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EXHIBIT 2.19
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AGREEMENT AND PLAN OF REORGANIZATION
dated as of the 27th day of March, 1997
by and among
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
and
the SHAREHOLDERS named herein
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TABLE OF CONTENTS
Page
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1. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Delivery and Filing of Certificate of Merger/Consolidation . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Articles of Incorporation, By-laws and Board of Directors
of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Certain Information With Respect to the Capital Stock of
the Company, FYI and Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Manner of Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Calculation of FYI Shares for the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Earnings Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. DELIVERY OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Delivery Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(A) Representations and Warranties of the Company and
the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Organization, Existence and Good Standing of the Company . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Capital Stock of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.6 Accounts and Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 Permits and Intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.9 Assets and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 Real Property Leases; Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 Environmental Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.13 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.14 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.15 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.16 Litigation and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.18 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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5.20 Employees; Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.22 Interests in Customers, Suppliers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.23 Business Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.24 Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.25 Bank Accounts and Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.26 Pooling-of-Interests Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.27 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.28 Continuity of Business Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.29 Spin-off by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.30 Pooling Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.31 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.32 Prospectus: Securities Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(B) Representations and Warranties of the Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . 23
5.33 Authority; Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.34 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.35 No Intention to Dispose of FYI Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.36 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.37 Validity of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.38 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6. REPRESENTATIONS OF FYI AND NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 FYI Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Validity of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.5 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Capitalization of FYI and Ownership of FYI Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.7 Transactions in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.9 Business; Real Property; Material Agreements; Financial
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10 Conformity with Law and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.11 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
SHAREHOLDERS AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Representations and Warranties; Performance of Obligations . . . . . . . . . . . . . . . . . . . . . 28
7.2 Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.7 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF FYI AND
NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1 Representations and Warranties; Performance of Obligations . . . . . . . . . . . . . . . . . . . . . 29
8.2 Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.3 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.4 Examination of Final Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.5 Repayment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.7 Shareholder Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.8 Termination of Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.9 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.10 Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.11 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.12 Closing Under Related Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.13 Broker Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.15 Release of Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.16 Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.17 Approval of Board of Directors of FYI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.18 Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.19 Accountant's Letter with Respect to Pooling of Interests Accounting . . . . . . . . . . . . . . . . 32
8.20 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Permitted Payments by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Preservation of Tax and Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Preparation and Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Covenants of the Company Concerning Termination of S Election . . . . . . . . . . . . . . . . . . . 33
9.5 Nomination of Shareholder to FYI Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 37
9.6 Company Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.7 Receivables Guaranteed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.8 Registration of FYI Stock; 1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.9 Economic Risk; Sophistication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.10 Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.11 Termination of Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1 FYI Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Employee Compensation and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.4 Shareholder Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.5 Indemnification for Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.6 Notice of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.7 Right to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.8 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.9 Satisfaction of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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10.10 Limitations of Indemnification; Proportionate Payments . . . . . . . . . . . . . . . . . . . . . . . 46
11. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2 Survival of Covenants, Agreements, Representations and Warranties . . . . . . . . . . . . . . . . . 47
11.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.6 Brokers and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.10 Exercise of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.11 Schedules to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.12 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.13 Reformation and Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.14 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.15 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.16 Tax Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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SCHEDULES
1.3(d) Officers of the Surviving Corporation
5.2 Jurisdictions of Qualification and Company Charter Documents
5.3 Capital Stock
5.5 Financial Statements and Contingent Liabilities
5.6 Accounts and Notes Receivable
5.7 Permits and Intangibles
5.8 Taxes
5.8(s) Joint Ventures and Partnerships
5.9 Assets and Properties
5.10 Real Property Leases
5.11 Environmental Matters
5.12(a) Contracts
5.12(b) Contract Defaults
5.15 Consents
5.16 Litigation
5.18 Intellectual Property Rights
5.19 Employee Benefit Plans
5.20 Employee Matters
5.21 Insurance
5.22 Affiliated Entities
5.23 Business Relations
5.24 Officers and Directors
5.25 Bank Accounts
5.26 Acquisitions of Company Stock
5.27 Absence of Certain Changes
5.28 Predecessor Information
5.30 Pooling Representation Letter
5.33 Liens on Stock
6.6 FYI Capital Stock
6.8 FYI Subsidiaries
6.9 FYI Financial Information
6.10 FYI Compliance with Laws
6.11 No Violations by FYI
8.4 Adjustments to Net Worth
8.7 Continuing Obligations
8.8 Continuing Related Party Agreements
11.6 Brokers and Agents
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ANNEXES
I Shareholders of the Company
II Aggregate Consideration to be paid to the Shareholders
III FYI Charter Documents
IV Opinion of Counsel to FYI and Newco
V Shareholder Release
VI Opinion of Counsel to the Company
VII Noncompetition Agreements
VIII Affiliate Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of the 27th day of March 1997, by and among F.Y.I. INCORPORATED, a Delaware
corporation ("FYI"), MMS ESCROW ACQUISITION CORP., a Delaware corporation
("Newco"), MMS ESCROW AND TRANSFER AGENCY, INC., a Michigan corporation (the
"Company"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the shareholders listed on
Annex I hereto (each of Messrs. ▇▇▇▇▇▇▇ and Kerbawy and such shareholders
referred to herein as a "Shareholder" and collectively the "Shareholders"),
with the shareholders listed on Annex I constituting all the shareholders of
the Company.
WHEREAS, Newco is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on March 4, 1997, and
is a wholly-owned subsidiary of FYI, a corporation organized and existing under
the laws of the State of Delaware;
WHEREAS, the respective Boards of Directors of Newco and the Company
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that Newco merge with and into
the Company pursuant to this Agreement and the applicable provisions of the
laws of the State of Michigan and of the State of Delaware, such transaction
sometimes being herein called the "Merger";
WHEREAS, the Boards of Directors of FYI, Newco and the Company have
approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, the Boards of Directors of each of the Constituent
Corporations intend for this reorganization to be accounted for as a "pooling
of interests";
NOW, THEREFORE, for and in consideration of the premises and of the
mutual agreements, representations, warranties, provisions and covenants herein
contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER/CONSOLIDATION.
The Constituent Corporations will cause a Certificate of Merger/Consolidation
with respect to the Merger (the "Certificate of Merger") to be signed, verified
and delivered to the Department of Consumer and Industry Services, Corporation,
Securities and Land Development Bureau of the State of Michigan and, if
required, a similar filing to be made with the relevant authorities in the
State of Delaware, on or before the Closing Date (as defined in Section 4).
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1.2 EFFECTIVE TIME OF THE MERGER. The "Effective Time of the
Merger" shall be the Closing Date as defined in Section 4. At the Effective
Time of the Merger, Newco shall be merged with and into the Company, in
accordance with the Certificate of Merger, the separate existence of Newco
shall cease and the corporate name of the Company shall continue to be MMS
Escrow and Transfer Agency, Inc. The Company shall be the surviving party in
the Merger and is hereinafter sometimes referred to as the "Surviving
Corporation." The Merger will be effected in a single transaction.
1.3 ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(a) The Articles of Incorporation of the Company then in
effect shall become the Articles of Incorporation of the Surviving
Corporation; and subsequent to the Effective Time of the Merger, such
Articles of Incorporation shall be the Articles of Incorporation of
the Surviving Corporation until changed as provided by law;
(b) The By-laws of Newco then in effect shall become the
By-laws of the Surviving Corporation; and subsequent to the Effective
Time of the Merger, such By-laws shall be the By-laws of the Surviving
Corporation until they shall thereafter be duly amended;
(c) The Board of Directors of the Surviving Corporation
shall consist of the following persons:
▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
The Board of Directors of the Surviving Corporation shall hold office
subject to the provisions of the laws of the State of Michigan and of
the Articles of Incorporation and By-laws of the Surviving
Corporation; and
(d) The officers of the Surviving Corporation shall be
the persons set forth on Schedule 1.3(d) hereto, each of such officers
to serve, subject to the provisions of the Articles of Incorporation
and By-laws of the Surviving Corporation and the terms of any
employment agreement executed by any such officer, until such
officer's successor is duly elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, FYI AND NEWCO. The respective designations and numbers of outstanding
shares and voting rights
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of each class of outstanding capital stock of the Company, FYI and Newco as of
the date of this Agreement are as follows:
(a) As of the date of this Agreement, the authorized
capital stock of the Company consists of fifty thousand (50,000)
shares of Common Stock, $1.00 par value per share (the "Company
Stock"), of which one thousand (1,000) shares are issued and
outstanding;
(b) As of February 14, 1997, the authorized capital stock
of FYI consists of twenty-six million (26,000,000) shares of Common
Stock, $.01 par value per share ("FYI Stock"), of which eight million
seven hundred eighty thousand and forty-two (8,780,042) shares are
issued and outstanding, and one million (1,000,000) shares of
Preferred Stock, $.01 par value per share, of which no shares are
issued and outstanding; and
(c) As of the date of this Agreement, the authorized
capital stock of Newco consists of 3,000 shares of Common Stock, $.01
par value per share ("Newco Stock"), of which ten (10) shares are
issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the
effect of the Merger shall be as provided in the applicable provisions of the
Michigan Business Corporation Act and the General Corporation Law of the State
of Delaware. Except as herein specifically set forth, the identity, existence,
purposes, powers, objects, franchises, privileges, rights and immunities of the
Company shall continue unaffected and unimpaired by the Merger and the
corporate franchises, existence and rights of Newco shall be merged with and
into the Company, and the Company, as the Surviving Corporation, shall be fully
vested therewith. At the Effective Time of the Merger, the separate existence
of Newco shall cease and, in accordance with the terms of this Agreement, the
Surviving Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as of a private nature, and all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions to shares, all taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to the Company and Newco shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and franchises and all
and every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Company and Newco; and the title to
any real estate, or interest therein, whether by deed or otherwise, vested in
the Company and Newco, shall not revert or be in any way impaired by reason of
the Merger. The Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the Company and Newco and any
claim existing, or action or proceeding pending, by or against the Company or
Newco may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the Company or Newco shall be impaired by
the Merger, and all debts, liabilities and duties of the Company and Newco
shall attach to the Surviving Corporation, and may be enforced against such
Surviving
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Corporation to the same extent as if said debts, liabilities and duties had
been incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of
(a) the Company Stock and (b) Newco Stock, each as issued and outstanding
immediately prior to the Effective Time of the Merger, respectively, into (i)
FYI Stock and (ii) shares of Common Stock, $.01 par value per share, of the
Surviving Corporation, shall be as follows:
As of the Effective Time of the Merger:
(a) All of the shares of the Company Stock issued and
outstanding immediately prior to the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder
thereof, automatically shall be deemed to represent that number of
shares of FYI Stock determined pursuant to Section 2.2 below, such
shares to be distributed to the Shareholders as provided in Annex II
hereto;
(b) All shares of the Company Stock that are held by the
Company as treasury stock (as defined in Section 5) shall be cancelled
and retired and no shares of FYI Stock or other consideration shall be
delivered or paid in exchange therefor; and
(c) Each share of Newco Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by virtue
of the Merger and without any action on the part of FYI, automatically
be converted into one fully paid and non-assessable share of Common
Stock of the Surviving Corporation that shall constitute all of the
issued and outstanding shares of Common Stock of the Surviving
Corporation immediately after the Effective Time of the Merger.
All voting rights of such FYI Stock received by the Shareholders shall
be fully exercisable by the Shareholders, and the Shareholders shall not be
deprived nor restricted in exercising those rights. At the Effective Time of
the Merger, FYI shall have no class of capital stock issued and outstanding
which, as a class, shall have any rights or preferences senior to the shares of
FYI Stock received by the Shareholders, including, without limitation, any
rights or preferences as to dividends or as to the assets of FYI upon
liquidation or dissolution or as to voting rights. The shares of FYI Stock
received by the Shareholders as of the Effective Time of the Merger shall not
be registered under the Securities Act of 1933, as amended (the "1933 Act").
2.2 CALCULATION OF FYI SHARES FOR THE COMPANY. All of the Company
Stock shall be converted, as a result of the Merger, into the number of shares
of FYI Stock to be distributed to the Shareholders as set forth in Annex II
attached hereto.
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2.3 EARNINGS TREATMENT. All earnings and cash flow of the Company
for the period from January 1, 1997 (the "Effective Date") through the
Effective Time of the Merger shall be for the benefit of the Surviving
Corporation and shall be acquired by the Surviving Corporation at the Closing
pursuant to the Merger of Newco into the Company.
3. DELIVERY OF SHARES
3.1 DELIVERY PROCEDURE. At or after the Effective Time of the
Merger and at the Closing:
(a) The Shareholders, as the holders of all outstanding
certificates representing shares of the Company Stock, shall, upon
surrender of such certificates, be entitled to receive 27,060 shares
of FYI Stock pursuant to Section 2.2 above less 2,706 shares of FYI
Stock to be retained by FYI and the Surviving Corporation for a period
of one hundred twenty (120) days from the date of the Closing as
security and as an offset for any breach of the representations,
warranties, covenants and agreements of the Company and the
Shareholders, including those warranties set forth in Section 9.7
hereof, and for the Shareholders' indemnification obligations, each as
set forth herein; and
(b) Until the certificates representing the Company Stock
have been surrendered by the Shareholders and replaced by the FYI
Stock, the certificates for the Company Stock shall, for all corporate
purposes be deemed to evidence the ownership of the number of shares
of FYI Stock that such Shareholders are entitled to receive as a
result of the Merger, as set forth in Section 2.2 above,
notwithstanding the number of shares of the Company such certificates
represent.
4. CLOSING
On the Closing Date (as defined below), the parties shall take all
actions necessary (i) to effect the Merger (including, if permitted by
applicable state law, the filing with the appropriate state authorities of the
Certificate of Merger) and (ii) to effect the conversion and delivery of shares
referred to in Section 3 hereof (hereinafter referred to as the "Closing").
The Closing shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇ (A
Professional Corporation), ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
The date on which the Closing shall occur shall be referred to as the "Closing
Date." On the Closing Date, the Certificate of Merger shall be filed with the
appropriate state authorities, or if already filed shall become effective, and
all transactions contemplated by this Agreement, including the conversion and
delivery of shares, shall occur and be deemed to be completed.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS
Each of the Company and the Shareholders, jointly and severally,
represent and warrant that all of the following representations and warranties
with respect to the Company and its business and operations set forth in this
Section 5(A) are true and correct at the time of the Closing.
5.1 AUTHORIZATION. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of
each such party, enforceable in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally, (ii) the
remedy of specific performance and injunctive relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceedings may be brought and (iii) rights to indemnification hereunder may be
limited under applicable securities laws (the "Equitable Exceptions"). The
Company has full corporate power, capacity and authority to execute this
Agreement, the Articles of Merger and all other agreements and documents
contemplated hereby.
5.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF THE COMPANY. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation with all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. The Company is duly qualified or licensed
as a foreign corporation and in good standing in each jurisdiction in which the
character or location of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so duly qualified or licensed would not have a
material adverse effect on the business, operations, properties, assets or
condition (financial or otherwise), results of operations or prospects of the
Company (a "Material Adverse Effect"). Set forth on Schedule 5.2 is a list of
the jurisdictions in which the Company is qualified or licensed to do business
as a foreign corporation. Set forth in Schedule 5.2 is a listing of all names
of all predecessor companies for the past five (5) years of the Company,
including the names of any entities from whom the Company previously acquired
material assets. In addition, set forth on Schedule 5.2 is a complete list of
all the names under which the Company does or has done business. Except as
disclosed in Schedule 5.2, the Company has not been a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
True, complete and correct copies of the Articles of Incorporation of the
Company certified by the Michigan Department of Consumer and Industry Services,
Corporation, Securities and Land Development Bureau as of the date not more
than twenty (20) days prior to the Closing and of the By-laws of the Company
are all attached hereto on Schedule 5.2 (the "Charter Documents"). Except as
set forth on Schedule 5.2 the minute books of the Company, as heretofore made
available to FYI, are correct and complete in all material respects.
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5.3 CAPITAL STOCK OF THE COMPANY.
(a) The Company's authorized capital stock is as set
forth in Section 1.4(a). All of the Company Stock has been validly
issued and is fully paid and nonassessable and no holder thereof is
entitled to any preemptive rights (except any statutory preemptive
rights, which the Shareholders hereby waive). There are no
outstanding conversion or exchange rights, subscriptions, options,
warrants or other arrangements or commitments obligating the Company
to issue any shares of capital stock or other securities or to
purchase, redeem or otherwise acquire any shares of capital stock or
other securities, or to pay any dividend or make any distribution in
respect thereof, except as set forth on Schedule 5.3.
(b) The Shareholders (i) own of record and beneficially
(subject to the community property interest of any Shareholder's
spouse) and have good and marketable title to all of the issued and
outstanding shares of the Company Stock, free and clear of any and all
liens, mortgages, security interests, encumbrances, pledges, charges,
adverse claims, options, rights or restrictions of any character
whatsoever other than standard state and federal securities law
private offering legends and restrictions (collectively, "Liens"), and
(ii) have the right to vote the Company Stock on any matters as to
which any shares of the Company Common Stock are entitled to be voted
under the laws of the state of incorporation of the Company and the
Company's Articles of Incorporation and By-laws, free of any right of
any other person.
5.4 SUBSIDIARIES. The Company does not presently own, of record
or beneficially, or control directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is the Company, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.5 FINANCIAL STATEMENTS.
(a) The Company has previously furnished to FYI and Newco
the unaudited balance sheets of the Company as of December 31, 1996
and as of December 31, 1995, and the related statements of operations,
shareholders' equity and cash flows for the two (2) fiscal years then
ended (collectively, the "Financial Statements"). The Financial
Statements present fairly the financial position and results of
operations of the Company as of the indicated dates and for the
indicated periods. The Company has previously permitted FYI and Newco
full access to papers pertaining to the Financial Statements.
(b) Except to the extent (and not in excess of the
amounts) reflected in the December 31, 1996 balance sheet included in
the Financial Statements or as disclosed on Schedule 5.5, the Company
has no liabilities or obligations (including, without limitation,
Taxes (as defined in Section 5.8) payable and deferred Taxes and
interest
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accrued since December 31, 1996) required to be reflected in the
Financial Statements (or the notes thereto) in accordance with GAAP
other than current liabilities incurred in the ordinary course of
business, consistent with past practice, subsequent to December 31,
1996. The Company has also delivered to FYI on Schedule 5.5, in the
case of those liabilities that are contingent, a reasonable estimate
of the maximum amount that may be payable. For each such contingent
liability, the Company shall provide on Schedule 5.5:
(i) A summary description of the liability
together with the following:
(A) Copies of all relevant documentation
relating thereto;
(B) Amounts claimed and any other action
or relief sought; and
(C) Name of claimant and all other
parties to the claim, suit or proceeding.
(ii) The name of each court or agency before which
such claim, suit or proceeding is pending;
(iii) The date such claim, suit or proceeding was
instituted; and
(iv) A reasonable best estimate by the Company of
the maximum amount, if any, which is likely to become payable
with respect to each such liability. If no estimate is
provided, the Company's best estimate shall for purposes of
this Agreement be deemed to be zero.
5.6 ACCOUNTS AND NOTES RECEIVABLE. Set forth on Schedule 5.6 is
an accurate list of the accounts and notes receivable of the Company, as of
December 31, 1996, and including receivables from and advances to employees and
the Shareholders. The Company shall provide FYI with an aging of all accounts
and notes receivable showing amounts due in 30-day aging categories. Except to
the extent reflected on Schedule 5.6, all such accounts and notes are legal,
valid and binding obligations of the obligors collectible in the amount shown
on Schedule 5.6, net of reserves reflected in such balance sheet.
5.7 PERMITS AND INTANGIBLES. The Company holds all licenses,
franchises, permits and other governmental authorizations, including permits,
titles (including, without limitation, motor vehicle titles and current
registrations), fuel permits, licenses, franchises, certificates, trademarks
trade names, patents, patent applications and copyrights owned or held by the
Company, the absence of any of which would have a Material Adverse Effect (the
"Material Permits"). An accurate list and summary description is set forth on
Schedule 5.7 hereto of all such Material Permits. The Material Permits are
valid, and the Company has not received any notice that any governmental
authority intends to cancel, terminate or not renew any such Material Permits.
The Company has conducted and is conducting its
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business in compliance with the requirements, standards, criteria and
conditions set forth in applicable permits, licenses, orders, approvals,
variances, rules and regulations and is not in violation of any of the
foregoing except where such noncompliance or violation would not have a
Material Adverse Effect. Except as specifically provided on Schedule 5.7, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Material Permits.
5.8 TAX MATTERS.
(a) The Company has filed all income tax returns required
to be filed by the Company and all returns, reports and forms of other
Taxes (as defined below) required to be filed by the Company and has
paid or provided for all Taxes shown to be due on such returns and all
such returns are accurate and correct in all respects. Except as set
forth on Schedule 5.8, (i) no action or proceeding for the assessment
or collection of any Taxes is pending against the Company and no
notice of any claim for Taxes, whether pending or threatened, has been
received; (ii) no deficiency, assessment or other formal claim for any
Taxes has been asserted or made against the Company that has not been
fully paid or finally settled; and (iii) no issue has been formally
raised by any taxing authority in connection with an audit or
examination of any return of Taxes. No federal, state or foreign
income tax returns of the Company have been examined, and there are no
outstanding agreements or waivers extending the applicable statutory
periods of limitation for such Taxes for any period. All Taxes that
the Company has been required to collect or withhold have been duly
withheld or collected and, to the extent required, have been paid to
the proper taxing authority. No Taxes will be assessed on or after
the Closing Date against the Company for any tax period ending on or
prior to the Closing Date other than for Taxes disclosed on Schedule
5.8. For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments including, without
limitation, income, excise, property, withholding, sales and franchise
taxes, imposed by the United States, or any state, county, local or
foreign government or subdivision or agency thereof, and including any
interest, penalties or additions attributable thereto.
(b) The Company is not a party to any Tax allocation or
sharing agreement.
(c) None of the assets of the Company constitutes
tax-exempt bond financed property or tax-exempt use property, within
the meaning of Section 168 of the Code. The Company is not a party to
any "safe harbor lease" that is subject to the provisions of Section
168(f)(8) of the Code as in effect prior to the Tax Reform Act of
1986, or to any "long-term contract" within the meaning of Section 460
of the Code.
(d) At the Closing Date, the Company will hold at least
ninety percent (90%) of the fair market value of its net assets and at
least seventy percent (70%)
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of the fair market value of its gross assets held immediately prior to
the Closing Date. For purposes of making this representation, amounts
paid by the Company to pay reorganization expenses and all redemptions
and distributions in anticipation of or as part of the plan of
reorganization by the Company will be included as assets of the
Company immediately prior to the Effective Time of the Merger.
(e) At the Closing Date, the Company will not have
outstanding any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire stock
in the Company that, if exercised or converted, would affect FYI's
acquisition or retention of ownership of more than eighty percent
(80%) of the total combined voting power of all classes of the Company
Stock and more than eighty percent (80%) of the total number of shares
of each class of Company non-voting stock. The Company has no plan or
intention to issue additional shares of its stock that would result in
FYI losing control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
(f) The Company is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(g) The fair market value of the assets of the Company
exceeds the sum of its liabilities, plus the amount of liabilities, if
any, to which the assets are subject.
(h) The Company is not under jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
(i) The liabilities of the Company to be assumed by the
Surviving Corporation and the liabilities to which the transferred
assets are subject were incurred by the Company in the ordinary course
of its trade or business.
(j) The fair market value of the FYI Stock received by
the Shareholders will be approximately equal to the fair market value
of the Company Stock surrendered in the Merger.
(k) There is no plan or intention by any Shareholder to
sell, exchange, or otherwise dispose of any of the shares of FYI Stock
received by such Shareholder in the Merger as of the Effective Time of
the Merger or otherwise described in Annex II. For purposes of this
representation, shares of the Company Stock exchanged for cash or
other property and shares of the Company Stock exchanged for cash in
lieu of fractional shares of FYI Stock will be treated as outstanding
shares of the Company Stock on the date of the transaction. Moreover,
shares of the Company Stock and shares of FYI stock held by the
Shareholders and otherwise sold, redeemed, or disposed of prior to or
subsequent to the Closing Date will be considered in making this
representation. In addition, there is no plan or intention by any
Shareholder to sell, exchange or otherwise dispose of FYI Stock, if
any, received by such Shareholder pursuant to Section 10.10.
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(l) The Company, the Shareholders, and to the best
knowledge of the Company, FYI and Newco will each pay their respective
expenses, if any, incurred in connection with the Merger.
(m) There is no intercorporate indebtedness existing
between FYI and the Company or between Newco and the Company that was
issued, acquired, or will be settled at a discount.
(n) None of the shares of FYI Stock received by the
Shareholders in the Merger will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to
the Shareholders in their capacities as employees, including but not
limited to amounts paid pursuant to the Employment Agreements
described in Section 7.5 and any options granted to the Shareholders
pursuant to Section 9.4, will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
(o) No stock of Newco will be issued in the transaction.
(p) There are no accounting method changes of the Company
that could give rise to an adjustment under Section 481 of the Code
for periods after the Closing Date.
(q) The Company has qualified as and has properly
reported its operations as an S corporation within the meaning of
Subchapter S of the Code and the corresponding provisions of the laws
of the state in which it is subject to tax since the taxable year
ending December 31, 1989. The Surviving Cooperation will be required
to utilize an accrual method of accounting after the Merger.
(r) The Company is not a "consenting corporation" within
the meaning of Section 341(f)(1) of the Code, or comparable provisions
of any state statutes, and none of the assets of the Company are
subject to an election under Section 341(f) of the Code or comparable
provisions of any state statutes.
(s) Except as set forth on Schedule 5.8(s), the Company
is not a party to any joint venture, partnership or other arrangement
that is treated as a partnership for federal income Tax purposes.
(t) The Company has substantial authority for the
treatment of, or has disclosed (in accordance with Section
6662(d)(2)(B)(ii) of the Code) on its Federal income returns, all
positions taken therein that could give rise to a substantial
understatement of Federal income tax within the meaning of Section
6662(d) of the Code.
(u) There currently are no limitations on the utilization
of the net operating losses, built-in losses, capital losses, Tax
credits or other similar items of the Company (collectively, the "Tax
Losses") under (i) Section 382 of the Code, (ii) Section 383 of
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the Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code,
(v) Section 1.1502-15 and Section 1.1502-15A of the Treasury
regulations, (vi) Section 1.1502-21 and Section 1.1502-21A of the
Treasury regulations or (vii) Sections 1.1502-91 through 1.1502-99 of
the Treasury regulations, in each case as in effect both prior to and
following the Tax Reform Act of 1986, except as may be applicable as a
result of entering into this Agreement or the consummation of the
Merger.
(v) The Company has not been a member of an affiliated
group filing a consolidated federal income Tax return and does not
have any liability for the Taxes of another person (i) under Section
1.1502-6 of the Treasury regulations (or any similar provision of
state, local or foreign law), (ii) as a transferee or successor, (iii)
by contract or (iv) otherwise.
(w) The Company's Tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal
income Tax deductions is accurately reflected on the Company's Tax
books and records.
(x) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code.
(y) At the end of the last taxable year, the Company did
not have aggregate Tax Losses for federal income Tax purposes except
as set forth on Schedule 5.8.
5.9 ASSETS AND PROPERTIES.
(a) REAL PROPERTY. The Company does not own, lease or
hold any interest in real property other than as set forth in Schedule
5.10.
(b) PERSONAL PROPERTY. Except as set forth on Schedule
5.9 and except for inventory and supplies disposed of or consumed, and
accounts receivable collected or written off, and cash utilized, all
in the ordinary course of business consistent with past practice, the
Company owns all of its inventory, equipment and other personal
property (both tangible and intangible) reflected on the latest
balance sheet included in the Financial Statements or acquired since
September 30, 1996, free and clear of any Liens, except for statutory
Liens for current taxes, assessments or governmental charges or levies
on property not yet due and payable.
(c) CONDITION OF PROPERTIES. Except as set forth on
Schedule 5.9, the leasehold estates the subject of the Real Property
Leases (as defined in Section 5.10) and the tangible personal property
owned or leased by the Company are in good operating condition and
repair, ordinary wear and tear excepted; and neither the Company nor
the Shareholders have any knowledge of any condition not disclosed
herein of any such leasehold estate that would materially affect the
fair market value, use or operation of any leasehold estate or
otherwise have a Material Adverse Effect.
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(d) COMPLIANCE. The continued use and occupancy of the
leasehold estates the subject of the Real Property Leases as currently
operated, used and occupied will not violate any zoning, building,
health, flood control, fire or other law, ordinance, order or
regulation or any restrictive covenant that could have a Material
Adverse Effect. There are no violations of any federal, state, county
or municipal law, ordinance, order, regulation or requirement
affecting any portion of the leasehold estates and no written notice
of any such violation has been issued by any governmental authority
that could have a Material Adverse Effect.
5.10 REAL PROPERTY LEASES; OPTIONS. Schedule 5.10 sets forth a
list and copies of (i) all leases and subleases under which the Company is
lessor or lessee or sublessor or sublessee of any real property, together with
all amendments, supplements, nondisturbance agreements, brokerage and
commission agreements and other agreements pertaining thereto ("Real Property
Leases"); (ii) all material options held by the Company or contractual
obligations on the part of the Company to purchase or acquire any interest in
real property; and (iii) all options granted by the Company or contractual
obligations on the part of the Company to sell or dispose of any material
interest in real property. Copies of all Real Property Leases and such options
and contractual obligations have been delivered to FYI and Newco. The Company
has not assigned any Real Property Leases or any such options or obligations.
There are no liens on the interest of the Company in the Real Property Leases,
subject only to (i) Liens for taxes and assessments not yet due and payable and
(ii) those matters set forth on Schedule 5.10. The Real Property Leases and
options and contractual obligations listed on Schedule 5.10 are in full force
and effect and constitute binding obligations of the Company and the other
parties thereto, and (x) there are no defaults thereunder, and (y) no event has
occurred that with notice, lapse of time or both would constitute a default by
the Company or, to the best knowledge of the Company and the Shareholders, by
any other party thereto.
5.11 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) (i) During the occupancy and operation of the
"Subject Property" (as defined below) by the Company and, to the best
knowledge of the Company and the Shareholders, prior to its occupancy
and operation, the operations of the Subject Property, and any use,
storage, treatment, disposal or transportation of "Hazardous
Substances" (as defined below) that has occurred in or on the Subject
Property prior to the date of this Agreement have been in compliance
with "Environmental Requirements" (as defined below); (ii) during the
occupancy and operation of the Subject Property by the Company and, to
the best knowledge of the Company and the Shareholders, prior to its
occupancy or operation, no release, leak, discharge spill, disposal or
emission of Hazardous Substances has occurred in, on or under the
Subject Property in a quantity or manner that violates or requires
further investigation or remediation under Environmental Requirements;
(iii) the Subject Property is free of Hazardous Substances as of the
date of this Agreement, except for the presence of small quantities of
Hazardous Substances utilized by the Company or other tenants of the
Subject Property in the ordinary course of their business; (iv) there
is no pending or threatened litigation or administrative investigation
or
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proceeding concerning the Subject Property involving Hazardous
Substances or Environmental Requirements; (v) there are no
above-ground or underground storage tank systems located at the
Subject Property; (vi) except as set forth on Schedule 5.11, the
Company has never owned, operated, or leased any real property other
than the Subject Property; and (vii) the Company's transportation to
or disposal at any off-site location of any Hazardous Substances from
property now or formerly owned, operated or leased by the Company at
the time of the Company's ownership, operation or lease thereof was
conducted in full compliance with applicable Environmental
Requirements.
(b) DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"Environmental Requirements" means all laws, statutes, rules,
regulations, ordinances, guidance documents, judgments, decrees,
orders, agreements and other restrictions and requirements (whether
now or hereafter in effect) of any governmental authority, including,
without limitation, federal, state and local authorities, relating to
the regulation or protection of human health and safety, natural
resources, conservation the environment, or the storage, treatment,
disposal, transportation, handling or other management of industrial
or solid waste, hazardous waste, hazardous or toxic substances or
chemicals, or pollutants.
"Hazardous Substance" means (i) any "hazardous substance" as
defined in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended from
time to time (42 U.S.C. Sections 9601 et seq.) ("CERCLA"), or any
regulations promulgated thereunder, or the Occupational Safety and
Health Act of 1970, as amended from time to time (29 U.S.C. Sections
651 et seq.) , or any regulations promulgated thereunder; (ii)
petroleum and petroleum by-products; or (iii) any additional
substances or materials that have been or are currently classified or
considered to be pollutants, hazardous or toxic under Environmental
Requirements.
"Subject Property" means all property subject to the Real
Property Leases and any properties listed on Schedule 5.11.
5.12 CONTRACTS.
(a) Set forth on Schedule 5.12(a) is a list of all
material contracts, agreements, arrangements and commitments (whether
oral or written) to which the Company is a party or by which its
assets or business are bound including, without limitation, material
contracts, agreements, arrangements or commitments (the following,
"Contracts") that relate to (i) the sale, lease or other disposition
by the Company of all or any substantial part of its business or
assets (otherwise than in the ordinary course of business), (ii) the
purchase or lease by the Company of a substantial amount of assets
(otherwise than in the ordinary course of business), (iii) the supply
by the Company of any customer's requirements for any item or the
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purchase by the Company of its requirements for any item or of a
vendor's output of any item, (iv) lending or advancing funds by the
Company, (v) borrowing of funds or guaranteeing the borrowing of funds
by any other person, whether under an indenture, note, loan agreement
or otherwise, (vi) any transaction or matter with any affiliate of the
Company, (vii) noncompetition, (viii) licenses and grants to or from
the Company relating to any intangible property listed on Schedule
5.18, (ix) the acquisition by the Company of any operating business or
the capital stock of any person since September 30, 1996, or (x) any
other matter that is material to the business, assets or operations of
the Company.
(b) Except as set forth on Schedule 5.12(b), each
Contract is in full force and effect on the date hereof, the Company
is not in default under any Contract, the Company has not given or
received notice of any default under any Contract, and, to the
knowledge of the Company and the Shareholders, no other party to any
Contract is in default thereunder.
5.13 NO VIOLATIONS. The execution, delivery and performance of
this Agreement and the other agreements and documents contemplated hereby by
the Company and the Shareholders and the consummation of the transactions
contemplated hereby will not (i) violate any provision of any Charter Document,
(ii) violate any statute, rule, regulation, order or decree of any public body
or authority by which the Company or the Shareholders or its or their
respective properties or assets are bound, or (iii) except as set forth in
Schedule 5.15, result in a violation or breach of, or constitute a default
under, or result in the creation of any encumbrance upon, or create any rights
of termination, cancellation or acceleration in any person with respect to any
Contract or any material license, franchise or permit of the Company or any
other agreement, contract, indenture, mortgage or instrument to which the
Company is a party or by which any of its properties or assets is bound.
5.14 GOVERNMENT CONTRACTS. The Company is not now and has not been
a party to any governmental contract.
5.15 CONSENTS. Except as set forth on Schedule 5.15, no consent,
approval or other authorization of any governmental authority or under any
Contract or other agreement or commitment to which the Company or the
Shareholders are parties or by which its or their respective assets are bound
is required as a result of or in connection with the execution or delivery of
this Agreement and the other agreements and documents to be executed by the
Company and the Shareholders or the consummation by the Company and the
Shareholders of the transactions contemplated hereby.
5.16 LITIGATION AND RELATED MATTERS. Set forth on Schedule 5.16 is
a list of all actions, suits, proceedings, investigations or grievances pending
against the Company or, to the best knowledge of the Company and the
Shareholders, threatened against the Company, the business or any property or
rights of the Company, at law or in equity, before or by any arbitration board
or panel, court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
("Agencies"). None of the actions, suits, proceedings or investigations listed
on Schedule 5.16
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23
either (i) results or would, if adversely determined, have a Material Adverse
Effect or (ii) affects or would, if adversely determined, affect the right or
ability of the Company to carry on its business substantially as now conducted.
The Company is not subject to any continuing court or Agency order, writ,
injunction or decree applicable specifically to its business, operations or
assets or its employees, nor in default with respect to any order, writ,
injunction or decree of any court or Agency with respect to its assets,
business, operations or employees. Schedule 5.16 lists (x) all worker's
compensation claims outstanding against the Company as of the date hereof and
(y) all actions, suits or proceedings filed by or against the Company since
September 30, 1996.
5.17 COMPLIANCE WITH LAWS. The Company (a) is in compliance with
all applicable laws, regulations (including federal, state and local
procurement regulations), orders, judgments and decrees except where the
failure to so comply would not have a Material Adverse Effect, and (b)
possesses all Material Permits.
5.18 INTELLECTUAL PROPERTY RIGHTS. Schedule 5.18 lists the
domestic and foreign trade names, trademarks, service marks, trademark
registrations and applications, service ▇▇▇▇ registrations and applications,
patents, patent applications, patent licenses, software licenses and copyright
registrations and applications owned by the Company or used thereby in the
operation of its business (collectively, the "Intellectual Property"), which
Schedule indicates (i) the term and exclusivity of its rights with respect to
the Intellectual Property and (ii) whether each item of Intellectual Property
is owned or licensed by the Company, and if licensed, the licensor and the
license fees therefor. Unless otherwise indicated on Schedule 5.18, the
Company has the right to use and license the Intellectual Property, and the
consummation of the transactions contemplated hereby will not result in the
loss or material impairment of any rights of the Company in the Intellectual
Property. Each item constituting part of the Intellectual Property has been,
to the extent indicated on Schedule 5.18, registered with, filed in or issued
by, as the case may be, the United States Patent and Trademark Office or such
other government entity, domestic or foreign, as is indicated on Schedule 5.18;
all such registrations, filings and issuances remain in full force and effect;
and all fees and other charges with respect thereto are current. Except as
stated on Schedule 5.18, there are no pending proceedings or adverse claims
made or, to the best knowledge of the Company and the Shareholders, threatened
against the Company with respect to the Intellectual Property; there has been
no litigation commenced or threatened in writing within the past five (5) years
with respect to the Intellectual Property or the rights of the Company therein;
and the Company and the Shareholders have no knowledge that (i) the
Intellectual Property or the use thereof by the Company conflicts with any
trade names, trademarks, service marks, trademark or service ▇▇▇▇ registrations
or applications, patents, patent applications, patent licenses or copyright
registrations or applications of others ("Third Party Intellectual Property"),
or (ii) such Third Party Intellectual Property or its use by others or any
other conduct of a third party conflicts with or infringes upon the
Intellectual Property or its use by the Company.
5.19 EMPLOYEE BENEFIT PLANS. Each employee benefit plan within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), maintained or contributed to by the Company or any of its
Group Members (as
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defined below) (collectively, the "Plans") is listed on Schedule 5.19, is in
substantial compliance with applicable law and has been administered and
operated in all material respects in accordance with its terms. Each Plan that
is intended to be "qualified" within the meaning of Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") and no event has occurred and no condition exists that could be
expected to result in the revocation of any such determination. No event that
constitutes a "reportable event" (within the meaning of Section 4043(b) of
ERISA) for which the 30-day notice requirement has not been waived by the
Pension Benefit Guaranty Corporation (the "PBGC") has occurred with respect to
any Plan. Except as set forth on Schedule 5.19, no Plan is subject to Title IV
of ERISA, and neither the Company nor any Group Member has made any
contributions to or participated in any "multiple employer plan" (within the
meaning of the Code or ERISA) or "multi-employer plan" (as defined in Section
4001(a)(3) of ERISA). Full payment has been made of all amounts that the
Company was required under the terms of the Plans to have paid as contributions
to such Plans on or prior to the date hereof (excluding any amounts not yet
due) and all amounts properly accrued to date as liabilities of the Company
that have not been paid have been properly recorded on the Financial
Statements, and no Plan that is subject to Part 3 of Subtitle B of Title 1 of
ERISA has incurred any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived. The
Company and, to the knowledge of the Company and the Shareholders, no other
"disqualified person" or "party in interest" (within the meaning of Section
4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in
any transactions in connection with any Plan that could be expected to result
in the imposition of a material penalty pursuant to Section 502(i) of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975(a)
of the Code. No material claim, action, proceeding, or litigation has been
made, commenced or, to the knowledge of the Company and the Shareholders,
threatened with respect to any Plan (other than for benefits payable in the
ordinary course and PBGC insurance premiums). No Plan or related trust owns
any securities in violation of Section 407 of ERISA. Neither the Company nor
any Group Member has incurred any liability or taken any action, or has any
knowledge of any action or event, that could cause it to incur any liability
(i) under Section 412 of the Code or Title IV of ERISA with respect to any
"single employer plan" (within the meaning of Section 4001(a)(15) of ERISA),
(ii) on account of a partial or complete withdrawal (within the meaning of
Section 4205 and 4203 of ERISA, respectively) with respect to any
"multi-employer plan" (within the meaning of Section 3(37) of ERISA), (iii) on
account of unpaid contributions to any such multi-employer plan, or (iv) to
provide health benefits or other non-pension benefits to retired or former
employees, except as specifically required by Section 4980B(f) of the Code.
Except as set forth on Schedule 5.19, neither the execution and delivery of
this Agreement by the Company or the consummation of the transactions
contemplated hereby will (i) entitle any current or former employee of the
Company to severance pay, unemployment compensation or any similar payment,
(ii) accelerate the time of payment or vesting, or increase the amount of, any
compensation due to any such employee or former employee, or (iii) directly or
indirectly result in any payment made or to be made to or on behalf of any
person to constitute a "parachute payment" (within the meaning of Section 280G
of the Code). For purposes of this Agreement, "Group Member" shall mean any
member of any "affiliated service group" as defined in Section 414(m) of the
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Code that includes the Company, any member of any "controlled group of
corporations" as defined in Section 1563 of the Code that includes the Company
or any member of any group of "trades or businesses under common control" as
defined by Section 414(c) of the Code that includes the Company.
5.20 EMPLOYEES; EMPLOYEE RELATIONS.
(a) Schedule 5.20 sets forth (i) the name and current
annual salary (or rate of pay) and other compensation (including,
without limitation, normal bonus, profit-sharing and other
compensation) now payable by the Company to each employee whose
current total annual compensation or estimated compensation is $30,000
or more, (ii) any increase to become effective after the date of this
Agreement in the total compensation or rate of total compensation
payable by the Company to each such person, (iii) any increase to
become payable after the date of this Agreement by the Company to
employees other than those specified in clause (i) of this Section
5.20(a), (iv) all presently outstanding loans and advances (other than
routine travel advances to be repaid or formally accounted for within
sixty (60) days) made by the Company to, or made to the Company by,
any director, officer or employee, (v) all other transactions between
the Company and any director, officer or employee thereof since
December 31, 1996, and (vi) except for accruals in the ordinary course
consistent with past practice, all accrued but unpaid vacation pay
owing to any officer or employee that is not disclosed on the
Financial Statements.
(b) Except as disclosed on Schedule 5.20, the Company is
not a party to, or bound by, the terms of any collective bargaining
agreement, and the Company has not experienced any material labor
difficulties during the last five (5) years. Except as set forth on
Schedule 5.20, there are no labor disputes existing, or to the best
knowledge of the Company and the Shareholders, threatened involving,
by way of example, strikes, work stoppages, slowdowns, picketing, or
any other interference with work or production, or any other concerted
action by employees. No charges or proceedings before the National
Labor Relations Board, or similar agency, exist, or to the best
knowledge of the Company and the Shareholders, are threatened.
(c) The relationships enjoyed by the Company with its
employees are good and the Company and the Shareholders have no
knowledge of any facts that would indicate that the employees of the
Company will not continue in the employ thereof following the Closing
on a basis similar to that existing on the date of this Agreement.
Since September 30, 1996, the Company has not experienced any
difficulties in obtaining any qualified personnel necessary for the
operations of its business and, to the best knowledge of the Company
and the Shareholders, no such shortage of qualified personnel is
threatened or pending. Except as disclosed on Schedule 5.20, the
Company is not a party to any employment contract with any individual
or employee, either express or implied. No legal proceedings,
charges, complaints or similar actions exist under any federal, state
or local laws affecting the employment relationship including, but not
limited to: (i) anti-discrimination statutes such as Title VII of the
Civil Rights Act of 1964, as amended (or similar state or local laws
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prohibiting discrimination because of race, sex, religion, national
origin, age and the like), including without limitation the
▇▇▇▇▇▇-▇▇▇▇▇▇ Civil Rights Act, MCL Section 37.2101 et seq., as
amended, and the Handicappers' Civil Rights Act, MCL Section 37.1101
et seq., as amended; (ii) the Fair Labor Standards Act or other
federal, state or local laws regulating hours of work, wages, overtime
and other working conditions; (iii) requirements imposed by federal,
state or local governmental contracts such as those imposed by
Executive Order 11246; (iv) state laws with respect to tortious
employment conduct, such as slander, false light, invasion of privacy,
negligent hiring or retention, intentional infliction of emotional
distress, assault and battery, sexual harassment or loss of
consortium; or (v) the Occupational Safety and Health Act, as amended,
as well as any similar state laws, or other regulations respecting
safety in the workplace; and to the best knowledge of the Company and
the Shareholders, no proceedings, charges, or complaints are
threatened under any such laws or regulations and no facts or
circumstances exist that would give rise to any such proceedings,
charges, complaints, or claims, whether valid or not. The Company has
complied with all applicable provisions of the ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇
Employee Right to Know Act, MCL Section 423.501 et seq., as amended.
The Company is not subject to any settlement or consent decree with
any present or former employee, employee representative or any
government or Agency relating to claims of discrimination or other
claims in respect to employment practices and policies; and no
government or Agency has issued a judgment, order, decree or finding
with respect to the labor and employment practices (including
practices relating to discrimination) of the Company. Since December
31, 1994 the Company has not incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act or similar
state laws; and the Company has not laid off more than ten percent
(10%) of its employees at any single site of employment in any ninety
(90) day period during the twelve (12) month period ending December
31, 1996.
(d) The Company is in compliance in all material respects
with the provisions of the Americans with Disabilities Act.
5.21 INSURANCE. Schedule 5.21 contains an accurate list of the
policies and contracts (including insurer, named insured, type of coverage,
limits of insurance, required deductibles or co-payments, annual premiums and
expiration date) for fire, casualty, liability and other forms of insurance
maintained by, or for the benefit of, the Company. All such policies are in
full force and effect and shall remain in full force and effect through the
Closing Date and are adequate for the business engaged in by the Company.
Neither the Company nor the Shareholders have received any notice of
cancellation or non-renewal or of significant premium increases with respect to
any such policy. Except as disclosed on Schedule 5.21, no pending claims made
by or on behalf of the Company under such policies have been denied or are
being defended against third parties under a reservation of rights by an
insurer thereof. All premiums due prior to the date hereof for periods prior
to the date hereof with respect to such policies have been timely paid.
5.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as set forth
on Schedule 5.22, no shareholder, officer, director or affiliate of the Company
possesses, directly or indirectly,
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27
any financial interest in, or is a director, officer, employee or affiliate of,
any corporation, firm, association or business organization that is a client,
supplier, customer, lessor, lessee or competitor of the Company. Ownership of
securities of a corporation whose securities are registered under the
Securities Exchange Act of 1934 not in excess of five percent (5%) of any class
of such securities shall not be deemed to be a financial interest for purposes
of this Section 5.22.
5.23 BUSINESS RELATIONS. Schedule 5.23 contains an accurate list
of all significant customers of the Company (i.e., those customers representing
five percent (5%) or more of the Company's revenues for the twelve (12) months
ended December 31, 1996). Except as set forth on Schedule 5.23, to the best
knowledge of the Company and the Shareholders, no customer or supplier of the
Company has or will cease to do business therewith after the consummation of
the transactions contemplated hereby, which cessation would have a Material
Adverse Effect; provided, however, that there can be no assurance that any
customer of the Company will not cease to do business with the Company
following the termination of its agreement with the Company or that one or more
partnerships controlled by any customer for whom the Company performs services
may not liquidate in the future. To the best knowledge of the Company and the
Shareholders, except as set forth on Schedule 5.23, no customer of the Company
that represents one percent (1%) or more of the Company's revenues for the most
recent twelve (12) month period or $50,000 or more in revenues of the Company,
whichever is less, is currently intending not to renew its contract with the
Company on substantially the same terms and conditions. Except as set forth on
Schedule 5.23, since December 31, 1996, the Company has not experienced any
difficulties in obtaining any inventory items necessary to the operation of its
business, and, to the best knowledge of the Company and the Shareholders, no
such shortage of supply of inventory items is threatened or pending. Except as
set forth on Schedule 5.23, the Company is not required to provide any bonding
or other financial security arrangements in any material amount in connection
with any transactions with any of its customers or suppliers.
5.24 OFFICERS AND DIRECTORS. Set forth on Schedule 5.24 is a list
of the current officers and directors of the Company.
5.25 BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 5.25 sets
forth each bank, savings institution and other financial institution with which
the Company has an account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto. Each person holding a
power of attorney or similar grant of authority on behalf of the Company is
identified on Schedule 5.25. Except as disclosed on such Schedule, the Company
has not given any revocable or irrevocable powers of attorney to any person,
firm, corporation or organization relating to its business for any purpose
whatsoever.
5.26 POOLING-OF-INTERESTS ACCOUNTING. Within the past two (2)
years, the Company has not been a subsidiary or division of another corporation
or a part of an acquisition that was later rescinded, and there has not been
any sale or spin-off of a significant amount of assets of the Company or any
affiliate of the Company other than in the ordinary course of business. The
Company owns no capital stock of FYI or Newco. Except as set forth on
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Schedule 5.26, the Company has not acquired any of its capital stock during the
past two (2) years; and the Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any shares of the Company Stock or any
interest therein or to pay any dividend or make any distribution in respect
thereof. Neither the voting stock structure of the Company nor the relative
ownership of shares among the Shareholders has been altered or changed within
the last two (2) years in contemplation of the Merger. Schedule 5.26 sets
forth a listing of all of the names of all predecessor companies of the
Company, including without limitation the names of any entities from whom the
Company has acquired material assets. Except as set forth on Schedule 5.26,
none of the shares of the Company Stock were issued pursuant to awards, grants
or bonuses. If required, the Shareholders and the President of the Company
will execute any documentation reasonably required by FYI's independent public
accountants to enable FYI to account for the Merger as a pooling-of-interests;
provided, however, that neither the Company nor the Shareholders will be
required to execute any such documentation to the extent it may adversely
affect the qualification of the Merger as a tax-free reorganization for federal
income tax purposes.
5.27 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 5.27 or as otherwise contemplated by this Agreement, since December
31, 1996, there has not been (a) any damage, destruction or casualty loss to
the physical properties of the Company (whether or not covered by insurance),
(b) any event or circumstance that would have a Material Adverse Effect, (c)
any entry into any transaction, commitment or agreement (including, without
limitation, any borrowing) material to the Company, except transactions,
commitments or agreements in the ordinary course of business consistent with
past practice, (d) any declaration, setting aside or payment of any dividend or
other distribution in cash, stock or property with respect to the capital stock
or other securities of the Company, any repurchase, redemption or other
acquisition by the Company of any capital stock or other securities, or any
agreement, arrangement or commitment by the Company to do so, (e) any increase
that is material in the compensation payable or to become payable by the
Company to its directors, officers, employee or agents or any increase in the
rate or terms of any bonus, pension or other employee benefit plan, payment or
arrangement made to, for or with any such directors, officers, employees or
agents, except as set forth on Schedule 5.27, (f) any sale, transfer or other
disposition of, or the creation of any Lien upon, any part of the assets of the
Company, tangible or intangible, except for sales of inventory and use of
supplies and collections of accounts receivables in the ordinary course of
business consistent with past practice, or any cancellation or forgiveness of
any debts or claims by the Company, (g) any change in the relations of the
Company with or loss of its customers or suppliers, of any loss of business or
increase in the cost of inventory items or change in the terms offered to
customers, which would have a Material Adverse Effect, or (h) any capital
expenditure (including any capital leases) or commitment therefor by the
Company in excess of $10,000.
5.28 CONTINUITY OF BUSINESS ENTERPRISE. The Company operates at
least one significant historic business line, or owns at least a significant
portion of its historic business assets, in each case within the meaning of
Treasury regulations Section 1.368-1(d).
5.29 SPIN-OFF BY THE COMPANY. There has not been any sale or
spin-off of material assets of either the Company, any other person or entity
that directly, or indirectly through
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29
one or more intermediates, controls, is controlled by or is under common
control with the Company, within the two (2) years prior to the date of this
Agreement.
5.30 POOLING LETTER. At FYI's expense, the Company and the
Shareholders have delivered to FYI and Newco and to Godfrey, Hammel, Danneels,
Certified Public Accountants (the "Company's Accountant") a pooling
representation letter substantially in the form set forth as Schedule 5.30.
The Company has received a letter from the Company's Accountant stating its
concurrence as to the appropriateness of the Company qualifying for pooling of
interests accounting treatment in accordance with GAAP and has delivered a copy
of that letter to FYI and Newco.
5.31 DISCLOSURE. All written agreements, lists, schedules,
instruments, exhibits, documents, certificates, reports, statements and other
writings furnished to FYI or Newco pursuant hereto or in connection with this
Agreement or the transactions contemplated hereby are and will be complete and
accurate in all material respects. No representation or warranty by the
Shareholders and the Company contained in this Agreement, in the schedules
attached hereto or in any certificate furnished or to be furnished by the
Shareholders or the Company to FYI or Newco in connection herewith or pursuant
hereto contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary in order to make any
statement contained herein or therein not misleading. There is no fact known
to any Shareholder that has specific application to such Shareholder or the
Company (other than general economic or industry conditions) that has a
Material Adverse Effect or, as far as such Shareholder can reasonably foresee,
could have a Material Adverse Effect, that has not been set forth in this
Agreement or any schedule hereto.
5.32 PROSPECTUS: SECURITIES REPRESENTATIONS. Each Shareholder has
received and reviewed a copy of the prospectus dated February 21, 1997,
including all supplements thereto (as supplemented, the "Shelf Prospectus")
contained in FYI's shelf registration statement on Form S-1. Each Shareholder
(a) has such knowledge, sophistication and experience in business and financial
matters that he is capable of evaluating the merits and risks of an investment
in the shares of FYI Stock, (b) fully understands the nature, scope and
duration of the limitations on transfer contained herein, in the Affiliate
Agreement and under applicable laws, and (c) can bear the economic risk of any
investment in the shares of FYI Stock and can afford a complete loss of such
investment. Each Shareholder has had an adequate opportunity to ask questions
and receive answers (and has asked such questions and received answers to his
satisfaction) from the officers of FYI concerning the business, operations and
financial condition of FYI. None of the Shareholders has any contract,
undertaking, agreement or arrangement, written or oral, with any other person
to sell, transfer or grant participation in any shares of FYI Stock to be
acquired by such Shareholder in the Merger.
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(B) REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each Shareholder severally represents and warrants that the
representations and warranties in this Section 5(B) as they apply to him are
true and correct as of the date of this Agreement and at the time of the
Closing.
5.33 AUTHORITY; OWNERSHIP. The Shareholder has the full legal
right, power and authority to enter into this Agreement. The Shareholder owns
beneficially (subject to any community property interest of his spouse) and of
record the shares of the Company Stock set forth opposite such Shareholder's
name on Annex I and such shares of the Company Stock, together with the other
shares of the Company Stock set forth on Annex I, constitutes all of the
outstanding shares of capital stock of the Company, and, except as set forth on
Schedule 5.33 hereof, such shares of the Company Stock owned by the Shareholder
are owned free and clear of all Liens other than standard state and federal
securities laws private offering restrictions. The Shareholder has owned the
Company Stock since the date set forth on Annex I.
5.34 PREEMPTIVE RIGHTS. The Shareholder does not have, or hereby
waives, any preemptive or other right to acquire shares of the Company Stock or
FYI Stock that the Shareholder has or may have had other than rights of the
Shareholder to acquire FYI Stock pursuant to (i) this Agreement or (ii) any
option granted by FYI.
5.35 NO INTENTION TO DISPOSE OF FYI STOCK. Each Shareholder
represents that there is no current plan or intention by such Shareholder to
sell, exchange or otherwise dispose of any of the shares of FYI Stock received
by such Shareholder in the Merger as of the Effective Time of the Merger.
Shares of the Company Stock and shares of FYI Stock held by the Shareholder and
otherwise sold, redeemed, or disposed of prior to or subsequent to the Closing
Date will be considered in making this representation. In addition, each
Shareholder represents that there is not any current plan or intention by such
Shareholder to sell, exchange or otherwise dispose of FYI Stock, if any,
received by such Shareholder pursuant to Section 10.10.
5.36 AFFILIATES. The Shareholders are the only persons who are
affiliates of the Company within the meaning of Rule 145 (each such person, an
"Affiliate") promulgated under the 1933 Act.
5.37 VALIDITY OF OBLIGATIONS. This Agreement, the Employment
Agreement, the Noncompetition Agreement and the Affiliate Agreement have each
been duly executed and delivered and are the legal, valid and binding
obligations of the Shareholder that is a party thereto in accordance with their
respective terms.
5.38 PAYMENTS. All amounts paid by the Company to the Shareholders
pursuant to Section 9.1 represents reasonable compensation for services
performed by the Shareholders for the Company.
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5.39 ABSENCE OF CLAIMS AGAINST THE COMPANY. The Shareholder does
not have any claims against the Company.
6. REPRESENTATIONS OF FYI AND NEWCO
FYI and Newco severally and jointly represent and warrant that all of
the following representations and warranties in this Section 6 are true and
correct at the time of the Closing.
6.1 DUE ORGANIZATION. Each of FYI and Newco is duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly authorized and qualified under all applicable laws, regulations,
and ordinances of public authorities to carry on its businesses in the places
and in the manner as now conducted except for where the failure to be so
authorized or qualified would not have a material adverse effect on its
business, operations, affairs, properties, assets or condition (financial or
otherwise).
6.2 FYI STOCK. The FYI Stock to be delivered to the Shareholders
at the Closing Date shall constitute valid and legally issued shares of FYI,
fully paid and nonassessable, and except as set forth in this Agreement, (a)
will be owned free and clear of all Liens created by FYI, and (b) will be
legally equivalent in all respects to the FYI Stock issued and outstanding as
of the date hereof.
6.3 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement, the Employment Agreements, the Noncompetition Agreements and the
Affiliate Agreements by FYI and Newco and the performance by each of FYI and
Newco of the transactions contemplated herein or therein have been duly and
validly authorized by the respective Boards of Directors of FYI and Newco to
the extent that it is a party thereto, and this Agreement, the Employment
Agreements, the Noncompetition Agreements and the Affiliate Agreements have
each been duly and validly authorized by all necessary corporate action, duly
executed and delivered and are the legal, valid and binding obligations of each
of FYI and Newco to the extent that it is a party thereto, enforceable against
such party thereto in accordance with their respective terms, subject to the
Equitable Exceptions.
6.4 AUTHORIZATION. The representatives of FYI and Newco executing
this Agreement have the corporate authority to enter into and bind FYI and
Newco to the terms of this Agreement. FYI and Newco have the full legal right,
power and authority to enter into this Agreement and the Merger.
6.5 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(a) Conflict with, or result in a breach or violation of
Certificate of Incorporation or By-laws of either FYI or Newco;
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(b) Materially conflict with, or result in a material
default (or would constitute a default but for any requirement of
notice or lapse of time or both) under any document, agreement or
other instrument to which either FYI or Newco is a party, or violate
or result in the creation or imposition of any lien, charge or
encumbrance on any of FYI's or Newco's properties pursuant to (i) any
law or regulation to which either FYI or Newco or any of their
respective property is subject, or (ii) any judgment, order or decree
to which FYI or Newco is bound or any of their respective property is
subject; or
(c) Result in termination or any impairment of any
material permit, license, franchise, contractual right or other
authorization of FYI or Newco.
6.6 CAPITALIZATION OF FYI AND OWNERSHIP OF FYI STOCK. The
authorized and outstanding capital stock of FYI and Newco is as set forth in
Sections 1.4(b) and 1.4(c) respectively. All issued and outstanding shares of
FYI stock are duly authorized, validly issued, fully paid and nonassessable.
There are no obligations of FYI to repurchase, redeem or otherwise acquire any
shares of FYI capital stock. All of the shares of FYI Stock to be issued to
the Shareholders in accordance herewith will be duly authorized, validly
issued, fully paid and nonassessable.
6.7 TRANSACTIONS IN CAPITAL STOCK. There has been no transaction
or action taken with respect to the equity ownership of FYI or Newco in
contemplation of the transactions described in this Agreement that would
prevent FYI from accounting for such transactions on a reorganization
accounting basis.
6.8 SUBSIDIARIES. Set forth on Schedule 6.8 hereto is a list of
the subsidiaries of FYI (each an "FYI Subsidiary" and collectively the "FYI
Subsidiaries"). Newco has no subsidiaries.
6.9 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS; FINANCIAL
INFORMATION. FYI has provided to the Company and the Shareholders FYI's
audited financial statements for the year ended December 31, 1996 as filed with
the Securities and Exchange Commission. Such FYI financial statements have
been prepared in accordance with GAAP and present fairly the financial position
of FYI as of the indicated dates and for the indicated periods. FYI has
provided the Company and the Shareholders with true, complete and correct
copies of (i) its Post-Effective Amendment No. 3 to its Registration Statement
on Form S-1 (Registration No. 333-1084) and Supplement to the Prospectus as
filed with the Securities and Exchange Commission on December 13, 1996, as
supplemented February 21, 1997, and of all supplements or amendments thereto
and (ii) its Registration Statement on Form S-1 (Registration No. 333-16057)
and Prospectus as filed with the Securities and Exchange Commission on December
12, 1996 and of all amendments thereto. Newco was formed on March 4, 1997, and
has no historical financial statements or information.
6.10 CONFORMITY WITH LAW AND LITIGATION. Neither FYI nor Newco is
in violation of any law or regulation or any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having
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jurisdiction over either of them that would have a material adverse effect on
the business, operations, affairs, properties, assets or condition (financial
or otherwise) of FYI and the FYI Subsidiaries taken as a whole (an "FYI
Material Adverse Effect"). Except as set forth on Schedule 6.10, there are no
claims, actions, suits or proceedings, pending or, to the knowledge of FYI or
Newco, threatened, against or affecting FYI or Newco, at law or in equity, or
before or by any Agency having jurisdiction over either of them and no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received, in each event that would have an FYI Material Adverse Effect.
FYI (including the FYI Subsidiaries) has conducted and is conducting its
business in compliance with the requirements, standards, criteria and
conditions set forth in applicable Federal, state and local statutes,
ordinances, orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing that would have an FYI Material Adverse
Effect.
6.11 NO VIOLATIONS. Copies of the Certificate of Incorporation (as
of the date hereof, certified by the Secretary or an Assistant Secretary of
each of FYI and Newco and by the Secretary of State of the State of Delaware)
and the By-laws (certified by the Secretary or an Assistant Secretary of each
of FYI and Newco), of FYI and Newco (the "FYI Charter Documents") have been
provided herewith as Annex III; neither FYI nor Newco is (a) in violation of
any FYI Charter Document or (b) in default, under any lease, instrument,
agreement, license, permit to which it is a party or by which its properties
are bound (the "FYI Material Documents") that would have an FYI Material
Adverse Effect; and, (i) the rights and benefits of FYI (including the FYI
Subsidiaries) under the FYI Material Documents will not be materially and
adversely affected by the transactions contemplated hereby and (ii) the
execution of this Agreement and the performance of the obligations hereunder
and the consummation of the transactions contemplated hereby will not result in
any material violation or breach or constitute a default under, any of the
terms or provisions of the FYI Material Documents or the FYI Charter Documents.
Except as set forth on Schedule 6.11, none of the FYI Material Documents
requires notice to, or the consent or approval of, any Agency or other third
party to any of the transactions contemplated hereby to remain in full force
and effect or give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit. The minute books of FYI and of
each FYI Subsidiary as heretofore made available to the Company are true and
correct.
6.12 TAXES.
(a) The fair market value of the FYI Stock received by
the Shareholders will be approximately equal to the aggregate fair
market value of the Company Stock surrendered in the Merger.
(b) Prior to the Merger, FYI will own all of the
outstanding stock of Newco. At all times prior to the Merger, no
person other than FYI has owned, or will own, any of the outstanding
stock of Newco.
(c) (i) Newco was formed by FYI solely for the
purpose of engaging in the transaction contemplated by the Agreement.
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(ii) There were not as of the date of the
Agreement and there will not be at the Closing Date, any
outstanding or authorized options, warrants, convertible
securities, calls, rights, commitments or any other agreements
of any character which Newco is a party to, or may be bound
by, requiring it to issue, transfer, sell, purchase, redeem or
acquire any shares of its capital stock or any securities or
rights convertible, into, exchangeable for, evidencing the
right to subscribe for or acquire, any shares of its capital
stock.
(iii) As of the date of this Agreement and the
Closing Date, except for obligations or liabilities incurred
in connection with (A) its incorporation or organization and
(B) the transactions contemplated thereby and in the
Agreement, Newco has not and will not have incurred, directly
or indirectly through any subsidiary, any obligations or
liabilities or engaged in any business or activities of any
type or kind whatsoever or entered into any agreement or
arrangements with any person or entity.
(iv) Prior to the Closing Date, Newco did not own
any asset other than an amount of cash necessary to
incorporate Newco and to pay the expenses of the Merger
attributable to Newco and such assets as were necessary to
perform its obligations under this Agreement.
(v) FYI has no plan or intention to cause the
Surviving Corporation to issue additional shares of its stock
that would result in FYI losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code.
(d) FYI has no plan or intention to reacquire any of its
stock issued in the Merger.
(e) FYI has no plan or intention to liquidate Newco or
merge Newco with or into another corporation (other than as described
in this Agreement); sell or otherwise dispose of the stock of Newco;
or cause Newco or any of its subsidiaries to sell or otherwise dispose
of any of its assets or of any of the assets acquired from the
Company, other than as contemplated by this Agreement, directly or
indirectly, except for (i) dispositions made in the ordinary course of
business, (ii) transfers of assets to a corporation all of whose
outstanding stock is owned directly by Newco or (iii) transfers of
assets by direct or indirect wholly-owned subsidiaries of Newco to
other direct or indirect wholly-owned subsidiaries of Newco.
(f) Assuming the correctness of the representation in
Section 5.8(i), any liabilities of Newco assumed by the Company, and
any liabilities to which the transferred assets of Newco are subject,
were incurred by Newco in the ordinary course of business.
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(g) FYI, Newco, and to the best knowledge of FYI, the
Company and the Shareholders will each pay their respective expenses,
if any, incurred in connection with the Merger.
(h) There is no intercorporate indebtedness existing
between FYI and the Company or between Newco and the Company that was
issued, acquired, or will be settled at a discount.
(i) Neither FYI nor Newco is an investment company as
defined in section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) None of the compensation received by any
shareholder-employee of the Company after the Merger will be separate
consideration for, or allocable to, any of their shares of the
Company; none of the shares of FYI Stock received by any
shareholder-employee in the Merger will be separate consideration for,
or allocable to, any employment agreement; and the compensation paid
to any shareholder-employee after the Merger pursuant to arrangements
entered into after the Merger will be for services actually rendered
and will be commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
(k) The proposed Merger is effected through the laws of
the United States, or a State or the District of Columbia.
(l) The proposed Merger is being undertaken for reasons
germane to the business of FYI and Newco.
(m) Assuming the correctness of the representation in
Section 5.8(d), FYI has no plan or intention to cause the Surviving
Corporation immediately after the Closing Date to hold less than
ninety percent (90%) of the fair market value of its net assets and
seventy percent (70%) of the fair market value of the gross assets of
the Company immediately prior to the Closing Date, with such amount
determined based on the same methodology described in Section 5.8(d).
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS AND THE
COMPANY
The obligations of the Shareholders and of the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions,
except that no such waiver shall be deemed to affect the survival of the
representations and warranties of FYI and Newco contained in Section 6 hereof.
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All of the representations and warranties of FYI and Newco contained in this
Agreement shall be true and correct as of the Closing Date; and each and all of
the terms, covenants and conditions
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of this Agreement to be complied with and performed by FYI and Newco on or
before the Closing Date shall have been duly complied with and performed.
7.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and all
other related legal matters shall be reasonably satisfactory to each of the
Company and the Shareholders and their respective counsel.
7.3 NO LITIGATION. No action or proceeding before a court or any
other Agency shall have been instituted or threatened to restrain or prohibit
the merger of Newco with and into the Company and no Agency shall have taken
any other action or made any request of the Company as a result of which the
management of the Company reasonably deems it inadvisable to proceed with the
transactions hereunder.
7.4 OPINION OF COUNSEL. The Company and the Shareholders shall
have received an opinion from ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇ (A Professional
Corporation), counsel for FYI, dated the Closing Date, in the form annexed
hereto as Annex IV.
7.5 CONSENTS AND APPROVALS. All necessary consents of and filings
with any Agency relating to the consummation of the transactions contemplated
herein shall have been obtained and made and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the Merger and no Agency
shall have taken any other action or made any request of the Company as a
result of which the Company deems it inadvisable to proceed with the
transactions hereunder.
7.6 GOOD STANDING CERTIFICATES. FYI and Newco each shall have
delivered to the Company a certificate, dated as of a date not more than twenty
(20) days prior to the Closing Date, duly issued by the Delaware Secretary of
State and in each state in which FYI or Newco is authorized to do business,
showing that each of FYI and Newco is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
FYI and Newco, respectively, for all periods prior to the Closing have been
filed and paid.
7.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall
have occurred that would constitute an FYI Material Adverse Effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF FYI AND NEWCO
The obligations of FYI and Newco with respect to actions to be taken
on the Closing Date are subject to the satisfaction or waiver on or prior to
the Closing Date of all of the following conditions, except that no such waiver
shall be deemed to affect the survival of the representations and warranties of
the Company and the Shareholders contained in Section 5 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All of the representations and warranties of the Shareholders and the Company
contained in this Agreement shall be true and correct as of the Closing Date;
and each and all of the terms,
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covenants and conditions of this Agreement to be complied with and performed by
the Shareholders and the Company on or before the Closing Date shall have been
duly complied with and performed.
8.2 SATISFACTION. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and all
other related legal matters shall be reasonably satisfactory to each of FYI and
Newco and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any
other Agency shall have been instituted or threatened to restrain or prohibit
the merger of Newco with and into the Company and no Agency shall have taken
any other action or made any request of FYI as a result of which the management
of FYI or Newco reasonably deems it inadvisable to proceed with the
transactions hereunder.
8.4 EXAMINATION OF FINAL FINANCIAL STATEMENTS. Prior to the
Closing Date, FYI shall have had sufficient time to review the unaudited
balance sheets of the Company for the fiscal month ended January 31, 1997, and
the unaudited statements of income, cash flows and retained earnings of the
Company for the fiscal month ended January 31, 1997, disclosing no material
adverse change in the financial condition thereof or the results of its
operations from the financial statements as of December 31, 1996.
8.5 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the
Shareholders shall have repaid the Company in full all amounts owing by the
Shareholders to the Company.
8.6 INSURANCE. FYI shall be named as an additional named insured
on all of the insurance policies of the Company.
8.7 SHAREHOLDER RELEASES. Each of the Shareholders shall have
delivered to FYI immediately prior to the Closing Date an instrument dated the
Closing Date in substantially the form of Annex V releasing the Company from
any and all claims of the Shareholder against the Company and obligations of
the Company to the Shareholder, except for items specifically identified on
Schedule 8.7 as being claims of or obligations to the Shareholder and
continuing obligations to Shareholder relating to his employment by the
Surviving Corporation.
8.8 TERMINATION OF RELATED PARTY AGREEMENTS. All existing
agreements between the Company and the Shareholders or business or personal
affiliates of the Company or the Shareholders and all existing bonus and
incentive plans and arrangements of the Company, other than those set forth on
Schedule 8.8, shall have been cancelled or terminated.
8.9 OPINION OF COUNSEL. FYI shall have received an opinion from
▇▇▇▇▇▇▇ Trogan Young and Schloss, P.C., counsel to the Company and the
Shareholders, dated the Closing Date, in the form annexed hereto as Annex VI.
8.10 NONCOMPETITION AGREEMENTS. Each of the Shareholders shall
have executed and delivered to FYI and Newco a Noncompetition Agreement with
FYI and Newco in substantially the forms attached hereto as Annex VII (the
"Noncompetition Agreements").
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8.11 AFFILIATE AGREEMENTS. Each of the Shareholders shall have
executed and delivered to FYI and Newco an Affiliate Agreement in substantially
the form annexed hereto as Annex VIII (the "Affiliate Agreement") with respect
to the shares of FYI Stock to be acquired thereby pursuant to Section 2 hereof
containing the Shareholder's undertakings as set forth in Section 9.10 hereof.
FYI and Newco shall be entitled to place appropriate legends on the
certificates evidencing any FYI Stock to be received by such Shareholders as
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the FYI Stock, consistent
with the terms of this Agreement and the Affiliate Agreements.
8.12 CLOSING UNDER RELATED AGREEMENT. Simultaneous with the
Closing, the transactions under that certain Agreement and Plan of
Reorganization by and among FYI, Mavricc Acquisition Corp., MAVRICC Management
Systems, Inc. and the Shareholders named therein (the "MAVRICC Agreement")
shall have been consummated, including without limitation the merger of Mavricc
Acquisition Corp. with and into MAVRICC Management Systems, Inc.
8.13 BROKER RELEASE. Simultaneous with the Closing, each broker or
agent identified on Schedule 11.6 shall have executed and delivered to FYI and
Newco an instrument dated the Closing Date in substantially the form set forth
on such Schedule 11.6 or in such other form as shall be reasonably satisfactory
to FYI and Newco releasing the Company, FYI and Newco from any and all claims
of such broker or agent with respect to fees, commissions and other amounts and
expenses thereof that may be payable thereto in connection with the
transactions set forth in this Agreement.
8.14 CONSENTS AND APPROVALS. All necessary consents of and filings
with any Agency or any third party relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no
action or proceeding shall have been instituted or threatened to restrain or
prohibit the Merger and no Agency shall have taken any other action or made any
request of FYI or Newco as a result of which either FYI or Newco deems it
inadvisable to proceed with the transactions hereunder.
8.15 RELEASE OF FINANCING STATEMENTS. The Company shall have
obtained and prepared for filing in the appropriate jurisdictions Termination
Statements properly executed by any parties holding a security interest or
other Encumbrance with respect to the Company, the Company Stock or the assets
of the Company as identified by lien searches conducted with respect to the
Company.
8.16 GOOD STANDING CERTIFICATES. The Company shall have delivered
to FYI a certificate, dated as of a date not more than twenty (20) days prior
to the Closing Date, duly issued by the appropriate governmental authority in
the state of incorporation of the Company and in each state, if any, in which
the Company is authorized to do business, showing that the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for all periods prior to the Closing have been
filed, and paid.
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8.17 APPROVAL OF BOARD OF DIRECTORS OF FYI. The Board of Directors
of FYI shall have approved the Merger and the performance by FYI of its
obligations as set forth under this Agreement.
8.18 CREDIT AGREEMENT. The lenders under FYI's Credit Agreement
dated as of April 18, 1996, as amended, shall have approved the extension of
credit to permit FYI and Newco to effect the transitions contemplated by this
Agreement.
8.19 ACCOUNTANT'S LETTER WITH RESPECT TO POOLING OF INTERESTS
ACCOUNTING. FYI and Newco shall have received a letter from the Company's
Accountant stating its concurrence, as of the Closing Date, as to the
appropriateness of the transactions contemplated by this Agreement qualifying
for pooling of interests accounting treatment in accordance with GAAP.
8.20 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall
have occurred that would constitute a Material Adverse Effect.
9. COVENANTS OF THE PARTIES
9.1 PERMITTED PAYMENTS BY THE COMPANY. Each of FYI and Newco
acknowledges and agrees that from and after December 31, 1996 and prior to the
Effective Time of the Merger, the Company may pay in a manner consistent with
its past business practices, compensation for services to the Shareholders not
to exceed (in the aggregate) the sum of $1,000. The parties to this Agreement
acknowledge and agree that, except as set forth in this Agreement, the Company
shall retain and shall not distribute to the Shareholders any amounts after the
date of this Agreement.
9.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. After the
Closing Date, FYI shall not and shall not permit any of the FYI Subsidiaries to
undertake any act that would jeopardize the tax-free status of the
reorganization of the Company, including without limitation the following:
(i) The retirement or reacquisition, directly or
indirectly, of all or part of the FYI Stock issued in
connection with the transactions contemplated hereby;
(ii) The entering into of financial arrangements
for the benefit of the Shareholders in their capacities as
such;
(iii) The disposition of any material part of the
assets of the Company within the two (2) years following the
Closing Date except in the ordinary course of business or to
eliminate duplicate services or excess capacity;
(iv) The discontinuance of the historic business
of the Company; and
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(v) The issuance of additional shares of stock of
the Surviving Corporation that would result in FYI losing
control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
9.3 PREPARATION AND FILING OF TAX RETURNS.
(a) The Shareholders shall prepare all Tax returns for
all taxable periods of the Company ending on or prior to the Closing
Date, including without limitation all Tax returns for the S Short
Year. Such Tax returns shall be prepared on a basis consistent with
past practice. In the event of a disagreement between FYI and the
Surviving Corporation and the Shareholders over the calculation of
taxable income for such Tax returns, the Shareholders shall be
required to obtain and produce an opinion letter from one of the
accounting firms commonly referred to within the United States as the
"big six" concluding that the treatment of the specific item at issue
should more likely than not be sustained upon examination by the
Internal Revenue Service. FYI and the Surviving Corporation shall be
responsible for the payment of all amounts (other than income Taxes)
due on such Tax returns to the extent they were reserved for on the
Financial Statements. FYI and the Surviving Corporation shall
cooperate with the Shareholders in the filing of such Tax returns.
FYI and the Surviving Corporation shall be responsible for the
preparation of all Tax returns of the Company for all taxable periods
ending after the Closing Date, including without limitation all Tax
returns for the C Short Year. FYI and the Surviving Corporation shall
be responsible for the payment of all amounts due on such Tax returns.
The Shareholders shall cooperate in the preparation of such Tax
returns.
(b) The Shareholders shall have responsibility for the
conduct of any audit of the Company of any taxable period ending on or
prior to the Closing Date; provided, however, that in the event that
the Shareholders receive notice of a claim from the Internal Revenue
Service or any other taxing authority the Shareholders shall promptly,
but in any event within five (5) business days, notify FYI and the
Surviving Corporation of such claim and of any action taken or
proposed to be taken. In the event FYI and the Surviving Corporation
wish to participate in such audit they may do so at their own cost and
expense.
(c) Each of the Company, Newco, FYI and the Shareholders
shall comply with the tax reporting requirements of Section 1.368-3 of
the Treasury Regulations promulgated under the Code, and shall treat
the transaction as a tax-free reorganization under Section 368(a) of
the Code unless otherwise required by law.
9.4 COVENANTS OF THE COMPANY CONCERNING TERMINATION OF S ELECTION.
(a) Definitions. The following terms, as used herein,
have the following meanings when used hereinafter:
"C Corporation Period" means the period commencing on the S
Termination Date.
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"C Short Year" means that portion of the S Termination Year of the
Company as defined in Section 1362(e)(1)(B) of the Code.
"S Corporation Period" means, as to the Company the period commencing
on the effective date of its S election and ending on the date immediately
preceding the S Termination Date.
"S Corporation Taxable Income" means the taxable income of the Company
from all sources during the S Corporation Period.
"S Short Year" means that portion of the S Termination Year of the
Company as defined in Section 1362(e)(1)(A) of the Code.
"S Termination Date" means the date on which the S corporation status
of the Company is terminated pursuant to Section 1362(d)(2) of the Code.
"S Termination Year" has the meaning set forth in Section 1362(e)(4)
of the Code.
(b) Termination of S Election; S Termination Year
(i) Termination of S Status. The Company made a
valid election under Section 1362(a) of the Code to be taxed in accordance with
the provisions of Subchapter S of the Code for its initial tax year beginning
May 24, 1989 and ending December 31, 1989 (the "S Election"). The Shareholders
acknowledge that the Merger will terminate the Company's S Election pursuant to
Section 1362(d)(2) of the Code.
(ii) Effective Date. The S Termination Date shall
be on the date of the Effective Time of the Merger.
(iii) S Termination Year. The fiscal year in which
the S corporation status of the Company is terminated will be an S Termination
Year with respect to the Company for federal income tax purposes, as defined in
Section 1362(e)(4) of the Code.
(iv) S Short Year. Pursuant to Section
1362(e)(1)(A) of the Code, the S Termination Year of the Company shall be
divided into two short taxable years: an S Short Year and a C Short Year. As
defined in Section 1362(e)(1)(A) of the Code, the S Short Year of the Company
shall be that portion of its S Termination Year beginning on the initial day of
its fiscal year and ending on the day immediately preceding the S Termination
Date. For federal income tax purposes, the Company will be treated as an S
corporation during its S Short Year.
(v) C Short Year. Pursuant to Section
1362(e)(1)(B) of the Code, the portion of the S Termination Year beginning on
the S Termination Date and ending on the last day of the fiscal year, shall be
the C Short Year of the Company. For federal income tax purposes, the Company
will be taxed as a C corporation during the C Short Year.
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(c) Allocation of Income
(i) Allocation Election. Tax items shall be
allocated to the S Short Year and the C Short Year pursuant to normal tax
accounting rules (that is, the "closing of the books method") rather than by
the pro rata allocation method contained in Section 1362(e)(2) of the Code.
(ii) Filing of Tax Returns. In respect to the
foregoing allocation, the Company shall cause to be prepared, at its expense,
and shall timely file all tax returns required by federal, state and local law
and, when appropriate, shall allocate the tax items to the S Short Year and the
C Short Year pursuant to normal tax accounting rules (that is, the "closing of
the books method") rather than the pro rata allocation method contained in
Section 1362(e)(2) of the Code.
(d) Taxes
(i) Liability for Taxes Incurred During S
Corporation Years Including S Short Year. The Shareholders shall pay (and
shall indemnify, defend and hold harmless the Surviving Corporation from and
against liability with respect to) any and all Taxes that are imposed on the
Shareholders or the Company and attributable to the taxable income of the
Company, including but not limited to, any taxable income of the Company
recognized as a result of the Merger of Newco into the Company (but for reasons
other than the failure of the Merger to qualify as a tax-free reorganization)
for all taxable periods (or that portion of any period including the S Short
Year) during which the Company was an S corporation. The Shareholders shall
pay any and all Taxes that are imposed on the Shareholders or the Company as a
result of the Company's S election being treated as invalid or ineffective for
any reason or such election being revoked or terminated prior to the S
Termination Date.
(ii) Liability for Taxes Incurred During C
Corporation Years Including C Short Year. The Surviving Corporation shall pay
or cause to be paid (and shall indemnify, defend and hold harmless the
Shareholders from and against liability with respect to) any and all Taxes
attributable to the taxable income of the Surviving Corporation for the C
Corporation Period. In no event will the Surviving Corporation be required to
pay any Taxes that are imposed upon the Company as a result of the Merger of
Newco into the Company (but for reasons other than the failure of the Merger to
qualify as a tax-free reorganization).
(e) If any Shareholder receives notice of an intention by
a taxing authority to audit any return of such Shareholder that includes any
item of income, gain, deduction, loss or credit reported by the Company with
respect to the S Corporation Period that such Shareholder has reason to believe
may affect the Surviving Corporation's tax returns during the C Corporation
Period, the Shareholder shall inform the Surviving Corporation, in writing, of
the audit promptly after receipt of such notice. If any Shareholder receives
notice from a taxing authority of any proposed adjustment for which the
Surviving Corporation may be required to indemnify hereunder (a "Proposed
Adjustment"), such Shareholder shall give notice to the Surviving Corporation
of the Proposed Adjustment promptly after receipt of
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such notice from a taxing authority. Upon receipt of such notice from such
Shareholder, the Surviving Corporation may request that such Shareholder
contest such Proposed Adjustment and such Shareholder shall permit the
Surviving Corporation to participate in (but not to control) such proceedings.
If the Surviving Corporation requests that any Proposed Adjustment be
contested, then such Shareholder shall, at the Surviving Corporation's expense,
contest the Proposed Adjustment or at the option of the Surviving Corporation
permit the Surviving Corporation to contest the Proposed Adjustment (including
pursuing all administrative and judicial appeals and processes). The Surviving
Corporation shall pay to such Shareholder all reasonable costs and expenses
(including reasonable attorneys' and accountants' fees) that such Shareholder
may incur in contesting such Proposed Adjustments. Neither Shareholder shall
make, accept or enter into a settlement or other compromise, with respect to
any Taxes indemnified hereunder, or forego or terminate any proceeding
undertaken hereunder without the consent of the Surviving Corporation, which
consent shall not be unreasonably withheld. The Shareholders will reasonably
assist if the Surviving Corporation contests any Proposed Adjustment.
(f) If the Surviving Corporation receives notice of an
intention by a taxing authority to audit any return of the Surviving
Corporation that includes any item of income, gain, deduction, loss or credit
reported by the Surviving Corporation with respect to the period after the
Merger during which the Surviving Corporation is a C corporation that the
Surviving Corporation has reason to believe may affect such Shareholder's tax
returns during the S Corporation Period, the Surviving Corporation shall inform
such Shareholder in writing, of the audit promptly after receipt of such
notice. If the Surviving Corporation receives notice from a taxing authority
of any proposed adjustment for which such Shareholder may be required to
indemnify the Surviving Corporation hereunder (a "Surviving Corporation
Proposed Adjustment"), the Surviving Corporation shall give notice to the
Shareholders of the Surviving Corporation Proposed Adjustment promptly after
receipt of such notice from a taxing authority. Upon receipt of such notice
from the Surviving Corporation, the Shareholders may, by in turn giving prompt
written notice to the Surviving Corporation, request that the Surviving
Corporation contest such Surviving Corporation Proposed Adjustment. If such
Shareholder requests that any Surviving Corporation Proposed Adjustment be
contested, then the Surviving Corporation shall contest the Surviving
Corporation Proposed Adjustment (including pursuing all administrative and
judicial appeals and processes) at such Shareholder's expense and shall permit
such Shareholder to participate in (but not to control) such proceeding.
(g) The Surviving Corporation and the Shareholders shall
cooperate fully with each other in all matters relating to Taxes and in the
determination of amounts payable hereunder. In the case of disagreement as to
the course of action to be pursued in dealing with taxing authorities
(including, without limitation, matters with respect to preparation and filing
of tax returns, conduct of audits, and proceedings in courts), the decision of
the party (the Surviving Corporation, on the one hand, or the Shareholders, on
the other hand) who will economically benefit from or be burdened by the course
of action (or in the case both parties benefit and/or are burdened, the
decision of the party with the greatest benefit or burden) shall control.
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(h) The Shareholders shall be entitled to all refunds of
any and all Taxes for the S Short Year and other tax periods ending before the
Effective Date. FYI and Newco shall be entitled to all refunds of any and all
Taxes for the C Short Year and other tax periods ending after the Effective
Date. The Shareholders and FYI and Newco shall cooperate in obtaining any
refund of income Taxes available from the relevant taxing authority.
9.5 NOMINATION OF SHAREHOLDER TO FYI BOARD OF DIRECTORS.
Following the Closing and to the extent permitted by the Delaware General
Corporation Law and applicable securities laws and the Certificate of
Incorporation and By-laws of FYI, FYI shall nominate and recommend ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ for election as a director at the FYI stockholders' meeting next
following the Closing.
9.6 COMPANY NAME. The Shareholders acknowledge and agree that the
name "MMS Escrow and Transfer Agency, Inc." or any derivation thereof, is an
important element of the Company's business and goodwill and covenants that
following the Closing Date neither of such Shareholders shall conduct a
business utilizing the above-described name without the prior written consent
of the Surviving Corporation.
9.7 RECEIVABLES GUARANTEED. The Shareholders jointly and
severally warrant to FYI, Newco and the Surviving Corporation that all accounts
receivable of the Company as of the Effective Date (the "Receivables") will be
collected by the Surviving Corporation in the aggregate full face amount
thereof no later than July 25, 1997. If the Surviving Corporation shall fail
to collect the aggregate full face amount of the Receivables set forth in the
Company's Financial Statements by July 25, 1997, then (i) the Shareholders may
acquire the uncollected Receivables plus any unpaid interest accrued thereon by
payment to the Surviving Corporation of an amount in cash equal to such
uncollected Receivables and interest multiplied by a factor of 6.0 on or before
July 25, 1997 or (ii) FYI may retain an amount of FYI Stock equal to the
product of the sum of all such uncollected Receivables plus any unpaid interest
accrued thereon multiplied by a factor of 6.0 from the FYI Stock retained by
FYI as provided for in Section 3.1(a) hereof, and if the amount of FYI Stock
retained by FYI pursuant to Section 3.1(a) hereof is not sufficient to
compensate the Surviving Corporation for such uncollected Receivables (based
upon the then-fair market value of such shares of FYI Stock as determined by
the closing price for such shares on the Nasdaq National Market on July 25,
1997), the Surviving Corporation may seek indemnification against the
Shareholders for such shortfall in accordance with Section 10 hereof. The
Surviving Corporation shall provide written notice to the Shareholders on or
before July 25, 1997 as to which alternative set forth in the foregoing
sentence it has elected with respect to such uncollected Receivables. Any such
amount retained by FYI or the Surviving Corporation shall be in an allocation
that will not adversely affect the parties' treatment of this transaction as a
tax-free reorganization under Section 368(a) of the Code. Proceeds from
Receivables collected after July 25, 1997 and for which the Surviving
Corporation has received payment under this Section 9.7 multiplied by a factor
of 6.0 shall be promptly and in any event within five (5) business days of
collection delivered by the Surviving Corporation to the Shareholders.
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9.8 REGISTRATION OF FYI STOCK; 1933 ACT. (a) On or after July 25,
1997 with respect to 13,259 of the shares of FYI Stock to be received by the
Shareholders upon consummation of the Merger, upon written request of either
Shareholder FYI shall use its reasonable best efforts to file registration
statements under the 1933 Act covering the registration of such shares of FYI
Stock (such shares of FYI Stock are referred to herein as "RS Shares") to be
received by the Shareholders pursuant to this Agreement for resale by the
Shareholders. FYI shall have no obligation to register the balance of the
shares of FYI Stock to be received by the Shareholders upon consummation of the
Merger. In connection with such registration statement, FYI shall:
(i) Use its reasonable best efforts to cause such
registration statement to become effective and keep such registration
statement effective for six (6) months (or such shorter period after
which FYI Stock may be sold by the Shareholders in accordance with the
requirements of Rule 144 under the 1933 Act); provided, however, that
FYI shall not be deemed to have used its reasonable best efforts to
keep the registration statement effective during the applicable period
if FYI voluntarily takes any action that results in the Shareholders
not being able to sell the RS Shares during such period, unless such
action is required by law;
(ii) Use its reasonable best efforts to prepare and file
with the United States Securities and Exchange Commission ("SEC") such
amendments and supplements to such registration statement as may be
necessary to comply with the applicable provisions of the 1933 Act;
(iii) No less than twenty-four (24) hours prior to filing
such registration statement or prospectus contained therein or any
amendment or supplement thereto, furnish to each Shareholder copies of
all documents proposed to be filed to permit the reasonable and timely
review of statements contained in such documents pertaining to such
parties and thereafter furnish to the Shareholders such number of
copies of such registration statement, each amendment and supplement
thereto, such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in
order to facilitate the disposition of the RS Shares to be received by
them pursuant to this Agreement;
(iv) Use its reasonable best efforts to register and
qualify the shares of FYI Stock covered by such registration statement
under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Shareholders, and to keep such
registration or qualification effective during the period such
registration statement is to be kept effective, provided that FYI
shall not be required to become subject to taxation, qualify to do
business or file a general consent to service of process in any such
jurisdictions;
(v) Use its reasonable best efforts to maintain the
authorization for quotation of the securities covered by such
registration statement on the Nasdaq National Market of the Nasdaq
Stock Market, Inc.; and
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(vi) Notify each Shareholder, at any time when the
Shareholders must suspend offers or sales of RS Shares under the
registration statement, either because the prospectus included in such
registration statement is required to be amended for any reason, such
as an amendment under the 1933 Act to provide current information, or
because the prospectus includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing. FYI shall use its reasonable best
efforts to enable the Shareholders to promptly recommence offers and
sales under the registration statement. Notwithstanding the foregoing
and anything to the contrary set forth in this Section 9.8, each
Shareholder acknowledges that there may occasionally be times when FYI
must suspend the use of the prospectus included in such registration
statement until such time as an amendment to the registration
statement has been filed by FYI and declared effective by the SEC, or
until such time as FYI has filed an appropriate report with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the "1934
Act"). Each Shareholder hereby covenants that he will not offer or
sell any shares of FYI Stock pursuant to such prospectus during the
period commencing when FYI notifies the Shareholder of the suspension
of the use of such prospectus and the reason therefor, and ending when
FYI notifies the Shareholder in writing that he may thereafter effect
offers and sales pursuant to such prospectus.
(b) It is a condition precedent to the obligations of FYI
to take any action pursuant to this Section 9.8 hereof with respect to the RS
Shares of any Shareholder that such Shareholder shall furnish to FYI such
information regarding himself, the FYI Stock held by him and the intended
method of disposition of such securities as shall be required to effect the
registration of such Shareholder's RS Shares and be required to effect the
registration of such Shareholder's RS Shares and as may be required from time
to time to keep such registration current.
(c) Except as otherwise provided, all expenses incurred
by or on behalf of FYI in connection with registrations, filings or
qualifications pursuant to this Section 9.8 hereof, including without
limitation all registration, filing and qualification fees, the fees and
expenses incurred in connection with the listing of the RS Shares to be
registered on each security exchange on which shares of Common Stock of FYI are
then listed, printer's and accounting fees, and fees and disbursements of
counsel for FYI, shall be borne by FYI. In no event shall FYI be obligated to
bear underwriting, brokerage or related fees, discounts or commissions or the
fees or expenses of counsel or advisors to the Shareholders.
(d) Each of FYI and the Shareholders shall agree to such
other reasonable and customary arrangements, undertakings and indemnifications
with respect to the registration of the RS Shares to be received by the
Shareholders pursuant to the Agreement as may be requested by any of them, but
shall not be obligated to enter into any underwriting arrangements. Such
indemnifications shall include FYI's indemnity of the Shareholders and their
brokers or dealers that may be deemed to be underwriters as reasonably
requested by the Shareholders and their brokers or dealers against liability,
including liability arising under the 1933 Act.
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(e) FYI covenants that it will at all times use its
reasonable best efforts to timely file any reports required to be filed by it
under the 1933 Act and the 1934 Act and that it will take such other actions as
may be reasonably necessary to enable the Shareholders to sell the FYI Stock
without registration under applicable exemptions provided for under the 1933
Act including, without limitation, Rule 144.
9.9 ECONOMIC RISK; SOPHISTICATION.
(a) Each Shareholder represents and warrants that such
Shareholder has not relied on any purchaser representative, or on the
Company or any other Shareholder, in connection with the acquisition
of shares of FYI Stock hereunder. The Shareholders (i) have such
knowledge, sophistication and experience in business and financial
matters that they are capable of evaluating the merits and risks of an
investment in the shares of FYI Stock, (ii) fully understand the
nature, scope and duration of the limitations on transfer described in
this Agreement and (iii) can bear the economic risk of an investment
in the shares of FYI Stock and can afford a complete loss of such
investment. The Shareholders have had an adequate opportunity to ask
questions and receive answers from the officers of FYI concerning any
and all matters relating to the transactions described herein
including without limitation the background and experience of the
officers and directors of FYI and the Surviving Corporation, the plans
for the operations of the business of FYI and the Surviving
Corporation, the business, operations and financial condition of FYI
and the Surviving Corporation, and any plans for additional
acquisitions and the like. The Shareholders have asked any and all
questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
(b) Each Shareholder further represents, warrants,
acknowledges and agrees that (x) he is acquiring the shares of FYI
Stock under this Agreement for his own account, as principal and not
on behalf of other persons, and for investment and not with a view to
the resale or distribution of all or any part of such shares, (y) he
will not sell or otherwise transfer such shares unless, in the opinion
of counsel who is satisfactory to the Company, the transfer can be
made without violating the registration provisions of the 1933 Act and
the rules and regulations thereunder, unless such sale or transfer is
under an effective registration statement, and (z) the certificate
representing such shares will also bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A
TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THE
SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS COVERED BY
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR, IN THE OPINION OF COUNSEL TO THE
ISSUER, IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH LAWS.
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THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,TRANSFERRED
OR ASSIGNED, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO
ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT, PRIOR TO THE PUBLICATION
AND DISSEMINATION OF FINANCIAL STATEMENTS BY THE ISSUER WHICH INCLUDE
THE RESULTS OF AT LEAST THIRTY (30) DAYS OF COMBINED OPERATIONS OF THE
ISSUER AND THE SURVIVING CORPORATION OF THE MERGER BETWEEN MMS ESCROW
ACQUISITION CORP. AND MMS ESCROW AND TRANSFER AGENCY, INC. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENTS) WHEN THIS REQUIREMENT HAS BEEN MET.
and
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF SUCH RULE.
9.10 POOLING ACCOUNTING. Each of FYI, Newco, the Shareholders and
the Company shall use commercially reasonable efforts to cause the business
combination to be effected by the Merger to be accounted for as a pooling of
interests. Each of FYI, Newco, the Shareholders and the Company shall use
reasonable efforts to cause its affiliates not to take any action that would
adversely affect the ability of FYI to account for the business combination to
be effected by the Merger as a pooling of interests.
9.11 TERMINATION OF SHAREHOLDERS' AGREEMENT. By execution of this
Agreement the Company and each Shareholder does hereby covenant and agree that
the Shareholders' Agreement by and among the Company, MAVRICC Management
Systems, Inc. and the Shareholders dated June 11, 1992 shall be terminated and
of no further force or effect as of the Closing.
10. INDEMNIFICATION
The Shareholders, FYI and Newco each make the following covenants that
are applicable to them, respectively.
10.1 FYI LOSSES.
(a) Each of the Shareholders jointly and severally agrees
to indemnify and hold harmless FYI, Newco and the Surviving
Corporation, and their respective directors, officers, employees,
representatives, agents and attorneys from, against and in respect of
any and all FYI Losses (as defined below) suffered, sustained,
incurred or required to be paid by any of them by reason of (i) any
representation or warranty made by the Company or the Shareholders in
or pursuant to this Agreement
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(including, without limitation, the representations and warranties
contained in any certificate delivered pursuant hereto) being untrue
or incorrect in any respect; (ii) any liability arising from or based
upon the operation of the Company through the Closing Date; (iii) the
termination of or withdrawal by the Company or any Group Member from
any employee pension benefit plan, as defined in Section 3(2)(A) of
ERISA that is maintained pursuant to a collective bargaining agreement
under which more than one employer makes contributions and to which
the Company or any Group Member is then making or accruing an
obligation to make contributions or has within the preceding five (5)
plan years made contributions; (iv) the items described in Schedule
5.16 hereof except in any instance and to the extent FYI Losses result
from the negligence or misconduct of FYI, Newco or the Surviving
Corporation; (v) liabilities for Taxes as a result of the conversion
of the Surviving Corporation from a cash basis to an accrual basis of
accounting after the Merger; or (vi) any failure by the Company or any
Shareholder to observe or perform its or his covenants and agreements
set forth in this Agreement or in any other agreement or document
executed by it or him in connection with the transactions contemplated
hereby; provided, however, that notwithstanding the foregoing, the
obligations of the Shareholders to indemnify and hold harmless FYI,
Newco and Surviving Corporation, and their respective directors,
officers, employees, representatives, agents and attorneys from,
against and in respect of any and all FYI Losses shall be several and
not joint with respect to acts or omissions of a Shareholder with
respect to such Shareholder's Employment Agreement and Noncompetition
Agreement.
(b) "FYI Losses" shall mean all damages (including,
without limitation, amounts paid in settlement with the Shareholders'
consent, which consent may not be unreasonably withheld), losses,
obligations, liabilities, claims, deficiencies, costs and expenses
(including, without limitation, reasonable attorneys' fees),
penalties, fines, interest and monetary sanctions, including, without
limitation, reasonable attorneys' fees and costs incurred to comply
with injunctions and other court and Agency orders, and other costs
and expenses incident to any suit, action, investigation, claim or
proceeding or to establish or enforce the rights of FYI, Newco and the
Surviving Corporation or such other persons to indemnification
hereunder.
10.2 ENVIRONMENTAL INDEMNITY.
(a) Each of the Shareholders jointly and severally agrees
to indemnify and hold harmless FYI, Newco and the Surviving
Corporation, and their respective directors, officers, employees,
representatives, agents and attorneys from, against and in respect of
any and all Environmental Costs (as defined below), arising in any
manner in connection with: (i) the presence at or on any property now
or formerly owned, operated or leased by the Company at the time of
the Company's operation or lease thereof of any Hazardous Substances
or the release, leak, discharge, spill, disposal, migration or
emission of Hazardous Substances from any such property at the time of
the Company's operation or lease thereof; (ii) the failure of the
Company to comply with any applicable Environmental Requirements prior
to the Closing Date; or (iii) the transportation to, disposal at, or
migration onto or into adjacent property or any off-site location of
any Hazardous Substances from property now or
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formerly owned, operated or leased by the Company at the time of the
Company's operation or lease thereof, whether or not the
transportation or disposal was conducted in full compliance with
Environmental Requirements.
(b) The obligations of this Section 10.2 shall include
the obligation to defend the Indemnified Parties (as defined below)
against any claim or demand for Environmental Costs, the obligation to
pay and discharge any Environmental Costs imposed on Indemnified
Parties, and the obligation to reimburse Indemnified Parties for any
Environmental Costs incurred or suffered, provided in each instance
that the claim for Environmental Costs arises in connection with a
matter for which Indemnified Parties are entitled to indemnification
under this Agreement. The obligation to reimburse the Indemnified
Parties shall also include the costs and expenses (including, without
limitation, reasonable attorneys' fees) to establish or enforce the
rights of FYI, Newco and the Surviving Corporation or such other
persons to indemnification hereunder.
(c) "Environmental Costs" shall mean any of the following
that arise in any manner regardless of whether based in contract,
tort, implied or express warranty, strict liability, Environmental
Requirement or otherwise: all liabilities, losses, judgments, damages,
punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, reasonable attorneys' fees
and fees and disbursements of environmental consultants, all costs
related to the performance of any required or necessary assessment,
investigation, remediation, response, containment, closure,
restoration, repair, cleanup or detoxification of any impacted
property, the preparation and implementation of any maintenance,
monitoring, closure, remediation, abatement or other plans required by
any governmental agency or by Environmental Requirements and any other
costs recovered or recoverable under any Environmental Requirement),
fines, penalties, or monetary sanctions. Environmental Costs shall
include without limitation: (i) damages for personal injury or death,
or injury to property or to natural resources; (ii) damage to real
property or damage resulting from the loss of the use of all or any
part of the property, including but not limited to business loss; and
(iii) the cost of any demolition, rebuilding or repair of any property
required by Environmental Requirements or necessary to restore such
property to its condition prior to damage caused by an environmental
condition or by the remediation of an environmental condition.
10.3 EMPLOYEE COMPENSATION AND BENEFITS. Each of the Shareholders
jointly and severally agrees to indemnify and hold FYI, Newco and the Surviving
Corporation, and their respective directors, officers, employees,
representatives, agents and attorneys harmless from and against any and all
claims made by employees of the Company, regardless of when made, for wages,
salaries, bonuses, pension, workmen's compensation, medical insurance,
disability, vacation, severance, pay in lieu of notice, sick benefits or other
compensation or benefit arrangements to the extent the same are based on
employment service rendered to the Company prior to the Closing Date or injury
or sickness occurring prior to the Closing Date and are not scheduled pursuant
to this Agreement or reserved for on the Financial Statements (collectively,
"Employee Claims").
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10.4 SHAREHOLDER LOSSES.
(a) FYI and Newco jointly and severally agree to
indemnify and hold harmless the Shareholders, and their respective
agents, and attorneys, for and in respect of any and all Shareholder
Losses (as defined below) suffered, sustained, incurred or required to
be paid by any of the Shareholders by reason of (i) any representation
or warranty made by FYI or Newco in or pursuant to this Agreement
(including, without limitation, the representations and warranties
contained in any certificate delivered pursuant hereto) being untrue
or incorrect in any respect; (ii) any failure by FYI or Newco to
observe or perform its covenants and agreements set forth in this
Agreement or any other agreement or document executed by it in
connection with the transactions contemplated hereby; or (iii) any
liability arising from or based upon the operation of the Company
subsequent to the Closing Date other than as a result of the breach of
a representation or warranty set forth in Section 5 hereof, except in
any instance and to the extent Shareholder Losses result from the
negligence or misconduct of the Shareholders or any of them (with
respect to periods prior to the Closing Date).
(b) "Shareholder Losses" shall mean all damages
(including, without limitation, amounts paid in settlement with the
consent of FYI and Newco, which consent may not be reasonably
withheld), losses, obligations, liabilities, claims, deficiencies,
costs and expenses (including, without limitation, reasonable
attorneys' fees), penalties, fines, interest and monetary sanctions,
including, without limitation, reasonable attorneys' fees and costs
incurred to comply with injunctions and other court and Agency orders,
and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce the
right of the Shareholders or such other persons to indemnification
hereunder.
10.5 INDEMNIFICATION FOR CERTAIN TAX MATTERS. The Shareholders
shall indemnify, defend and hold harmless the Surviving Corporation from and
against all Tax liabilities of the Company incurred or accrued prior to the
Effective Date and the liability of the Company or the Surviving Corporation
with respect to all Taxes, including interest and additions to Taxes, resulting
from any final determination (or settlement) that the Merger of Newco into the
Company fails to qualify as a tax-free transaction as to the Company and/or the
Surviving Corporation pursuant to Section 368(a)(1)(A) and Section 368(a)(2)(E)
of the Code as a result of any breach of a representation, warranty or covenant
of the Company or a Shareholder. FYI and the Surviving Corporation shall
indemnify, defend and hold harmless the Shareholders from and against all Tax
liabilities of the Company and/or the Surviving Corporation incurred or accrued
on or after the Effective Date and the liability of the Shareholders, the
Company and the Surviving Corporation with respect to all Taxes, resulting from
any final determination (or settlement) that the Merger of Newco into the
Company fails to qualify as a tax-free transaction as to the Shareholders, the
Company and/or the Surviving Corporation pursuant to Section 368(a)(1)(A) and
Section 368(a)(2)(E) of the Code as a result of any breach of a representation,
warranty or covenant by FYI or Newco.
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52
10.6 NOTICE OF LOSS. Except to the extent set forth in the next
sentence, a party to the Agreement will not have any liability under the
indemnity provisions of this Agreement with respect to a particular matter
unless a notice setting forth in reasonable detail the breach or other matter
which is asserted has been given to the Indemnifying Party (as defined below)
and, in addition, if such matter arises out of a suit, action, investigation,
proceeding or claim, such notice is given promptly, but in any event within
thirty (30) days after the Indemnified Party (as defined below) is given notice
of the claim or the commencement of the suit, action, investigation or
proceeding. Notwithstanding the preceding sentence, failure of the Indemnified
Party to give notice hereunder shall not release the Indemnifying Party from
its obligations under this Section 10, except to the extent the Indemnifying
Party is actually prejudiced by such failure to give notice. With respect to
FYI Losses, Environmental Costs, Employee Claims and the matters described in
the first sentence of Section 10.5, the Shareholders shall be the Indemnifying
Party and FYI and Newco and their respective directors, officers, employees,
representatives, agents and attorneys shall be the Indemnified Party. With
respect to Shareholder Losses and the matters described in the second sentence
of Section 10.5, FYI and Newco shall be the Indemnifying Party and the
Shareholders and their respective agents and attorneys shall be the Indemnified
Party.
10.7 RIGHT TO DEFEND. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed
by an Indemnified Party, the Indemnifying Party shall be entitled to defend,
contest or otherwise protect against any such suit, action, investigation,
claim or proceeding at its own cost and expense, and the Indemnified Party must
cooperate in any such defense or other action. The Indemnified Party shall
have the right, but not the obligation, to participate at its own expense in
defense thereof by counsel of its own choosing, but the Indemnifying Party
shall be entitled to control the defense unless the Indemnified Party has
relieved the Indemnifying Party from liability with respect to the particular
matter or the Indemnifying Party fails to assume defense of the matter. In the
event the Indemnifying Party shall fail to defend, contest or otherwise protect
in a timely manner against any such suit, action, investigation, claim or
proceeding, the Indemnified Party shall have the right, but not the obligation,
thereafter to defend, contest or otherwise protect against the same and make
any compromise or settlement thereof and recover the entire cost thereof from
the Indemnifying Party including, without limitation, reasonable attorneys'
fees, disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or the compromise or settlement thereof,
provided, however, that the Indemnified Party must send a written notice to the
Indemnifying Party of any such proposed settlement or compromise, which
settlement or compromise the Indemnifying Party may reject, in its reasonable
judgment, within thirty (30) days of receipt of such notice. Failure to reject
such notice within such thirty (30) day period shall be deemed an acceptance of
such settlement or compromise. The Indemnified Party shall have the right to
effect a settlement or compromise over the objection of the Indemnifying Party;
provided, that if (i) the Indemnifying Party is contesting such claim in good
faith or (ii) the Indemnifying Party has assumed the defense from the
Indemnified Party, the Indemnified Party waives any right to indemnity.
therefor. If the Indemnifying Party undertakes the defense of such matters,
the Indemnified Party shall not, so long as the Indemnifying Party does not
abandon the defense thereof, be entitled to recover from the
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53
Indemnifying Party any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof other than the
reasonable costs of investigation undertaken by the Indemnified Party with the
prior written consent of the Indemnifying Party.
10.8 COOPERATION. Each of FYI Newco, the Surviving Corporation,
the Company and the Shareholders, and each of their affiliates, successors and
assigns shall cooperate with each other in the defense of any suit, action,
investigation, proceeding or claim by a third party and, during normal business
hours, shall afford each other access to their books and records and employees
relating to such suit, action, investigation, proceeding or claim and shall
furnish each other all such further information that they have the right and
power to furnish as may reasonably be necessary to defend such suit, action,
investigation, proceeding or claim, including, without limitation, reports,
studies, correspondence and other documentation relating to Environmental
Protection Agency, Occupational Safety and Health Administration, and Equal
Employment Opportunity Commission matters.
10.9 SATISFACTION OF CLAIMS. The Shareholders shall have the
option of paying any amounts owed thereby pursuant to Sections 10.1, 10.2 and
10.3 for FYI Losses, Environmental Costs and Employee Claims with shares of FYI
Stock received pursuant to this Agreement and valued at the closing price per
share on the Closing Date, in cash or in a combination of FYI Stock and cash.
10.10 LIMITATIONS OF INDEMNIFICATION; PROPORTIONATE PAYMENTS. The
persons or entities indemnified pursuant to this Section 10 shall not assert
any claim for indemnification hereunder until such time as and solely to the
extent that the aggregate of all claims that such persons may have against the
Indemnifying Parties shall exceed $10,000 with respect to all claims (the
"Basket"), but upon reaching the amount of the Basket, from the first dollar of
all claims; provided, however, that to the extent that any amounts recoverable
by FYI and the Surviving Corporation as described in Section 9.7 hereof exceed
the amount of FYI Stock retained by FYI and the Surviving Corporation pursuant
to Section 3.1(a), any such excess shall not be subject to the Basket. Any
amounts paid to the Shareholders pursuant to this Section 10 shall be paid in
FYI Stock, valued at the closing price per share on the Closing Date.
Notwithstanding any other provision of this Agreement, no Indemnifying Party
shall be obligated to defend and hold harmless an Indemnified Party with
respect to any claim for indemnification hereunder in excess of the aggregate
consideration set forth on Annex II; provided, however, that the foregoing
limitation shall not be applicable to any breach of the representations and
warranties contained in Section 5.3 hereof.
11. GENERAL
11.1 COOPERATION. The Company, the Shareholders, FYI and Newco
shall each deliver or cause to be delivered to the other on the Closing Date,
and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The Company will cooperate and use its reasonable
efforts to have the present officers, directors and
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54
employees thereof cooperate with FYI on and after the Closing Date in
furnishing information, evidence, testimony and other assistance in connection
with any Tax return filing obligations, actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing Date.
11.2 SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES.
(a) Covenants and Agreements. All covenants and
agreements made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing and shall
continue in full force and effect thereafter according to their terms
without limit as to duration.
(b) Representations and Warranties. All representations
and warranties contained herein shall survive the Closing and shall
continue in full force and effect thereafter for a period of three (3)
years following the Closing, except that (a) the representations and
warranties contained in Section 5.8 and Section 6.12hereof shall
survive until the earlier of (i) the expiration of the applicable
periods (including any extensions) of the respective statutes of
limitation applicable to the payment of the Taxes to which such
representations and warranties relate without an assertion of a
deficiency in respect thereof by the applicable taxing authority or
(ii) the completion of the final audit and determination by the
applicable taxing authority and final disposition of any deficiency
resulting therefrom, (b) the representations and warranties contained
in Section 5.11 shall survive for a period of five (5) years following
the Closing, (c) the representations and warranties contained in
Section 5.19 shall survive until the expiration of the applicable
period of the statutes of limitation applicable to ERISA matters, and
(d) the representations and warranties contained in Sections 5.1, 5.2
and 5.3 and Sections 6.1, 6.2, 6.3 and 6.4 shall survive indefinitely.
(c) Claims Made Prior to Expiration. Notwithstanding the
foregoing survival periods set forth in this Section 11.2, the
termination of a survival period shall not affect the rights of an
Indemnified Party in respect of any claim made by any party with
specificity, in good faith and in writing to the Indemnifying Party in
accordance with Sections 10.6 and 11.8 hereof prior to the expiration
of the applicable survival period.
11.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of FYI, and the heirs and legal representatives of the Shareholders.
11.4 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
Shareholders, the Company, Newco and FYI, and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This
Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and this Agreement and
the
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55
Annexes hereto may be modified or amended only by a written instrument executed
by the Shareholders, the Company, Newco and FYI, acting through their
respective officers, duly authorized by their respective Boards of Directors.
11.5 COUNTERPARTS. This Agreement may be executed simultaneously
in two (2) or more counterparts, each of which shall be deemed an original and
all of which together shall constitute but one and the same instrument.
11.6 BROKERS AND AGENTS. Except as disclosed on Schedule 11.6,
each party represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
11.7 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, FYI and Newco will pay the fees, expenses and
disbursements of FYI and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and expenses incurred
in the performance and compliance with all conditions to be performed by FYI
under this Agreement. In the event the transactions herein contemplated are
consummated, the Shareholders will pay from personal funds and not from the
funds of the Company, the fees, expenses and disbursements of its agents,
representatives, accountants, counsel and other business advisors incurred in
connection with the subject matter of this Agreement. The Shareholders
acknowledge that they, and not the Company or FYI, will pay all taxes due upon
receipt of the consideration payable to the Shareholders pursuant to Section 2
hereof, and all sales, use, real property, transfer, recording, gains, stock
transfer and other similar fees in connection with the transactions
contemplated by this Agreement.
11.8 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by (a) depositing the same in
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) delivering the same
in person to an officer or agent of such party, or (c) telecopying the same
with electronic confirmation of receipt.
(i) If to FYI or Newco, addressed to them at:
F.Y.I. Incorporated
MMS Escrow Acquisition Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
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56
with copies to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(ii) If to the Shareholders, addressed thereto at
the address set forth on Annex I, with copies to such counsel
as is set forth below:
(iii) If to the Company, addressed to:
MMS Escrow and Transfer Agency, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Messrs. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇
and marked "Personal and Confidential"
with copies to:
▇▇▇▇▇▇▇ Trogan Young and Schloss, P.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 11.8 from time to time.
11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
11.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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57
11.11 SCHEDULES TO THIS AGREEMENT. Information to be disclosed by
the Company and the Shareholders pursuant to the schedules described herein
shall be deemed disclosed if and to the extent set forth on the corresponding
schedules to the MAVRICC Agreement.
11.12 TIME. Time is of the essence with respect to this Agreement.
11.13 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.14 REMEDIES CUMULATIVE. No right, remedy or election given by
any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
11.15 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
11.16 TAX STRUCTURE. It is the intent of the parties that the
transactions contemplated by this Agreement be structured as a tax-free
reorganization under Section 368(a) of the Code.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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58
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
F.Y.I. INCORPORATED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
MMS ESCROW ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
MMS ESCROW AND TRANSFER AGENCY, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
59
THE SHAREHOLDERS:
THE AMENDED AND RESTATED ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ REVOCABLE TRUST
U/A/D SEPTEMBER 10, 1981
By:
----------------------------------
Title: Trustee
THE RESTATED ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ TRUST
U/A/D MAY 30, 1984
By:
---------------------------------
Title: Trustee
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
60
ANNEX I
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
SHAREHOLDERS OF THE COMPANY:
Number of Shares
Name and Address of Company Stock Date of Acquisition
---------------- ---------------- -------------------
The Amended and Restated 500 March 20, 1997*
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Trust u/a/d
September 10, 1981
c/o ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
The Amended ▇▇▇▇ ▇. 500 March 20, 1997**
Kerbawy Trust u/a/d
May 30, 1984
c/o ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
--------------------
* ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ held the 500 shares of Company Stock from June
22, 1989 until the transfer to the Amended and Restated ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Trust.
** ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ held the 500 shares of Company Stock from June
22, 1989 until the transfer to the Amended ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust.
61
ANNEX II
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
Aggregate consideration to be paid to the Shareholders:
Stock - 27,060 shares of FYI Stock, including 2,706 of such shares of
FYI Stock to be held by FYI pursuant to Section 3.1(a) above (1,353
shares of which shall be from the Amended and Restated ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ Revocable Trust and 1,353 shares of which shall be from the
Amended ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust), of which 13,530 shares of FYI Stock
shall be paid to the Amended and Restated ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Revocable
Trust (in certificates for 12,177 shares and 1,353 shares) and 13,530
shares of FYI Stock shall be paid to the Amended ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust
(in certificates for 12,177 shares and 1,353 shares).
62
ANNEX III
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
FYI CHARTER DOCUMENTS
[PROVIDED UNDER CERTIFICATES OF SECRETARY OF FYI AND NEWCO]
63
ANNEX IV
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
OPINION OF COUNSEL TO FYI AND NEWCO
64
OPINION OF COUNSEL TO FYI AND NEWCO
March 27, 1997
The ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Living Trust
u/a/d September 10, 1981, as amended
The ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust
u/a/d May 30, 1984, as amended
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
MMS Escrow and Transfer Agency, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
We have acted as counsel to F.Y.I. Incorporated, a Delaware
corporation ("FYI"), and MMS Escrow Acquisition Corp., a Delaware corporation
("Acquisition"), in connection with the transactions contemplated by the
Agreement and Plan of Reorganization (the "Agreement") dated as of March 27,
1997 by and between FYI, Acquisition, MMS Escrow and Transfer Agency, Inc. and
the Shareholders named therein (the "Shareholders").
This opinion is being delivered to you pursuant to Section 7.4 of the
Agreement. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise
identified to our satisfaction, of such documents and corporate and public
records as we deemed to be necessary as a basis for the opinion hereinafter
expressed. With respect to such examination, we have assumed the genuineness
of all signatures appearing on all documents presented to us as originals, and
the conformity to the originals of all documents presented to us as conformed
or reproduced copies. Where factual matters material to such opinion were not
independently established, we have relied upon certificates of appropriate
state and local officials, upon representations of executive officers and
employees and agents of FYI and Acquisition, and upon such other data as we
deemed to be appropriate under the circumstances. We also wish to advise you
that when in the following opinion we have made statements to our "knowledge"
we shall mean (with respect to matters of fact), that after an examination of
documents made available to us by FYI and Acquisition, and after inquiry of
officers of FYI and Acquisition, but without any judgment or litigation
searches or any other independent factual investigation, we have no reason to
believe that such statements are factually incorrect. Statements made to our
"knowledge" shall furthermore refer only to then current actual knowledge of
attorneys of our firm who have worked on matters for FYI and Acquisition.
65
Based upon the foregoing and such consideration of matters of law as
we deemed to be relevant, and subject to the qualifications and assumptions set
forth herein, we are of the following opinion:
(i) FYI and Acquisition have each been duly organized and
are validly existing in good standing under the laws of the State of
Delaware;
(ii) The Agreement has been duly authorized, executed and
delivered by each of FYI and Acquisition, constitutes the valid and
binding agreement of each thereof and is enforceable against each
thereof in accordance with its terms;
(iii) Each share of FYI Stock to be issued to the
Shareholders has been duly and validly authorized and issued; upon
consummation of the transactions set forth in the Agreement, each of
such shares will be fully paid and nonassessable; and none of such
shares will have been issued in violation of the preemptive rights of
any stockholder of FYI;
(iv) Assuming the due authorization, execution, delivery
and filing of the Certificate of Merger with the Secretary of State of
Delaware, the Merger shall become effective under the laws of the
State of Delaware; assuming the due authorization, execution, delivery
and filing and endorsement of the Certificate of Merger/Consolidation
with the Department of Consumer and Industry Services, Corporation,
Securities and Land Development Bureau of the State of Michigan, the
Merger shall become effective under the laws of the State of Michigan;
(v) To our knowledge, except as set forth on Schedule
5.15 to the Agreement no notice to, consent, authorization, approval
or order of any court or Agency or of any other third party is
required in connection with the execution, delivery or consummation of
the Agreement by FYI or Acquisition, except for such notices,
consents, authorizations, approvals or orders as have already been
made or obtained; and
(vi) The execution of the Agreement and the performance by
FYI and Acquisition of their respective obligations thereunder will
not violate any of the terms or provisions of their respective
Certificates of Incorporation or By-laws or result in any breach of or
default under any lease, instrument, license, permit or any other
agreement to which they are a party, except where such violations,
breaches or defaults would not have a material adverse effect on FYI.
The opinion set forth in paragraph (ii) above is subject to the
following qualifications: (i) the enforceability of the obligations of FYI and
Acquisition under the Agreement are subject to (1) bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to creditors' rights, (2) the rights of the United States under the
Federal Tax Lien Act of 1966, as amended, and (3) applicable state and federal
laws, regulations, rulings or decisions that authorize the forfeiture of real,
personal, or other property to States or to the United States; (ii) the
availability of equitable remedies, including specific performance and
injunctive relief, is subject to the discretion of the court
66
before which any proceeding therefor may be brought; (iii) we have assumed the
due authorization, execution and delivery of the Agreement by each of the other
parties thereto other than FYI and Acquisition; (iv) no opinion is expressed as
to the enforceability of provisions requiring indemnification for liabilities
under the securities laws; and (v) no opinion is expressed as to the
enforceability of the provisions of the Noncompetition Agreements or the
Employment Agreement.
Insofar as our opinions expressed above pertain to matters of Michigan
law we have relied, without independent verification, on the opinion of Loomis,
Ewert, Parsley, ▇▇▇▇▇ and Gotting. We have no reason to believe our reliance
is not justified. No opinion is expressed with respect to laws other than the
laws of the State of Texas, the General Corporation Law of the State of
Delaware and the federal laws of the United States of America (other than
federal laws applicable to patents, copyrights and trademarks), except to the
extent that we have relied, as to matters of Michigan law, on the opinion of
Loomis, Ewert, Parsley, ▇▇▇▇▇ and Gotting.
This opinion is solely for your benefit and may not be relied on by
any other person other than you or used for any other purpose without our prior
written consent. This opinion is limited to the matters stated herein, and no
opinion is to be implied or may be inferred beyond the matters expressly
stated. We undertake no obligation or responsibility to update or supplement
this opinion.
Very truly yours,
▇▇▇▇▇ ▇▇▇▇▇▇▇ RAIN ▇▇▇▇▇▇▇
(A Professional Corporation)
By:
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
67
ANNEX V
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
SHAREHOLDER RELEASE
68
SHAREHOLDER RELEASE
The undersigned, the shareholders (the "Shareholders") of MMS Escrow
and Transfer Agency, Inc., a Michigan corporation ("MMS"), hereby certify, with
respect to the Agreement and Plan of Reorganization dated as of March 27, 1997
by and among F.Y.I. Incorporated ("FYI"), MMS Escrow Acquisition Corp.
("Acquisition"), MMS and the Shareholders:
1. Each Shareholder releases MMS from any and all claims of such
Shareholder against MMS and obligations of MMS to such Shareholder other than
obligations arising in connection with the Agreement and Plan of Reorganization
described above, any employment and noncompetition agreements between the
Shareholder and FYI and/or Acquisition and any right to the issuance of the
shares of FYI Stock set forth on Annex II to the Agreement and Plan of
Reorganization described above. Each of the Shareholders waives each and every
one of such rights that he may have under Michigan or Texas law to the full
extent that he may lawfully waive such rights with respect to this general
release of claims.
2. This Release may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Shareholder
Release to be duly executed, delivered and authorized, as of this 27th day of
March, 1997.
The ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Living Trust
u/a/d September 10, 1981, as amended
By:
----------------------------------
Title:
-------------------------------
The ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust
u/a/d May 30, 1984, as amended
By:
----------------------------------
Title:
-------------------------------
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
69
ANNEX VI
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
OPINION OF COUNSEL TO THE COMPANY
OPINION OF COUNSEL TO
MMS ESCROW AND TRANSFER AGENCY, INC. ("MMS")
(i) MMS has been duly organized and is validly existing in good
standing under the laws of the State of Michigan;
(ii) The authorized and outstanding capital stock of MMS is as
represented in the Agreement; each share of such stock has been duly and
validly authorized and issued, and is fully paid and nonassessable;
(iii) To our knowledge, MMS has no outstanding options, warrants,
calls, conversion rights or other commitments of any kind to issue or sell any
of its capital stock;
(iv) The Agreement has been duly authorized, executed and delivered
by MMS and the Shareholders, and constitutes a valid and binding agreement of
MMS and such Shareholders, enforceable against MMS and such Shareholders in
accordance with its terms;
(v) Assuming the due authorization, execution, delivery, filing
and endorsement of the Certificate of Merger/Consolidation with the Secretary
of State in the State of Michigan, the Merger shall become effective under the
laws of the State of Michigan. Upon the consummation of the Merger, no former
shareholder of MMS will be entitled to any rights as a dissenting shareholder;
(vi) To our knowledge, except to the extent set forth on Schedule
5.12(b) to the Agreement, MMS is not in default, nor has received any notice of
default, under any of the contracts or agreements listed on such Schedule
5.12(a);
(vii) To our knowledge, except as set forth on Schedule 5.15 (a
schedule to the Agreement or to opinion), no notice to, consent, authorization,
approval or order of any court or Agency or body or of any other third party is
required in connection with the execution, delivery or consummation of the
Agreement by MMS or any of the Shareholders
70
except for such notices, consents, authorizations, approvals or orders as have
already been made or obtained; and
(viii) The execution of the Agreement and the performance by MMS and
the Shareholders of their respective obligations thereunder will not violate
any of the terms or provisions of the Charter Documents of MMS or result in any
breach of or default under any lease, instrument, license, permit or any other
agreement listed on Schedules 5.7, 5.10 or 5.12(a) to the Agreement, except to
the extent specifically set forth on such Schedules and on Schedule 5.12(b) to
the Agreement.
71
ANNEX VII
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
NONCOMPETITION AGREEMENTS
72
SHAREHOLDER NONCOMPETITION AGREEMENT
THIS SHAREHOLDER NONCOMPETITION AGREEMENT (the "Agreement") made and
entered into as of the 27th day of March, 1997, by and among MMS Escrow
Acquisition Corp., a Delaware corporation ("Acquisition"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("Promisor").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Reorganization dated as
of March 27, 1997 (the "Reorganization Agreement"), by and between Acquisition,
F.Y.I. Incorporated ("FYI"), MMS Escrow and Transfer Agency, Inc. (the
"Company"), Promisor and the other shareholders listed therein, Acquisition is
to merge into the Company and the Company is to be the Surviving Corporation in
the Merger (each as defined in the Reorganization Agreement);
WHEREAS, an affiliate of Promisor shall receive shares of common stock
of FYI upon closing of the transactions under the Reorganization Agreement in
exchange for all of its shares of capital stock in the Company;
WHEREAS, the Reorganization Agreement provides, as a condition to the
closing of the transactions thereunder, that Promisor shall execute and deliver
this Agreement;
WHEREAS, the agreements of Promisor hereunder are an important aspect
of the transactions contemplated by the Reorganization Agreement, and
Acquisition would not consummate the transactions contemplated by the
Reorganization Agreement absent the execution and delivery by Promisor of this
Agreement;
WHEREAS, each of Promisor and Acquisition agree and acknowledge that
Promisor has been and is presently engaged in the administrative and securities
recordkeeping services business (the foregoing, the "Business"), in and around
the territories specified in Schedule I attached hereto (collectively, the
"Territory");
WHEREAS, Promisor and Promisor's affiliates have substantial financial
resources, experience in the Business and the ability to operate a business or
businesses that could compete with the Company or FYI in the Business following
the Closing; and
WHEREAS, the agreements of Promisor hereunder are reasonable and
necessary, both in scope and duration, to protect the business and goodwill of
the Company that will be acquired pursuant to the Reorganization Agreement, and
Buyer would suffer damages, including the loss of profits, if Promisor or any
of his affiliates engaged, directly or indirectly, in a competing business
therewith.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements contained herein,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged,
73
and upon the terms and subject to the conditions hereinafter set forth, the
parties do hereby agree as follows:
1. Disclosure of Information. Subject to Section 3(c), Promisor
agrees that for a period of five (5) years after the date hereof, without the
prior written consent of the Company, Promisor shall not, directly or
indirectly, through any form of ownership, in any individual or representative
or affiliated capacity whatsoever, except as may be required by law, reveal,
divulge, disclose or communicate to any person, firm, association, corporation
or other entity in any manner whatsoever information of any kind, nature or
description concerning: (i) the names of any prior or present suppliers or
customers of the Company, (ii) the prices for which the Company obtains or has
obtained products or services, (iii) the names of the personnel of the Company,
(iv) the manner of operation of the Company, (v) the plans, trade secrets, or
other data of any kind, nature or description, whether tangible or intangible,
of the Company, or (vi) any other financial, statistical or other information
that the Company designates or treats as confidential or proprietary. The
agreements set forth herein shall not apply to any information that at the time
of disclosure or thereafter is generally available to and known by the public
(other than as a result of a disclosure directly or indirectly by Promisor in
violation of this Agreement), the disclosure of which is required by law,
regulation, order, decree or process or is otherwise approved by the Company or
FYI. Without regard to whether any or all of the foregoing matters would be
deemed confidential, material or important, the parties hereto stipulate that
as between them, the same are important, material and confidential and gravely
affect the effective and successful conduct of the Business and its goodwill.
2. Noncompetition. Subject to Section 3(c), Promisor agrees that
for a period of five (5) years following the date hereof, Promisor shall not:
(i) Call upon, solicit, divert, take away or attempt to
call upon, solicit, divert or take away any past, existing or
potential customers, suppliers, businesses, or accounts of the
Business in connection with any business substantially similar to the
Business in the Territory;
(ii) Hire, attempt to hire, contact or solicit with
respect to hiring for Promisor or on behalf of any other person any
present or future employee of the Company in the Business;
(iii) Engage in, or give any advice to any person, firm,
partnership, association, venture, corporation or other entity engaged
in, a business substantially similar to the Business in the Territory;
(iv) Lend credit, money or reputation for the purpose of
establishing or operating a business substantially similar to the
Business in the Territory;
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74
(v) Do any act that Promisor knew or reasonably should
have known would be reasonably likely to materially injure the
Company;
(vi) Without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business
under the name "MMS Escrow and Transfer Agency" or any other trade
names, trademarks or service marks heretofore used by Promisor in the
Territory other than as contemplated in the Reorganization Agreement.
The covenants in subsections (i) through (vi) are intended to restrict
Promisor from competing in the Territory in any manner with the Company or the
Business in the activities that have heretofore been carried on by the Company.
The obligations set forth in subsections (i) through (vi) above shall apply to
actions by Promisor, through any form of ownership, and whether as principal,
officer, director, agent, employee, employer, consultant, shareholder or holder
of any equity security (beneficially or as trustee of any trust), lender,
partner, joint venturer or in any other individual or representative or
affiliated capacity whatsoever. None of the foregoing shall prevent Promisor
from being the holder of up to 5.0% in the aggregate of any class of securities
of any corporation engaged in the activities described in subsections (i)
through (vi) above, provided that such securities are listed on a national
securities exchange or reported on Nasdaq.
3. Enforcement of Covenants.
(a) Promisor acknowledges that a violation or
attempted violation of any of the covenants and agreements in Sections
1 and 2 above will cause such damage to the Company as will be
irreparable, the exact amount of which would be difficult to ascertain
and for which there will be no adequate remedy at law, and
accordingly, Promisor agrees that the Company shall be entitled as a
matter of right to an injunction issued by any court of competent
jurisdiction, restraining such violation or attempted violation of
such covenants and agreements by Promisor, or the affiliates, partners
or agents of such Promisor, as well as to recover from Promisor any
and all costs and expenses sustained or incurred by the Company in
obtaining such an injunction, including, without limitation,
reasonable attorneys' fees. Promisor agrees that no bond or other
security shall be required in connection with such injunction.
Promisor further agrees that the five (5) year period of restriction
set forth in Sections 1 and 2 above shall be tolled during any period
of violation thereof by Promisor. Any exercise by the Company of its
rights pursuant to this Section 3 shall be cumulative and in addition
to any other remedies to which the Company may be entitled. Each
party represents and warrants that it has been represented by counsel
in the negotiation and execution of this Agreement, including without
limitation the provisions set forth above in this Section 3(a)
concerning the recovery of attorneys' fees.
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75
(b) Promisor understands and acknowledges that
the Company shall have the right, in its sole discretion, to reduce
the scope of any covenants set forth in Sections 1 and 2, or any
portion thereof, without Promisor's consent, effective immediately
upon receipt by Promisor of written notice thereof; and Promisor
agrees that Promisor shall comply forthwith with any covenant as so
modified, which shall be fully enforceable as so revised in accordance
with the terms of this Agreement.
(c) In the event that Promisor's Employment
Agreement with Acquisition dated of even date herewith is terminated
without cause by Acquisition or with good reason by Promisor (as
described in such Employment Agreement), the term of Promisor's
covenants and agreements set forth in Sections 1 and 2 hereof shall be
reduced to one (1) year from the effective date of such termination.
4. Intellectual Property. Promisor recognizes and agrees that,
on and after the date hereof, Promisor will not have the right to use for
Promisor's own account any of the service marks, trademarks, trade names,
licenses, procedures, processes, labels, trade secrets or customer lists of the
Company.
5. Validity. To the extent permitted by applicable law, if it
should ever be held that any provision contained herein does not contain
reasonable limitations as to time, geographical area or scope of activity to be
restrained, then the court so holding shall at the request of the Company
reform such provisions to the extent necessary to cause them to contain
reasonable limitations as to time, geographical area and scope of activity to
be restrained and to give the maximum permissible effect to the intentions of
the parties as set forth herein; and the court shall enforce such provisions as
so reformed. If, notwithstanding the foregoing, any provision hereof is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof; and the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or enforceable provision or by its severance here from.
Furthermore, in lieu of such illegal, invalid or unenforceable provision there
shall be added automatically by the Company as a part hereof a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable, and the parties hereby agree to
such provision.
6. Notice. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and validly given if (i) delivered personally, (ii)
sent by telecopy with electronic confirmation of receipt, (iii) delivered by
overnight express, or (iv) sent by registered or certified mail, postage
prepaid, as follows:
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76
If to the Company:
MMS Escrow Acquisition Corp.
c/o F.Y.I. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Promisor:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally, or sent by telecopy or overnight express
in the manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon receipt by such party. Any notice that is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been given to the party to whom it is addressed at the close
of business, local time of the recipient, on the fourth day after the day it is
so placed in the mail.
7. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto with respect to the matters covered hereby, and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
8. Modification and Waiver. No modification or amendment of any
of the terms, conditions or provisions in this Agreement may be made otherwise
than by written agreement signed by the parties hereto, except as provided in
Sections 3(b) and 5 hereof. The waiver by any party to this Agreement of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach by any party nor shall such waiver constitute
a continuing waiver.
9. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Neither this Agreement
nor any rights, interests or
-5-
77
obligations hereunder may be assigned by any party hereto without the prior
written consent of the other parties hereto, and any purported assignment in
violation of this Section 9 shall be null and void.
10. Headings. The headings of the sections of this Agreement are
inserted for convenience of reference only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO ITS
CHOICE OF LAW PRINCIPLES).
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and such counterparts
together shall constitute one and the same instrument.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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78
IN WITNESS WHEREOF, the parties have duly caused this Agreement to be
executed as of the date first above written.
ACQUISITION:
MMS ESCROW ACQUISITION CORP.
By:
---------------------------------
Printed Name:
Title:
PROMISOR:
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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79
SCHEDULE I
TERRITORY
That area within the boundaries of the State of Michigan (the "State")
and within one hundred (100) miles of any boundary of the State.
80
SHAREHOLDER NONCOMPETITION AGREEMENT
THIS SHAREHOLDER NONCOMPETITION AGREEMENT (the "Agreement") made and
entered into as of the 27th day of March, 1997, by and among MMS Escrow
Acquisition Corp., a Delaware corporation ("Acquisition"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("Promisor").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Reorganization dated as
of March 27, 1997 (the "Reorganization Agreement"), by and between Acquisition,
F.Y.I. Incorporated ("FYI"), MMS Escrow and Transfer Agency, Inc. (the
"Company"), Promisor and the other shareholders listed therein, Acquisition is
to merge into the Company and the Company is to be the Surviving Corporation in
the Merger (each as defined in the Reorganization Agreement);
WHEREAS, an affiliate of Promisor shall receive shares of common stock
of FYI upon closing of the transactions under the Reorganization Agreement in
exchange for all of its shares of capital stock in the Company;
WHEREAS, the Reorganization Agreement provides, as a condition to the
closing of the transactions thereunder, that Promisor shall execute and deliver
this Agreement;
WHEREAS, the agreements of Promisor hereunder are an important aspect
of the transactions contemplated by the Reorganization Agreement, and
Acquisition would not consummate the transactions contemplated by the
Reorganization Agreement absent the execution and delivery by Promisor of this
Agreement;
WHEREAS, each of Promisor and Acquisition agree and acknowledge that
Promisor has been and is presently engaged in the administrative and securities
recordkeeping services business (the foregoing, the "Business"), in and around
the territories specified in Schedule I attached hereto (collectively, the
"Territory");
WHEREAS, Promisor and Promisor's affiliates have substantial financial
resources, experience in the Business and the ability to operate a business or
businesses that could compete with the Company or FYI in the Business following
the Closing; and
WHEREAS, the agreements of Promisor hereunder are reasonable and
necessary, both in scope and duration, to protect the business and goodwill of
the Company that will be acquired pursuant to the Reorganization Agreement, and
Buyer would suffer damages, including the loss of profits, if Promisor or any
of his affiliates engaged, directly or indirectly, in a competing business
therewith.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual representations, warranties, covenants and agreements contained herein,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged,
81
and upon the terms and subject to the conditions hereinafter set forth, the
parties do hereby agree as follows:
1. Disclosure of Information. Subject to Section 3(c), Promisor
agrees that for a period of five (5) years after the date hereof, without the
prior written consent of the Company, Promisor shall not, directly or
indirectly, through any form of ownership, in any individual or representative
or affiliated capacity whatsoever, except as may be required by law, reveal,
divulge, disclose or communicate to any person, firm, association, corporation
or other entity in any manner whatsoever information of any kind, nature or
description concerning: (i) the names of any prior or present suppliers or
customers of the Company, (ii) the prices for which the Company obtains or has
obtained products or services, (iii) the names of the personnel of the Company,
(iv) the manner of operation of the Company, (v) the plans, trade secrets, or
other data of any kind, nature or description, whether tangible or intangible,
of the Company, or (vi) any other financial, statistical or other information
that the Company designates or treats as confidential or proprietary. The
agreements set forth herein shall not apply to any information that at the time
of disclosure or thereafter is generally available to and known by the public
(other than as a result of a disclosure directly or indirectly by Promisor in
violation of this Agreement), the disclosure of which is required by law,
regulation, order, decree or process or is otherwise approved by the Company or
FYI. Without regard to whether any or all of the foregoing matters would be
deemed confidential, material or important, the parties hereto stipulate that
as between them, the same are important, material and confidential and gravely
affect the effective and successful conduct of the Business and its goodwill.
2. Noncompetition. Subject to Section 3(c), Promisor agrees that
for a period of five (5) years following the date hereof, Promisor shall not:
(i) Call upon, solicit, divert, take away or attempt to
call upon, solicit, divert or take away any past, existing or
potential customers, suppliers, businesses, or accounts of the
Business in connection with any business substantially similar to the
Business in the Territory;
(ii) Hire, attempt to hire, contact or solicit with
respect to hiring for Promisor or on behalf of any other person any
present or future employee of the Company in the Business;
(iii) Engage in, or give any advice to any person, firm,
partnership, association, venture, corporation or other entity engaged
in, a business substantially similar to the Business in the Territory;
(iv) Lend credit, money or reputation for the purpose of
establishing or operating a business substantially similar to the
Business in the Territory;
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82
(v) Do any act that Promisor knew or reasonably should
have known would be reasonably likely to materially injure the
Company;
(vi) Without limiting the generality of the foregoing
provisions, conduct a business substantially similar to the Business
under the name "MMS Escrow and Transfer Agency, Inc." or any other
trade names, trademarks or service marks heretofore used by Promisor
in the Territory other than as contemplated in the Reorganization
Agreement.
The covenants in subsections (i) through (vi) are intended to restrict
Promisor from competing in the Territory in any manner with the Company or the
Business in the activities that have heretofore been carried on by the Company.
The obligations set forth in subsections (i) through (vi) above shall apply to
actions by Promisor, through any form of ownership, and whether as principal,
officer, director, agent, employee, employer, consultant, shareholder or holder
of any equity security (beneficially or as trustee of any trust), lender,
partner, joint venturer or in any other individual or representative or
affiliated capacity whatsoever. None of the foregoing shall prevent Promisor
from being the holder of up to 5.0% in the aggregate of any class of securities
of any corporation engaged in the activities described in subsections (i)
through (vi) above, provided that such securities are listed on a national
securities exchange or reported on Nasdaq.
3. Enforcement of Covenants.
(a) Promisor acknowledges that a violation or
attempted violation of any of the covenants and agreements in Sections
1 and 2 above will cause such damage to the Company as will be
irreparable, the exact amount of which would be difficult to ascertain
and for which there will be no adequate remedy at law, and
accordingly, Promisor agrees that the Company shall be entitled as a
matter of right to an injunction issued by any court of competent
jurisdiction, restraining such violation or attempted violation of
such covenants and agreements by Promisor, or the affiliates, partners
or agents of such Promisor, as well as to recover from Promisor any
and all costs and expenses sustained or incurred by the Company in
obtaining such an injunction, including, without limitation,
reasonable attorneys' fees. Promisor agrees that no bond or other
security shall be required in connection with such injunction.
Promisor further agrees that the five (5) year period of restriction
set forth in Sections 1 and 2 above shall be tolled during any period
of violation thereof by Promisor. Any exercise by the Company of its
rights pursuant to this Section 3 shall be cumulative and in addition
to any other remedies to which the Company may be entitled. Each
party represents and warrants that it has been represented by counsel
in the negotiation and execution of this Agreement, including without
limitation the provisions set forth above in this Section 3(a)
concerning the recovery of attorneys' fees.
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83
(b) Promisor understands and acknowledges that
the Company shall have the right, in its sole discretion, to reduce
the scope of any covenants set forth in Sections 1 and 2, or any
portion thereof, without Promisor's consent, effective immediately
upon receipt by Promisor of written notice thereof; and Promisor
agrees that Promisor shall comply forthwith with any covenant as so
modified, which shall be fully enforceable as so revised in accordance
with the terms of this Agreement.
(c) In the event that Promisor's Employment
Agreement with Acquisition dated of even date herewith is terminated
without cause by Acquisition or with good reason by Promisor (as
described in such Employment Agreement), the term of Promisor's
covenants and agreements set forth in Sections 1 and 2 hereof shall be
reduced to one (1) year from the effective date of such termination.
4. Intellectual Property. Promisor recognizes and agrees that,
on and after the date hereof, Promisor will not have the right to use for
Promisor's own account any of the service marks, trademarks, trade names,
licenses, procedures, processes, labels, trade secrets or customer lists of the
Company.
5. Validity. To the extent permitted by applicable law, if it
should ever be held that any provision contained herein does not contain
reasonable limitations as to time, geographical area or scope of activity to be
restrained, then the court so holding shall at the request of the Company
reform such provisions to the extent necessary to cause them to contain
reasonable limitations as to time, geographical area and scope of activity to
be restrained and to give the maximum permissible effect to the intentions of
the parties as set forth herein; and the court shall enforce such provisions as
so reformed. If, notwithstanding the foregoing, any provision hereof is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof; and the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or enforceable provision or by its severance here from.
Furthermore, in lieu of such illegal, invalid or unenforceable provision there
shall be added automatically by the Company as a part hereof a provision as
similar in terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable, and the parties hereby agree to
such provision.
6. Notice. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and validly given if (i) delivered personally, (ii)
sent by telecopy with electronic confirmation of receipt, (iii) delivered by
overnight express, or (iv) sent by registered or certified mail, postage
prepaid, as follows:
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If to the Company:
MMS Escrow Acquisition Corp.
c/o F.Y.I. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Promisor:
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally, or sent by telecopy or overnight express
in the manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon receipt by such party. Any notice that is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been given to the party to whom it is addressed at the close
of business, local time of the recipient, on the fourth day after the day it is
so placed in the mail.
7. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto with respect to the matters covered hereby, and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
8. Modification and Waiver. No modification or amendment of any
of the terms, conditions or provisions in this Agreement may be made otherwise
than by written agreement signed by the parties hereto, except as provided in
Sections 3(b) and 5 hereof. The waiver by any party to this Agreement of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach by any party nor shall such waiver constitute
a continuing waiver.
9. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective
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successors and permitted assigns. Neither this Agreement nor any rights,
interests or obligations hereunder may be assigned by any party hereto without
the prior written consent of the other parties hereto, and any purported
assignment in violation of this Section 9 shall be null and void.
10. Headings. The headings of the sections of this Agreement are
inserted for convenience of reference only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO ITS
CHOICE OF LAW PRINCIPLES).
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and such counterparts
together shall constitute one and the same instrument.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties have duly caused this Agreement to be
executed as of the date first above written.
ACQUISITION:
MMS ESCROW ACQUISITION CORP.
By:
----------------------------------
Printed Name:
Title:
PROMISOR:
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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SCHEDULE I
TERRITORY
That area within the boundaries of the State of Michigan (the "State")
and within one hundred (100) miles of any boundary of the State.
88
ANNEX VIII
TO THAT CERTAIN
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 27, 1997
BY AND AMONG
F.Y.I. INCORPORATED
MMS ESCROW ACQUISITION CORP.
MMS ESCROW AND TRANSFER AGENCY, INC.
AND
THE SHAREHOLDERS NAMED THEREIN
AFFILIATE AGREEMENT
89
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (the "Agreement") is made and entered into as
of March 27, 1997 by and among F.Y.I. Incorporated, a Delaware corporation
("FYI"), MMS Escrow Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of FYI ("Newco"), MMS Escrow and Transfer Agency, Inc.,
a Michigan corporation (the "Company"), and the undersigned affiliate of the
Company ("Affiliate").
RECITALS
A. The Company, FYI, Newco, Affiliate and certain other parties
have entered into an Agreement and Plan of Reorganization (the "Reorganization
Agreement") and the Company and Newco have entered or will enter into a Plan of
Merger, which agreements (collectively, the "Merger Agreements") provide for
the merger (the "Merger") of Newco with and into the Company, with the Company
as the surviving corporation (the "Surviving Corporation"). Pursuant to the
Merger, all outstanding capital stock of the Company will be converted into the
common stock, $.01 par value of FYI (the "FYI Stock").
B. Affiliate may, as a result of the Merger, receive shares of
FYI Stock (the "Shares") in exchange for shares owned by Affiliate of the
common stock of the Company (the "Company Stock").
C. Affiliate understands that, because the Merger will be
accounted for using the "pooling of interests" method and Affiliate may be
deemed, as of the date hereof, to be an "affiliate" of the Company, as such
term is defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules
and regulations of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), the Shares
beneficially owned by Affiliate may only be disposed of in conformity with the
limitations described herein.
NOW THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares. (a) Affiliate agrees not to
transfer, sell, or otherwise dispose of or direct or cause the sale, transfer
or other disposition of, or reduce Affiliate's risk relative to, any shares of
the Company Stock (except for the conversion of the Company Stock into FYI
Stock in the Merger) or Shares held by Affiliate or on Affiliate's behalf,
whether owned on the date hereof or after acquired, within the thirty (30) days
prior to the Effective Time of the Merger (as defined in the Reorganization
Agreement).
(b) Affiliate further agrees not to transfer, sell or
otherwise dispose of, or direct or cause the sale, transfer or other
disposition of, or reduce Affiliate's risk relative to, any Shares held by
Affiliate or on Affiliate's behalf or received by Affiliate or on Affiliate's
behalf in or as a result of the Merger or otherwise, until after the date (the
"Expiration Date") FYI shall have publicly released a report in the form of a
quarterly earnings report, registration statement filed with the Commission, a
report filed with the Commission on Form 10-K, 10-Q or 8-K or any other public
filing, statement or public announcement that
90
includes the combined financial results (including combined sales and net
income) of FYI and the Company for a period of at least thirty (30) days of
combined operations of FYI and the Company following the Effective Time of the
Merger.
2. Representations, Warranties and Covenants of Affiliate.
Affiliate represents, warrants and covenants as follows:
(a) Affiliate has full power and authority to execute
this Agreement, to make the representations, warranties and covenants
herein contained and to perform Affiliate's obligations hereunder.
(b) Affiliate will not sell, transfer, or otherwise
dispose of, or make any offer or agreement relating to any of the
foregoing with respect to, any Shares, except: (i) in a transaction
permitted pursuant to Rule 145 under the Securities Act; (ii) in a
transaction that is otherwise exempt from the registration
requirements of the Securities Act; or (iii) pursuant to a
registration statement under the Securities Act.
3. Rules 144 and 145. From and after the Effective Time of the
Merger and for so long as is necessary in order to permit Affiliate to sell the
Shares pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, FYI will use reasonable efforts to file on a timely basis all
reports required to be filed by it pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder, as the same shall
be in effect at the time, referred to in paragraph (c) of Rule 144 under the
Securities Act, in order to permit Affiliate to sell, transfer or otherwise
dispose of the Shares held by it pursuant to the terms and conditions of Rule
145 and the applicable provisions of Rule 144.
4. Limited Resales. FYI acknowledges that the provisions of
Section 2(b) of this Agreement will be satisfied as to any sale by the
undersigned of the Shares pursuant to Rule 145(b) under the Securities Act,
upon receipt of a broker's letter and a letter from the undersigned with
respect to that sale stating that the applicable requirements of Rule 145(d)(1)
have been met or a letter from the undersigned stating that the requirements of
Rule 145(d)(1) are inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3);
provided, however, that FYI has no reasonable basis to believe that such sales
were not made in compliance with such provisions of Rule 135(d) and subject to
any changes in Rule 145 after the date of this Agreement.
5. Legends. Affiliate also understands and agrees that stop
transfer instructions will be given to FYI's transfer agent with respect to
certificates evidencing the Shares and that there will be placed on the
certificate evidencing the Shares legends stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A
TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THE
SHARES REPRESENTED HEREBY HAVE BEEN
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ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH
SALE OR TRANSFER IS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR, IN
THE OPINION OF COUNSEL TO THE ISSUER, IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,TRANSFERRED
OR ASSIGNED, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO
ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT, PRIOR TO THE PUBLICATION
AND DISSEMINATION OF FINANCIAL STATEMENTS BY THE ISSUER WHICH INCLUDE
THE RESULTS OF AT LEAST THIRTY (30) DAYS OF COMBINED OPERATIONS OF THE
ISSUER AND THE SURVIVING CORPORATION OF THE MERGER BETWEEN MMS ESCROW
ACQUISITION CORP. AND MMS ESCROW AND TRANSFER AGENCY, INC. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENTS) WHEN THIS REQUIREMENT HAS BEEN MET.
and
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF SUCH RULE.
After the Expiration Date, FYI agrees to deliver instructions to its transfer
agent to remove the above legends, and replace such legends with the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF SUCH RULE.
and (to the extent applicable):
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A
TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THE
SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS COVERED BY
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR, IN THE OPINION OF
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COUNSEL TO THE ISSUER, IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND SUCH LAWS.
FYI agrees to remove promptly such stop transfer instructions and legend by
delivery of instructions to its transfer agent to remove such legend upon (i)
the transfer of the Shares represented by such certificate pursuant to a
registration statement under the Securities Act or in accordance with the
applicable provisions of Rule 145 under the Securities Act (including, without
limitation, paragraph (d) thereof), (ii) the expiration of the restrictive
period set forth in Rule 145(d), or (iii) the delivery by Affiliate to FYI of a
copy of a letter from the Staff of the Commission, or an opinion of counsel in
form and substance reasonably satisfactory to FYI, to the effect that such
legend is not required for purposes of the Securities Act.
6. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, and
all of which together shall constitute one and the same instrument.
(b) Binding Agreement. This Agreement will inure to the
benefit of and be binding upon and enforceable against the parties and
their successors and assigns, including administrators, executors,
representatives, heirs, legatees and devisees of Affiliate and
pledgees holding FYI Stock as collateral.
(c) Waiver. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement shall be
effective unless in writing and signed by each party hereto.
(d) Governing Law. This Agreement shall be governed by
and construed, interpreted and enforced in accordance with the laws of
the State of Delaware.
(e) Effect of Headings. The Section headings herein are
for convenience only and shall not affect the construction or
interpretation of this Agreement.
(f) Third Party Reliance. Counsel to and independent
auditors for the parties shall be entitled to rely upon this
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
FYI: AFFILIATE:
F.Y.I. INCORPORATED
--------------------------------
By: By:
---------------------------- -----------------------------
Title: Title:
------------------------- --------------------------
Affiliate's Address for Notice:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
THE COMPANY: NEWCO:
MMS ESCROW AND TRANSFER MMS ESCROW ACQUISITION CORP.
AGENCY, INC.
By: By:
---------------------------- -----------------------------
Title: Title:
------------------------- --------------------------
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