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EXHIBIT 2.3
SEARCH-MS FINANCIAL
ESCROW AGREEMENT
This Escrow Agreement, dated as of July 31, 1997 (the "Escrow
Agreement"), is entered into by and among Search Financial Services, Inc., a
Delaware corporation ("Search"); and the undersigned holders of shares of the
common stock, $.001 par value, of MS Financial, Inc., MS Diversified
Corporation, a Mississippi corporation ("MSD"), MS Financial Services, Inc., a
Mississippi corporation and a wholly-owned subsidiary of MSD ("MSDSub") and
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Fund IV, L.P. (sometimes referred to as "GTCR IV"),
and U.S. Trust Company of Texas, N.A., a national bank ("Escrow Agent"). MSD,
MSDSub and GTCR IV are sometimes collectively referred to as the
"Stockholders".
W I T N E S S E T H:
WHEREAS, MS Financial, Inc. ("MS Financial"), Search and Search's
wholly owned subsidiary, Search Capital Acquisition Corp. ("Newco"), have
entered into an Agreement and Plan of Merger dated February 7, 1997 (as
amended, the "Merger Agreement"), to effect the Merger (as defined in the
Merger Agreement; capitalized terms used herein shall have the same definition
as in the Merger Agreement unless otherwise specifically indicated) of Newco
into MS Financial, which will result in MS Financial being controlled by Search
instead of by the Stockholders, and each outstanding share of MS Financial
Stock will be converted into the right to receive that number of shares of
Search Common Stock, $.01 par value per share ("Search Common Stock"),
specified in the Merger Agreement; and
WHEREAS, Stockholders and Search have entered into a Stockholders
Agreement dated February 7, 1997 (as amended, the "Stockholders Agreement"),
pursuant to which Stockholders and Search agreed to enter into this Escrow
Agreement; and
WHEREAS, Search has agreed to issue the Search Common Stock as an
integral part of the Merger to all of the stockholders of MS Financial,
including but not limited to, the Stockholders; and
WHEREAS, the Stockholders Agreement provides that portions of the
Search Common Stock to be issued as Merger Consideration to the Stockholders
are to be held in escrow pursuant to this Escrow Agreement in order to (i)
guaranty payment of indemnification obligations under the Stockholders
Agreement and (ii) reserve against the possibility that certain anticipated tax
refunds are not received by MS Financial or the Surviving Corporation; and
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WHEREAS, Stockholders and Search desire that Escrow Agent hold the
Search Common Stock in escrow, and Escrow Agent has agreed to do so, on the
terms and conditions set forth in this Escrow Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, which are
incorporated into this Escrow Agreement as if fully set forth, and for other
good and valuable consideration, the receipt and sufficiency of all of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Establishment of Escrow.
(a) Indemnification Escrow Fund. Search hereby delivers to Escrow
Agent the number of shares (the "Escrow Shares") of Merger Consideration equal
to Two Million, Five Hundred Thousand Dollars ($2,500,000) worth of Search
Common Stock at the Valuation Period Market Value (the "Escrow Fund") to Escrow
Agent to hold in escrow on the terms and conditions set forth herein.
(b) Tax Holdback Escrow. Search hereby delivers to Escrow Agent
the number of shares (the "Tax Holdback Shares") of Merger Consideration equal
to Two Million, Three Hundred Thousand Dollars ($2,300,000) worth of Search
Common Stock at the Valuation Period Market Value (the "Tax Holdback Fund") to
hold in escrow on the terms and conditions set forth herein.
2. Receipt. Escrow Agent hereby acknowledges receipt of the Escrow Fund
and the Tax Holdback Fund and agrees to hold them in escrow in accordance with
the terms of this Escrow Agreement.
3. Charges Against Escrow Fund. The Escrow Fund has been created
pursuant to Section 12.1 of the Stockholders Agreement for the purpose of
securing and providing a source for satisfying any amount to be paid in Escrow
Shares by the Stockholders to Search pursuant to Section 10 of the Stockholders
Agreement. In the event that, and from time to time as, Search determines that
it is entitled to any of the Escrow Shares as indemnification pursuant to the
aforesaid Section 10 of the Stockholders Agreement, Search shall provide a
notice to the Escrow Agent, in substantially the form attached hereto as
Exhibit 1, of such claim (a "Claim") against the Escrow Fund, stating the
method of computation of such Claim, the number of Escrow Shares to satisfy the
amount of such claim, a brief description of the facts upon which such Claim is
based and a reference to the provisions of the Stockholders Agreement in
respect of which such Claim shall have occurred. The Escrow Agent shall mail a
copy of such
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Claim notice via registered or certified mail, return receipt requested, to the
Stockholders. Unless it receives a timely Objection Notice from the
Stockholders pursuant to Section 4 below, the Escrow Agent shall disburse to
Search out of the Escrow Fund the number of Escrow Shares specified in the
notice of the Claim.
4. Dispute of Claim Against Escrow Fund.
(a) The Stockholders (or either of them) shall have the right to
dispute any Claim against the Escrow Fund within the thirty (30) business day
period following delivery of a copy of a Claim notice by delivering to the
Escrow Agent and Search written notice in substantially the form attached
hereto as Exhibit 2 (an "Objection Notice") that the Stockholders dispute the
matter(s) set forth in such Claim notice either with respect to the validity,
the amount, or the number of Escrow Shares of the Claim (or each). Such notice
shall include the basis, with reasonable specificity, of the objection.
(b) Upon timely receipt of an Objection Notice, the Escrow Agent
shall reserve against the Escrow Fund 1.5 times the number of Escrow Shares
stated in the Claim and place such Escrow Shares so reserved in a separate
account (in effect putting a hold on any disbursement of such Escrow Shares)
(such shares so reserved and placed in a separate account being called a
"Dispute Fund"). The Escrow Agent shall take no action with respect to the
Dispute Fund, except upon receipt of joint written instructions from Search and
the Stockholders in substantially the form attached hereto as Exhibit 3 or by a
final judgment or decree of any court of competent jurisdiction in accordance
with Section 16.7 of the Stockholders Agreement. Upon such instructions or
judgment, decree or award, the Escrow Agent shall promptly follow the
instruction therein.
5. Release of Escrow Fund. The Escrow Agent shall release to the
Stockholders, pro rata, a number of Escrow Shares not in excess of the
Distributable Escrow Fund (for purposes of this Section 5, Distributable Escrow
Fund means the Escrow Shares less that number of shares which correspond to 1.5
times the value of each unresolved Claim made less than thirty (30) days prior
to a Distribution Date (as defined below) and excluding therefrom the Dispute
Fund), as follows: 25% of the Distributable Escrow Fund on the first
anniversary after the Effective Time; 25% eighteen months after the Effective
Time; 25% twenty-four months after the Effective Time; and the remainder thirty
months after the Effective Time (each such date a "Distribution Date");
provided, that if the value of the Search Common Stock held in the Dispute Fund
on a Distribution Date exceeds on such Distribution Date 1.5 times the amount
of the Claim(s) (the "Excess Dispute Fund Amount" refers to the excess value),
then that number of shares of Search Common Stock that corresponds to the value
on such Distribution Date of the Excess Dispute Fund Amount shall be
transferred to the Escrow Fund, considered part of the Distributable Escrow
Fund and subject to distribution as provided above.
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6. Tax Holdback Fund.
(a) Charges Against the Tax Holdback Fund. The Tax Holdback Fund
has been created pursuant to Section 12.4 of the Stockholders Agreement for the
purpose of reserving against the possibility that MS Financial or the Surviving
Corporation do not receive certain anticipated tax refunds from federal and
state taxing authorities. On December 31, 1998 (unless such date is
accelerated or extended by mutual agreement of the parties based on the status
of such refunds), any shares of Search Common Stock remaining in the Tax
Holdback Fund (i.e., after releases of any of such shares pursuant to paragraph
(b) below) shall be released to Search pursuant to joint instructions signed by
Search and the Stockholders.
(b) Release of Tax Holdback Fund. As tax refunds in excess of
$4,000,000 are received by MS Financial or the Surviving Corporation, shares of
Search Common Stock held in the Tax Holdback Fund shall be released to the
Stockholders from escrow on no less than a quarterly basis in proportion to
such income tax refunds received, pursuant to joint instructions signed by
Search and the Stockholders.
7. Certificate Legend. The certificates representing the Escrow Fund and
the Tax Holdback Fund shall bear the legend required by the Stockholders
Agreement until said legend is removed pursuant to the terms and conditions of
the Stockholders Agreement. Thereafter, all certificates representing the
Search Common Stock still constituting a part of the Escrow Fund or the Tax
Holdback Fund shall bear a legend substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISTRIBUTED OR DISPOSED
OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF
1933 AND THE CONDITIONS SPECIFIED IN THAT CERTAIN ESCROW AGREEMENT
DATED JULY 31, 1997, TO WHICH AGREEMENT SEARCH FINANCIAL SERVICES,
INC ("SEARCH"), MS DIVERSIFIED CORPORATION, MS FINANCIAL SERVICES,
INC. AND GOLDER, THOMA, ▇▇▇▇▇▇, ▇▇▇▇▇▇ FUND IV, L.P. ARE PARTIES.
A COPY OF SUCH AGREEMENT WILL BE MAILED TO THE HOLDER HEREOF WITHOUT
CHARGE WITHIN FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR
DIRECTED TO SEARCH AT ITS HEADQUARTERS IN DALLAS, TEXAS."
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8. Fees. The Escrow Agent is charging for its services hereunder the
fees set forth on Schedule A, attached hereto and incorporated herein. Search
shall be solely responsible for the payment of such fees.
9. Duties. The duties of the Escrow Agent hereunder are only such as are
herein specifically provided, being purely administrative in nature, and the
Escrow Agent shall incur no liability whatsoever except for fraudulent conduct.
Other than the obligations of the Escrow Agent set forth in this Escrow
Agreement, the Escrow Agent shall have no other obligations, rights, or duties
with reference to this Escrow Agreement. The Escrow Agent shall not be bound
by any modification of this Escrow Agreement unless in writing and signed by
all of the parties hereto.
10. Uncertainty or Conflict: In the event that the Escrow Agent shall be
uncertain as to its duties or obligations hereunder or shall receive
instructions from any party hereto with respect to any part or all of the
Escrow Fund or the Tax Holdback Fund, which are in conflict with any of the
provisions of this Escrow Agreement, the Escrow Agent shall be entitled to
refrain from taking any action other than to keep safely the Escrow Fund and
the Tax Holdback Fund and any other property so received by it until it shall
be directed by a court as provided in the following Section.
11. Litigation: If (i) the Escrow Agent becomes involved in or is
threatened with litigation for any reason resulting from its capacity as Escrow
Agent, and/or (ii) the Escrow Agent is uncertain as to its duties or
obligations hereunder, the Escrow Agent is hereby authorized to deposit with
the U.S. district court in St. Louis, Missouri the Escrow Fund and/or the Tax
Holdback Fund and notify Stockholders and Search of the same. Thereupon, the
Escrow Agent shall stand fully relieved and discharged of any further duties
hereunder in respect of such action and the matters giving rise thereto except
as may be instructed by said court. In the event Escrow Agent is a party to
any litigation, Stockholders and Search severally agree to reimburse Escrow
Agent on demand for any reasonable out-of-pocket expenses incurred by Escrow
Agent in connection with such litigation.
12. Escrow Agent Replacement. If Escrow Agent resigns as Escrow Agent,
the parties shall have thirty (30) days to select a new Escrow Agent. If the
parties fail to select a new Escrow Agent within said thirty (30) day period,
Escrow Agent shall appoint a successor Escrow Agent. Any successor Escrow
Agent shall agree to be bound by all of the terms and conditions of this Escrow
Agreement.
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13. Voting Rights. The respective Stockholders will, subject to the
restrictions set forth in the Stockholders Agreement, retain the right to vote
the Escrow Shares and the Tax Holdback Shares.
14. Termination. Upon disbursement of the entire Escrow Fund and the Tax
Holdback Fund, this Escrow Agreement shall terminate.
15. Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail,
postage prepaid, or by recognized courier service, as follows:
If to Search
or Newco to: Search Financial Services, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Pres. & CEO
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Executive Vice
President and General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: Riezman & Blitz, P.C.
7700 Bonhomme, ▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: 314-727-6458
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
If to
MSD, or MSDSub: MS Diversified Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.P.
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Post Office Box 23066
Jackson, Mississippi 39225-3066
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to GTCR IV: ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Fund IV, L.P.
c/o Golder, Thoma, Cressy, Rauner, Inc.
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▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Escrow
Agent to: U.S. Trust Company of Texas, ▇.▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as the Person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such
notice, request, claim, demand, waiver, consent, approval or other
communication shall be deemed to have been given as of the date so delivered,
telefaxed, mailed or dispatched and, if given by any other means, shall be
deemed given only when actually received by the addressees.
16. Miscellaneous.
a. This Escrow Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns.
b. This Escrow Agreement may be executed in one or more
counterparts, and each such counterpart shall, for all purposes, be
deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
c. If any provision(s) of this Escrow Agreement are held to be
invalid, illegal or unenforceable by a court of competent
jurisdiction, the validity, legality and enforceability of the
remaining provisions of this Escrow Agreement shall not in any way be
affected or impaired thereby.
d. The obligations and duties of Escrow Agent herein are personal
to Escrow Agent and Escrow Agent may not assign any and/or all of its
obligations or duties hereunder except as set forth herein.
e. Indemnity. Escrow Agent is hereby severally indemnified by
Search and Stockholders against any liability resulting from the
exercise of its duties under this Escrow Agreement which are not
performed fraudulently or with gross negligence.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
SEARCH FINANCIAL SERVICES, INC. ("SEARCH")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Executive Vice President & Chief Financial Officer
MS DIVERSIFIED CORPORATION ("MSD")
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President; CEO
MS FINANCIAL SERVICES, INC. ("MSDSub")
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ FUND IV,
L.P. ("GTCR IV")
By: GTCR IV, L.P., its General Partner
By: Golder, Thoma, Cressey, Rauner, Inc.,
its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
Its Authorized Officer
U.S. TRUST COMPANY OF TEXAS, N.A. ("Escrow Agent")
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: VICE PRESIDENT
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SCHEDULE A
ESCROW AGENT FEES
Search shall pay to the Escrow Agent a fee of $2,500 per year, or part thereof,
payable semi-annually in advance.
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Exhibit 1
[date]
NOTICE OF CLAIM FOR INDEMNITY
U.S. Trust Company of Texas, N.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
RE: Escrow Agreement, dated July 31, 1997 (the "Escrow
Agreement"), among Search Financial Services, Inc., a Delaware
corporation ("Search"), ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Fund IV,
L.P., MS Diversified Corporation, MS Financial Services, Inc.
(collectively, the "Stockholders") and U.S. Trust Company of
Texas, N.A.
Subject to Section 5 of the Escrow Agreement, you are hereby
authorized and instructed to disburse ___________ Escrow Shares (as defined in
the Escrow Agreement) from the Escrow Fund (as defined in the Escrow
Agreement), representing a total amount of $_______________, to Search by
reason of the following claim:
This claim is based on the following facts:
[brief description of the method of computation of the Claim,
the facts upon which the Claim is based and a reference to the
provisions of the Stockholders Agreement in respect of which
such Claim shall have occurred]
SEARCH FINANCIAL SERVICES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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Exhibit 2
[date]
OBJECTION NOTICE
U.S. Trust Company of Texas, N.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
RE: Escrow Agreement, dated July 31, 1997 (the "Escrow
Agreement"), among Search Financial Services, Inc., a Delaware
corporation ("Search"), ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Fund IV,
L.P., MS Diversified Corporation, MS Financial Services, Inc.
(collectively, the "Stockholders") and U.S. Trust Company of
Texas, N.A.
You hereby are notified that the Stockholders dispute the Claim for
Indemnity set out in the Notice for Claim for Indemnity of Search dated
_________________ ("Claim"). The basis for disputing such Claim is:
[insert a paragraph stating with reasonable specificity the
basis of the objection]
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
FUND, IV., L.P.
By: GTCR IV, L.P., its General Partner
By: Golder, Thoma, Cressey, Rauner,
Inc., its General Partner
By:
-----------------------------
Its Authorized Officer
MS DIVERSIFIED CORPORATION
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
MS FINANCIAL SERVICES, INC.
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
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Exhibit 3
[date]
JOINT INSTRUCTIONS FOR DISPUTE RESOLUTION
U.S. Trust Company of Texas, N.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
RE: Escrow Agreement, dated July 31, 1997 (the "Escrow
Agreement"), among Search Financial Services, Inc., a Delaware
corporation ("Search"), ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Fund IV,
L.P., MS Diversified Corporation, MS Financial Services, Inc.
(collectively, the "Stockholders") and U.S. Trust Company of
Texas, N.A.
You hereby are authorized and instructed to take the following action
with respect to the Dispute Fund (as defined in the Escrow Agreement) that was
created by reason of Search's Notice of Claim for Indemnity dated _____________
_____ and the Stockholders' Objection Notice dated __________________:
[Instructions for treatment of the Dispute Fund]
SEARCH FINANCIAL SERVICES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ FUND, IV.,
L.P.
By: GTCR IV, L.P., its General
Partner
By: Golder, Thoma, Cressey,
Rauner, Inc., its General
Partner
By:
------------------------
Its Authorized Officer
MS DIVERSIFIED CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
MS FINANCIAL SERVICES, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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