THIS DEED OF VARIATION is made on the 5 MARCH 1999
BETWEEN:-
(1) INSIGNIA FINANCIAL GROUP, INC. ("INSIGNIA"), incorporated in the State
of Delaware, U.S.A., whose principal office is at 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, X.X.X.; and
(2) XXXX XXXXXXX XXXXXXXX, as agent and attorney for the Covenantors as
defined below (the "COVENANTORS' REPRESENTATIVE").
RECITALS
(A) Pursuant to an offer document dated 20 February 1998 (the "OFFER
DOCUMENT"), Insignia's predecessor, also known as Insignia Financial
Group, Inc. ("OLD INSIGNIA"), offered to acquire all the issued and to
be issued share capital of Xxxxxxx Xxxxx Group Limited ("REGL") and the
offers contained in the Offer Document were declared unconditional on 25
February 1998.
(B) Old Insignia and Xxxxxx Xxxxxxx and Others entered into a deed of
warranty and indemnity dated 25 February 1998 (the "DEED OF WARRANTY AND
INDEMNITY") pursuant to which Old Insignia and the Covenantors assumed
obligations towards and acquired rights against each other.
(C) By an agreement dated 26 May 1998, Old Insignia agreed to merge with
Apartment Investment and Management Company with the latter company
operating as the surviving corporation.
(D) Prior to the merger referred to in Recital (C), Old Insignia transferred
its commercial business including REGL and its subsidiaries, to a
subsidiary of Insignia/ESG Holdings, Inc., ("IESG"), at that time a
wholly owned subsidiary of Old Insignia. Prior to such merger, Old
Insignia agreed to transfer its rights, obligations and liabilities
under and in respect of the Deed of Warranty and Indemnity and the Offer
Document to IESG.
(E) By a Deed of Assumption and Variation (the "DEED OF ASSUMPTION AND
VARIATION") which took effect from 30 September 1998, IESG was
substituted for Old Insignia in respect of the rights, obligations and
liabilities of Old Insignia under the Offer Document and the Deed of
Warranty and Indemnity.
(F) On 30 October 1998, IESG changed its name to "Insignia Financial Group,
Inc."
(G) The Covenantors' Representative was given power under the Deed of
Warranty and Indemnity and the Offer Document on behalf of the
Covenantors to vary, waive or agree any changes to the method of
calculating REGL Modified Pre-Tax Profit, Base Amount and Principal
Amount of Deferred Loan Notes to be issued, including,
without limitation, in order to address any issues that may arise from
the acquisition or merger of a company by or with any member of the
Group.
(H) The parties to this Deed wish to vary the terms of the offers contained
in the Offer Document and the terms of the Deed of Warranty and
Indemnity (as varied by the Deed of Assumption and Variation) in
accordance with the terms set out in this Deed.
NOW IT IS HEREBY AGREED:-
1. DEFINITIONS
1.1 In this Deed, including the Recitals, unless otherwise provided, words
and expressions defined in the Offer Document and the Deed of Warranty
and Indemnity bear the same meaning and in addition, the following words
and expressions shall bear the following meanings:-
"DEED" this Deed of Variation;
"OFFER DOCUMENT" has the meaning given to it in Recital (A);
"COVENANTORS" means each of the "Covenantors" as defined in the
Deed of Warranty and Indemnity;
"RELEVANT OFFERS" the C Ordinary Share Offer, the Cancellation
Alternative, the Convertible Share Offer and the
Ordinary Share Offer (as each such term is defined
in the Offer Document)
1.2 Unless otherwise stated, in this Deed:-
(a) references to the parties hereto include their respective
permitted assignees and/or the respective successors in title to
substantially the whole of their respective undertakings and, in
the case of individuals, to their respective estates and personal
representatives;
(b) references to persons shall include bodies corporate and
incorporated, associations, partnerships and individuals;
(c) words denoting the singular shall include the plural and words
denoting any gender shall include all genders;
(d) references to clauses are to clauses of this Deed; and
(e) a reference to (or any specified provision of) the Deed of
Warranty and Indemnity or the Offer Document is to be construed
as a reference to the Deed of Warranty and Indemnity or the Offer
Document (or that provision) as it has been, is by this Deed or
may hereafter be, from time to time, amended, varied,
supplemented, re-stated or novated.
2. EFFECT OF THE DEED
2.1 It is the intention of the parties to this Deed that the provisions of
this Deed shall become binding and effective on the date stated at the
beginning of this Deed.
2.2 Save to the extent amended by this Deed, the Deed of Warranty and
Indemnity (as subsequently amended by the Deed of Assumption and
Variation) and the Offer Document shall continue in full force and
effect.
3. VARIATION
3.1 The parties agree that the terms of the Relevant Offers as set out in
the Offer Document shall be varied as set out in this clause 3.
3.2 The calculation of the Principal amount of Deferred Loan Notes to be
issued under the Relevant Offers be and is hereby amended by making the
following amendments to paragraph 15(A) of Appendix III of the Offer
Document (Certain Definitions):-
(a) the definition of "BASE AMOUNT" be deleted and replaced by the
following definition:-
"BASE AMOUNT" shall mean in respect of the First Period, the
sum of (pounds sterling)5,750,000 and in respect
of each subsequent Relevant Period, the sum of:-
(a) (pounds sterling)6,000,000; and
(b) an amount equal to the aggregate of one
third of the Deferred Loan Notes payable in
respect of each preceding Relevant
Period(s);"
(b) the definition of "REGL Modified Pre-tax Profit" be deleted and
replaced by the following definition:-
"REGL MODIFIED
PRE-TAX PROFIT" shall mean in respect of each Relevant
Period the profit of the combined businesses
of the REGL Group (excluding Insignia RE
GmbH) and the St. Xxxxxxx Group (the
"ENLARGED GROUP") determined in accordance
with UK GAAP applied consistently (including
the recognition of all liabilities under
contractual obligations) with the audited
accounts of REGL for the year ending 31
December 1998, before UK Corporation Tax,
provided that such amount shall be adjusted
as follows:-
(a) increased by an amount equal to the
effect of amortising the goodwill
arising as a result of the acquisition
of St. Xxxxxxx Holdings Limited or any
other acquisition, the financial
results of which would be included in
the combined profit of the Enlarged
Group;
(b) increased by any amount that is
deducted from the combined profit of
the Enlarged Group during the Relevant
Period in respect of relevant claims
under, and as defined in, the St.
Xxxxxxx Agreement, provided that the
aggregate of all such adjustments may
never exceed(pounds sterling)100,000 in
respect of all Relevant Periods;
(c) increased by an amount that is deducted
from the combined profit of the
Enlarged Group during the Relevant
Period in respect of relevant claims
under the Deed of Warranty and
Indemnity provided that the aggregate
of all such adjustments may never
exceed(pounds sterling)150,000 in
respect of all Relevant Periods;
(d) in addition to any adjustments in
accordance with paragraphs (b) and (c)
above, increased by any amount that is
deducted from the combined profit of
the Enlarged Group during the Relevant
Period in respect of relevant claims
under the St Xxxxxxx Agreement or
relevant claims under the Deed of
Warranty and Indemnity but only to the
extent that such amount is recovered by
Insignia from the Escrow Fund or the
escrow fund (as such latter term is
defined in the St. Xxxxxxx Agreement);
(e) decreased by any gain on sale, or
increased by any loss on disposal, of
any portion of the business of the
Enlarged Group or any sale of assets of
the Enlarged Group not in the ordinary
course of business;
(f) decreased by an amount equal to a rate
of ten per cent. per annum (calculated
on a daily basis) of all additional
capital contributed or lent by Insignia
(including any Insignia securities or,
for the avoidance of doubt, any
retained profits of the Enlarged Group)
or provided in connection with any
acquisitions (other than the
acquisition
of St. Xxxxxxx Holdings Limited), the
results of which are included in the
accounts of the Enlarged Group for any
Relevant Period and so that any amount
calculated in accordance with this
sub-paragraph (f) shall be in
substitution for any other interest
charged in respect of the same capital
contributed or money lent and included
in the accounts of the Enlarged Group
in any Relevant Period;
(g) increased by an amount equal to any
interest charged on any loan provided
by Insignia to the REGL Group so that
REGL may purchase the business and
assets of the St. Xxxxxxx Group;
(h) increased by an amount equal to ten
per cent of the value of the aggregate
of the proceeds of disposal in any
Relevant Period of any portion of the
existing UK business of the St. Xxxxxxx
Group or REGL but only to the extent
that such proceeds are remitted to
Insignia;
(i) by disregarding, in respect of the
First Period, any profits or losses of
the St. Xxxxxxx Group up to and
including 28 February 1999;
(j) by disregarding any profit of REGL
attributable to its business outside
the United Kingdom applying its normal
criteria for determining such
attributions; and
(k) increased by an amount of any
professional and other external costs
incurred by the Enlarged Group in
connection with any acquisitions or
proposed acquisitions outside the
United Kingdom."
(c) the following definitions be included:-
(i) "references to the "FIRST PERIOD" are to the period
commencing on 1 January 1999 and ending on 31
December 1999 (both dates inclusive), references to
the "SECOND PERIOD" are to the period commencing on
1 January 2000 and ending on 31 December 2000,
references to the "THIRD PERIOD" are to the period
commencing on 1 January 2001 and ending on 31
December 2001 and references to the "FOURTH PERIOD"
are to the period commencing on 1 January 2002 and
ending on 31 December 2002;"
(ii) "RELEVANT PERIOD" shall mean, as appropriate, the
First Period, the Second Period, the Third Period
and the Fourth Period;"
(iii) "ST. XXXXXXX GROUP" shall mean St. Xxxxxxx
Holdings Limited and its subsidiaries from time to
time;"
(iv) "ST. XXXXXXX AGREEMENT" shall mean the agreement
between Insignia Financial Group Inc., and the
Vendors as defined therein, whereby Insignia agrees
to buy and the Vendors agree to sell the entire
issued share capital of St. Xxxxxxx Holdings
Limited.
(d) the definition of "Principal amount of Deferred Loan Notes to be
issued" be deleted and replaced by the following definition:-
"PRINCIPAL AMOUNT OF DEFERRED LOAN NOTES TO BE ISSUED"
shall mean, for each Relevant Period, the amount, if any,
equal to 3 times the amount by which REGL Modified Pre-tax
Profit exceeds the Base Amount.
(e) the definition of "MAXIMUM AMOUNT" be amended by deleting the
words from the beginning of the second line of the definition to
the end of section C on page 33 of the Offer Document and
substituting therefor the words "below shall not exceed
(pounds sterling)7,500,000."; and
(f) the definitions of "XXXXXXX XXXXX AUDITED FINANCIALS" and
"PENSION FUND INDEMNITY" shall be deleted.
3.3 In consideration of the amendments made hereby, the parties hereby agree
that Insignia shall pay to each Covenantor his appropriate proportion
(as defined in the Deed of Warranty and Indemnity) of the sum of
(pounds sterling)2,000,000, such payment to be made in cleared funds on
6 April 1999 to such account as the relevant Covenantor shall have
specified in writing or if no such bank account is specified, by cheque
to the relevant Covenantor sent to his address shown in the register of
such Covenantors maintained by Insignia.
3.4 In consideration of the amendments made hereby, Insignia hereby agrees
to pay to the Covenantors an amount (the "ACQUISITION FEE") equal to 5
per cent. of the aggregate of all consideration paid or earned (as the
case may be) from time to time to any vendor(s) of any European (for
these purposes, excluding the United Kingdom) companies, partnerships,
businesses or operations of any other description acquired prior to 31
December 2002 by Insignia or any of its subsidiary undertakings from
time to time, provided that:-
(a) the acquisition of Insignia RE GmbH and Colliers Xxxxxxxx
Xxxxxxxx, Inc. ("CMN") (but not any interest in any subsidiary of
CMN held by any person
other than CMN or a subsidiary of CMN) shall be disregarded for
the purposes of determining the Acquisition Fee; and
(b) the Acquisition Fee for all such acquisitions shall not exceed
(pound)1,000,000 in the aggregate.
3.5 For the purposes of clause 3.4:-
(a) "consideration paid or earned" shall include, without
limitation:-
(i) consideration in money or money's worth;
(ii) any consideration which is to be held subject to any
escrow arrangements (without discounting its value by
reason of being held subject to such escrow arrangements);
(iii) any signing-on fees paid to, or earned by, any vendor(s);
and
(iii) any stock options which will be deemed to have the same
value as attributed to such options in the transaction
from which they arise; and
(b) "vendor(s)" shall include any individual or corporate entity who/
which is entitled to receive any consideration (excluding salary,
on-going consultancy fees or other normal benefits in accordance
with any contract of employment or contract for services) as a
consequence of becoming an employee or consultant of Insignia or
any of its subsidiary undertakings from time to time,
notwithstanding that such person or corporate entity may not
dispose of any business in connection with receiving such
consideration.
3.6 Insignia shall pay to each Covenantor his appropriate proportion of any
Acquisition Fee within 10 business days of the consideration to which
such Acquisition Fee relates having been agreed or determined. Any
payment of an Acquisition Fee shall be made in the manner provided in
clause 3.3.
3.7 Notwithstanding anything to the contrary in the Deed of Warranty and
Indemnity or the Offer Document, the payments to the Covenantors
referred to in clauses 3.3, 3.4 and 3.6 shall be paid free from all
claims, liens, charges, mortgages, pledges, encumbrances and shall not
be subject to any equity set-off or cross-claim on the part of the
Company against any Covenantor, including, without limitation, the
escrow arrangements set out in clause 5 of Schedule 2 of the Deed of
Warranty and Indemnity.
3.8 Notwithstanding anything to the contrary in the Deed of Warranty and
Indemnity or the Offer Document, the Principal amount of Deferred Loan
Notes issued in any Relevant Period shall be issued to the Covenantors
free from all claims, liens, charges, mortgages, pledges, encumbrances
and shall not be subject to any equity set-off or cross-claim on the
part of the Company against any Covenantor and shall not be subject to
the Escrow Arrangements, unless and save only to the extent that if, at
the
date when the Deferred Loan Notes are issued, each Covenantor's
appropriate proportion of the value of any relevant claim outstanding
under the Deed of Warranty and Indemnity exceeds the amount of such
Covenantor's Retained Escrow Security. In such event, Insignia shall
deliver to the Escrow Agent Deferred Loan Notes equal to the value of
such shortfall of each Covenantor's Escrow Security and will deliver a
copy of such certificate to each Covenantor.
4 GOVERNING LAW
4.1 This Deed (and any dispute, controversy, proceedings or claim of
whatever nature arising out of or in any way relating to this agreement
or its formation) shall be governed by and construed in accordance with
English law.
4.2 The parties irrevocably submit to the non-exclusive jurisdiction of the
High Court of Justice in London for the purpose of hearing and
determining any dispute arising out of or in connection with this Deed
and for the purpose of enforcement of any judgement against their
respective assets.
EXECUTED and DELIVERED as a DEED by the parties on the date stated at the
beginning of the DEED.
EXECUTED and DELIVERED ) By: /s/ Xxxxxx X. Xxxxxx
as a deed by INSIGNIA FINANCIAL ) ------------------------------
GROUP, INC. acting by:- ) Xxxxxx X. Xxxxxx
President
By: /s/ Xxxx X. Xxxxxxx
------------------------------
Xxxx X. Xxxxxxx
Executive Vice President
Director
Director/Authorised Signatory
EXECUTED and DELIVERED ) By: /s/ Xxxx Xxxxxxx Xxxxxxxx
as a DEED by XXXX XXXXXXX ) ------------------------------
FROGGATT as agent and attorney ) Xxxx Xxxxxxx Xxxxxxxx
for the Covenantors, in the Chief Executive Officer
presence of:- )
DATED 5 March 1999
------------------
(1) INSIGNIA FINANCIAL GROUP, INC.
(2) XXXX XXXXXXX XXXXXXXX
DEED OF VARIATION
GPE(824.cln)/758725
