EXHIBIT (10)(c)
FAREISI TRANSITION AGREEMENT
This FAREISI TRANSITION AGREEMENT (this "Agreement") is made as of the 30th
day of November, 1997 by and among First American Real Estate Solutions LLC, a
California limited liability company ("NEWCO"), First American Real Estate
Information Services, Inc., a California corporation ("FAREISI"), for itself and
each of the FAFCO Members (as such term is defined in the Joint Venture
Agreement described below), and The First American Financial Corporation, a
California corporation ("FAFCO").
RECITALS
A. NEWCO was formed on or before November 30, 1997 as a limited liability
company with FAREISI, certain affiliates of FAREISI, and EXPERIAN INFORMATION
SOLUTIONS, INC. ("EXPERIAN"), as members. The FAFCO Members contributed the
assets, liabilities and going business of their respective Real Estate
Information Service businesses (collectively, the "FAREISI Business") to NEWCO
in return for issuance of an eighty percent (80%) membership interest in NEWCO.
EXPERIAN contributed the assets, liabilities and going business of its Real
Estate Solutions business (the "RES Business") and Ten Million Dollars
($10,000,000) cash to NEWCO in return for issuance of a twenty percent (20%)
membership interest in NEWCO. These contributions and membership interests are
the subject of a Contribution and Joint Venture Agreement dated as of November
30, 1997 (the "Joint Venture Agreement") and an Operating Agreement dated as of
November 30, 1997 (the "Operating Agreement").
B. The parties have agreed to enter into this Agreement to provide for
certain matters relating to the operation of the FAREISI Business by NEWCO
following the Closing Date, subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration for the forgoing and for other good and
valuable consideration, and intending to be legally bound hereby, the parties
hereby agree as follows:
TERMS AND CONDITIONS
ARTICLE I
Definitions and Construction
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1.1 Definitions: The Joint Venture Agreement and the Operating Agreement
define certain terms. Such terms shall, to the extent not inconsistent with the
definitions contained in this Agreement have the meanings set forth in those
agreements, where used herein and identified with initial capital letters.
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1.2 Other Definitions, Meanings and Interpretations: For purposes of this
Agreement, the term "parties" means (except where the context otherwise
requires) NEWCO, FAREISI and FAFCO; the term "person" includes any natural
person, firm, association, partnership, corporation, limited liability company,
governmental agency or other entity other than the parties; and the words
"hereof," "herein," "hereby" and other words of similar import refer to this
Agreement as a whole. The headings of the Articles and Sections of this
Agreement have been included herein for convenience of reference only and shall
not be deemed to affect the meaning of the operative provisions of this
Agreement. The meanings given to defined terms (whether defined herein or in
the Joint Venture and Operating Agreements) shall apply equally to both the
singular and plural forms of such terms.
1.3 Relationship with the Joint Venture and Operating Agreements: This
Agreement is intended to support and supplement the Joint Venture and Operating
Agreements. Wherever possible, this Agreement and the Joint Venture and
Operating Agreements shall be construed as being consistent. Where particular
matters are addressed expressly in this Agreement, the terms and conditions of
this Agreement, and not those of the Joint Venture or Operating Agreement, shall
govern. Otherwise, the terms and conditions of the Joint Venture and Operating
Agreements shall govern.
ARTICLE II
Human Resource Matters
----------------------
2.1 Transition of Hired Employees: Except as otherwise specifically
provided in Section 2.2, all employees of the FAREISI Business shall, at the
Effective Time, automatically become employees of NEWCO as of the Effective
Time. All employees of the FAREISI Business automatically hired by NEWCO as of
the Effective Time shall be referred to herein as the "Hired Employees." Except
as otherwise specifically provided in this Agreement, no FAFCO Member shall have
any obligation with respect to the Hired Employees after the Effective Time.
2.2 Inactive Employees: Notwithstanding anything in this Agreement, the
Joint Venture Agreement or the Operating Agreement to the contrary, FAREISI
shall cause each FAFCO Member (subject to such FAFCO Member's policies and
procedures) to retain all of its employees engaged in the FAREISI Business who
are on leave of absence status (whether paid or unpaid) as of the Effective Time
(together with all liabilities related to such retained employees), until such
time as such FAFCO Member has determined, in good faith and consistent with past
practices, that any such person may return to active status. Upon making such
determination, the FAFCO Member shall promptly notify NEWCO and such employee
shall thereafter, upon reporting to work, automatically become an employee of
NEWCO and shall be treated as a Hired Employee for the purposes of this
Agreement (and all liabilities related to such employee shall then be
automatically assumed by NEWCO).
2.3 Insurance Plans: FAFCO acknowledges and agrees that NEWCO does not
intend to establish its own medical, vision, dental, life, accidental death and
dismemberment,
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and long-term disability plans (collectively, "Insurance Plans") for the Hired
Employees. Accordingly, from and after the Effective Time, for so long as NEWCO
desires, FAFCO shall ensure that the Hired Employees and, to the extent NEWCO so
desires, any other employees hired from time to time by NEWCO after the
Effective Time (collectively, the "NEWCO Employees") are eligible to participate
in FAFCO's Insurance Plans upon terms and conditions substantially similar to
those offered to employees of FAFCO and its subsidiaries. NEWCO agrees to
reimburse FAFCO for FAFCO's direct costs, if any, incurred in making the
Insurance Plans available to the NEWCO Employees.
2.4 Accrued Vacation: Each FAFCO Member will transfer to NEWCO the
liability for accrued vacation pay of the Hired Employees as of the Effective
Time. NEWCO will credit to each Hired Employee the accrued vacation such Hired
Employee accrued with FAREISI prior to the Effective Time.
2.5 401(k) Plans: FAFCO acknowledges and agrees the NEWCO does not
intend to establish its own 401(k) plan for the NEWCO Employees. Accordingly,
from and after the Effective Time, for so long as NEWCO desires, FAFCO shall
ensure that the NEWCO Employees are eligible to participate in FAFCO's 401(k)
plan upon substantially terms and conditions substantially similar to those
offered to employees of FAFCO and its subsidiaries. NEWCO agrees to reimburse
FAFCO for FAFCO's direct costs, if any, incurred in making the 401(k) plan
available to the NEWCO Employees.
ARTICLE III
Treasury, Banking and Tax Matters
---------------------------------
3.1 Disbursement Accounts:
(a) During the period from the Closing Date through the Effective Time
(the "Interim Operating Period"), FAREISI shall cause each FAFCO
Member to (i) retain control over any disbursement account presently
under the control of a FAFCO Member and (ii) continue to issue checks
on behalf of the FAREISI Business in the ordinary course of business.
FAREISI shall cause each FAFCO Member to separately account for
amounts distributed by such FAFCO Member on behalf of the FAREISI
Business.
(b) In the event that NEWCO does not have a disbursement system or
disbursement bank account in place by the Effective Time, FAREISI
shall cause each FAFCO Member to assist NEWCO in processing NEWCO
payments subsequent to the Effective Time, as follows:
Prior to the Effective Time, those FAFCO Members which need to do so
will open a new disbursement bank account ("NEWCO's FAREISI
Disbursement Bank Account") to process post-Effective Time payments
relating to the FAREISI Business. Each FAFCO Member will continue to
process such
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accounts payable after the Effective Time and shall be entitled to be
reimbursed for its direct costs incurred in connection therewith. The
checks for these payments will be written from NEWCO's FAREISI
Disbursement Bank Account. This bank account will not be run as a
controlled disbursement account. No FAFCO Member will fund this
account. The FAFCO Members will issue checks from NEWCO's FAREISI
Disbursement Bank Account only to the extent that funding has been
provided to this account by NEWCO in advance. There will be no
interest credited to this account. All bank costs, expenses, fees and
earnings credits relating to the opening and operation of NEWCO's
FAREISI Disbursement Bank Account will be the responsibility of NEWCO
and will be charged directly to such account.
(c) Within ninety (90) days after the Effective Date (the last day of such
ninety (90) day period to be known as the "Bank Account Cut-off
Date"), NEWCO will have completed all necessary actions to transfer
the ownership of NEWCO's FAREISI Disbursement Bank Account to NEWCO.
Regardless of whether the transfer of ownership of FAREISI's NEWCO
Disbursement Bank Account to NEWCO has been completed by the Bank
Account Cut-off Date, FAREISI shall cause the FAFCO Members to cease
issuing checks from this account as of the end of the Bank Account
Cut-Off Date.
3.2 Lock Box Accounts: FAREISI shall cause the FAFCO Members to assist
NEWCO in working work with FAFCO Members' banks to cause the lock boxes and
related bank accounts of the FAREISI Business in existence on the date hereof to
transfer to NEWCO as of the Effective Time. All cleared funds received into
these lock boxes prior to the Effective Time will be the property of the FAFCO
Members; provided, however that (i) if the cleared funds received into these
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accounts during the Interim Operating Period exceed the cash disbursements
(including, without limitation, payroll disbursements) of the FAREISI Business
during the Interim Operating Period, FAREISI shall cause an aggregate amount
equal to such difference to be deposited in such lock box accounts within (2)
business days following the Effective Date and such amounts will become the
property of NEWCO, or (ii) if the cleared funds received into these accounts
during the Interim Operating Period are less than the cash disbursements
(including, without limitation, payroll disbursements) of the FAREISI Business
during the Interim Operating Period, NEWCO shall within two (2) business days
following the Effective Date reimburse FAREISI for such difference. All cleared
funds received after the Effective Time will be the property of NEWCO.
3.3 Payroll Accounts:
(a) During the Interim Period, FAREISI shall cause each FAFCO Member to
retain its payroll bank accounts in existence on the date hereof.
FAREISI shall cause the FAFCO Members to (with respect to the FAREISI
Business) issue paychecks and make direct payroll deposits from this
account for the period from the Closing Date through the end of the
last payroll period ending prior to
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the Effective Time. All payroll liabilities of the FAREISI Business
for Hired Employees accrued after such time will be transferred to
NEWCO at the Effective Time.
(b) In the event that NEWCO does not have a payroll system or payroll bank
account in place by the Effective Time, FAREISI shall cause each FAFCO
Member to assist NEWCO in processing NEWCO's payroll related to the
FAREISI Business subsequent to the Effective Time, as follows:
Prior to the Effective Time, those FAFCO Members which need to do so
will open a new payroll bank account ("NEWCO's FAREISI Payroll Bank
Account") to process NEWCO payroll relating to the FAREISI Business.
Each FAFCO Member shall continue to process such payroll after the
Effective Time and shall be entitled to be reimbursed for its direct
costs incurred in connection therewith. These payments will be issued
from NEWCO's FAREISI Payroll Bank Account. This bank account will not
be run as a controlled disbursement account. No FAFCO Member will
fund this account. NEWCO must deposit funds into the account for
payroll taxes paid and net payroll one day before each pay day. There
will be no interest credited to this account. All bank costs,
expenses, fees and earnings credits relating to the opening and
operation of NEWCO's FAREISI Payroll Bank Account will be the
responsibility of NEWCO and will be charged directly to such account.
(c) By the Bank Account Cut-off Date, NEWCO will have completed all
necessary actions to transfer the ownership of NEWCO's FAREISI Payroll
Bank Account to NEWCO. Regardless of whether the transfer of
ownership of NEWCO's FAREISI Payroll Bank Account to NEWCO has been
completed by the Bank Account Cut-off Date, FAREISI will cause the
FAFCO Members to cease issuing checks and making payments from this
account as of the end of the Bank Account Cut-Off Date.
3.4 Escrow and Petty Cash Accounts: FAREISI shall cause the FAFCO Members
to assist NEWCO in working with FAREISI's banks to cause the escrow and petty
cash bank accounts applicable to the FAREISI Business in existence on the date
hereof to transfer to NEWCO as of the Effective Time. Funds in these accounts
as of the Effective Time will be the property of NEWCO. FAREISI shall cause the
FAFCO Members to operate and fund these accounts in the ordinary course of
business until the Effective Date.
3.5 Tax and Wage Information: Each Hired Employee will receive one W-2
and one 1099 from each FAFCO Member by which such employee was employed for
calendar year 1997.
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ARTICLE IV
Financial Coordination
----------------------
4.1 Bonuses: FAREISI shall cause the account balances of such accounts as
are kept by each FAFCO Member for the purpose of awarding bonuses and/or
commissions to such FAFCO Members' employees under any applicable bonus or
commission plans, if any, as funded through the Effective Time with respect to
the Hired Employees to be transferred to NEWCO at the Effective Time. FAREISI
shall cause each FAFCO Member to determine, in good faith and generally
consistent with past practice, the actual payout amounts for the Hired Employees
under such plans, if any, for that portion of fiscal year 1997/1998 up to the
Effective Time in accordance with that FAFCO Members' normal practices and
processes and thereafter deliver such payout information to NEWCO. NEWCO shall
distribute such bonuses/commissions, as instructed by the FAFCO Member, to the
appropriate recipients at such times as NEWCO shall determine (but in no event
prior to January 1, 1998). Within five (5) business days following any payment
of such bonuses/commissions, FAREISI shall cause the FAFCO Member to reimburse
NEWCO for the total costs related to such bonuses/commissions to the extent they
relate to the period through November 30, 1997.
4.2 Surety Bonds: As promptly as possible after the Effective time,
NEWCO shall take any and all action necessary to have each surety bond relating
to the FAREISI Business which was provided by any FAFCO Member to be replaced by
a surety bond obtained by NEWCO. If, after the Effective Time, any FAFCO Member
is required to pay any amounts under any surety bond for actions or inactions on
the part of NEWCO or any of its affiliates, then NEWCO shall reimburse such
FAFCO Member for all amounts paid by such FAFCO Member under such surety bond
within five (5) business days of receipt from the FAFCO Member of a request for
the payment of such amounts.
ARTICLE V
Corporate Purchase Agreements
-----------------------------
5.1 Certain Existing Purchase Agreements: Prior to the Effective Date,
the FAREISI Business received goods and services pursuant to purchase agreements
entered into by the FAFCO Members on behalf of all of their business units (the
"Existing Purchase Agreements"). The Joint Venture and Operating Agreements do
not contemplate that NEWCO will be able to continue to obtain goods and services
after the Effective Time pursuant to the Existing Purchase Agreements.
Therefore, NEWCO shall use its reasonable best efforts to obtain new contracts
from such vendors or other, lenders on a stand-alone basis as promptly as
possible after the Effective Time. In the meantime, however, in order to
provide NEWCO with an opportunity to solicit new bids and negotiate new
contracts for the goods and services provided under the Existing Purchase
Agreements, FAREISI shall cause the FAFCO Members to, if and only to the extent
expressly permitted by the terms of the Existing Purchase Agreements, allow
NEWCO to purchase goods and services pursuant to the Existing Purchase
Agreements for, except as provided below, a period not to exceed one hundred
eighty (180)
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days after the Effective Date (the "Transition Period"). During the Transition
Period, NEWCO shall pay all vendors providing goods or services to it under the
Existing Purchase Agreements pursuant to separate purchase orders. Upon
expiration of the Transition Period, NEWCO's right to purchase goods and
services pursuant to the Existing Purchase Agreements shall terminate and
FAREISI shall have no other obligations to NEWCO with respect to such
agreements.
ARTICLE VI
Additional Agreements
---------------------
6.1 Excelis Agreement: During the Interim Operating Period, FAFCO,
FAREISI and NEWCO shall, subject to the terms of the Operating Agreement as
incorporated into the Interim Operating Agreement, use their best efforts to
document the relationship that Excelis, Inc. will have with NEWCO from and after
the Effective Time.
6.2 Dallas Property: During the Interim Operating Period, FAREISI and
NEWCO shall, subject to the terms of the Operating Agreement as incorporated
into the Interim Operating Agreement, use their best efforts to document the
relationship that FAREISI will have with NEWCO from and after the Effective Time
in respect of that certain real property owned by FAREISI and located at 8435
Stemmons Freeway, Dallas, Texas (the "Dallas Property"), which relationship
shall require FAREISI (i) to sublease to NEWCO that space currently utilized in
connection with the FAREISI Business and (ii) to make available to NEWCO certain
tenant improvements at the Dallas Property, which tenant improvements shall be
paid for on a monthly basis over a ten-year period.
ARTICLE VII
General Support Services
------------------------
7.1 Post-Effective Date Support Arrangements: Each of FAREISI and NEWCO
anticipate that occasional requests for services regarding tax, payroll,
treasury and other matters (including requests to answer specific questions
related thereto) may be made by the other party after the Effective Date.
Subject to the terms of the Operating Agreement, such services shall be provided
without charge unless the party receiving such request determines, in its sole
discretion, that satisfaction of such request would involve the expenditure of a
significant amount of time and/or resources, in which case, such party shall
provide to the requesting party an estimate of the costs anticipated to be
incurred in satisfying the request, which costs shall include (a) the pro rata
portion of the salary and bonus of the employees actually providing the services
requested pursuant hereto, (b) reasonable out-of-pocket expenses (evidenced by
appropriate documentation) and (c) a payroll expense charge in an amount equal
to 23% of the amount of salary billed and 11% of bonus billed, pursuant to
clause (a) above. Upon receipt of such estimate, the requesting party shall
have two (2) business days in which to notify the other party whether such party
should undertake to
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provide the requested services. If such services are provided, the party
providing the services shall deliver to the requesting party an invoice on a
monthly basis containing a description of the services performed and the
aggregate costs actually incurred in performing such services (which amount may
exceed the estimate provided to the requesting party, provided that in such
case, the party providing the services shall provide reasonable detail to the
requesting party as to the nature of such excess). The invoice shall be paid by
the requesting party within thirty (30) days of receipt thereof. Notwithstanding
the foregoing, FAREISI and NEWCO may from time to time require personnel and
other data from the other party related to or required in connection with their
maintenance of human resources databases, which information shall be provided to
the requesting party without charge. The parties obligation to provide support
services pursuant to this Section 6.1 is in addition to any other specific
support services commitments agreed to by the parties pursuant to any other
agreements, including the Joint Venture and Operating Agreements, and nothing in
this Section 6.1 is intended or shall be construed to obligate any party to pay
or reimburse any amounts with respect to such other commitments.
ARTICLE VIII
Miscellaneous
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8.1 Cooperation: The parties will cooperate in good faith to carry out
the purposes of this Agreement. Without limiting the generality of the
foregoing, each party will assist the other party and furnish the other party
with such information and documentation as the other party may reasonably
request.
8.2 Enforcement Against the FAFCO Members: FAREISI shall cause each FAFCO
Member to comply with its obligations under this Agreement.
8.3 Indemnity:
(a) NEWCO agrees to defend, indemnify and hold harmless each FAFCO Member
and its subsidiaries and affiliates (including, without limitation,
their respective officers, directors, employees, shareholders and
agents) (the "FAFCO Parties") against any and all liabilities,
damages, losses, claims, costs and expenses (including, without
limitation, costs of collection and reasonable attorneys' fees)
(collectively, "Damages") arising out of or resulting from any demand,
claim, lawsuit or other cause of action brought by a third party as a
result of or in connection with the post-closing services rendered by
employees of any FAFCO Party pursuant to this Agreement, provided that
no FAFCO Party shall be entitled to indemnification in respect of its
or his own gross negligence or wilful misconduct.
(b) FAREISI hereby agrees to defend, indemnify and hold harmless NEWCO and
its subsidiaries and affiliates (including, without limitation, their
respective
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officers, directors, employees, shareholders and agents) (the "NEWCO
Parties") against any and all Damages arising out of or resulting from
any demand, claim, lawsuit or other cause of action brought by a third
party as a result of or in connection with the postclosing services
rendered by employees of any NEWCO Party pursuant to this Agreement,
provided that no NEWCO Party shall be entitled to indemnification in
respect of its or his own gross negligence or wilful misconduct.
8.4 No Liability:
(a) In providing services hereunder, no FAFCO Party shall be liable to any
NEWCO Party for any error or omission except to the extent that any
such error or omission results from the willful failure of a FAFCO
Party's employee to perform the services required hereunder or from
the gross negligence or willful misconduct of any such FAFCO Party
employee. In no event shall any FAFCO Party be liable to any NEWCO
Party or any third party for any special or consequential damages,
including, without limitation, lost profits or injury to the goodwill
of any NEWCO Party, in connection with the performance, misfeasance or
nonfeasance hereunder of any FAFCO Party. Neither FAREISI nor any
FAFCO Party makes any representation or warranty under this Agreement
as to the accuracy or completeness of any information provided to
NEWCO pursuant to the terms of this Agreement; provided; however, that
nothing in this Agreement is intended to limit or otherwise affect the
representations and warranties made under the Joint Venture and
Operating Agreements or in any certificate or other document delivered
pursuant thereto.
(b) In providing services hereunder, no NEWCO Party shall be liable to any
FAFCO Party for any error or omission except to the extent than any
such error or omission results from the willful failure of a NEWCO
Party's employee to perform the services required hereunder or from
the gross negligence or willful misconduct of any such FAFCO Party
employee. In no event shall any NEWCO Party be liable to any FAFCO
Party or any third party for any special or consequential damages,
including, without limitation, lost profits or injury to the goodwill
of any FAFCO Party, in connection with the performance, misfeasance or
nonfeasance hereunder of any NEWCO Party. Neither NEWCO nor any Newco
Party makes any representation or warranty under this Agreement as to
the accuracy or completeness of any information provided to any FAFCO
Party pursuant to the terms of this Agreement; provided; however, that
nothing in this Agreement is intended to limit or otherwise affect the
representations and warranties made under the Joint Venture and
Operating Agreements or in any certificate or other document delivered
pursuant thereto.
8.5 Confidentiality: The parties acknowledge that information concerning
the business or operations of any of the other parties received as a result of
the operation of this
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Agreement constitutes confidential information subject to the terms and
conditions of the Joint Venture and Operating Agreements.
8.6 Severability: If any provision of this Agreement shall finally be
determined to be unlawful, then such provision shall be deemed to be severed
from this Agreement and every other provision of this Agreement shall remain in
full force and effect.
8.7 Notices: Any notice or other communication required or permitted to
be given under this Agreement shall be given in the manner provided in the Joint
Venture Agreement.
8.8 Assignment: This Agreement shall be binding upon and inure to the
benefit of the successors of each of the parties, but shall not be assigned by
any party without the prior written consent of the other parties.
8.9 No Third Parties: This Agreement is not intended to, and shall not,
create any rights in or confer any benefits upon any person other than the
parties hereto.
8.10 Governing Law: This Agreement will be governed by and construed in
accordance with the internal substantive laws of the State of California, except
where the substantive laws of another jurisdiction mandatorily apply.
8.11 Counterparts: More than one counterpart of this Agreement may be
executed by the parties hereto, and each fully executed counterpart shall be
deemed an original without production of the others.
8.12 Complete Agreement: This Agreement, together with the EXPERIAN
Transition, Joint Venture and Operating Agreements, sets forth the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior letters of intent, agreements, covenants, arrangements,
communications, representations, or warranties, whether oral or written, by any
officer, employee, or representative or either party relating thereto.
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IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
FIRST AMERICAN REAL ESTATE
SOLUTIONS LLC
By: /s/ Parker S. Kennedy
----------------------------
Title:
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FIRST AMERICAN REAL ESTATE
INFORMATION SERVICES, INC.
By: /s/ John Long
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Title:
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THE FIRST AMERICAN FINANCIAL
CORPORATION
By: /s/ Parker S. Kennedy
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Title:
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