INSIGNIA FINANCIAL GROUP INC /DE/
SECOND AMENDMENT TO CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>7
<FILENAME>file006.txt
<DESCRIPTION>SECOND AMENDMENT TO CREDIT AGREEMENT
<TEXT>
<PAGE>

                                SECOND AMENDMENT

     THIS SECOND AMENDMENT (the "Amendment") to the Credit Agreement referred to
below is entered into as of the 7th day of June, 2002, by and among INSIGNIA
FINANCIAL GROUP, INC., a corporation organized under the laws of Delaware (the
"Borrower"), THE LENDERS SIGNATORY HERETO (collectively, the "Lenders"),
WACHOVIA BANK, NATIONAL ASSOCIATION (F/K/A FIRST UNION NATIONAL BANK), as
Administrative Agent (the "Administrative Agent"), LEHMAN COMMERCIAL PAPER INC.,
as Syndication Agent (the "Syndication Agent"), and BANK OF AMERICA, N.A., as
Documentation Agent (the "Documentation Agent" and, together with the
Administrative Agent and the Syndication Agent, the "Agents").

                              STATEMENT OF PURPOSE

     The Borrower, the Lenders and the Agents are parties to a certain Credit
Agreement dated as of May 4, 2001 (as amended by the First Amendment dated as of
November 26, 2001 and as further amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), pursuant to which the
Lenders have agreed to make, and have made, certain Extensions of Credit to the
Borrower.

     The Borrower has requested the Lenders to amend the Credit Agreement in the
respects provided in this Amendment.

     NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows:

     I. AMENDMENTS TO THE CREDIT AGREEMENT.

     (a) Amendments to Existing Definitions. The definitions of the following
quoted terms which are set forth in Section 1.1 of the Credit Agreement are
hereby amended in their entirety as follows:

         "Co-Investment Entity" means any corporation, limited liability
     company, partnership or other form of entity (i) in which the Borrower or a
     Subsidiary of the Borrower owns an equity interest pursuant to a joint
     venture or similar arrangement with one or more Persons who own more than
     fifty percent (50%) of the ownership or other equity interests in such
     entity, (ii) which has as its sole business the ownership of real property
     (or an interest therein including leasehold interests), the rendering of
     services and furnishing of products customarily provided by landlords, or
     the ownership of the debt (including the securitization of such debt) of
     entities which own real property (or an interest therein including
     leasehold interests), and (iii) which does not engage in any real estate
     development activities for its own account.

         "Debt" means, with respect to the Borrower and its Subsidiaries at any
     date and without duplication, the sum of the following calculated in
     accordance with GAAP: (a)

<PAGE>

     all Debt for Money Borrowed, (b) all obligations to pay the deferred
     purchase price of property or services of any such Person, except trade
     payables arising in the ordinary course of business not more than ninety
     (90) days past due, (c) all obligations of any Person secured by a Lien on
     any asset of the Borrower and its Restricted Subsidiaries, (d) all
     Contingent Obligations of any such Person, including any asserted claim
     with respect to any Indemnified Matter, (e) obligations in the form of
     earn-out obligations to be paid in cash, but only to the extent such
     earn-out obligations have been incurred and are required to be included on
     a Consolidated balance sheet of the Borrower and its Restricted
     Subsidiaries prepared in accordance with GAAP, (f) all obligations of any
     such Person under Capital Leases, (g) all obligations, contingent or
     otherwise, of any such Person relative to the face amount of letters of
     credit (including, without limitation, the Letters of Credit), whether or
     not drawn, including, without limitation, any reimbursement obligation with
     respect thereto (including, without limitation, any Reimbursement
     Obligation), (h) all net obligations incurred by any such Person pursuant
     to Hedging Agreements and (i) all Disqualified Stock of the Borrower and
     its Restricted Subsidiaries valued at its maximum fixed repurchase price.
     Notwithstanding the foregoing, there shall be excluded from the definition
     of Debt: (a) all obligations for the deferred purchase price of property to
     the extent the obligation of the Borrower or any of its Subsidiaries is
     secured by cash deposits access to which is restricted to the seller of
     such property, or any third party guarantor, or any of their respective
     successors and assigns; (b) obligations incurred in connection with any
     arbitrage loan facility between the Borrower and any Lender or any other
     commercial bank organized under, or which has a branch or agency licensed
     under, the laws of (i) the United States or any state thereof, (ii) the
     United Kingdom of Great Britain and Northern Ireland or (iii) any
     participating member state of the European Union (as so described in any
     legislative measure of the Council of European Union) in an aggregate
     amount not to exceed $50,000,000, to the extent the obligation of the
     Borrower to repay advances under such loan facility is fully collateralized
     at all times by cash or Cash Equivalents funded with the proceeds of such
     loan facility; (c) guarantee obligations of the Borrower of up to
     $10,000,000 on account of First Ohio Mortgage Corporation or any other
     Unrestricted Subsidiary with respect to lines of credit, the proceeds of
     which are used solely to fund mortgage loans; and (d) the obligation for
     the deferred purchase price in a transaction which has been identified to
     the Lenders as of the date of this Agreement to the extent that the
     obligation of the Borrower or any of its Subsidiaries is to be fulfilled by
     the transfer of a segregated cash account established or assumed by the
     Borrower or any of its Subsidiaries for the purpose of the payment of such
     deferred purchase price, in an amount not to exceed $15 million. For
     purposes of this definition, the "maximum fixed repurchase price" of any
     Disqualified Stock that does not have a fixed repurchase price will be
     calculated in accordance with the terms of such Disqualified Stock as if
     such Disqualified Stock were repurchased on any date on which Debt is
     required to be determined pursuant to this Agreement, and as if such price
     is based upon, or measured by, the fair market value of such Disqualified
     Stock. For the purposes of this definition, "fair market value" means, with
     respect to any asset or property, the price which would be negotiated in an
     arm's-length free market transaction, for cash, between an informed willing
     seller and an informed willing buyer neither of which is under pressure or
     compulsion to sell or buy.

                                       2
<PAGE>

         "Hedging Agreement" means any interest rate, foreign currency,
     commodity or equity swap, collar, cap, floor or forward rate agreement, or
     other agreement or arrangement designed to protect against fluctuations in
     interest rates or currency, commodity or equity values (including, without
     limitation, any option with respect to any of the foregoing and any
     combination of the foregoing agreements or arrangements), and any
     confirmation executed in connection with any such agreement or arrangement,
     all as amended or modified.

         "Net Income" means, with respect to the Borrower and its Restricted
     Subsidiaries for any period, the Consolidated net income (or loss) of the
     Borrower and its Restricted Subsidiaries for such period determined in
     accordance with GAAP; provided that for purposes of the determination of
     Net Income pursuant to Section 10.7(c), (i) the effects of goodwill
     impairment adjustments arising out of the initial application of FASB 142
     shall be excluded (provided that the actual amount of such goodwill
     impairment adjustments shall not exceed $30,000,000) and (ii) the loss
     associated with the sale of Realty One, Inc. shall be excluded.

         "Subordinated Debt" means the collective reference to (i) the Blackacre
     Subordinated Debt and the Blackacre Subordinated Contingent Obligations,
     and (ii) any other Debt (including, without limitation, any other
     Contingent Obligations) of the Borrower or any Restricted Subsidiary which
     (A) is subordinated in right and time of payment to the Obligations in a
     manner reasonably satisfactory to the Agents and the Required Lenders and
     (B) contains such other terms and conditions as are reasonably satisfactory
     to the Agents and the Required Lenders.

     (b) Additional Defined Terms. Section 1.1 of the Credit Agreement is
amended by the addition of the following defined terms (in alphabetical order):

         "Blackacre Financing Amount" means the sum of the gross proceeds
     actually paid to the Borrower pursuant to the Blackacre Subordinated Credit
     Agreement and the Series B Convertible Preferred Subscription Agreement.

         "Blackacre Subordinated Contingent Obligations" means the Subordinated
     Debt of the Subsidiary Guarantors consisting of the Contingent Obligations
     of the Subsidiary Guarantors with respect to the Blackacre Subordinated
     Debt.

         "Blackacre Subordinated Credit Agreement" means the $37,500,000
     Subordinated Credit Agreement dated as of June 7, 2002 by and among the
     Borrower, as borrower, the lenders who are or may become party thereto, as
     lenders, and Madeleine L.L.C., as administrative agent.

         "Blackacre Subordinated Debt" means the Subordinated Debt of the
     Borrower evidenced by the Blackacre Subordinated Credit Agreement.

                                       3
<PAGE>

         "Blackacre Subordinated Loan Documents" means the Blackacre
     Subordinated Credit Agreement and all exhibits and schedules thereto and
     each other document, instrument, certificate and agreement executed or
     delivered by the Borrower or any Subsidiary thereof in connection with the
     Blackacre Subordinated Credit Agreement or otherwise referred to therein or
     contemplated thereby, including, without limitation, each document,
     instrument, certificate and agreement with respect to the Series B
     Convertible Preferred Stock and the Series C Convertible Preferred Stock
     and the Trust Convertible Preferred Securities, all as amended, restated or
     otherwise modified from time to time.

         "Convertible Preferred Stock" means, collectively, the Series A
     Convertible Preferred Stock, the Series B Convertible Preferred Stock and
     the Series C Convertible Preferred Stock.

         "Disqualified Stock" shall have the meaning assigned thereto in the
     Blackacre Subordinated Credit Agreement.

         "FASB 142" means Financial Accounting Standards Board Statement No.
     142, as in effect on the Second Amendment Effective Date, specifying
     applicable accounting principles with respect to goodwill adjustments.

         "Qualified Equity Interest" means any Qualified Stock and all warrants,
     options or other rights to acquire Qualified Stock (but excluding any debt
     security that is convertible into or exchangeable for capital stock or
     other equity interests). For the purposes of this definition, "Qualified
     Stock" of any Person means any and all capital stock or equity interests of
     such Person, other than Disqualified Stock.

         "Second Amendment Effective Date" means June 7, 2002.

         "Senior Debt" means, with respect to the Borrower and its Restricted
     Subsidiaries on any date of determination, Total Debt of such Persons minus
     Subordinated Debt of such Persons.

         "Series A Certificate of Designation" means the Certificate of
     Designation of the Series A Convertible Preferred Stock as in effect on the
     Second Amendment Effective Date.

         "Series A Convertible Preferred Stock" means the Series A Convertible
     Preferred Stock of the Borrower, par value $.01 per share, having a
     liquidation preference of $100.00 per share and such other rights and
     preferences as are set forth in the Series A Certificate of Designation
     (which preferred stock was issued in exchange for the convertible preferred
     stock of the Borrower, par value $.01 per share, having a liquidation
     preference of $100.00 per share and such other rights and preferences as
     are set forth in the Certificate of Designation filed with the Secretary of
     State of the State of Delaware on February 3, 2000).

                                       4
<PAGE>

         "Series B Certificate of Designation" means the Certificate of
     Designation of the Series B Convertible Preferred Stock as in effect on the
     Second Amendment Effective Date.

         "Series B Convertible Preferred Stock" means the Series B Convertible
     Preferred Stock of the Borrower, par value $.01 per share, having a
     liquidation preference of $100.00 per share and such other rights and
     preferences as are set forth in the Series B Certificate of Designation.

         "Series B Convertible Preferred Stock Documents" means each document,
     instrument, certificate and agreement executed or delivered by the Borrower
     or any Subsidiary thereof in connection with the issuance of the Series B
     Convertible Preferred Stock or otherwise referred to therein or
     contemplated thereby, including, without limitation, the Series B
     Convertible Preferred Subscription Agreement and each document, instrument,
     certificate and agreement with respect to the Series C Convertible
     Preferred Stock and the Trust Convertible Preferred Securities, all as
     amended, restated or otherwise modified from time to time.

         "Series B Convertible Preferred Subscription Agreement" means the Stock
     Subscription and Exchange Agreement, dated as of June 7, 2002, by and among
     the Borrower and the purchasers specified on the signature pages thereof
     with respect to the sale and purchase of the Series B Convertible Preferred
     Stock.

         "Series C Certificate of Designation" means the Certificate of
     Designation of the Series C Convertible Preferred Stock as in effect on the
     Second Amendment Effective Date.

         "Series C Convertible Preferred Stock" means the Series C Convertible
     Preferred Stock of the Borrower, par value $.01 per share, having a
     liquidation preference of $100.00 per share and such other rights and
     preferences as are set forth in the Series C Certificate of Designation,
     into which (i) the Blackacre Subordinated Debt may be converted, (ii)
     Series A Convertible Preferred Stock may be converted and (iii) the Series
     B Convertible Preferred Stock may be converted.

         "Total Leverage Ratio" means the ratio calculated pursuant to Section
     9.1(a) hereof; provided that for the purposes of determining the Applicable
     Margin pursuant to Section 4.1(c) and the Commitment Fee Rate pursuant to
     Section 4.3(a), the Total Leverage Ratio shall equal the greater of (i) the
     Total Leverage Ratio (as determined after the Second Amendment Effective
     Date) and (ii) the Leverage Ratio (as determined prior to the Second
     Amendment Effective Date).

         "Trust" means the statutory business trust to be formed by the Borrower
     in conjunction with any conversion by the Borrower of the Blackacre
     Subordinated Debt, the Series A Convertible Preferred Stock or the Series B
     Convertible Preferred Stock into Trust Convertible Preferred Securities.


                                       5
<PAGE>

         "Trust Convertible Preferred Securities" means the 10% Trust
     Convertible Preferred Securities of the Trust into which, with the prior
     written consent of the Agents and the Required Lenders, (i) the Blackacre
     Subordinated Debt may be converted, (ii) the Series A Convertible Preferred
     Stock may be converted and (iii) the Series B Convertible Preferred Stock
     may be converted.

     (c) Deletion of Defined Terms. The definition of the term "Leverage Ratio"
which is set forth in Section 1.1 of the Credit Agreement is hereby deleted in
its entirety.

     (d) Amendments to Section 4.1(c).

         (i) Applicable Margin Table. The table set forth in subsection (c) of
     Section 4.1 of the Credit Agreement is hereby deleted in its entirety and
     the following table is substituted in lieu thereof:

<TABLE>
<CAPTION>

                                                          Applicable Margin Per Annum
     Level             Total Leverage Ratio              LIBOR +           Base Rate +
     -----             --------------------              -----------------------------
<S>                    <C>                                <C>             <C>
        I              Greater than 3.00 to 1.00          2.75%                 1.25%

        II             Equal to or less than              2.50%                 1.00%
                       3.00 to 1.00 but greater
                       than 2.25 to 1.00

        III            Equal to or less than              2.25%                 0.75%
                       2.25 to 1.00 but greater
                       than 1.50 to 1.00

        IV             Equal to or less than              2.00%                 0.50%
                       1.50 to 1.00
</TABLE>

         (ii) Substitution of Total Leverage Ratio for Leverage Ratio. Each
     reference to the term "Leverage Ratio" in subsection (c) of Section 4.1 of
     the Credit Agreement is hereby deleted in its entirety and the term "Total
     Leverage Ratio" is substituted in lieu thereof:

     (e) Amendment to Section 4.3(a). The table set forth in subsection (a) of
Section 4.3 of the Credit Agreement is hereby deleted in its entirety and the
following is substituted in lieu thereof:


                Level                              Commitment Fee Rate
                -----                              -------------------

                I                                           0.500%

                II                                          0.500%

                III                                         0.500%

                IV                                          0.375%


                                       6
<PAGE>

     (f) Amendment of Section 6.1(w) and Addition of New Section 6.1(w).
Subsection (w) of Section 6.1 of the Credit Agreement is amended to become
subsection (x) of Section 6.1 of the Credit Agreement and the following
subsection (w) of Section 6.1 of the Credit Agreement is hereby set forth as an
addition to the Credit Agreement:

         (w) Additional Subordinated Debt and Equity Documents.

               (i) Blackacre Subordinated Loan Documents. Each Blackacre
         Subordinated Loan Document has been identified on Schedule 6.1(w), and
         the Borrower has delivered to the Administrative Agent true, complete
         and correct copies of the Subordinated Blackacre Loan Documents
         together with all amendments and modifications thereto. The
         Subordinated Blackacre Loan Documents (including the schedules and
         exhibits thereto) comprise a full and complete copy of all agreements
         between the parties thereto with respect to the subject matter thereof
         and all transactions related thereto, and there are no agreements or
         understandings, oral or written, or side agreements not contained
         therein that relate to or modify the substance thereof. As of the
         Second Amendment Effective Date, the representations and warranties
         made by the Borrower in the Blackacre Subordinated Loan Documents are
         true and correct and no default or event of default exists thereunder.

               (ii) Series B Convertible Preferred Stock Documents. Each Series
         B Convertible Preferred Stock Document has been identified on Schedule
         6.1(w), and the Borrower has delivered to the Administrative Agent
         true, complete and correct copies of the Series B Convertible Preferred
         Stock Documents together with all amendments and modifications thereto.
         The Series B Convertible Preferred Stock Documents (including the
         schedules and exhibits thereto) comprise a full and complete copy of
         all agreements between the parties thereto with respect to the subject
         matter thereof and all transactions related thereto, and there are no
         agreements or understandings, oral or written, or side agreements not
         contained therein that relate to or modify the substance thereof. As of
         the Second Amendment Effective Date, the representations and warranties
         made by the Borrower in the Series B Convertible Preferred Stock
         Documents are true and correct and no default or event of default
         exists thereunder.

     (g) Amendment to Section 9.1. Section 9.1 of the Credit Agreement is hereby
deleted in its entirety and the following is substituted in lieu thereof:

         SECTION 9.1 Leverage Ratios.

         (a) Total Leverage Ratio. Permit the ratio of (i) Total Debt as of the
     end of any fiscal quarter to (ii) EBITDA for the period of four (4)
     consecutive fiscal quarters ending on such date to be greater than the
     corresponding ratio set forth below:



                                       7
<PAGE>

                           Period                                Ratio
                           ------                                -----
                March 31, 2002 through and including
                March 31, 2003                              3.50 to 1.00

                June 30, 2003 and thereafter                3.25 to 1.00

     provided that (A) for the purpose of the calculation hereof for the fiscal
     quarter ending March 31, 2002, EBITDA shall equal EBITDA for the period of
     two (2) consecutive fiscal quarters ending on such date times two (2); and
     (B) for the purpose of the calculation hereof for the fiscal quarter ending
     June 30, 2002, EBITDA shall equal EBITDA for the period of three (3)
     consecutive fiscal quarters ending on such date times four-thirds (4/3).
     Notwithstanding anything to the contrary contained in this Agreement, Total
     Debt as of March 31, 2002 through and including September 29, 2002 shall
     not exceed $195,000,000.

         (b) Senior Leverage Ratio. Permit the ratio of (i) Senior Debt as of
     the end of any fiscal quarter to (ii) EBITDA for the period of four (4)
     consecutive fiscal quarters ending on such date to be greater than 3.00 to
     1.00; provided that (A) for the purpose of the calculation hereof for the
     fiscal quarter ending March 31, 2002, EBITDA shall equal EBITDA for the
     period of two (2) consecutive fiscal quarters ending on such date times two
     (2); and (B) for the purpose of the calculation hereof for the fiscal
     quarter ending June 30, 2002, EBITDA shall equal EBITDA for the period of
     three (3) consecutive fiscal quarters ending on such date times four-thirds
     (4/3). Notwithstanding anything to the contrary contained in this
     Agreement, Senior Debt as of March 31, 2002 through and including September
     29, 2002 shall not exceed $180,000,000.

     (h) Amendment to Section 9.2. Section 9.2 of the Credit Agreement is hereby
deleted in its entirety and the following is substituted in lieu thereof:

         SECTION 9.2 Minimum Net Worth. Permit, as of any fiscal quarter end,
     Consolidated Net Worth to be less than the sum of (a) $347,135,000 plus (b)
     fifty percent (50%) of cumulative Net Income for each quarter for which Net
     Income is greater than zero during the period commencing on the Second
     Amendment Effective Date and ending on such fiscal quarter end (excluding
     the income (or loss) of any Person accrued prior to the date it becomes a
     Subsidiary of the Borrower or is merged into or consolidated with the
     Borrower) plus (c) seventy-five percent (75%) of the Net Cash Proceeds of
     any equity issuance by the Borrower or any of its Restricted Subsidiaries
     subsequent to the Second Amendment Effective Date less (d) the actual
     amount of impairment adjustments arising out of the initial application of
     FASB 142 (as reflected in the financial statements of the Borrower to be
     filed with its Report on Form 10-Q for the fiscal quarter ending June 30,
     2002); provided that the actual amount of such impairment adjustments
     pursuant to clause (d) above shall not exceed $30,000,000.

     (i) Amendment to Section 9.3. Section 9.3 of the Credit Agreement is hereby
deleted in its entirety and the following is substituted in lieu thereof:

                                       8
<PAGE>

         SECTION 9.3 Debt to Capitalization Ratios.

         (a) Total Debt to Total Capitalization Ratio. Permit, as of any fiscal
     quarter end, the ratio of (i) Total Debt as of such fiscal quarter end to
     (ii) Total Capitalization as of such fiscal quarter end to exceed 0.45 to
     1.00.

         (b) Senior Debt to Total Capitalization Ratio. Permit, as of any fiscal
     quarter end, the ratio of (i) Senior Debt as of such fiscal quarter end to
     (ii) Total Capitalization as of such fiscal quarter end to exceed 0.40 to
     1.00.

     (j) Amendment to Section 10.1(c). Subsection (c) of Section 10.1 of the
Credit Agreement is hereby deleted in its entirety and the following is
substituted in lieu thereof:

               (c) Subordinated Debt in an aggregate amount not to exceed
         $100,000,000 on any date of determination; provided that such
         Subordinated Debt may include Blackacre Subordinated Debt and Blackacre
         Subordinated Contingent Obligations in an aggregate principal amount
         not to exceed $37,500,000 (plus interest, fees and expenses) on any
         date of determination.

     (k) Amendments to Section 10.4(g).

         (i) The reference to "$100,000,000 (plus gains and minus losses
actually realized from such investments and loans after December 31, 2000)" in
subsection (g) of Section 10.4 of the Credit Agreement is hereby deleted in its
entirety and "$100,000,000 (plus gains and minus losses actually realized from
such investments and loans after December 31, 2000 and plus any portion of the
Blackacre Financing Amount which is not used to finance the investments
permitted pursuant to subsections (i) and (j) of this Section 10.4)" is inserted
in lieu thereof.

         (ii) Subsection (g) of Section 10.4 of the Credit Agreement is hereby
further amended by deleting the "and" at the end of such subsection.

     (l) Amendment to Section 10.4(h) and Addition of New Sections 10.4(i) and
(j). Subsection (h) of Section 10.4 of the Credit Agreement is hereby amended by
deleting the "." at the end of such subsection and inserting ";" in lieu
thereof; and the following subsections (i) and (j) are hereby set forth as an
addition to Section 10.4 of the Credit Agreement:

         (i) the investment by the Borrower in HQ Global as more particularly
     described on Schedule 10.4(i) attached hereto; provided that the aggregate
     amount of such investment, together with the investment described in
     subsection (j) of this Section 10.4, shall not exceed the Blackacre
     Financing Amount; and

         (j) the investment by the Borrower in a partnership to be formed by the
     Borrower and Sun International as more particularly described on Schedule
     10.4(j) attached hereto; provided that the aggregate amount of such
     investment, together with the investment described in subsection (i) of
     this Section 10.4, shall not exceed the Blackacre Financing Amount.


                                       9
<PAGE>

     (m) Amendment to Section 10.7(a). Subsection (a) of Section 10.7 of the
Credit Agreement is hereby deleted in its entirety and the following is
substituted in lieu thereof:

         (a) the Borrower or any Restricted Subsidiary may pay dividends in
     Qualified Equity Interests;

     (n) Amendment to Section 10.7(b), Amendment to Section 10.7(c) and Addition
of New Section 10.7(d). Subsection (b) of Section 10.7 of the Credit Agreement
is hereby amended by deleting "and" at the end of such subsection; subsection
(c) of Section 10.7 of the Credit Agreement is hereby amended by deleting the
"." at the end of such subsection and inserting "; and" in lieu thereof; and the
following subsection (d) is hereby set forth as an addition to Section 10.7 of
the Credit Agreement:

         (d) nothing in this Section 10.7 shall preclude or restrict any
     purchase, redemption other acquisition or retirement for value of any
     capital stock (or any options, warrants or rights to acquire shares of
     capital stock) required by the terms of any acquisition or related
     agreement pursuant to which any Restricted Subsidiary was acquired.

     (o) Amendment to Section 10.10. Section 10.10 of the Credit Agreement is
hereby deleted in its entirety and the following is substituted in lieu thereof:

         SECTION 10.10 Amendments; Payments and Prepayments of Subordinated
     Debt. Amend or modify (or permit the modification or amendment of) any of
     the terms or provisions of any Subordinated Debt (including, without
     limitation, any Contingent Obligations with respect to any Subordinated
     Debt) in any manner which would reasonably be expected to have an adverse
     effect upon the rights or interests of the Agents or the Lenders, or make
     any payment or prepayment on, or redeem or acquire for value (including,
     without limitation, by way of depositing with any trustee with respect
     thereto money or securities before due for the purpose of paying when due)
     any Subordinated Debt (including, without limitation, any Contingent
     Obligations with respect to any Subordinated Debt); provided that the
     Borrower shall be permitted to make payments of interest, fees and expenses
     with respect to the Blackacre Subordinated Debt solely to the extent such
     payments are required pursuant to the Blackacre Subordinated Credit
     Agreement as in effect on the Second Amendment Effective Date.

     (p) Amendment of Section 10.13 and Addition of New Section 10.13 and New
Section 10.14. Section 10.13 of the Credit Agreement is amended to become
Section 10.15 of the Credit Agreement and the following Section 10.13 and
Section 10.14 of the Credit Agreement are hereby set forth as an addition to the
Credit Agreement:

         SECTION 10.13 Limitation on Right to Convert. Exercise any right to
     convert the Blackacre Subordinated Debt, the Series A Convertible Preferred
     Stock or the Series B Convertible Preferred Stock into Trust Convertible
     Preferred Securities without the prior written consent of the Agents and
     the Required Lenders.


                                       10
<PAGE>

         SECTION 10.14 Blackacre Subordinated Loan Documents. Amend or modify
     any of the Blackacre Subordinated Loan Documents in any manner which could
     reasonably be expected to have an adverse effect upon the rights or
     interests of the Agents or the Lenders.

     (q) Amendment to Section 11.1(g). Subsection (g) of Section 11.1 of the
Credit Agreement is hereby deleted in its entirety and the following is
substituted in lieu thereof:

         (g) Debt Cross-Default. (i) There shall occur any acceleration of the
     maturity of an aggregate principal amount outstanding of any Debt for Money
     Borrowed (other than the Notes) of the Borrower or any Restricted
     Subsidiary in excess of $5,000,000 (other than any such acceleration
     resulting from the sale of an asset to the extent that such Debt for Money
     Borrowed was incurred to finance the acquisition of such asset, by its
     terms is due and payable on the sale of such asset and is paid in full when
     due), or (ii) any other event shall occur or condition shall exist under
     any agreement, mortgage, indenture or instrument relating to any Debt for
     Money Borrowed of the Borrower or any Restricted Subsidiary in excess of
     $5,000,000 (including, without limitation, Debt for Money Borrowed under
     the Blackacre Subordinated Loan Documents) and shall continue after the
     applicable grace or cure period, if any, specified in such agreement,
     mortgage, indenture or instrument, if the effect of any such event or
     condition is to accelerate, or to permit the acceleration of, the maturity
     of such Debt for Money Borrowed (other than any such acceleration resulting
     from the sale of an asset to the extent that such Debt for Money Borrowed
     was incurred to finance the acquisition of such asset, by its terms is due
     and payable on the sale of such asset and is paid in full when due), or
     (iii) the Borrower or any Restricted Subsidiary shall default in the
     payment of any Debt for Money Borrowed in excess of $5,000,000 at final
     maturity.

     (r) Amendment to Section 11.1(i). Subsection (i) of Section 11.1 of the
Credit Agreement is hereby deleted in its entirety and the following is
substituted in lieu thereof:

         (i) Change of Ownership and Control. Any person or group of persons
     (within the meaning of Section 13(d) of the Securities Exchange Act of
     1934, as amended) other than Andrew L. Farkas and any (i) trusts of which
     he and/or any of his children or spouse are beneficiaries or (ii) any other
     Persons of which he or any of his children or spouse is the controlling
     beneficial equityholder, and their respective Affiliates, shall obtain
     ownership or control in one or more series of transactions of more than
     twenty-five percent (25%) of the common stock and twenty-five percent (25%)
     of the voting power of the Borrower entitled to vote in the election of
     members of the board of directors of the Borrower and Andrew L. Farkas and
     any trusts of which he and/or any of his children or spouse are
     beneficiaries or any other Persons of which he or any of his children or
     spouse is the controlling beneficial equityholder, and their respective
     Affiliates cease to own or control fifty-one percent (51%) or more of the
     voting power of the Borrower; provided, however, the acquisition of up to
     twenty-five percent (25%) of the common stock and up to twenty-five percent
     (25%) of the voting power of the Borrower by Blackacre Capital Management
     LLC and/or its Affiliates by reason of the conversion of Series A
     Convertible Preferred Stock, Series B Convertible

                                       11
<PAGE>

     Preferred Stock, Series C Convertible Preferred Stock and/or Blackacre
     Subordinated Debt owned by any of them shall be excluded from the
     foregoing.

     (s) Amendment to Schedules. The Credit Agreement is hereby amended by
replacing or adding Schedules 6.1(a), 6.1(w), 10.4(i) and 10.4(j) thereto in the
form of Schedules 6.1(a), 6.1(w), 10.4(i) and 10.4(j) to this Amendment.

     II. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective only
upon the satisfaction of all of the following conditions precedent (the date of
satisfaction of all such conditions being referred to herein as the "Amendment
Effective Date"):

         (a) Amendment Documents. On or before the Amendment Effective Date, the
     Administrative Agent shall have received a fully executed original of this
     Amendment executed by the Borrower, the Subsidiary Guarantors, the Agents
     and the Required Lenders.

         (b) Blackacre Subordinated Credit Agreement. On or before the Amendment
     Effective Date,

               (i) Blackacre Subordinated Credit Agreement. The Agents and the
         Lenders shall have received a complete executed copy of the Blackacre
         Subordinated Credit Agreement, including, without limitation, all
         exhibits, schedules and attachments thereto, all in form and substance
         reasonably satisfactory to the Administrative Agent and the Required
         Lenders and certified to be true, correct and complete by the Borrower.

               (ii) Other Blackacre Subordinated Loan Documents. The Agents and
         the Lenders shall have received all Blackacre Subordinated Loan
         Documents reasonably requested by the Agents and the Lenders which have
         been executed in connection with the Blackacre Subordinated Credit
         Agreement (including, without limitation, each opinion of counsel
         delivered in connection with the Blackacre Subordinated Credit
         Agreement), each in form and substance reasonably satisfactory to the
         Agents and the Required Lenders.

         (c) Series B Convertible Preferred Stock. On or before the Amendment
     Effective Date,

               (i) Series B Convertible Preferred Stock Documents. The Agents
         and the Lenders shall have received all Series B Convertible Preferred
         Stock Documents reasonably requested by the Agents and the Lenders
         which have been executed in connection with the issuance of the Series
         B Convertible Preferred Stock (including, without limitation, each
         opinion of counsel delivered in connection with the issuance of the
         Series B Convertible Preferred Stock), each in form and substance
         reasonably satisfactory to the Agents and the Required Lenders.


                                       12
<PAGE>

               (ii) Proceeds of the Series B Convertible Preferred Stock. The
         Borrower shall have delivered to the Agents a certificate, in form and
         substance reasonably satisfactory to the Agents, certifying that the
         Borrower has received proceeds from the issuance of the Series B
         Convertible Preferred Stock in the amount of at least $12,500,000.

         (d) Corporate and Other Proceedings. On or before the Amendment
     Effective Date, all corporate and other proceedings taken or to be taken in
     connection with the transactions contemplated hereby and all documents
     incidental thereto not previously found acceptable by the Administrative
     Agent, acting on behalf of the Lenders, and its counsel, shall be
     reasonably satisfactory in form and substance to the Administrative Agent
     and such counsel, and the Administrative Agent and such counsel shall have
     received all such counterpart originals or certified copies of such
     documents as the Administrative Agent may reasonably request.

         (e) Fees and Expenses.

               (i) Amendment Fee. On or before the Amendment Effective Date, the
         Borrower shall have paid to the Administrative Agent, for the account
         of each Lender which has consented to and joined in the execution of
         this Amendment by 5:00 p.m. on June 10, 2002 (each a "Consenting
         Lender"), an amendment fee equal to the product of (i) the Commitment
         of such Consenting Lender and (ii) 25 basis points. The amendment fees
         shall be distributed by the Administrative Agent to each Consenting
         Lender by wire transfer of immediately available funds.

               (ii) Other Fees and Expenses. On or before the Amendment
         Effective Date, the Borrower shall have paid all other reasonable fees
         and out of pocket charges and other expenses incurred in connection
         with this Amendment and the transactions contemplated hereby,
         including, without limitation, the fees, charges and other expenses
         referred to in Section IV(e) of this Amendment.

         (f) Other Documents. On or before the Amendment Effective Date, the
     Agents shall have received any other agreements, documents or instruments
     (including, without limitation, an opinion of counsel) reasonably requested
     thereby in connection with the execution of this Amendment.

     III. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Agents and the Lenders that:

         (a) The execution and delivery of this Amendment by the Borrower and
     the Subsidiary Guarantors and the performance of the Credit Agreement, as
     amended and modified by this Amendment, and the other Loan Documents, do
     not and will not violate any law, rule or regulation, or any judgment,
     order or decree applicable to the Borrower or any of its Subsidiaries, or
     constitute a breach of the Articles of Incorporation, Bylaws or corporate
     resolutions of the Borrower or any Subsidiary Guarantor or any agreement to

                                       13
<PAGE>

     which the Borrower or any Subsidiary Guarantor is a party or by which its
     or their assets are bound.

         (b) Each of the Borrower and each of the Subsidiary Guarantors has the
     power and authority and has taken all necessary action to authorize the
     execution, delivery and performance of this Amendment and the performance
     of the Credit Agreement as amended and modified by this Amendment. This
     Amendment, the Credit Agreement, as amended and modified by this Amendment,
     and the other Loan Documents, constitute legal, valid and binding
     obligations of the Borrower and the Subsidiary Guarantors, enforceable in
     accordance with their respective terms.

         (c) (i) The representations and warranties of the Borrower and its
     Subsidiaries contained in Article VI of the Credit Agreement and in the
     other Loan Documents are true and correct in all material respects on and
     as of the date of this Amendment with the same effect as if made on and as
     of such date, except to the extent that such representations and warranties
     expressly relate to an earlier date (in which case such representations and
     warranties were true and correct in all material respects on and as of such
     earlier date).

         (ii) The representations and warranties of the Borrower and its
     Subsidiaries contained in the Blackacre Subordinated Credit Agreement and
     in the other Blackacre Subordinated Loan Documents are true and correct in
     all material respects on and as of the date of this Amendment with the same
     effect as if made on and as of such date, except to the extent that such
     representations and warranties expressly relate to an earlier date (in
     which case such representations and warranties were true and correct in all
     material respects on and as of such earlier date).

         (iii) The representations and warranties of the Borrower and its
     Subsidiaries contained in the Series B Convertible Preferred Stock
     Documents are true and correct in all material respects on and as of the
     date of this Amendment with the same effect as if made on and as of such
     date, except to the extent that such representations and warranties
     expressly relate to an earlier date (in which case such representations and
     warranties were true and correct in all material respects on and as of such
     earlier date).

         (d) (i) No Default or Event of Default exists under the Credit
     Agreement or any other Loan Document.

               (ii) No Default or Event of Default as defined in the
     Subordinated Blackacre Credit Agreement or any other Subordinated Blackacre
     Loan Document exists.

               (iii) No Default or Event of Default as defined in any Series B
     Convertible Preferred Stock Document exists.


                                       14
<PAGE>

     IV. GENERAL PROVISIONS.

     (a) Limited Amendment. Except as otherwise provided herein, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect. This Amendment shall not be deemed (i) to be a waiver
of, or consent to, or a modification or amendment of, any other term or
condition of the Credit Agreement or of any other term or condition of the other
Loan Documents or (ii) to prejudice any other right or rights which the Agents
or any Lender may now have or may have in the future under or in connection with
the Credit Agreement or the other Loan Documents or any of the instruments or
agreements referred to therein, as the same may be amended or modified from time
to time.

     (b) Counterparts. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

     (c) Definitions. All capitalized terms used and not defined herein shall
have the meanings given thereto in the Credit Agreement.

     (d) GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     (e) Fees and Expenses. All reasonable fees and expenses incurred in
connection with the preparation and negotiation of this Amendment and with the
fulfillment of the requirements hereunder shall be borne by the Borrower. If any
documentary or recording tax should be assessed or the affixing of any stamps be
required by local, state or federal governments, the Borrower shall pay such tax
and the cost of such stamps.

     (f) Conflicting Terms. In the event of any conflict or inconsistency
between the terms of this Amendment and the Credit Agreement and the other Loan
Documents, this Amendment shall control.

     (g) Cross-References. All references in the Credit Agreement, or in any
other Loan Document, to the terms "Credit Agreement" or "Agreement" or other
similar reference shall be deemed to refer to the Credit Agreement as amended or
modified by this Amendment. In addition, all notices, requests, certificates and
other instruments executed and delivered after the execution and delivery of
this Amendment may refer to the Credit Agreement without making specific
reference to this Amendment, but nevertheless all such references shall include
this Amendment unless the context otherwise requires.

     (h) Successors and Assigns. Whenever in this Amendment any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party and all covenants, provisions and agreements by or on
behalf of the Borrower which are contained in this Amendment shall inure to the
benefit of the successors and assigns of the Agents and Lenders.


                                       15
<PAGE>

     V. JOINDER OF THE GUARANTORS. The Subsidiary Guarantors join in the
execution and delivery of this Amendment solely for the purpose of evidencing
their consent thereto, and to acknowledge that the Guaranty Agreement remains in
full force and effect with respect to the Credit Agreement as amended hereby.

                           [Signature Pages to Follow]


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized officers as of the
date first above written.

                                           BORROWER:

                                           INSIGNIA FINANCIAL GROUP, INC.

                                           By: /s/
                                               ---------------------------------
                                               Name:  Adam B. Gilbert
                                                      --------------------------
                                               Title: Executive Vice President
                                                      --------------------------



<PAGE>

                                    LENDERS:

                                    WACHOVIA BANK, NATIONAL ASSOCIATION
                                    (f/k/a First Union National Bank),
                                    as Administrative Agent and Lender

                                    By: /s/
                                        ----------------------------------------
                                        Name:  Douglas A. Nickel
                                               ---------------------------------
                                        Title: Vice President
                                               ---------------------------------



<PAGE>

                                        LEHMAN COMMERCIAL PAPER INC.,
                                        as Syndication Agent and Lender

                                        By: /s/
                                            ------------------------------------
                                            Name:  Michelle Swanson
                                                   -----------------------------
                                            Title: Authorized Signatory
                                                   -----------------------------


<PAGE>


                                        LEHMAN BROTHERS BANKHAUS AG,
                                        London Branch

                                        By: /s/
                                            ------------------------------------
                                            Name:  T. Colwell
                                                   -----------------------------
                                            Title: Authorised Signatory
                                                   -----------------------------


<PAGE>

                                      BANK OF AMERICA, N.A.,
                                      as Documentation Agent

                                      By: /s/
                                          --------------------------------------
                                          Name:  Scott K. Mitchell
                                                 -------------------------------
                                          Title: Senior Vice President
                                                 -------------------------------


<PAGE>


                                      THE BANK OF NEW YORK

                                      By: /s/
                                          --------------------------------------
                                          Name:  Anthony J. Verzi
                                                 -------------------------------
                                          Title: Vice President
                                                 -------------------------------


<PAGE>


                                      LASALLE BANK NATIONAL ASSOCIATION

                                      By: /s/
                                          --------------------------------------
                                          Name:  Julie Anne Thick
                                                 -------------------------------
                                          Title: Vice President
                                                 -------------------------------


<PAGE>


                                      U.S. BANK NATIONAL ASSOCIATION
                                      (f/k/a Firstar Bank)

                                      By: /s/
                                          --------------------------------------
                                          Name:  R. Michael Newton
                                                 -------------------------------
                                          Title: Vice President
                                                 -------------------------------


<PAGE>


                                      BARCLAYS BANK PLC

                                      By: /s/
                                          --------------------------------------
                                          Name:  Nicholas A. Bell
                                                 -------------------------------
                                          Title: Director
                                                 -------------------------------


<PAGE>


                                      CITIBANK, N.A.,
                                      successor to European American Bank

                                      By: /s/
                                          --------------------------------------
                                          Name:  Anthony V. Pantina
                                                 -------------------------------
                                          Title: Vice President
                                                 -------------------------------


<PAGE>


                                      NATIONAL CITY BANK

                                      By:
                                          --------------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------


<PAGE>

                                      THE ROYAL BANK OF SCOTLAND PLC

                                      By: /s/
                                          --------------------------------------
                                         Name:  Hugh Davies
                                                --------------------------------
                                         Title: Senior Corporate Manager
                                                --------------------------------


<PAGE>

                             GUARANTORS:

                             IFS SECURITIES, INC.
                             INSIGNIA FINANCIAL SERVICES, INC.
                             INSIGNIA INVESTMENT MANAGEMENT, INC.
                             INSIGNIA OPPORTUNITY DIRECTIVES II, LLC
                                 By: Insignia Financial Services, Inc., Member
                             OPPENHEIMER-WEST VILLAGE PROPERTIES, INC.
                             RAQZ CORP.
                             WESTVILLE PROPERTIES, INC.

                             By: /s/
                                 ---------------------------------------------
                                 Name: Frank M. Garrison
                                 Title: President

                             BAKER COMMERCIAL REALTY, INC.
                             CONSTRUCTION INTERIORS, INC.
                             E.S.G. OPERATING CO., INC.
                             EDWARD S. GORDON MANAGEMENT
                               CORPORATION
                             FIRST CLAYTON PROPERTIES, L.P.
                               By: Insignia Commercial Investments Group, Inc.
                                      its General Partner
                             I/ESG KENSINGTON INVESTORS, LLC

                               By: Insignia Commercial Investments Group, Inc.,
                                      its Managing Member
                             I/ESG OCTANE HOLDINGS, LLC
                             IBTHAI, INC.
                             IBT II, INC.
                             IBT III, INC.
                             IBT IV, INC.
                             IBT V, INC.
                             IBT VI, INC.
                             ICIG 101 MARIETTA, LLC
                               By: Insignia Commercial Investments Group, Inc.,
                                      its Managing Member
                             ICIG COUNTRY CLUB MANOR, L.L.C.
                               By: Insignia Commercial Investments Group, Inc.,
                                      its Managing Member


<PAGE>

                        ICIG FRESH MEADOWS, L.L.C.
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        ICIG MOCKINGBIRD, L.L.C
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        ICIG OAKHILL DIRECTIVES, L.L.C.
                          By: Insignia/ESG, Inc., its Managing Member
                        ICIG SANTA ROSA, LLC
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        ICII-WV HOLDINGS, LLC
                          By: Insignia Capital Investments, Inc.,
                                 its Managing Member
                        IFC ACQUISITION CORP. I
                        IFC ACQUISITION CORP. II
                        IFS ACQUISITION LLC
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        IFS ACQUISITION LLC II
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        IFS ACQUISITION LLC III
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        IFS ACQUISITION LLC IV
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        IFS ACQUISITION DIRECTIVES, LLC
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        IFS SOUTHLAND INVESTORS LLC
                          By: Insignia Realty Investors, LLC, its Managing
                                 Member
                          By: Insignia Commerical Investments Group, Inc.,
                                 its Managing Member
                        INSIGNIA/ESG, INC.
                        INSIGNIA/ESG OF COLORADO, INC.
                        INSIGNIA/ESG CAPITAL CORPORATION
                        INSIGNIA/ESG NORTHEAST, INC.
                        INSIGNIA ACQUISITION CORPORATION
                        INSIGNIA CAPITAL INVESTMENTS, INC.
                        INSIGNIA CLINTON DIRECTIVES, LLC
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        INSIGNIA COMMERCIAL INVESTMENTS
                          GROUP, INC.

<PAGE>

                        INSIGNIA COMMERCIAL MANAGEMENT, INC.
                        INSIGNIA DEVELOPMENT GROUP, INC.
                        INSIGNIA DOUGLAS ELLIMAN, LLC
                          By: Insignia Residential Group, Inc.,
                                 its Managing Member
                        INSIGNIA HOTELS III, L.L.C.
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        INSIGNIA ML PROPERTIES, LLC
                             By: Insignia/ESG, Inc., its Managing Member
                        INSIGNIA NAUTICA, INC.
                        INSIGNIA RO, INC.
                        INSIGNIA REALTY INVESTORS, LLC
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        INSIGNIA REALTY INVESTORS II, LLC
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        INSIGNIA REALTY INVESTORS III, LLC
                          By: Insignia Commercial Investments Group, Inc.,
                                 its Managing Member
                        INSIGNIA RESIDENTIAL GROUP, INC.
                        INSIGNIA RESIDENTIAL INVESTMENT
                          CORPORATION
                        LAMBERT ROAD, L.P.
                          By: Insignia Commercial Investments Group, Inc.,
                                 its General Partner
                        PAYROLL SERVICES, INC.
                        SECURED INVESTMENT CORPORATION
                        WV FINANCING, LLC
                          By: Insignia Capital Investments, Inc.,
                                 its Managing Member

                        By: /s/
                            ----------------------------------------------------
                            Name:  Adam B. Gilbert
                            Title: Executive Vice President


</TEXT>
</DOCUMENT>
