned by any "person," including any "group" (as such terms
are used in Section 13(d) and 14(d) of the Exchange Act), other than any of
the Company's present affiliates; (ii) a sale or series of sales by the
Company of subsidiaries, divisions, assets (other than marketable
securities), or operating businesses representing in the aggregate 20% or
more of the Company's 1998 budgeted EBITDA and each such sale after such
threshold has been reached; (iii) a spin off, or series of spin offs, of
any of the Company's divisions, operating businesses or subsidiaries that
meet the 1998 budgeted EBITDA threshold set forth in (ii) above which is
followed by a subsequent Extraordinary Transaction (as defined above, but
with reference to the spun off entity rather than the Company) of the
subsidiary, division or business spun off within five years following such
spin off; or (iv) any transaction which results in any one or more of the
Company's divisions, subsidiaries or operating businesses, representing in
the aggregate 20% or more of the Company's EBITDA, being owned by a third
party. In the event a Material Asset Disposition is consummated in one or
more steps, including, without limitation, by way of second-step merger,
any additional consideration paid or to be paid in any subsequent step in
the Material Asset Disposition in respect of (x) subsidiaries, divisions,
assets (other than marketable securities), or operating businesses of the
Company and (y) capital stock of the Company (and any securities
convertible into, or options, warrants or other rights to acquire, such
capital stock) shall be included for purposes of calculating the bonus
payable pursuant to this Section 4(e). "Consideration" shall not include
the assumption, directly or indirectly, or repayment of indebtedness or
other liabilities of the Company but shall include the assumption, directly
or indirectly, or repayment of the Trust Convertible Preferred Securities
presently outstanding or any similar securities. If all or a portion of the
consideration paid in the Material Asset Disposition is other than cash or
securities, then the value of such non-cash consideration shall be the fair
market value thereof on the date the Material Asset Disposition is
consummated as mutually agreed upon in good faith by the Company's Board of
Directors and the Executive. If such non-cash consideration consists of
common stock, options, warrants or rights for which a public trading market
existed prior to the consummation of the Material Asset Disposition, then
the value of such securities shall be determined by the closing or last
sales price thereof on the date of the consummation of the Material Asset
Disposition; provided, however, that if such non-cash consideration
consists of newly-issued, publicly-traded common stock, options, warrants
or rights for which no public trading market existed prior to the
consummation of the Material Asset Disposition, then the value thereof
shall be the average of the closing prices for the 20 trading days
subsequent to the fifth trading day after the consummation of the Material
Asset Disposition. In such event, the portion of the bonus payable to the
Executive pursuant to this Section 4(e) attributable to such securities
shall be paid on the 30th trading day subsequent to consummation of the
Material Asset Disposition. If no public market exists for the common
stock, options, warrants or other rights issued in the Material Asset
Disposition, then the value of thereof shall be as mutually agreed upon in
good faith by the Company's Board of Directors and the Executive. If the
non-cash consideration paid in the Material Asset Disposition consists of
preferred stock or debt securities (regardless of whether a public trading
market existed for such preferred stock or debt securities prior to
consummation of the Material Asset Disposition or exists thereafter), the
value hereof shall be the face or principal amount, as the case may be. Any
amounts payable by a purchaser to the Company, any shareholder of the
Company or any Affiliate of either the Company or any shareholder of the
Company in connection with a non-competition, employment, consulting,
licensing, supply or other agreement shall be deemed to be part of the
consideration paid in the Material Asset Disposition. If all or a portion
of the consideration payable in connection with the Material Asset
Disposition includes contingent future payments, then the Company shall pay
to the Executive, upon consummation of such Material Asset Disposition, an
additional cash fee, determined in accordance with this Section 4(e) as,
when and if such contingency payments are received. However, in the event
of an installment purchase at a fixed price and a fixed time schedule, the
Company agrees to pay the Executive, upon consummation of the Material
Asset Disposition, a cash fee determined in accordance with this Section
4(e) based on the present value of such installment payments using a
discount rate of 6.5%.
(f) Fringe Benefit Programs. In addition to the other benefits
provided to the Executive hereunder and to the extent he satisfies the
eligibility requirements thereof and to the extent permitted by law,
participation in fringe benefit programs made available generally to
employees of the Company, including, without limitation, pension, profit
sharing, stock purchase, savings, bonus, disability, life insurance, health
insurance, hospitalization, dental, deferred compensation and other plans
and policies authorized on the date hereof or in the future.
(g) Expense Reimbursement. Reimbursement of the Executive for all
out-of-pocket expenses incurred by him in connection with the performance
of his duties hereunder, including professional activities and membership
fees and dues relating to professional organizations of which the Executive
currently is a member or is directed in writing to be a member by the Chief
Executive Officer of the Company and including, without limitation,
expenses required for professional licensing of the Executive, and business
related cell phone expense in accordance with the Company's written
policies and procedures, all upon the presentation of appropriate
documentation therefore in accordance with the then regular procedures of
the Company.
(h) Perquisites. In addition to the other benefits provided to the
Executive hereunder, and at the sole cost and expense of the Company except
as otherwise provided herein:
(i) A membership and annual dues at the city or country club of the
Executive's choice, subject to approval by the Chief Executive Officer of
the Company;
(ii) Reasonable consultations with financial and tax advisors or
counselors, including annual income tax preparation and audits relating to
the period during which the Executive was employed by the Company (whether
or not under this Agreement) and whether such audit expense is incurred
during or after the Employment Period;
(iii) The cost of term life insurance, providing a death benefit of up
to five million dollars ($5,000,000) upon the life of the Executive, the
beneficiaries and owner of which shall be designated by the Executive and
which term insurance shall be upon terms and conditions, and in form and
substance available at the time, and otherwise reasonably satisfactory to
the Executive in his sole discretion and which term life insurance shall be
paid for by the Company during the Employment Period at the Company's sole
cost and expense. If the Company is the owner of such policy, upon
termination of the Executive's employment by the Company, the ownership of
such term life insurance shall be transferred to the Executive or his
designee. At Executive's option, Executive may apply the cost of such a
policy to some other benefit of Executive's choice;
(iv) The Executive shall be entitled to reasonable business usage of
aircraft owned or leased by the Company as determined by the Chief
Executive Officer of the Company. With prior consent from the Chief
Executive Officer of the Company, the Executive may utilize such aircraft
for personal use and in such event the cost of such use shall be added to
and included in the Executive's compensation for federal, state and local
income tax purposes; and
(v) The Executive shall be entitled to an annual automobile allowance
of up to one thousand dollars ($1,000), payable monthly in arrears.
(i) Vacations, etc. Leaves-of-absence in accordance with the then regular
procedures of the Company governing senior executives, and four weeks of paid
vacation per year on a non-cumulative basis.
(j) Parachute Limit. Notwithstanding anything else herein, to the extent
the Executive would be subject to the excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), on such amounts or
benefits received from the Company required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code (the
"Parachute Payments"), the amounts of any Parachute Payments shall be
automatically reduced as described herein to an amount one dollar less than an
amount that would subject the Executive to the excise tax under Section 4999 of
the Code (the "Parachute Limit"); provided, however, that this Section 4(j)
shall apply only if the reduced Parachute Payments received by the Executive
(after taking into account further reductions for applicable federal, state and
local income, social security and other taxes) would be greater than the
unreduced Parachute Payments to be received by the Executive minus (i) the
excise tax payable under Section 4999 of the Code with respect to such Parachute
Payments and (ii) all applicable federal, state and local income, social
security and other taxes on such Parachute Payments. The foregoing reduction
shall be applied to the Parachute Payments as follows: (i) first by reducing the
amounts payable under Section 4(d) (if such amounts are included in such
computation) until such amounts have been exhausted up to the Parachute Limit,
(ii) then by reducing any such other amounts and benefits (other than awards
described in (iii) below) as determined by the Company, and (iii)
notwithstanding anything contained herein or in an option, warrant or restricted
stock agreement, award or plan relating to the Executive then, on a pro-rata
basis up to the Parachute Limit, by failing to accelerate the vesting (without
affecting the right to vest) upon a change in ownership or effective control or
change in ownership of a substantial portion of assets (as described in Code
Section 280G(b)(2)(A)(i)) of any unvested awards of shares of restricted stock
of the Company previously granted to Executive and options or warrants to
purchase shares of the Company previously granted to Executive. Notwithstanding
the foregoing, the Company shall treat any of the amounts described in (i)
through (iii) above as a Parachute Payment solely to the extent required under
applicable law.
Section 5. Representations, Warranties and Covenants of the Executive. The
Executive represents and warrants to the Company as follows:
(a) He is under no contractual or other restriction or obligation
which is inconsistent with the execution of this Agreement, the performance
of his duties hereunder, or the other rights of the Company hereunder; and
(b) He is able to perform the essential functions of his duties
hereunder with or without reasonable accommodations.
Section 6. Non-Solicitation; Confidentiality.
(a) Non-Solicitation.
(1) In recognition of the close personal contact the Executive
has or will have with the Company's and its affiliates' trade secrets,
confidential information, records and business relationships, and the
position of trust in which the Company holds the Executive, the
Executive further covenants and agrees that while the Executive is
employed by the Company and for a period lasting for one (1) year
following the cessation of the Executive's employment with the
Company, the Executive will not, either for himself or an officer,
director, employee, agent, representative, independent contractor or
in any relationship to any person, partnership, corporation, or other
entity (except the Company or its Affiliates or subsidiaries),
solicit, directly or by assisting others, business from any of the
Company's customers or clients with whom the Executive has had
material contact (as defined below) during the twelve (12) month
period preceding the date of cessation of the Executive's employment
with the Company, for the purpose of providing goods or services to
said customers and clients. For purposes of this Agreement, "material
contact" exists between the Executive and any of the Company's
customers or clients (i) with whom the Executive actually dealt; or
(ii) whose dealings with the Company were handled, coordinated or
supervised by the Executive; or (iii) about whom the Executive
obtained confidential information in the ordinary course of business
through the Executive's association with the Company.
(2) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not solicit,
employ, engage or in any manner encourage any employee, broker or
sales person of the Company, or any of its respective subsidiaries or
affiliates to leave their employ for the employ of a person or entity
which directly or indirectly competes with the Company, or any of its
respective subsidiaries or affiliates.
(3) The Executive covenants and agrees that, for a period ending
on the second anniversary of the date on which the Executive's
employment with the Company ceases, the Executive will not purchase
for his own account any limited partnership units of partnerships
that, on the date of purchase, are controlled directly or indirectly
by the Company, except that the provisions of this sentence shall not
be deemed breached merely because the Executive owns, immediately
after a purchase, not more than one percent of the outstanding units.
Should the Executive breach the foregoing sentence, all his options
issued by the Company or any of its subsidiaries shall be cancelled
and all of his restricted stock issued by the Company or any of its
subsidiaries (whether or not then vested) which he then owns shall be
forfeited. For purposes of this Section 6(a)(3), "purchase" shall mean
the payment of cash only for such limited partnership units and shall
not include payment of cash for interests in an entity whose assets
consist in whole or in part of such limited partnership units.
The Executive acknowledges that the foregoing provisions are
intended to protect the Company's and its subsidiaries' and
Affiliates' business and customer contacts, not to prevent the
Executive from pursuing a livelihood in the general area of his
previous training, and they should be interpreted accordingly.
(b) Confidentiality. All confidential information which the Executive
may now possess, may obtain during or after his employment with Company, or
may create prior to the end of his employment with the Company or otherwise
relating to the business of the Company or any of its subsidiaries or
affiliates or of any customer or supplier of any of them shall not be
published, disclosed, or made accessible by him to any other person, either
during or after the cessation of his employment, or used by him except
during his employment with the Company in the business and for the benefit
of the Company and its subsidiaries and Affiliates. In addition, the
Executive agrees not to disclose, publish or make accessible to any other
person, from and after the date of this Agreement, during the Employment
Period or at any time thereafter, any of the terms or provisions of this
Agreement, except the Executive's accountants who need such information to
advise him, prepare his tax returns, make required filings and the like;
provided, however, that the Executive will be responsible for causing any
such accountants to be aware of and to abide by the obligations contained
in this Section 6(b) and will be responsible for any breach of such
obligations by any of them. In the event that the Executive becomes legally
compelled to disclose any of the confidential information, the Executive
will provide the Company with prompt written notice so that the Company may
seek a protective order or other appropriate remedy and/or waive in writing
compliance with the provisions of this Section 6(b) and in the event that
such protective order or other remedy is not obtained, or should the
Company waive in writing compliance with the provisions of this Section
6(b), the Executive will furnish only that portion of the confidential
information which is so legally required. The Executive shall return all
tangible evidence of such confidential information to the General Counsel
of the Company prior to or at the cessation of his employment.
(c) Interpretation. Since a breach of the provisions of this Section 6
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach and the Company shall not be required to
post a bond in any proceeding brought for such purpose. The Executive
agrees that the provisions of this Section 6 are necessary and reasonable
to protect the Company in the conduct of its businesses. If any restriction
contained in this Section 6 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope
thereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced form such restriction shall then be
enforceable in the manner contemplated hereby. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies, at
law or in equity, for such breach or threatened breach.
Section 7. Termination.
(a) Definitions.
(i) Death Termination Event. As used herein, "Death Termination
Event" shall mean the death of the Executive.
(ii) Disability Termination Event. As used herein, "Disability
Termination Event" shall mean a circumstance where the Executive is
physically or mentally incapacitated or disabled or otherwise unable
to fully discharge his duties hereunder for a period of 185
consecutive days.
(iii) Estate. As used herein, "Estate" shall mean (A) in the
event that the last will and testament of the Executive has not been
probated at the time of determination, the estate of the Executive and
(B) in the event that the last will and testament of the Executive has
been probated at the time of determination, the legatees of the
Executive who are entitled under such will to the assets or payments
at issue.
(iv) Termination For Cause. As used herein, the term "Termination
For Cause" shall mean the termination by the Company of the
Executive's employment hereunder upon a good faith determination by a
majority vote of the members of the Board of Directors of the Company
that termination of this Agreement is necessary by reason of (A) the
Executive shall be convicted of a felony, (B) the Executive shall
commit any act or omit to take any action in bad faith and to the
material detriment of the Company and Executive shall not have cured
the same within 30 days after the Company sends written notice
thereof, or (C) Executive shall breach in a material way any material
term of this Agreement and fail to correct such breach within 30 days
after the Company sends written notice thereof.
(v) Termination Without Cause. As used herein, "Termination
Without Cause" shall mean any termination of the Executive's
employment by the Company hereunder that is not a Termination For
Cause, a Death Termination Event, or a Disability Termination Event
but not a conversion to a consulting agreement.
(b) Death Termination Event. Upon the occurrence of a Death
Termination Event, this Agreement will terminate automatically upon the
date that such Death Termination Event occurred (subject to the last
sentence of this Section 7), whereupon the Company shall continue to pay
the then current Base Salary to the Estate of the Executive for a period
equal to the remaining term of the Employment Period.
(c) Disability Termination Event. Upon the occurrence of a Disability
Termination Event, this Agreement shall terminate automatically upon the
date that such Disability Termination Event occurred (subject to the last
sentence of this Section 7), whereupon the Company shall continue to pay
the then-current Base Salary to the Executive for the period equal to the
remaining term of the Employment Period (determined on the assumption that
the Employment Period will not be terminated prior to December 31, 2000).
(d) Termination For Cause. The Executive and the Company agree that
the Company shall have the right to effectuate a Termination For Cause in
accordance with the terms of this Agreement at any time. Upon the
occurrence of a Termination For Cause, this Agreement will terminate upon
the date that such Termination For Cause occurs (subject to the provisions
of Section 9), whereupon (i) the Executive shall not be entitled to receive
any additional payments hereunder other than the Base Salary, as then in
effect, to and including the date that such Termination For Cause occurs
and (ii) the Company shall be entitled to any and all remedies and damages
available to it.
(e) Termination Without Cause. Upon the occurrence of a Termination
Without Cause, this Agreement shall terminate upon the date that such
Termination Without Cause occurs (subject to the provisions of Section 9),
whereupon the Executive shall continue to receive the consideration set
forth in Sections 4(a) through (e) and Section 4(h)(i), (ii), (iii) and (v)
through December 31, 2000.
In the event of a termination of Executive's employment for any reason
other than a Termination for Cause or voluntary termination by the
Executive, including, but not limited to a Death Termination Event,
Disability Termination Event, Termination Without Cause, all options,
warrants and restricted stock then held by and/or granted to the Executive
will immediately vest and be exercisable by the Executive but in the event
of the occurrence of an Extraordinary Transaction, no options, warrants or
restricted stock then held by and/or granted to the Executive will
immediately vest as a result thereof.
Section 8. Withholding. The Company shall be entitled to withhold from
amounts payable to the Executive hereunder such amounts as may be required by
applicable law to be so withheld.
Section 9. Survival. Notwithstanding anything in this Agreement to the
contrary, Section 6 of this Agreement shall survive any termination of this
Agreement or cessation of the Executive's employment hereunder for the periods
stated therein.
Section 10. Modification. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
Section 11. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given, at the address of such party set forth in the
preamble to this Agreement (or to such other address as such party shall have
furnished in writing in accordance with the provisions of this Section 11).
Notice to the Estate shall be sufficient if addressed to the Executive as
provided in this Section 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
Section 12. Waiver. Any waiver by either party of a breach of any provision
of Agreement shall not operate as a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
Section 13. Binding Effect. The Executive's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance or the claims of the
Executive's creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors.
Section 14. Headings. The headings in this Agreement are solely for
convenience of reference, and shall be given no effect in the construction or
interpretation of this Agreement.
Section 15. Enforcement. Should the Executive sue to enforce any of his
rights under this Agreement and should the Executive prevail on any issue in
such suit, then the Company shall pay all the Executive's costs of such suit
(including attorneys fees and disbursements). If any taxes are imposed on such
payment, the Company shall make such additional payments to the Executive as may
be necessary, so that after deducting the taxes imposed on all payments made to
the Executive pursuant to this paragraph, the Executive is left on an after tax
basis with an amount equal to his claim for indemnification prior to the
payments described in this sentence.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina, without
reference to the conflict of law provisions thereof.
Section 18. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself, or through its agent, prepared the same, and it is
expressly agreed and acknowledged that the Executive, the Company and their
respective attorneys and representatives have participated in the preparation
hereof.
Section 19. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALING BETWEEN OR AMONG THEM RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT AND THE RELATIONSHIPS BEING ESTABLISHED. THE SCOPE OF
THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO THE TRIAL BY THE
COURT.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/Andrew L. Farkas
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Name: /s/Andrew L. Farkas
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Its: Chairman and Chief Executive Officer
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EXECUTIVE
/s/Ronald Uretta
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Name: Ronald Uretta
