1
EXHIBIT 10.19
TECHNICAL SERVICES AGREEMENT
THIS AGREEMENT is made and entered into as of June 29, 1998, by and
between Insignia Financial Group, Inc., a Delaware corporation ("IFG"),
Insignia/ESG Holdings, Inc., a Delaware corporation ("I/ESG") and Apartment
Investment and Management Company, a Maryland real estate investment trust
("AIMCO").
BACKGROUND
IFG (which is the parent company of I/ESG) and AIMCO have entered into
a definitive agreement and plan of merger pursuant to which IFG will be merged
with and into AIMCO upon satisfaction of certain conditions (the "Merger").
Prior to consummation of the Merger, IFG intends to spin off I/ESG as
an independent, public company.
I/ESG currently utilizes certain information systems of IFG which will
be acquired by AIMCO upon consummation of the Merger. I/ESG is in the process of
establishing its own information systems in anticipation of its spin-off from
IFG; however, these new independent systems will not be fully operational until
after consummation of the Merger, but prior to March 31, 1999. Therefore, IFG,
AIMCO and I/ESG desire to enter into this Agreement whereby AIMCO will provide
I/ESG with the technical and information services described on Exhibit "A"
hereto upon the terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual covenants and agreements contained
herein, and upon the terms and subject to the conditions hereinafter set forth,
the parties do hereby agree as follows:
1. SCOPE OF SERVICES. Subject to the terms and conditions of this
Agreement, AIMCO agrees to use its best efforts to provide I/ESG with the
services described in "Exhibit A" (collectively, the "Services"). AIMCO agrees
to use its best efforts to insure that such Services are delivered and performed
in a timely and careful manner consistent with past practices of Insignia
Financial Group, Inc. I/ESG may in its discretion, at its sole expense, retain
outside consultants to assist AIMCO in providing the Services. AIMCO agrees that
it will cooperate with any outside consultants retained by I/ESG to assist AIMCO
in providing the Services and in the transition of the Services to I/ESG's
internal information systems personnel.
2. TERM OF AGREEMENT.
A. The term of this Agreement shall be for the period commencing on
the Effective Date of the Merger ("Effective Date") and ending on December 31,
1998; provided, however, that I/ESG may extend the term of this Agreement on a
month-to-month basis thereafter until such time as I/ESG determines in its sole
and absolute discretion that the Services are no longer
2
required, but in no event beyond March 31, 1999. Notwithstanding the foregoing,
I/ESG may terminate this Agreement at any time in its absolute and full
discretion, upon 15 days prior written notice to AIMCO. Upon termination of this
Agreement, all rights and obligations of each party hereunder, other than with
respect to any payments due hereunder, shall cease, as of the effective date of
such termination, and any amounts owed by either party hereunder shall be paid
in full. Upon any termination of any service hereunder, AIMCO will cooperate
with I/ESG in transferring such service function to such other technical service
providers as I/ESG shall designate. In addition, upon termination of this
Agreement, AIMCO shall return to I/ESG any property of I/ESG in its possession
used in connection with the Services.
B. I/ESG acknowledges that in the event I/ESG acquires additional
assets or merges with or acquires additional entities after the date hereof,
AIMCO's cost structure to provide the Services may increase. I/ESG shall,
therefore, notify, AIMCO in writing within five business days after the
execution of any binding definitive agreement pursuant to which additional
Services by AIMCO will be needed so that AIMCO may assess the effect such
agreement will have on AIMCO's cost of providing Services. AIMCO will notify
I/ESG in writing within 15 business days of any change in its cost structure,
and the Fee will be adjusted accordingly. Notwithstanding anything to the
contrary in this Agreement, AIMCO may terminate this Agreement upon 15 days
prior written notice in the event the parties cannot agree on the new cost
structure.
3. PLACE OF PERFORMANCE. AIMCO will perform the Services from the
locations where such Services were performed internally by IFG prior to
consummation of the Merger; provided, however, that such Services may be
performed from another location, if in AIMCO's reasonable business judgment it
preferable to do so and the performance of the Services from such other
location(s) will not have an adverse effect on the quality and timeliness of the
Services.
4. COMMUNICATIONS LINES. It is understood and agreed that I/ESG shall be
exclusively responsible for and shall pay all installation, monthly and other
charges relating to the installation and use of data communication lines in
connection with the Services. AIMCO shall not be responsible for loss of
availability of the communications lines used by I/ESG in accessing the
Services, except for any communication lines connecting I/ESG with AIMCO which
are the responsibility of AIMCO and except to the extent that AIMCO causes the
loss of any such communication lines.
5. FEES AND PAYMENTS.
A. I/ESG agrees to pay AIMCO a monthly fee (the "Fee") during the
term hereof in accordance with the fee schedule set forth on Exhibit C attached
hereto, subject to adjustment as provided in Section 2.B. The parties agree that
such Fee is intended to represent an approximation of the actual costs incurred
by AIMCO in performing and delivering the Services hereunder.
B. I/ESG shall pay the Fee each month in arrears within five
business days following receipt by I/ESG of an invoice from AIMCO specifying the
Fee amount owed for the
-2-
3
immediately preceding calendar month. Any invoice for a partial calendar month
shall be prorated. Such payments are to be made by wire transfer to the
following account of AIMCO (or another account designated in writing by AIMCO):
Bank:
City:
ABA Routing No.
Account No.
All invoices shall include any additional charges or credits
required to correct for any prior billing error, together with supporting
documentation explaining such error.
I/ESG shall be permitted to request from time to time copies
of supporting documentation relating to invoices it receives from AIMCO. I/ESG
shall also have the right, at its expense, to have fees and expenses which have
been invoiced by AIMCO to I/ESG audited by I/ESG's outside auditors for the
purpose of determining whether such fees and expenses have been correctly
computed in accordance with the provisions hereof. Such audits shall be
conducted during normal business hours and under reasonable terms and
conditions. AIMCO will cooperate with I/ESG's outside auditors by promptly
providing them with such documentation as they shall reasonably request in
connection with the audit.
D. All amounts not paid by I/ESG when due pursuant to this
Agreement shall bear interest at an annual rate equal to the Prime Rate, as
announced from time to time by First Union National Bank of South Carolina (or,
if not announced thereby, by another bank of national standing selected by
AIMCO), plus 1.5%, from the due date until such amounts are paid in full.
6. CONFIDENTIALITY OF I/ESG FILES; FILE SECURITY AND RETENTION.
A. Any I/ESG computer files or other information provided by
I/ESG to AIMCO for use in connection with provision of the Services shall remain
the exclusive and confidential property of I/ESG. AIMCO shall treat as
confidential and will not otherwise make available any I/ESG computer files or
other confidential information to any person other than employees of AIMCO on a
need-to-know basis. AIMCO will instruct its employees who have access to the
I/ESG computer files and other information to keep the same confidential by
using the same care and discretion that AIMCO uses with respect to its own
confidential property.
B. AIMCO and I/ESG will provide adequate security measures to
insure that third parties do not have access to the I/ESG computer files and
other information. AIMCO reserves the right to issue and change regulations and
procedures from time to time to improve file security upon notice and consent of
I/ESG.
C. AIMCO will take commercially reasonable precautions to prevent
the loss of or alteration to the I/ESG computer files. As a precaution, I/ESG
will, to the extent it deems necessary, keep copies of all source documents of
the information delivered to AIMCO or inputted by I/ESG into the AIMCO system
and will maintain a procedure external to the AIMCO system for the
reconstruction of lost or altered I/ESG computer files.
-3-
4
D. AIMCO will, to the extent applicable, retain the I/ESG
computer files held by AIMCO at AIMCO's facility in accordance with, and to the
extent provided by, AIMCO's then prevailing records retention policies. AIMCO
will not dispose of any I/ESG computer files without providing adequate written
notice to I/ESG. At I/ESG's request, AIMCO will provide I/ESG, in a standard
AIMCO format, with any and all of the I/ESG computer files requested by I/ESG
which are then in AIMCO's possession. Upon termination of this Agreement and
prior written notice by AIMCO, AIMCO may transfer any or all of the I/ESG
computer files to I/ESG.
7. OWNERSHIP, LICENSES AND SUBLICENSES, CONFIDENTIALITY AND
NON-DISCLOSURE.
A. I/ESG acknowledges that all computer programs (other than
pre-packaged third party software, but not including modifications,
enhancements, or improvements to such pre-packaged software made for the benefit
of AIMCO) and related documentation made available, directly or indirectly, by
AIMCO to I/ESG as part of the Services (the "AIMCO Products") will, after the
Effective Date, be the exclusive and confidential property of AIMCO or the third
parties from whom AIMCO has secured the right to use such computer programs and
documentation. AIMCO and the third parties referred to in the immediately
preceding sentence shall retain all rights and title, to the extent of their
respective interests, to all copyrights, trademarks, service marks, trade
secrets, and other proprietary rights in the applicable logos, product names,
AIMCO Products and Services.
B. I/ESG shall receive all improvements, enhancements,
modifications and updates to any AIMCO Products which are delivered to I/ESG as
part of the Services if and as they are made generally available by AIMCO, at no
cost, to I/ESG; provided, however, that in no event will AIMCO be required to
take any action that would constitute a violation of its obligations under any
software license agreement that it assumes in connection with the Merger or
otherwise.
C. I/ESG WILL NOT MAKE ANY ALTERATION, CHANGE OR MODIFICATION TO
ANY OF THE AIMCO PRODUCTS OR TO ANY OF THE AIMCO SUPPORTED FILES USED BY AIMCO
IN CONNECTION WITH PROVIDING THE SERVICES TO I/ESG. I/ESG MAY NOT RECOMPILE,
DECOMPILE, DISASSEMBLE, REVERSE ENGINEER, OR MAKE OR DISTRIBUTE ANY OTHER FORM
OF, OR ANY DERIVATIVE WORK FROM THE AIMCO PRODUCTS AND/OR THE SERVICES.
D. I/ESG shall treat as confidential and will not disclose or
otherwise make available any of the AIMCO Products or any trade secrets,
processes, proprietary data, information or documentation related thereto, or
any pricing or product information furnished to I/ESG by AIMCO (collectively,
the "Confidential Information"), in any form, to any person other than
employees, agents, consultants and representatives of I/ESG. I/ESG will instruct
its employees who have access to the Confidential Information to keep the same
confidential by using the same care and discretion that is used with respect to
its own confidential property and trade secrets.
-4-
5
E. I/ESG's use of any pre-packaged third party software during
the term of this Agreement will be governed by the terms and conditions of the
applicable third party license agreements contained in the package delivered to
I/ESG hereunder with such pre-packaged third party software.
8. REPRESENTATIONS AND WARRANTIES OF AIMCO. AIMCO hereby represents and
warrants to I/ESG that:
A. AIMCO will, immediately upon consummation of the Merger, have
the know-how and personnel necessary in order to comply with AIMCO's obligations
under this Agreement.
B. AIMCO will instruct its personnel who are or will be in charge
of overseeing the performance and delivery of the Services to I/ESG that AIMCO
has entered into this binding and enforceable Agreement obligating AIMCO to
perform and deliver the Services, and AIMCO will appoint Xx Xxxxxxx as I/ESG's
contact person at AIMCO.
9. INDEMNIFICATION
A. Subject to Section 9.E, AIMCO shall indemnify, defend (using
counsel acceptable to I/ESG) and hold harmless I/ESG and its affiliates and each
of their respective officers, directors, employees, stockholders, partners,
agents and representatives, and each of their respective successors and assigns,
from and against any and all liabilities, obligations, claims, losses, causes of
action, suits, proceedings, awards, judgments, settlements, demands, damages
(but including only direct damages, costs, expenses, fines, penalties,
deficiencies, taxes and fees, (including without limitation the fees, expenses,
disbursements and investigation costs of attorneys and consultants) arising
directly out of or resulting in any way from or in connection with (i) any
breach by AIMCO of its obligations and duties hereunder, and (ii) any
negligence, fraud, or willful or intentional misconduct by AIMCO or its
employees in connection with the performance of its obligations hereunder. For
purposes of this Section 0.X, Xxxxxxx, Arps and Xxxxx Xxxx, LLP are deemed to be
acceptable by I/ESG.
B. Subject to Section 9.E, Insignia/ESG agrees to indemnify,
defend (using counsel acceptable to AIMCO) and hold harmless AIMCO and its
affiliates and each of their respective officers, directors, employees,
stockholders, partners, agents and representatives, and each of their respective
successors and assigns, from and against any and all liabilities, obligations,
claims, losses, causes of action, suits, proceedings, awards, judgments,
settlements, demands, damages, costs, expenses, fines, penalties, deficiencies,
taxes and fees, (including without limitation the fees, expenses, disbursements
and investigation costs of attorneys and consultants) arising directly or
indirectly out of or resulting in any way from or in connection with (i) any
breach by I/ESG of its obligations and duties hereunder and (ii) any negligence,
fraud, or willful or intentional misconduct of I/ESG in connection with the
performance of its obligations hereunder.
C. If any action or proceeding is brought against a party with
respect to which indemnity may be sought under this Section 8, the indemnifying
party, upon written notice from
-5-
6
the indemnified party, shall assume the investigation and defense thereof,
including the employment of counsel and payment of all reasonable expenses. The
indemnified party shall have the right to employ separate counsel in any such
action or proceeding and to participate in the defense thereof, but the
indemnifying party shall not be required to pay the fees and expenses of such
separate counsel, unless such separate counsel is employed with the written
approval and consent of the indemnifying party, which consent may be withheld in
the indemnifying party's reasonable discretion.
D. The indemnities in this Section 9 shall survive the expiration
or termination of this Agreement.
E. Anything in this Agreement to the contrary notwithstanding,
AIMCO and I/ESG hereby waive and release each other of, and from, any and all
right of recovery, claim, action, or cause of action against each other, their
agents, officers, and employees, for any loss or damage that may occur to
property, by reason of fire or the elements, or other casualty, regardless of
cause or origin, including negligence of AIMCO or I/ESG and their officers,
employees or agents, to the extent the same is insured against under insurance
policies carried by AIMCO or I/ESG; however, neither party's waiver shall
include any deductible amounts on insurance policies carried by such party, nor
extend to acts of the type described in clauses (i) and (ii) of Section 8.A and
8.B. AIMCO and I/ESG agree to obtain a waiver of subrogation from the respective
insurance companies which have issued policies of insurance covering all risk of
direct physical loss and to have the insurance policies endorsed, if necessary,
to prevent the invalidation of the insurance coverages by reason of the mutual
waivers.
10. LAWS AND GOVERNMENTAL REGULATIONS. I/ESG shall be responsible (i) for
compliance with all laws and governmental regulations affecting its business and
(ii) for any use it may make of the Services to assist it in complying with such
laws and governmental regulations, and AIMCO shall not have any responsibility
relating thereto (including, without limitation, advising I/ESG of I/ESG's
responsibilities in complying with any laws or governmental regulations
affecting I/ESG's business). AIMCO agrees to use its best efforts to cause the
applicable Services to be designed and delivered in such a manner that they will
be able to assist I/ESG in complying with its applicable legal and regulatory
responsibilities; in no event shall I/ESG rely solely on its use of the Services
in complying with any laws and governmental regulations.
11. DEFAULT; REMEDIES UPON DEFAULT.
A. Should I/ESG (a) default in the payment of any sum of money
hereunder, (b) default in the performances of any of its other obligations under
this Agreement or (c) commit an act of bankruptcy or become the subject of any
proceeding under the Bankruptcy Act or become insolvent, or if any substantial
part of I/ESG's property becomes subject to any levy, seizure, assignment,
application, or sale for or by any creditor or governmental agency, then, in any
such event, AIMCO, at its option may, upon written notice thereof, immediately
terminate this Agreement. Nothing in this Section 11 shall in any way limit
AIMCO's rights and remedies under Section 9 hereof.
-6-
7
B. Should AIMCO (a) default in the payment of any sum of money
hereunder, (b) default in the performance of any of its obligations under this
Agreement of (c) commit an act of bankruptcy or become the subject of any
proceeding under the Bankruptcy Act or become insolvent, or if any substantial
part of AIMCO's property becomes subject to any levy, seizure, assignment,
application, or sale for or by any creditor or governmental agency, then, in any
such event, I/ESG, at its option may, upon written notice thereof, immediately
terminate this Agreement. Nothing in this Section 11 shall in any way limit
I/ESG's rights and remedies under Section 9 hereof.
12. GENERAL.
A. This Agreement shall not be assigned by I/ESG or AIMCO without
the prior written consent of the other party, and any attempt by I/ESG or AIMCO
to assign any of its rights, duties or obligations which arise under this
Agreement without such consent will be void.
B. Both parties acknowledge that it has not been induced to enter
into this Agreement by any representation or warranty not set forth in this
Agreement. This Agreement contains the entire agreement of AIMCO and I/ESG with
respect to its subject matter and supersedes all existing agreements and all
other oral, written or other communications between them concerning its subject
matter. This Agreement shall not be modified in any way except by a writing
signed by both AIMCO and I/ESG.
C. If any provision of this Agreement (or any portion thereof)
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this Agreement shall not in any way be
affected or impaired thereby.
D. The failure by either AIMCO or I/ESG to insist upon strict
performance of any of the provisions contained herein shall in no way constitute
a waiver of any of its rights as set forth herein, at law or in equity, or a
waiver by either AIMCO or I/ESG of any other provision or subsequent default by
the other in the performance of or compliance with any of the terms and
conditions set forth herein.
E. The headings in this Agreement are intended for convenience of
reference and shall not affect its interpretation.
INSIGNIA/ESG HOLDINGS, INC.
By:/s/ XXXX X. XXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President
INSIGNIA FINANCIAL GROUP, INC.
By:/s/ XXXX X. XXXXXXX
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Secretary
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By:/s/ XXXXXX X. XXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
-7-
8
EXHIBIT "A"
At I/ESG's sole expense:
1. AIMCO will provide access to either of AIMCO's mainframe Corporate
Financials or the PeopleSoft Corporate Financials for processing
I/ESG's Corporate Financials. Corporate Financials consists of the
following applications: Accounts Receivable / Billing, Accounts
Payable, General Ledger, and Fixed Assets.
2. AIMCO will provide access to the central hardware for processing
Corporate Financials. (Mainframe or HP Server).
3. AIMCO will provide Operations personnel to run central computer
Operations.
4. AIMCO will provide on-line availability to Accounts Payable, Accounts
Receivable, and General Ledger between the hours of 08:00 and 21:00
(EST), provided on-line availability shall not be for total hours
greater than provided I/ESG today.
5. AIMCO will provide inquiry and input capability to the I/ESG Accounting
staff located in Greenville, SC. Inquiry and limited input will be
provided to regional accounting offices located in Irvine, CA; Dallas,
TX; and Tampa, FL.
6. AIMCO will provide I/ESG reports as listed in EXHIBIT "B", Report
Schedule.
7. AIMCO will provide Corporate Financials software maintenance for the
term of this Agreement.
8. AIMCO will be responsible for data backups and delivering to I/ESG upon
request.
9. AIMCO will provide Customer Response Center for I/ESG to contact with
issues and questions. Hours of Operation for Response Center is 08:30 -
17:30 (EST), Monday through Friday.
-8-
9
EXHIBIT "B"
===================================================================================================================================
APPLICATION JOB NAME REPORTS FILES JOB COMPLETION TIME
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Financial Statements Day after each cutoff
(Overall, Supp A, Supp B),
08:30
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Cash Receipts Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Distribution of APs Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft AutoBank Transfer Report Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Corporate ACH Report Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Download Management Fee file Day after Supp A cutoff, 08:00
to network server
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Control File Update Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Transaction File List Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Unposted JE Register Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft General Ledger Account Summary Monday - Friday, 08:00
IV
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft General Ledger Out of Balance Monday - Friday, 08:00
Report
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft GL Update Error-Audit Report Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft JE Exception - XX Xxxxxx Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft JE Numeric Register Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Daily Transaction Analysis Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft Postage 16th of every month, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft GL Consolidation Errors File Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
G/L PeopleSoft GL Inactive Report Monday - Friday, 08:00
-----------------------------------------------------------------------------------------------------------------------------------
A/R PeopleSoft Daily Transaction Listing Monday - Friday, 08:30
===================================================================================================================================
-9-
10
EXHIBIT "B"
(CONTINUED)
** TIMES ARE EASTERN TIMES
===================================================================================================================================
APPLICATION JOB NAME REPORTS FILES JOB COMPLETION TIME
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Check Register Check Stock Monday - Friday, 08:30
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Unpaid Invoice Register Monday - Friday, 08:30
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Unpaid Invoice Register Due Monday - Friday, 08:30
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Check Recaps Monday - Friday, 08:30
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Daily A/P Distribution Monday - Friday, 08:30
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Check Register Check Stock Monday after cutoff, 08:30
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Unpaid Invoice Register Monday after cutoff, 08:30
-----------------------------------------------------------------------------------------------------------------------------------
A/P PeopleSoft Paid Invoices for Y/E Day after A run in March,
June, September, December,
08:30
===================================================================================================================================
-10-
11
EXHIBIT "C"
FEE SCHEDULE
A. Monthly charge for processing and support of the Services: $54,000
B. Other services outside the Services:
o Applications and Technical Services Personnel time: $60/hour plus
expenses
o CIO and Management Personnel time: $145/hour plus
expenses
-11-
