SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT {X}
FILED BY A PARTY OTHER THAN THE REGISTRANT { }
Check the appropriate box:
{ } Preliminary Proxy Statement
{ } Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
{ X } Definitive Proxy Statement
{ } Definitive Additional Materials
{ } Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
INSIGNIA FINANCIAL GROUP, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
{X} No fee required.
{ } Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction
applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
{ } Fee paid previously with preliminary materials.
{ } Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
[Insignia Financial Group Logo]
200 PARK AVENUE
NEW YORK, NY 10166
(212) 984-8033
FAX: (212) 984-8040
WWW.INSIGNIAFINANCIAL.COM
April 15, 2002
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2002 Annual Meeting of Stockholders of Insignia Financial Group, Inc. The
Annual Meeting will be held on Wednesday, May 15, 2002, beginning at 9:00 a.m.,
local time, at Proskauer Rose LLP, 1585 Broadway, 26th Floor, New York, NY
10036. The formal Notice of Annual Meeting is included in the enclosed
material.
This year, in addition to electing two directors, you are being asked to
approve an amendment to the 1998 Stock Incentive Plan and to ratify the
appointment of KPMG LLP as the Company's new auditors. Your Board of Directors
believes that the approval of these proposals is in the best interests of the
Company and all its shareholders, and unanimously recommends that you vote
"FOR" each proposal.
We appreciate your investment in Insignia Financial Group, Inc. It is
important that your views be represented whether or not you are able to be
present at the Annual Meeting. Please sign and return the enclosed proxy card
as soon as possible.
Sincerely,
/s/ Andrew L. Farkas
Andrew L. Farkas
Chairman of the Board of Directors
and Chief Executive Officer
INSIGNIA FINANCIAL GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Insignia
Financial Group, Inc. (the "Company") will be held on Wednesday, May 15, 2002,
beginning at 9:00 a.m., local time, at Proskauer Rose LLP, 1585 Broadway, 26th
Floor, New York, NY 10036 for the following purposes:
(1) to elect two directors, each for a term of three years expiring in 2005;
(2) to consider and vote upon the approval of an amendment to the Insignia
Financial Group, Inc. 1998 Stock Incentive Plan;
(3) to ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 2002; and
(4) to transact such other business as may lawfully come before the meeting
and any postponement or adjournment thereof.
Information with respect to the above matters is set forth in the Proxy
Statement that accompanies this Notice. Financial and other information
concerning the Company is contained in the Annual Report to Stockholders for
the year ended December 31, 2001.
The Board of Directors has fixed the close of business on April 1, 2002 as
the record date for determining stockholders entitled to notice of and to vote
at the meeting. A complete list of the stockholders of record entitled to vote
at the meeting will be produced and kept at the time and place of the meeting
and during the whole time thereof, and may be inspected by any stockholder who
is present. The list will also be open to examination of any stockholder for
any purpose germane to the meeting for a period of 10 days prior to the meeting
during ordinary business hours at the office of the Company's Corporate
Secretary at 200 Park Avenue, 17th Floor, New York, New York 10166.
So that we may be sure your shares will be voted at the meeting, please
date, sign and return the enclosed proxy card promptly. For your convenience if
you are in the United States, a prepaid return envelope is enclosed for your
use in returning your proxy card. If you attend the meeting, you may revoke
your proxy and vote in person.
By Order of the Board of Directors,
/s/ Adam B. Gilbert
Adam B. Gilbert
Secretary
New York, New York
April 15, 2002
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. EVEN IF
YOU PLAN TO BE PRESENT, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD AT YOUR EARLIEST CONVENIENCE IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY.
INSIGNIA FINANCIAL GROUP, INC.
200 PARK AVENUE
NEW YORK, NEW YORK 10166
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2002
GENERAL INFORMATION
The enclosed proxy is solicited by the Board of Directors of Insignia
Financial Group, Inc., a Delaware corporation ("Insignia" or the "Company"),
for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
on Wednesday, May 15, 2002, beginning at 9:00 a.m., local time, at Proskauer
Rose LLP, 1585 Broadway, 26th Floor, New York, NY 10036, and at any
postponement or adjournment thereof. The Notice of Annual Meeting of
Stockholders, this Proxy Statement and the enclosed proxy card will be first
mailed to stockholders on or about April 15, 2002.
Insignia, which was incorporated under the laws of the state of Delaware
on May 6, 1998 and was formerly known as Insignia/ESG Holdings, Inc.,
originally was a wholly-owned subsidiary of Insignia Financial Group, Inc., a
Delaware corporation ("Former Parent"). On September 21, 1998, Former Parent
effected the spin-off of Insignia through a pro rata distribution to the
holders of Class A common stock of Former Parent of all the then outstanding
common stock of Insignia (the "Spin-Off"). On October 1, 1998, Former Parent
(which then consisted solely of businesses and assets relating to the
multi-family residential real estate industry) merged into Apartment Investment
and Management Company, a Maryland corporation ("AIMCO"), with AIMCO being the
surviving corporation (the "Merger"). On November 2, 1998, Insignia assumed the
name of Former Parent, "Insignia Financial Group, Inc.," and reclaimed Former
Parent's original New York Stock Exchange symbol, "IFS." The principal
executive offices of Insignia are located at 200 Park Avenue, New York, New
York 10166.
The securities of the Company entitled to vote at the Annual Meeting
consist of shares of common stock, par value $.01 per share, of the Company
("Common Stock"). At the close of business on April 1, 2002 (the "Record
Date"), there were outstanding and entitled to vote 22,925,549 shares of Common
Stock. The holders of record of Common Stock on the Record Date are entitled to
one vote per share. The Company's Certificate of Incorporation does not provide
for cumulative voting in the election of directors.
VOTING AND PROXY PROCEDURES
A properly executed proxy received in time for the Annual Meeting will be
voted in accordance with the directions given in the proxy. The enclosed form
of proxy provides a means for the holders of Common Stock to vote for both
nominees for director listed therein or to withhold authority to vote for one
or both of such nominees. STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES ON
THE PROXY, BUT IF NO CHOICE IS SPECIFIED, ELIGIBLE SHARES WILL BE VOTED FOR (1)
THE ELECTION OF THE TWO NOMINEES FOR DIRECTOR NAMED THEREIN, (2) THE PROPOSED
AMENDMENT TO THE INSIGNIA FINANCIAL GROUP, INC. 1998 STOCK INCENTIVE PLAN (THE
"STOCK PLAN") AND (3) THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP ("KPMG")
AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31,
2002. At the date of this Proxy Statement, management of the Company knows of
no other matters which are likely to be brought before the Annual Meeting.
However, if any other matters should properly come before the Annual Meeting,
the persons named in the enclosed proxy will have discretionary authority to
vote such proxy in accordance with their best judgment on such matters.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked by a duly executed later dated proxy, by written notice
filed with the Secretary of the Company at the Company's corporate office at
any time before the proxy is exercised, or by voting in person at the Annual
Meeting.
The holders of a majority of the total shares of Common Stock issued and
outstanding at the close of business on the Record Date, whether present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The affirmative vote of a plurality of the
votes cast at the Annual Meeting is required for the election of directors. The
affirmative vote of a majority of the shares present (in person or by proxy)
and entitled to vote on the proposal to amend the Stock Plan is required to
approve such proposal, provided that the total number of votes cast on such
proposal represents over 50% of the outstanding Common Stock on the Record
Date. The affirmative vote of a majority of the shares present (in person or by
proxy) and entitled to vote at the Annual Meeting is required for the
ratification of the appointment of KPMG as the Company's independent auditors
for the fiscal year ending December 31, 2002 and for any other matters that may
properly come before the Annual Meeting or any postponement or adjournment
thereof.
Shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee that are represented at
the Annual Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum at the Annual Meeting, but will not be treated as a vote cast either for
or against a proposal.
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, proxies may be solicited by the directors,
officers and employees of the Company, without additional compensation, by
personal interview, telephone, telegram or otherwise. Arrangements will also be
made with brokerage firms and other custodians, nominees and fiduciaries who
hold the Common Stock of record for the forwarding of solicitation materials to
the beneficial owners thereof. The Company will reimburse such brokers,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith. To assist in the solicitation of
proxies, the Company has engaged D.F. King & Co., Inc. at a fee not to exceed
$5,000 plus reimbursement of its out-of-pocket expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 1, 2002, certain information
with respect to shares of Common Stock beneficially owned by each of Insignia's
directors, by each nominee for director, by Insignia's Chief Executive Officer
and each of the four other most highly compensated executive officers serving
as such at December 31, 2001 (the "Named Executive Officers"), by all of its
directors and executive officers as a group and by persons who are known to the
Company to be the beneficial owners of more than five percent of the issued and
outstanding shares of Common Stock. Such persons have sole voting power and
sole dispositive power with respect to all shares set forth in the table unless
otherwise specified in the footnotes to the table.
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------ ------------------ -----
Andrew L. Farkas .......................... 2,233,210(1) 9.4%
Insignia Financial Group, Inc.
200 Park Avenue
New York, NY 10166
Apollo Real Estate Investment ............. 1,667,821(2) 7.3%
Fund, L.P. and Apollo Real Estate
Advisors, L.P.
2 Manhattanville Road
Purchase, NY 10577
Capital Group International, Inc. ......... 2,668,030(3) 11.6%
and Capital Guardian Trust
Company
11100 Santa Monica Boulevard
Los Angeles, CA 90025
2
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------ ------------------ -----
Dimensional Fund Advisors, Inc. ......................... 2,112,631(4) 9.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Stephen Feinberg ........................................ 1,854,131(5) 7.5%
450 Park Avenue, 28th Floor
New York, New York 10022
Greenlight Capital, L.L.C., ............................. 1,693,400(6) 7.4%
David Einhorn and
Jeffrey A. Keswin
420 Lexington Avenue, Suite 1740
New York, New York 10170
James A. Aston .......................................... 258,220(7) 1.1%
Robert J. Denison ....................................... 38,821(8) *
Robin L. Farkas ......................................... 215,189(9) *
Alan C. Froggatt ........................................ 44,988(10) *
Frank M. Garrison ....................................... 204,135(11) *
Robert G. Koen .......................................... 38,555(12) *
Stephen M. Ross ......................................... 4,400(13) *
Stephen B. Siegel ....................................... 409,152(14) 1.8
Ronald Uretta ........................................... 251,315(15) 1.1%
H. Strauss Zelnick ...................................... 49,555(16) *
All directors and executive officers as a group ......... 3,841,902(1)(7)-(17) 15.4%
(13 individuals)
----------
(*) Denotes less than 1%.
(1) Includes shares owned by (i) Metro Shelter Directives, Inc. and (ii) F
III, Inc. Also includes 835,562 shares subject to options and warrants
that are or will become exercisable within 60 days.
(2) Apollo Real Estate Advisors, L.P. is the managing general partner of
Apollo Real Estate Investment Fund, L.P. (collectively, "Apollo"). The
foregoing is based upon a Schedule 13G/A filed by Apollo with the
Securities and Exchange Commission (the "Commission") dated February 12,
2002.
(3) Capital Group International, Inc. ("Capital") is the parent holding
company of a group of investment management companies. Capital does not
have investment power or voting power over any of the securities reported
herein. Capital Guardian Trust Company ("Capital Guardian"), a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934 and a
wholly owned subsidiary of Capital, is the beneficial owner of the
reported shares as a result of serving as the investment manager of
various institutional accounts. The shares reported include 48,000 shares
resulting from the assumed conversion of warrants to purchase Common
Stock. The foregoing is based upon a Schedule 13G filed by Capital and
Capital Guardian with the Commission dated February 9, 2001.
(4) Dimensional Fund Advisors, Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisers Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including comingled group trusts.
(These investment
3
companies and investment vehicles are the "Portfolios"). In its role as
investment adviser and investment manager, Dimensional possessed both
investment and voting power over 2,112,631 shares of Common Stock as of
December 31, 2001. The Portfolios own all securities reported in this
statement, and Dimensional disclaims beneficial ownership of such
securities. The foregoing is based upon information provided to the
Company by Dimensional on March 1, 2002.
(5) 250,000 shares of convertible preferred stock (the "Preferred Stock") of
the Company are held of record by Madeleine L.L.C. on behalf of various
private investment funds referred to below that are managed by Stephen
Feinberg. Mr. Feinberg possesses sole voting and investment authority
over such shares. The Preferred Stock is convertible at any time into a
total of 1,785,714 shares of Common Stock. The private investment funds
include Cerberus Partners, L.P., Cerberus Institutional Partners, L.P.
and Cerberus International, Ltd. The foregoing is based upon a Schedule
13D filed by Mr. Feinberg with the Commission dated February 18, 2000.
Also includes 68,417 shares of Common Stock issued in lieu of cash
dividends on the Preferred Stock.
(6) Greenlight Capital, L.L.C. ("Greenlight") provides investment management
services to private individuals and institutions, including Greenlight
Capital, L.P., of which Greenlight is the general partner ("Fund"),
Greenlight Capital Offshore, Ltd., for whom Greenlight acts as investment
advisor ("Offshore"), and Greenlight Capital Qualified, L.P., of which
Greenlight is the general partner ("Qualified'). David Einhorn and
Jeffrey A. Keswin are the principals of Greenlight. Greenlight, Mr.
Einhorn and Mr. Keswin for the account of each of Fund, Offshore and
Qualified have the power to vote and dispose of the shares held by each
such entity. Greenlight, Mr. Einhorn and Mr. Keswin disclaim beneficial
ownership of the shares owned by Fund, Offshore or Qualified. The
foregoing is based upon information provided to the Company by Greenlight
in March 2002.
(7) Includes 191,240 shares subject to options and warrants that are or will
become exercisable within 60 days and 129 shares held in an IRA. Also
includes 5,934 shares owned by Mr. Aston's children, with respect to
which Mr. Aston disclaims beneficial ownership.
(8) Includes 266 shares held by First Security Management, Inc., a
corporation of which Mr. Denison is the president and sole shareholder.
Also includes 38,555 shares subject to options and warrants that are or
will become exercisable within 60 days.
(9) Includes 38,555 shares subject to options and warrants that are or will
become exercisable within 60 days. Also includes 7,998 shares owned by
Mr. Farkas's wife, with respect to which Mr. Farkas disclaims beneficial
ownership.
(10) Includes 21,587 shares subject to options that are or will become
exercisable within 60 days. Also includes 3,396 shares owned by Mr.
Froggatt's wife, with respect to which Mr. Froggatt disclaims beneficial
ownership.
(11) Includes 191,240 shares subject to options and warrants that are or will
become exercisable within 60 days.
(12) Includes 38,555 shares subject to options and warrants that are or will
become exercisable within 60 days.
(13) Includes 4,400 shares subject to options and warrants that are or will
become exercisable within 60 days.
(14) Includes (a) 309,152 shares subject to options that are or will become
exercisable within 60 days, and (b) 350 shares owned by Mr. Siegel's
child, with respect to which Mr. Siegel disclaims beneficial ownership.
(15) Includes (a) 191,240 shares subject to options and warrants that are or
will become exercisable within 60 days, and (b) 133 shares owned by Mr.
Uretta's spouse and 2,238 shares owned by Mr. Uretta's children, with
respect to which Mr. Uretta disclaims beneficial ownership.
(16) Includes 38,555 shares subject to options and warrants that are or will
become exercisable within 60 days.
(17) Includes 66,274 shares subject to options and warrants that are or will
become exercisable within 60 days.
4
MATTERS TO COME BEFORE THE ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Board of
Directors of Insignia (the "Insignia Board") will consist of not fewer than
three persons. The Insignia Board has fixed the number of directors at eight.
The Certificate of Incorporation of the Company divides the Insignia Board
into three classes, with such classes being as nearly equal in number as the
total number of directors constituting the entire Insignia Board permits. The
terms of office of the respective classes expire in successive years. At the
Annual Meeting, two members are to be elected to the Insignia Board to serve
for a term of three years until the annual meeting of stockholders in 2005.
Each of the nominees is now a director of the Company and is standing for
reelection. The Insignia Board has no reason to believe that either of the
nominees will be unable to serve if elected to office and, to the knowledge of
the Insignia Board, each of the nominees intends to serve the entire term for
which election is sought. Should either or both of the nominees named herein
become unable or unwilling to accept nomination or election, the persons named
in the proxy will vote for such other person or persons as the Insignia Board
may recommend. The affirmative vote of a plurality of the votes cast at the
Annual Meeting is required for the election of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR THE ELECTION OF EACH OF THE NOMINEES.
The following provides information about the two nominees for election to
the Insignia Board, as well as the other incumbent members of the Insignia
Board.
NOMINEES FOR ELECTION TO TERMS EXPIRING 2005
ALAN C. FROGGATT
Alan C. Froggatt, 52, has been a director of Insignia since March 2001.
Mr. Froggatt is Chief Executive Officer of Insignia's European Operations and
is Chief Executive of Insignia Richard Ellis. Richard Ellis Group Limited, one
of the United Kingdom's leading property service firms, was acquired by
Insignia in February 1998. Mr. Froggatt joined Richard Ellis Group Limited in
1971, becoming a Partner in 1984. Mr. Froggatt became Managing Partner of that
firm in 1995 and Chief Executive following its incorporation in 1997.
ROBERT G. KOEN
Robert G. Koen, 55, has been a director of Insignia since its inception in
May 1998. Since February 1996, Mr. Koen has been a partner in the law firm of
Akin, Gump, Strauss, Hauer & Feld, LLP, which represents Insignia or certain of
its affiliates from time to time.
DIRECTORS WHOSE TERMS EXPIRE 2003
ROBIN L. FARKAS
Robin L. Farkas, 68, has been a director of Insignia since its inception
in May 1998. Mr. Farkas is currently a self-employed private investor. From
March 1994 to March 1995, Mr. Farkas was Chairman of the Dormitory Authority of
the State of New York and from 1984 until 1993 Mr. Farkas was the Chairman of
the Board and Chief Executive Officer of Alexander's Inc., a real estate
company. He is also a director of REFAC Technology, a company engaged in the
licensing of intellectual property rights and product design and development,
and Chairman and a director of ICF Ventures LLC, a venture capital firm
investing in India. Mr. Farkas is the father of Andrew L. Farkas.
5
ROBERT J. DENISON
Robert J. Denison, 60, has been a director of Insignia since its inception
in May 1998. Mr. Denison has been General Partner of First Security Company II,
L.P., an investment advisory firm, for more than the past five years.
H. STRAUSS ZELNICK
H. Strauss Zelnick, 44, has been a director of Insignia since August 1998.
Mr. Zelnick is a media and entertainment executive with experience in the
television, video, motion picture, entertainment software and recorded music
industries. He is a principal of ZelnickMedia Corporation, and Chairman of
Nippon Columbia Co., Ltd. Mr. Zelnick was President and Chief Executive Officer
of BMG Entertainment, a division of Bertelsmann AG, from July 1998 through
December 2000. Mr. Zelnick was President and Chief Executive Officer of BMG
Entertainment North America, a division of BMG Entertainment, from January 1995
to June 1998. Prior to joining BMG Entertainment, Mr. Zelnick was President and
Chief Executive Officer of Crystal Dynamics, a supplier of video game software,
from 1993 to 1994, and prior to that he was President and Chief Operating
Officer of Twentieth Century Fox. Mr. Zelnick is a director of On2.com, a
leading provider of audio-visual encoding software.
DIRECTORS WHOSE TERMS EXPIRE 2004
ANDREW L. FARKAS
Andrew L. Farkas, 41, has been a director and the Chairman of Insignia
since its inception in May 1998 and Chief Executive Officer of Insignia since
August 1998. Mr. Farkas served as Chairman and Chief Executive Officer of
Former Parent from January 1991 until October 1998 when Former Parent merged
into AIMCO, as Former Parent's President from May 1995 until October 1998, and
as a director of Former Parent from its inception in August 1990 until October
1998. He served as Chief Executive Officer of Insignia Properties Trust (a
subsidiary of Former Parent) ("IPT") from December 1996 until September 1998
and as Chairman of its Board of Trustees from December 1996 until February
1999, when IPT merged into AIMCO.
STEPHEN B. SIEGEL
Stephen B. Siegel, 57, has been a director of Insignia since its inception
in May 1998 and President of Insignia since August 1998. Mr. Siegel also serves
as Chairman (since September 1998) and Chief Executive Officer of Insignia/ESG,
Inc. ("Insignia/ESG"), a subsidiary of Insignia which was a subsidiary of
Former Parent (since July 1996). Mr. Siegel served as President of Edward S.
Gordon Company, Incorporated (now Insignia/ESG) from May 1992 until May 1998.
Mr. Siegel is a director of Liberty Property Trust, a real estate investment
trust.
STEPHEN M. ROSS
Stephen M. Ross, 61, has been a director of Insignia since May 2001. Mr.
Ross is the Chairman, Chief Executive Officer and managing General Partner of
The Related Companies, L.P., a privately held fully integrated real estate firm
with divisions specializing in development, acquisitions, financial services
and property management. Mr. Ross founded the company in 1972.
---------------------
The Company's By-laws provide that nominations for the election of
directors to the Insignia Board may be made by or at the direction of the
Insignia Board or by any stockholder entitled to vote for the election of
directors as described below. The By-laws establish an advance notice procedure
for the nomination, other than by or at the direction of the Insignia Board, of
candidates for election as directors. Notice of director nominations must be
timely given in writing to the Secretary of Insignia prior to the meeting at
which the directors are to be elected. To be timely, notice must be delivered
to or mailed and received at the principal executive offices of Insignia not
less than 50 nor more than 80 days prior to the scheduled date of the annual
meeting or special meeting of stockholders called by the Insignia Board for
6
the purpose of electing directors; provided, however, that if less than 60
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
delivered or mailed and received not later than the close of business on the
tenth day following the earlier of (i) the day on which such notice of the date
of the meeting was mailed, or (ii) the day on which such public disclosure was
made. Notice to Insignia from a stockholder who proposes to nominate a person
at a meeting for election as a director must contain all information about such
person that would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee (including such person's
written consent to serve as a director if so elected) and certain information
about the stockholder proposing to nominate that person. If the chairman of the
meeting of stockholders determines that a person was not nominated in
accordance with the nomination procedure, such nomination will be disregarded.
COMMITTEES OF THE BOARD OF DIRECTORS
The Insignia Board has three standing committees: the Executive Committee,
the Audit Committee and the Compensation Committee. The Insignia Board does not
have a standing nominating committee. The functions normally performed by a
nominating committee are performed by the Insignia Board as a whole. The
primary functions of the Committees and their members are as follows:
Executive Committee -- This Committee has the authority of the Insignia
Board to act on most matters during intervals between meetings of the Insignia
Board. The members of the Executive Committee are Andrew L. Farkas (Chairman),
Robin L. Farkas, Mr. Siegel, Mr. Koen, Mr. Denison and Mr. Froggatt.
Audit Committee -- This Committee has responsibility for assisting the
Insignia Board in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to stockholders and others, the
system of internal controls which the Company's management and the Insignia
Board have established and the audit process. The Audit Committee operates
under a written charter adopted by the Insignia Board, a copy of which was
attached to last year's proxy statement. The members of the Audit Committee are
Mr. Denison (Chairman), Mr. Ross and Mr. Zelnick.
Compensation Committee -- This Committee has responsibility for reviewing
and approving the compensation and benefits of executive officers, advising
management regarding benefits, including bonuses, and other terms and
conditions of compensation of other employees, administering Insignia's
incentive compensation plans, including the Stock Plan and the Insignia
Financial Group, Inc. Executive Performance Incentive Plan (the "Incentive
Plan"), and reviewing and recommending compensation of directors. The members
of the Compensation Committee are Mr. Zelnick (Chairman) and Mr. Ross.
MEETINGS OF THE INSIGNIA BOARD
During the fiscal year ended December 31, 2001, the Insignia Board met six
times, the Executive Committee met two times, the Audit Committee met four
times and the Compensation Committee met two times. No incumbent director
attended fewer than 75% of the meetings of the Insignia Board and the
Committees of which he is a member, except that Stephen M. Ross attended 63% of
the meetings of the Insignia Board and the Committees of which he is a member
since he was elected on May 21, 2001.
COMPENSATION OF DIRECTORS
Directors who are also officers of the Company do not receive any fee or
remuneration for services as members of the Insignia Board. During fiscal 2001,
each of Insignia's directors who is not an employee of Insignia received a fee
of $50,000 per year for serving as a director. Each director who is not a
full-time employee of Insignia is eligible to participate in the Stock Plan,
which provides for each non-employee director to receive at the time of his
initial election an option to purchase 20,000 shares of Common Stock, a portion
of which is exercisable the year after the grant, and to receive an additional
option each year thereafter to purchase 2,000 shares, in each case, at the then
fair market value of the Common Stock. In January 2000, each non-employee
director received from Insignia (i) a warrant to purchase 25,000 shares of
Common Stock at the then fair market value of the Common Stock, and (ii) an
Equity Grant (as
7
defined below) of a 0.25% interest in Insignia's aggregate equity interests in
all New Operating Entities (as defined below) and New Investment Entities (as
defined below) (see "Compensation Relating to Insignia's Investment in Internet
Initiatives" below for a description of the Equity Grant program).
AUDIT COMMITTEE REPORT
The following Audit Committee Report shall not be deemed to be "soliciting
material" or to be "filed" with the Commission, nor shall it be incorporated by
reference into any filings under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that the Company specifically
incorporates it by reference into such filing.
The Company's management is responsible for the Company's internal
controls, financial reporting process and compliance with laws and regulations.
The Company's independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing principles and to issue a report
thereon. The Audit Committee serves as the Insignia Board's representative to
monitor and oversee these processes. The Audit Committee represents and advises
the Insignia Board in performing some of its oversight responsibilities, but
does not itself prepare financial statements or perform audits, and its members
are not auditors or certifiers of the Company's financial statements. The Audit
Committee operates under a written charter adopted by the Insignia Board in
2001. This year the Audit Committee reviewed, reassessed and approved the
adequacy of the Charter.
In this context, the Audit Committee has reviewed and discussed with the
Company's management the Company's consolidated financial statements for the
year ended December 31, 2001. Management represented to the Audit Committee
that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles. The Audit Committee
also has reviewed and discussed the Company's consolidated financial statements
with the independent auditors. The Audit Committee's discussion with the
independent auditors included the matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees).
The Company's independent auditors also provided to the Audit Committee
the written disclosures and the letter from them required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Audit Committee discussed with the independent auditors
that firm's independence.
Based upon the Audit Committee's review and discussions referred to above,
the Audit Committee recommended that the Insignia Board include the Company's
audited consolidated financial statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001 filed with the Securities and
Exchange Commission.
Members of the Audit Committee
Robert J. Denison
Stephen M. Ross
H. Strauss Zelnick
8
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Compensation Committee Report on Executive Compensation
shall not be deemed to be "soliciting material" or to be "filed" with the
Commission, nor shall it be incorporated by reference into any filings under
the Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Insignia Board is currently composed of
Messrs. Zelnick and Ross. The Compensation Committee has responsibility for
determining the Company's compensation program for its executive officers,
including the Named Executive Officers. The Committee also administers the
Stock Plan and the Incentive Plan and, subject to the provisions of such plans,
approves grants under the plans for all employees, including the Named
Executive Officers.
The Compensation Committee has furnished this report on the Company's
executive compensation policies. This report describes the Compensation
Committee's compensation policies applicable to the Company's executive
officers and provides specific information regarding the compensation of the
Company's Chief Executive Officer.
PRINCIPLES OF EXECUTIVE COMPENSATION AND PROGRAM COMPONENTS
The Company's executive compensation philosophy is designed to attract and
retain outstanding executives and to foster employee commitment and align
employee and stockholder interests. To this end, the Company has sought to
provide competitive levels of compensation that integrate pay with the
Company's annual and long-term performance goals and reward above-average
corporate performance. The Company believes that these objectives are best
accomplished by offering its senior employees a compensation program consisting
of base salary, annual incentive payments and periodic grants of stock options,
restricted stock and other stock-based awards. In addition, certain employees
of Insignia, including the Named Executive Officers, receive incentive awards
consisting of equity interests in limited partnerships or limited liability
companies (or contractual rights to receive payments tied to the performance of
Insignia's equity interests) in entities in which Insignia has invested. Such
incentive awards are granted subject to performance and vesting provisions
established on an investment-by-investment basis and, once vested, entitle the
holder to receive a portion of the cash proceeds otherwise receivable by
Insignia with respect to the investment, generally after Insignia has received
a return of its invested capital and a preferred return of 10% thereon.
Annual compensation for executive officers is tied to Insignia's financial
performance; the performance of certain units within Insignia; the performance
of specific transactions; and the results achieved by individual executives in
the preceding fiscal year. Insignia takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level of compensation for senior executives, such as growth in earnings,
Net EBITDA and the achievement of business unit growth. The Compensation
Committee has set executive performance objectives for 2002. Insignia believes
that it offers compensation competitive with compensation offered by comparable
commercial real estate services companies.
BASE SALARY
The Committee annually reviews executive officer salaries and, after
consultation with the Chief Executive Officer, makes adjustments as warranted
based on competitive practices and the individual's performance. Salary
increases, if made, generally occur during the first quarter of the calendar
year retroactive to January 1st of that year.
INSIGNIA EXECUTIVE PERFORMANCE INCENTIVE PLAN
The Incentive Plan provides for annual incentive payments to key
executives of Insignia and its subsidiaries based upon the performance of
Insignia (or a subsidiary, division or other operational unit).
9
The Incentive Plan is based on a strong pay-for-performance philosophy and
provides a direct linkage between Insignia's performance and compensation. A
central element of this philosophy is to link a significant portion of annual
cash compensation to the attainment of annual financial objectives.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a Federal income tax deduction to any publicly
held corporation for compensation paid in excess of $1 million in any taxable
year to the chief executive officer or any of the four other most highly
compensated executive officers. Insignia intends to structure awards under the
Incentive Plan so that compensation resulting therefrom would be qualified
"performance based compensation" eligible for continued deductibility. The
Incentive Plan provides that no individual may receive for any fiscal year an
amount under the Incentive Plan which exceeds $5,000,000.
INSIGNIA 1998 STOCK INCENTIVE PLAN
The Stock Plan is intended to enhance the profitability and value of
Insignia for the benefit of its stockholders by enabling Insignia (i) to offer
stock-based incentives to employees and consultants of Insignia and its
affiliates, thereby creating a means to raise the level of stock ownership by
such individuals in order to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and
stockholders, and (ii) to grant nondiscretionary, nonqualified stock options to
non-employee directors, thereby creating a means to attract, retain and reward
such non-employee directors and strengthen the mutuality of interests between
non-employee directors and stockholders. The Stock Plan permits the grant of
incentive stock options, nonqualified stock options, stock appreciation rights,
restricted stock, performance shares, performance units and other stock-based
awards.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Compensation Committee annually reviews the compensation for the Chief
Executive Officer, who is responsible for the strategic direction and financial
performance of Insignia. During 2001, Insignia paid Mr. Farkas a base salary of
$1,000,000 as provided in his employment agreement. Pursuant to his employment
agreement, Mr. Farkas also earned a formulaic bonus under the Incentive Plan,
based entirely upon the achievement by the Company of objective performance
criteria, of $1,500,000 for 2001. In addition, Mr. Farkas was granted incentive
awards of up to 4% of the cash proceeds otherwise receivable by Insignia with
respect to co-investment and development transactions initiated by Insignia
during 2001 (generally after Insignia has received a return of its invested
capital and a preferred return thereon or, in limited instances, only from
Insignia's "promotional" or "over-ride" interest with respect to an investment
and not from the return of or on any of Insignia's actual investment). Mr.
Farkas was also granted a 22% interest in Insignia's "promotional" or
"over-ride" interest in Insignia Opportunity Partners II, L.P. that was formed
in 2001. (See "Employment Agreements" below for a summary of the material terms
of Mr. Farkas' employment agreement with Insignia, and "Compensation Relating
to Insignia's Equity Investments in Real Estate" below for a summary of the
incentive award program with respect to co-investment and development
transactions.)
In approving the compensation terms of Mr. Farkas' employment agreement
with Insignia when it was entered into in 2000, the Compensation Committee took
into account Insignia's strong revenue growth, its strong balance sheet, the
achievement of significant strategic goals and the performance-based nature of
the greatest part of potential compensation.
Members of the Compensation Committee
H. Strauss Zelnick
Stephen M. Ross
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Denison, Ross and Zelnick (non-employee directors) served as
members of the Compensation Committee at various times during 2001. None of the
Compensation Committee members or executive officers have any relationships
that must be disclosed under this caption.
10
EXECUTIVE SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation
earned or paid to the Named Executive Officers for services rendered to the
Company during each of the past three fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-----------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS (1) COMPENSATION
--------------------------------- ------------- ------------- -------------------
Andrew L. Farkas ................ 2001 $1,000,000 $1,500,000 $ 59,922 (5)
Chairman of the Board of 2000 $1,000,000 $4,000,000 $ 55,279(5)
Directors and Chief 1999 $ 750,000 $2,065,000 -- (7)
Executive Officer
Stephen B. Siegel ............... 2001 $1,000,000 $1,000,000 $ 3,485,707(9)
Director and President; 2000 $1,000,000 $4,000,000 $ 1,837,930(9)
Chairman and Chief 1999 $1,000,000 $1,300,000 $ 1,729,466(9)
Executive Officer of
Insignia/ESG, Inc.
Frank M. Garrison ............... 2001 $ 500,000 $ 200,000 $ -- (7)
Office of the Chairman, 2000 $ 500,000 $ 800,000 -- (7)
President of Insignia 1999 $ 450,000 $ 200,000 -- (7)
Financial Services, Inc.
Ronald Uretta ................... 2001 $ 500,000 $ 400,000 $ -- (7)
Chief Operating Officer and 2000 $ 500,000 $ 900,000 -- (7)
Treasurer, President of 1999 $ 500,000 $ 200,000 -- (7)
Insignia/ESG, Inc. and
President of Insignia
Residential Group, Inc.
James A. Aston .................. 2001 $ 500,000 $ 200,000 $ -- (7)
Chief Financial Officer 2000 $ 500,000 $ 800,000 -- (7)
1999 $ 400,000 $ 200,000 -- (7)
LONG-TERM COMPENSATION
--------------------------
AWARDS
--------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION AWARDS ($) OPTIONS (#) COMPENSATION (2)
--------------------------------- ------------ ------------- -------------------------
Andrew L. Farkas ................ -- -- $ 1,060,601(3)(4)
Chairman of the Board of -- 1,000,000 $ 723,727(3)(6)
Directors and Chief -- -- $ 277,680(8)
Executive Officer
Stephen B. Siegel ............... -- -- $ 319,797(4)
Director and President; -- -- $ 169,201(6)
Chairman and Chief -- -- $ 243,541(8)
Executive Officer of
Insignia/ESG, Inc.
Frank M. Garrison ............... -- -- $ 1,616,966(4)
Office of the Chairman, -- 200,000 $ 686,125(6)
President of Insignia -- -- $ 382,938(8)
Financial Services, Inc.
Ronald Uretta ................... -- -- $ 1,314,296(4)
Chief Operating Officer and -- 200,000 $ 539,027(6)
Treasurer, President of -- -- $ 309,810(8)
Insignia/ESG, Inc. and
President of Insignia
Residential Group, Inc.
James A. Aston .................. -- -- $ 1,345,355(4)
Chief Financial Officer -- 200,000 $ 539,027(6)
-- -- $ 310,030(8)
----------
(1) Bonuses are determined principally pursuant to formulae based upon the
achievement of performance targets, including achievement of target Net
EBITDA per share amounts and increases in the trading price for the
Common Stock. The formulae for fiscal 2001 provided for bonuses to be
paid if one or more of these targets were met: (i) if the Net EBITDA per
share, after all bonuses, met or exceeded, $2.20 (ii) if Net EBITDA per
share, after all bonuses, met or exceeded $3.22 (with a pro-rata portion
of bonuses being paid in Net EBITDA per share after all bonuses exceeded
$2.93 but was less than $3.22) and (iii) if the closing price for the
Common Stock on December 31, 2001 was at least 15% higher than the
closing price of the Common Stock on December 29, 2000. Net EBITDA for
this purpose includes, among other things, the results of real estate
investments after related interest expense is included, but does not
include, among other things, real estate depreciation and gain or loss on
disposition.
(2) Messrs. Garrison, Uretta and Aston received contingent payment awards
from the profits of certain real estate investments retained by Former
Parent that were awarded to them while they were executive officers of
Former Parent. In the spinoff of the Company from Former Parent in 1998,
Former Parent and the Company agreed that Former Parent would remit all
amounts payable to these persons to the Company, and that the Company
would then distribute such amounts to the executive officers. The Company
bears no out of pocket cost with respect to these payments. Under this
arrangement, these individuals each received the following amounts
through the Company from Former Parent: (i) $915,324 in 2001; (ii)
$739,125 in 2000; and (iii) $199,648 in 1999. These amounts are not
included in the summary compensation table.
(3) Does not include $950,000 and $697,777 in 2001 and 2000, respectively,
paid by Insignia as a reimbursement for specific business usage by
Insignia of employee property and business entertainment expenses.
(4) Consists of incentive payments (the right to which vested over time) made
by Insignia to, and proceeds with respect to previously granted equity
interests received by, each of the Named Executive Officers in connection
with dispositions of real estate investments, certain debt instruments
and other investments. The foregoing amounts resulted from the successful
execution of Insignia's investment strategies in specific real estate
investments and advised real estate fund activities and were subordinated
to the return of Insignia's capital and a preferred return thereon. These
payments did not include any portion of the fees received by Insignia and
its affiliates from the related investment project.
(5) Includes in fiscal 2001 aircraft usage of $50,300. Includes in fiscal
2000 deferred compensation of $51,869.
(6) Includes the aggregate value at the grant date of incentive awards
consisting of equity interests in limited partnerships, limited liability
companies, and a private investment partnership. Also includes incentive
payments (the right to which vested over
11
time) made by Insignia to each of the Named Executive Officers in
connection with dispositions of real estate investments, certain debt
instruments and other investments as follows: (a) Andrew L. Farkas:
$569,114; (b) Stephen B. Siegel: $157,089; (c) Frank M. Garrison:
$662,025; (d) Ronald Uretta: $526,915; and (e) James A. Aston: $526,915.
The foregoing amounts resulted from the successful execution of Insignia's
investment strategies in specific real estate investments and advised real
estate fund activities and were subordinated to the return of Insignia's
capital and a preferred return thereon or paid from Insignia's
"promotional" or "over-ride" interest with respect to an investment and
not from the return of or on any of Insignia's actual investment. These
payments did not include any portion of the fees received by Insignia and
its affiliates from the related investment project.
(7) Total perquisites did not exceed $50,000.
(8) Includes the aggregate value at the grant date of incentive awards
consisting of equity interests in limited partnerships, limited liability
companies, and a private investment partnership. Also includes incentive
payments (the right to which vested over time) made by Insignia to, and
proceeds with respect to previously granted equity interests received by,
each of the Named Executive Officers in connection with dispositions of
real estate investments and certain debt instruments as follows: (a)
Andrew L. Farkas: $264,580; (b) Stephen B. Siegel: $243,141; (c) Frank M.
Garrison: $330,190; (d) Ronald Uretta: $300,310; and (e) James A. Aston:
$300,310. The foregoing amounts resulted from the successful execution of
Insignia's investment strategies in specific real estate investments and
advised real estate fund activities and were subordinated to the return
of Insignia's capital and a preferred return thereon. These payments did
not include any portion of the fees received by Insignia and its
affiliates from the related investment project.
(9) With respect to fiscal 2001, represents (a) $2,889,027 in commissions and
advances on commissions paid pursuant to Mr. Siegel's employment
agreement with Insignia, (b) forgiveness of principal (in the amount of
$333,333) and interest (in the amount of $99,183) on loans from Insignia
and (c) perquisites totaling $164,164, including $129,196 of deferred
compensation. With respect to fiscal 2000, represents (a) $1,152,624 in
commissions and advances on commissions paid to Mr. Siegel pursuant to
his employment agreement with Insignia, (b) forgiveness of principal (in
the amount of $500,000) and interest (in the amount of $99,750) on loans
from Insignia and (c) perquisites totaling $85,556, including $62,017 of
deferred compensation. With respect to fiscal 1999, represents (a)
$1,096,256 in commissions and advances on commissions paid pursuant to
Mr. Siegel's employment agreement with Insignia, (b) forgiveness of
principal (in the amount of $500,000) and interest (in the amount of
$75,450) on loans from Insignia and (c) perquisites totaling $57,760,
including $30,408 of deferred compensation. Forgiveness of loans was made
in accordance with objective criteria established at the time the loans
were made.
OPTION GRANTS DURING FISCAL 2001
None of the Named Executive Officers was granted any stock options or
warrants during fiscal year 2001. During fiscal year 2001, stock options
representing an aggregate of 50,000 shares of Common Stock were issued to all
employees as a group.
OPTION EXERCISES AND VALUES FOR FISCAL 2001
The following table provides information concerning options and warrants
exercised in fiscal 2001 by the Named Executive Officers and the value of such
officers' unexercised options and warrants at December 31, 2001.
AGGREGATED OPTION EXERCISES IN FISCAL 2001 AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT
SHARES YEAR-END(#)(a) FISCAL YEAR-END($)(a)(b)
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- ------------- ------------- ------------- --------------- ------------- --------------
Andrew L. Farkas .......... -- -- 668,894 381,106 $1,788,903 $1,011,097
Stephen B. Siegel ......... -- -- 271,422 92,857 -- --
Frank M. Garrison ......... -- -- 157,880 92,120 $ 358,064 $ 201,936
Ronald Uretta ............. -- -- 157,880 92,120 $ 358,064 $ 201,936
James A. Aston ............ -- -- 157,880 92,120 $ 358,064 $ 201,936
----------
(a) Includes warrants.
(b) Calculated using the closing price of $10.80 per share of Insignia
Common Stock on December 31, 2001 minus the option or warrant
exercise price.
EMPLOYMENT AGREEMENTS
Following is a description of employment agreements between Insignia and
each the Named Executives Officers.
12
Andrew L. Farkas
Andrew L. Farkas is employed by Insignia pursuant to an employment
agreement dated May 18, 2000, effective as of January 1, 2000 (the "Farkas
Employment Agreement"), which provides for him to serve as Chairman of the
Board of Directors and Chief Executive Officer of Insignia until December 31,
2002 (the "Expiration Date"), or such earlier date as provided therein. The
Farkas Employment Agreement provides for an annual salary of $1,000,000 (the
"Base Salary"), subject to such discretionary increases as may be determined by
the Insignia Board. In addition, Mr. Farkas may receive (i) an annual
performance bonus of up to $4,000,000 under the Incentive Plan based on Mr.
Farkas' performance against objectives determined by the Compensation Committee
in accordance with the Incentive Plan and (ii) an annual discretionary bonus
which the Compensation Committee of the Board may elect to pay Mr. Farkas in
such amount as it may determine to be appropriate. Mr. Farkas also is entitled
to certain perquisites and received a $146,000 signing bonus. Mr. Farkas may
elect to convert the Farkas Employment Agreement into a consulting agreement
with the Company on substantially the same terms as the Farkas Employment
Agreement (except that Mr. Farkas shall cease to be an officer and director of
the Company) if (a) without the prior written consent of Mr. Farkas, his title,
powers or duties within the Company have been substantially diminished, other
than as a result of termination for cause, or (b) the Company has undergone a
change of control (as set forth in the Farkas Employment Agreement) after or in
connection with a Significant Transaction (as defined below).
Under the Farkas Employment Agreement, in January 2000 Mr. Farkas was
granted options and warrants exercisable for an aggregate of 1,000,000 shares
of Common Stock at an exercise price of $8.00 per share. During the term of the
Farkas Employment Agreement, Mr. Farkas will continue to participate in the
Company's co-investment programs on the basis currently in place or as may be
amended by the Compensation Committee (See "Compensation Relating to Insignia's
Equity Investments in Real Estate" below for a summary of the Company's
co-investment program). In addition, Mr. Farkas has the right to receive Equity
Grants (as defined below) with respect to investments by Insignia and its
subsidiaries in certain new businesses (see "Compensation Relating to
Insignia's Equity Investments in Internet Initiatives" below for a summary of
the Equity Grant program).
Mr. Farkas has agreed that for one year after the cessation of his
employment with the Company, he will not, if such action would have a material
adverse effect on the Company, in direct competition with the Company, solicit
business from any of Insignia's customers or clients with whom he has had
"material contact" (as defined in the Farkas Employment Agreement) during the
twelve month period preceding the date of cessation of his employment with
Insignia, and he will neither solicit employees of Insignia to work for any
direct competitor of Insignia for two years after the cessation of this
employment with the Company, nor interfere with any contracts that exist
between the Company and any customers or clients of the Company as of the
effective date of the Farkas Employment Agreement.
Mr. Farkas' employment will be terminated in the event that Mr. Farkas is
disabled during his employment with Insignia, whereupon Insignia will pay him
75% of his then-current Base Salary for a period of time equal to twice the
remaining term under the Farkas Employment Agreement immediately prior to his
termination (but not less than four years). If Mr. Farkas dies during the term
of the Farkas Employment Agreement, Insignia will pay to his estate his
then-current Base Salary through the Expiration Date. If Mr. Farkas is
terminated without cause and such termination is not in connection with a
Significant Transaction (as defined below), Insignia will pay him his
then-current Base Salary through the Expiration Date. In addition, if Mr.
Farkas dies, is disabled or is terminated without cause during the term of the
Farkas Employment Agreement, Insignia will continue to pay all perquisites to
which Mr. Farkas is entitled and will pay all bonuses to be paid upon the
occurrence of a Significant Transaction (as defined below) or a Material Asset
Disposition (as defined below) to Mr. Farkas or his estate if the Significant
Transaction or the Material Asset Disposition giving rise to such payment
occurs, or a definitive agreement regarding such event has been executed (a)
before or within 180 days after the termination of Mr. Farkas' employment due
to his death, (b) before or within 185 days after the termination of Mr.
Farkas' employment due to his disability, or (c) before the Expiration Date in
the event Mr. Farkas' employment is terminated without cause.
13
The Farkas Employment Agreement provides that upon the occurrence of any
one of several events or transactions involving Insignia set forth in the
Farkas Employment Agreement (each, a "Significant Transaction"), including, but
not limited to, any change of control (as defined in the Farkas Employment
Agreement) of Insignia, Insignia is required to pay to Mr. Farkas an amount
equal to 1.0% of the total equity market capitalization of Insignia on the date
the Significant Transaction occurs. Upon the occurrence of a Significant
Transaction and/or upon termination for any reason, other than termination for
cause or voluntary termination by Mr. Farkas, all options and warrants (but not
Equity Grants) granted to Mr. Farkas will vest immediately and be exercisable.
The Farkas Employment Agreement also provides that in the event that Insignia
enters into a transaction resulting in (i) a majority of the equity interest in
Insignia being beneficially owned by a person or persons who is not an
affiliate of Insignia, or (ii) the spin-off, sale or other disposition to a
third party of one or more of Insignia's subsidiaries, divisions or operating
businesses (each, a "Material Asset Disposition"), Insignia will pay to Mr.
Farkas a cash bonus equal to 1.0% of the consideration received by Insignia or
its stockholders as a result of such Material Asset Disposition.
To the extent Mr. Farkas would be subject to the excise tax under Section
4999 of the Code on amounts or benefits to be received from Insignia required
to be included in the calculation of parachute payments for purposes of
Sections 280G and 4999 of the Code, the amounts of any such payments will be
automatically reduced to an amount one dollar less than an amount that would
subject Mr. Farkas to the excise tax under Section 4999 of the Code, provided
that the automatic reduction would apply only if the reduced payments received
by Mr. Farkas (after taking into account further reductions for applicable
taxes) would be greater than his unreduced payments, after applicable taxes.
Mr. Farkas and the Company have agreed to in principle, but have not yet
executed, an amendment to the Farkas Employment Agreement that would (i) extend
the term of the Farkas Employment Agreement to December 31, 2005, subject to
earlier termination as set forth in the Farkas Employment Agreement; (ii) as of
January 1, 2003, use January 1, 2003 as the "Effective Date" for purposes of
measuring all benefits, consideration, restrictions and/or obligations in the
Farkas Employment Agreement with a duration component; (iii) clarify that Mr.
Farkas is entitled to an annual performance bonus solely under the Incentive
Plan of up to $4,000,000; (iv) provide for the immediate vesting of Equity
Grants upon the occurrence of a Significant Transaction; (v) provide that
quarterly advance payments due to Mr. Farkas under the Farkas Employment
Agreement be paid to Mr. Farkas should he be terminated without cause or become
disabled and be paid to his estate following his death; and (vi) provide for a
contingent retention bonus in the amount of $2,000,000 to be paid to Mr.
Farkas. The contingent retention bonus is payable in installments from a
certain percentage (for the first $500,000 of the bonus, 33.5%, and for the
remaining $1,500,000, 67%) of the cash proceeds, if any, otherwise receivable
by Insignia with respect to its "promotional" or "over-ride" interest in
Insignia Opportunity Partners and Insignia Opportunity Partners II, L.P., but
not from the return of or on any of Insignia's actual investment therein nor
any fees received by the Company in respect of acquisition or asset management
services. No such installment payments shall be paid to Mr. Farkas after he
terminates his employment (or consulting arrangement) with the Company for any
reason (other than in connection with a Significant Transaction) or if the
Company terminates Mr. Farkas's employment (or consulting arrangement) for
cause (in accordance with the Farkas Employment Agreement).
Insignia made a loan to Mr. Farkas in the amount of $1,500,000 in March
2002. The terms of the loan are described below (see "Employee Loans").
Stephen B. Siegel
Stephen B. Siegel is employed by Insignia and Insignia/ESG pursuant to an
employment agreement, as amended (the "Siegel Employment Agreement"), which
provides for him to serve as President of Insignia and Chairman and Chief
Executive Officer of Insignia/ESG until December 31, 2005, subject to earlier
termination or extension as provided for in the Agreement. The Siegel
Employment Agreement provides that Mr. Siegel is to receive (i) a base annual
salary of $1,000,000, (ii) 30% of all promotional commission revenues earned,
received and retained by Insignia/ESG in respect of transactions as to which
Mr. Siegel has rendered services recognized by Insignia/ESG, and (iii) 50% of
all net commissions in
14
respect of agency transactions as to which Mr. Siegel has rendered services
recognized by Insignia/ESG. The Siegel Employment Agreement also provides that
Mr. Siegel will receive, for each year or part thereof during the employment
term, an amount (up to a maximum of $400,000 annually) equal to 0.6% of the
gross commissions earned, received and retained by Insignia/ESG, but only to
the extent that Insignia/ESG and all of its wholly-owned subsidiaries meet or
exceed its annual EBITDA (as defined below) budget, as established by
Insignia's Compensation Committee, after reduction for all bonus compensation
paid to employees of Insignia/ESG (including the imputed bonus of Mr. Siegel),
all Insignia/ESG overhead allocations and all other compensation paid to Mr.
Siegel, which annual EBITDA budget will be increased by Insignia's Compensation
Committee for each subsequent year by an amount of no less than 10% of the
annual EBITDA budget for the immediately preceding year. "EBITDA" means
earnings before interest, taxes, depreciation and amortization, computed in
accordance with generally accepted accounting principles, consistently applied.
The Siegel Employment Agreement further provides that Mr. Siegel will receive
for each year an annual bonus of up to $2,500,000 under the Incentive Plan
based upon his performance against objectives determined by the Compensation
Committee in accordance with the Incentive Plan.
In addition, upon the consummation of a transaction resulting in a change
in the ownership of a majority of the issued and outstanding shares of Common
Stock and a change in the majority of the Insignia Board, Mr. Siegel is
entitled to receive a payment in the amount of 0.5% of the consideration
received by Insignia or its stockholders as a direct result of such transaction
(excluding the assumption or repayment of debt or other liabilities), which
payment is required to be made upon the earlier of the involuntary termination
of Mr. Siegel's employment with Insignia, other than for cause, or the
expiration of the term of the Siegel Employment Agreement.
Former Parent made a loan to Mr. Siegel in the amount of $1,000,000. The
loan, which was assumed by Insignia in connection with the Spin-Off, was
forgiven ratably over a three-year period which ended July 1, 2001. In
addition, Insignia/ESG has purchased, at Insignia/ESG's expense, term life
insurance on the life of Mr. Siegel with a death benefit of $5,000,000, the
beneficiaries of which are designated by Mr. Siegel.
The Siegel Employment Agreement provides that Mr. Siegel will not compete
with either Insignia or Insignia/ESG for two years after the termination of the
Siegel Employment Agreement. If Mr. Siegel is terminated without cause, Mr.
Siegel may elect either to observe the non-compete agreement and receive the
compensation provided for in the Siegel Employment Agreement until December 31,
2005 or to accept other employment that violates the non-compete provision and
receive compensation at a rate of $1,000,000 per year until December 31, 2005,
less the aggregate compensation payable to him for such new employment. If Mr.
Siegel is terminated for cause (as defined in the Siegel Employment Agreement),
Insignia and Insignia/ESG are required to pay Mr. Siegel his base salary up to
and including the date on which the termination occurred. Upon Mr. Siegel's
death, Insignia or Insignia/ESG is required to pay Mr. Siegel's estate
compensation at the annual rate of $1,000,000 during the remaining term of the
Siegel Employment Agreement, not to exceed one year.
Pursuant to the Siegel Employment Agreement, on September 21, 1998 Mr.
Siegel received a grant of options to purchase 100,000 shares of Common Stock.
In addition, Insignia has made a loan to Mr. Siegel in the amount of $999,999
to purchase shares of Common Stock, which loan is secured by such shares
purchased (see "Employee Loans").
Insignia/ESG also made loans to Mr. Siegel in the amount of $500,000 in
September 1999 and in the amount of $1,500,000 in June 2001. The terms of the
loans are described below (see "Employee Loans").
Frank M. Garrison, James A. Aston and Ronald Uretta
Messrs. Frank M. Garrison, James A. Aston and Ronald Uretta are employed
by Insignia pursuant to employment agreements with Insignia, effective as of
September 21, 1998, as amended (the "Executive Employment Agreements"), which
provide for Mr. Garrison to serve as Office of the Chairman and Executive
Managing Director of Insignia and President and Chief Executive Officer of
Insignia Financial Services, Inc., for Mr. Aston to serve as Chief Financial
Officer of Insignia and for Mr. Uretta to serve as
15
Chief Operating Officer of Insignia until December 31, 2003 (December 31, 2005,
in the case of Mr. Garrison), or such earlier or later date as provided therein
(the "Expiration Time"). Mr. Garrison's Executive Employment Agreement provides
that if the Company has not notified him of its intention not to extend or
renew the agreement by December 31, 2005, the term shall automatically extend
so that the Expiration Time is not less than six months from the date the
Company notifies him of its intent not to renew or extend the term. Messrs.
Garrison, Aston and Uretta each are to receive a base salary of $500,000,
$550,000 and $600,000 per year, respectively, subject to such discretionary
increases as may be determined by the Insignia Board, and a bonus determined by
the Insignia Board or the Compensation Committee. Messrs. Garrison, Aston and
Uretta also are entitled to certain perquisites. Messrs. Garrison, Aston and
Uretta each has agreed that for one year after the termination of his Executive
Employment Agreement, he will not solicit business from any of Insignia's
customers or clients with whom he has had "material contact" (as defined in the
Executive Employment Agreements) during the twelve month period preceding the
date of cessation of his employment with Insignia, and he will neither solicit
employees of Insignia to work for any direct competitor of Insignia nor
purchase more than 1% of the outstanding limited partner units of any
partnerships controlled directly or indirectly by Insignia for two years after
the termination of his Executive Employment Agreement.
Each of the Executive Employment Agreements provides that it will be
terminated in the event that Mr. Garrison, Aston or Uretta, as applicable, is
disabled during his employment with Insignia, whereupon Insignia is required to
pay his salary through the Expiration Time and to pay all bonuses to be paid
upon the occurrence of a Significant Transaction or a Material Asset
Disposition (as described below) if the event giving rise to such payment
occurs, or a definitive agreement regarding such event is executed, before or
within 180 days after such termination. If Mr. Garrison, Aston or Uretta, as
applicable, dies during the term of his Executive Employment Agreement,
Insignia is required to pay to his estate his salary through the Expiration
Time, and to pay all bonuses to be paid upon the occurrence of a Significant
Transaction or a Material Asset Disposition if the event giving rise to such
payment occurs, or a definitive agreement regarding such event is executed,
before or within 180 days after his death. If Mr. Garrison, Aston or Uretta, as
applicable, is terminated without cause, Insignia is required to pay his salary
and all bonuses to be paid upon the occurrence of a Significant Transaction or
a Material Asset Disposition through the Expiration Time. Upon termination
without cause, or due to Mr. Garrison's, Aston's or Uretta's death or
disability, all options and warrants granted to Mr. Garrison, Aston or Uretta,
as applicable, will immediately vest and be exercisable.
Upon the occurrence of a Significant Transaction, Messrs. Garrison, Aston
and Uretta each may elect to convert his Executive Employment Agreement into a
consulting agreement with substantially the same terms and conditions, except
that the consulting services provided by Mr. Garrison, Aston and Uretta, as
applicable, shall be provided to Insignia at reasonable times convenient to
each of them on no less than five business days' notice. The Executive
Employment Agreements also provide that upon the occurrence of a Material Asset
Disposition, Insignia is required to pay each of Messrs. Garrison, Aston and
Uretta a cash bonus equal to 0.5% (or 0.25% if the Executive Employment
Agreements are converted to consulting agreements) of the consideration
received by Insignia or its stockholders as a result of such Material Asset
Disposition (excluding the assumption or repayment of debt or other
liabilities).
To the extent Messrs. Garrison, Aston or Uretta would be subject to the
excise tax under Section 4999 of the Code on amounts or benefits to be received
from Insignia required to be included in the calculation of parachute payments
for purposes of Sections 280G and 4999 of the Code, the amounts of any such
payments will be automatically reduced to an amount one dollar less than an
amount that would subject Mr. Garrison, Aston or Uretta, as applicable, to the
excise tax under Section 4999 of the Code, provided that the automatic
reduction would apply only if the reduced payments received by Mr. Garrison,
Aston or Uretta, as applicable, (after taking into account further reductions
for applicable taxes) would be greater than the unreduced payments to be
received by him, after applicable taxes.
Mr. Garrison and the Company have executed an amendment to Mr. Garrison's
employment agreement that in addition to extending the term of his employment
agreement to December 31, 2005, subject to earlier termination as set forth in
his employment agreement, provides that (i) as of January 1, 2003, such date
will be used as the "Effective Date" for purposes of measuring all benefits,
consideration,
16
restrictions and/or obligations in Mr. Garrison's employment agreement with a
duration component; (ii) Mr. Garrison will be granted an option pursuant to the
Stock Plan to purchase 100,000 shares of the Company's Common Stock; and (iii)
Mr. Garrison will be paid a contingent retention bonus in the amount of
$500,000. The contingent retention bonus is payable in installments from 33.5%
of the cash proceeds, if any, otherwise receivable by Insignia with respect to
its "promotional" or "over-ride" interest in Insignia Opportunity Partners and
Insignia Opportunity Partners II, L.P., but not from the return of or on any of
Insignia's actual investment therein nor any fees received by Insignia in
respect of acquisition or asset management services. No such installment
payments shall be paid to Mr. Garrison after he terminates his employment (or
consulting arrangement) with the Company for any reason (other than in
connection with a Significant Transaction) or if the Company terminates Mr.
Garrison's employment (or consulting arrangement) for cause (in accordance with
Mr. Garrison's employment Agreement).
COMPENSATION RELATING TO INSIGNIA'S EQUITY INVESTMENTS IN REAL ESTATE
Insignia operates an equity investment program which identifies investment
opportunities for various clients, and invests along side those clients or, in
limited instances, by itself in the acquisition, development and/or operation
of qualifying real estate and real estate-related assets. In connection with
the equity investment program, selected employees of Insignia, including the
Named Executive Officers, receive incentive awards tied to the success of
Insignia's investments consisting of (i) incentive payment rights ("Payment
Rights") and/or (ii) equity interests in limited partnerships, limited
liability companies or a private real estate investment trust which own or
invest in real estate, debt secured by real estate or other real estate-related
assets ("Equity Interests"). Such incentive awards are granted subject to
performance and vesting provisions established on an investment-by-investment
basis and, once vested, entitle the holder to receive a portion (which
generally approximates 50% in the aggregate for all holders of such incentive
awards) of the cash proceeds otherwise receivable by Insignia with respect to
the investment, generally after Insignia has received a return of its invested
capital and a preferred return of 10% thereon or, in limited instances, only
from Insignia's "promotional" or "over-ride" interest with respect to an
investment and not from the return of or on any of Insignia's actual
investment. In some cases, subsequent grants ranging from 5% to 10% of such
proceeds may be made to additional employees based on a number of factors,
including the degree of success of a particular investment. The aggregate
incentive awards granted to the Named Executive Officers with respect to an
investment generally approximates 25% of the amount of cash proceeds in excess
of Insignia's invested capital and a 10% preferred return thereon otherwise
receivable by Insignia. The aggregate incentive awards granted to Named
Executive Officers with respect to Insignia's "promotional" or "over-ride"
interests with respect to investments, including the Insignia Opportunity
Partners and Insignia Opportunity Partners II, L.P. investment funds, generally
are greater than 25% and as high as 47.5% of the amount of cash proceeds
otherwise receivable by Insignia only from such "promotional" or "over-ride"
interest. In 2001, Insignia's investments in the equity investment program
yielded aggregate cash proceeds of $33.2 million, of which $10.2 million was
paid or accrued to 37 employees who held incentive awards or were granted
incentive awards at the time of the realization of the proceeds and $23.0
million was paid to Insignia. In some instances, selected employees of
Insignia, including the Named Executive Officers, are offered the opportunity
to invest on the same basis as third-party investors.
For fiscal 2001, 2000 and 1999 the Named Executive Officers were granted
Payment Rights and/or Equity Interests in 4, 15 and 22 of such investments,
respectively, under the equity investment program in which Insignia invested
(or has agreed to invest or provided guarantees for) an aggregate of $1.8
million, $13.5 million and $29.9 million, respectively. The aggregate value of
such Equity Interests at the time of grant (which was 2002 with respect to the
2001 investments) is included in the Summary Compensation Table. In addition to
such grants of Payment Rights and/or Equity Interests, in fiscal 2001, 2000 and
1999, incentive payments with respect to Payment Rights were made by Insignia
to, and proceeds with respect to Equity Interests were received by, each of the
Named Executive Officers in connection with dispositions of assets or entities
in such program, which payments are included in, and discussed in the notes to,
the Summary Compensation Table.
17
COMPENSATION RELATING TO INSIGNIA'S EQUITY INVESTMENTS IN INTERNET INITIATIVES
The Insignia Board has authorized Mr. Farkas to make restricted grants
("Equity Grants"), at any time and from time to time, to one or more members of
management or other key employees of the Company or its subsidiaries, including
himself, of portions of Insignia's equity interests in new entities established
to invest in or operate companies or business ventures relating to the Internet
and other businesses outside of the scope of the Company's traditional lines of
business. An Equity Grant will constitute a grant of a portion of the Company's
equity interest in either a New Investment Entity or a New Operating Entity. A
"New Investment Entity" is a special purpose entity initially capitalized by
Insignia or one or more of its subsidiaries on or after January 1, 2000 for the
primary purpose of (i) making and/or holding a minority, non-controlling
investment by the Company in securities of one or more companies or business
ventures not directly or indirectly controlled by the Company, or (ii) serving
as a managing general partner (or in a similar capacity) of an entity that
raises third-party capital to be invested in securities of businesses not
directly or indirectly controlled by the Company. A "New Operating Entity" is
any operating entity initially capitalized by the Company or one or more of its
subsidiaries on or after January 1, 2000 for the primary purpose of engaging in
a line of business which is outside the scope of the traditional lines of
business engaged in by the Company and its subsidiaries prior to June 1999,
which non-traditional businesses include all Internet-oriented lines of
business. Mr. Farkas is authorized to make Equity Grants to members of
management and key employees of up to 25% in the aggregate of Insignia's equity
interests in each New Investment Entity and up to 30% in the aggregate of
Insignia's equity interest in each New Operating Entity. As of December 31,
2001, Insignia had written-off as worthless substantially all of its Internet
initiatives, does not anticipate any incentive payments will become due to
employees with respect to those investments and does not anticipate making any
further such investments.
18
PERFORMANCE GRAPH
The following data and graph compare the cumulative total stockholder
return on the Common Stock with the cumulative total stockholder return of a
peer group index* and the New York Stock Exchange Composite Index (the "NYSE
Index"). The data and graph assume that a $100 investment was made on September
21, 1998 (the date of the Spin-Off) in each of the Common Stock, the peer group
index and the NYSE Index, and that all dividends were reinvested quarterly.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
INSIGNIA FINANCIAL GROUP, INC.,
A PEER GROUP INDEX AND THE NYSE INDEX
COMPANY/PEER GROUP/NYSE 9/21/98 12/31/98 12/31/99 12/31/00 12/31/01
--------------------------- --------- ---------- ---------- ---------- -----------
Insignia .................. $100 $ 94.17 $ 67.48 $ 92.23 $ 83.88
Peer Group Index .......... $100 $ 96.21 $ 41.20 $ 48.50 $ 48.74
NYSE Index ................ $100 $ 117.42 $ 128.16 $ 129.45 $ 116.23
[LINE CHART]
* Based on information for a self-constructed peer group consisting of the
common stock of the following companies: Grubb & Ellis Company, Trammell
Crow Company and Jones Lang LaSalle Inc. In last year's proxy statement,
the Peer Group Index had included CB Richard Ellis Services, Inc. which
ceased to be publicly traded during 2001. The Peer Group Index has been
recalculated without CB Richard Ellis Services, Inc.
The foregoing data and graph are based on historical data and are not
necessarily indicative of future performance. This data and graph shall not be
deemed to be "soliciting material" or to be "filed" with the Commission, nor
shall it be incorporated by reference into any filings under the Securities Act
or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into such filing.
19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who beneficially own more than 10% of the
Company's outstanding Common Stock to file with the Commission initial reports
of ownership and reports of changes in ownership of the Common Stock. Based
solely upon a review of Forms 3, 4 and 5 furnished to the Company with respect
to fiscal 2001, the Company is not aware of any person who was a director,
executive officer or beneficial owner or more than 10% of its outstanding
Common Stock, during (or with respect to) the prior fiscal year, who failed to
file with the Commission on a timely basis reports required by Section 16(a) of
the Exchange Act.
EMPLOYEE LOANS
Former Parent made a loan to Mr. Siegel in the amount of $1,000,000
pursuant to the terms of the Siegel Employment Agreement. The loan was assumed
by Insignia when Insignia assumed the Siegel Employment Agreement in connection
with the Spin-Off. The principal amount of the loan and interest thereon was to
be forgiven ratably over a three year period, which began on July 1, 1998,
provided Mr. Siegel remained employed by the Company. The balance of the loan
was forgiven, according to schedule, on July 1, 2001. The interest rate charged
on the loan was the same as the interest rate applicable to funds borrowed by
Insignia on its revolving credit facility, which rate was approximately 6.9% at
the time the balance of the loan was forgiven.
In November 1998, Insignia made a loan to Mr. Siegel, pursuant to the
Insignia Financial Group, Inc. 1998 Supplemental Stock Purchase and Loan
Program (the "Supplemental Stock Purchase and Loan Program"), in the amount of
$999,999 to purchase shares of Common Stock, which loan is secured by such
shares. Mr. Siegel has agreed to repay the principal amount of the loan and
interest thereon (at a rate of 7.5% per annum) in 40 equal quarterly
installments commencing on March 31, 1999 and ending on December 31, 2008. As
of March 31, 2002, $773,468 of the principal amount of such loan remained
outstanding.
In September 1999, Insignia/ESG made a loan in the amount of $500,000 to
Mr. Siegel. The interest rate on the loan was the same as the interest rate
applicable to funds borrowed by Insignia on its revolving credit facility,
which rate was approximately 4.9% at December 31, 2001. The balance of the loan
outstanding on March 31, 2001, $166,667, was forgiven by the Company on March
31, 2002.
In June 2001, Insignia/ESG made a loan in the amount of $1,500,000 to Mr.
Siegel. The interest rate on the loan is the same as the interest rate
applicable to funds borrowed by Insignia on its revolving credit facility,
which rate was approximately 4.9% at December 31, 2001. At March 31, 2002, the
entire principal amount of such loan remained outstanding. The loan will become
due upon the earliest of (i) Mr. Siegel's voluntary termination of his
employment with Insignia/ESG, (ii) the termination of Mr. Siegel's employment
with Insignia/ESG for cause or (iii) March 15, 2006. Insignia/ESG will forgive
$375,000 of the principal amount of the loan and accrued interest thereon on
March 15 of the year following each of 2002, 2003, 2004 and 2005 to the extent
that Insignia/ESG's Actual Net EBITDA equals or exceeds 75% of its annual
budgeted Net EBITDA for any such year, as established by Insignia/ESG and
approved by the Insignia Board. In addition, if Insignia/ESG's aggregate Actual
Net EBITDA for fiscal 2002, 2003, 2004 and 2005 equals or exceeds its aggregate
annual Budgeted EBITDA for such years, any outstanding principal amount of the
loan and accrued interest thereon, will be forgiven as of March 15, 2006. Any
outstanding principal balance and accrued interest on the loan will be forgiven
upon the death or permanent disability of Mr. Siegel.
In March 2002, Insignia made a loan in the amount of $1,500,000 to Andrew
L. Farkas. The interest rate on the loan is the same as the interest rate
applicable to funds borrowed by Insignia on its revolving credit facility,
which rate was approximately 4.9% at December 31, 2001. The loan will become
due on March 5, 2005. Insignia may deduct interest payments due on the loan
quarterly from certain amounts payable to Mr. Farkas under the Farkas
Employment Agreement. The loan is recourse to certain rights Mr. Farkas may
have to receive payments from the Company's 401(k) Restoration Plan. If Mr.
Farkas's
20
employment with the Company is terminated before the maturity date of the loan
as a result of, among other reasons, a Significant Transaction, the unpaid
principal and all accrued interest thereon shall be forgiven either upon the
termination event or over a two-year period thereafter.
Pursuant to the Supplement Stock Purchase and Loan Program, Insignia made
a loan in the amount of $100,000 to Alan C. Froggatt, a director and the Chief
Executive Officer of Insignia's European Operations and of Insignia Richard
Ellis to purchase shares of Common Stock, which loan is secured by such shares.
Mr. Froggatt has agreed to repay the principal amount of the loan and interest
thereon (at a rate of 7.5% per annum) in 40 equal quarterly installments
commencing on March 31, 2000 and ending on December 31, 2009. As of March 31,
2002, $85,463 of the principal amount of such loan remained outstanding.
Pursuant to the Supplemental Stock Purchase and Loan Program, Insignia
made a loan in the amount of $193,125 to Jeffrey P. Cohen, Executive Vice
President of Insignia, to purchase shares of Common Stock, which loan is
secured by such shares. Mr. Cohen has agreed to repay the principal amount of
the loan and interest thereon (at a rate of 7.5% per annum) in 40 equal
quarterly installments commencing on March 31, 1999 and ending on December 31,
2008. As of March 31, 2002, $149,376 of the principal amount of such loan
remained outstanding.
PROPOSAL 2: APPROVAL OF AMENDMENT TO THE COMPANY'S STOCK PLAN
The purpose of the Stock Plan is to enhance the profitability and value of
Insignia for the benefit of its stockholders by enabling Insignia (i) to offer
stock-based incentives to Insignia Employees, employees of Insignia affiliates
and consultants to Insignia and its affiliates, thereby creating a means to
raise the level of stock ownership by such individuals in order to attract,
retain and reward such individuals and strengthen the mutuality of interests
between such individuals and stockholders and (ii) to grant nondiscretionary,
nonqualified stock options to non-employee directors, thereby creating a means
to attract, retain and reward such non-employee directors and strengthen the
mutuality of interests between non-employee directors and stockholders. In
recent years Insignia has been severely restricted in its ability to make
grants under the Stock Plan because so few shares of Common Stock remained
available for awards. The Insignia Board believes that increasing the number of
shares of Common Stock available for future awards under the Stock Plan is
essential to retain and motivate existing employees through future awards, as
well as to attract new employees.
As of March 31, 2002, 2,671,793 shares of Common Stock were subject to
outstanding options under the Stock Plan and 313,212 shares of Common Stock
remained available for future grants under the Stock Plan. The Insignia Board
has approved an amendment to the Stock Plan which, if approved by the
stockholders, will increase the aggregate number of shares of Common Stock
available for awards under the Stock Plan by 1,000,000 shares of Common Stock.
The proposed amendment also adds a provision to the Stock Plan which prohibits
the "repricing" of an outstanding stock option to reduce the exercise price
through the amendment of an outstanding stock option or the grant of a new
stock option in substitution for a simultaneously surrendered stock option. The
following description of the Stock Plan, which reflects the proposed amendment,
is a summary and is qualified in its entirety by reference to the Stock Plan, a
copy of which may be obtained upon written request to Insignia's Investor
Relations Department at 200 Park Avenue, New York, NY 10166.
ADMINISTRATION
The Stock Plan is administered and interpreted by the Compensation
Committee of the Insignia Board, except that with respect to awards to
non-employee directors, the Stock Plan is administered by the Insignia Board.
If no Compensation Committee exists which has the authority to administer the
Stock Plan, the functions of the Compensation Committee will be exercised by
the Insignia Board.
The terms and conditions of individual awards will be set forth in written
agreements which will be consistent with the terms of the Stock Plan. Awards
under the Stock Plan may not be made on or after August 10, 2008, but awards
granted prior to such date may extend beyond that date.
21
ELIGIBILITY AND TYPES OF AWARDS UNDER THE STOCK PLAN
All employees and consultants of Insignia and its affiliates, including
prospective employees and consultants, are eligible to be granted (i)
nonqualified stock options, (ii) stock appreciation rights either with a stock
option which may be exercised only at such times and to the extent the related
option is exercisable or independent of a stock option, (iii) "restricted"
shares of Common Stock, (iv) performance shares entitling recipients to receive
a fixed number of shares of Common Stock or the cash equivalent thereof, as
determined by the Compensation Committee in its sole discretion, upon the
attainment of performance goals established by the Compensation Committee
(based on the performance criteria previously approved by stockholders), based
on a specified performance period, (v) performance units entitling recipients
to receive a value payable in cash or shares of Common Stock, as determined by
the Compensation Committee, upon the attainment of performance goals
established by the Compensation Committee (based on the performance criteria
previously approved by stockholders), for a specified performance cycle, (vi)
awards of Common Stock and other awards that are valued in whole or in part by
reference to, or are payable in or otherwise based on, Common Stock and may be
granted either alone or in addition to or in tandem with stock options, stock
appreciation rights, restricted stock, performance shares or performance units
and (vii) awards providing benefits similar to those listed above which are
designed to meet the requirements of non-U.S. jurisdictions under the Stock
Plan. In addition, employees of Insignia and its affiliates that qualify as
subsidiaries or parent corporations are eligible to be granted incentive stock
options ("ISOs") under the Stock Plan.
The Stock Plan also authorizes the automatic grant of nonqualified stock
options to each non-employee director, without further action by the Insignia
Board or the stockholders, as follows: (i) options to purchase 20,000 shares of
Common Stock will be granted to each non-employee director as of the date he or
she begins service as a non-employee director on the Insignia Board; and (ii)
options to purchase 2,000 shares of Common Stock will be granted to each
non-employee director as of the first day of the month following each annual
meeting of stockholders of Insignia.
The Compensation Committee determines the terms and conditions of grants
to employees under the Stock Plan, including the exercise price of stock
options. No ISO or non-qualified stock option which is intended to be
performance based for purposes of Section 162(m) of the Internal Revenue Code
or which is granted to a non-employee director may have an exercise price less
than the fair market value of the Common Stock at the time of grant (or, in the
case of an ISO granted to a 10% stockholder, 110% of fair market value).
Outstanding stock options may not be amended to reduce the exercise price nor
can new options with a lower exercise price be substituted for a simultaneously
surrendered stock option.
The Compensation Committee has adopted under the Stock Plan, a
supplemental stock purchase and loan program for employees of Insignia and its
designated affiliates whose target annual base compensation equals or exceeds
$100,000 ("Covered Employees"). Covered Employees may purchase shares of Common
Stock through the Stock Plan, subject to and in accordance with terms and
conditions set by the Compensation Committee.
AVAILABLE SHARES
The aggregate number of shares of Common Stock which have been and may be
issued or used for reference purposes under the Stock Plan, as amended, or with
respect to which awards may be granted may not exceed the greater of (i)
4,500,000 shares of Common Stock with respect to all types of awards or (ii)
12% of the number of shares of Common Stock issued and outstanding (assuming
full dilution for all outstanding awards and equity convertible into Common
Stock), determined as of the close of the most recent fiscal quarter of
Insignia, with respect to all types of awards other than ISOs.
The maximum number of shares of Common Stock with respect to which any
option, stock appreciation right, award of performance shares or award of
restricted stock for which the grant of such award or lapse of the relevant
restriction period is subject to the attainment of pre-established performance
goals (in accordance with Section 162(m) of the Internal Revenue Code) which
may be granted under the Stock Plan during any fiscal year of Insignia to any
individual is 500,000 shares per type of award, provided that the maximum
number of shares of Common Stock for all types of awards does
22
not exceed 500,000 for any individual during any fiscal year. The maximum value
at grant of performance units which may be granted under the Stock Plan during
any fiscal year of Insignia to any individual is $250,000. To the extent that
shares of Common Stock for which awards are permitted to be granted to an
individual during a fiscal year are not covered by an award in a fiscal year,
the number of shares of Common Stock for which awards may be granted to that
individual will automatically increase in subsequent fiscal years until used.
The number of shares of Common Stock available for the grant of awards and
the exercise price of an award may be adjusted to reflect any change in
Insignia's capital structure or business by reason of certain corporate
transactions or events.
CHANGE IN CONTROL
Unless determined otherwise by the Compensation Committee at the time of
grant, and except to the extent provided in the applicable award agreement, the
recipient's employment agreement or other agreement approved by the
Compensation Committee, no accelerated vesting or lapsing of restrictions will
occur upon a change in control of Insignia (as defined in the Stock Plan). The
Compensation Committee may, in its sole discretion, provide for accelerated
vesting of an award at any time. Upon a change in control of Insignia, options
granted to non-employee directors will immediately become fully exercisable.
AMENDMENT AND TERMINATION
Notwithstanding any other provision of the Stock Plan, the Insignia Board
or the Compensation Committee at any time may amend any or all of the
provisions of the Stock Plan, or suspend or terminate it entirely,
retroactively or otherwise; provided, however, that, unless otherwise required
by law or specifically provided in the Stock Plan, the rights of a participant
with respect to awards granted prior to such amendment, suspension or
termination, may not be impaired without the consent of such participant. In
addition, in certain circumstances, no amendment can be made without the
approval of the stockholders of Insignia.
FUTURE AWARDS; MISCELLANEOUS
Awards granted under the Stock Plan are generally nontransferable, except
that the Compensation Committee may, in its sole discretion, permit the
transfer of nonqualified stock options (other than those granted to
non-employee directors) at the time of grant or thereafter.
The Stock Plan is not subject to any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Stock Plan is
not, nor is it intended to be, qualified under Section 401(a) of the Internal
Revenue Code.
Because future awards under the proposed Stock Plan will be based upon
prospective factors, including the nature of services to be rendered by
prospective employees of Insignia and their potential contributions to the
success of Insignia, actual awards cannot be determined at this time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE STOCK PLAN
The rules concerning the Federal income tax consequences with respect to
options granted and to be granted pursuant to the Stock Plan are quite
technical. Moreover, the applicable statutory provisions are subject to change,
as are their interpretations and applications which may vary in individual
circumstances. Therefore, the following is designed to provide a general
understanding of the Federal income tax consequences. In addition, the
following discussion does not set forth any state or local income tax or estate
tax consequences that may be applicable.
INCENTIVE STOCK OPTIONS. In general, an employee will not realize taxable
income upon either the grant or the exercise of an ISO and Insignia will not
realize an income tax deduction at either such time. If the recipient does not
sell the Common Stock received pursuant to the exercise of the ISO within
either (i) two years after the date of the grant of the ISO or (ii) one year
after the date of exercise, a subsequent
23
sale of the Common Stock will result in long-term capital gain or loss to the
recipient and will not result in a tax deduction to Insignia. The exercise of
an ISO may have implications in the computation of alternative minimum taxable
income for the recipient.
If the recipient disposes of the Common Stock acquired upon exercise of
the ISO within either of the above mentioned time periods, the recipient will
generally realize as ordinary income an amount equal to the lesser of (i) the
fair market value of the Common Stock on the date of exercise over the option
price or (ii) the amount realized upon disposition over the option price. In
such event, Insignia generally will be entitled to an income tax deduction
equal to the amount recognized as ordinary income. Any gain in excess of such
amount realized by the recipient as ordinary income would be taxed at the rates
applicable to short-term or long-term capital gains, depending on the holding
period.
NONQUALIFIED STOCK OPTIONS. A recipient will not realize any taxable
income upon the grant of a nonqualified stock option and Insignia will not
receive a deduction at the time of grant unless the option has a readily
ascertainable fair market value at the time of grant. Upon exercise of a
nonqualified stock option, the recipient generally will realize ordinary income
in an amount equal to the excess of the fair market value of the Common Stock
on the date of exercise over the exercise price. Upon a subsequent sale of the
Common Stock by the recipient, the recipient will recognize short-term or
long-term capital gain or loss depending upon his or her holding period for the
Common Stock. Insignia generally be allowed a deduction equal to the amount
recognized by the recipient as ordinary income.
MISCELLANEOUS. In addition, with regard to both ISOs and nonqualified
stock options, (i) any officers and directors of Insignia subject to Section
16(b) of the Securities Exchange Act of 1934, as amended, may be subject to
special tax rules regarding the income tax consequences concerning their
nonqualified stock options, (ii) any entitlement to a tax deduction on the part
of Insignia is subject to the applicable tax rules, including Section 162(m) of
the Internal Revenue Code regarding a $1,000,000 limitation on deductible
compensation to certain officers, and (iii) if the exercisability or vesting of
any award is accelerated because of a change of control, payments relating to
the awards or a portion thereof, either alone or together with certain other
payments, may constitute parachute payments under section 280G of the Internal
Revenue Code, which excess amounts may be subject to excise taxes.
VOTE REQUIRED
The affirmative vote of a majority of the shares present (in person or by
proxy) and entitled to vote on the proposal to amend the Stock Plan is required
to approve such proposal, provided that the total number of votes cast on such
proposal represents over 50% of the outstanding Common Stock on the Record
Date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR THE ADOPTION OF THIS PROPOSAL.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors requests that the stockholders ratify its selection
of KPMG to serve as the Company's independent auditors for the fiscal year
ending December 31, 2002. In April 2002, the Company dismissed Ernst & Young
LLP ("E&Y") as the Company's independent auditors and replaced them with KPMG
for the fiscal year ending December 31, 2002. The decision to change
independent auditors was recommended by the Company's Audit Committee and
approved by the Company's Board of Directors. The Company did not consult with
KPMG regarding any of the matters identified in Item 304(a)(2) of Regulation
S-K prior to KPMG's appointment as independent auditors in April 2002.
E&Y examined the consolidated financial statements of the Company for the
fiscal years ended December 31, 2001 and December 31, 2000. The reports of E&Y
on the Company's financial statements for the years ended December 31, 2001 and
December 31, 2000 did not contain an adverse opinion or a disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting
24
principles. During the years ended December 31, 2001 and December 31, 2000 and
through the date of E&Y's dismissal: (i) there have occurred none of the
"reportable events" listed in Item 304(a)(1)(v) of Regulation S-K and (ii)
there were no disagreements with E&Y on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of E&Y, would have
caused E&Y to make reference thereto in its reports on the financial statements
for such periods. The Company has filed with the Commission a letter from E&Y
stating that E&Y agrees with the foregoing statements.
Representatives of E&Y and KPMG are expected to be present at the Annual
Meeting to make a statement if they desire to do so and to respond to
appropriate questions by stockholders.
In the year ended December 31, 2001, in addition to audit services, E&Y
also provided certain non-audit services to the Company in 2001. The Audit
Committee has considered whether the provision of these additional services is
compatible with maintaining the independence of the Company's independent
auditors. The following table sets forth the fees incurred by the Company for
the services of E&Y in 2001.
Audit Fees ............................. $987,000
Financial Information Systems
Design and Implementation Fees ....... $ --
Tax Services ........................... $638,000
All Other Fees ......................... $208,500
VOTE REQUIRED
The affirmative vote of a majority of the shares present (in person or by
proxy) and entitled to vote at the meeting is required for the ratification of
the Insignia Board's selection of KPMG as the Company's independent auditors
for the fiscal year ending December 31, 2002.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR THE RATIFICATION OF THIS PROPOSAL.
STOCKHOLDER PROPOSALS
ADVANCE NOTICE PROCEDURES. Under the Company's bylaws, no business may be
brought before an annual meeting unless it is brought before the meeting by or
at the direction of the Board or by a stockholder entitled to vote who has
delivered notice (containing certain information specified in the bylaws) to
the Company's Corporate Secretary at 200 Park Avenue, New York, New York 10166
not less than 50 or more than 80 days prior to the scheduled date for the
annual meeting. If the Company gives less than 60 days' notice or prior public
disclosure of the scheduled date for the annual meeting, such notice to be
timely must be delivered to the Company not later than the close of business on
the 10th day following the earlier of the day on which a notice of the date of
the meeting was mailed or the day on which such public disclosure was made.
These requirements are separate from and in addition to the SEC's requirements
that a stockholder must meet in order to have a stockholder proposal included
in the Company's proxy statement.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING. Stockholders interested
in submitting a proposal for inclusion in the proxy materials for the Company's
annual meeting of stockholders in 2003 may do so by following the procedures
prescribed in SEC Rule 14a-8. To be eligible for inclusion, stockholder
proposals must be received by the Company's Corporate Secretary at 200 Park
Avenue, New York, New York 10166 no later than December 16, 2002.
OTHER MATTERS
Upon written request addressed to the Company's Director of Investor
Relations at 200 Park Avenue, New York, New York 10166 from any person
solicited herein, the Company will provide, at no cost, a copy of its Annual
Report on Form 10-K for the fiscal year ended December 31, 2001.
25
Management of the Company does not know of any matters to be brought
before the Annual Meeting other than the matters set forth in the Notice of
Annual Meeting of Stockholders and matters incident to the conduct of the
Meeting. However, if any other matters should properly come before the Annual
Meeting, the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their best judgment.
DATED: April 15, 2002 BY ORDER OF THE BOARD OF DIRECTORS
/s/ Adam B. Gilbert
-----------------------
Adam B. Gilbert
Secretary
26
Appendix A
INSIGNIA FINANCIAL GROUP, INC.
--------------------------
1998 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED AS OF APRIL __, 2002)
--------------------------
ARTICLE I
PURPOSE
The purpose of this Insignia Financial Group, Inc. 1998 Stock Incentive
Plan (AMENDED AND RESTATED AS OF APRIL __, 2002) is to enhance the profitability
and value of the Company for the benefit of its stockholders by enabling the
Company (i) to offer employees of and Consultants to the Company and its
Affiliates stock-based incentives and other equity interests in the Company,
thereby creating a means to raise the level of stock ownership by employees and
Consultants in order to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and the Company's
stockholders, and (ii) to make equity based awards to Non-Employee Directors,
thereby creating a means to attract, retain and reward such Non-Employee
Directors and strengthen the mutuality of interests between Non-Employee
Directors and the Company's stockholders.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Acquisition Event" has the meaning set forth in Section 4.2(d).
2.2 "Affiliate" means each of the following: (i) any Subsidiary; (ii)
any Parent; (iii) any corporation, trade or business (including, without
limitation, a partnership or limited liability company) which is directly or
indirectly controlled 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company or one of its
Affiliates; and (iv) any other entity in which the Company or any of its
Affiliates has a material equity interest and which is designated as an
"Affiliate" by resolution of the Committee.
2.3 "Award" means any award under this Plan of any: (i) Stock Option;
(ii) Stock Appreciation Right; (iii) Restricted Stock; (iv) Performance Share;
(v) Performance Unit; (vi) Other Stock-Based Award; or (vii) other award
providing benefits similar to (i) through (vi) designed to meet the requirements
of a Foreign Jurisdiction.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means, with respect to a Participant's Termination of
Employment or Termination of Consultancy: (i) in the case where there is no
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award (or where there is such an
agreement but it does not define "cause" (or words of like import)), termination
due to a Participant's insubordination, dishonesty, incompetence, moral
turpitude, other misconduct of any kind or the refusal to perform his or her
duties or responsibilities for any reason other than illness or incapacity; or
(ii) in the case where there is an employment agreement, consulting agreement,
change in control agreement or similar agreement in effect between the Company
or an Affiliate and the Participant at the time of the grant of the Award that
defines "cause" (or words of like import), as defined under such agreement;
provided, however, that with regard to any agreement that conditions "cause" on
occurrence of a change in control, such definition of "cause" shall not apply
until a change in control actually takes place and then only with regard to a
termination thereafter. With respect to a Participant's Termination of
Directorship, "cause" shall mean an act or failure to act that constitutes cause
for removal of a director under applicable Delaware law.
2.6 "Change in Control" has the meaning set forth in Article XIII or
Article XIV, as applicable.
2.7 "Code" means the Internal Revenue Code of 1986, as amended. Any
reference to any section of the Code shall also be a reference to any successor
provision.
2.8 "Committee" means: (a) with respect to the application of this Plan
to Eligible Employees and Consultants, a committee or subcommittee of the Board
appointed from time to time by the Board, which committee or subcommittee shall
consist of two or more non-employee directors, each of whom is intended to be,
to the extent required by Rule 16b-3, a "non-employee director" as defined in
Rule 16b-3 and, to the extent required by Section 162(m) of the Code and any
regulations thereunder, an "outside director" as defined under Section 162(m) of
the Code; provided, however, that if and to the extent that no Committee exists
which has the authority to administer this Plan, the functions of the Committee
shall be exercised by the Board and all references herein to the Committee shall
be deemed to be references to the Board; and (b) with respect to the application
of this Plan to Non-Employee Directors, the Board.
2.9 "Common Stock" means the common stock, $.01 par value per share, of
the Company.
2.10 "Company" means Insignia Financial Group, Inc., a Delaware
corporation, and its successors by operation of law. Prior to November 2, 1998,
the Company was known as Insignia/ESG Holdings, Inc.
2.11 "Consultant" means any advisor or consultant to the Company or its
Affiliates.
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2.12 "Disability" means, with respect to an Eligible Employee,
Consultant or Non-Employee Director, a permanent and total disability as
defined in Section 22(e)(3) of the Code. A Disability shall only be deemed to
occur at the time of the determination by the Committee of the Disability.
2.13 "Distribution Date" means the date of distribution of Common Stock
by Insignia Financial Group, Inc. to holders of Class A Common Stock, par value
$.01 per share, of Insignia Financial Group, Inc.
2.14 "Effective Date" means the effective date of this Plan as defined
in Article XVIII.
2.15 "Eligible Employee" means each employee of the Company or an
Affiliate.
2.16 "Exchange Act" means the Securities Exchange Act of 1934, as
amended. Any references to any section of the Exchange Act shall also be a
reference to any successor provision.
2.17 "Fair Market Value" means, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, as of any
date, the last sales price for the Common Stock on the applicable date: (i) as
reported on the principal national securities exchange on which it is then
traded or the Nasdaq Stock Market, Inc. or (ii) if not traded on any such
national securities exchange or the Nasdaq Stock Market, Inc. as quoted on an
automated quotation system sponsored by the National Association of Securities
Dealers, Inc. If the Common Stock is not readily tradable on a national
securities exchange, the Nasdaq Stock Market, Inc. or any automated quotation
system sponsored by the National Association of Securities Dealers, Inc., its
Fair Market Value shall be set in good faith by the Committee. Notwithstanding
anything herein to the contrary, "Fair Market Value" means the price for Common
Stock set by the Committee in good faith based on reasonable methods set forth
under Section 422 of the Code and the regulations thereunder including, without
limitation, a method utilizing the average of prices of the Common Stock
reported on the principal national securities exchange on which it is then
traded during a reasonable period designated by the Committee. For purposes of
the grant of any Stock Option, the applicable date shall be the date for which
the last sales price is available at the time of grant. For purposes of the
conversion of a Performance Unit to shares of Common Stock for reference
purposes, the applicable date shall be the date determined by the Committee in
accordance with Section 10.1. For purposes of the exercise of any Stock
Appreciation Right, the applicable date shall be the date a notice of exercise
is received by the Committee or, if not a day on which the applicable market is
open, the next day that it is open.
2.18 "Foreign Jurisdiction" means any jurisdiction outside of the
United States including, without limitation, countries, states, provinces and
localities.
2.19 "Incentive Stock Option" means any Stock Option awarded to an
Eligible Employee under this Plan intended to be and designated as an "Incentive
Stock Option" within the meaning of Section 422 of the Code.
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2.20 "Limited Stock Appreciation Right" means an Award of a limited
Tandem Stock Appreciation Right or a Non-Tandem Stock Appreciation Right made
pursuant to Section 7.5 of this Plan.
2.21 "Non-Employee Director" means a director of the Company who is not
an active employee of the Company or an Affiliate and who is not an officer,
director or employee of (i) any entity which, directly or indirectly,
beneficially owns or controls 5% or more of the combined voting power of the
then outstanding voting securities of the Company (or any Subsidiary) entitled
to vote generally in the election of directors of the Company (or, if
applicable, the Subsidiary) or (ii) any entity controlling, controlled by or
under common control (within the meaning of Rule 405 of the Securities Act) with
any such entity.
2.22 "Non-Qualified Stock Option" means any Stock Option awarded under
this Plan that is not an Incentive Stock Option.
2.23 "Non-Tandem Stock Appreciation Right" means a Stock Appreciation
Right entitling a Participant to receive an amount in cash or Common Stock (as
determined by the Committee in its sole discretion) equal to the excess of: (i)
the Fair Market Value of a share of Common Stock as of the date such right is
exercised, over (ii) the aggregate exercise price of such right.
2.24 "Other Stock-Based Award" means an Award of Common Stock and other
Awards made pursuant to Article XI that are valued in whole or in part by
reference to, or are payable in or otherwise based on, Common Stock, including,
without limitation, an Award valued by reference to performance of an Affiliate.
2.25 "Parent" means any parent corporation of the Company within the
meaning of Section 424(e) of the Code.
2.26 "Participant" means any Eligible Employee or Consultant to whom an
Award has been made under this Plan and each Non-Employee Director of the
Company; provided, however, that a Non-Employee Director shall be a Participant
for purposes of the Plan solely with respect to awards of Stock Options pursuant
to Article XIII.
2.27 "Performance Criteria" has the meaning set forth in Exhibit A.
2.28 "Performance Cycle" has the meaning set forth in Section 10.1.
2.29 "Performance Goal" means the objective performance goals
established by the Committee in accordance with Section 162(m) of the Code and
based on one or more Performance Criteria.
2.30 "Performance Period" has the meaning set forth in Section 9.1.
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2.31 "Performance Share" means an Award made pursuant to Article IX of
this Plan of the right to receive Common Stock or, as determined by the
Committee in its sole discretion, cash of an equivalent value at the end of the
Performance Period or thereafter.
2.32 "Performance Unit" means an Award made pursuant to Article X of
this Plan of the right to receive a fixed dollar amount, payable in cash or
Common Stock (or a combination of both) as determined by the Committee in its
sole discretion, at the end of a specified Performance Cycle or thereafter.
2.33 "Plan" means this Insignia Financial Group, Inc. 1998 Stock
Incentive Plan (AMENDED AND RESTATED AS OF APRIL __, 2002), as amended from time
to time. Prior to November 2, 1998, the Plan was known as the Insignia/ESG
Holdings, Inc. 1998 Stock Incentive Plan.
2.34 "Reference Stock Option" has the meaning set forth in Section 7.1.
2.35 "Restricted Stock" means an Award of shares of Common Stock under
this Plan that is subject to restrictions under Article VIII.
2.36 "Restriction Period" has the meaning set forth in Section 8.3(a)
with respect to Restricted Stock.
2.37 "Retirement" means a Termination of Employment or Termination of
Consultancy without Cause by a Participant at or after age 65 or such earlier
date after age 50 as may be approved by the Committee with regard to such
Participant. With respect to a Participant's Termination of Directorship,
Retirement shall mean the failure to stand for reelection or the failure to be
reelected at or after a Participant has attained age 65 or, with the consent of
the Board, before age 65 but after age 50.
2.38 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange
Act as then in effect or any successor provisions.
2.39 "Section 162(m) of the Code" means Section 162(m) of the Code and
any Treasury regulations thereunder.
2.40 "Securities Act" means the Securities Act of 1933, as amended. Any
reference to any section of the Securities Act shall also be a reference to any
successor provision.
2.41 "Stock Appreciation Right" or "SAR" means the right pursuant to an
Award granted under Article VII.
2.42 "Stock Option" or "Option" means any option to purchase shares of
Common Stock granted to Eligible Employees or Consultants under Article VI or to
Non-Employee Directors under Article XIII.
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2.43 "Subsidiary" means any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Code.
2.44 "Tandem Stock Appreciation Right" means a Stock Appreciation Right
entitling the holder to surrender to the Company all (or a portion) of a Stock
Option in exchange for an amount in cash or Common Stock (as determined by the
Committee in its sole discretion) equal to the excess of: (i) the Fair Market
Value, on the date such Stock Option (or such portion thereof) is surrendered,
of the Common Stock covered by such Stock Option (or such portion thereof), over
(ii) the aggregate exercise price of such Stock Option (or such portion
thereof).
2.45 "Ten Percent Stockholder" means a person owning stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company, its Subsidiaries or its Parent.
2.46 "Termination of Consultancy" means, with respect to a Consultant,
that the Consultant is no longer acting as a consultant to the Company or an
Affiliate. In the event an entity shall cease to be an Affiliate, there shall be
deemed a Termination of Consultancy of any individual who is not otherwise a
Consultant to the Company or another Affiliate at the time the entity ceases to
be an Affiliate.
2.47 "Termination of Directorship" means, with respect to a
Non-Employee Director, that the Non-Employee Director has ceased to be a
director of the Company.
2.48 "Termination of Employment" means: (i) a termination of employment
(for reasons other than a military or personal leave of absence granted by the
Company) of a Participant from the Company and its Affiliates; or (ii) when an
entity which is employing a Participant ceases to be an Affiliate, unless the
Participant otherwise is, or thereupon becomes, employed by the Company or
another Affiliate.
2.49 "Transfer" means anticipate, alienate, attach, sell, assign,
pledge, encumber, charge, hypothecate or otherwise transfer and "Transferred"
has a correlative meaning.
ARTICLE III
ADMINISTRATION
3.1 The Committee. The Plan shall be administered and interpreted by
the Committee. If for any reason the appointed Committee does not meet the
requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance
with the requirements of Rule 16b-3 and Section 162(m) of the Code shall not
affect the validity of Awards, grants, interpretations or other actions of the
Committee.
3.2 Grants of Awards. The Committee shall have full authority to grant
to Eligible Employees and Consultants, pursuant to the terms of this Plan: (i)
Stock Options; (ii) Tandem Stock Appreciation Rights and Non-Tandem Stock
Appreciation Rights; (iii) Restricted Stock;
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(iv) Performance Shares; (v) Performance Units; (vi) Other Stock-Based Awards;
and (vii) other awards providing benefits similar to (i) through (vi) designed
to meet the requirements of Foreign Jurisdictions. All Awards shall be granted
by, confirmed by, and subject to the terms of, a written agreement executed by
the Company and the Participant. In particular, the Committee shall have the
authority:
(a) to select the Eligible Employees and Consultants to whom
Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Awards, including any
combination of two or more Awards, are to be granted hereunder to one
or more Eligible Employees or Consultants;
(c) to determine, in accordance with the terms of this Plan, the
number of shares of Common Stock to be covered by each Award granted
hereunder;
(d) to determine the terms and conditions, not inconsistent with
the terms of this Plan, of any Award granted hereunder (including, but
not limited to, the exercise or purchase price (if any), any
restriction or limitation, any vesting schedule or acceleration thereof
and any forfeiture restrictions or waiver thereof, regarding any Award
and the shares of Common Stock relating thereto, based on such factors,
if any, as the Committee shall determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash, Common Stock and/or Restricted Stock
under Section 6.3(d) or, with respect to Stock Options granted to
Non-Employee Directors, Section 13.4(d);
(f) to determine whether, to what extent and under what
circumstances to provide loans (which shall bear interest at the rate
the Committee shall provide) to Eligible Employees and Consultants in
order to exercise Stock Options under this Plan or to purchase Awards
under this Plan (including shares of Common Stock);
(g) to determine whether a Stock Option is an Incentive Stock
Option or Non-Qualified Stock Option, whether a Stock Appreciation
Right is a Tandem Stock Appreciation Right or Non-Tandem Stock
Appreciation Right or whether an Award is intended to satisfy Section
162(m) of the Code;
(h) to determine whether to require an Eligible Employee or
Consultant, as a condition of the granting of any Award, not to sell or
otherwise dispose of shares of Common Stock acquired pursuant to the
exercise of an Option or an Award for a period of time as determined by
the Committee, in its sole discretion, following the date of the
acquisition of such Option or Award;
(i) to modify, extend or renew an Award, subject to Article XV
herein, provided, however, that if an Award is modified, extended or
renewed and thereby deemed to be the issuance of a new Award under the
Code or the applicable accounting
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rules, the exercise price of an Award may continue to be the
original exercise price even if less than the Fair Market Value of the
Common Stock at the time of such modification, extension or renewal;
and
(j) to offer to buy out an Option previously granted, based on
such terms and conditions as the Committee shall establish and
communicate to the Participant at the time such offer is made.
3.3 Guidelines. Subject to Article XV hereof, the Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing this Plan and perform all acts, including the delegation
of its administrative responsibilities, as it shall, from time to time, deem
advisable; to construe and interpret the terms and provisions of this Plan and
any Award issued under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in this Plan or
in any agreement relating thereto in the manner and to the extent it shall deem
necessary to effectuate the purpose and intent of this Plan. The Committee may
adopt special guidelines and provisions for persons who are residing in, or
subject to, the taxes of, Foreign Jurisdictions to comply with applicable tax
and securities laws and may impose any limitations and restrictions that it
deems necessary to comply with the applicable tax and securities laws of such
Foreign Jurisdictions. To the extent applicable, this Plan is intended to comply
with Section 162(m) of the Code and the applicable requirements of Rule 16b-3
and shall be limited, construed and interpreted in a manner so as to comply
therewith.
3.4 Decisions Final. Any decision, interpretation or other action made
or taken in good faith by or at the direction of the Company, the Board or the
Committee (or any of its members) arising out of or in connection with this Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective heirs, executors, administrators,
successors and assigns.
3.5 Reliance on Counsel. The Company, the Board or the Committee may
consult with legal counsel, who may be counsel for the Company or other counsel,
with respect to its obligations or duties hereunder, or with respect to any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6 Procedures. If the Committee is appointed, the Board shall
designate one of the members of the Committee as chairman and the Committee
shall hold meetings, subject to the By-Laws of the Company, at such times and
places as it shall deem advisable. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all the Committee members in accordance with the By-Laws of the
Company, shall be fully as effective as if it had been made by a vote at a
meeting duly called and held. The Committee shall keep minutes of its meetings
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
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3.7 Designation of Consultants/Liability.
(a) The Committee may designate employees of the Company and
professional advisors to assist the Committee in the administration of
this Plan and may grant authority to officers to execute agreements or
other documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and
agents as it may deem desirable for the administration of this Plan and
may rely upon any opinion received from any such counsel or consultant
and any computation received from any such consultant or agent.
Expenses incurred by the Committee in the engagement of any such
counsel, consultant or agent shall be paid by the Company. The
Committee, its members and any employee of the Company designated
pursuant to paragraph (a) above shall not be liable for any action or
determination made in good faith with respect to this Plan. To the
maximum extent permitted by applicable law, no officer of the Company
or member or former member of the Committee shall be liable for any
action or determination made in good faith with respect to this Plan or
any Award granted under it. To the maximum extent permitted by
applicable law or the Certificate of Incorporation or By-Laws of the
Company and to the extent not covered by insurance, each officer and
member or former member of the Committee shall be indemnified and held
harmless by the Company against any cost or expense (including
reasonable fees of counsel reasonably acceptable to the Company) or
liability (including any sum paid in settlement of a claim with the
approval of the Company), and advanced amounts necessary to pay the
foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with this Plan,
except to the extent arising out of such officer's, member's or former
member's own fraud or bad faith. Such indemnification shall be in
addition to any rights of indemnification the officers, directors or
members or former officers, directors or members may have under
applicable law or under the Certificate of Incorporation or By-Laws of
the Company or any Affiliate. Notwithstanding anything else herein,
this indemnification will not apply to the actions or determinations
made by an individual with regard to Awards granted to him or her under
this Plan.
ARTICLE IV
SHARE AND OTHER LIMITATIONS
4.1 Shares.
(a) General Limitation. The aggregate number of shares of Common
Stock which may be issued or used for reference purposes under this
Plan or with respect to which Awards may be granted shall not exceed
the greater of (i) 4,500,000 shares of Common Stock (subject to any
increase or decrease pursuant to Section 4.2) with respect to all types
of Awards or (ii) 12% of the number of shares of Common Stock issued
and outstanding (assuming full dilution of all outstanding Awards and
equity
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convertible into Common Stock), determined as of the Company's
most recent fiscal quarter immediately preceding the grant of any Award
(subject to any increase or decrease pursuant to Section 4.2) with
respect to all types of Awards other than Incentive Stock Options. The
shares of Common Stock available under this Plan may be either
authorized and unissued Common Stock or Common Stock held in or
acquired for the treasury of the Company. To the extent that an
Incentive Stock Option is disqualified and no longer an Incentive Stock
Option, the number of shares of Common Stock underlying the Stock
Option shall continue to count against the aggregate limit of 4,500,000
shares of Common Stock set forth herein. If any Stock Option or Stock
Appreciation Right granted under this Plan expires, terminates or is
canceled for any reason without having been exercised in full or, with
respect to Stock Options, the Company repurchases any Stock Option, the
number of shares of Common Stock underlying such unexercised or
repurchased Stock Option or any unexercised Stock Appreciation Right
shall again be available for the purposes of Awards under this Plan. If
any shares of Restricted Stock, Performance Shares or Performance Units
awarded under this Plan to a Participant are forfeited or repurchased
by the Company for any reason, the number of forfeited or repurchased
shares of Restricted Stock, Performance Shares or Performance Units
shall again be available for the purposes of Awards under this Plan. If
a Tandem Stock Appreciation Right is granted or a Limited Stock
Appreciation Right is granted in tandem with a Stock Option, such grant
shall only apply once against the maximum number of shares of Common
Stock which may be issued under this Plan. In determining the number of
shares of Common Stock available for Awards other than Awards of
Incentive Stock Options, if Common Stock has been exchanged by a
Participant as full or partial payment to the Company, or for
withholding, in connection with the exercise of a Stock Option or the
number shares of Common Stock otherwise deliverable has been reduced
for withholding, the number of shares of Common Stock exchanged as
payment in connection with the exercise or for withholding or reduced
shall again be available for purposes of Awards under this Plan.
(b) Individual Participant Limitations. (i) The maximum number of
shares of Common Stock subject to any Award of Stock Options, Stock
Appreciation Rights, Performance Shares or shares of Restricted Stock
for which the grant of such Award or the lapse of the relevant
Restriction Period is subject to the attainment of Performance Goals in
accordance with Section 8.3(a)(ii) herein which may be granted under
this Plan during any fiscal year of the Company to each Eligible
Employee or Consultant shall be 500,000 shares per type of Award
(subject to any increase or decrease pursuant to Section 4.2), provided
that the maximum number of shares of Common Stock for all types of
Awards does not exceed 500,000 during any fiscal year of the Company.
If a Tandem Stock Appreciation Right is granted or a Limited Stock
Appreciation Right is granted in tandem with a Stock Option, it shall
apply against the Eligible Employee's or Consultant's individual share
limitations for both Stock Appreciation Rights and Stock Options.
(ii) There are no annual individual Eligible Employee or
Consultant share limitations on Restricted Stock for which the grant of
such Award or the lapse of
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the relevant Restriction Period is not subject to attainment of
Performance Goals in accordance with Section 8.3(a)(ii) hereof.
(iii) The maximum value at grant of Performance Units which may be
granted under this Plan during any fiscal year of the Company to each
Eligible Employee or Consultant shall be $250,000. Each Performance
Unit shall be referenced to one share of Common Stock and shall be
charged against the available shares under this Plan at the time the
unit value measurement is converted to a referenced number of shares of
Common Stock in accordance with Section 10.1.
(iv) The individual Participant limitations set forth in this
Section 4.1(b) shall be cumulative; that is, to the extent that shares
of Common Stock for which Awards are permitted to be granted to an
Eligible Employee or a Consultant during a fiscal year are not covered
by an Award to such Eligible Employee or Consultant in a fiscal year,
the number of shares of Common Stock available for Awards to such
Eligible Employee or Consultant shall automatically increase in the
subsequent fiscal years during the term of the Plan until used.
4.2 Changes.
(a) The existence of this Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company or any Affiliate, any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the
dissolution or liquidation of the Company or any Affiliate, any sale or
transfer of all or part of the assets or business of the Company or any
Affiliate or any other corporate act or proceeding.
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(b) Subject to the provisions of Section 4.2(d), in the event of
any such change in the capital structure or business of the Company by
reason of any stock split, reverse stock split, stock dividend,
combination or reclassification of shares, recapitalization, or other
change in the capital structure of the Company, merger, consolidation,
spin-off, reorganization, partial or complete liquidation, issuance of
rights or warrants to purchase any Common Stock or securities
convertible into Common Stock, or any other corporate transaction or
event having an effect similar to any of the foregoing and effected
without receipt of consideration by the Company, then the aggregate
number and kind of shares which thereafter may be issued under this
Plan, the number and kind of shares or other property (including cash)
to be issued upon exercise of an outstanding Stock Option or other
Awards granted under this Plan and the purchase price thereof shall be
appropriately adjusted consistent with such change in such manner as
the Committee may deem equitable to prevent substantial dilution or
enlargement of the rights granted to, or available for, Participants
under this Plan, and any such adjustment determined by the Committee in
good faith shall be final, binding and conclusive on the Company and
all Participants and employees and their respective heirs, executors,
administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any
adjustment in Options or Awards pursuant to Section 4.2(a) or (b) shall
be aggregated until, and eliminated at, the time of exercise by
rounding-down for fractions less than one-half and rounding-up for
fractions equal to or greater than one-half. No cash settlements shall
be made with respect to fractional shares eliminated by rounding.
Notice of any adjustment shall be given by the Committee to each
Participant whose Award has been adjusted and such adjustment (whether
or not such notice is given) shall be effective and binding for all
purposes of this Plan.
(d) In the event of a merger or consolidation in which the Company
is not the surviving entity or in the event of any transaction that
results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale
or transfer of all or substantially all of the Company's assets (all of
the foregoing being referred to as "Acquisition Events"), then the
Committee may, in its sole discretion, terminate all outstanding Stock
Options and Stock Appreciation Rights, effective as of the date of the
Acquisition Event, by delivering notice of termination to each
Participant at least 30 days prior to the date of consummation of the
Acquisition Event, in which case during the period from the date on
which such notice of termination is delivered to the consummation of
the Acquisition Event, each such Participant shall have the right to
exercise in full all of his or her Stock Options and Stock Appreciation
Rights that are then outstanding (without regard to any limitations on
exercisability otherwise contained in the Stock Option or Award
Agreements), but any such exercise shall be contingent upon and subject
to the occurrence of the Acquisition Event, and, provided that, if the
Acquisition Event does not take place within a specified period after
giving such notice for any reason whatsoever, the notice and exercise
pursuant thereto shall be null and void.
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If an Acquisition Event occurs but the Committee does not
terminate the outstanding Stock Options and Stock Appreciation Rights pursuant
to this Section 4.2(d), then the provisions of Section 4.2(b) shall apply.
4.3 Minimum Purchase Price. Notwithstanding any provision of this Plan
to the contrary, if authorized but previously unissued shares of Common Stock
are issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
4.4 Assumption of Awards. Except with regard to awards that are subject
to termination agreements with Insignia Financial Group Inc. providing for the
cash-out and cancellation of the award, awards that were granted prior to the
Effective Date under the Insignia Financial Group Inc.'s 1992 Stock Incentive
Plan, as amended, to individuals who became Eligible Employees of or Consultants
to the Company or an Affiliate as of the Distribution Date and that were
outstanding immediately prior to the Distribution Date will be assumed by the
Company as of the Distribution Date and converted into Awards hereunder based on
the Company's Common Stock in a manner determined by the Committee. The terms of
such Awards shall be governed by the terms of this Plan as of the Effective
Date. Notwithstanding the foregoing, such Awards shall continue to be governed
by the terms of the applicable agreement in effect prior to the Effective Date,
except as adjusted to reflect the appropriate number of shares of Common Stock
and, with respect to Stock Options, the appropriate exercise price.
ARTICLE V
ELIGIBILITY
5.1 General Eligibility. All Eligible Employees and Consultants and
prospective employees of and Consultants to the Company and its Affiliates are
eligible to be granted Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares, Performance Units, Other Stock-Based
Awards and awards providing benefits similar to each of the foregoing designed
to meet the requirements of Foreign Jurisdictions under this Plan. Eligibility
for the grant of an Award and actual participation in this Plan shall be
determined by the Committee in its sole discretion. The vesting and exercise of
Awards granted to a prospective employee or Consultant are conditioned upon such
individual actually becoming an Eligible Employee or Consultant.
5.2 Incentive Stock Options. All Eligible Employees of the Company, its
Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock
Options under this Plan. Notwithstanding the foregoing, unless otherwise
permitted pursuant to the Code, "qualified real estate agents" (as defined in
Section 3508 of the Code) shall not be eligible to be granted Incentive Stock
Options under this Plan. Eligibility for the grant of an Award and actual
participation in this Plan shall be determined by the Committee in its sole
discretion.
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5.3 Non-Employee Directors. Non-Employee Directors are only eligible to
receive an Award of Stock Options in accordance with Article XIII of the Plan.
ARTICLE VI
STOCK OPTIONS
6.1 Stock Options. Each Stock Option granted hereunder shall be one of
two types: (i) an Incentive Stock Option intended to satisfy the requirements of
Section 422 of the Code; or (ii) a Non-Qualified Stock Option.
6.2 Grants. The Committee shall have the authority to grant to any
Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock
Options or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not qualify as an
Incentive Stock Option (whether because of its provisions or the time or manner
of its exercise or otherwise), such Stock Option or the portion thereof which
does not qualify, shall constitute a separate Non- Qualified Stock Option. The
Committee shall have the authority to grant any Consultant one or more
Non-Qualified Stock Options (with or without Stock Appreciation Rights).
Notwithstanding any other provision of this Plan to the contrary or any
provision in an agreement evidencing the grant of a Stock Option to the
contrary, any Stock Option granted to an Eligible Employee of an Affiliate
(other than an Affiliate which is a Parent or a Subsidiary) shall be a
Non-Qualified Stock Option.
6.3 Terms of Stock Options. Stock Options granted under this Plan shall
be subject to the following terms and conditions, and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem desirable:
(a) Exercise Price. The exercise price per share of Common Stock
purchasable under an Incentive Stock Option or a Stock Option intended
to be "performance-based" for purposes of Section 162(m) of the Code
shall be determined by the Committee at the time of grant, but shall
not be less than 100% of the Fair Market Value of the share of Common
Stock at the time of grant; provided, however, that if an Incentive
Stock Option is granted to a Ten Percent Stockholder, the exercise
price shall be no less than 110% of the Fair Market Value of the Common
Stock. The exercise price per share of Common Stock purchasable under a
Non-Qualified Stock Option shall be determined by the Committee.
(b) Stock Option Term. The term of each Stock Option shall be
fixed by the Committee; provided, however, that no Stock Option shall
be exercisable more than 10 years after the date such Stock Option is
granted; and further provided that the term of an Incentive Stock
Option granted to a Ten Percent Stockholder shall not exceed 5 years.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at
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grant. If the Committee provides, in its discretion, that any
Stock Option is exercisable subject to certain limitations (including,
without limitation, that such Stock Option is exercisable only in
installments or within certain time periods), the Committee may waive
such limitations on the exercisability at any time at or after grant in
whole or in part (including, without limitation, waiver of the
installment exercise provisions or acceleration of the time at which
such Stock Option may be exercised), based on such factors, if any, as
the Committee shall determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
and waiting period provisions apply under subsection (c) above, Stock
Options may be exercised in whole or in part at any time and from time
to time during the Stock Option term by giving written notice of
exercise to the Committee specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price as follows: (i) in cash or by check, bank draft or money
order payable to the order of the Company; (ii) if the Common Stock is
traded on a national securities exchange, the Nasdaq Stock Market, Inc.
or quoted on a national quotation system sponsored by the National
Association of Securities Dealers, through a "cashless exercise"
procedure whereby the Participant delivers irrevocable instructions to
a broker to deliver promptly to the Company an amount equal to the
purchase price; or (iii) on such other terms and conditions as may be
acceptable to the Committee (including, without limitation, the
relinquishment of Stock Options or by payment in full or in part in the
form of Common Stock owned by the Participant for a period of at least
6 months (and for which the Participant has good title free and clear
of any liens and encumbrances) based on the Fair Market Value of the
Common Stock on the payment date as determined by the Committee). No
shares of Common Stock shall be issued until payment therefor, as
provided herein, has been made or provided for.
(e) Incentive Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an Eligible Employee during any
calendar year under this Plan and/or any other stock option plan of the
Company, any Subsidiary or any Parent exceeds $100,000, such Options
shall be treated as Non-Qualified Stock Options. In addition, if an
Eligible Employee does not remain employed by the Company, any
Subsidiary or any Parent at all times from the time an Incentive Stock
Option is granted until 3 months prior to the date of exercise thereof
(or such other period as required by applicable law), such Stock Option
shall be treated as a Non-Qualified Stock Option. Should any provision
of this Plan not be necessary in order for the Stock Options to qualify
as Incentive Stock Options, or should any additional provisions be
required, the Committee may amend this Plan accordingly, without the
necessity of obtaining the approval of the stockholders of the Company.
(f) Form, Modification, Extension and Renewal of Stock Options.
Subject to the terms and conditions and within the limitations of this
Plan, Stock Options shall be evidenced by such form of agreement or
grant as is approved by the Committee, and the Committee may (i)
modify, extend or renew outstanding Stock Options granted under this
Plan (provided that the rights of a Participant are not reduced without
his consent),
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and (ii) accept the surrender of outstanding Stock Options (up to
the extent not theretofore exercised) and authorize the granting of new
Stock Options in substitution therefor (to the extent not theretofore
exercised). NOTWITHSTANDING THE FOREGOING, WITHOUT THE APPROVAL OF THE
SHAREHOLDERS OF THE COMPANY, AN OUTSTANDING STOCK OPTION MAY NOT BE
MODIFIED TO REDUCE THE EXERCISE PRICE THEREOF NOR MAY A NEW OPTION AT A
LOWER PRICE BE SUBSTITUTED FOR A SIMULTANEOUSLY SURRENDERED OPTION,
PROVIDED THAT THE FOREGOING SHALL NOT APPLY TO ADJUSTMENTS OR
SUBSTITUTIONS IN ACCORDANCE WITH SECTION 4.2.
(g) Other Terms and Conditions. Stock Options may contain such
other provisions, which shall not be inconsistent with any of the terms
of this Plan, as the Committee shall deem appropriate including,
without limitation, permitting "reloads" such that the same number of
Stock Options are granted as the number of Stock Options exercised,
shares used to pay for the exercise price of Stock Options or shares
used to pay withholding taxes ("Reloads"). With respect to Reloads, the
exercise price of the new Stock Option shall be the Fair Market Value
on the date of the "reload" and the term of the Stock Option shall be
the same as the remaining term of the Stock Options that are exercised,
if applicable, or such other exercise price and term as determined by
the Committee.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 Tandem Stock Appreciation Rights. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option (a "Reference Stock
Option") granted under this Plan ("Tandem Stock Appreciation Rights"). In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Reference Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of the grant
of such Reference Stock Option. Consultants shall not be eligible for a grant of
Tandem Stock Appreciation Rights granted in conjunction with all or part of an
Incentive Stock Option.
7.2 Terms and Conditions of Tandem Stock Appreciation Rights. Tandem
Stock Appreciation Rights shall be subject to such terms and conditions, not
inconsistent with the provisions of this Plan, as shall be determined from time
to time by the Committee, including Article XII and the following:
(a) Term. A Tandem Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Stock Option shall
terminate and no longer be exercisable upon the termination or exercise
of the Reference Stock Option, except that, unless otherwise determined
by the Committee, in its sole discretion, at the time of grant, a
Tandem Stock Appreciation Right granted with respect to less than the
full number of shares covered by the Reference Stock Option shall not
be reduced until and then only to the extent the exercise or
termination of the Reference Stock Option causes the number of
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shares covered by the Tandem Stock Appreciation Right to exceed
the number of shares remaining available and unexercised under the
Reference Stock Option.
(b) Exercisability. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the
Reference Stock Options to which they relate shall be exercisable in
accordance with the provisions of Article VI and this Article VII.
(c) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by a Participant by surrendering the applicable portion of
the Reference Stock Option. Upon such exercise and surrender, the
Participant shall be entitled to receive an amount determined in the
manner prescribed in this Section 7.2. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the
extent the related Tandem Stock Appreciation Rights have been
exercised.
(d) Payment. Upon the exercise of a Tandem Stock Appreciation
Right, a Participant shall be entitled to receive up to, but no more
than, an amount in cash and/or Common Stock (as chosen by the Committee
in its sole discretion at grant, or thereafter if no rights of a
Participant are reduced) equal in value to the excess of the Fair
Market Value of one share of Common Stock over the option price per
share specified in the Reference Stock Option, multiplied by the number
of shares in respect of which the Tandem Stock Appreciation Right shall
have been exercised.
(e) Deemed Exercise of Reference Stock Option. Upon the exercise
of a Tandem Stock Appreciation Right, the Reference Stock Option or
part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set
forth in Article IV of this Plan on the number of shares of Common
Stock to be issued under this Plan.
7.3 Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Option granted under
this Plan.
7.4 Terms and Conditions of Non-Tandem Stock Appreciation Rights. Non-
Tandem Stock Appreciation Rights shall be subject to such terms and conditions,
not inconsistent with the provisions of this Plan, as shall be determined from
time to time by the Committee, including Article XII and the following:
(a) Term. The term of each Non-Tandem Stock Appreciation Right
shall be fixed by the Committee, but shall not be greater than ten (10)
years after the date the right is granted.
(b) Exercisability. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at grant. If the
Committee provides, in its discretion, that any such right is
exercisable subject to certain limitations (including, without
limitation, that it is exercisable only in installments or within
certain time periods), the Committee
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may waive such limitation on the exercisability at any time at or
after grant in whole or in part (including, without limitation, waiver
of the installment exercise provisions or acceleration of the time at
which rights may be exercised), based on such factors, if any, as the
Committee shall determine, in its sole discretion.
(c) Method of Exercise. Subject to whatever installment exercise
and waiting period provisions apply under subsection (b) above,
Non-Tandem Stock Appreciation Rights may be exercised in whole or in
part at any time and from time to time during the option term, by
giving written notice of exercise to the Company specifying the number
of Non-Tandem Stock Appreciation Rights to be exercised.
(d) Payment. Upon the exercise of a Non-Tandem Stock Appreciation
Right a Participant shall be entitled to receive, for each right
exercised, up to, but no more than, an amount in cash and/or Common
Stock (as chosen by the Committee in its sole discretion at grant, or
thereafter if no rights of a Participant are reduced) equal in value to
the excess of the Fair Market Value of one share of Common Stock on the
date the right is exercised over the Fair Market Value of one share of
Common Stock on the date the right was awarded to the Participant.
7.5 Limited Stock Appreciation Rights. The Committee may, in its sole
discretion, grant a Tandem Stock Appreciation Right or a Non-Tandem Stock
Appreciation Right as a Limited Stock Appreciation Right. Limited Stock
Appreciation Rights may be exercised only upon the occurrence of a Change in
Control or such other event as the Committee may, in its sole discretion,
designate at the time of grant or thereafter. Upon the exercise of limited Stock
Appreciation Rights, except as otherwise provided in an Award agreement, the
Participant shall receive in cash or Common Stock, as determined by the
Committee, an amount equal to the amount (i) set forth in Section 7.2(d) with
respect to Tandem Stock Appreciation Rights, or (ii) set forth in Section 7.4(d)
with respect to Non-Tandem Stock Appreciation Rights, as applicable.
ARTICLE VIII
RESTRICTED STOCK
8.1 Awards of Restricted Stock. Shares of Restricted Stock may be
issued to Eligible Employees or Consultants either alone or in addition to other
Awards granted under this Plan. The Committee shall determine the eligible
persons to whom, and the time or times at which, grants of Restricted Stock will
be made, the number of shares to be awarded, the price (if any) to be paid by
the recipient (subject to Section 8.2), the time or times within which such
Awards may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the Awards. The
Committee may condition the grant or vesting of Restricted Stock upon the
attainment of specified performance goals, including established Performance
Goals in accordance with Section 162(m) of the Code, or such other factors as
the Committee may determine, in its sole discretion.
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8.2 Awards and Certificates. An Eligible Employee or Consultant
selected to receive Restricted Stock shall not have any rights with respect to
such Award, unless and until such Participant has delivered to the Company a
fully executed copy of the applicable Award agreement relating thereto and has
otherwise complied with the applicable terms and conditions of such Award.
Further, such Award shall be subject to the following conditions:
(a) Purchase Price. The purchase price of Restricted Stock shall
be fixed by the Committee. Subject to Section 4.3, the purchase price
for shares of Restricted Stock may be zero to the extent permitted by
applicable law, and, to the extent not so permitted, such purchase
price may not be less than par value.
(b) Acceptance. Awards of Restricted Stock must be accepted within
a period of 90 days (or such shorter period as the Committee may
specify at grant) after the Award date by executing a Restricted Stock
Award agreement and by paying whatever price (if any) the Committee has
designated thereunder.
(c) Legend. Each Participant receiving shares of Restricted Stock
shall be issued a stock certificate in respect of such shares of
Restricted Stock, unless the Committee elects to use another system,
such as book entries by the transfer agent, as evidencing ownership of
shares of Restricted Stock. Such certificate shall be registered in the
name of such Participant, and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Award, substantially in the following form:
"The anticipation, alienation, attachment, sale, transfer,
assignment, pledge, encumbrance or charge of the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Insignia Financial Group, Inc. (the
"Company") 1998 Stock Incentive Plan (AMENDED AND RESTATED AS OF
APRIL __, 2002) (the "Plan") and an Agreement entered into between
the registered owner and the Company dated . Copies of
such Plan and Agreement are on file at the principal office of
the Company."
(d) Custody. The Committee may require that any stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed and that, as a condition to the
grant of such Award of Restricted Stock, the Participant shall have
delivered a duly signed stock power, endorsed in blank, relating to the
Common Stock covered by such Award.
8.3 Restrictions and Conditions on Restricted Stock Awards. Shares of
Restricted Stock awarded pursuant to this Plan shall be subject to Article XII
and the following restrictions and conditions:
(a) Restriction Period; Vesting and Acceleration of Vesting. (i)
The Participant shall not be permitted to Transfer shares of Restricted
Stock awarded under this Plan during the period or periods set by the
Committee (the "Restriction Period")
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commencing on the date of such Award, as set forth in the
Restricted Stock Award agreement and such agreement shall set forth a
vesting schedule and any events which would accelerate vesting of the
shares of Restricted Stock. Within these limits, based on service,
attainment of Performance Goals pursuant to Section 8.3(a)(ii) below
and/or such other factors or criteria as the Committee may determine in
its sole discretion, the Committee may provide for the lapse of such
restrictions in installments in whole or in part, or may accelerate the
vesting of all or any part of any Restricted Stock Award and/or waive
the deferral limitations for all or any part of any Restricted Stock
Award.
(ii) Objective Performance Goals, Formulae or Standards. If the
grant of shares of Restricted Stock or the lapse of restrictions is
based on the attainment of Performance Goals, the Committee shall
establish the Performance Goals and the applicable vesting percentage
of the Restricted Stock Award applicable to each Participant or class
of Participants in writing prior to the beginning of the applicable
fiscal year or at such later date as otherwise determined by the
Committee and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may incorporate
provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar type events or
circumstances. With regard to a Restricted Stock Award that is intended
to comply with Section 162(m) of the Code, to the extent any such
provision would create impermissible discretion under Section 162(m) of
the Code or otherwise violate Section 162(m) of the Code, such
provision shall be of no force or effect. The applicable Performance
Goals shall be based on one or more of the Performance Criteria set
forth in Exhibit A hereto.
(b) Rights as Stockholder. Except as provided in this subsection
(b) and subsection (a) above and as otherwise determined by the
Committee, the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a holder of shares of Common
Stock of the Company including, without limitation, the right to
receive any dividends, the right to vote such shares and, subject to
and conditioned upon the full vesting of shares of Restricted Stock,
the right to tender such shares. The Committee may, in its sole
discretion, determine at the time of grant that the payment of
dividends shall be deferred until, and conditioned upon, the expiration
of the applicable Restriction Period.
(c) Lapse of Restrictions. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Stock subject to
such Restriction Period, the certificates for such shares shall be
delivered to the Participant. All legends shall be removed from said
certificates at the time of delivery to the Participant except as
otherwise required by applicable law.
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ARTICLE IX
PERFORMANCE SHARES
9.1 Award of Performance Shares. Performance Shares may be awarded
either alone or in addition to other Awards granted under this Plan. The
Committee shall, in its sole discretion, determine the Eligible Employees and
Consultants to whom and the time or times at which such Performance Shares shall
be awarded, the duration of the period (the "Performance Period") during which,
and the conditions under which, a Participant's right to Performance Shares will
be vested and the other terms and conditions of the Award in addition to those
set forth in Section 9.2.
Each Performance Share awarded shall be referenced to one share of
Common Stock. Except as otherwise provided herein, the Committee shall condition
the right to payment of any Performance Share Award upon the attainment of
objective Performance Goals established pursuant to Section 9.2(c) below and
such other non-performance based factors or criteria as the Committee may
determine in its sole discretion.
9.2 Terms and Conditions. A Participant selected to receive Performance
Shares shall not have any rights with respect to such Awards, unless and until
such Participant has delivered a fully executed copy of a Performance Share
Award agreement evidencing the Award to the Company and has otherwise complied
with the following terms and conditions:
(a) Earning of Performance Share Award. At the expiration of the
applicable Performance Period, the Committee shall determine the extent
to which the Performance Goals established pursuant to Section 9.2(c)
are achieved and the percentage of each Performance Share Award that
has been earned.
(b) Payment. Following the Committee's determination in accordance
with subsection (a) above, shares of Common Stock or, as determined by
the Committee in its sole discretion, the cash equivalent of such
shares shall be delivered to the Participant, in an amount equal to
such Participant's earned Performance Share Award. Notwithstanding the
foregoing, except as may be set forth in the agreement covering the
Award, the Committee may, in its sole discretion and in accordance with
Section 162(m) of the Code, award an amount less than the earned
Performance Share Award and/or subject the payment of all or part of
any Performance Share Award to additional vesting and forfeiture
conditions as it deems appropriate.
(c) Objective Performance Goals, Formulae or Standards. The
Committee shall establish the objective Performance Goals for the
earning of Performance Shares based on a Performance Period applicable
to each Participant or class of Participants in writing prior to the
beginning of the applicable Performance Period or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals are substantially uncertain. Such Performance Goals
may incorporate, if and only to the extent permitted under Section
162(m) of the Code, provisions for disregarding (or adjusting for)
changes in accounting methods, corporate transactions (including,
without limitation, dispositions and acquisitions) and other similar
type events or circumstances. To the extent any such provision would
create impermissible discretion under Section 162(m) of the Code or
otherwise violate Section 162(m) of the Code, such provision shall be
of no force or effect. The applicable
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Performance Goals shall be based on one or more of the Performance
Criteria set forth in Exhibit A hereto.
(d) Dividends and Other Distributions. At the time of any Award of
Performance Shares, the Committee may, in its sole discretion, award an
Eligible Employee or Consultant the right to receive the cash value of
any dividends and other distributions that would have been received as
though the Eligible Employee or Consultant had held each share of
Common Stock referenced by the earned Performance Share Award from the
last day of the first year of the Performance Period until the actual
distribution to such Participant of the related share of Common Stock
or cash value thereof. Such amounts, if awarded, shall be paid to the
Participant as and when the shares of Common Stock or cash value
thereof are distributed to such Participant and, at the discretion of
the Committee, may be paid with interest from the first day of the
second year of the Performance Period until such amounts and any
earnings thereon are distributed. The applicable rate of interest shall
be determined by the Committee in its sole discretion; provided,
however, that for each fiscal year or part thereof, the applicable
interest rate shall not be greater than a rate equal to the four-year
U.S. Government Treasury rate on the first day of each applicable
fiscal year.
ARTICLE X
PERFORMANCE UNITS
10.1 Awards of Performance Units. Performance Units may be awarded
either alone or in addition to other Awards granted under this Plan. The
Committee shall, in its sole discretion, determine the Eligible Employees to
whom and the time or times at which such Performance Units shall be awarded, the
duration of the period (the "Performance Cycle") during which, and the
conditions under which, a Participant's right to Performance Units will be
vested and the other terms and conditions of the Award in addition to those set
forth in Section 10.2.
Performance Units shall be awarded in a dollar amount determined by the
Committee and shall be converted for purposes of calculating growth in value to
a referenced number of shares of Common Stock based on the Fair Market Value of
shares of Common Stock at the close of trading on the first business day
following the announcement of the annual financial results of the Company for
the fiscal year of the Company immediately preceding the fiscal year of the
commencement of the relevant Performance Cycle, provided that the Committee may
provide that the minimum price for such conversion shall be the Fair Market
Value on the date of grant.
Each Performance Unit shall be referenced to one share of Common Stock.
Except as otherwise provided herein, the Committee shall condition the right to
payment of any Performance Unit Award upon the attainment of objective
Performance Goals established pursuant to Section 10.2(a) and such other
non-performance based factors or criteria as the Committee may determine in its
sole discretion. The cash value of any fractional Performance Unit Award
subsequent to conversion to shares of Common Stock shall be treated as a
dividend
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or other distribution under Section 10.2(e) to the extent any portion of the
Performance Unit Award is earned.
10.2 Terms and Conditions. The Performance Units awarded pursuant to
this Article 10 shall be subject to the following terms and conditions:
(a) Performance Goals. The Committee shall establish the objective
Performance Goals for the earnings of Performance Units based on a
Performance Cycle applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable
Performance Cycle or at such later date as permitted under Section
162(m) of the Code and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may incorporate, if and
only to the extent permitted under Section 162(m) of the Code,
provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar type events or
circumstances. To the extent any such provision would create
impermissible discretion under Section 162(m) of the Code or otherwise
violate Section 162(m) of the Code, such provision shall be of no force
or effect. The applicable Performance Goals shall be based on one or
more of the Performance Criteria set forth in Exhibit A hereto.
(b) Vesting. At the expiration of the Performance Cycle, the
Committee shall determine and certify in writing the extent to which
the Performance Goals have been achieved, and the percentage of the
Performance Units of each Participant that have vested.
(c) Payment. Subject to the applicable provisions of the Award
agreement and this Plan, at the expiration of the Performance Cycle,
cash and/or shares of Common Stock (as the Committee may determine in
its sole discretion at grant, or thereafter if no rights of a
Participant are reduced) shall be delivered to the Participant in
payment of the vested Performance Units covered by the Performance Unit
Award. Notwithstanding the foregoing, except as may be set forth in the
agreement covering the Award, the Committee may, in its sole
discretion, and to the extent applicable and permitted under Section
162(m) of the Code, award an amount less than the earned Performance
Unit Award and/or subject the payment of all or part of any Performance
Unit Award to additional vesting and forfeiture conditions as it deems
appropriate.
(d) Accelerated Vesting. Based on service, performance and/or such
other factors or criteria, if any, as the Committee may determine, the
Committee may, at or after grant, accelerate the vesting of all or any
part of any Performance Unit Award and/or waive the deferral
limitations for all or any part of such Award.
(e) Dividends and Other Distributions. At the time of any Award of
Performance Units, the Committee may, in its sole discretion, award an
Eligible Employee or Consultant the right to receive the cash value of
any dividends and other distributions that would have been received as
though the Eligible Employee or Consultant had held each share of
Common Stock referenced by the earned Performance
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Unit Award from the last day of the first year of the Performance
Cycle until the actual distribution to such Participant of the related
share of Common Stock or cash value thereof. Such amounts, if awarded,
shall be paid to the Participant as and when the shares of Common Stock
or cash value thereof are distributed to such Participant and, at the
discretion of the Committee, may be paid with interest from the first
day of the second year of the Performance Cycle until such amounts and
any earnings thereon are distributed. The applicable rate of interest
shall be determined by the Committee in its sole discretion; provided,
however, that for each fiscal year or part thereof, the applicable
interest rate shall not be greater than a rate equal to the four-year
U.S. Government Treasury rate on the first day of each applicable
fiscal year.
ARTICLE XI
OTHER STOCK-BASED AWARDS
11.1 Other Awards. Other Stock-Based Awards may be granted either alone
or in addition to or in tandem with Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares or Performance Units.
Subject to the provisions of this Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
Awards shall be made, the number of shares of Common Stock to be awarded
pursuant to such Awards, and all other conditions of the Awards. The Committee
may also provide for the grant of Common Stock under such Awards upon the
completion of a specified performance period.
11.2 Terms and Conditions. Other Stock-Based Awards made pursuant to
this Article XI shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable provisions of
the Award agreement and this Plan, shares of Common Stock subject to
Awards made under this Article XI may not be Transferred prior to the
date on which the shares are issued, or, if later, the date on which
any applicable restriction, performance or deferral period lapses.
(b) Dividends. Unless otherwise determined by the Committee at the
time of Award, subject to the provisions of the Award agreement and
this Plan, the recipient of an Award under this Article XI shall be
entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of shares of Common
Stock covered by the Award, as determined at the time of the Award by
the Committee, in its sole discretion.
(c) Vesting. Any Award under this Article XI and any Common Stock
covered by any such Award shall vest or be forfeited to the extent so
provided in the Award agreement, as determined by the Committee, in its
sole discretion.
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(d) Waiver of Limitation. The Committee may, in its sole
discretion, waive in whole or in part any or all of the limitations
imposed hereunder (if any) with respect to any or all of an Award under
this Article XI.
(e) Price. Common Stock or Other Stock-Based Awards issued on a
bonus basis under this Article XI may be issued for no cash
consideration; Common Stock or Other Stock-Based Awards purchased
pursuant to a purchase right awarded under this Article XI shall be
priced as determined by the Committee. Subject to Section 4.3, the
purchase price of shares of Common Stock or Other Stock-Based Awards
may be zero to the extent permitted by applicable law, and, to the
extent not so permitted, such purchase price may not be less than par
value. The purchase of shares of Common Stock or Other Stock-Based
Awards may be made on either an after-tax or pre-tax basis, as
determined by the Committee; provided, however, that if the purchase is
made on a pre-tax basis, such purchase shall be made pursuant to a
deferred compensation program established by the Committee, which will
be deemed a part of this Plan.
11.3 Purchase and Loan Program. The Company's 1998 Supplemental Stock
Purchase and Loan Program shall be an Other Stock-Based Award under this Article
XI and shall be deemed incorporated herein.
ARTICLE XII
NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY
12.1 Non-Transferability. No Stock Option, Stock Appreciation Right,
Performance Unit, Performance Share or Other Stock-Based Award shall be
Transferable by the Participant otherwise than by will or by the laws of descent
and distribution. All Stock Options and all Stock Appreciation Rights shall be
exercisable, during the Participant's lifetime, only by the Participant. Tandem
Stock Appreciation Rights shall be Transferable, to the extent permitted above,
only with the underlying Stock Option. Shares of Restricted Stock under Article
VIII may not be Transferred prior to the date on which shares are issued, or, if
later, the date on which any applicable restriction, performance or deferral
period lapses. No Award shall, except as otherwise specifically provided by law
or herein, be Transferable in any manner, and any attempt to Transfer any such
Award shall be void, and no such Award shall in any manner be liable for or
subject to the debts, contracts, liabilities, engagements or torts of any person
who shall be entitled to such Award, nor shall it be subject to attachment or
legal process for or against such person. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter, that a Non-Qualified
Stock Option granted pursuant to Article VI (other than a Non-Qualified Stock
Option granted to a Non-Employee Director) that is otherwise not transferable
pursuant to this Article XII is transferable in whole or part and in such
circumstances, and under such conditions, as specified by the Committee.
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12.2 Termination of Employment or Termination of Consultancy. The
following rules apply with regard to the Termination of Employment or
Termination of Consultancy of a Participant:
(a) Rules Applicable to Stock Options and Stock Appreciation
Rights. Unless otherwise determined by the Committee at grant or, if no
rights of the Participant are reduced, thereafter:
(i) Termination by Reason of Death, Disability or Retirement. If a
Participant's Termination of Employment or Termination of Consultancy
is by reason of death, Disability or Retirement, all Stock Options and
Stock Appreciation Rights held by such Participant may be exercised, to
the extent exercisable at the Participant's Termination of Employment
or Termination of Consultancy, by the Participant (or, in the case of
death, by the legal representative of the Participant's estate) at any
time within a period of one year from the date of such Termination of
Employment or Termination of Consultancy, but in no event beyond the
expiration of the stated terms of such Stock Options and Stock
Appreciation Rights; provided, however, that, in the case of
Retirement, if the Participant dies within such exercise period, all
unexercised Stock Options and Non-Tandem Stock Appreciation Rights held
by such Participant shall thereafter be exercisable, to the extent to
which they were exercisable at the time of death, for a period of one
year from the date of such death, but in no event beyond the expiration
of the stated term of such Stock Options and Non-Tandem Stock
Appreciation Rights.
(ii) Involuntary Termination Without Cause. If a Participant's
Termination of Employment or Termination of Consultancy is by
involuntary termination without Cause, all Stock Options and Stock
Appreciation Rights held by such Participant may be exercised, to the
extent exercisable at Termination of Employment or Termination of
Consultancy, by the Participant at any time within a period of 90 days
from the date of such Termination of Employment or Termination of
Consultancy, but in no event beyond the expiration of the stated term
of such Stock Options and Stock Appreciation Rights.
(iii) Voluntary Termination. If a Participant's Termination of
Employment or Termination of Consultancy is voluntary (other than a
voluntary termination described in Section 12.2(a)(iv)(B) below), all
Stock Options and Stock Appreciation Rights held by such Participant
may be exercised, to the extent exercisable at Termination of
Employment or Termination of Consultancy, by the Participant at any
time within a period of 30 days from the date of such Termination of
Employment or Termination of Consultancy, but in no event beyond the
expiration of the stated terms of such Stock Options and Stock
Appreciation Rights.
(iv) Termination for Cause. If a Participant's Termination of
Employment or Termination of Consultancy (A) is for Cause or (B) is a
voluntary termination (as provided in subsection (iii) above) within 90
days after an event which would be grounds for a Termination of
Employment or Termination of Consultancy for
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Cause, all Stock Options and Stock Appreciation Rights held by
such Participant shall thereupon terminate and expire as of the date of
such Termination of Employment or Termination of Consultancy.
(b) Rules Applicable to Restricted Stock. Subject to the
applicable provisions of the Restricted Stock Award agreement and this
Plan, upon a Participant's Termination of Employment or Termination of
Consultancy for any reason during the relevant Restriction Period, all
Restricted Stock still subject to restriction will vest or be forfeited
in accordance with the terms and conditions established by the
Committee at grant or thereafter.
(c) Rules Applicable to Performance Shares and Performance Units.
Subject to the applicable provisions of the Award agreement and this
Plan, upon a Participant's Termination of Employment or Termination of
Consultancy for any reason during the Performance Period, the
Performance Cycle or other period or restriction as may be applicable
for a given Award, the Performance Shares or Performance Units in
question will vest (to the extent applicable and to the extent
permissible under Section 162(m) of the Code) or be forfeited in
accordance with the terms and conditions established by the Committee
at grant or thereafter.
(d) Rules Applicable to Other Stock-Based Awards. Subject to the
applicable provisions of the Award agreement and this Plan, upon a
Participant's Termination of Employment or Termination of Consultancy
for any reason during any period or restriction as may be applicable
for a given Award, the Other Stock- Based Awards in question will vest
or be forfeited in accordance with the terms and conditions established
by the Committee at grant or thereafter.
ARTICLE XIII
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
13.1 Stock Options. The terms of this Article XIII shall apply only to
Stock Options granted to Non-Employee Directors.
13.2 Grants. Without further action by the Board or the stockholders of
the Company, each Non-Employee Director shall, subject to the terms of the Plan,
be granted:
(a) Stock Options to purchase 20,000 shares of Common Stock as of
the date the Non-Employee Director begins service as a Non-Employee
Director on the Board; and
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(b) In addition to Stock Options granted pursuant to (a) above,
Stock Options to purchase 2,000 shares of Common Stock as of the first
day of the month following the annual meeting of stockholders of the
Company, provided he or she has not, as of such day, experienced a
Termination of Directorship.
13.3 Non-Qualified Stock Options. Stock Options granted under this
Article XIII shall be Non-Qualified Stock Options.
13.4 Terms of Stock Options. Stock Options granted under this Article
XIII shall be subject to the following terms and conditions, and shall be in
such form and contain such additional terms and conditions, not inconsistent
with the terms of this Plan, as the Board shall deem desirable:
(a) Stock Option Price. The Stock Option price per share of Common
Stock purchasable under a Stock Option shall be determined by the Board
at the time of grant but shall not be less than 100% of the Fair Market
Value of the share of Common Stock at the time of grant.
(b) Stock Option Term. The term of each Stock Option shall be 5
years.
(c) Exercisability. (i) Stock Options granted to Non-Employee
Directors pursuant to Section 13.2(a) shall vest and become exercisable
as follows:
Stock Options to purchase 4,000 shares of Common Stock shall be
exercisable on or after the later of (A) 6 months and one day after the date of
grant or (B) the Effective Date;
Stock Options to purchase 4,000 shares of Common Stock shall be
exercisable on or after the first anniversary of the date that is 6 months and
one day after the date of grant.
Stock Options to purchase 4,000 shares of Common Stock shall be
exercisable on or after the second anniversary of the date that is 6 months and
one day after the date of grant.
Stock Options to purchase 4,000 shares of Common Stock shall be
exercisable on or after the third anniversary of the date that is 6 months and
one day after the date of grant.
Stock Options to purchase 4,000 shares of Common Stock shall be
exercisable on or after the fourth anniversary of the date that is 6 months and
one day after the date of grant.
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(ii) Stock Options granted to Non-Employee Directors pursuant to
Section 13.2(b) shall be exercisable on or after the later of (A) 6
months and one day after the date of grant or (B) the Effective Date.
(d) Method of Exercise. Subject to whatever waiting period
provisions apply under subsection (c) above, Stock Options may be
exercised in whole or in part at any time and from time to time during
the Stock Option term, by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price as
follows: (i) in cash or by check, bank draft or money order payable to
the Company; (ii) if the Common Stock is traded on a national
securities exchange, through a "cashless exercise" procedure whereby
the Participant delivers irrevocable instructions to a broker to
deliver promptly to the Company an amount equal to the purchase price;
or (iii) such other arrangement for the satisfaction of the purchase
price, as the Board may accept. If and to the extent determined by the
Board in its sole discretion at or after grant, payment in full or in
part may also be made in the form of Common Stock owned by the
Participant for at least 6 months (and for which the Participant has
good title free and clear of any liens and encumbrances) based on the
Fair Market Value of the Common Stock on the payment date. No shares of
Common Stock shall be issued until payment, as provided herein,
therefor has been made or provided for.
(e) Form, Modification, Extension and Renewal of Stock Options.
Subject to the terms and conditions and within the limitations of the
Plan, a Stock Option shall be evidenced by such form of agreement or
grant as is approved by the Board, and the Board may modify, extend or
renew outstanding Stock Options granted under the Plan (provided that
the rights of a Participant are not reduced without his consent).
13.5 Termination of Directorship. The following rules apply with regard
to Stock Options upon the Termination of Directorship:
(a) Termination of Directorship by Reason of Death, Disability or
Otherwise Ceasing to be a Director. Except as otherwise provided
herein, upon the Termination of Directorship by reason of death,
Disability, resignation, failure to stand for reelection or failure to
be reelected or otherwise, all outstanding Stock Options exercisable
and not exercised shall remain exercisable by the Participant or, in
the case of death, by the Participant's estate or by the person given
authority to exercise such Stock Options by his or her will or by
operation of law, at any time within a period of one year from the date
of such Termination of Directorship, but in no event beyond the
expiration of the stated term of such Stock Option.
(b) Cancellation of Options. Except as provided in (a) above, no
Stock Options that were not exercisable as of the date of Termination
of Directorship shall thereafter become exercisable upon a Termination
of Directorship for any reason or no reason whatsoever, and such Stock
Options shall terminate and become null and void upon a Termination of
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Directorship. If a Non-Employee Director's Termination of Directorship
is for Cause, all Stock Options held by the Non-Employee Director shall
thereupon terminate and expire as of the date of termination.
13.6 Acceleration of Exercisability. All Stock Options granted to
Non-Employee Directors and not previously exercisable shall become fully
exercisable immediately upon a Change in Control (as defined herein). For this
purpose, a "Change in Control" shall be deemed to have occurred upon:
(a) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(1) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 80% of the combined voting power
of the then outstanding voting securities of Company entitled to vote
generally in the election of directors, including, but not limited to,
by merger, consolidation or similar corporate transaction or by
purchase; excluding, however, the following: (x) any acquisition by the
Company, any Subsidiary or any Parent, or (y) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the
Company, any Subsidiary or any Parent; or
(b) the approval of the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of more than 80% of the gross assets of the Company
and its Subsidiaries and Parent (if any) on a consolidated basis
(determined under generally accepted accounting principles in
accordance with prior practice); excluding, however, such a sale or
other disposition to a corporation with respect to which, following
such sale or other disposition, (x) more than 20% of the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors
will be then beneficially owned, directly or indirectly, by the
individuals and entities who were beneficial owners of the outstanding
shares of Common Stock immediately prior to such sale or other
disposition, (y) no person (other than the Company, its Subsidiaries
and Parent (if any), and any employee benefit plan (or related trust)
of the Company, any Subsidiary or any Parent or such corporation or any
person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the outstanding
shares of Common Stock) will beneficially own, directly or indirectly
20% or more of the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election or directors, and (z) individuals who were members of the
incumbent board immediately prior to the sale or other disposition will
constitute at least a majority of the members of the board of directors
of such corporation.
13.7 Changes.
(a) The Awards to a Non-Employee Director shall be subject to
Sections 4.2(a), (b) and (c) of the Plan and this Section 13.7, but
shall not be subject to Section 4.2(d).
(b) If the Company shall not be the surviving corporation in any
merger or consolidation, or if the Company is to be dissolved or
liquidated, then, unless the
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surviving corporation assumes the Stock Options or substitutes new
Stock Options which are determined by the Board in its sole discretion
to be substantially similar in nature and equivalent in terms and value
for Stock Options then outstanding, upon the effective date of such
merger, consolidation, liquidation or dissolution, any unexercised
Stock Options shall expire without additional compensation to the
holder thereof; provided, that, the Board shall deliver notice to each
Non-Employee Director at least 30 days prior to the date of
consummation of such merger, consolidation, dissolution or liquidation
which would result in the expiration of the Stock Options and during
the period from the date on which such notice of termination is
delivered to the consummation of the merger, consolidation, dissolution
or liquidation, such Participant shall have the right to exercise in
full, effective as of such consummation, all Stock Options that are
then outstanding (without regard to limitations on exercise otherwise
contained in the Stock Options) but contingent on occurrence of the
merger, consolidation, dissolution or liquidation, and, provided that,
if the contemplated transaction does not take place within a 90 day
period after giving such notice for any reason whatsoever, the notice,
accelerated vesting and exercise shall be null and void and, if and
when appropriate, new notice shall be given as aforesaid.
ARTICLE XIV
CHANGE IN CONTROL PROVISIONS
14.1 Benefits. In the event of a Change in Control of the Company,
except as otherwise provided by the Committee upon the grant of an Award and
except as provided in Section 13.6 of this Plan with regard to Non-Employee
Directors, the Participant shall be entitled to the following benefits:
(a) Except to the extent provided in the applicable Award
agreement, the Participant's employment agreement with the Company or
an Affiliate, as approved by the Committee, or other written agreement
approved by the Committee (as such agreement may be amended from time
to time), (i) Awards granted and not previously exercisable shall not
become exercisable upon a Change in Control, (ii) restrictions to which
any shares of Restricted Stock granted prior to the Change in Control
are subject shall not lapse upon a Change in Control, and (iii) the
conditions required for vesting of any unvested Performance Units
and/or Performance Shares shall not be deemed to be satisfied upon a
Change in Control.
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(b) The Committee, in its sole discretion, may provide for the
purchase of any Stock Option by the Company or an Affiliate for an
amount of cash equal to the excess of the Change in Control Price (as
defined below) of the shares of Common Stock covered by such Stock
Options, over the aggregate exercise price of such Stock Options. For
purposes of this Section 14.1, Change in Control Price shall mean the
higher of (i) the highest price per share of Common Stock paid in any
transaction related to a Change in Control of the Company, or (ii) the
highest Fair Market Value per share of Common Stock at any time during
the sixty (60) day period preceding a Change in Control.
(c) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise at the time a Stock Option is granted
hereunder or thereafter, no acceleration of exercisability shall occur
with respect to such Stock Options if the Committee reasonably
determines in good faith, prior to the occurrence of the Change in
Control, that the Stock Options shall be honored or assumed, or new
rights substituted therefor (each such honored, assumed or substituted
stock option hereinafter called an "Alternative Option"), by a
Participant's employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control, provided that any such
Alternative Option must meet the following criteria:
(i) the Alternative Option must be based on stock which is traded
on an established securities market, or which will be so traded within
30 days of the Change in Control;
(ii) the Alternative Option must provide such Participant with
rights and entitlements substantially equivalent to or better than the
rights, terms and conditions applicable under such Stock Option,
including, but not limited to, an identical or better exercise
schedule; and
(iii) the Alternative Option must have economic value
substantially equivalent to the value of such Stock Option (determined
at the time of the Change in Control).
For purposes of Incentive Stock Options, any assumed or substituted
Stock Option shall comply with the requirements of Treasury Regulation ss.
1.425-1 (and any amendments thereto).
(d) Notwithstanding anything else herein, the Committee may, in
its sole discretion, provide for accelerated vesting of an Award or
accelerated lapsing of restrictions on shares of Restricted Stock at
any time.
14.2 Change in Control. A "Change in Control" shall have the meaning
specified in the applicable Award Agreement, the Participant's employment
agreement with the Company or an Affiliate, as approved by the Committee, or
other written agreement approved by the Committee (as such agreement may be
amended from time to time).
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ARTICLE XV
TERMINATION OR AMENDMENT OF PLAN
Notwithstanding any other provision of this Plan, the Board or the
Committee may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of this Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article XVII), or suspend or terminate it entirely, retroactively
or otherwise; provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to Awards
granted prior to such amendment, suspension or termination, may not be impaired
without the consent of such Participant and, provided further, without the
approval of the shareholders of the Company in accordance with the laws of the
State of Delaware, to the extent required by the applicable provisions of Rule
16b-3 or Section 162(m) of the Code, or, to the extent applicable to Incentive
Stock Options, Section 422 of the Code, no amendment may be made which would (i)
increase the aggregate number of shares of Common Stock that may be issued under
this Plan; (ii) increase the maximum individual Participant limitations for a
fiscal year under Section 4.1(b); (iii) change the classification of employees
or Consultants eligible to receive Awards under this Plan; (iv) decrease the
minimum option price of any Stock Option or Stock Appreciation Right; (v) extend
the maximum option period under Section 6.3; (vi) materially alter the
Performance Criteria for the Award of Restricted Stock, Performance Units or
Performance Shares as set forth in Exhibit A; or (vii) require stockholder
approval in order for this Plan to continue to comply with the applicable
provisions of Section 162(m) of the Code or, to the extent applicable to
Incentive Stock Options, Section 422 of the Code. In no event may this Plan be
amended without the approval of the stockholders of the Company in accordance
with the applicable laws of the State of Delaware to increase the aggregate
number of shares of Common Stock that may be issued under this Plan, decrease
the minimum exercise price of any Stock Option or Stock Appreciation Right, or
to make any other amendment that would require stockholder approval under the
rules of any exchange or system on which the Company's securities are listed or
traded at the request of the Company.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV above or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.
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ARTICLE XVI
UNFUNDED PLAN
16.1 Unfunded Status of Plan. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE XVII
GENERAL PROVISIONS
17.1 Legend. The Committee may require each person receiving shares
pursuant to an Award under this Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by this Plan, the
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on Transfer.
All certificates for shares of Common Stock delivered under this Plan
shall be subject to such stock transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange Commission, any stock exchange upon which the
Stock is then listed or any national securities association system upon whose
system the Stock is then quoted, any applicable Federal or state securities law,
and any applicable corporate law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
17.2 Other Plans. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
17.3 No Right to Employment/Consultancy. Neither this Plan nor the
grant of any Award hereunder shall give any Participant or other employee or
Consultant any right with respect to continuance of employment or Consultancy by
the Company or any Affiliate, nor shall they be a limitation in any way on the
right of the Company or any Affiliate by which an employee is employed or a
Consultant is retained to terminate his employment or Consultancy at any time.
17.4 Withholding of Taxes. The Company shall have the right to deduct
from any payment to be made to a Participant, or to otherwise require, prior to
the issuance or delivery of any shares of Common Stock or the payment of any
cash hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld. Upon the vesting of Restricted Stock, or upon
making an election under Code Section 83(b), a Participant shall pay all
required withholding to the Company.
Any such withholding obligation with regard to any Participant may be
satisfied, subject to the consent of the Committee, by reducing the number of
shares of Common Stock otherwise
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deliverable or by delivering shares of Common Stock already owned. Any fraction
of a share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.
17.5 Listing and Other Conditions.
(a) As long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities association, the
issue of any shares of Common Stock pursuant to an Award shall be
conditioned upon such shares being listed on such exchange or system.
The Company shall have no obligation to issue such shares unless and
until such shares are so listed, and the right to exercise any Stock
Option with respect to such shares shall be suspended until such
listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion
that any sale or delivery of shares of Common Stock pursuant to an
Award is or may in the circumstances be unlawful or result in the
imposition of excise taxes on the Company under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall have no
obligation to make such sale or delivery, or to make any application or
to effect or to maintain any qualification or registration under the
Securities Act or otherwise with respect to shares of Common Stock or
Awards, and the right to exercise any Stock Option shall be suspended
until, in the opinion of said counsel, such sale or delivery shall be
lawful or will not result in the imposition of excise taxes on the
Company.
(c) Upon termination of any period of suspension under this
Section 17.5, any Award affected by such suspension which shall not
then have expired or terminated shall be reinstated as to all shares
available before such suspension and as to shares which would otherwise
have become available during the period of such suspension, but no such
suspension shall extend the term of any Stock Option.
17.6 Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
17.7 Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
17.8 Other Benefits. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its subsidiaries nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
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17.9 Costs. The Company shall bear all expenses included in
administering this Plan, including expenses of issuing Common Stock pursuant to
any Awards hereunder.
17.10 No Right to Same Benefits. The provisions of Awards need not be
the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
17.11 Death/Disability. The Committee may in its discretion require the
transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may also require that the agreement of the transferee to be bound by
all of the terms and conditions of this Plan.
17.12 Section 16(b) of the Exchange Act. All elections and transactions
under this Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with any applicable exemptive
condition under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act, as it may deem necessary or proper for the administration
and operation of this Plan and the transaction of business thereunder.
17.13 Severability of Provisions. If any provision of this Plan shall
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provisions had not been included.
17.14 Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of
this Plan, and shall not be employed in the construction of this Plan.
ARTICLE XVIII
EFFECTIVE DATE OF PLAN
The Plan ORIGINALLY BECAME EFFECTIVE ON AUGUST 10, 1998 AND THE
AMENDMENTS CONTAINED HEREIN shall become effective ON APRIL __, 2002, subject to
the approval of the COMPANY'S stockholders TO the EXTENT AND in the MANNER
provided BY APPLICABLE LAW.
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ARTICLE XIX
TERM OF PLAN
No Award shall be granted pursuant to this Plan on or after the tenth
anniversary of the earlier of the date this Plan is adopted or the date of
stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date.
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EXHIBIT A
PERFORMANCE CRITERIA
Performance Goals established for purposes of conditioning the grant of
an Award of Restricted Stock based on performance or the vesting of
performance-based Awards of Restricted Stock, Performance Units and/or
Performance Shares shall be based on one or more of the following performance
criteria ("Performance Criteria"): (i) the attainment of certain target levels
of, or a specified percentage increase in, revenues, income before income taxes
and extraordinary items, net income, earnings before income tax, earnings before
interest, taxes, depreciation and amortization, funds from operation of real
estate investments or a combination of any or all of the foregoing; (ii) the
attainment of certain target levels of, or a percentage increase in, after-tax
or pre-tax profits including, without limitation, that attributable to
continuing and/or other operations; (iii) the attainment of certain target
levels of, or a specified increase in, operational cash flow; (iv) the
achievement of a certain level of, reduction of, or other specified objectives
with regard to limiting the level of increase in, all or a portion of, the
Company's bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of such cash balances and/or other offsets and adjustments as may be established
by the Committee; (v) the attainment of a specified percentage increase in
earnings per share or earnings per share from continuing operations; (vi) the
attainment of certain target levels of, or a specified increase in return on
capital employed or return on invested capital; (vii) the attainment of certain
target levels of, or a percentage increase in, after- tax or pre-tax return on
stockholders' equity; (viii) the attainment of certain target levels of, or a
specified increase in, economic value added targets based on a cash flow return
on investment formula; (ix) the attainment of certain target levels in the fair
market value of the shares of the Company's common stock; and (x) the growth in
the value of an investment in the Company's common stock assuming the
reinvestment of dividends. For purposes of item (i) above, "extraordinary items"
shall mean all items of gain, loss or expense for the fiscal year determined to
be extraordinary or unusual in nature or infrequent in occurrence or related to
a corporate transaction (including, without limitation, a disposition or
acquisition) or related to a change in accounting principle, all as determined
in accordance with standards established by Opinion No. 30 of the Accounting
Principles Board.
In addition, such Performance Criteria may be based upon the attainment
of specified levels of Company (or subsidiary, division or other operational
unit of the Company) performance under one or more of the measures described
above relative to the performance of other corporations. To the extent permitted
under Code Section 162(m), but only to the extent permitted under Code Section
162(m) (including, without limitation, compliance with any requirements for
stockholder approval), the Committee may: (i) designate additional business
criteria on which the Performance Criteria may be based or (ii) adjust, modify
or amend the aforementioned business criteria.
INSIGNIA FINANCIAL GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
PROSKAUER ROSE LLP
1585 BROADWAY
26TH FLOOR
NEW YORK, NEW YORK
MAY 15, 2002
9:00 A.M.
- FOLD AND DETACH HERE -
--------------------------------------------------------------------------------
INSIGNIA FINANCIAL GROUP, INC
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR ANNUAL MEETING OF STOCKHOLDERS -- MAY 15, 2002
The undersigned stockholder of Insignia Financial Group, Inc. (the "Company")
hereby appoints Andrew L. Farkas and Adam B. Gilbert, and each of them, proxies
of the undersigned with full power of substitution to vote at the Annual
Meeting of Stockholders of the Company to be held on Wednesday, May 15, 2002,
beginning at 9:00 a.m., local time, at Proskauer Rose LLP, 1585 Broadway, 26th
Floor, New York, New York 10036 and at any postponement or adjournment thereof,
the number of votes which the undersigned would be entitled to cast if
personally present:
(1) Election of Directors
[ ] FOR [ ] WITHHOLD AUTHORITY
both nominees listed below (except
as marked to the contrary below)
Alan C. Froggatt Robert G. Koen
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, DRAW A
LINE THROUGH OR STRIKE OUT THAT NOMINEE'S NAME WHERE SET FORTH
ABOVE.
(2) Proposal to amend the Insignia Financial Group, Inc. 1998 Stock Incentive
Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Proposal to ratify the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ending December 31, 2002
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) To consider and act upon any other matter which may properly come before
the meeting or any adjournment thereof all as more particularly described
in the Proxy Statement dated April 15, 2002, relating to such meeting,
receipt of which is hereby acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2 AND PROPOSAL 3.
Dated ----------------------- , 2002
-----------------------------------------
-----------------------------------------
Signature(s) of Stockholder(s)
-----------------------------------------
-----------------------------------------
Print Name(s) of Stockholder(s)
Please sign your name exactly as it
appears hereon. Joint owners must each
sign. When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as it appears
hereon.