EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INSIGNIA FINANCIAL GROUP, INC.,
CBRE HOLDING, INC.,
CB XXXXXXX XXXXX SERVICES, INC.
AND
APPLE ACQUISITION CORP.
FEBRUARY 17, 2003
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.............................................................................................1
1.1. Definitions.....................................................................................1
ARTICLE 2 THE MERGER.............................................................................................11
2.1. The Merger.....................................................................................11
2.2. Organizational Documents.......................................................................11
2.3. Directors and Officers.........................................................................11
ARTICLE 3 CONVERSION OF SECURITIES AND RELATED MATTERS...........................................................11
3.1. Capital Stock of Acquiror......................................................................11
3.2. Cancellation of Treasury Stock and Acquiror-Owned Shares.......................................12
3.3. Conversion of Company Shares...................................................................12
3.4. Conversion of Company Series A Preferred Shares................................................12
3.5. Conversion of Company Series B Preferred Shares................................................12
3.6. Exchange of Certificates.......................................................................12
3.7. Company Stock Options and Restricted Shares....................................................14
3.8. Warrants.......................................................................................16
3.9. Supplemental Stock Purchase and Loan Plan......................................................16
3.10. Dissenting Shares..............................................................................16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................17
4.1. Corporate Existence and Power..................................................................17
4.2. Corporate Authorization........................................................................17
4.3. Governmental Authorization.....................................................................17
4.4. Non-Contravention..............................................................................18
4.5. Capitalization.................................................................................18
4.6. Subsidiaries...................................................................................20
4.7. Company SEC Documents; Financial Statements; Undisclosed Liabilities...........................21
4.8. [Reserved].....................................................................................22
4.9. Absence of Certain Changes.....................................................................22
4.10. Litigation.....................................................................................22
4.11. Taxes 10
4.12. Employee Benefits..............................................................................24
4.13. Compliance with Laws; Licenses, Permits and Registrations......................................27
4.14. Title to Assets................................................................................27
4.15. Intellectual Property..........................................................................27
4.16. Transaction Fees; Opinions of Financial Advisor................................................28
4.17. Labor Matters..................................................................................28
4.18. Material Contracts.............................................................................29
4.19. Real Estate....................................................................................31
4.20. Environmental..................................................................................32
4.21. Insurance......................................................................................32
4.22. Affiliate Transactions.........................................................................33
4.23. Required Vote; Board Approval; State Takeover Statutes.........................................33
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4.24. Information to Be Supplied.....................................................................34
4.25. No Knowledge of Breach.........................................................................34
4.26. Disclaimer of Other Representations and Warranties.............................................34
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HOLDING, PARENT AND ACQUIROR........................................34
5.1. Corporate Existence and Power..................................................................34
5.2. Corporate Authorization........................................................................35
5.3. Governmental Authorization.....................................................................35
5.4. Non-Contravention..............................................................................35
5.5. Parent SEC Documents...........................................................................35
5.6. [Reserved].....................................................................................36
5.7. Financing......................................................................................36
5.8. Information to Be Supplied.....................................................................37
5.9. Disclaimer of Other Representations and Warranties.............................................37
5.10. No Knowledge of Breach.........................................................................38
ARTICLE 6 COVENANTS OF THE COMPANY...............................................................................38
6.1. Company Interim Operations.....................................................................38
6.2. Stockholder Meeting............................................................................42
6.3. Acquisition Proposals; Board Recommendation....................................................42
6.4. French Warrants................................................................................45
6.5. Supplemental Company Disclosure Schedule.......................................................45
6.6. Pre-Closing Terminations.......................................................................46
ARTICLE 7 COVENANTS OF HOLDING, PARENT AND ACQUIROR..............................................................46
7.1. Director and Officer Liability.................................................................46
7.2. Employee Benefits..............................................................................48
7.3. Conduct of Holding, Parent and Acquiror........................................................49
7.4. Transfer Taxes and Other Tax Matters...........................................................49
7.5. Financing Arrangements.........................................................................50
7.6. Certain Existing Obligations...................................................................51
ARTICLE 8 COVENANTS OF HOLDING, PARENT, ACQUIROR AND THE COMPANY.................................................52
8.1. Efforts and Assistance.........................................................................52
8.2. Proxy Statement................................................................................53
8.3. Public Announcements...........................................................................53
8.4. Access to Information; Notification of Certain Matters.........................................54
8.5. Further Assurances.............................................................................55
8.6. Disposition of Litigation......................................................................55
8.7. Confidentiality and No-Raid Agreements.........................................................55
8.8. Resignation of Directors.......................................................................56
8.9. Sales of Real Estate Investment Assets.........................................................56
8.10. Treatment of Net Proceeds......................................................................57
8.11. 401(k) Restoration Plan........................................................................57
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ARTICLE 9 CONDITIONS TO MERGER...................................................................................57
9.1. Conditions to the Obligations of Each Party....................................................57
9.2. Conditions to the Obligations of the Company...................................................57
9.3. Conditions to the Obligations of Holding, Parent and Acquiror..................................58
ARTICLE 10 TERMINATION...........................................................................................59
10.1. Termination....................................................................................59
10.2. Effect of Termination..........................................................................61
10.3. Fees and Expenses..............................................................................62
10.4. Indemnification................................................................................62
ARTICLE 11 MISCELLANEOUS.........................................................................................63
11.1. Notices........................................................................................63
11.2. Survival.......................................................................................64
11.3. Amendments; No Waivers.........................................................................64
11.4. Successors and Assigns.........................................................................65
11.5. Counterparts; Effectiveness; Third Party Beneficiaries.........................................65
11.6. Governing Law..................................................................................65
11.7. Jurisdiction...................................................................................65
11.8. Enforcement....................................................................................66
11.9. Entire Agreement...............................................................................66
11.10. Authorship.....................................................................................66
11.11. Severability...................................................................................66
11.12. Waiver of Jury Trial...........................................................................66
11.13. Headings; Construction.........................................................................66
EXHIBITS:
Exhibit A Form of Voting Agreement
Exhibit B Form of Joint Press Release
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and entered
into as of this 17th day of February 2003, by and among Insignia Financial
Group, Inc., a Delaware corporation (the "COMPANY"), CBRE Holding, Inc., a
Delaware corporation ("HOLDING"), CB Xxxxxxx Xxxxx Services, Inc., a Delaware
corporation wholly owned by Holding ("PARENT"), and Apple Acquisition Corp., a
Delaware corporation wholly owned by Parent ("ACQUIROR").
WHEREAS, a Special Committee (as defined herein) of the Board of Directors
of the Company has (i) determined that the Merger (as defined herein) is
advisable and in the best interest of the Company's stockholders, and (ii)
approved the Merger and recommended approval of the Merger by the Board of
Directors of the Company;
WHEREAS, the Board of Directors of the Company has (i) determined that the
Merger is advisable and in the best interest of the Company's Stockholders (as
defined below), and (ii) approved the Merger;
WHEREAS, the Board of Directors of each of Parent and Acquiror has (i)
determined that the Merger is advisable and in the best interest of its
stockholders, and (ii) approved the Merger;
WHEREAS, simultaneously with the execution of this Agreement, certain
Company Stockholders have entered into voting agreements with Parent (the
"VOTING AGREEMENTS"), each of which is in the form attached hereto as Exhibit A,
pursuant to which, among other things, such Company Stockholders have agreed to
vote their Company Shares in favor of adopting and approving this Agreement and
the Merger; and
WHEREAS, by resolutions duly adopted, the respective Boards of Directors of
the Company, Parent and Acquiror have approved and adopted this Agreement and
the transactions and other agreements contemplated hereby.
NOW, THEREFORE, in consideration of the premises and promises contained
herein, and intending to be legally bound, the parties hereto agree as set forth
below.
ARTICLE 1
DEFINITIONS
1.1. DEFINITIONS.
(a) As used herein, the following terms have the meanings set forth
below:
"ACQUIROR SHARE" means one share of common stock of Acquiror, $0.01 par
value per share.
"ACQUISITION PROPOSAL" means any offer or proposal (whether or not in
writing) from any Third Party regarding any of the following: (a) a transaction
pursuant to which a Third Party acquires or would acquire beneficial ownership
of more than fifteen percent (15%) of the outstanding shares of any class of
Equity Interests of the Company, whether from the Company or pursuant to a
tender offer or exchange offer or otherwise, (b) a merger, consolidation,
business combination, reorganization, sale of all or substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company, or (c) except for any transaction set forth in Section 6.1 of the
Company Disclosure Schedule, any transaction which would result in a Third Party
acquiring more than 15% of the fair market value on a consolidated basis of the
assets (including, without limitation, the capital stock of Subsidiaries) of the
Company and its Subsidiaries immediately prior to such transaction (whether by
purchase of assets, acquisition of stock of a Subsidiary or otherwise).
"AFFILIATE" means, with respect to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with, such
first Person. For purposes of this definition, the term "CONTROL" (including the
correlative terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"BUSINESS DAY" means any day, other than a Saturday, Sunday or one on which
banks are authorized by Law to be closed in New York, New York or Los Angeles,
California.
"CASH DISTRIBUTION" means a cash distribution or payment (without
duplication) made on or after the date of this Agreement and prior to the
Closing Date by a Real Estate Investment Entity or (without duplication) a
Relevant Subsidiary to any holder of a debt obligation of or an Equity Interest
in such Real Estate Investment Entity or Relevant Subsidiary (if, and only if,
such payment is not an interest payment or a distribution of net operating
earnings), excluding any distribution or payment directly or indirectly made
with (x) the proceeds of any indebtedness (including any refinancing) unless
such indebtedness is (i) non-recourse to the Company and its Subsidiaries or
(ii) non-recourse to the Company and its Subsidiaries with exceptions to such
non-recourse provisions that are no less favorable to the Company and its
Subsidiaries (and are applicable only to the same Subsidiaries) as the
indebtedness of such Real Estate Investment Entity that is being refinanced (but
which in no event would generally be characterized as full recourse), or (y) any
cash generated by sale of any Real Estate Investment Asset on or prior to
December 31, 2002. For the avoidance of doubt, management fees, advisory fees or
other similar fees or payments made to a Company Subsidiary will not be deemed
to constitute a Cash Distribution.
"CHANGE IN CONTROL PRICE" means the higher of (i) the Common Merger
Consideration, or (ii) the highest Fair Market Value per Company Share at any
time during the sixty (60) day period preceding the Closing.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended, together
with the rules and regulations promulgated thereunder.
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"COMPANY BALANCE SHEET" means the Company's consolidated balance sheet
included in the Company 10-K relating to its fiscal year ended on December 31,
2001.
"COMPANY CHARTER" means the certificate of incorporation of the Company,
including, without limitation, the Certificate of Designation with respect to
the Series A Preferred Stock filed with the Secretary of State on June 7, 2002,
the Certificate of Designation with respect to the Series B Preferred Stock
filed with the Secretary of State on June 7, 2002 and any such other amendments
or restatements thereof.
"COMPANY JOINT VENTURE" means a Joint Venture of the Company or any of its
Subsidiaries.
"COMPANY MATERIAL ADVERSE EFFECT" means any material adverse effect on (a)
the business, assets, liabilities, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement or the other agreements
and transactions contemplated hereby to which it is a party; provided, however,
that this definition shall exclude any adverse effect arising out of,
attributable to or resulting from:
(i) any generally applicable change in Law or GAAP or interpretation
of any thereof;
(ii) the termination of any employee's or independent contractor's
employment by, or independent contractor relationship with, the Company or
any of its Subsidiaries, or any notice thereof, other than (A) as a result
of any breach by the Company or any of its Subsidiaries of the terms of
this Agreement or (B) as a result of any termination (other than for cause
or pursuant to Section 6.6) by the Company or any of its Subsidiaries of
any employee or independent consultant in writing;
(iii) the announcement of discussions among the parties hereto
regarding the transactions contemplated hereby, the announcement of any
other actual or proposed Acquisition Proposal, the announcement of this
Agreement or the transactions contemplated hereby, any suit, action or
proceeding arising out of or in connection with this Agreement or the
transactions contemplated hereby (other than causes of action brought by
Holding, Parent or Acquiror for breach of this Agreement) or any actions
taken pursuant to Sections 8.1(a) and 8.1(b);
(iv) the disposition of any assets that would not violate the terms of
this Agreement or the write down or write off of the value of any such
assets for accounting purposes;
(v) actions or inactions specifically permitted by a prior written
waiver by Holding, Parent and Acquiror of performance by the Company of any
of its obligations under this Agreement;
(vi) the failure of the Company or any of its Subsidiaries to obtain
any Third Party consents to the execution and delivery of this Agreement,
or the agreements
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relating to the transactions contemplated hereby to the extent such Third
Party consents are set forth in the Company Disclosure Schedule;
(vii) any diminution in value of, or adverse developments after the
date of this Agreement relating to, the Real Estate Investment Entities,
other than as a result of the Company's breach of this Agreement;
(viii) the cancellation or notice of cancellation of third-party
management, tenant representation and/or brokerage contracts to which the
Company or any of its Subsidiaries is or may become a party;
(ix) conditions generally affecting the business or industry in which
the Company or any of its Subsidiaries operate;
(x) U.S., U.K., French or global general economic or political
conditions or financial markets; and
(xi) any outbreak or escalation of hostilities (including, without
limitation, any declaration of war by the U.S. Congress) or acts of
terrorism.
"COMPANY OPTION" means any option to purchase Company Shares, whether
granted pursuant to the Company Option Plans or otherwise.
"COMPANY OPTION PLANS" means the Company's 1998 Stock Incentive Plan,
Xxxxxxx Xxxxx Group Limited 1997 Unapproved Share Option Scheme, St. Xxxxxxx
Holdings Limited 1999 Unapproved Share Option Scheme and Brooke International
(China) Limited Share Option Scheme, each as amended, supplemented or otherwise
modified.
"COMPANY PREFERRED SHARE" means one share of Series A Preferred Stock or
one share of Series B Preferred Stock.
"COMPANY SERIES A PREFERRED SHARE" means one share of the Series A
Preferred Stock.
"COMPANY SERIES B PREFERRED SHARE" means one share of the Series B
Preferred Stock.
"COMPANY SHARE" means one share of common stock of the Company, par value
$0.01 per share.
"COMPANY SEC DOCUMENTS" means (a) the annual reports on Form 10-K of the
Company for the years ended December 31, 1999, 2000 and 2001 (the "COMPANY
10-K"), (b) the quarterly reports on Form 10-Q of the Company for the quarters
ended March 31, 2002, June 30, 2002 and September 30, 2002, (c) the Company's
proxy and information statements relating to meetings of, or actions taken
without a meeting by, the Company Stockholders, since January 1, 2002, and (d)
all other reports, filings, registration statements and other documents filed by
the Company with the SEC since January 1, 1999; in each case including all
exhibits, appendices and attachments thereto, whether filed therewith or
incorporated by reference therein.
"COMPANY STOCKHOLDERS" or "STOCKHOLDERS" means the stockholders of the
Company.
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"COMPANY SUBSIDIARY" means a Subsidiary of the Company or any of its
Subsidiaries.
"COMPANY WARRANT" means any warrant to purchase Company Shares, other than
the TOPR Warrants.
"COVERED ENTITIES" shall have the meaning set forth in Section 7.6(b).
"COVERED PARTICIPANT" shall have the meaning set forth in Section 7.6(b).
"DAMAGES" means all losses, liabilities, claims, damages, payments, Taxes,
Liens, costs and expenses (including costs and expenses of actions, amounts paid
in connection with any assessments, judgments or settlements relating thereto,
interest and penalties recovered by a third party with respect thereto and
out-of-pocket expenses and reasonable attorneys' fees and expenses reasonably
incurred in defending against any such actions).
"ENVIRONMENTAL LAWS" shall mean all Laws relating to the protection of the
indoor or outdoor environment (including, without limitation, the quality of the
ambient air, soil, surface water or groundwater, natural resources or human
health or safety).
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses, registrations,
and other authorizations required under applicable Environmental Laws.
"EQUITY INTEREST" means with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock or other
equity interests (including, without limitation, partnership or membership
interests in a partnership or limited liability company or any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses, or distributions of assets, of the issuing Person) whether
outstanding on the date hereof or issued after the date hereof; provided,
however that "Equity Interests" shall not include any right to receive cash
payments under bonus plans of the Company or its Subsidiaries.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"FAIR MARKET VALUE" means, as of any date, the last sales price for a
Company Share on the applicable date as reported on the New York Stock Exchange.
"GAAP" means United States generally accepted accounting principles,
applied on a consistent basis.
"GOVERNMENTAL ENTITY" means any federal, state, local, international or
foreign governmental authority, any transgovernmental authority or any court,
administrative or regulatory agency or commission or other governmental
authority, agency or body.
"JOINT VENTURE" means, with respect to any Person, any corporation or other
entity (including a division or line of business of such corporation or other
entity) (A) of which such Person and/or any of its Subsidiaries beneficially
owns a portion of the Equity Interests that is insufficient to make such
corporation or other entity a Subsidiary of such Person, and (B) that is
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engaged in the same business as such Person or its Subsidiaries or in a related
or complementary business.
"KNOWLEDGE" means, with respect to the matter in question, if any of the
following officers of the Company has actual knowledge of the matter: Xxxxxx
Xxxxxx, Xxx Xxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxx and Xxxx
Xxxxxxxx.
"LAW" means any federal, state, local, international or foreign law
(including common law), rule, regulation, judgment, code, ruling, statute,
order, directives, decree, injunction or ordinance or other legal requirement.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of an asset.
"MATERIALS OF ENVIRONMENTAL CONCERN" shall mean any hazardous, acutely
hazardous, or toxic substance or waste or any other words of similar import
defined and regulated as such under Environmental Laws (including, without
limitation, the federal Comprehensive Environmental Response, Compensation and
Liability Act, as amended, and the federal Resource Conservation and Recovery
Act, as amended) and any other material or organism that would be reasonably
expected to result in liability under any Environmental Law (including, without
limitation, oil, petroleum products, asbestos, polychlorinated biphenyls and
mold).
"NET PROCEEDS" means the aggregate cash proceeds Deemed Received by the
Company (as defined below) on or after the date of this Agreement and prior to
or simultaneously with the Closing from or as a result of (i) all Real Estate
Asset Sales completed prior to or simultaneously with the Closing and (ii) all
Cash Distributions. The amount of cash proceeds "DEEMED RECEIVED BY THE COMPANY"
shall be the amount of cash proceeds that would ultimately be distributable to
the Company (i.e., Insignia Financial Group, Inc.) by its direct Subsidiaries,
assuming repayment in full of all indebtedness of all Company Subsidiaries in
the chain of ownership at or above the level at which the sale occurred (other
than indebtedness other under the Senior Credit Agreement and the Senior
Subordinated Credit Agreement), and net of: (a) any Taxes (other than income
Taxes) that are payable by the Company or any of it Subsidiaries as a result of
the transaction or event giving rise to such receipt of cash proceeds, (b) any
liabilities or obligations retained by the Company or any of its Subsidiaries
relating to any Real Estate Investment Asset directly or indirectly sold
pursuant to any Real Estate Asset Sale (including, without limitation, any
liabilities or obligations relating to the underlying Real Estate Investment
Asset that was directly or indirectly sold in such Real Estate Asset Sale), (c)
fees, costs and expenses payable to third parties and incurred in connection
with the transaction or event giving rise to such receipt of cash proceeds
(including, without limitation, any incentive or other bonuses paid to
management of the Company or any Subsidiary), (d) any payments required to be
made by the Company or any of its Subsidiaries in respect of any Participation
Interests in connection with the transaction or event giving rise to such
receipt of cash proceeds and (e) any cash generated by any sale of a Real Estate
Investment Asset on or prior to December 31, 2002. If the buyer in a Real Estate
Asset Sale is willing to assume a retention/severance agreement for which the
Company or its Subsidiaries would otherwise be liable and if the Parent consents
to such assumption, then the amount of such obligations assumed by the buyer
will be considered cash proceeds of the transaction. Net Proceeds will be
determined in good faith by mutual
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written agreement of Parent and the Company and certified in writing by Parent
and the Company at or prior to Closing. For the avoidance of doubt, cash
proceeds can only be Deemed Received by the Company if they were actually
received prior to or simultaneously with the Closing by a Subsidiary or a Joint
Venture that remains a Subsidiary or a Joint Venture, respectively, of the
Company immediately following Closing (i.e., such Subsidiary or Joint Venture is
not sold in a Real Estate Asset Sale).
"NON-U.S. COMPETITION LAWS" means all (a) non-U.S. Laws intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade, (b) antitrust Laws by antitrust
authorities outside of the United States and (c) takeover Laws of jurisdictions
outside of the United States.
"NO-RAID AGREEMENT" means the No-Raid Agreement, dated January 19, 2003, by
and between Holding and the Company.
"PARENT BALANCE SHEET" means Holding's consolidated balance sheet included
in the Parent 10-K relating to its fiscal year ended on December 31, 2001.
"PARENT CREDIT AGREEMENT" means the Credit Agreement, dated as of July 20,
2001, among Parent, Holding, the lenders party thereto and CSFB.
"PARENT MATERIAL ADVERSE EFFECT" means any change or effect that would
prevent or materially impair the ability of Holding, Parent or Acquiror to
consummate the Merger and the other transactions contemplated by this Agreement.
"PARENT SEC DOCUMENTS" means (a) the annual report on Form 10-K of Holding
for the year ended December 31, 2001 (the "PARENT 10-K"), (b) the quarterly
reports on Form 10-Q of Holding for the quarters ended March 31, 2002, June 30,
2002 and September 30, 2002 and (c) all other reports, filings, registration
statements and other documents filed by Holding or Parent with the SEC since
July 20, 2001; in each case including all exhibits, appendices and attachments
thereto, whether filed therewith or incorporated by reference therein.
"PARTICIPATION INTERESTS" shall have the meaning set forth in Section
7.6(b).
"PERMITTED LIENS" means (a) liens for utilities and current Taxes not yet
due and payable, (b) mechanics', carriers', workers', repairers', materialmen's,
warehousemen's and other similar liens arising or incurred in the ordinary
course of business, (c) liens for Taxes being contested in good faith for which
appropriate reserves have been included on the balance sheet of the applicable
Person, (d) easements, restrictions, covenants or rights of way currently of
record against any of the Owned Real Property which do not interfere with, or
increase the cost of operation of, the business of the Company and its
Subsidiaries in any material respect, (e) minor irregularities of title which do
not interfere with, or increase the cost of the business of the Company and its
Subsidiaries in any material respect, and (f) liens under the Senior Credit
Agreement.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust or any other entity or organization, including
any Governmental Entity.
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"PROXY STATEMENT" means the proxy statement to be mailed to the Company
Stockholders in connection with the Company Stockholder Approval, together with
any amendments or supplements thereto.
"REAL ESTATE ASSET SALE" means the sale or assignment of any Real Estate
Investment Asset, provided that with respect to a sale of a Real Estate
Investment Contract, (x) the Company's and its Subsidiaries' entire direct and
indirect interests in the applicable Real Estate Investment Entity are also
sold, (y) such Real Estate Investment Contract has not been materially amended
after the date of this Agreement and (z) Net Proceeds Deemed Received by the
Company in connection with the sale or assignment of such Real Estate Investment
Contract will be reduced by any accrued and unpaid fees and similar payments due
under such contract on the date of sale or assignment. Notwithstanding the
foregoing, in order for a sale or other transaction to qualify as a Real Estate
Asset Sale, (A) the entire direct or indirect interest of the Company and its
Subsidiaries in the relevant Real Estate Investment Asset must be sold as part
of such transaction, (B) all Participation Interests relating to such Real
Estate Investment Asset must either be assumed entirely by the purchaser or
assignee or satisfied in full so that the Company and its Subsidiaries have no
further liability or obligation relating to such Participation Interests, or the
transaction must have been otherwise structured in such a manner that neither
the Company nor any of its Subsidiaries has any liability or obligation relating
to such Participation Interests after the consummation of the transaction, (C)
to the extent that the Company or any of its Subsidiaries has given any
financial, performance or other guarantees with respect to such Real Estate
Investment Asset or an applicable Relevant Subsidiary or any indebtedness
relating thereto, or has any reimbursement or other obligations relating to any
letter of credit, bond or other similar instrument relating to such Real Estate
Investment Asset or Relevant Subsidiary or any indebtedness relating thereto,
either (1) the Company and its Subsidiaries are fully and unconditionally
released from such obligations and liabilities or (2) the Company and its
Subsidiaries are fully indemnified against all such obligations and liabilities
and such indemnity is fully secured by cash, a letter of credit or other
collateral reasonably satisfactory to Parent, and (D) such sale is on
commercially reasonable terms that would not reasonably be expected to result in
the Company or any of its Subsidiaries incurring any future indemnification or
other obligations in respect of such Real Estate Asset Sale or the assets
applicable Real Estate Investment Asset sold or assigned.
"REAL ESTATE INVESTMENT ASSET" means any: (i) asset owned by a Real Estate
Investment Entity; (ii) direct Equity Interest in or debt obligation of any Real
Estate Investment Entity; (iii) direct Equity Interest in a Company Subsidiary
(a "RELEVANT SUBSIDIARY") that directly or indirectly owns an Equity Interest in
a Real Estate Investment Entity, provided that the only assets of such Relevant
Subsidiary consist of (x) direct or indirect (through one or more Relevant
Subsidiaries) Equity Interests in one or more Real Estate Investment Entities,
(y) debt obligations of one or more Real Estate Investment Entities or Relevant
Subsidiaries and/or (z) cash or cash equivalents that were included in the net
book value of the Real Estate Investment Assets represented to Parent or
represent the proceeds from transactions closing after December 31, 2002 that
had they occurred between the date of this Agreement and the Closing would have
been a Real Estate Asset Sale or Cash Distribution; or (iv) Real Estate
Investment Contract.
"REAL ESTATE INVESTMENT CONTRACT" means any asset management, development,
construction, investment management, financial advisory, proceeds, profit
participation or
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similar agreement or contract relating solely to a Real Estate Investment Entity
and/or the assets of a Real Estate Investment Entity, but excluding any sale,
lease or property management agreements.
"REAL ESTATE INVESTMENT ENTITY" means the Company Subsidiaries and Company
Joint Ventures set forth in Section 1.1(A) of the Company Disclosure Schedule.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SENIOR CREDIT AGREEMENT" means the Senior Credit Agreement, dated as of
May 4, 2001, among the Company, First Union National Bank, Xxxxxx Commercial
Paper Inc., Bank of America, N.A. and the other lenders party thereto, as
amended through the date hereof.
"SERIES A PREFERRED CERTIFICATE OF DESIGNATION" means the Certificate of
Designation of the Company that was filed with the Secretary of State on June 7,
2002 with respect to the Series A Preferred Stock, as amended, supplemented or
otherwise modified.
"SERIES A PREFERRED STOCK" means the Series A Convertible Preferred Stock,
par value $0.01 per share, the voting powers, designation, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof were created by resolution
of the Company's Board of Directors adopted on April 25, 2002.
"SERIES B PREFERRED CERTIFICATE OF DESIGNATION" means the Certificate of
Designation of the Company that was filed with the Secretary of State on June 7,
2002 with respect to the Series B Preferred Stock, as amended, supplemented or
otherwise modified.
"SERIES B PREFERRED STOCK" means the Series B Convertible Preferred Stock,
par value $0.01 per share, the voting powers, designation, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof were created by resolution
of the Company's Board of Directors adopted on April 25, 2002.
"SIGNIFICANT SUBSIDIARY" means a Subsidiary of any Person which generated
at least $15 million in consolidated revenues, determined on an annualized basis
for the year ended December 31, 2002, or had at least $5 million in consolidated
tangible assets, net of associated non-recourse debt, on December 31, 2002.
"SPECIAL COMMITTEE" means the Special Committee of the Company's Board of
Directors appointed by resolution of the Company's Board of Directors adopted on
October 14, 2002.
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership or other entity (including joint ventures) of
which such Person, directly or indirectly, (a) has the right or ability to
elect, designate or appoint a majority of the board of directors or other
Persons performing similar functions for such entity, whether as a result of the
beneficial ownership of Equity Interests, contractual rights or otherwise or (b)
beneficially owns
9
a majority of the voting Equity Interests (including, without limitation,
general partner Equity Interests).
"SUMMARY OF GRANTS" means the summary table of Participation Interests set
forth in Section 1.1(B) of the Company Disclosure Schedule.
"SUPERIOR PROPOSAL" means any Acquisition Proposal (with all of the
percentages included in the definition of Acquisition Proposal increased to 50%
for purposes of this definition) that a majority of the disinterested members of
the Company's Board of Directors or the Special Committee determines in good
faith, after considering the advice of outside legal counsel and financial
advisors, would result in a transaction, if consummated, that would be more
favorable to the Company Stockholders (taking into account all facts and
circumstances, including all legal, financial, regulatory and other aspects of
the proposal and the identity of the offeror) than the transactions contemplated
hereby and is reasonably capable of being consummated (including, without
limitation, the availability of committed financing, to the extent needed to
complete the transaction).
"TAXES" means all United States federal, state, local or foreign income,
profits, estimated gross receipts, windfall profits, environmental (including
taxes under Section 59A of the Code), severance, property, intangible property,
occupation, production, sales, use, license, excise, emergency excise,
franchise, capital gains, capital stock, employment, withholding, social
security (or similar), disability, transfer, registration, stamp, payroll, goods
and services, value added, alternative or add-on minimum tax, estimated, or any
other tax, custom, duty or governmental fee, or other like assessment or charge
of any kind whatsoever, together with any interest, penalties, fines, related
liabilities or additions to tax that may become payable in respect therefor
imposed by any Governmental Entity, whether disputed or not.
"THIRD PARTY" means a Person (or group of Persons) other than Parent,
Acquiror or any of their Affiliates (excluding the Company and its controlled
Affiliates).
"THRESHOLD AMOUNT" means the sum of (i) $45 million and (ii) the aggregate
amount of all cash, property or other assets directly or indirectly contributed,
loaned (including any draws under a letter of credit or a guarantee) or
otherwise transferred by the Company or any of its Subsidiaries to any Real
Estate Investment Entity or Relevant Subsidiary (but only if and to the extent
that all or a portion of the Company's and its Subsidiaries' direct or indirect
interest in such Relevant Subsidiary is sold or otherwise assigned in a Real
Estate Asset Sale) between the date hereof and the Effective Time.
"TOPR WARRANT AGREEMENT" means the Warrant Agreement, dated as of September
30, 1998, between Insignia/ESG Holdings, Inc. and First Union National Bank, as
amended.
"TOPR WARRANTS" means the 1,196,000 warrants to purchase Company Shares
issued pursuant to the TOPR Warrant Agreement.
"U.K. OVERDRAFT FACILITY" means the (pound)5,000,000 Overdraft Credit
Facility between Insignia Xxxxxxx Xxxxx Group Limited and Barclays Bank PLC, as
amended through the date hereof.
10
ARTICLE 2
THE MERGER
2.1. THE MERGER.
(a) At the Effective Time, Acquiror shall be merged with and into the
Company (the "MERGER") in accordance with the terms and conditions of this
Agreement and the Delaware General Corporation Law (as amended, the "DGCL"), at
which time the separate corporate existence of Acquiror shall cease and the
Company shall continue its existence. In its capacity as the corporation
surviving the Merger, this Agreement sometimes refers to the Company as the
"SURVIVING CORPORATION."
(b) On the Closing Date, the Company and Acquiror will file a certificate
of merger or other appropriate documents (the "CERTIFICATE OF MERGER") with the
Delaware Secretary of State (the "SECRETARY OF STATE") and make all other
filings or recordings required by the DGCL in connection with the Merger. The
Merger shall become effective at the time when the Certificate of Merger is duly
filed with and accepted by the Secretary of State, or at such later time as is
agreed upon by the parties and specified in the Certificate of Merger (such time
as the Merger becomes effective is referred to herein as the "EFFECTIVE TIME").
(c) From and after the Effective Time, the Merger shall have the effects
set forth in the DGCL.
(d) The closing of the Merger (the "CLOSING") shall be held at the offices
of Xxxxxxx Xxxxxxx & Xxxxxxxx, 0000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000
(or such other place as agreed by the parties) on the day on which all of the
conditions set forth in Article 9 are satisfied or waived, unless the parties
hereto agree to another date. The date upon which the Closing occurs is
hereinafter referred to as the "CLOSING DATE".
2.2. ORGANIZATIONAL DOCUMENTS. The Certificate of Merger shall provide that
at the Effective Time (a) the Company's certificate of incorporation in effect
immediately prior to the Effective Time shall be the Surviving Corporation's
certificate of incorporation and (b) the Acquiror's by-laws in effect
immediately prior to the Effective Time shall be the Surviving Corporation's
by-laws, in each case until amended in accordance with applicable Law.
2.3. DIRECTORS AND OFFICERS. From and after the Effective Time (until such
time as their successors are duly elected or appointed and qualified), (A)
Acquiror's directors at the Effective Time shall be the Surviving Corporation's
directors and (B) the Company's officers immediately prior to the Effective Time
shall be the Surviving Corporation's officers.
ARTICLE 3
CONVERSION OF SECURITIES AND RELATED MATTERS
3.1. CAPITAL STOCK OF ACQUIROR. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Company Share or
Acquiror Share, each Acquiror Share issued and outstanding immediately prior to
the Effective Time shall
11
be converted into one share of common stock, par value $0.01 per share, of the
Surviving Corporation.
3.2. CANCELLATION OF TREASURY STOCK AND ACQUIROR-OWNED SHARES. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any Company Share, Company Preferred Share or Acquiror Share, each
Company Share and Preferred Share held by the Company as treasury stock or owned
by Holding, Parent or Acquiror or either of their respective Subsidiaries
immediately prior to the Effective Time shall be canceled and retired, and no
payment shall be made or consideration delivered in respect thereof.
3.3. CONVERSION OF COMPANY SHARES. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any Company
Share, Company Preferred Share or Acquiror Share, each Company Share issued and
outstanding immediately prior to the Effective Time (other than (a) shares to be
cancelled in accordance with Section 3.2, (b) Dissenting Shares and (c) shares
held by any wholly-owned Company Subsidiary, which shall remain outstanding)
shall be converted into the right to receive in cash from Acquiror, without
interest, an amount equal to $11.00, subject to adjustment as contemplated by
Section 7.4(c) and 8.10 (the "COMMON MERGER CONSIDERATION").
3.4. CONVERSION OF COMPANY SERIES A PREFERRED SHARES. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any Company Share, Company Preferred Share or Acquiror Share, each Company
Series A Preferred Share issued and outstanding immediately prior to the
Effective Time (other than (a) shares to be cancelled in accordance with Section
3.2 and (b) shares held by any wholly-owned Company Subsidiary, which shall
remain outstanding) shall be converted into the right to receive, without
interest, the amount set forth in Paragraph (e)(1) of the Series A Certificate
of Designation (the "SERIES A PREFERRED MERGER CONSIDERATION").
3.5. CONVERSION OF COMPANY SERIES B PREFERRED SHARES. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any Company Share, Company Preferred Share or Acquiror Share, each Company
Series B Preferred Share issued and outstanding immediately prior to the
Effective Time (other than (a) shares to be cancelled in accordance with Section
3.2 and (b) shares held by any wholly-owned Company Subsidiary, which shall
remain outstanding) shall be converted into the right to receive, without
interest, the amount set forth in Paragraph (e)(1) of the Series B Certificate
of Designation (the "SERIES B PREFERRED MERGER CONSIDERATION," and together with
the Common Merger Consideration and the Series A Preferred Merger Consideration,
the "MERGER CONSIDERATION").
3.6. EXCHANGE OF CERTIFICATES.
(a) Promptly after the date hereof, Acquiror shall appoint a bank or trust
company reasonably acceptable to the Company as an agent (the "EXCHANGE AGENT")
for the benefit of holders of Company Shares, Company Series A Preferred Shares
and Company Series B Preferred Shares for the purpose of exchanging, pursuant to
this Article 3, certificates representing the Company Shares, Company Series A
Preferred Shares or Company Series B Preferred Shares (the "CERTIFICATES"). At
the Effective Time, Holding will, and will cause Parent and Acquiror to, make
available to and deposit with the Exchange Agent the Merger
12
Consideration to be paid in respect of Company Shares, Company Series A
Preferred Shares and Company Series B Preferred Shares pursuant to this Article
3 (the "EXCHANGE FUND"), and except as contemplated by Section 3.6(f) or Section
3.6(g) hereof, the Exchange Fund shall not be used for any other purpose. The
Exchange Agent shall invest the Merger Consideration as directed by the Acquiror
or the Surviving Corporation, as the case may be, on a daily basis. Any interest
and other income resulting from such investments shall be paid to the Surviving
Corporation. Any net loss resulting from such investments shall be borne by
Holding, Parent and Acquiror and Holding will, or will cause Parent and Acquiror
to, deposit additional funds with the Exchange Agent in an amount equal to such
net loss before the funds are paid by the Exchange Agent to the Company
Stockholders.
(b) As promptly as practicable after the Effective Time, the Surviving
Corporation shall send, or shall cause the Exchange Agent to send, to each
record holder of Certificates a letter of transmittal and instructions (which
shall be in customary form and specify that delivery shall be effected, and risk
of loss and title shall pass, only upon delivery of the Certificates to the
Exchange Agent), for use in the exchange contemplated by this Section 3.6. Upon
surrender of a Certificate to the Exchange Agent, together with a duly executed
letter of transmittal, the holder shall be entitled to receive, in exchange
therefore, the Common Merger Consideration as provided in this Article 3 in
respect of the Company Shares represented by the Certificate, the Series A
Preferred Merger Consideration as provided in this Article 3 in respect of the
Series A Preferred Shares represented by the Certificate or the Series B
Preferred Merger Consideration as provided in this Article 3 in respect of the
Series B Preferred Shares represented by the Certificate, in each of the
foregoing cases, after giving effect to any required withholding Tax. Until
surrendered as contemplated by this Section 3.6, each Certificate shall be
deemed after the Effective Time to represent only the right to receive the
Common Merger Consideration, the Series A Preferred Merger Consideration or the
Series B Preferred Merger Consideration, as the case may be.
(c) All cash paid upon surrender of Certificates in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to Company Shares, Company Series A Preferred Shares or
Company Series B Preferred Shares represented thereby. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to Company Shares, Company Series A Preferred Shares or Company Series B
Preferred Shares, except as otherwise provided herein or by Law. As of the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers on the Company's stock
transfer books of any Company Shares, Company Series A Preferred Shares or
Company Series B Preferred Shares, other than transfers that occurred before the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 3.6.
(d) If payment of the Merger Consideration in respect of Company Shares,
Company Series A Preferred Shares or Company Series B Preferred Shares is to be
made to a Person other than the Person in whose name a surrendered Certificate
is registered, it shall be a condition to such payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such payment shall have paid any
transfer and other Taxes required by reason of such payment in a name other than
that
13
of the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation or the Exchange
Agent that such Taxes either have been paid or are not payable.
(e) Upon the request of the Surviving Corporation, the Exchange Agent shall
deliver to the Surviving Corporation any portion of the Merger Consideration
made available to the Exchange Agent pursuant to this Section 3.6 that remains
undistributed to holders of Company Shares, Company Series A Preferred Shares
and Company Series B Preferred Shares six (6) months after the Effective Time.
Holders of Certificates who have not complied with this Section 3.6 prior to the
demand by the Surviving Corporation shall thereafter look only to the Surviving
Corporation for payment of any claim to the Merger Consideration.
(f) None of Parent, the Surviving Corporation or the Exchange Agent shall
be liable to any Person in respect of any Company Shares, Company Series A
Preferred Shares or Company Series B Preferred Shares (or dividends or
distributions with respect thereto) for any amounts paid to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
(g) Each of the Surviving Corporation and Acquiror shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable hereunder to
any Person any amounts that it is required to deduct and withhold with respect
to payment under any provision of federal, state, local or foreign income tax
Law and shall make any required filings with tax authorities with respect to
such withholding. To the extent that the Surviving Corporation or Acquiror
withholds those amounts, the withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of Company Shares, Company
Series A Preferred Shares or Company Series B Preferred Shares in respect of
which deduction and withholding was made by the Surviving Corporation or
Acquiror, as the case may be.
(h) If any Certificate has been or is claimed to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
that a Certificate has been lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to that Certificate, the Exchange Agent
will deliver to such Person in exchange for such lost, stolen or destroyed
Certificate, the proper amount of the Merger Consideration.
3.7. COMPANY STOCK OPTIONS AND RESTRICTED SHARES.
(a) Subject to Section 3.7(d), the Company shall terminate each outstanding
Company Option, effective as of the Effective Date and in accordance with the
provisions of Section 4.2(d) of the Company's 1998 Stock Incentive Plan ("1998
PLAN"), whether or not such Company Option was granted under the 1998 Plan, by
delivering notice of termination to each holder at least thirty (30) days prior
to the Effective Date, in which case during the period from the date on which
such notice of termination is delivered to the Effective Date, each such holder
shall have the right to exercise in full all of his or her Company Options.
14
(b) Subject to Section 3.7(d), the Company shall amend each Company Option
to provide that to the extent that each Company Option is not exercised prior to
the Effective Time, the Surviving Company shall purchase each Company Option,
whether vested or unvested, at the Effective Time, and the per share purchase
price shall be in the form of a lump sum cash amount equal to the excess, if
any, of (i) the Common Merger Consideration over (ii) the exercise price per
Company Share subject to such purchased Company Option. Such purchase price will
be paid promptly after the Effective Time.
(c) Notwithstanding any other provision in this Section 3.7, to the extent
applicable (as clarified in the following sentence), at the Effective Time, the
Surviving Company shall purchase Company Options issued under the 1998 Plan for
a lump sum cash amount equal to (i) the product of the Change in Control Price
multiplied by the number of Company Shares subject the such Company Option less
(ii) the aggregate exercise price for such Company Option. The Company only may
purchase Company Options under this Section 3.7(c) to the extent that such
Company Option issued under the 1998 Plan, or a separate written agreement
approved by the Company's Board of Directors that (i) defines the term "Change
in Control," and (ii) provides that the Merger constitutes a "Change in Control"
(as such term is defined in the subject Company Option or separate written
agreement). Such purchase price will be paid promptly after the Effective Time.
(d) Prior to the Effective Time, the Company shall use its commercially
reasonable efforts to (i) obtain all necessary consents, without payment
therefor, from the holders of Company Options and (ii) take such other actions
(including, without limitation, terminating or amending the terms of any Company
Option or Company Option Plan and any such other stock option or compensation
plans or arrangements applicable to Company Options), necessary to give effect
to the transactions contemplated by Sections 3.7(a)-(c), inclusive.
(e) The Company shall take all requisite action so that, as of the
Effective Time, the Company's 1998 Employee Stock Purchase Plan (the "COMPANY
PURCHASE PLAN") and the Company Option Plans shall be terminated. The Parent
shall receive from the Company evidence that the Company Purchase Plan and the
Company Option Plans have been terminated pursuant to a resolution of the
Company's Board of Directors (the form and substance of such resolution shall be
subject to review and approval of the Parent, which approval shall not be
unreasonably withheld). The rights of participants in the Company Purchase Plan
with respect to any offering period then underway under the Company Purchase
Plan, which commences prior to the Effective Time, shall be determined by
treating the last Business Day prior to the Effective Time as the last day of
such offering period and by making such other pro-rata adjustments as may be
necessary to reflect the shortened offering period but otherwise treating such
shortened offering period as a fully effective and completed offering period for
all purchases under the Company Purchase Plan. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of
the Company Purchase Plan and the terms of any offering period commencing prior
to the Effective Time) that are necessary to give effect to the transactions
contemplated by this Section 3.7(e).
(f) At the Effective Time, each outstanding restricted stock award for
Company Shares ("RESTRICTED STOCK AWARD") shall be canceled and in consideration
of such cancellation, the Surviving Corporation shall pay to each holder of a
canceled Restricted Stock
15
Award, as soon as practicable following the Effective Time, an amount per
Company Share subject to such canceled Restricted Stock Award equal to the
Common Merger Consideration.
3.8. WARRANTS.
(a) At the Effective Time, each outstanding Company Warrant, whether or not
vested, shall be canceled and in consideration of such cancellation, the
Surviving Corporation shall pay to each holder of a canceled Company Warrant, as
soon as practicable following the Effective Time, an amount per Company Share
subject to such canceled Company Warrant equal to the excess, if any, of (i) the
Common Merger Consideration over (ii) the exercise price per Company Share
subject to such canceled Company Warrant.
(b) At the Effective Time, each outstanding TOPR Warrant, whether or not
vested, shall remain outstanding pursuant to the terms of the TOPR Warrant
Agreement; provided, however that each such TOPR Warrant shall thereafter be
entitled, pursuant to Section 10.1 of the TOPR Warrant Agreement, to receive the
Common Merger Consideration, in lieu of Company Shares, in the manner and upon
the terms set forth in the TOPR Warrant Agreement.
3.9. SUPPLEMENTAL STOCK PURCHASE AND LOAN PLAN. The Company agrees to
deliver, or cause the custodian designated by the Company with respect to the
Supplemental Stock Purchase and Loan Program (the "SSPLP") to deliver, the
Certificates held by the Company or such custodian to the Exchange Agent
promptly after receipt of a letter of transmittal and instructions from the
owners of the Common Shares represented by the Certificates and promptly after
receipt of the Common Merger Consideration with respect to the Common Shares
represented by such Certificates deliver such Common Merger Consideration to the
participants in the SSPLP, net of the outstanding principal and accrued and
unpaid interest with respect to the promissory notes for which such Certificates
were pledged under the SSPLP.
3.10. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
Company Shares that are outstanding immediately prior to the Effective Time and
which are held by Persons who shall have properly demanded in writing appraisal
for such shares in accordance with Section 262 (or any successor provision) of
the DGCL (the "DISSENTING SHARES") shall not be converted into or represent the
right to receive the Common Merger Consideration as provided hereunder and shall
only be entitled to such rights and consideration as are granted by Section 262
(or any successor provision) of the DGCL. Such Persons shall be entitled to
receive payment of the appraised value of such Company Shares in accordance with
the provisions of Section 262 (or any successor provision) of the DGCL, except
that all Dissenting Shares held by Persons who shall have failed to perfect or
who effectively shall have withdrawn or lost their right to appraisal of such
shares under Section 262 (or any successor provision) of the DGCL shall
thereupon be deemed to have been converted into the Common Merger Consideration
pursuant to Section 3.3 hereto as of the Effective Time or the occurrence of
such failure, withdrawal or loss, whichever occurs later.
(b) The Company shall give Acquiror (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands and any other
instruments
16
served pursuant to the DGCL and received by the Company and (ii) the opportunity
to participate in all negotiations and proceedings with respect to demands for
appraisal or the payment of the fair cash value of any such shares under the
DGCL. Other than pursuant to a court order, the Company shall not, except with
the prior written consent of Acquiror, make any payment with respect to any
demands for appraisal or the payment of the fair cash value of any such shares
or offer to settle or settle any such demands.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Company Disclosure Schedule attached hereto, the
Company represents and warrants to Acquiror as set forth below.
4.1. CORPORATE EXISTENCE AND POWER. The Company is a corporation, duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware, and has all corporate powers and authority required to own, lease
and operate its properties and assets and to carry on its business as now
conducted. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
and assets owned, leased or operated by it or the nature of its activities makes
qualification necessary, except where the failure to be so qualified would not
be reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
4.2. CORPORATE AUTHORIZATION. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the Merger
and the other transactions contemplated hereby are within the Company's
corporate powers and, except for the Company Stockholder Approval, have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than the
Company Stockholder Approval and the filing and recordation of the Certificate
of Merger in accordance with the DGCL). The Board of Directors of the Company
unanimously has approved this Agreement and has resolved to recommend that the
Company Stockholders vote their shares in favor of the adoption of this
Agreement and the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company, and assuming that this
Agreement constitutes the valid and binding obligation of Holding, Parent and
Acquiror, constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
4.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby will not require any consent, approval, action,
order, authorization, or permit of, or registration, declaration or filing with,
any Governmental Entity, other than (a) the filing of (i) the Certificate of
Merger in accordance with the DGCL and (ii) the appropriate documents with
respect to the Company's qualification to do business with the relevant
authorities of other states or jurisdictions in which the Company is qualified
to do business; (b) compliance with any applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX XXX") and any
Non-U.S. Competition Laws;
17
(c) compliance with any applicable requirements of the Securities Act and the
Exchange Act; (d) such as may be required under any applicable state securities
or blue sky Laws; and (e) other consents, approvals, actions, orders,
authorizations, permits, registrations, declarations and filings which, if not
obtained or made, would not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. The consummation of the Merger and
the other transactions contemplated hereby will not result in the lapse of any
Permit of the Company or its Subsidiaries or the breach of any authorization or
right to use any Permit of the Company or its Subsidiaries or other right that
the Company or any of its Subsidiaries has from a Third Party, except where such
lapses or breaches would not be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect.
4.4. NON-CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the Merger and
the other transactions contemplated hereby do not and will not (a) contravene or
conflict with the Company Charter or the certificate or articles of
incorporation or by-laws (or any equivalent governing or organizational
document) of any Company Subsidiary, (b) assuming compliance with the matters
referred to in Section 4.3, contravene or conflict with or constitute a
violation of any provision of any Law binding upon or applicable to the Company
or its Subsidiaries by which any of their respective properties or assets is
bound or affected, (c) constitute a breach of or default under (or an event that
with notice or lapse of time or both could reasonably be expected to become a
breach or default) or give rise (with or without notice or lapse of time or
both) to a right of termination, amendment, cancellation or acceleration under
any agreement, contract, note, bond, mortgage, indenture, lease, concession,
franchise, Permit or other similar authorization or joint venture, limited
liability or partnership agreement or other instrument binding upon the Company,
any Company Subsidiary or any of their respective properties or assets, or (d)
result in the creation or imposition of any Lien (except as contemplated by the
Commitment Letter) on any asset of the Company or any of its Subsidiaries, other
than, in the case of clauses (b), (c) and (d) taken together, any items that
would not be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
4.5. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 80,000,000
Company Shares and 20,000,000 shares of preferred stock, par value $0.01 per
share, of which 296,422 shares have been designated Series A Preferred Stock and
177,280 shares have been designated Series B Preferred Stock. As of February 11,
2003, (i) 24,805,930 Company Shares were issued and outstanding (including
1,502,600 Company Shares held in treasury), all of which have been duly
authorized and validly issued and are fully paid and nonassessable and were
issued free of preemptive or similar rights, including 138,663 Company Shares
that were collateral for then outstanding notes receivables delivered to the
Company by employees of the Company, whether pursuant to the Company's
Supplemental Stock Purchase and Loan Program or otherwise (the "LOAN SHARES"),
(ii) no Company Shares were held by Company Subsidiaries, (iii) 91,507 Company
Shares were subject to restricted stock awards then outstanding, of which none
were vested (the "RESTRICTED SHARES"), (iv) 7,081,074 Company Shares were
reserved for issuance under Company Option Plans and 4,462,761 Company Shares
were subject to Company Options then outstanding, (v) 1,785,714 Company Shares
were reserved for issuance upon conversion of the Series A Preferred Stock, (vi)
811,688 Company Shares were reserved for
18
issuance upon conversion of the Series B Preferred Stock, (vii) 1,492,500
Company Shares were issuable upon the exercise of Company Warrants then
outstanding, (viii) 1,196,000 Company Shares were issuable upon the exercise of
TOPR Warrants then outstanding, (ix) there was outstanding $15,000,000 aggregate
principal amount of indebtedness (the "EXCHANGEABLE INDEBTEDNESS") under the
Senior Subordinated Credit Agreement, dated as of June 7, 2002 (the "SENIOR
SUBORDINATED CREDIT AGREEMENT"), between the Company and Xxxxxxxxx L.L.C., as
lender and administrative agent, which upon the terms, and subject to the
conditions, set forth in the Senior Subordinated Credit Agreement and the
Exchange Agreement, dated as of June 18, 2002 (the "EXCHANGE AGREEMENT"),
between the Company and Xxxxxxxxx L.L.C. may be exchanged together with the
Series A Preferred Stock and the Series B Preferred Stock, at the option of the
Company, for the Exchange Securities (as defined in the Exchange Agreement), (x)
250,000 shares of Series A Preferred Stock were issued and outstanding, each
with a Conversion Price (as defined in the Series A Certificate of Designation)
of $14.00 per share, and (xi) 125,000 shares of Series B Preferred Stock were
issued and outstanding, each with a Conversion Price (as defined in the Series B
Certificate of Designation) of $15.40 per share. The Company has provided to
Parent true and complete copies of all documentation governing the Company
Warrants, the TOPR Warrants, the Loan Shares, the Exchangeable Indebtedness, the
Series A Preferred Stock and the Series B Preferred Stock. From September 30,
2002 until the date of this Agreement, the Company has not declared or paid any
dividend or distribution in respect of any of its Equity Interests and has not
repurchased or redeemed any shares of its Equity Interests, and its Board of
Directors has not resolved to do any of the foregoing.
(b) Except (i) as set forth in this Section 4.5 and (ii) for changes since
February 11, 2003, resulting from the exercise of Company Options, Company
Warrants and TOPR Warrants or the conversion of, or the payments of dividends
on, Series A Preferred Stock and Series B Preferred Stock, in each case
outstanding on that date, neither the Company nor any Company Subsidiary has
issued, or reserved for issuance, any (x) Equity Interests of the Company, (y)
securities of the Company or any Company Subsidiary convertible into or
exchangeable for Equity Interests of the Company or (z) options, warrants or
other rights to acquire from the Company or any Company Subsidiary, or
obligations of the Company or any Company Subsidiary to issue, any Equity
Interests of the Company or securities convertible into or exchangeable for
Equity Interests of the Company (the items in clauses (x), (y) and (z) being
referred to collectively as the "COMPANY SECURITIES"). There are no outstanding
agreements or other obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any Company Securities.
(c) Section 4.5(c) of the Company Disclosure Schedule sets forth a complete
and accurate list of all outstanding Company Options, Company Warrants, TOPR
Warrants, the Restricted Shares and Loan Shares as of February 11, 2003, which
list sets forth the name of the holders thereof (which, for purposes of the TOPR
Warrants, shall only need to be the record holder or holders thereof as of
October 12, 2001) and, to the extent applicable, the exercise price or purchase
price thereof, the number of Company Shares subject thereto, the schedule of
vesting (including any acceleration of vesting that may result from this
Agreement or the transactions contemplated hereby), the governing Company
Employee Plan (as defined below) with respect thereto and the expiration date
thereof.
19
(d) The Company has provided to Acquiror true and complete copies of each
of the documents entered into with respect to each of the following and there
are no other agreements or arrangements (whether written or verbal) between the
Company and the other party to each such document with respect to the following:
(i) the consent of each holder of a Company Series A Preferred Share to the
treatment of such Company Series A Preferred Share set forth in Article 3
hereto, without payment of any additional consideration thereon, (ii) the
consent of each holder of Series B Preferred Stock to the treatment of the
Series B Preferred Stock set forth in Article 3 hereto, without payment of any
additional consideration thereon, and (iii) the consent of each of the holders
of a Company Warrant set forth on Section 4.5(d) of the Company Disclosure
Schedule to the treatment of such Company Warrant set forth in Section 3.8
hereto, without payment of any additional consideration thereon, unless the
consent of such holder of a Company Warrant with respect to such treatment is
not required by the terms of such Company Warrant.
4.6. SUBSIDIARIES.
(a) Each Significant Subsidiary of the Company (i) is a corporation duly
incorporated or an entity duly organized, and is validly existing and in good
standing (except in jurisdictions where such concept does not exist) under the
Laws of its jurisdiction of incorporation or organization, and has all powers
and authority required to own, lease or operate its properties and assets and to
carry on its business as now conducted, and (ii) has all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and is duly qualified to do business as a foreign corporation or
entity and is in good standing in each jurisdiction where the character of the
property and assets owned, leased or operated by it or the nature of its
activities makes such qualification necessary, in each case in this clause (ii)
with exceptions which would not be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect.
(b) Section 4.6 of the Company Disclosure Schedule sets forth the name of
all Subsidiaries and Joint Ventures of the Company and, to the extent
applicable, the total number of authorized, issued and outstanding Equity
Interests of each such Subsidiary and Joint Venture as of the date of this
Agreement. All of the outstanding Equity Interests in each Subsidiary of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive or similar rights. All of the Equity
Interests in each Subsidiary of the Company are beneficially owned, directly or
indirectly, by the Company. Such Equity Interests (i) are owned free and clear
of any Lien (except for liens under the Senior Credit Agreement) and free of any
other limitation or restriction (including any limitation or restriction on the
right to vote, sell or otherwise dispose of the Equity Interests) and (ii) were
issued in compliance with all applicable federal, state and foreign securities
laws, in each case in this clause (ii) without any exception other than those
which would not be reasonably likely to have, individually or in the aggregate,
a Company Material Adverse Effect. There are no outstanding (x) securities of
the Company or any Company Subsidiary convertible into or exchangeable or
exercisable for Equity Interests in any Company Subsidiary, (y) options,
warrants or other rights to acquire from the Company or any Company Subsidiary,
or obligations of the Company or any Company Subsidiary to issue, any Equity
Interests in, or any securities convertible into or exchangeable or exercisable
for any Equity Interests in, any Company Subsidiary or (z) agreements,
obligations or arrangements of the Company or any Company Subsidiary to issue,
20
sell, repurchase, redeem or otherwise acquire any Equity Interests in any
Company Subsidiary. The Covered Entities do not own any assets other than Equity
Interests in Real Estate Investment Entities.
(c) None of the Company, any of its Subsidiaries or, to the Knowledge of
the Company, any Company Joint Venture is in violation of any provision of its
articles or certificate of incorporation or bylaws or equivalent organizational
and governing documents, other than violations which would not be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect. The Company has made available to the Acquiror true and correct copies
of the articles or certificate of incorporation or bylaws or equivalent
organizational and governing documents of each Company Subsidiary and Company
Joint Venture.
4.7. COMPANY SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has filed all forms, reports, filings, registration
statements and other documents required to be filed by it with the SEC since
January 1, 1999. No Company Subsidiary is required to file any form, report,
registration statement or prospectus or other document with the SEC.
(b) As of its filing date, each Company SEC Document complied as to form in
all material respects with the applicable requirements of the Securities Act
and/or the Exchange Act, as the case may be.
(c) No Company SEC Document filed since January 1, 1999 pursuant to the
Exchange Act contained, as of its filing date, any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. No Company SEC Document, as amended or supplemented,
if applicable, filed since January 1, 1999 pursuant to the Securities Act
contained, as of the date on which the document or amendment became effective,
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(d) Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company included in the Company
SEC Documents were prepared in conformity with GAAP (except as may be indicated
in the notes thereto) throughout the periods involved, and each fairly presents,
in all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements).
(e) Section 4.7 of the Company Disclosure Schedule sets forth the unaudited
consolidated balance sheet and statement of operations of the Company and its
Subsidiaries as of and for the 3-month period ended December 31, 2002 (the "MOST
RECENT COMPANY FINANCIAL STATEMENTS"). The financial information included in the
Most Recent Company Financial Statements has been prepared in accordance with
GAAP.
21
(f) There are no liabilities of the Company or any Company Subsidiary, of
any kind whatsoever, whether accrued, contingent, absolute or otherwise, other
than: (i) liabilities (A) disclosed or provided for in the Company Balance Sheet
or disclosed in the notes thereto or in the Company's consolidated balance sheet
or disclosed in the notes thereto included in the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 2002 or (B) not required by GAAP
to be disclosed or provided for in a consolidated balance sheet of the Company
which would not be reasonably likely to have, individually or in the aggregate,
a Company Material Adverse Effect; (ii) liabilities incurred after September 30,
2002 (A) in the ordinary course of business consistent with past practice and
(B) outside the ordinary course of business consistent with past practice that
would not reasonably be likely to have, individually or in the aggregate, a
Company Material Adverse Effect and (iii) liabilities under this Agreement or
incurred in connection with the transactions contemplated hereby.
4.8. [RESERVED].
4.9. ABSENCE OF CERTAIN CHANGES. Since September 30, 2002, except as
otherwise expressly contemplated by this Agreement and the Company Disclosure
Schedule, the Company and each of its Significant Subsidiaries has conducted its
business in the ordinary course consistent with past practice and there has not
been (a) any damage, destruction or other casualty losses (whether or not
covered by insurance) affecting the business, properties or assets of the
Company or any of its Subsidiaries that has had or would be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect; (b)
any amendment or change in the Company Charter, the Company's by-laws or the
certificate or articles of incorporation or by-laws (or equivalent
organizational and governing documents) of any Significant Subsidiary of the
Company; (c) any change by the Company in its accounting methods, principles or
practices (other than changes required by GAAP after September 30, 2002); (d)
other than in the ordinary course of business consistent with past practices,
any sale of a material amount of assets of the Company and its Significant
Subsidiaries; (e) any material Tax election, any change in method of accounting
with respect to Taxes or any compromise or settlement of any proceeding with
respect to any material Tax liability by the Company or any of its Subsidiaries;
or (f) any action, event, occurrence, development or state of circumstances or
facts that has had or would be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
4.10. LITIGATION. There is no litigation, action, suit, claim,
investigation, arbitration or proceeding or inquiry, whether civil, criminal or
administrative (each, a "CLAIM"), pending, or to the Knowledge of the Company
threatened, against the Company, any of its Subsidiaries or any of their
respective assets, properties or employees before any arbitrator or Governmental
Entity that would be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. Set forth on Section 4.10 of the
Company Disclosure Schedule is a list of all Claims pending, or to the Knowledge
of the Company, threatened, as of the date hereof, against the Company or any of
its Subsidiaries or any of their respective assets, properties or employees (if
such Claim is related to, or arising from, an employee's actions or omissions on
behalf of the Company or any of its Subsidiaries) before any arbitrator or
Governmental Entity in an amount of $100,000 or more or which are criminal in
nature. Neither the Company nor any of its Subsidiaries nor any of their
respective properties, assets or, to the Knowledge of the Company, employees is
or are subject to any order, writ, judgment, injunction, decree,
22
settlement, determination or award having, or which would be reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect.
4.11. TAXES.
(a) All Tax returns, statements, reports and forms (collectively, the
"COMPANY RETURNS") required to be filed with any taxing authority by, or with
respect to, the Company and each of its Subsidiaries have been filed in
accordance with all applicable Laws, except when a failure to do so would not be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect; (b) the Company and each of its Subsidiaries has timely paid all
Taxes due and payable whether or not shown as being due on any Company Return
(other than Taxes which are being contested in good faith and for which adequate
reserves are reflected on the Company Balance Sheet), except when a failure to
make such payments would not be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect, and, as of the time of filing,
the Company Returns were true, correct and complete in all material respects;
(c) the Company and each of its Subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party, except when a failure to make such payments would not be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect; (d) there is no action, suit, proceeding, audit or claim now proposed or
pending against the Company or any of its Subsidiaries in respect of any Taxes,
except for such action, suit, proceeding, audit or claim that would not be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect; (e) neither the Company nor any of its Subsidiaries is party to,
bound by or has any obligation under, any material tax sharing agreement or
similar material contract or arrangement or any material agreement that
obligates them to make any payment computed by reference to the Taxes, taxable
income or taxable losses of any other Person; (f) there are no Liens (other than
Permitted Liens) with respect to Taxes on any of the assets or properties of the
Company or any of its Subsidiaries other than with respect to Taxes not due and
payable, except for such Liens that would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect; (g) neither
the Company nor any of its Subsidiaries has waived any statute of limitations
nor agreed to any extension of time to assess any U.S. federal income tax or any
foreign, state or local income tax in any jurisdiction in which the Company or
its Subsidiaries has paid for the year or years involved an amount of tax which
is material to the Company and its Subsidiaries, taken as a whole; (h) neither
the Company nor any of its Subsidiaries (i) is, or has been, a member of an
affiliated, consolidated, combined or unitary group, other than one of which the
Company was the common parent and (ii) has any liability for the Taxes of any
Person (other than the Company and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law), or
as a transferee or successor, by contract or otherwise, except, in each case of
clauses (h)(i) and (h)(ii) above, as would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect; (i) no
consent under Section 341(f) of the Code has been filed with respect to the
Company or any of its Subsidiaries; (j) neither the Company nor any of its
Subsidiaries has ever entered into a closing agreement pursuant to Section 7121
of the Code that could affect the Company or a Subsidiary of the Company in a
Tax period or portion thereof beginning after the Effective Time; and (k)
neither the Company nor any of its Subsidiaries has agreed to make or is
required to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting
23
method or otherwise, except for such adjustments that would not be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect.
4.12. EMPLOYEE BENEFITS.
(a) Section 4.12(a) of the Company Disclosure Schedule contains a true and
complete list of each "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the meaning
of Section 3(37) of ERISA), and all stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation, employee loan and all other material employee
benefit plans, agreements, programs or policies, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise) under which any current or former employee, director or consultant of
the Company or its Subsidiaries (the "COMPANY EMPLOYEES") has any present or
future right to benefits and which are contributed to, sponsored by or
maintained by the Company or any of its Subsidiaries; provided, however, that
any employment agreement providing for total compensation and benefits with a
pre-tax value that has not in the past exceeded and cannot reasonably be
expected in the next two years to exceed $200,000 per annum need not be listed
on Section 4.12(a) of the Company Disclosure Schedule. All such plans,
agreements, programs, policies and arrangements shall be collectively referred
to as the "COMPANY PLANS."
(b) With respect to each Company Plan (other than any multiemployer plan
within the meaning of Section 3(37) of ERISA related to the Company's property
management business), the Company has provided or made available to the Parent a
current, accurate and complete copy thereof and, to the extent applicable: (i)
any related trust agreement or other funding instrument; (ii) the most recent
determination letter, if applicable; (iii) any summary plan description and
other material written communications by the Company or its Subsidiaries to the
Company Employees concerning the extent of the benefits provided; (iv) a summary
of any proposed amendments or changes considered prior to the date hereof by the
Company's Board of Directors or any committee thereof and anticipated to be made
to the Company Plans at any time within the twelve months immediately following
the date hereof, except for such proposed amendments or changes that are
required by applicable Law; and (v) for the three most recent completed years,
if applicable, (A) the Form 5500 and attached schedules, (B) audited financial
statements, and (C) actuarial valuation reports.
(c) Except with respect to any Foreign Benefit Plan (defined below), or as
would not individually or in the aggregate, when combined with other items of
adverse effect under this Section 4.12, be reasonably likely to have a Company
Material Adverse Effect, or as set forth in Section 4.12(c) of the Company
Disclosure Schedule, (i) each Company Plan (other than a multiemployer plan
within the meaning of Section 3(37) of ERISA) has been established and
administered in accordance with its terms, and in compliance with the applicable
provisions of ERISA, the Code and other applicable laws, rules and regulations;
(ii) each Company Plan (other than a multiemployer plan within the meaning of
Section 3(37) of ERISA) which is intended to be qualified within the meaning of
Section 401(a) of the Code has received a favorable determination letter as to
its qualification, and nothing has occurred, whether by action
24
or failure to act, that could reasonably be expected to cause the loss of such
qualification; (iii) no event has occurred and no condition exists that could
reasonably be expected to subject the Company or its Subsidiaries, either
directly or by reason of their affiliation with any member of their "Controlled
Group" (defined as any organization which is a member of a controlled group of
organizations within the meaning of Sections 414(b), (c), (m) or (o) of the
Code), to any tax, fine, lien, penalty or other liability imposed by ERISA, the
Code or other applicable laws, rules and regulations; (iv) no "reportable event"
(as such term is defined in Section 4043 of the Code) that could reasonably be
expected to result in liability to the Company or its Subsidiaries, no
"prohibited transaction" (as such term is defined in Section 406 of ERISA and
Section 4975 of the Code) that could reasonably be expected to result in
liability to the Company or any of its Subsidiaries or "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA and Section 412 of
the Code (whether or not waived)) has occurred with respect to any Company Plan;
(v) there is no written proposal to the Company's Board of Directors that any
Company Plan be materially amended, suspended or terminated, or otherwise
modified to alter benefits (or the levels thereof); (vi) no Company Plan is a
collateral assignment split-dollar life insurance program which covers, or
otherwise provides for "personal loans" to, executive officers (within the
meaning of Section 402 of The Xxxxxxxx-Xxxxx Act of 2002); and (vii) except as
disclosed in the proxy statements for annual meetings prior to the date hereof,
all awards, grants or bonuses made pursuant to any Company Plan have been, or
will be, fully deductible to the Company or its Subsidiaries notwithstanding
Section 162 of the Code. Except as set forth in Section 4.12(c) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
incurred any current or projected liability in respect of post-employment or
post-retirement health, medical or life insurance benefits for current, former
or retired employees of Company or any of its Subsidiaries, except as required
to avoid an excise tax under Section 4980B of the Code or otherwise except as
may be required pursuant to any other applicable Law.
(d) With respect to each of the Company Plans that is not a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA but is subject to Title
IV of ERISA, as of the Closing Date, the assets of each such Company Plan are at
least equal in value to the present value of the accrued benefits (vested and
unvested) of the participants in such Company Plan on a termination and
projected benefit obligation basis, based on the actuarial methods (as
applicable) and assumptions indicated in the most recent applicable actuarial
valuation reports.
(e) Except as set forth in Section 4.12(e) of the Company Disclosure
Schedule, with respect to any multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA) to which the Company, its Subsidiaries or any member of
their Controlled Group has any liability or contributes (or has at any time
contributed or had an obligation to contribute): (i) none of the Company, its
Subsidiaries or any member of their Controlled Group has incurred any withdrawal
liability under Title IV of ERISA which remains unsatisfied or would be subject
to such liability if, as of the Closing Date, the Company, its Subsidiaries or
any member of their Controlled Group were to engage in a complete withdrawal (as
defined in Section 4203 of ERISA) or partial withdrawal (as defined in Section
4205 of ERISA) from any such multiemployer plan; and (ii) to the Knowledge of
the Company, no such multiemployer plan is in reorganization or insolvent (as
those terms are defined in Sections 4241 and 4245 of ERISA, respectively),
except, in each case of clauses (i) and (ii) above, any items that would not be
25
reasonably likely to have, individually or in the aggregate, when combined with
other items of adverse effect under this Section 4.12, a Company Material
Adverse Effect.
(f) Except as set forth in Section 4.12(f) of the Company Disclosure
Schedule, with respect to any Company Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course or otherwise
reserved on the Company Balance Sheet) are pending or threatened, (ii) to the
Knowledge of the Company, no facts or circumstances exist that could reasonably
be expected to give rise to any such actions, suits or claims, (iii) no written
or oral communication has been received from the Pension Benefit Guaranty
Corporation (the "PBGC") in respect of any Company Plan subject to Title IV of
ERISA concerning the funded status of any such plan or any transfer of assets
and liabilities from any such plan in connection with the transactions
contemplated herein, and (iv) no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the PBGC, the Internal
Revenue Service or other governmental agencies are pending, threatened or in
progress (including, without limitation, any routine requests for information
from the PBGC), except, in each case of clauses (i) and (iv) above, any items
that would not be reasonably likely to have individually or in the aggregate,
when combined with other items of adverse effect under this Section 4.12, a
Company Material Adverse Effect.
(g) Except as set forth in Section 4.12(g) of the Company Disclosure
Schedule, no Company Plan exists that, as a result of the execution of this
Agreement or the transactions contemplated by this Agreement (whether alone or
in connection with any subsequent event(s), including but not limited to the
termination of a Company Employee's employment), could reasonably be expected to
result in (i) the payment to any Company Employee of any money or other
property, (ii) the provision of any benefits or other rights to any Company
Employee or (iii) the increase, acceleration or provision of any payments,
benefits or other rights to any Company Employee. Except as set forth in Section
4.12(g) of the Company Disclosure Schedule, the Company's ability to deduct the
payments, rights or benefits set forth in Section 4.12(g) of the Company
Disclosure Schedule is not limited by Section 280G of the Code.
(h) There has been no amendment to, written interpretation of or
announcement (whether or not written) by Company or any of its Subsidiaries
relating to, or any change in employee participation or coverage under, any
Company Plan that materially would increase the expense of maintaining such
Company Plan above the level of the expense provided for in the 2003 Budget.
(i) Except as set forth in Section 4.12(i) of the Company Disclosure
Schedule, no Company Plan is maintained outside the jurisdiction of the United
States, or covers any employee residing or working outside the United States
(any such Company Plan set forth in Section 4.12(i) of the Company Disclosure
Schedule, "FOREIGN BENEFIT PLANS").
(j) Except as would not individually or in the aggregate, when combined
with other items of adverse effect under this Section 4.12, be reasonably likely
to have a Company Material Adverse Effect, all Foreign Benefit Plans have been
established, maintained and administered in compliance with their terms and all
applicable statutes, laws, ordinances, rules, orders, decrees, judgments, writs,
and regulations of any controlling governmental authority or instrumentality. No
material liability or obligation of the Company or its
26
Subsidiaries exists with respect to any Foreign Benefit Plan, except as set
forth in the Most Recent Company Financial Statements. Except as set forth in
Section 4.12(j) of the Company Disclosure Schedule, the assets of each Foreign
Benefit Plan that is required to be funded under applicable Law are at least
equal in value to the present value of the accrued benefits (vested and
unvested) of the participants in such Foreign Benefit Plan on a termination and
projected benefit obligation basis, based on the actuarial methods (as
applicable) and assumptions indicated in the most recent applicable actuarial
valuation reports.
4.13. COMPLIANCE WITH LAWS; LICENSES, PERMITS AND REGISTRATIONS.
(a) Neither the Company nor any of its Subsidiaries is in violation of, or
has violated, any applicable provisions of any Laws, except for violations which
would not be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. To the Knowledge of the Company, neither the
Company nor any of its Subsidiaries is in material violation of, or has violated
in any material respects, the Foreign Corrupt Practices Act of 1977, as amended.
(b) The Company and each of its Subsidiaries has all permits, licenses,
easements, variances, exemptions, consents, certificates, approvals,
authorizations of and registrations (collectively, "PERMITS") with and under all
Laws, and from all Governmental Entities required by the Company and each
Company Subsidiary to carry on their respective businesses as currently
conducted, except where the failure to have the Permits would not be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect.
4.14. TITLE TO ASSETS. The Company and each of its Subsidiaries has good
title to, or valid leasehold interests in, all their respective assets, except
for those which are no longer used or useful in the conduct of their businesses
or where the absence thereof would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect. All of
these assets, other than assets in which the Company or any of its Subsidiaries
has leasehold interests, are free and clear of all Liens, except for (a)
Permitted Liens and (b) Liens that would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
4.15. INTELLECTUAL PROPERTY. Except as would not be reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect, the
Company and each of its Subsidiaries owns or has a valid license or other right
to use each trademark, service xxxx, trade name, domain name, invention, patent,
trade secret, copyright, know-how (including any registrations or applications
for registration of any of the foregoing) or any other similar type of
proprietary intellectual property right necessary to carry on the business of
the Company and each of its Subsidiaries, taken as a whole, as currently
conducted (collectively, the "COMPANY INTELLECTUAL PROPERTY"). To the Knowledge
of the Company, neither the Company nor any of its Subsidiaries has received any
written notice of infringement of or challenge to, and there are no claims
pending with respect to the rights of others to the use of, any Company
Intellectual Property that would be reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect.
27
4.16. TRANSACTION FEES; OPINIONS OF FINANCIAL ADVISOR.
(a) Except for (i) Bear, Xxxxxxx & Co. Inc. ("BEAR XXXXXXX") and (ii)
non-Affiliates of the Company in connection with Real Estate Asset Sales, if
any, there is no investment banker, financial advisor, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf of,
the Company or any Company Subsidiary which might be entitled to any fee or
commission from the Company, Parent, Acquiror or any of their respective
Affiliates upon consummation of the Merger or the other transactions
contemplated by this Agreement. The fees and expenses of Bear Xxxxxxx and third
parties in connection with Real Estate Asset Sales, if any, will be borne by the
Company. The Company has heretofore furnished to the Acquiror complete and
correct copies of all agreements between the Company or its Subsidiaries and
Bear Xxxxxxx pursuant to which such firm would be entitled to any payment
relating to the Merger and the other transactions contemplated by this
Agreement.
(b) The Board of Directors of the Company and the Special Committee have
received the opinion of Bear Xxxxxxx, dated as of the date hereof, to the effect
that, as of such date, and subject to the qualifications stated therein, the
Merger Consideration is fair to the holders of Company Shares from a financial
point of view.
4.17. LABOR MATTERS.
(a) Except as set forth in Section 4.17(a) of the Company Disclosure
Schedule or as otherwise required by Law, each current Company Employee is an
"at will" employee (whose employment may be terminated at any time by the
Company or such employee can be terminated for less than $100,000). Except as
otherwise required by Law, each of the real estate brokers of the Company and
its Subsidiaries ("COMPANY INDEPENDENT CONTRACTORS") may be terminated on no
more than 30 days' notice or can be terminated for less than $100,000. The
Company and its Subsidiaries are and have always been in compliance with all
applicable Laws respecting labor, employment, immigration, fair employment
practices, terms and conditions of employment, workers' compensation,
occupational safety, plant closings, wages and hours, and any other Law
applicable to any of the Company Employees, Company Independent Contractors, or
other persons providing services to the Company or any of its Subsidiaries,
except such failures to comply that would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect. Each of the
Company and its Subsidiaries has withheld all amounts required by applicable Law
or by agreement to be withheld from the wages, salaries and other payments to
Company Employees, and none of the Company and its Subsidiaries is or has been
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing in any material respect, except for such
failures that would not be reasonably likely to have, a Company Material Adverse
Effect. None of the Company and its Subsidiaries is or has been liable for any
payment to any trust or other fund or to any Governmental Entity with respect to
unemployment compensation benefits, social security, or other benefits or
obligations for Company Employees (other than routine payments to be made in the
ordinary course of business and consistent with past practice), except such
liabilities that would not be reasonably expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
28
(b) There are no pending claims against the Company or any of its
Subsidiaries under any Company Plan or under workers' compensation plan or
policy or for long-term disability (other than regular claims for benefits in
accordance with the terms of such Company Plans and policies) except such claims
that would not be reasonably expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
(c) The Company and its Subsidiaries are in compliance with all Laws
concerning the classification of employees and independent contractors and have
properly classified all such persons for purposes of participation in the
Company Plans, except in the case that non-compliance would not be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect.
(d) To the Company's Knowledge, the Company and its Subsidiaries have
provided or made available to Parent copies of all written employment,
consulting, change of control, severance agreements or arrangements which have
been entered into between the Company and any of its Subsidiaries, on the one
hand, and any current Company Employee or current Company Independent Contractor
on the other hand, including any amendments thereto; provided, however, that any
such arrangement providing for compensation and benefits with a pre-tax value
that has not in the past exceeded and cannot reasonably be expected in the next
two years to exceed $200,000 per annum has not been provided or made available
to Parent. To the Company's Knowledge, the Company and its Subsidiaries have
provided or made available to Parent copies of any agreements or arrangements
(including any amendments thereto) with former Company Employees or former
Company Independent Contractors if such agreements or arrangements result in any
obligation (absolute or contingent) of the Company or any of its Subsidiaries to
make any payment as a result of the transactions contemplated hereby; provided,
however, that any such arrangement providing for compensation and benefits with
a pre-tax value that has not in the past exceeded and cannot reasonably be
expected in the next two years to exceed $200,000 per annum has not been
provided or made available to Parent. Other than as expressly set forth in the
documents provided to Parent pursuant to the preceding two sentences or as
otherwise provided for in the 2003 Budget, there have been no changes to the
remuneration or benefits of any kind payable or due to any such Company Employee
or such Company Independent Contractor.
(e) Except as set forth in Section 4.17(e) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement, contract, or other agreement or understanding
with a labor union that is applicable to Persons employed by the Company or its
Subsidiaries. Other than as a result of the public announcement of discussions
regarding the transactions contemplated by this Agreement, there are no strikes,
slowdowns, work stoppages, lockouts or other material labor controversies
pending or, to the Knowledge of the Company, threatened by or between the
Company or any of its Subsidiaries and any of their respective Company
Employees.
4.18. MATERIAL CONTRACTS.
(a) Section 4.18(a) of the Company Disclosure Schedule sets forth the
following contracts, undertakings, commitments, licenses or agreements, written
or verbal, to which the Company or any of its Subsidiaries is a party or which
are applicable to any of their
29
respective assets or properties, in each case as of the date hereof (true and
complete copies (or written summaries, if verbal) of which have been made
available to Parent prior to the date hereof) (each a "MATERIAL CONTRACT"):
(i) contracts requiring annual expenditures by or liabilities of any
party thereto in excess of $100,000 which have a remaining term in excess
of ninety (90) days and are not cancelable (without material penalty, cost
or other liability) within ninety (90) days;
(ii) contracts containing covenants limiting the ability of the
Company or any of its Subsidiaries or other Affiliates of the Company
(including Parent and its Affiliates after the Effective Time) to engage in
any line of business or compete with any person, in any market or line of
business, or operate at any geographic location or solicit the employment
of any Person or hire any Person in any market or line of business or in
any geographic location;
(iii) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments and contracts providing for the borrowing
or lending of money, whether as borrower, lender or guarantor, and any
agreements or instruments pursuant to which any cash of the Company or any
of its Subsidiaries is held in escrow or its use by the Company and its
Subsidiaries is otherwise restricted;
(iv) all contracts pursuant to which any material property or assets
of the Company or any of its Subsidiaries is, or may become subject to, a
Lien (other than Permitted Liens);
(v) joint venture, alliance, affiliation or partnership agreements or
joint development or similar agreements pursuant to which any third party
is entitled to develop or market any products or services on behalf of, or
together with, the Company or any of its Significant Subsidiaries or
receive referrals of business from, or provide referrals of business to,
the Company or any of its Significant Subsidiaries;
(vi) contracts for the acquisition or sale, directly or indirectly (by
merger or otherwise) of material assets (whether tangible or intangible) or
the capital stock of another Person, including, without limitation,
contracts for any such completed acquisitions or sales pursuant to which an
"earn out" or similar form of obligation (whether absolute or contingent)
is pending or for which there are any continuing indemnification or similar
obligations, in each case excluding any such contract entered into prior to
January 1, 2000 and with respect to which there are no remaining
obligations on the party of any party (including, without limitation, any
indemnification obligations);
(vii) contracts under which the Company or any of its Subsidiaries has
granted any exclusive rights;
(viii) any interest rate or currency swaps, caps, floors or option
agreements or any other interest rate or currency risk management
arrangement or foreign exchange contracts;
30
(ix) all licenses, sublicenses, consent, royalty or other agreements
with any Third Party concerning the trademarks and trade names of the
Company and its Subsidiaries;
(x) contracts with, or commitments to, Affiliates of the Company that
are set forth in Section 4.22 of the Company Disclosure Schedule; and
(xi) contracts with "change of control" or similar provisions which
would be triggered by the Merger or the other transactions contemplated
hereunder.
(b) Neither the Company nor any of its Subsidiaries is, or has received any
notice that any other party is, in breach, default or violation or is unable to
perform in any respect (each a "DEFAULT") under any Material Contract (and no
event has occurred or not occurred through the Company's or any of its
Subsidiaries' action or inaction or, to the Knowledge of the Company, through
the action or inaction of any third parties, which with notice or the lapse of
time or both would constitute or give rise to a Default), except for those
Defaults which would not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received written notice of the termination of, or intention to
terminate, any Material Contract, except for such notices or terminations that
would not be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. Except as set forth on Section 4.18(b) of the
Company Disclosure Schedule, no Claims for indemnification under any purchase or
sale agreement has been made by or against the Company or any of its
Subsidiaries since January 1, 2000 and there are no such Claims outstanding or,
to the Knowledge of the Company, threatened, except for any Claims first
asserted after the date of this Agreement that would not reasonably be likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
4.19. REAL ESTATE.
(a) Section 4.19(a) of the Company Disclosure Schedule contains a true and
complete list of all of the leases, licenses, tenancies, subleases and all other
occupancy agreements in which the Company, any of its Significant Subsidiaries
or, if party to or otherwise bound by such an agreement that requires payment of
at least $100,000 per year, any of its other Subsidiaries, is a tenant,
subtenant, landlord or sublandlord (the leased and subleased space or parcel of
real property thereunder being, collectively, the "LEASED PROPERTY"), together
with all amendments and modifications thereto (the "LEASES"). The Leased
Property is the only real property and interests in real property leased by the
Company or any of such Subsidiaries that is used primarily in their businesses.
Except as would not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect: (i) the Company (or its applicable
Subsidiary) has good and valid title to the leasehold estate in all the Leased
Property, free and clear of any Liens (other than Permitted Liens), (ii) the
Leases are in full force and effect, (iii) neither the Company (or its
applicable Subsidiary), nor to the Knowledge of the Company, any other party to
any Lease, is in default under the Leases, and no event has occurred which, with
notice or lapse of time, would constitute a breach or default by the Company (or
such Subsidiary) under the Leases, (iv) the Company (or its applicable
Subsidiary) has not assigned, transferred, conveyed, mortgaged, or encumbered
any interest in any Leased Property,
31
and (v) the Company (or its applicable Subsidiary) enjoys peaceful and
undisturbed possession under the Leases.
(b) Section 4.19(b) of the Company Disclosure Schedule contains a true and
complete list of all real property owned by the Company or any of its
Significant Subsidiaries (other than the Real Estate Investment Entities) (the
"OWNED REAL PROPERTY") as of the date hereof, including the address, and a
description suitable to identify the property. The Owned Real Property is the
only real property and interests in real property owned by the Company or any of
its Significant Subsidiaries that is used primarily in their businesses. Except
as would not be reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect: (i) there are no proceedings in eminent domain,
condemnation or other similar proceedings pending or, to the Knowledge of the
Company, threatened, relating to or affecting any portion of the Owned Real
Property, (ii) the current use of the Owned Real Property does not violate any
instrument of record or agreement affecting such Real Property, (iii) there are
no violations of any covenants, conditions, restrictions, easements, agreements
or orders of any Governmental Entity having jurisdiction over any of the Owned
Real Property that affect such Owned Real Property or the use or occupancy
thereof, (iv) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the Owned Real Property, (v) there are no
outstanding options or rights of first refusal to purchase or lease the Owned
Real Property, or any portion thereof or interest therein, (vi) except under a
lease or agreement, there are no parties (other than the Company or any of its
Significant Subsidiary) in possession of any Owned Real Property and (vi) the
Company (or its applicable Significant Subsidiary) has not assigned,
transferred, conveyed, mortgaged, or encumbered any interest in any Owned Real
Property. The Leased Property and the Owned Real Property constitute all real
property necessary to operate the businesses of the Company and its Significant
Subsidiaries as presently conducted.
4.20. ENVIRONMENTAL. Except as would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect: (i) the
Company and each of its Subsidiaries complies, and complied at all prior times,
with all applicable Environmental Laws, and possess and comply with, and
possessed and complied with at all prior times, all applicable Environmental
Permits required under such Environmental Laws; (ii) there are no Materials of
Environmental Concern or conditions in violation of Environmental Laws at or
relating to any Leased Property or Owned Real Property or other facility
currently or previously owned, leased, managed or operated by the Company or any
of its Subsidiaries that would reasonably be expected to result in liability of
the Company or any of its Subsidiaries under any applicable Environmental Law;
(iii) neither the Company nor any of its Subsidiaries has received a Claim or,
to the Knowledge of the Company, is there any threatened Claim or any written
notification alleging that it is liable under any Environmental Law, or any
request for information pursuant to Section 104(e) of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, or similar
Environmental Law concerning any release or threatened release of Materials of
Environmental Concern at any location; and (iv) none of the Company and its
Subsidiaries has assumed any liability under any Environmental Law by contract
or, to the Knowledge of the Company, by operation of Law.
4.21. INSURANCE. The Company maintains insurance coverage in such amounts
and covering such risks as is generally in accordance with normal industry
practice for companies
32
engaged in businesses similar to those of the Company and its Subsidiaries, and
has made available to Acquiror true and correct copies of all insurance policies
involving general errors and omissions, directors and officers coverage or
environmental liabilities of the Company or any of its Subsidiaries in effect on
the date hereof. There is no material claim by the Company or any of its
Subsidiaries pending under any of such insurance as to which coverage has been
questioned, denied or disputed by the underwriters of such insurance. All
premiums payable prior to the date of this Agreement under all such insurance
have been paid and the Company and each of its Subsidiaries is in all material
respects in compliance with the terms of such insurance.
4.22. AFFILIATE TRANSACTIONS. Except (i) as expressly disclosed in the
Company SEC Documents, (ii) for any expense reimbursements and advances in the
ordinary course of business consistent with past practice, (iii) for any
Participation Interests identified in the Summary of Grants, (iv) for any
employment or consulting agreement identified in the Company Disclosure
Schedule, (v) for any benefits pursuant to a Company Plan, (vi) for transactions
with any non-employee member of the Company's Board of Directors or his or her
Affiliates in the ordinary course of business consistent with past practice or
(vii) for any other contract, commitment, agreement, arrangement or other
transaction identified in the Company Disclosure Schedule, there are no
contracts, commitments, agreements, arrangements or other transactions with more
than $100,000 of obligations, commitments or payments remaining as of the date
hereof between the Company or any Company Subsidiary, on the one hand, and any
(x) officer or director of the Company or any Company Subsidiary or any of their
immediate family members (including their spouses), (y) record or beneficial
owner of five percent or more of any class or series of voting securities of the
Company or (z) Affiliate of any such officer, director, family member or
beneficial owner, on the other hand.
4.23. REQUIRED VOTE; BOARD APPROVAL; STATE TAKEOVER STATUTES.
(a) The only vote required of the holders of any class or series of the
Company's Equity Interests necessary to adopt this Agreement and to approve the
Merger and the other transactions contemplated hereby is the approval of a
majority of the outstanding Company Shares (the "COMPANY STOCKHOLDER APPROVAL").
For the avoidance of doubt and without limiting the generality of the foregoing,
no vote of the holders of any other class or series of the Company's Equity
Interests is required under Article EIGHTH of the Company Charter to adopt this
Agreement and to approve the Merger and the other transactions contemplated
hereby.
(b) On or prior to the date hereof, the Company's Board of Directors and
the Special Committee have (i) determined that this Agreement, the Voting
Agreements and the transactions contemplated hereby and thereby, including the
Merger, are in the best interests of the Company and the Company Stockholders,
(ii) approved this Agreement, the Voting Agreements and the transactions
contemplated hereby and thereby, including the Merger, and (iii) resolved to
recommend to the Company Stockholders that they vote in favor of adopting and
approving this Agreement and the Merger in accordance with the terms hereof.
Such approvals by the Company's Board of Directors and the Special Committee are
sufficient to render inapplicable to this Agreement, the Voting Agreements, the
Merger and any of such other transactions contemplated hereby or thereby, the
restrictions on "business combinations" set forth in Section 203 of the DGCL. To
the Knowledge of the Company, no other state takeover
33
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement, the Voting Agreements or any of the transactions
contemplated hereby or thereby and no provision of the Company Charter or the
Company's by-laws or similar governing or organizational instruments of any
Company Subsidiary would, directly or indirectly, restrict or impair the ability
of Parent to vote, or otherwise to exercise the rights of a stockholder with
respect to, shares of the Company and any Company Subsidiary that may be
acquired or controlled by Parent, as a result of the Merger or otherwise.
4.24. INFORMATION TO BE SUPPLIED. The Proxy Statement will not contain, at
the time of the mailing thereof and at the time of the Company Stockholder
Meeting, any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
statements made or incorporated by reference in the Proxy Statement based on
information supplied by Holding or its Affiliates in writing specifically for
inclusion or incorporation by reference therein.
4.25. NO KNOWLEDGE OF BREACH. The Company has no Knowledge as of the date
hereof (and without giving effect to Section 6.5) of any breaches of the
representations or warranties contained in Article 5 hereof such that the
condition in Section 9.2(a)(ii) would not be satisfied.
4.26. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. The Company does
not make, and has not made, any representations or warranties in connection with
the Merger and the transactions contemplated hereby other than those expressly
set forth herein. Except as expressly set forth herein, no Person has been
authorized by the Company to make any representation or warranty relating to the
Company or any Company Subsidiary or their respective businesses, or otherwise
in connection with the Merger and the transactions contemplated hereby and, if
made, such representation or warranty may not be relied upon as having been
authorized by the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
HOLDING, PARENT AND ACQUIROR
Except as disclosed in the Holding, Parent and Acquiror Disclosure Schedule
attached hereto, Holding, Parent and Acquiror, jointly and severally, represent
and warrant to the Company that:
5.1. CORPORATE EXISTENCE AND POWER. Each of Holding, Parent and Acquiror is
a corporation duly incorporated, validly existing and in good standing under the
Laws of its jurisdiction of incorporation and has all corporate powers and
authority required to own, lease and operate its properties and assets and carry
on its business as now conducted. Each of Holding, Parent and Acquiror is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned, leased or operated
34
by it or the nature of its activities makes qualification necessary, except
where the failure to be qualified would not be reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.
5.2. CORPORATE AUTHORIZATION. The execution, delivery and performance by
each of Holding, Parent and Acquiror of this Agreement and the consummation by
each of Holding, Parent and Acquiror of the Merger and the other transactions
contemplated hereby are within the corporate powers of each of Holding, Parent
and Acquiror and have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Holding,
Parent or Acquiror are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Holding, Parent and Acquiror and assuming that
this Agreement constitutes the valid and binding obligation of the Company, this
Agreement constitutes a valid and binding agreement of each of Holding, Parent
and Acquiror, enforceable in accordance with its terms.
5.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance by
each of Holding, Parent and Acquiror of this Agreement and the consummation by
Holding, Parent and Acquiror of the transactions contemplated hereby will not
require any consent, approval, action, order, authorization, or permit of, or
registration, declaration or filing with, any Governmental Entity by Holding,
Parent or Acquiror other than (a) those set forth in clauses (a) through (d) of
Section 4.3 and (b) other consents, approvals, actions, orders, authorizations,
permits, registrations, declarations and filings which, if not obtained or made,
would not prevent or materially impair the ability of Holding, Parent or
Acquiror to consummate the Merger or the other transactions contemplated by this
Agreement.
5.4. NON-CONTRAVENTION. The execution, delivery and performance by Holding,
Parent and Acquiror of this Agreement and the consummation by Holding, Parent
and Acquiror of the Merger and the other transactions contemplated hereby do not
and will not (a) contravene or conflict with the certificate of incorporation or
by-laws of any of Holding, Parent or Acquiror, (b) assuming compliance with the
matters referred to in Section 5.3, contravene or conflict with, or constitute a
violation of, any provision of Law, binding upon or applicable to any of
Holding, Parent and Acquiror or by which any of their respective properties or
assets is bound or affected, (c) constitute a breach or default under (or an
event that with notice or lapse of time or both could reasonably become a breach
or default) or give rise (with or without notice or lapse of time or both) to a
right of termination, amendment, cancellation or acceleration under any
agreement, contract, note, bond, mortgage, indenture, lease, license,
concession, franchise, joint venture, limited liability or partnership agreement
or other instrument binding upon, any of Holding, Parent or Acquiror or their
respective properties or assets, or (d) result in the creation or imposition of
any Lien (except as contemplated by the Commitment Letter) on any asset of any
of Holding, Parent or Acquiror other than, in the case of clauses (b), (c) and
(d) taken together, any such items that would not be reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.
5.5. PARENT SEC DOCUMENTS.
(a) Parent and Holding have filed all forms, reports, filings, registration
statements and other documents required to be filed by it with the SEC since
July 20, 2001.
35
(b) As of its filing date, each Parent SEC Document complied as to form in
all material respects with the applicable requirements of the Securities Act
and/or the Exchange Act, as the case may be.
(c) No Parent SEC Document filed since July 20, 2001 pursuant to the
Exchange Act contained, as of its filing date, any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. No Parent SEC Document, as amended or supplemented,
if applicable, filed since July 20, 2001 pursuant to the Securities Act
contained, as of the date on which the document or amendment became effective,
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(d) Each of the audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent and Holding included in the
Parent SEC Documents were prepared in conformity with GAAP (except as may be
indicated in the notes thereto) throughout the periods involved, and each fairly
presents, in all material respects, the consolidated financial position of
Holding, Parent and their consolidated Subsidiaries as of the dates thereof and
their consolidated results of operations and changes in financial position for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements).
(e) Section 5.5 of the Holding, Parent and Acquiror Disclosure Schedule
sets forth the unaudited consolidated balance sheet and statement of operations
of Holding and its Subsidiaries as of and for the 3-month period ended December
31, 2002 (the "MOST RECENT HOLDING FINANCIAL STATEMENTS"). The financial
information included in the Most Recent Holding Financial Statements has been
prepared in accordance with GAAP.
5.6. [RESERVED].
5.7. FINANCING.
(a) As of the date of this Agreement, Acquiror has received an executed
commitment letter dated as of February 17, 2003 (the "COMMITMENT LETTER") from
Credit Suisse First Boston ("CSFB"), pursuant to which CSFB has committed,
subject to the terms and conditions set forth therein, to provide to Parent the
amount of financing set forth in the Commitment Letter (the "FINANCING"), to
complete the transactions contemplated hereby. A true and complete copy of the
Commitment Letter has been previously provided to the Company. Acquiror has
fully paid any and all commitment fees or other fees required by such Commitment
letter to be paid as of the date hereof (and will duly pay any such fees that
become due after the date hereof). The Commitment Letter is valid and in full
force and effect, does not contain any material misrepresentation by Parent
(other than those resulting from inaccurate information provided by the Company)
and no event has occurred which (with or without notice, lapse of time or both)
would constitute a breach thereunder on the part of Holding, Parent or Acquiror.
It is the good faith belief of Holding, Parent and Acquiror that the Financing
will be obtained.
36
(b) Parent has entered into a subscription agreement dated as of February
17, 2003 (the "SUBSCRIPTION AGREEMENT") and a commitment letter dated as of
February 17, 2003 (the "XXXX STRATEGIC COMMITMENT LETTER") with certain existing
stockholders of Parent named therein (including Affiliates of Xxxx Capital
Partners, L.P.), pursuant to which such stockholders (or their assignees or
designees) have committed, subject to the terms and conditions set forth
therein, to provide to Parent not less than $100 million and up to $145 million
of financing to complete the transactions contemplated hereby and satisfy the
financing conditions set forth in clauses (a) and (d) of the section of Exhibit
A of the Commitment Letter titled "Acquisition" (collectively, the "ADDITIONAL
FINANCING"). A true and complete copy of each of the Subscription Agreement and
the Xxxx Strategic Commitment Letter has been previously provided to the
Company. Each of the Subscription Agreement and the Xxxx Strategic Commitment
Letter is valid and in full force and effect and no event has occurred which
(with or without notice, lapse of time or both) would constitute a breach
thereunder on the part of Holding, Parent or Acquiror. It is the good faith
belief of Holding, Parent and Acquiror that the Additional Financing will be
obtained.
(c) As of the date of this Agreement, there are no outstanding Revolving
Loans (as defined in the Parent Credit Agreement) and approximately $1.3 million
of L/C Exposure (as defined in the Parent Credit Agreement) under the Parent
Credit Agreement.
(d) Assuming that the information provided by the Company to Parent in
writing (including in electronic format) with respect to the Company's and its
Subsidiaries' historical costs is true and correct in all respects material to
this representation and warranty and was derived from the books and records of
the Company and its Subsidiaries, the aggregate annualized cost savings relating
to ongoing operations of the Company and its Subsidiaries and Parent and its
Subsidiaries after giving effect to the Merger (as such amount is calculated for
purposes of Section 8 of Exhibit D to the Financial Commitment) would equal at
least the amount set forth in Section 5.7 of the Holding, Parent and Acquiror
Disclosure Schedule.
5.8. INFORMATION TO BE SUPPLIED. The information supplied or to be supplied
by Holding, Parent and Acquiror in writing specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the time of the
mailing thereof and at the time of the Company Stockholder Meeting (if any), not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, neither Holding, Parent nor Acquiror
makes any representation or warranty with respect to any statements made or
incorporated by reference in the Proxy Statement based on information supplied
by the Company for inclusion or incorporation by reference therein.
5.9. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Holding, Parent
and Acquiror do not make, and have not made, any representations or warranties
in connection with the Merger and the transactions contemplated hereby other
than those expressly set forth herein. Except as expressly set forth herein, no
Person has been authorized by Holding, Parent or Acquiror to make any
representation or warranty relating to Holding, Parent or Acquiror or their
respective businesses, or otherwise in connection with the Merger and the
transactions
37
contemplated hereby and, if made, such representation or warranty may not be
relied upon as having been authorized by Holding, Parent or Acquiror.
5.10. NO KNOWLEDGE OF BREACH. Each of the Persons set forth on Section 5.10
of the Parent Disclosure Schedule has reviewed Article 4 of this Agreement and
the Company Disclosure Schedules (as delivered on the date hereof and without
giving effect to Section 6.5) and, based on such review, has no actual knowledge
as of the date hereof of any breaches of the representations or warranties
contained therein such that the condition in Section 9.3(a)(ii) would not be
satisfied.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees as set forth below.
6.1. COMPANY INTERIM OPERATIONS. Except as set forth in the Company
Disclosure Schedule or as otherwise expressly contemplated hereby, without the
prior written consent of Acquiror, from the date hereof until the Effective
Time, the Company shall, and shall cause each Company Subsidiary to, conduct its
business in all material respects in the ordinary course consistent with past
practice, and shall, subject to the other limitations set forth in this Section
6.1, use commercially reasonable efforts to (i) preserve intact its present
business organization, (ii) maintain in effect all material Permits that are
required for the Company or such Company Subsidiary to carry on its business,
(iii) keep available the services of its present key officers, employees and
independent contractors, and (iv) preserve existing relationships with its
material customers, lenders, suppliers and other Persons having material
business relationships with it. Without limiting the generality of the
foregoing, except as set forth in the Company Disclosure Schedule or as
otherwise expressly contemplated by this Agreement, from the date hereof until
the Effective Time, without the prior written consent of Acquiror (such consent
not to be unreasonably withheld with respect to the immediately following
clauses (e), (g), (i), (k) and (n)), the Company shall not, nor shall it permit
any Company Subsidiary, directly or indirectly, to:
(a) amend the Company Charter, the Company's by-laws or any Company
Subsidiary's certificate of incorporation or by-laws (or equivalent
organizational or governing documents);
(b) (i) split, combine or reclassify any of its Equity Interests or amend
the terms of any rights, warrants or options to acquire its securities, (ii)
except for ordinary course dividends by a Company Subsidiary or by the Company
to holders of Company Preferred Shares, declare, set aside or pay any dividend
or other distribution (whether in cash, stock or property or any combination
thereof) in respect of its Equity Interests or otherwise make any payments to
holders of such Equity Interests in their capacities as such, or (iii) except
with respect to any repurchases entirely for cash of the Company Series A
Preferred Shares and Company Series B Preferred Shares for an amount per share
that is less than or equal to the Series A Preferred Merger Consideration or the
Series B Preferred Merger Consideration,
38
respectively, redeem, repurchase or otherwise acquire or offer to redeem,
repurchase, or otherwise acquire any of its securities or any rights, warrants
or options to acquire its securities;
(c) issue, deliver, sell, exchange, grant, pledge, encumber or transfer or
authorize the issuance, delivery, sale, grant, pledge, encumbrance or transfer
of, any Equity Interests in the Company or any Company Subsidiary or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any Equity Interests in the Company or any Company
Subsidiary, other than the issuance of Company Shares or, in the case of clause
(iv) only, Equity Interests in any Company Subsidiary pursuant to (i) the
exercise of Company Options granted prior to the date hereof, (ii) the exercise
of Company Warrants and TOPR Warrants issued prior to the date hereof, (iii) the
conversion of, or as a dividend on (if the payment of a dividend in cash would
breach or violate the provisions of the Senior Credit Agreement), Company
Preferred Shares issued prior to the date hereof (but not the exchange of such
Company Preferred Shares pursuant to the Exchange Agreement), (iv) issuance of
Company Shares in connection with the vesting of Restricted Shares and (v)
issuance of Company Shares under the Company Purchase Plan;
(d) acquire, directly or indirectly (whether pursuant to merger, stock or
asset purchase, joint venture or otherwise), in one transaction or series of
related transactions (i) any Person, any Equity Interests or other securities in
any Person, any division or business of any Person or all or substantially all
of the assets of any Person or (ii) any interest or investment in real property
(except to the extent (A) otherwise obligated pursuant to any binding agreement
as of the date hereof, a copy of which has previously been made available to
Parent or (B) solely among or between the Company and its Subsidiaries);
(e) sell, lease, encumber or otherwise dispose of any assets, other than
(i) sales in the ordinary course of business consistent with past practice, (ii)
obsolete equipment and property no longer used in the operation of the Company's
business, and (iii) assets which do not have a value of more than $100,000
individually or $500,000 in the aggregate;
(f) (i) (A) incur any indebtedness for borrowed money, except borrowings
under the terms of the Senior Credit Agreement, the U.K. Overdraft Facility or,
solely to the extent borrowings are then not available under the Senior Credit
Agreement, the Senior Subordinated Credit Agreement, in each case to fund
working capital in the ordinary course consistent with past practice (provided
that no such indebtedness may be incurred with respect to the matters identified
as "Prohibited Borrowings" in Section 6.1(f) of the Company Disclosure
Schedule), (B) issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any Company Subsidiary, (C) make
any loans, advances or capital contributions to, or investments in, any other
Person, other than to the Company or any Company Subsidiary and other than
advancements to brokers and other commission based Company Employees or Company
Independent Contractors in the ordinary course of business consistent with past
practice, or (D) assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any Person (other than obligations of
the Company or any Company Subsidiary and the endorsements of negotiable
instruments for collection in the ordinary course of business consistent with
past practice), or (ii) enter into or materially amend any contract, agreement,
commitment or arrangement to effect any of the transactions prohibited by this
Section 6.1(f);
39
(g) except with the prior written consent of Parent (which will not be
unreasonably withheld or delayed) or with respect to Material Contracts that
relate solely to capital expenditures that are permitted by Section 6.1(i)
hereto, (i) enter into any contract, agreement or arrangement that if entered
into prior to the date hereof would be a Material Contract (except for all
revenue producing contracts that would otherwise be included within clause (i)
of the definition of Material Contracts and would not otherwise fall within any
of clauses (ii) through (xi) of the definition of Material Contracts), (ii)
amend or modify in any material respect or terminate any Material Contract
(except for all revenue producing contracts that would otherwise be included
within clause (i) of the definition of Material Contracts and would not
otherwise fall within any of clauses (ii) through (xi) of the definition of
Material Contracts) or (iii) otherwise waive, release or assign any material
rights, claims or benefits of the Company or any Company Subsidiary under any
Material Contract;
(h) except as required by applicable Law or the terms of any employment
agreement or Company Plan existing as of the date of this Agreement, (i) unless
provided for in the 2003 Budget, increase the compensation (including, without
limitation, commission rates) or benefits of any present or former director,
officer or employee of the Company or any Company Subsidiaries, (ii) pay a
bonus, whether accrued or unaccrued, to any present or former director, officer
or employee of the Company or any Company Subsidiaries, (iii) grant, or alter
the terms of, any severance or termination pay or benefits to any present or
former director, officer or employee of the Company or its Subsidiaries, (iv)
loan or advance any money or other property to any present or former director,
officer or employee of the Company or any Company Subsidiaries, other than
advancements to brokers and other commission based Company Employees or Company
Independent Contractors in the ordinary course of business consistent with past
practice, (v) establish, adopt, enter into, amend or terminate any Company Plan
or any plan, agreement, program, policy, trust, fund or other arrangement that
would be a Company Plan if it were in existence as of the date of this
Agreement, (vi) grant any equity or equity-based awards, other than in the
ordinary course consistent with past practice, (vii) enter into any employment,
consulting, independent contractor or similar agreement, or amend, supplement or
modify the terms of any such existing agreements, (viii) hire, or offer to hire,
any new employee or enter into any new independent contractor relationship, or
agree to enter into any new independent contractor relationship (except (A) to
replace employees or independent contractors departing after the date hereof or
that have departed prior to the date hereof but have not yet been replaced,
provided that the compensation and benefits offered to such replacement do not
materially exceed that of the replaced employee or independent contractor, (B)
for new employees who have aggregate pre-tax compensation (including bonuses and
commissions of no greater than $200,000 per year, (C) with respect to offers of
employment that are outstanding as of the date hereof, (D) for ordinary course
hiring of brokers consistent with past practice in connection with the
residential brokerage business of the Company and its Subsidiaries or (E)
employees assigned to properties managed by the Company or any of its
Subsidiaries for which the compensation and benefits of such employees are fully
reimbursed to the Company and its Subsidiaries) or (ix) terminate any employee
or independent contractor of the Company or its Subsidiaries other than in
writing;
(i) except (x) as set forth on the 2003 Budget set forth in Section 6.1(i)
of the Company Disclosure Schedule (the "2003 BUDGET") and (y) for authorization
of ordinary course capital expenditures by Real Estate Investment Entities
(other than with respect to the
40
matters identified as "Prohibited Expenditures" in Section 6.1(f) of the Company
Disclosure Schedule), authorize or make any single capital expenditure in excess
of $50,000 or aggregate capital expenditures of the Company and the Company
Subsidiaries, taken together, in excess of $250,000;
(j) change the Company's methods of accounting in effect at December 31,
2001, except as required by changes in GAAP or by Regulation S-X of the Exchange
Act or as otherwise specifically disclosed in the Company SEC Documents filed
prior to the date hereof, as concurred in by its independent public accountants;
(k) (i) except for the payment of any deductible under an existing
insurance policy (or a commercially reasonable substitute for a company engaged
in businesses similar to those of the Company and its Subsidiaries) with respect
to a Claim that is being settled by such insurance company, settle, pay,
compromise or discharge any Claim that is in excess of $250,000 or is otherwise
material to the business, financial condition or results of operations of the
Company and the Company Subsidiaries, taken as a whole or (ii) settle, pay,
compromise or discharge any Claim against the Company or any Company Subsidiary
with respect to or arising out of the transactions contemplated by this
Agreement, the Asset Agreements, the Voting Agreements, the Confidentiality
Agreement and the No-Raid Agreement;
(l) other than in the ordinary course of business consistent with past
practice, (i) make any material Tax election or take any position on any Company
Return filed on or after the date of this Agreement or adopt any method therein
that is materially inconsistent with elections made, positions taken or methods
used in preparing or filing similar returns in prior periods, (ii) enter into
any settlement or compromise of any material Tax liability, (iii) file any
amended Company Return with respect to any material Tax, (iv) change any annual
Tax accounting period, (v) enter into any closing agreement relating to any
material Tax or (vi) surrender any right to claim a material Tax refund;
(m) open any office in a new geographical territory, create any new
business division or otherwise enter into any new line of business;
(n) fail to continuously maintain in full force and effect its current
insurance or a commercially reasonable substitute for a company engaged in
businesses similar to those of the Company and its Subsidiaries;
(o) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any Company Subsidiary (other than the Merger);
(p) willfully take any action that would result in a material breach of any
provision of this Agreement or the inability of the Company to satisfy the
conditions precedent set forth in Section 9.3(a) hereto;
(q) except for (i) expense reimbursements and advances in the ordinary
course of business consistent with past practice, (ii) revenue producing
agreements entered into with Real Estate Investment Entities in the ordinary
course of business consistent with past practice having terms consistent with
past
41
practice and (iii) transactions with any non-employee member of the Company's
Board of Directors or his or her Affiliates in the ordinary course of business
consistent with past practice, enter into any contract, commitment or agreement
with any Affiliate of the Company or its Subsidiaries or any of their immediate
family members (including their spouses);
(r) except as specifically contemplated by this Agreement and the Company
Disclosure Schedules (without giving effect to Section 6.5), enter into any
agreement not in existence as of the date hereof that would provide for the
making of any payment or result in any adverse change in rights or obligations
of the Company and its Subsidiaries as a result of the Merger, the Financing or
the Additional Financing; and
(s) authorize, agree or commit, verbally or in writing, to do any of the
foregoing.
provided, however that the conduct of business by each of Insignia Opportunity
Trust and Insignia Opportunity Partners, L.P. (collectively, "IOP") and Insignia
Opportunity Partners II, L.P. ("IOP II") shall not be subject to the foregoing
clauses (a) through (s) to the extent such conduct is in the ordinary course of
business consistent with past practice; provided, further that the conduct of
business of Octane Ventures, LLC shall not be subject to the foregoing clauses
(a) through (s).
6.2. STOCKHOLDER MEETING. Subject to Section 6.3 hereto, the Company shall
cause a meeting of its Stockholders (the "COMPANY STOCKHOLDER MEETING") to be
duly called and held as promptly as reasonably practicable after the date hereof
for the purpose of obtaining the Company Stockholder Approval. Subject to
Section 6.3 hereto, the Company's Board of Directors and the Special Committee
shall recommend approval and adoption by the Company Stockholders of this
Agreement and the transactions contemplated hereby, including the Merger (the
"COMPANY RECOMMENDATION"), and the Company shall take all other reasonable
lawful action to solicit and secure the Company Stockholder Approval. Subject to
Section 6.3 hereto, the Company Recommendation, together with a copy of the
opinion referred to in Section 4.16(b), shall be included in the Proxy
Statement. Parent and Acquiror or their agents shall have the right to solicit
from the Company Stockholders proxies in favor of adoption of this Agreement and
the transactions contemplated hereby.
6.3. ACQUISITION PROPOSALS; BOARD RECOMMENDATION.
(a) The Company agrees that it shall not, nor shall it permit any Company
Subsidiary to, nor shall it authorize or knowingly permit any officer, director,
employee, investment banker, attorney, accountant, agent or other advisor or
representative of the Company or any Company Subsidiary, directly or indirectly,
to (i) solicit, initiate or otherwise knowingly encourage the submission of any
Acquisition Proposal, (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or take any
other action knowingly to facilitate any inquiries or the making of any proposal
that constitutes, or that would reasonably be expected to lead to, any
Acquisition Proposal, (iii) grant any waiver or release under any standstill or
similar agreement with respect to any class or series of the Company's equity
securities to the extent such waiver or release would permit the other party or
42
parties to such agreement to actually acquire such securities or approve any
matter for purposes of Section 203 of the DGCL with respect to any Third Party
(for the avoidance of doubt, a waiver or release under such agreement that
solely permits a proposal or offer, including, without limitation, an
Acquisition Proposal, would not violate this clause (iii)) or (iv) enter into
any agreement with respect to any Acquisition Proposal; provided, however, that
if the Company receives an unsolicited Acquisition Proposal from a Third Party
that the Company's Board of Directors or the Special Committee determines in
good faith is or could reasonably be expected to lead to the delivery of a
Superior Proposal from that Third Party, the Company may, subject to compliance
with all the other provisions of this Section 6.3, furnish information to and
engage in discussions and negotiations with such Third Party with respect to its
Acquisition Proposal ("PERMITTED ACTIONS") if and only to the extent that, the
Board of Directors or the Special Committee, by majority vote, concludes in good
faith, after consultation with outside financial advisors and legal advisors,
that, as a result of such Acquisition Proposal, such Permitted Action is
necessary for the Board of Directors or the Special Committee to act in a manner
consistent with their respective fiduciary duties under applicable Law. The
Board of Directors of the Company or the Special Committee shall provide
Acquiror with prompt notice (but in no event later than the next day) of its
engaging in any Permitted Actions.
(b) Except as permitted by this Section 6.3(b), neither the Board of
Directors of the Company nor the Special Committee or any other committee
thereof shall amend, withdraw, modify, change, condition or qualify in any
manner adverse to Acquiror, the Company Recommendation (it being understood and
agreed that a communication by the Board of Directors of the Company to the
Company Stockholders pursuant to Rule 14d-9(f) of the Exchange Act, or any
similar communication to the Company Stockholders in connection with the making
or amendment of a tender offer or exchange offer by any Person other than the
Company or any Company Subsidiary, shall not be deemed to constitute a
withdrawal, modification, amendment, condition or qualification of the Company
Recommendation for purposes of this Section 6.3). Notwithstanding the foregoing,
the Board of Directors of the Company or the Special Committee may withdraw or
modify the Company Recommendation in a manner adverse to Acquiror if (i) the
Company has complied in all material respects with this Section 6.3, (ii) the
Company shall have notified Parent at least two Business Days in advance of its
intention to effect such withdrawal or modification of the Company
Recommendation and (iii) the Board of Directors or the Special Committee, by
majority vote, concludes in good faith, after consultation with outside
financial advisors and legal advisors, that such withdrawal or modification is
necessary for the Board of Directors or the Special Committee to act in a manner
consistent with their respective fiduciary duties under applicable Law.
(c) Unless the Company's Board of Directors or the Special Committee has
previously withdrawn, or is concurrently therewith withdrawing, the Company
Recommendation in accordance with this Section 6.3, neither the Company's Board
of Directors nor the Special Committee or any other committee thereof shall
recommend any Acquisition Proposal to the Company Stockholders. Nothing
contained in this Section 6.3 or elsewhere in this Agreement shall (i) prevent
the Company's Board of Directors or the Special Committee from complying with
Rule 14e-2 under the Exchange Act with respect to any Acquisition Proposal or
making any disclosure required by applicable Law or (ii) prohibit accurate
disclosure of factual information regarding the business, financial condition or
results of operations of the Company, or the fact that an Acquisition Proposal
has been made, the identity of the party
43
making such Acquisition Proposal or the material terms of such Acquisition
Proposal to the extent such information, facts, identity or terms are required
to be disclosed under applicable Law.
(d) Notwithstanding anything in this Section 6.3 to the contrary, at any
time prior to obtaining the Company Stockholder Approval, the Board of Directors
of the Company or the Special Committee may, in response to a Superior Proposal
that was unsolicited and that did not otherwise result from a breach of this
Section 6.3, cause the Company to terminate this Agreement pursuant to Section
10.1(c)(ii) and concurrently enter into an agreement regarding such Superior
Proposal; provided, however, that the Company shall not terminate this Agreement
pursuant to Section 10.1(c)(ii), and any purported termination pursuant to
Section 10.1(c)(ii) shall be void and of no force or effect (and the Company may
not enter into such agreement regarding such Superior Proposal), unless the
Company shall have complied in all material respects with all the provisions of
this Section 6.3, including the notification provisions in this Section 6.3, and
with all applicable requirements of Sections 10.2(b) (including the payment of
the Termination Fee (as defined in Section 10.2(b)) prior to or concurrently
with such termination) in connection with such Superior Proposal; and provided
further, however, that the Company shall not exercise its right to terminate
this Agreement pursuant to Section 10.1(c)(ii) until after the second Business
Day following Parent's receipt of written notice (a "NOTICE OF SUPERIOR
PROPOSAL") from the Company advising Parent that the Board of Directors of the
Company or the Special Committee has received a Superior Proposal, specifying
the material terms and conditions of the Superior Proposal, identifying the
person making such Superior Proposal and stating that the Board of Directors of
the Company or the Special Committee intends to exercise its right to terminate
this Agreement pursuant to Section 10.1(c)(ii) (it being understood and agreed
that, prior to any such termination taking effect, any amendment to the price or
any other material term of a Superior Proposal (such amended Superior Proposal,
a "MODIFIED SUPERIOR PROPOSAL") shall require a new Notice of Superior Proposal
and a new two Business Day period with respect to such Modified Superior
Proposal).
(e) The Company shall notify Acquiror promptly (but in no event later than
the next Business Day) after receipt by the Company of any Acquisition Proposal
or any request for information relating to the Company or any Company Subsidiary
in connection with an Acquisition Proposal or for access to the properties,
books or records of the Company or any Company Subsidiary or any request for a
waiver or release under any standstill or similar agreement by any Person that
has made, or informs the Board of Directors or the Special Committee of the
Company or such Company Subsidiary that it is considering making, an Acquisition
Proposal; provided, however, that prior to participating in any discussions or
negotiations or furnishing any such information, the Company shall receive from
such Person an executed confidentiality agreement on terms that are not
materially less favorable to the Company than the Confidentiality Agreement,
dated as of October 14, 2002 (the "CONFIDENTIALITY AGREEMENT"), between Holding
and the Company. The notice shall indicate the material terms and conditions of
the proposal or request and the identity of the Person making it, and the
Company will promptly notify Acquiror of any material modification of or
material amendment to any Acquisition Proposal (and the terms of such
modification or amendment); provided, however, that, without limiting what
changes may be material, any change in the form, amount, timing or other aspects
of the consideration to be paid with respect to the Acquisition Proposal shall
be deemed to be a material modification or a material
44
amendment. The Company shall keep Acquiror informed, on a reasonably current
basis, of the status of any negotiations, discussions and documents with respect
to such Acquisition Proposal or request.
(f) The Company shall immediately cease, and shall cause any Person acting
on its behalf to cease, and cause to be terminated any existing discussions or
negotiations with any Third Party conducted heretofore with respect to any of
the foregoing and shall request any such parties in possession of confidential
information about the Company or any Company Subsidiary that was furnished by or
on behalf of the Company or any such Subsidiary to return or destroy all such
information in the possession of any such party or the agent or advisor of any
such party.
6.4. FRENCH WARRANTS. The Company shall, or shall cause its Subsidiaries
to, exercise any call rights or other rights the Company or such Subsidiaries
have to purchase or acquire the outstanding Warrants (solely for purposes of
this Section 6.4, as defined in the Share Purchase Agreement, dated November 30,
2001, among the Company, Insignia France SARL, Xxxx Xxxxxx Xxxxxxxx and the
other parties thereto) for cash or, solely to the extent payment in cash would
breach or violate the provisions of the Senior Credit Agreement, Company Shares.
6.5. SUPPLEMENTAL COMPANY DISCLOSURE SCHEDULE. Subject to the provisions of
the following sentence, the Company shall have the right to make additions (each
such addition, a "SUPPLEMENTAL EXCEPTION") to the Company Disclosure Schedule by
delivering a single supplement thereto (the "SUPPLEMENTAL DISCLOSURE SCHEDULE"),
which Supplemental Disclosure Schedule must be delivered to Parent no later than
eleven (11) Business Days after the date hereof and may contain Supplemental
Exceptions solely with respect to the following provisions of Article 4 (it
being understood that any disclosure provided in the Supplemental Disclosure
Schedule will be deemed to apply solely to the following Sections of Article 4
(and not any other Sections of Article 4) notwithstanding anything to the
contrary in the Company Disclosure Schedule or the Supplemental Disclosure
Schedule): the second sentence of Section 4.1, Section 4.4(b), Section 4.4(c),
Section 4.6(a), Section 4.6(c), Section 4.7(f), Section 4.9, Section 4.11,
Section 4.12 (excluding the last sentence of Section 4.12(g)), Section 4.13,
Section 4.14, Section 4.15, Section 4.17, Section 4.18 (excluding the last
sentence of Section 4.18 (b)), Section 4.19, Section 4.20, Section 4.21 and
Section 4.22. With respect to the Supplemental Disclosure Schedule, (i) each
Supplemental Exception included in the Supplemental Disclosure Schedule must be
a fact, event, circumstance or other matter that existed as of the date hereof,
and the Supplemental Disclosure Schedule cannot include any facts, events,
circumstances or other matters arising only after the date of this Agreement,
(ii) each Supplemental Exception can refer only to specific facts, events,
circumstances or other matters (e.g. identification of a contract by date and
names of the parties thereto), and the Supplemental Disclosure Schedule cannot
include general statements or exceptions (e.g. references to general categories
of contracts), (iii) the Supplemental Disclosure Schedule cannot include any
agreement, contract or transaction to which any Person named in the definition
of "Knowledge" is a party and (iv) each Supplemental Disclosure must contain
only such information as the Company in good faith believes is required to be
included on the Company Disclosure Schedule. Copies of all documents referred to
in any Supplemental Disclosure Schedule must be made available to Parent on or
prior to the date of delivery of such Supplemental Disclosure Schedule. In
addition, the Company agrees to deliver promptly (but in no event later than two
Business Days after a request by Parent) to Parent all
45
information reasonably requested by Parent relating to any Supplemental
Exceptions disclosed in the Supplemental Disclosure Schedule. In the event the
Supplemental Exceptions included in the Supplemental Disclosure Schedule could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, then Parent shall have the right to terminate this
Agreement no later than five (5) Business Days after receipt of the Supplemental
Disclosure Schedule, or, if later, two (2) Business Days after receipt by Parent
of the documents and information referred to in the two immediately preceding
sentences but in no event later than ten (10) Business Days after delivery of
the Supplemental Disclosure Schedule. All Supplemental Exceptions included in
the Supplemental Disclosure Schedule in accordance with this Section 6.5 will be
deemed to have been included in the Company Disclosure Schedule from and after
the date of this Agreement.
6.6. PRE-CLOSING TERMINATIONS. No later than 30 days prior to the Closing Date
Parent will deliver to the Company a list of all employees and independent
contractors that Parent wishes to have terminated prior to the Closing (the
"SECTION 6.6 LIST"). After the satisfaction or waiver of all conditions
precedent set forth in Article 9 but prior to the Closing, subject to compliance
with applicable Law, the Company shall, and shall cause all of its Subsidiaries
to, terminate (effective prior to the Closing) the employment or independent
contractor relations, as applicable, of all employees and independent
contractors listed on the Section 6.6 List.
ARTICLE 7
COVENANTS OF HOLDING, PARENT AND ACQUIROR
Each of Holding, Parent and Acquiror agrees as set forth below.
7.1. DIRECTOR AND OFFICER LIABILITY.
(a) Holding, Parent, Acquiror and the Surviving Corporation agree that the
Surviving Corporation shall adopt on or prior to the Effective Time, in its
certificate of incorporation and by-laws, the same indemnification, limitation
of or exculpation from liability and expense advancement provisions as those set
forth in the Company's certificate of incorporation and by-laws, in each case as
of the date of this Agreement, and that such provisions shall not be amended,
repealed, revoked or otherwise modified for a period of six (6) years and one
(1) month after the Effective Time in any manner that would adversely affect the
rights thereunder of the individuals who on or prior to the Effective Time were
directors, officers, employees or agents of the Company or any Company
Subsidiary or are otherwise entitled to the benefit of such provisions, unless
such modification is required after the Effective Time by applicable Law.
(b) To the fullest extent permitted under applicable Law, commencing at the
Effective Time and continuing for six (6) years (or for such longer period
provided for in any applicable statute of limitations) and one (1) month
thereafter, Parent or the Surviving Corporation shall, and if Parent and the
Surviving Corporation do not promptly do so, Holding shall, indemnify, defend
and hold harmless, each present and former director, officer or employee of the
Company and each Company Subsidiary and their respective estates, heirs,
46
personal representatives, successors and assigns (collectively, the "INDEMNIFIED
PARTIES") against all costs and expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and settlement amounts
paid in connection with any Claim (whether asserted prior to, at or after, the
Effective Time) arising out of or pertaining to any action or omission in their
capacity as director or officer of the Company or any Company Subsidiary or
their serving at the request of the Company or any Company Subsidiary as
director, officer, trustee, partner or fiduciary of another Person, pension or
other employee benefit plan or enterprise in each case occurring on or before
the Effective Time (including the transactions contemplated by this Agreement);
provided, however, that in the event any Claim or Claims for indemnification are
made within such six-year (or within such longer period provided for in any
applicable statute of limitations) and one-month period, all rights to
indemnification in respect of any such Claim or Claims shall continue until the
final disposition of any and all such Claims. Without limiting the foregoing, in
the event of any Claim, (i) Parent or the Surviving Corporation shall, and if
Parent and the Surviving Corporation do not promptly do so, Holding shall (x)
periodically advance reasonable fees and expenses (including attorneys fees)
with respect to the foregoing and pay the reasonable fees and expenses of
counsel selected by each Indemnified Party, promptly after statements therefor
are received, provided that the Indemnified Party to whom fees and expenses are
advanced or for which fees and expenses of counsel are paid provides an
undertaking to repay such advances and payments if it is ultimately determined
that such Indemnified Party is not entitled to indemnification, and (y)
vigorously assist each Indemnified Party in such defense, and (ii) subject to
the terms of this Section 7.1, Holding, Parent and the Surviving Corporation
shall cooperate in the defense of any matter. If any Claim is commenced as to
which an Indemnified Party desires to receive indemnification, such Indemnified
Party shall notify the Surviving Corporation with reasonable promptness;
provided, however, that failure to give reasonably prompt notice to the
Surviving Corporation shall not affect the indemnification obligations of
Holding, Parent or the Surviving Corporation hereunder except to the extent that
the failure to so notify has prejudiced the Surviving Corporation in such Claim.
The Indemnified Party shall have the right to retain counsel of such Indemnified
Party's own choice to represent such person; and such counsel shall, to the
extent consistent with its professional responsibilities, cooperate with
Holding, Parent and the Surviving Corporation and any counsel designated by any
of Holding, Parent or the Surviving Corporation. Holding, Parent and the
Surviving Corporation shall be liable only for any settlement of any Claim
against an Indemnified Party made with Parent or the Surviving Corporation
written consent. Holding, Parent and the Surviving Corporation shall not,
without the prior written consent of an Indemnified Party, settle or compromise
any Claim, or permit a default or consent to the entry of any judgment in
respect thereof, unless such settlement, compromise or consent includes, as an
unconditional term thereof, the giving by the claimant to such Indemnified Party
of an unconditional release from all liability in respect of such claim.
(c) For six (6) years and one (1) month from the Effective Time, the
Surviving Corporation shall, and Holding and Parent shall cause the Surviving
Corporation to, provide to the present and former directors and officers of the
Company and each Company Subsidiary liability and fiduciary liability insurance
protection with the same coverage and in the same amount, and on terms no less
favorable to the directors and officers than that provided by the Company's
directors' and officers' liability insurance policies in effect on the date
hereof and listed on Section 7.1(c) of the Company Disclosure Schedule;
provided, however, that the
47
Surviving Corporation shall not be obligated to make premium payments for such
insurance to the extent such annual premiums exceed 300% of the annual premiums
paid as of the date hereof by the Company for such insurance; and provided,
further, that if the premiums with respect to such insurance exceed 300% of the
annual premiums paid as of the date hereof by the Company for such insurance,
the Surviving Corporation shall be obligated to obtain such insurance with the
maximum coverage as can be obtained at an annual premium equal to 300% of the
annual premiums paid by the Company as of the date hereof.
(d) All rights to indemnification and/or advancement of expenses contained
in any agreement with any Indemnified Parties as in effect on the date hereof
with respect to matters occurring on or prior to the Effective Time (including
the transactions contemplated hereby) shall survive the Merger and continue in
full force and effect.
(e) This Section 7.1 shall survive the consummation of the Merger and is
intended to be for the benefit of, and shall be enforceable by, the Indemnified
Parties referred to herein, their heirs and personal representatives and shall
be binding on Holding, Parent and the Surviving Corporation and their respective
successors and assigns and the covenants and agreements contained herein shall
not be deemed exclusive of any other rights to which an Indemnified Party is
entitled, whether pursuant to Law, contract or otherwise.
(f) If Holding, Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Holding, Parent or the Surviving Corporation, as the case may be,
shall assume the obligations set forth in this Section 7.1.
(g) Nothing in this Agreement is intended to, shall be construed to or
shall release, waive or impair any rights to directors' and officers' insurance
claims under any policy that is or has been in existence with respect to the
Company or any of its officers, directors or employees, it being understood and
agreed that the indemnification provided for in this Section 7.1 is not prior to
or in substitution for any such claims under such policies.
7.2. EMPLOYEE BENEFITS.
(a) The Surviving Corporation shall, and Holding and Parent shall cause the
Surviving Corporation to, provide to individuals who are employees of the
Company and each Company Subsidiary immediately prior to the Effective Time and
who subsequently become employees of the Surviving Corporation (the "CONTINUING
EMPLOYEES"), with employee benefits that, in the aggregate, are substantially
equivalent to the employee benefits provided by Parent or its Subsidiaries to
their own similarly situated current employees.
(b) For purposes of determining eligibility to participate and the vesting
of benefits under plans maintained or contributed to by Holding, Parent or its
Subsidiaries for the benefit of the Continuing Employees and for each of the
Persons set forth in Section 7.2 of the Company Disclosure Schedule (the
"PURCHASER PLANS"), including, but not limited to, any
48
pension, severance, 401(k), vacation and sick pay plan, and for purposes of
calculating benefits under any severance, sick leave or vacation plans, Holding,
Parent or its Subsidiaries shall give credit for years of service with the
Company, as if they were years of service with Holding, Parent or its
Subsidiaries. Holding, Parent and its Subsidiaries shall recognize such service
for purposes of satisfying any waiting period, evidence of insurability
requirements or the application of any preexisting condition limitation.
Holding, Parent and its Subsidiaries shall also give the Continuing Employees
and such Persons set forth in Section 7.2 of the Company Disclosure Schedule
credit for amounts paid under a corresponding Company Plan during the same
period for purposes of applying deductibles, co-payments and out-of-pocket
maximums as though such amounts had been paid in accordance with the terms and
conditions of the benefit plan sponsored or maintained by Holding, Parent or any
of its Subsidiaries.
(c) Effective as of the day immediately preceding the Effective Date, the
Company shall terminate the Insignia Financial Group, Inc. 401(k) Retirement
Savings Plan and any other 401(k) plan(s) that Company or its Affiliates sponsor
for the benefit of Company Employees (the "COMPANY 401(K) PLANS"), subject to
and conditioned upon the occurrence of the Effective Time, unless Parent
provides notice to the Company at least 15 days prior to the Effective Time that
the Company 401(k) Plans shall not be terminated. The Parent shall receive from
the Company evidence that the Company 401(k) Plans have been terminated pursuant
to a resolution of the Company's Board of Directors (the form and substance of
such resolution shall be subject to review and approval of the Parent, which
approval shall not be unreasonably withheld). Notwithstanding anything herein to
the contrary, as promptly as possible following the Effective Time, the Parent
shall permit Continuing Employees to participate in a tax-qualified defined
contribution plan established or maintained by the Parent or its Affiliate (the
"PARENT 401(K) PLAN") and, to the extent permitted by the Parent 401(k) Plan, to
rollover (whether by direct or indirect rollover, as selected by such
participant) his or her "eligible rollover distribution" (as defined under
Section 402(c)(4) of the Code) from the Company 401(k) Plans. No loan shall be
placed into default or declared in default, and the Parent shall consider, in
good faith, permitting participants in the Company 401(k) Plans to transfer his
or her account balance under the Company 401(k) Plans, together with the
promissory note evidencing the plan loan and the applicable loan documentation,
to the Parent 401(k) Plan through a direct rollover. In such case, the loan
shall be assumed and continued by the Parent 401(k) Plan in a manner
substantially similar to the Company 401(k) Plans.
7.3. CONDUCT OF HOLDING, PARENT AND ACQUIROR. Holding and Parent each will,
and will take all action necessary to cause Acquiror to, perform its obligations
under this Agreement to consummate the Merger on the terms and subject to
conditions set forth in this Agreement.
7.4. TRANSFER TAXES AND OTHER TAX MATTERS.
(a) The parties shall cooperate in the preparation, execution and filing of
all returns, questionnaires, applications or other documents regarding all
state, local and foreign real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees or similar Taxes ("TRANSFER TAXES") which become
payable in connection with the transactions contemplated by this Agreement that
are required to be filed on or before the Effective Time. All Transfer Taxes
(including any interest
49
or penalties with respect thereto) attributable to the Merger shall be timely
paid by Holding, Parent, Acquiror or the Surviving Corporation.
(b) Any liability arising out of New York State or New York City Real
Property Transfer Taxes with respect to interests in real property owned,
directly or indirectly, by the Company or any of its Subsidiaries immediately
prior to the Effective Time, if applicable and due in connection with the
Merger, shall be borne by Holding, Parent or the Surviving Corporation and
expressly shall not be a liability of the Company Stockholders.
(c) If legislation is enacted prior to the Effective Time that the Company
and Parent in good faith mutually agree reduces or eliminates the federal income
tax on dividend income that would be payable by U.S. individuals as a result of
a cash dividend on the Common Shares, then the Company shall have the right to
declare a cash dividend on the Common Shares prior to the Effective Time if the
distribution of such dividend would result in tax savings to holders of the
Common Shares. If such a dividend is declared, the Common Merger Consideration
shall be reduced by the amount of such dividend per share. Notwithstanding the
foregoing, no dividend shall be declared under this Section 7.4(c) if, in the
good faith judgment of Parent, the payment of the dividend and the related
reduction of the Common Merger Consideration increases the aggregate cost of the
transactions contemplated by this Agreement to Acquiror or otherwise adversely
affects Acquiror or its direct or indirect stockholders.
7.5. FINANCING ARRANGEMENTS.
(a) Holding and Parent each hereby agrees to use commercially reasonable
efforts to arrange and obtain the Financing on the terms set forth in the
Commitment Letter and the Additional Financing on the terms set forth in the
Subscription Agreement and the Xxxx Strategic Commitment Letter. Holding and
Parent will keep the Company informed on a reasonably current basis in
reasonable detail of the status of their efforts to arrange the Financing and
the Additional Financing, and shall not permit any amendment or modification to
be made to, or any waiver of any provision or remedy under, the Commitment
Letter, the Subscription Agreement or the Xxxx Strategic Commitment Letter
without the prior written consent of the Company. Holding and Parent will be
under no obligation under any circumstances to obtain more than $100.0 million
(plus the amount, if any, required by the Xxxx Strategic Commitment Letter) of
equity financing for the Merger and related matters. In the event that Holding
or Parent is unable to obtain the Financing or the Additional Financing, Holding
and Parent shall use commercially reasonable efforts to obtain alternative
financing with overall pricing, cost, timing and maturity terms that are no less
favorable, and other terms that are no less favorable in any material respect,
to Holding and Parent than those contained in the Commitment Letter or the
Subscription Agreement and Xxxx Strategic Commitment Letter, as the case may be.
(b) Each of Holding, Parent and Acquiror agrees that it will not take any
action, and it will not permit any of its Subsidiaries to take any action, that
would violate clause (e) of the eighth paragraph of the Commitment Letter.
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7.6. CERTAIN EXISTING OBLIGATIONS.
(a) Parent shall, and shall cause the Surviving Corporation to, honor all
the obligations of the Company under the employment agreements and
indemnification agreements listed in Section 7.6 of the Company Disclosure
Schedule.
(b) Holding, Parent and Acquiror acknowledge that certain employees of and
consultants to (and former employees of and consultants to) the Company or one
or more of its Subsidiaries (and assignees of such employees and consultants)
(each, a "COVERED PARTICIPANT") (i) own direct Equity Interests in, or are
assignees of economic interests associated with direct Equity Interests in, the
Covered Entities (as defined below) and/or (ii) are the beneficiaries of
contractual grants pursuant to letter agreements of rights to certain proceeds
received by certain Subsidiaries of the Company that own direct or indirect
Equity Interests in or hold debt obligations of one or more Real Estate
Investment Entities (the interests of the Covered Participants described in the
foregoing clauses (i) and (ii) that exist as of the date of this Agreement, a
summary of which has been provided to Parent, as well as any such additional
interests that may be granted or issued as permitted by Section 6.1 of this
Agreement, are collectively referred to herein as "PARTICIPATION INTERESTS"). As
soon as reasonably practicable after the date hereof, but no later than
immediately prior to the Closing, the Company shall, if and to the extent
applicable, cause the relevant governing and organizational documents of each
Relevant Subsidiary that is a Covered Entity to be amended to provide that,
effective upon the Closing: (x) the Relevant Subsidiary that is a Covered Entity
may not voluntarily sell, transfer or otherwise dispose of any material assets
directly held by it (it being understood this will not restrict the sale or
other disposition of the underlying Real Estate Asset(s) held by the applicable
Real Estate Investment Entity, nor will it prevent the direct or indirect sale
of any Equity Interest in the Relevant Subsidiary that is a Covered Entity)
without the approval of at least one-third in interest of the Covered
Participants who directly or indirectly own Equity Interests in such Covered
Entity; and (y) such provisions may not be amended without the approval of at
least one-third in interest of the Covered Participants who own Equity Interests
in such Relevant Subsidiary that is a Covered Entity. In addition, Holding,
Parent and Acquirer hereby expressly acknowledge the validity and existence of
the obligations of the Surviving Corporation and its Subsidiaries with respect
to the Participation Interests, and agree to cause the Surviving Corporation and
its Subsidiaries (or any successor thereto that is a Subsidiary of Holding,
Parent or the Surviving Corporation) to use all commercially reasonable efforts
to provide for the Participation Interests to be cashed out only when the
underlying Real Estate Asset(s) are sold (rather than on a sale by the Company
or its Subsidiary of its interest in a Real Estate Investment Entity or a
Relevant Subsidiary). The holders of Participation Interests are express,
intended third party beneficiaries of this Section 7.6(b). "COVERED ENTITY"
means any Subsidiary of the Company (i) that owns a direct or indirect Equity
Interest in or holds a debt obligation of a Real Estate Investment Entity, and
(ii) in which one or more employees of or consultants to (or former employees of
or consultants to) the Company or any of its Subsidiaries (or an assignee of any
such employee or consultant) holds an Equity Interest (either directly or
pursuant to an assignment of an economic interest by a direct holder of an
Equity Interest in such Subsidiary), and (iii) in which the direct or indirect
holders of Equity Interests do not include any Person other than (x) the Company
or a Subsidiary of the Company or (y) an employee of or consultant to (or former
employee of or consultant to) the Company or any of its Subsidiaries (or an
assignee of any such employee or consultant).
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ARTICLE 8
COVENANTS OF HOLDING, PARENT, ACQUIROR AND THE COMPANY
The parties hereto agree as set forth below.
8.1. EFFORTS AND ASSISTANCE.
(a) Subject to the terms and conditions hereof, each party will use
commercially reasonable efforts to take, or cause to be taken, all actions, to
file, or cause to be filed, all documents and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable,
including, without limitation, obtaining all necessary consents, waivers,
approvals, estoppels, authorizations, Permits or orders from all Governmental
Entities or other Third Parties. The Company, Holding, Parent and Acquiror shall
furnish all information required to be included in any application or other
filing to be made pursuant to the rules and regulations of any Governmental
Entity in connection with the transactions contemplated by this Agreement.
Holding, Parent, Acquiror and the Company shall have the right to review in
advance and comment thereon, and to the extent reasonably practicable each will
consult the other on, all the information relating to the other and each of
their respective Subsidiaries, that appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the Merger.
(b) Each of the Company, Holding and Parent shall make, and shall cause
their respective ultimate parents, if any, to make, an appropriate filing of a
notification and report form pursuant to the HSR Act with respect to the
transactions contemplated hereby promptly and shall promptly respond to any
request for additional information pursuant to the HSR Act and supply such
information. In addition, the Company, Holding and Parent shall each promptly
make any other filing that is required under any Non-U.S. Competition Law and
shall promptly respond to any request for additional information pursuant to
such Non-U.S. Competition Law and supply such information. Holding, Parent,
Acquiror and the Company shall each use their commercially reasonable efforts to
resolve objections, if any, as may be asserted by any Governmental Entity with
respect to the Merger under any antitrust, trade, competition or takeover Laws
of any Governmental Entity, and neither the Company nor any Company Subsidiary
shall agree to do any of the actions set forth in the foregoing clause without
the prior written consent of Acquiror. Holding, Parent and Acquiror shall
reasonably consult with the Company and, subject to being permitted to do so by
the Governmental Entity, the Company shall have the right to attend and
participate in any telephone calls or meetings that Holding, Parent or Acquiror
has with any Governmental Entity with regard to this Agreement and the
transactions contemplated hereby.
(c) The Company shall provide, and will cause each Company Subsidiary and
their respective officers and employees to provide, all commercially reasonable
cooperation in connection with the arrangement and obtaining of the Financing as
may be reasonably requested by Parent, including, without limitation,
facilitating customary due diligence and arranging senior officers, as selected
by Parent, assisting in the preparation of ratings agency presentations,
offering memoranda, private placement memoranda and similar documents,
52
meeting with prospective lenders and investors in customary "road show"
presentations, executing and delivering commitment and financing letters,
underwriting, purchase or placement agreements, pledge and security documents,
other definitive financing documents, or other requested certificates or
documents and comfort letters and consents of accountants as may be reasonably
requested by Parent, provided, however that in no event will the Company or any
Company Subsidiary be required to enter into any agreement relating to such
Financing that could impose any liability on the Company or any Company
Subsidiary prior to the Closing. In addition, in conjunction with the obtaining
of the Financing, the Company agrees, at the reasonable request of Parent or
Acquiror, to call conditionally for prepayment or redemption, or to prepay,
redeem and/or renegotiate, as the case may be, any then existing indebtedness of
the Company; provided, however that no such prepayment or redemption shall
themselves actually be made until contemporaneously with or after the Closing.
(d) Each of Holding, Parent, Acquiror and the Company shall use its best
efforts to obtain the consents, approvals, actions, orders, authorizations,
registrations, declarations, announcements and filings set forth on Section
8.1(d) of the Company Disclosure Schedule.
8.2. PROXY STATEMENT. As soon as practicable and in any event no later than
30 days after execution of this Agreement, the Company shall prepare and file
the Proxy Statement with the SEC under the Exchange Act. The Company will use
commercially reasonable efforts to have the Proxy Statement cleared by the SEC.
Holding, Parent, Acquiror and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Acquiror of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Acquiror promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Acquiror and its counsel the opportunity to review
and comment on the Proxy Statement and any other documents filed with the SEC or
mailed to the Company Stockholders prior to their being filed with, or sent to,
the SEC or mailed to its Stockholders and shall give Acquiror and its counsel
the opportunity to review and comment on all amendments and supplements to the
Proxy Statement and any other documents filed with, or sent to, the SEC or
mailed to the Company Stockholders and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC or mailed to its Stockholders. Each of the Company, Holding, Parent and
Acquiror agrees to use its commercially reasonable efforts, after consultation
with the other parties hereto, to respond promptly to all such comments of and
requests by the SEC. As promptly as practicable after the Proxy Statement has
been cleared by the SEC, the Company shall mail the Proxy Statement to the
Stockholders. Each of the Company, Holding, Parent and Acquiror promptly shall
correct any information provided by it and used in the Proxy Statement that
shall have become false or misleading in any material respect, and the Company
shall take all steps necessary to file with the SEC and have cleared by the SEC
any amendment or supplement to the Proxy Statement as to correct the same and to
cause the Proxy Statement as so corrected to be disseminated to the Company
Stockholders, in each case to the extent required by applicable Law.
8.3. PUBLIC ANNOUNCEMENTS. On the date of the signing of this Agreement,
the parties shall issue a joint press release substantially in the form attached
hereto as Exhibit B. The
53
parties shall cooperate with each other in the development and distribution of,
and consult with each other before issuing, any other press release or making
any public statement with respect to this Agreement and the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other parties (which shall not
be unreasonably withheld or delayed), except as may be required by applicable
Law or any listing agreement with any national securities exchange.
8.4. ACCESS TO INFORMATION; NOTIFICATION OF CERTAIN MATTERS.
(a) From the date hereof until the Effective Time and subject to applicable
Law, the Company and each Company Subsidiary shall, upon reasonable advance
notice, (i) give to Parent and Acquiror, their counsel, financial advisors,
auditors and other authorized representatives reasonable access to its offices,
properties, books and records; (ii) furnish or make available to Parent and
Acquiror, their counsel, financial advisors, auditors and other authorized
representatives any financial and operating data and other information as those
Persons may reasonably request; and (iii) instruct its employees, counsel,
financial advisors, auditors and other authorized representatives to cooperate
with the reasonable requests of Parent and Acquiror in connection with such
matters. Any access pursuant to this Section shall be conducted in a manner
which will not interfere unreasonably with the conduct of the business of the
Company and its Subsidiaries and shall be in accordance with any other existing
agreements or obligations binding on the Company or any of its Subsidiaries.
Unless otherwise required by Law or as otherwise provided in this Agreement,
each of Parent and Acquiror will hold, and will cause its respective officers,
employees, counsel, financial advisors, auditors and other authorized
representatives to hold any nonpublic information obtained in any investigation
in confidence in accordance with and agrees to be bound by, the terms of the
Confidentiality Agreement, provided that Parent and Acquiror will have the right
to provide all such information to any potential purchaser in connection with a
Real Estate Asset Sale and such potential purchaser's officers, employees,
counsel, financial advisors, auditors and other authorized representatives as
long as such persons agree to keep such information confidential and agree not
to hire or solicit the employees of the Company and its Subsidiaries, in each
case in writing reasonably satisfactory to the Company. No access pursuant to
this Section 8.4(a) shall affect any representations or warranties of the
parties herein or the conditions to the obligations of the parties hereto. From
the date hereof until the Effective Time, the Company shall, and shall cause its
Subsidiaries to, provide Parent and its Subsidiaries with reasonable access,
upon reasonable prior notice to Xxxx Xxxxxxx, the General Counsel of the Company
or any Person designated by him to receive such notices, to employees and
consultants of the Company and its Subsidiaries for the purpose of enabling
Parent or its Subsidiaries to meet with and make offers of employment or service
to one or more of said individuals and to discuss integration and other
transition matters with respect to the transactions contemplated hereby;
provided, however that the Company shall have the right to have a representative
attend each such meeting.
(b) The Company shall give prompt notice to Parent and Acquiror, and Parent
and Acquiror shall give prompt notice to the Company, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would
reasonably be expected to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect;
(ii) any failure of the Company or Parent and Acquiror, as the case may be, to
materially comply with or satisfy, or the occurrence or
54
nonoccurrence of any event, the occurrence or nonoccurrence of which would
reasonably be expected to cause the failure by such party to materially comply
with or satisfy , any covenant, condition or agreement to be complied with or
satisfied by it hereunder; (iii) any notice or other communication from any
Third Party alleging that the consent of such Third Party is or may be required
in connection with the transactions contemplated by this Agreement; and (iv) the
occurrence of any event, development or circumstance which has had or would be
reasonably likely to result in a Company or Parent Material Adverse Effect;
provided, however, that the delivery of any notice pursuant to this Section
8.4(b) shall not limit or otherwise affect (x) the representations, warranties,
covenants or agreements of the parties hereto or (y) the remedies available
hereunder to the party giving or receiving such notice.
8.5. FURTHER ASSURANCES. Upon the terms and subject to the conditions of
this Agreement, each of the parties hereto shall use their respective reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. Without the prior written consent of Parent, the Company
will not intentionally amend or waive any term or rights it has under the
consent letter received from the holder of the Company Preferred Shares. At and
after the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of the Company or Acquiror, any deeds, bills of sale, assignments or assurances
and to take and do, in the name and on behalf of the Company or Acquiror, any
other actions and things to vest, perfect or confirm of record or otherwise in
the Surviving Corporation any and all right, title and interest in, to and under
any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger.
8.6. DISPOSITION OF LITIGATION. The Company will consult with Parent with
respect to any action by any Third Party to restrain or prohibit or otherwise
oppose the Merger or the other transactions contemplated by this Agreement or
any Voting Agreement and, subject to Section 6.3, will resist any such effort to
restrain or prohibit or otherwise oppose the Merger or the other transactions
contemplated by this Agreement or any Voting Agreement. Parent may participate
in (but not control) the defense of any stockholder litigation against the
Company and its directors relating to the transactions contemplated by this
Agreement or any Voting Agreement at Parent's sole cost and expense. In
addition, subject to Section 6.3, the Company will not voluntarily cooperate
with any Third Party which has sought or may hereafter seek to restrain or
prohibit or otherwise oppose the Merger or the other transactions contemplated
by this Agreement or any Voting Agreement and will cooperate with Parent to
resist any such effort to restrain or prohibit or otherwise oppose the Merger or
the other transactions contemplated by this Agreement or any Voting Agreement.
8.7. CONFIDENTIALITY AND NO-RAID AGREEMENTS. Subject to Section 10.2(c)
hereto, the parties acknowledge that the Company and Holding entered into the
Confidentiality Agreement and the No-Raid Agreement, which agreements shall
continue in full force and effect in accordance with their respective terms
until the earlier of (a) the Effective Time or (b) the expiration of each such
agreement according to its terms. Subject to Section 6.3 hereto, without
55
the prior written consent of Acquiror, neither the Company nor any Company
Subsidiary will waive or fail to enforce any provision of any confidentiality or
similar agreement which the Company or any Company Subsidiary has entered into
in connection with any completed or proposed business combination relating to
the Company or such Company Subsidiary.
8.8. RESIGNATION OF DIRECTORS. Prior to the Effective Time, the Company
shall use its commercially reasonable efforts to deliver to Acquiror evidence
satisfactory to Acquiror of the resignation of all directors of the Company,
effective at the Effective Time.
8.9. SALES OF REAL ESTATE INVESTMENT ASSETS.
(a) From the date of this Agreement through the Closing Date, the Company
will have the right, but not the obligation, to market for sale to third parties
at or prior to the Closing any or all of the Real Estate Investment Assets. To
the extent the Company engages in any such marketing and sales activities, the
Board of Directors of the Company will instruct the current President of
Insignia Financial Services, Inc. ("IFS") to keep (and to instruct his direct
and indirect reports to keep) Parent reasonably informed of such marketing and
sale activities (including, without limitation, providing a telephonic update at
least once per week regarding such activities), to provide Parent with a
reasonable advance review of any agreements regarding the sale of Real Estate
Investment Assets (it being understood that such review shall not obligate the
Company to accept any comments of Parent with respect to such agreements) and to
consider in good faith the views of Parent (it being understood that the
obligations under this Section 8.9(a) are limited to requiring the Company's
Board of Directors to provide such instruction and do not impose any obligations
on the Company as with respect to the current President of IFS or his report(s)
or the consequences of their actions or inactions).
(b) Holding shall have the right to require that, after the satisfaction or
waiver of all conditions precedent set forth in Article 9 but at or immediately
prior to the Closing, all or any of the Real Estate Investment Assets that have
not been sold prior to the Closing Date to be sold and transferred to Holding or
one or more of its Subsidiaries for such consideration and in such terms as
Holding shall determine, provided that in no event shall any such terms or
conditions have any force or effect until immediately prior to the Closing, and
provided, further that this Section 8.9(b) shall not obligate the Company or its
Subsidiaries to obtain any third party or governmental approval and such sale
and transfer shall not be required if the sale or transfer could cause a failure
of a condition precedent to this Agreement or if it would violate applicable
Law.
(c) Prior to the Closing, the Company (or its appropriate Subsidiaries)
will enter into a definitive agreement to sell on or after the Closing Date the
investment set forth in Section 8.9(c) of the Company Disclosure Schedule to a
Third Party on such terms as the Company shall be able to sell it, provided that
prior to entering into any such agreement the Company will provide Parent with a
copy of all agreements relating to such sale and Parent will have two Business
Days to approve or reject such terms in writing and provided, further that the
Closing may be a condition precedent to the closing of any such agreement. If
Parent rejects such terms in writing, then the Company will not enter into such
Agreement and all obligations of the Company under this Section 8.9(c) will
immediately terminate. The parties acknowledge that the closing of any such sale
shall be subject to certain governmental approvals.
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8.10. TREATMENT OF NET PROCEEDS. In the event the amount of Net Proceeds
Deemed Received by the Company exceeds the Threshold Amount (which Net Proceeds,
for the avoidance of doubt, shall not include any contingent rights to future
cash payments or any amounts of cash held in escrow) (the amount of Net Proceeds
in excess of the Threshold Amount is referred to herein as the "EXCESS NET
PROCEEDS AMOUNT"), each of Holding, Parent, Acquiror and the Company shall
increase the Common Merger Consideration such that the additional amounts
payable to holders of the Company Shares pursuant to Section 3.3 hereto
(assuming (a) no Common Shares are held by any of Holding, Parent, Acquiror or
any wholly-owned Company Subsidiary and (b) no Dissenting Shares), holders of
Company Options pursuant to Section 3.7 hereto (assuming all Company Options are
terminated thereunder) and holders of Company Warrants (assuming all Company
Warrants are canceled thereunder), in the aggregate, shall equal the Excess Net
Proceeds Amount; provided, however that in no event shall the Common Merger
Consideration exceed $12.00 per share, subject to adjustment as contemplated by
Section 7.4(c). Each of Holding, Parent and Acquiror agree to take all necessary
actions to effect the provisions of the immediately foregoing sentence, if
applicable.
8.11. 401(K) RESTORATION PLAN. The Company shall, and Holding and Parent
shall cause the Surviving Corporation to, pay to each participant in the
Company's 401(k) Restoration Plan (the "RESTORATION PLAN") whose employment with
the Company terminates the amount owing to him under the Restoration Plan as of
the date of termination. Such payment shall be made in accordance with the terms
of the Restoration Plan.
ARTICLE 9
CONDITIONS TO MERGER
9.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
Company, Parent and Acquiror to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) the Company Stockholder Approval shall have been obtained;
(b) any applicable waiting period or required approval under the HSR Act,
Non-U.S. Competition Law or any other similar applicable Law required prior to
the completion of the Merger shall have expired or been earlier terminated or
received; and
(c) no Governmental Entity of competent authority or jurisdiction shall
have issued any Law, decision or taken any other action then in effect, which
restrains, enjoins or otherwise prohibits or makes illegal the consummation of
the Merger; provided, however, that the parties hereto shall use their
commercially reasonable efforts to have any such restraint, injunction or
prohibition removed or vacated.
9.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the Merger are subject to the satisfaction of the
following further conditions:
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(a) (i) each of Holding, Parent and Acquiror shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, (ii) (A) the representations and
warranties of Holding, Parent and Acquiror contained in this Agreement that are
qualified by reference to a Parent Material Adverse Effect or materiality shall
be true and correct when made and at and as of the Effective Time, as if made at
and as of such time (except for those representations and warranties that speak
as of a specified time, which shall be true and correct as of such specified
time), and (B) all other representations and warranties of Holding, Parent and
Acquiror shall have been true and correct when made and at and as of the
Effective Time, as if made at and as of such time (except for those
representations and warranties that speak as of a specified time, which shall be
true and correct as of such specified time), except such representations and
warranties of Holding, Parent and Acquiror which if incorrect would not be
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect, and (iii) the Company shall have received a certificate signed
by the Chief Executive Officer or President of each of Holding, Parent and
Acquiror to the foregoing effect.
9.3. CONDITIONS TO THE OBLIGATIONS OF HOLDING, PARENT AND ACQUIROR. The
obligations of Holding, Parent and Acquiror to consummate the Merger are subject
to the satisfaction of the following further conditions:
(a) (i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) except to the extent waived in writing by Parent or any
disposition of assets after the date of this Agreement that is permitted
pursuant to this Agreement (A) the representations and warranties of the Company
contained in this Agreement that are qualified by reference to a Company
Material Adverse Effect or materiality shall be true and correct when made
(subject to Section 6.5) and at and as of the Effective Time, as if made at and
as of such time (except for those representations and warranties that speak as
of a specified time, which shall be true and correct as of such specified time),
(B) the representations and warranties set forth in Sections 4.1, 4.2, 4.5,
4.6(b), 4.16, 4.22 and 4.23 that are not qualified by materiality or Material
Adverse Effect shall be true and correct in all material respects when made
(subject to Section 6.5) and at and as of the Effective Time, as if made at and
as of such time (except for those representations and warranties that speak as
of a specified time, which shall be true and correct as of such specified time),
and (C) all other representations and warranties of the Company shall have been
true and correct when made and at and as of the time of the Effective Time, as
if made as of such time (except for those representations and warranties that
speak as of a specified time, which shall be true and correct as of such
specified time), except for such failures to be true or correct that would not
be reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect, provided, however that even if a condition set forth in
clause (A), (B) or (C) of clause (ii) is not satisfied, the condition to the
obligations of Holdings, Parent and Acquiror to consummate the Merger contained
in clause (ii) shall be deemed satisfied if the aggregate Damages to Holding,
Parent, the Surviving Corporation and/or the Company Subsidiaries from all
breaches of representations and warranties (after giving effect to Section 6.5
but without giving effect to any Material Adverse Effect or materiality
qualifications but excluding any breach that is waived in writing by Parent and
any disposition of assets after the date of this Agreement that is permitted
pursuant to this Agreement) would not be reasonably likely to exceed,
individually or in the aggregate, $20 million, and (iii) Acquiror shall have
received a certificate signed by the Chief
58
Executive Officer or Chief Financial Officer of the Company to the foregoing
effect. The $20 million threshold contained in clause (ii) shall not be
considered evidence either for or against any assertion that a Material Adverse
Effect has occurred.
(b) all consents, approvals, actions, orders, authorizations,
registrations, declarations, announcements and filings set forth on Section
8.1(d) of the Company Disclosure Schedule shall have been obtained or made; and
(c) (i) Holding or Parent shall have received (A) the proceeds of the
Financing on the terms contemplated by the Commitment Letter or (B) an aggregate
of at least $610,000,000 of debt financing on terms contemplated by the last
sentence of Section 7.5(a) hereto and (ii) in the event that any Financing or
debt financing is placed into escrow and the Company has approved the terms of
such escrow (which approval will not be unreasonably withheld or delayed), the
conditions to the release of such escrow shall have been satisfied.
ARTICLE 10
TERMINATION
10.1. TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time by written notice, whether
before or after the Company Stockholder Approval shall have been obtained:
(a) by mutual written agreement of Holding, Parent, Acquiror and the
Company, in each case duly authorized by the Boards of Directors or a duly
authorized committee thereof;
(b) by either Acquiror or the Company, if
(i) the Merger shall not have been consummated by July 14, 2003 (the
"END DATE"); provided, however, that the right to terminate this Agreement
under this Section 10.1(b)(i) shall not be available to any party whose
breach of any provision of this Agreement has resulted in the failure of
the Merger to occur on or before the date the Merger Agreement is sought to
be terminated pursuant to this clause (i);
(ii) there shall be any Law that makes consummation of the Merger
illegal or otherwise prohibited or any judgment, injunction, order or
decree of any Governmental Entity having competent jurisdiction enjoining
the Company or Acquiror from consummating the Merger is entered and the
injunction, judgment, order or decree shall have become final and
nonappealable and, prior to that termination, the parties shall have used
reasonable best efforts to resist, resolve or lift, as applicable, the Law,
judgment, injunction, order or decree; or
(iii) (A) the Company Stockholder Meeting has been convened and
concluded and (B) the Company Stockholder Approval shall not have been
obtained;
59
(c) by the Company,
(i) if a breach of or failure to perform in any material respect any
representation, warranty, covenant or agreement on the part of Holding,
Parent or Acquiror set forth in this Agreement shall have occurred which
would cause any of the conditions set forth in Sections 9.1(b) or 9.2(a)
not to be satisfied, and such condition shall be incapable of being
satisfied by the End Date; or
(ii) as contemplated by Section 6.3(d), provided, however that
termination of this Agreement pursuant to this Section 10.1(c)(ii) shall
not be effective until the Termination Fee has been paid to Acquiror in
accordance with Section 10.2(b); or
(d) by Acquiror, if:
(i) a breach of or failure to perform in any material respect any
representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement shall have occurred which would cause any of
the conditions set forth in Sections 9.1(b) or 9.3(a) not to be satisfied,
and such condition is incapable of being satisfied by the End Date;
(ii) (A) the Board of Directors of the Company, the Special Committee
or any other duly authorized committee of the Board of Directors shall (1)
amend, withdraw, modify, change, condition or qualify the Company
Recommendation in a manner adverse to Holding, Parent and Acquiror; (2)
approve or recommend to the Company Stockholders an Acquisition Proposal
(other than by Holding, Parent, Acquiror or their Affiliates); (3) approve
or recommend that the Company Stockholders tender, or otherwise fail to
recommend the Company Stockholders not to tender, their Company Shares in
any tender or exchange offer that is an Acquisition Proposal (other than by
Holding, Parent, Acquiror or their Affiliates); or (4) approve a resolution
or agree to do any of the matters set forth in the immediately foregoing
clauses (1) through (3); or (B) after the third Business Day following
Parent's receipt of a Notice of Superior Proposal unless prior to such
termination (x) a new Notice of Superior Proposal has been delivered with
respect to an Acquisition Proposal by a different Third Party than the
prior Notice of Superior Proposal (in which event, such new Notice of
Superior Proposal shall then be subject to this Section 10.1(d)(ii)(B)),
(y) a new Notice of Superior Proposal has been delivered with respect to a
Modified Superior Proposal (in which event, such new Notice of Superior
Proposal shall then be subject to this Section 10.1(d)(ii)(B)) or (z) the
Company shall have irrevocably withdrawn such Notice of Superior Proposal
and terminated all discussions and negotiations with such Third Party
regarding any Acquisition Proposal;
(iii) any Person or group (other than Holding, Parent, Acquiror or
their Affiliates) acquires beneficial ownership of a majority of the
outstanding Company Shares; or
(iv) as contemplated by Section 6.5.
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10.2. EFFECT OF TERMINATION.
(a) If this Agreement is terminated pursuant to Section 10.1 (except as
provided in Section 10.2(b) and Section 10.2(c)), there shall be no liability or
obligation on the part of Holding, Parent, Acquiror, the Company or any of their
respective officers, directors, stockholders, agents or Affiliates, except no
such termination shall relieve any party hereto of any liability or damages
resulting from any willful breach of this Agreement; provided that the
provisions of Sections 8.3, 8.7, 10.2, 10.3, 10.4 and Article 11 of this
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
(b) In the event that:
(i) this Agreement is terminated by Acquiror pursuant to Section
10.1(d)(ii)(A)(1) (but only if, prior to the time the Board of Directors,
Special Committee or other committee amended, withdrew, modified, changed,
conditioned or qualified the Company Recommendation, the Company had
received or there had been any public announcement or disclosure of an
Acquisition Proposal), Section 10.1(d)(ii)(A)(2), (3) or (4), Section
10.1(d)(ii)(B), or Section 10.1(d)(iii), the Company shall pay to Parent
(in immediately available funds to an account designated by Parent) on the
next Business Day following such termination a cash amount equal to the
$7,000,000 (the "TERMINATION FEE");
(ii) this Agreement is terminated by the Company pursuant to Section
10.1(c)(ii), then simultaneous with such termination, the Company shall pay
to Acquiror (in immediately available funds to an account designated by
Parent) a cash amount equal to the Termination Fee; or
(iii) (A) this Agreement is terminated pursuant to Section 10.1(b)(i)
(provided that at the time of such termination pursuant to Section
10.1(b)(i), the condition precedent in Section 9.1(b) shall have been
satisfied and the reason for the Closing not having previously occurred
shall not be the failure to satisfy the condition precedent set forth in
Section 9.2(a) or Section 9.3(c)), Section 10.1(b)(iii) or Section
10.1(d)(i) (but only if such termination pursuant to Section 10.1(d)(i)
relates to the breach of or failure to perform in any material respect a
covenant or agreement of the Company), (B) an Acquisition Proposal (with
all percentages included in the definition of Acquisition Proposal
increased to 30% for purposes of this definition) has been made prior to
such termination and (C) a transaction contemplated by an Acquisition
Proposal (with all percentages included in the definition of Acquisition
Proposal increased to 30% for purposes of this definition) is completed or
a definitive agreement is executed by the parties thereto with respect to
an Acquisition Proposal (with all percentages included in the definition of
Acquisition Proposal increased to 30% for purposes of this definition)
within twelve (12) months from the date this Agreement is terminated, the
Company shall pay to Parent (in immediately available funds to an account
designated by Parent) on the next Business Day following the earlier of the
closing of the transaction contemplated by such Acquisition Proposal or the
Company entering into a definitive agreement contemplating such Acquisition
Proposal, a cash amount equal to the Termination Fee. Subject to Section
11.8, in the event that the Termination Fee is paid pursuant to this
61
Section 10.2(b)(iii), such payment will constitute liquidated damages and
be in lieu of all other damages otherwise receivable by Holding, Parent or
Acquiror and, upon receipt, will be the sole and exclusive remedy for the
matters giving rise thereto.
(c) If and only if this Agreement is terminated pursuant to Section
10.1(c)(i) or 10.1(b)(i) (but, in the case of Section 10.1(b)(i), only if the
sole reason(s) for termination is the failure of a condition precedent set forth
in Section 9.1(b) and/or 9.3(c)), the parties acknowledge and agree that,
effective immediately upon such termination, the No-Raid Agreement shall be
amended and restated in its entirety, without any action by the parties thereto,
to read as set forth in Section 10.2(c) of the Holding, Parent and Acquiror
Disclosure Schedule.
(d) If and only if all of the conditions precedent in Article 9 have been
satisfied other than those in Section 9.3(c) and the sole reason for the failure
of such condition precedent is the breach of the Subscription Agreement and/or
the Xxxx Strategic Commitment Letter by the Investors (as defined therein),
Holding hereby assigns to the Company, effective as of such time, all of its
rights to enforce the Subscription Agreement and the Xxxx Strategic Commitment
Letter.
10.3. FEES AND EXPENSES. Except as otherwise specifically provided herein,
all fees and expenses incurred in connection herewith and the transactions
contemplated hereby shall be paid by the party incurring expenses, whether or
not the Merger is consummated.
10.4. INDEMNIFICATION.
(a) In the event of the termination of this Agreement prior to the
Effective Time (i) pursuant to Section 10.1(c)(i) or (ii) pursuant to Section
10.1(a) or 10.1(b)(i) due solely to the failure of the condition(s) set forth in
Section 9.1(b) and/or or 9.3(c) to be satisfied (in case of a termination under
either Section 10.1(a) or 10.1(b)(i)), then Parent, Holdings and Acquiror shall,
jointly and severally, indemnify and hold the Company and its Subsidiaries
(collectively, "COMPANY INDEMNIFIED PARTIES") harmless from and against any and
all damages incurred by any Company Indemnified Party (hereinafter "COMPANY
LOSSES"), which are caused by (1) the termination or delivery of notice of
termination, during the Covered Period (as defined below), by any person that is
a commercial real estate services broker or independent contractor of the
Company or its Subsidiaries as of February 7, 2003 of his or her employment or
independent contractor relationship with the Company or its Subsidiaries or (2)
the termination or substantial diminution, or notice thereof during the Covered
Period, by any Person that is a client of the Company or its Subsidiaries as of
February 7, 2003 of its commercial real estate services client relationship with
the Company or its Subsidiaries, including early termination of third-party
management, tenant representation and/or brokerage contracts, in each case under
clause (1) and clause (2) if (and only if) such termination or substantial
diminution (x) results from the announcement of discussions among the parties
hereto regarding the transactions contemplated hereby or the announcement of
this Agreement or the transactions contemplated hereby and (y) does not result
from the Company's breach of this Agreement, provided that the maximum aggregate
amount of Company Losses for which the Company Indemnified Parties may be
indemnified pursuant to this Section 10.4 is $50,000,000 and none of Parent,
Holdings or Acquiror will be liable for any Company Losses in excess of such
$50,000,000. For the
62
avoidance of doubt, "Company Losses" shall not include any matters arising out
of or resulting from (x) conditions generally affecting the business or industry
in which the Company or any of its Subsidiaries operate, (y) U.S., U.K., French
or global general economic or political conditions or financial markets in
general or (z) any outbreak or escalation of hostilities (including, without
limitation, any declaration of war by the U.S. Congress) or acts of terrorism.
Company Losses shall not include any reduction in market price or value of the
Company Shares or any other securities of the Company or any of its Subsidiaries
nor shall any such reduction in market price or value be used as evidence of, or
otherwise be deemed relevant to, the determination of any amount of damages
incurred. The amount of Company Losses as a result of an event specified in
clause (1) will be the cost (including any signing bonus) of replacing the
relevant broker or independent contractor with a comparable broker or
independent contractor plus the lost profits of the Company or its Subsidiaries
as a result of any lost revenue. "COVERED PERIOD" means the period from February
7, 2003 through the date this Agreement is terminated (it being understood that
the period for which damages may arise is not limited to the Covered Period).
(b) Subject to Section 10.2(c) and Section 11.8, the indemnity provided in
this Section 10.4 shall be the sole and exclusive remedy of the Company
Indemnified Parties against Parent, Holdings or Acquiror at law or equity for
any matter covered by Section 10.4(a).
ARTICLE 11
MISCELLANEOUS
11.1. NOTICES. All notices, requests and other communications to any party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given,
if to Holding, Parent or Acquiror, to:
CB Xxxxxxx Xxxxx Services, Inc.
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile Number: (000) 000-0000
with a copy to (which copy shall not be deemed to be notice to Holding,
Parent or Acquiror):
Xxxxxxx Xxxxxxx & Xxxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Facsimile Number: (000) 000-0000
63
if to the Company, to:
Insignia Financial Group, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile Number: (000) 000-0000
with a copy to (which copy shall not be deemed to be notice to the
Company):
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile Number: (000) 000-0000
with a copy to (which copy shall not be deemed to be notice to the
Company):
Dechert LLP
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: G. Xxxxxx X'Xxxxxxx
Facsimile Number: (000) 000-0000
or such other address or facsimile number as a party may hereafter specify for
the purpose by notice to the other parties hereto. Each notice, request or other
communication shall be effective only (a) if given by facsimile, when the
facsimile is transmitted to the facsimile number specified in this Section and
the appropriate facsimile confirmation is received or (b) if given by overnight
courier or personal delivery when delivered at the address specified in this
Section.
11.2. SURVIVAL. The representations and warranties contained herein and in
any certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement. The covenants contained in
Articles 2, 3, 7, and 11 and in Section 8.7 shall survive the Effective Time.
11.3. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived prior to the
Effective Time, if, and only if, the amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, a member of the Special
Committee on behalf of the Special Committee, Parent and Acquiror or in the case
of a waiver, by the party against whom the waiver is to be effective (if such
party is the Company, such waiver shall be signed also by a member of the
Special Committee on behalf of the Special Committee).
(b) At any time prior to the Effective Time, any party hereto may with
respect to any other party hereto (i) extend the time for the performance of any
of the obligations or other acts of such party and (ii) waive any inaccuracies
in the representations and warranties
64
of such party contained herein or in any document delivered pursuant hereto. No
such extension or waiver shall be deemed or construed as a continuing extension
or waiver on any occasion other than the one on which such extension or waiver
was granted or as an extension or waiver with respect to any provision of this
Agreement not expressly identified in such extension or waiver on the same or
any other occasion. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.
11.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that all or any of the rights or
obligations of Parent or Acquiror may be assigned to any direct or indirect
wholly-owned Subsidiary of such party (which assignment shall not relieve such
assigning party of its obligations hereunder); provided, further, that other
than with respect to the foregoing proviso, no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of the other parties hereto. Any purported assignment in violation
hereof shall be null and void.
11.5. COUNTERPARTS; EFFECTIVENESS; THIRD PARTY BENEFICIARIES. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by all of the other
parties hereto. Except as set forth in Sections 7.1 and 7.6, no provision of
this Agreement is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
11.6. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the internal Laws of the State of Delaware applicable to
contracts executed and fully performed within the state of Delaware.
11.7. JURISDICTION. Except as otherwise expressly provided in this
Agreement, the parties hereto agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in the United States District Court for the District of Delaware or, if
such court does not have jurisdiction over the subject matter of such proceeding
or if such jurisdiction is not available, in the Court of Chancery of the State
of Delaware, County of New Castle, and each of the parties hereby consents to
the exclusive jurisdiction of those courts (and of the appropriate appellate
courts therefrom) in any suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by Law, any objection which it may now or hereafter
have to the laying of the venue of any suit, action or proceeding in any of
those courts or that any suit, action or proceeding which is brought in any of
those courts has been brought in an inconvenient forum. Process in any suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any of the named courts. Without limiting
the foregoing, each party agrees that service of process on it by notice as
provided in Section 11.1 shall be deemed effective service of process.
65
11.8. ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at Law or in equity.
11.9. ENTIRE AGREEMENT. This Agreement (together with the exhibits and
schedules hereto), the Voting Agreements, the No-Raid Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof.
11.10. AUTHORSHIP. The parties agree that the terms and language of this
Agreement were the result of negotiations between the parties and, as a result,
there shall be no presumption that any ambiguities in this Agreement shall be
resolved against any party. Any controversy over construction of this Agreement
shall be decided without regard to events of authorship.
11.11. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon a determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
11.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.13. HEADINGS; CONSTRUCTION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement (a) words denoting the
singular include the plural and vice versa, (b) "it" or "its" or words denoting
any gender include all genders, (c) the word "including" shall mean "including
without limitation," whether or not expressed, (d) any reference herein to a
Section, Article, Paragraph, Clause or Schedule refers to a Section, Article,
Paragraph or Clause of or a Schedule to this Agreement, unless otherwise stated,
and (e) when calculating the period of time within or following which any act is
to be done or steps taken, the date which is the reference day in calculating
such period shall be excluded and if the last day of such period is not a
Business Day, then the period shall end on the next day which is a Business Day.
* * *
66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------
Xxxxx X. Xxxxxxxx
Office of the Chairman
CBRE HOLDING, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
CB XXXXXXX XXXXX SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
APPLE ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------
Xxxxxxx X. Xxxxx
President
