PLAN AND AGREEMENT
OF
MERGER
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER........................................................1
1.1 Articles of Merger.....................................1
1.2 Consideration for Merger...............................2
1.3 Effective Date.........................................2
ARTICLE II
ISSUANCE AND EXCHANGE OF SHARES...................................2
2.1 FDC Share Distribution.................................2
2.2 Surrender of MCSI Shares...............................2
2.3 Fractional Shares......................................2
2.4 Accounting, Adjustments and Allocations................2
2.5 Procedures for Resolving Accounting, Adjustments and
Allocations Disputes...................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MCSI AND EXECUTIVE SHAREHOLDERS.3
3.1 Organization and Qualification of MCSI.................3
3.2 Authorized and Outstanding Capitalization..............3
3.3 Authorization..........................................3
3.4 No Conflicting Agreements..............................4
3.5 Compliance with Applicable Law.........................4
3.6 Material Misstatements or Omissions....................4
3.7 No Known Adverse Effects...............................4
3.8 Consents and Approvals.................................4
3.9 Subsidiaries...........................................5
3.10 Litigation.............................................5
3.11 Brokers................................................5
3.12 Taxes..................................................5
3.13 Ownership..............................................5
3.14 Accounts...............................................5
3.15 License Agreements.....................................6
3.16 Intellectual Property..................................6
3.17 Contracts..............................................6
3.18 Financial Statements...................................6
3.19 Absence of Undisclosed or Contingent Liabilities.......7
3.20 No Material Adverse Changes............................7
3.21 Absence of Developments................................7
3.22 Title to Properties....................................7
3.23 Tax Matters............................................8
3.24 Tax Notices............................................8
3.25 Employees..............................................9
3.26 Employee Benefit Plans.................................9
3.27 Gifts.................................................10
3.28 Employee Health and Safety............................10
3.29 Representations Concerning Solvency...................10
3.30 Investment Representations............................10
3.31 Representations as to Knowledge.......................11
ARTICLE IV
PRE-CLOSING COVENANTS OF MCSI....................................11
4.1 Inspection of Properties and Books....................11
4.2 Other Contracts.......................................12
4.3 Ongoing Operation.....................................12
4.4 Indebtedness..........................................12
4.5 Records...............................................12
4.6 Articles of Incorporation; Bylaws.....................12
4.7 Distributions or Dividends............................12
4.8 Notice of Breach......................................12
4.9 Nondisclosure.........................................12
4.10 Employment Matters....................................13
4.11 Insurance.............................................13
4.12 Preservation of Business..............................13
4.13 Regulatory Filings....................................13
4.14 No Negotiations.......................................14
4.15 Assignment of Contracts, Leases and Other Agreements..14
4.16 Commercially Reasonable Efforts.......................14
4.17 Additional Disclosure.................................14
ARTICLE V
POST-CLOSING COVENANTS...........................................14
5.1 Further Assurances....................................14
5.2 Litigation Support....................................15
5.3 Employees of the Business.............................15
5.4 Intellectual Property Rights..........................15
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FDC AND ACQUISITION............15
6.1 Organization and Qualification of FDC and Acquisition.15
6.2 Authorization.........................................16
6.3 No Conflicting Agreements.............................16
6.4 Compliance with Applicable Law........................16
6.5 Litigation............................................16
6.6 Material Misstatements or Omissions...................17
6.7 No Known Adverse Effects..............................17
6.8 Consents and Approvals................................17
6.9 Brokers...............................................17
6.10 Representations as to Knowledge.......................17
6.11 Authorization of Common Stock.........................17
6.12 FDC's Public Documents and Access to Information......17
6.13 Reports Under the Exchange Act........................18
6.14 Nasdaq Market Listing.................................18
6.15 Financial Statements..................................18
6.16 Absence of Undisclosed or Contingent Liabilities......18
6.17 No Material Adverse Changes...........................19
ARTICLE VII
COVENANTS OF FDC AND ACQUISITION.................................19
7.1 Other Contracts.......................................19
7.2 Additional Disclosure.................................19
7.3 Notice of Breach......................................19
7.4 Nondisclosure.........................................19
7.5 Commercially Reasonable Efforts.......................19
7.6 Regulatory Filings....................................19
7.7 Non-Compete and Confidentiality Agreements............20
7.8 Employment Agreements.................................20
7.9 Assumption of Certain Leases..........................20
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING..................................20
8.1 Conditions Precedent to Obligations of MCSI and
Executive Shareholders................................20
8.2 Conditions Precedent to Obligations of FDC and
Acquisition...........................................23
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES.......................26
ARTICLE X
INDEMNIFICATION..................................................27
10.1 Indemnification.......................................27
10.2 Limitation of Liability...............................27
10.3 Method of Asserting Claims............................27
10.4 Payment of Claim......................................28
10.5 Sole Rights and Remedies..............................28
ARTICLE XI
AMENDMENT, TERMINATION AND BREACH................................29
11.1 Amendment and Modification............................29
11.2 Termination and Abandonment...........................29
ARTICLE XII
CLOSING..........................................................29
12.1 Closing...............................................29
12.2 Allocations...........................................30
12.3 MCSI's and Executive Shareholders' Deliveries at
Closing...............................................30
12.4 FDC's and Acquisition's Deliveries at Closing.........31
12.5 Removal of Personal Effects Following Closing.........32
ARTICLE XIII
MISCELLANEOUS....................................................32
13.1 Notice................................................32
13.2 Entire Agreement......................................33
13.3 Successors and Assigns................................33
13.4 Expenses..............................................33
13.5 Severability..........................................33
13.6 Governing Law.........................................33
13.7 Counterparts..........................................33
13.8 Amendments............................................33
13.9 No Third Party Beneficiary............................33
13.10Headings..............................................34
13.11Disputes..............................................34
13.12Delivery of Exhibits..................................34
PLAN AND AGREEMENT OF MERGER
Factual Data Corp.
Mortgage Credit Services, Inc.
and
FDC Acquisition, Inc.
This Plan and Agreement of Merger ("Agreement") is by and among Factual Data
Corp. ("FDC"), Mortgage Credit Services, Inc., ("MCSI") and FDC Acquisition,
Inc. ("Acquisition"). This Agreement has been executed this 16th day of
December, 1998 and shall become effective in accordance with Section 1.3. Xxxxx
X. Xxxxxx and Xxxxx X. Xxxxxx are referred to herein as the "Executive
Shareholders."
WITNESSETH:
WHEREAS, FDC is a corporation duly organized under the laws of the State of
Colorado and Acquisition, a wholly owned subsidiary of FDC, is a corporation
duly organized under the laws of the State of Texas;
WHEREAS, MCSI is a corporation duly organized under the laws of the State of
Texas; and
WHEREAS, until the day immediately preceding the Closing, MCSI has and will own
all of the shares of Credit Profile Services, Inc., a Texas corporation ("CPS"),
CPS theretofore having engaged in the business of supplying various credit
reporting services to consumers and commercial enterprises; and
WHEREAS, on the day immediately preceding the Closing, MCSI has caused CPS to
merge with and into MCSI under Texas law, with MCSI the surviving corporation of
such merger (the "MCSI/CPS Merger"; all references hereinafter to MCSI, except
as otherwise expressly provided herein, shall include both MCSI and CPS); and
WHEREAS, FDC desires to acquire MCSI through a merger of MCSI with and into
Acquisition under Texas law (the "Merger") and pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, it is agreed among the parties as follows:
ARTICLE I
THE MERGER
1.1 Articles of Merger. Subject to the conditions set forth herein on the
"Effective Date" (as herein defined), MCSI and Acquisition shall enter into
and file Articles of Merger attached hereto as Exhibit 1.1 under which
Acquisition shall be the surviving corporation and shareholders of MCSI
shall receive common stock of FDC and cash as set forth in Section 1.2. The
transaction contemplated by this Agreement shall be completed at a closing
("Closing") on a closing date ("Closing Date") which shall be as soon as
possible.
On the Closing Date, all of the documents to be furnished to MCSI and FDC,
including the documents to be furnished pursuant to Article VIII of this
Agreement, shall be delivered to Xxxxx & Xxxxxx, P.C., counsel to FDC, to
be held in escrow until the Effective Date or the date of termination of
this Agreement, whichever first occurs and thereafter shall be promptly
distributed to the parties as their interests may appear.
1.2 Consideration for Merger. On the Effective Date, shareholders of MCSI will
receive in proportion to their share ownership in MCSI: (i) $446,000 cash
(the "Cash Consideration"), and (ii) 297,334 shares of FDC's restricted
common stock of the same class as that quoted or listed for sale in any
public market, exchange, or listing organization (the "Stock") to be
deposited into escrow in accordance with Exhibit 1.2 and distributed in
accordance therewith.
1.3 Effective Date. If this Agreement is duly adopted by the holders of the
requisite number of shares of MCSI in accordance with the applicable laws
and subject to the other provisions hereof, such documents as may be
required by law to accomplish the Agreement shall be filed as required by
law to effectuate same, and the Merger shall become effective. The time of
filing the last document required by law shall be the Effective Date for
the Agreement. For accounting, adjustments and allocations purposes as
described in Section 2.4 below, this Agreement shall be effective as of
11:59 p.m., on the last day of the month preceding the Effective Date.
ARTICLE II
ISSUANCE AND EXCHANGE OF SHARES
2.1 FDC Share Distribution. The Stock shall be deposited into and distributed
from the escrow described in Section 1.2 above in accordance with Exhibit
1.2.
2.2 Surrender of MCSI Shares. The stock transfer books of MCSI shall be closed
on the Effective Date, and thereafter no transfers of the stock of MCSI
shall be made. MCSI shall appoint an exchange agent ("Exchange Agent"),
which is expected to be FDC's counsel or its stock transfer agent, to
accept surrender of the certificates representing the shares of MCSI, and
to deliver simultaneously in exchange for such surrendered certificates,
the consideration provided for in Section 1.2 above.
2.3 Fractional Shares. No fractional shares of FDC stock shall be issued as a
result of the Agreement; rather, such shares shall be rounded up to the
nearest whole share.
2.4 Accounting, Adjustments and Allocations. MCSI's business activities are,
and will be, ongoing as a separate corporate entity owned by the
shareholders of MCSI prior to the Closing Date and by FDC after the Closing
Date. However, this Agreement is deemed to be effective the date set forth
in the last sentence of Section 1.3 above for purposes of accounting,
adjustments and allocations which will be determined by the parties as of
such date ("Accounting Date") in accordance with Exhibit 2.4 hereto. The
net amount resulting from the computations set forth on Exhibit 2.4 will be
determined and paid by FDC or the shareholders of MCSI, as the case may be,
as an adjustment to the Cash Consideration as provided in Exhibit 2.4 but
in any event no later than 90 days after the Closing Date.
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2.5 Procedures for Resolving Accounting, Adjustments and Allocations Disputes.
FDC and MCSI have agreed to certain procedures for resolving any
accounting, adjustments and allocations disputes as set forth on Exhibit
2.5 attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MCSI
AND EXECUTIVE SHAREHOLDERS
Each of MCSI and the two Executive Shareholders represents and warrants to
FDC and Acquisition that, except as otherwise expressly provided in this
Agreement (or the exhibits and disclosure schedules hereto), the statements
contained in this Article III are true, correct and complete as of the date
of this Agreement and will be true, correct and complete on the Closing
Date as follows:
3.1 Organization and Qualification of MCSI. MCSI is a corporation duly
organized, validly existing and in good standing under the laws of the
state of incorporation, and is duly qualified and authorized to do business
as a foreign corporation and is in good standing in each jurisdiction, if
any, in which the nature of the business conducted by it or the properties
owned, leased or operated by it makes such qualification necessary or, if
not, then such lack of authorization will not have materially adversely
affected its operations. MCSI has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. The copies of the Articles of
Incorporation (certified by the Secretary of the State of the state of
incorporation) and the Bylaws of MCSI, both as amended to date, which have
been delivered to FDC and attached hereto as Exhibits 3.1(a) and 3.1(b),
respectively, are complete and correct, and MCSI is not in default under or
in violation of any provision of its Articles of Incorporation or Bylaws.
The minute books (containing the records of meeting of the shareholders,
the Board of Directors and any committees of the Board of Directors), the
stock certificate books and the stock record books of MCSI, as made
available to FDC, are correct and complete in all material respects.
3.2 Authorized and Outstanding Capitalization. The aggregate number of shares
which MCSI is authorized to issue is 1,000,000, being comprised of 200,000
shares of preferred stock, of which none are issued and outstanding,
700,000 shares of Class A common stock of which 2,000 are issued and
outstanding and 100,000 shares of Class B common stock of which 1,030 are
issued and outstanding, each of which outstanding shares is fully paid and
non-assessable as of the date hereof and all of which are owned by five
shareholders of MCSI.
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3.3 Authorization. This Agreement has been duly and validly executed and
delivered by MCSI and the agreements, representations and warranties
contained herein constitute valid and binding obligations, representations
and warranties of MCSI enforceable in accordance with their terms. This
Agreement and the transactions contemplated hereby have been approved by an
appropriate resolution adopted by all shareholders of MCSI. Attached hereto
as Exhibit 3.3(a) is a Certificate with attached resolution which shall
evidence such approval and authorization of all shareholders of MCSI and
which shall be attested to by the President of MCSI. This Agreement and the
consummation of the transactions contemplated hereby and thereby have been
duly and unanimously approved by the Board of Directors of MCSI. Attached
hereto as Exhibit 3.3(b) is a certified copy of the Directors' Consent or a
resolution passed pursuant to a duly and validly called meeting of the
Board of Directors. This Agreement constitutes, and all other agreements
contemplated hereby to be executed and delivered by MCSI will when executed
and delivered constitute, the legal, valid and binding obligations of, and
be enforceable in accordance with their respective terms against, MCSI.
3.4 No Conflicting Agreements. Except as set forth in Exhibit 3.4, the
execution and delivery of this Agreement by MCSI does not, and consummation
by MCSI of the transactions contemplated hereby will not, (a) violate any
existing term or provision of any law, regulation, order, writ, judgment,
injunction or decree applicable to MCSI or its assets, (b) conflict with or
result in a breach of any of the terms, conditions or provisions of the
Articles of Incorporation or Bylaws of MCSI or result in a material breach
of any material agreement or instrument to which MCSI is a party, or (c)
result in the creation or imposition of any lien, charge, security
interest, encumbrance, restriction or claim upon any asset of MCSI.
3.5 Compliance with Applicable Law. Except as set forth in Exhibit 3.5, MCSI
has not received any notice of any violation, probable violation or default
by MCSI under any applicable law, regulation or order of any governmental
department, commission, board or agency or instrumentality, domestic or
foreign, having jurisdiction over MCSI's operations which could materially
adversely affect the business, operations, financial condition, properties
or assets of MCSI, or the ability to consummate the transaction
contemplated hereby. To MCSI's and Executive Shareholders' knowledge after
reasonable inquiry, MCSI has operated its business, and will continue to
operate its business, in compliance in all material respects with the Fair
Credit Reporting Act, the Real Estate Settlement Procedures Act, the Fair
Debt Collection Act and applicable state law. Additionally, MCSI has given
notice of this transaction to all government entities that require such
notice.
3.6 Material Misstatements or Omissions. Neither this Agreement nor any other
document, certificate or statement furnished to FDC by or on behalf of MCSI
in connection with this Agreement contains any untrue statement of a
material fact, or omits any material fact known to the Executive
Shareholders necessary to make the statements contained herein or therein
not misleading in light of the known to the Executive Shareholders context
in which they were made.
3.7 No Known Adverse Effects. Except as set forth on Exhibit 3.7, there is no
fact actually known to MCSI or Executive Shareholders which materially
adversely affects or will materially adversely affect MCSI which has not
been set forth in writing in this Agreement or disclosed in the other
documents, certificates or written statements furnished to FDC by or on
behalf of MCSI in connection herewith.
4
3.8 Consents and Approvals. The execution and delivery by MCSI of this
Agreement, and the performance by MCSI of its obligations hereunder, does
not require MCSI to obtain any consent, approval, agreement, or action of,
or make any filing with or give any notice to, any corporation, person,
entity, or firm or any public, governmental or judicial authority except
(i) such as have been duly obtained or made, as the case may be, and or
will be duly obtained and made and in full force and effect as of the
Closing, (ii) those as to which the failure to obtain would have no
material adverse effect on the transactions contemplated hereby, and (iii)
approval of MCSI's shareholders, which shall be obtained prior to the
execution hereof.
3.9 Subsidiaries. Except as set forth on Exhibit 3.9, MCSI does not own, have
an ownership interest in, or control any corporation, partnership,
proprietorship or other entity.
3.10 Litigation. Except as described in Exhibit 3.10, there are no actions,
proceedings or investigations pending or to the actual conscious knowledge
of MCSI or Executive Shareholders threatened against MCSI before any court
or administrative agency which could result in any material adverse change
in the operations or financial condition of MCSI other than as identified
therein.
3.11 Brokers. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by MCSI directly with
representatives of FDC, without the intervention of any person by, through
or on behalf of MCSI through whom any valid claim by any such person could
be made against FDC for a finder's fee, brokerage commission, or similar
payment. All rights of indemnity under Article X hereof shall apply to any
such claim relating to a Loss (hereinafter defined) arising out of this
Agreement for any such fee, commission or similar payment.
3.12 Taxes. FDC shall not be responsible for any business, occupation,
withholding or similar tax, or any taxes of any kind related to the
business of MCSI for any period prior to the Closing and appropriate
adjustments for federal and state income taxes shall be made in the
financial statements of MCSI and cash reserves for the payment of such
taxes shall be established prior to Closing.
3.13 Ownership. MCSI is the owner, beneficially and of record, of all of the
assets as identified on Exhibit 3.13(a) hereto, free and clear of all
liens, encumbrances, equities, options, claims, charges and restrictions,
except as otherwise described on Exhibit 3.13(b) hereto.
3.14 Accounts. The list of customers attached hereto as Exhibit 3.14(a)
represents the customers with which MCSI now does or has done business,
principally in the area of mortgage credit reporting and, with respect to
its customers, summaries of revenues realized from each during the 12 month
period ending 30 days prior to the date hereof. The customers with which
MCSI maintains a contract or agreement are identified on Exhibit 3.14(b)
hereto. Except as described on Exhibit 3.14(c), all such contracts or
agreements are valid and enforceable against MCSI and are not currently,
and will not be at Closing, in material default, invalid or unenforceable
in any manner, or where termination is threatened or imminent to the actual
conscious knowledge of MCSI and Executive Shareholders. MCSI has performed
all of its material obligations and material responsibilities as described
under each such contract or agreement, none of such contracts or agreements
are subject to any material counterclaim or setoff and such contracts are
in full force and effect and will continue in full force and effect
following the Closing. Except as described on Exhibit 3.14(d), MCSI has no
reason to believe that amounts payable under such contracts or agreements,
assuming due performance by FDC in the future will not be paid
substantially in accordance with the terms of such contracts or agreements.
MCSI has not received any notices of default, claims, or any other type of
notice with respect to each such contract or agreement or, if such notice
has been received, a copy of any such notice has been provided in writing
to FDC.
5
3.15 License Agreements. Attached as Exhibit 3.15 is a complete and accurate
list of any material license agreements to which MCSI is a party as of the
date hereof relating to MCSI's credit reporting business. Also stated on
Exhibit 3.15 is the expiration date of each such license agreement. Except
as described on Exhibit 3.15, all such license agreements are valid and
enforceable against MCSI and are not currently, and will not be at Closing,
in material default, invalid or unenforceable in any material respect. To
the extent the Merger constitutes a transfer of any license agreement
hereunder and requires the consent of any third party, MCSI shall use its
commercially reasonable efforts to obtain such consents if so requested by
FDC. MCSI has not received any written notices of default or claims with
respect to any license agreement or, if such written notice has been
received, a copy of such notice has been provided in writing to FDC.
3.16 Intellectual Property. Attached as Exhibit 3.16 to this Agreement is a
schedule of all material trade names, trademarks, service marks, and their
registrations, if any, owned by MCSI or in which MCSI has any material
right, license, or for which MCSI has made application, together with a
brief description of each (hereinafter collectively the "Intellectual
Property"). To MCSI's and Executive Shareholders' actual conscious
knowledge, MCSI has not infringed, and by its use of its Intellectual
Property, is not now infringing on any United States or state trade name,
trademark, service xxxx or copyright belonging to any other person, firm or
corporation.
3.17 Contracts. Except as set forth in Exhibit 3.17, MCSI is not a party to, nor
bound by, any contract, distributorship agreement, license agreement,
agency agreement or output or requirements agreement, or any other
agreement, indenture, mortgage, deed of trust, lease, loan agreement or
instrument which Acquisition would not succeed to by virtue of this
Agreement, nor will this transaction create any default by MCSI as to any
of such agreements which will materially adversely affect the future
operation of Acquisition.
3.18 Financial Statements. MCSI has delivered to FDC copies of MCSI's
subsidiary's statements of revenue for the fiscal year ended December 31,
1997 and, to the extent available, the interim period ending within 60 days
prior to the date hereof (collectively, the "Financial Statements"). MCSI
has also submitted to FDC a statement of gross revenues prepared in
accordance with generally accepted accounting principles indicating that
gross revenues totaled $4,059,787 for the period from September 1, 1997 to
August 31, 1998. The Financial Statements are based upon the information
contained in the books and records of MCSI's subsidiary and fairly and
accurately present, in all material respects, the operations of MCSI's
subsidiary as of the dates thereof and revenue for the periods referred to
therein. The monthly financial statements generated by MCSI's subsidiary
from and after the interim period delivered to FDC will be prepared on a
basis consistent in all material respects with the methods and procedures
used to prepare the Financial Statements. If requested by FDC, in writing,
MCSI will deliver such monthly financial statements from and after the
interim period to FDC within 30 days of the end of each month from the date
hereof to Closing.
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3.19 Absence of Undisclosed or Contingent Liabilities. MCSI has no liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether
due or to become due, whether known or unknown, and regardless of when
asserted, in excess of $5,000 except as otherwise set forth in the
Financial Statements, the monthly financial statements or Exhibit 3.19
hereto.
3.20 No Material Adverse Changes. Since the date of the most recent Financial
Statements, there has been no change materially adverse to MCSI in its
assets, financial condition, gross profit, operating results, customer,
employee or supplier relations, business condition or prospects, except as
otherwise disclosed on Exhibit 3.20 hereto.
3.21 Absence of Developments. MCSI has, and will until Closing:
(a) Conducted its business and operations only in the regular and ordinary
course; maintained reasonable business insurance; committed no
material waste of assets; disposed or otherwise changed in any
material respect the nature of any asset such that cash or accounts
receivable are increased (other than in the ordinary course of
business), nor created or suffered to exist any material lien, charge
or encumbrance on any asset or incurred any indebtedness for borrowed
money (other than in the ordinary course) which is secured by one or
more of the assets; and has used its reasonable commercial efforts to
maintain and preserve in all material respects its business
organization intact and maintain in all material respects its
relationships with suppliers, employees, customers and others;
(b) Refrained from making capital expenditures or commitments for
additions to the property, plant or equipment or entered into
transactions which could reasonably be expected to materially alter or
affect operations, except as otherwise have been approved in writing
by FDC;
(c) Refrained from paying the officers or directors or their affiliates,
whether in the capacities of shareholders, directors, officers or
employees, any dividends or any bonuses or any other forms of
compensation except for non-bonus compensation in accordance with
current practice; and
7
(d) Maintained title to, and refrained from making or permitting, any
material transfer, sale, pledge, encumbrance on, lien or other
material disposition of assets of MCSI except in the ordinary course
of business.
3.22 Title to Properties. MCSI does not own any real property. The Office Leases
to which MCSI's subsidiary is a party, true and complete copies of which
are attached hereto as Exhibit 3.22, are each in full force and effect, and
MCSI holds a valid and existing leasehold interest in each such lease for
the term set forth in such lease. MCSI shall utilize its reasonable
commercial efforts to obtain an assignment of the Office Leases if
requested to do so by FDC. MCSI shall have delivered complete and accurate
copies of such Office Leases to FDC, and such Office Leases shall not have
been modified in any material respect except to the extent that such
modifications are disclosed in writing delivered to FDC. MCSI is not in
default in any material respect, and no circumstances exist which, if
unremedied would, either with or without notice or the passage of time or
both, result in a default in any material respect under each such lease.
The fixed assets necessary for the conduct of MCSI's business are in good
condition and repair, ordinary wear and tear excepted, and are usable in
the ordinary course of business. There are no defects in such fixed assets
or other conditions relating thereto which, in the aggregate, materially
adversely affect the operation or value of such fixed assets. MCSI owns, or
leases under valid leases, all equipment and other tangible assets
necessary for the conduct of its business.
3.23 Tax Matters.
(a) MCSI has filed all federal, state, local and foreign tax returns that
it was required to file. All such tax returns were correct and
complete in all material respects. All taxes owed by MCSI (whether or
not shown on any tax return) have been paid or properly reserved for
with cash in the Financial Statements. MCSI is not currently the
beneficiary of any extension of time within which to file any tax
return. No claim has ever been made to MCSI by an authority in a
jurisdiction where MCSI does not file tax returns that it is or may be
subject to taxation by that jurisdiction.
(b) MCSI has withheld and paid all taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party.
(c) To MCSI's and Executive Shareholders' actual knowledge, there is no
basis for any authority to assess any additional taxes for any period
for which tax returns have been filed. There is no dispute or claim
concerning any liability for taxes of MCSI (i) claimed or raised by
any authority in writing with any directors, officers or employees of
MCSI, or (ii) as to which any such person has actual knowledge based
upon personal contact with any agent of such authority. Exhibit 3.23
lists all federal, state, local and foreign income tax returns filed
with respect to MCSI for taxable periods ended after December 31,
1995, indicates those tax returns that have been audited, if any, and
indicates those tax returns that currently are the subject of audit,
if any. MCSI has made available to FDC correct and complete copies of
all federal income tax returns, examination reports, if any, and
statements of deficiencies filed, assessed against or agreed to by
MCSI since December 31, 1995.
8
3.24 Tax Notices. Except as set forth on Exhibit 3.24 hereto, no deficiency for
any tax has been proposed, asserted or assessed against MCSI that has not
been resolved and paid in full. No waiver, extension or comparable consent
given by MCSI regarding the application of the statute of limitations with
respect to any tax is outstanding, nor is any request for any such waiver
or consent pending. Except as described in Exhibit 3.24 hereto, there has
been no tax audit or other administrative proceeding or court proceeding
with respect to any tax, nor is any such tax audit or other proceeding
pending, nor has there been any written notice to MCSI by any taxing
authority regarding any such tax, audit or other proceeding or, to the
actual conscious knowledge of MCSI or Executive Shareholders, is any such
tax audit or other proceeding threatened with regard to any tax. MCSI does
not expect the assessment of any additional tax for any periods completed
prior to Closing and is not aware of any unresolved questions, claims or
disputes concerning the liability for tax for any periods completed prior
to Closing which would exceed the reserves established on its books and
records. For the purposes hereof, the term "Tax" or "Taxes" means all
taxes, charges, fees, levies or other assessments, including without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, workmen's compensation, social security, unemployment, excise,
estimated, severance, stamp, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever including,
without limitation, all interest and penalties thereon, and additions to
tax or additional amounts imposed by any taxing authority, domestic or
foreign, upon MCSI.
3.25 Employees. Except as described on Exhibit 3.25, (a) MCSI has no actual
notice that any executive employee of MCSI or any group of MCSI's employees
has any plan or intention to terminate his, her or its employment following
the Closing; (b) MCSI has complied in all material respects with all laws
relating to the employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the payment
of social security and other taxes; (c) to MCSI's and Executive
Shareholders' actual conscious knowledge, MCSI has no material labor
relations problem pending and its labor relations are satisfactory; (d)
there are no workmen's compensation, sexual harassment, discrimination or
claims pending against MCSI nor are MCSI or the Executive Shareholders
aware of any facts that would give rise to such claims; (e) to MCSI's
actual conscious knowledge, no employee of MCSI is subject to any secrecy
or non-competition agreement or any other agreement or restriction of any
kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of
MCSI; and (f) to MCSI's and Executive Shareholders' actual conscious
knowledge, no employee or former employee of MCSI has any claim with
respect to any intellectual property rights of MCSI.
3.26 Employee Benefit Plans.
(a) Except as provided in writing to FDC and as listed on Exhibit 3.26,
with respect to all employees and former employees of MCSI and all
dependents and beneficiaries of such employees and former employees,
(i) MCSI does not maintain or contribute to any non-qualified deferred
compensation or retirement plans, contracts or arrangements, (ii) MCSI
does not maintain or contribute to any qualified defined contribution
plans as defined in Section 3(34) of ERISA or Section 414(i) of the
Code, (iii) MCSI does not maintain or contribute to any qualified
defined benefit plans as defined in Section 3(35) of ERISA or Section
414(j) of the Code, and (iv) MCSI does not maintain or contribute to
any employee welfare benefit plans as defined in Section 3(1) of
ERISA.
9
(b) To MCSI's actual conscious knowledge, to the extent required (either
as a matter of law or to obtain the intended tax treatment and tax
benefits), all employee benefit plans as defined in Section 3(3) of
ERISA which MCSI does maintain or to which it does contribute
(collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all
required contributions which are due have been made and a proper
accrual has been made for all contributions due in the current fiscal
year, (ii) there are no actions, suits or claims pending, other than
routine uncontested claims for benefits, and (iii) to MCSI's actual
conscious knowledge, there have been no prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code.
(c) MCSI does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. MCSI has no
actual or potential liabilities under Section 4201 of ERISA for any
complete or partial withdrawal from a multi-employer plan. MCSI has no
actual or potential liability for death or medical benefits after
separation from employment, other than (i) death benefits under the
employee benefit plans or programs (whether or not subject to ERISA)
that will be set forth in writing to FDC, and (ii) health care
continuation benefits described in Section 4980B of the Code.
3.27 Gifts. Neither MCSI nor, to MCSI's and Executive Shareholders' actual
conscious knowledge, any of its officers, directors or shareholders has
made or agreed to make gifts of money, other property or similar benefits
(other than incidental gifts of articles of nominal value) to any actual or
potential customer, supplier, governmental employee, political party,
candidate for office, governmental agency or instrumentality or any other
person in a position to assist or hinder MCSI in connection with any actual
or proposed business transaction.
3.28 Employee Health and Safety. To MCSI's and Executive Shareholders' actual
conscious knowledge, MCSI has not violated and has no liability, and has
not received a notice or charge asserting any violation of or liability
under, OSHA or any other federal or state acts (including rules and
regulations thereunder) and, to MCSI's and Executive Shareholders' actual
conscious knowledge, regulating or otherwise affecting employee health and
safety.
3.29 Representations Concerning Solvency. MCSI has not incurred, and does not
intend to incur, and has no reasonable basis to believe that it will incur,
any debts beyond its ability to pay such debts as they become due. FDC may
rely on such representations in asserting that FDC has no reasonable cause
to believe that MCSI is or will become insolvent as a result of the
transactions contemplated hereby. MCSI has undertaken the transactions
described herein in good faith, considering its obligations to any person
or entity to whom MCSI owes a right to payment, whether or not the right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured and
has undertaken the transaction described herein without any intent to
hinder, delay or defraud its creditors. MCSI will not, and has not,
concealed this transaction or the proceeds of such transaction from any of
its creditors. MCSI has not removed or concealed any assets from its
creditors and will not incur debt in connection with the assets or business
that is significantly greater than the normal and customary debts of MCSI
in the ordinary course.
10
3.30 Investment Representations. The Executive Shareholders do hereby, and each
other shareholder of MCSI by separate letter will, individually represent
and acknowledge to FDC that:
(a) shareholder is a knowledgeable business person and able to fend for
himself/herself in the Merger and contemplated transactions;
(b) shareholder has received a disclosure package containing the documents
described in Section 6.12 and has further received all information
regarding FDC requested by shareholder and such has been carefully
reviewed by shareholder and his/her legal and tax counsel;
(c) shareholder understands the shares of FDC to be acquired in the Merger
have not been registered under the Securities Act of 1933 ("Act") and
are restricted securities thereunder and may not be sold absent
registration under the Act or pursuant to an applicable exemption
therefrom; and
(d) shareholder is able to bear the economic risk associated with the FDC
shares to be acquired by him/her hereunder.
3.31 Representations as to Knowledge. The representations and warranties
contained in Article III hereof shall in each and every event whereby an
exercise of discretion or a statement to the "best knowledge", "best of
knowledge" or "knowledge" is required on behalf of any party to this
Agreement be deemed to require that such exercise of discretion or
statement be in good faith, with due diligence, to the best efforts of each
such party and be exercised always in a reasonable manner and within
reasonable times.
ARTICLE IV
PRE-CLOSING COVENANTS OF MCSI
MCSI hereby covenants and agrees that, between the date hereof and the Closing,
it will comply with the provisions of this Article IV, except to the extent FDC
may otherwise consent in writing.
11
4.1 Inspection of Properties and Books. MCSI shall assist any individual or
individuals designated by FDC with reasonable prior notice to visit or
inspect any property of MCSI, at reasonable times acceptable to both
parties, including books of accounts and records of MCSI, to make extracts
or copies of such books and records and to discuss the affairs, finances
and accounts of MCSI with its officers, and shall use its reasonable
commercial efforts to obtain access for FDC to MCSI's accountants' work
papers. As a condition to the Closing, the parties acknowledge and agree
that MCSI shall furnish to FDC financial statements, documents and
corporate materials ("Evaluation Material") which shall be used in
connection with a due diligence review. The parties agree that FDC shall
treat the Evaluation Material confidentially, and shall not disclose to any
party, except as otherwise set forth herein, the Evaluation Material or any
information set forth therein; provided, however, that FDC is authorized to
disclose the Evaluation Material to its investment banker, counsel and
accountants for their review. FDC shall instruct its officers, directors,
employees, agents or representatives (including investment banker, counsel
and accountants) of the confidential nature of the Evaluation Material and
shall be responsible for ensuring that the Evaluation Material is kept
confidential by such persons. In the event the Closing is not consummated,
all Evaluation Material and derivative works shall be returned to MCSI (or
in the case of derivative works, destroyed), within ten days of a request
therefor, with the understanding that FDC shall retain no copies of the
Evaluation Material or any derivative works and shall not disclose to any
other party the Evaluation Material or information contained therein, with
the exception of (i) information which becomes generally available to the
public other than as a result of disclosure by FDC, or (ii) information
included in the Evaluation Material which is first disclosed by a third
party not bound by a confidentiality agreement with MCSI and (iii)
information required to be disclosed in any registration statement or
periodic report under the disclosure requirements of applicable federal and
state securities laws.
4.2 Other Contracts. Except in the ordinary course of business, MCSI shall not
enter into or become subject to any agreement. transaction, or commitment
which would restrict or in any way impair the obligation or ability of MCSI
to comply with all of the terms of this Agreement.
4.3 Ongoing Operation. Except for the MCSI/CPS merger, MCSI shall carry on its
business substantially in the same manner as heretofore conducted, only in
the ordinary course, and shall not take any action except in the ordinary
course, on an arm-length basis and in accordance in all material respects
with all applicable laws, rules and regulations and MCSI's past custom and
industry practice.
4.4 Indebtedness. MCSI will not create, incur, assume, guarantee or otherwise
become liable with respect to any indebtedness, except in the ordinary
course of its business and subject to prior written notice to FDC. Except
in the ordinary course of its business, and subject to prior written notice
to FDC, MCSI will not sell, pledge, encumber or otherwise subject its
assets to any claim or indebtedness not in existence prior to the Closing.
4.5 Records. MCSI shall maintain its books, accounts and records in the usual,
regular and ordinary manner.
12
4.6 Articles of Incorporation; Bylaws. Except for the MCSI/CPS merger, MCSI
will not amend its Articles of Incorporation or Bylaws or otherwise alter
its corporate existence or powers.
4.7 Distributions or Dividends. MCSI will not declare or pay any dividend, make
any distribution on shares of its capital stock or repurchase any shares of
its capital stock.
4.8 Notice of Breach. In the event of and promptly after becoming actually
aware of the occurrence or threatened occurrence of any event which would
cause or constitute a material breach of any warranty, representation,
covenant or agreement of MCSI contained herein, MCSI shall give notice in
writing of such event or threatened event to FDC and use all commercially
reasonable efforts to prevent or promptly remedy such breach or threatened
breach.
4.9 Nondisclosure. The parties agree that any publicity release, security
filing, memorandum or any other communication (collectively
"Communication"), whether written or oral, identifying this proposed
transaction shall not identify MCSI at any time prior to Closing unless
required by applicable securities laws or regulations. MCSI shall timely
review and approve any public Communication prepared by FDC before its
dissemination and release.
4.10 Employment Matters. MCSI shall not, directly or indirectly, except in the
ordinary course of business, (i) enter into or modify any employment,
severance or similar agreements or arrangements with, or grant any bonuses,
salary increases, severance or termination paid to, any officers or
directors or consultants, or (ii) take any material action with respect to
the grant of any bonuses, salary increases, severance or termination pay or
with respect to any material increase of benefits payable in effect on the
date hereof. MCSI shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement
for the benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director.
4.11 Insurance. Without providing FDC 30 days' prior written notice, MCSI shall
not cancel or terminate its current insurance policies or cause any of the
coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to or
greater than the coverage under the cancelled, terminated or lapsed
policies for substantially similar premiums are in full force and effect.
13
4.12 Preservation of Business. MCSI shall (i) use its commercially reasonable
efforts to preserve intact MCSI's business organization and goodwill, keep
available the services of MCSI's officers and employees as a group and
maintain satisfactory relationships with suppliers, distributors, customers
and others having business relationships with MCSI up to the Closing, at
MCSI's expense, (ii) confer on a weekly basis with representatives of FDC
to report operational matters and the general status of ongoing operations,
(iii) not intentionally take any action which would render, or which
reasonably would be expected to render, any representation or warranty made
by MCSI in the Agreement untrue in any material respect at the Closing,
(iv) notify FDC of any emergency or other change in the normal course of
MCSI's business or in the operation of MCSI's properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if, in each
case, such emergency, change, complaint, investigation or hearing would be
material, individually or in the aggregate, to the business, operations or
financial condition of MCSI or the ability of MCSI to consummate the
transactions contemplated by this Agreement, and (v) promptly notify FDC in
writing if MCSI or its representatives shall discover that any
representation or warranty made by MCSI in this Agreement was when made, or
has subsequently become, untrue in any material respect.
4.13 Regulatory Filings. MCSI is not required, and shall not be required prior
to or following Closing, to make any filings or submissions under any laws
or regulations applicable to MCSI for the consummation of the transactions
contemplated herein. MCSI shall make all filings necessary such that, at
the Closing, FDC may file for and obtain use of MCSI's corporate name
identified on page one of this Agreement. FDC has advised MCSI that the
execution of this Agreement and Closing of the transaction contemplated
hereby may require FDC to provide certain disclosure concerning the
business and the financial statements of MCSI to the United States
Securities and Exchange Commission. MCSI hereby consents to the inclusion
of such disclosure concerning MCSI, the financial statements of MCSI's
credit reporting business, as audited by FDC's independent certified public
accountant, and the representations and warranties made by MCSI in the
course of this transaction, in a periodic report or any amendment thereto,
to the extent necessary to allow FDC to discharge its disclosure
obligations under the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
4.14 No Negotiations. None of MCSI, its officers, directors or the Executive
Shareholders shall cause MCSI to, directly or indirectly, through any
officer, director, agent or otherwise, solicit, initiate or encourage
submission of any proposal or offer from any person or entity (including
any of its or their officers or employees) relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or the
purchase of all or a material portion of the assets of, or any equity
interest in, MCSI or any similar transaction or business combination
involving MCSI, or participate in any negotiations regarding, or furnish to
any other person, any information with respect to, or otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person or entity to do or seek any of the
foregoing. MCSI shall within five business days notify FDC of any such
proposal or offer, or any inquiry from or contact with any person with
respect thereto, and shall promptly provide FDC with such information
regarding such proposal, offer, inquiry or contact as FDC may request.
14
4.15 Assignment of Contracts, Leases and Other Agreements. MCSI agrees that,
prior to the Closing, unless otherwise consented to by FDC, it will secure
the approval of all parties with which MCSI has material customer, supplier
or other agreements as to which consent to the transactions contemplated
hereunder is required by such agreements.
4.16 Commercially Reasonable Efforts. MCSI and Executive Shareholders agree to
use their commercially reasonable efforts in good faith to satisfy the
various conditions to Closing and to consummate the transactions provided
for herein as expeditiously as possible. Neither MCSI nor Executive
Shareholders will not take or knowingly permit to be taken any action that
would be in breach of the terms or provisions of this Agreement or that
would cause any of their representations and warranties contained herein to
be or become untrue in any material respect.
4.17 Additional Disclosure. From the date of this Agreement to and including the
Closing Date, MCSI promptly upon the occurrence thereof, will advise FDC of
each event subsequent to the date hereof which would have had to be
disclosed on any exhibit to this Agreement had it occurred prior to the
date hereof.
ARTICLE V
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the Closing.
5.1 Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any
other party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to
indemnification therefor under Article X).
5.2 Litigation Support. In the event and for so long as any party actively is
contesting or defending against any action, suit, proceedings, hearing,
investigation, charge, complaint, claim or demand in connection with (a)
any transaction contemplated by this Agreement, or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act or transaction on or prior to the
Closing Date involving MCSI, each of the other parties will cooperate with
each other and counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records
as shall be reasonably necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor under Article X).
15
5.3 Employees of the Business.
(a) FDC shall use commercially reasonable efforts to continue to employ
all of the employees of MCSI's credit reporting business actively
employed by MCSI as of the Closing Date upon such terms and conditions
and with such benefits as FDC generally provides to its employees.
(b) FDC shall take all commercially reasonable actions necessary to permit
the employees of MCSI to participate as soon as practicable after the
Closing Date in the standard employee benefit plans and programs of
FDC for which they otherwise are eligible. FDC shall credit employees
of MCSI with their prior service with CPS as being service with FDC
and will credit such employees with all of the vacation pay and other
nonqualified benefits accrued through the Closing Date which are shown
on Exhibit 5.3(b) (the dollar amount of which is referred to as the
"Accrued Benefits"). MCSI agrees to pay to FDC all vacation pay
benefits accrued to the date of Closing (or to provide FDC an
equivalent credit on the Closing Statement).
(c) The provisions of this Section 5.3 shall inure solely to the benefit
of MCSI, and no third party (including, without limitation, any
employee of MCSI) shall be permitted to rely hereon as a third party
beneficiary or otherwise.
5.4 Intellectual Property Rights. After the Closing, Executive Shareholders
will have no rights with respect to any trademarks, trade names or trade
dress associated with MCSI's FACTUAL DATA operation involving credit
reporting.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FDC AND ACQUISITION
FDC represents and warrants to MCSI that the statements contained in this
Article VI are true, correct and complete as of the date of this Agreement and
will, except as otherwise expressly provided in this Agreement be true, correct
and complete on the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement) as follows:
6.1 Organization and Qualification of FDC and Acquisition. FDC and Acquisition
are each a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado and Texas, respectively,
and each is duly qualified and authorized to do business as a foreign
corporation and each is in good standing in each jurisdiction, if any, in
which the nature of the business conducted by it or the properties owned,
leased or operated by it makes such qualification necessary or, if not,
then such lack of authorization will not have materially adversely affected
FDC. FDC and Acquisition have all requisite corporate power and authority
to own, lease and operate their properties and to carry on their businesses
as now being conducted. Neither FDC nor Acquisition is in default under or
in violation of any provision of its respective Articles of Incorporation
or Bylaws, true and correct copies of which have been provided to the
shareholders of MCSI prior to Closing.
16
6.2 Authorization. This Agreement has been duly and validly executed and
delivered by FDC and Acquisition and the agreements, representations and
warranties contained herein constitute valid and binding obligations,
representations and warranties of FDC and Acquisition enforceable in
accordance with their terms. This Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and unanimously
approved by the Board of Directors of FDC and Acquisition. Attached hereto
as Exhibit 6.2(a), 6.2(b) and 6.2(c) are certified copies of FDC's
Directors' consent or resolutions passed pursuant to duly and validly
called meetings of the Board of Directors and consents of Acquisition's
Board of Directors and shareholder. This Agreement constitutes, and all
other agreements contemplated hereby to be executed and delivered by FDC
and Acquisition will when executed and delivered constitute, the legal,
valid and binding obligations of, and be enforceable in accordance with
their respective terms against, FDC and Acquisition.
6.3 No Conflicting Agreements. The execution and delivery of this Agreement by
FDC and Acquisition does not, and consummation by FDC and Acquisition of
the transactions contemplated hereby will not, (a) violate any existing
term or provision of any law, regulation, order, writ, judgment, injunction
or decree applicable to FDC or Acquisition, (b) conflict with or result in
a breach of any of the terms, conditions or provisions of the Articles of
Incorporation or Bylaws of FDC or Acquisition or result in material breach
of any material agreement or instrument to which FDC or Acquisition is a
party, or (c) result in the creation or imposition of any lien, charge,
security interest, encumbrance, restriction or claim upon FDC or
Acquisition or any of their assets.
6.4 Compliance with Applicable Law. Except as set forth in Exhibit 6.4, neither
FDC nor Acquisition has received any notice of any violation, probable
violation or default by FDC or Acquisition under any applicable law,
regulation or order of any governmental department, commission, board or
agency or instrumentality, domestic or foreign, having jurisdiction over
FDC's or Acquisition's operations which could materially adversely affect
the business, operations, financial condition, properties or assets of
either, or the ability to consummate the transaction contemplated hereby.
To FDC's knowledge after reasonable inquiry, FDC has operated its business,
and will continue to operate its business, in compliance in all material
respects with the Fair Credit Reporting Act, the Real Estate Settlement
Procedures Act, the Fair Debt Collection Act and applicable state law.
6.5 Litigation. Except as set forth on Exhibit 6.5, there are no material
actions, proceedings or investigations pending, or to the knowledge of FDC,
threatened against FDC, Acquisition or their officers or directors, before
any court or administrative agency or administrative officer.
6.6 Material Misstatements or Omissions. Neither this Agreement nor any other
document, certificate or statement furnished to MCSI by or on behalf of FDC
or Acquisition in connection with this Agreement contains any untrue
statement of a material fact, or omits any material fact necessary to make
the statements contained herein and therein not misleading in light of the
context in which they were made.
17
6.7 No Known Adverse Effects. Except as set forth on Exhibit 6.7, there is no
fact actually known to FDC or Acquisition, their officers or directors
which materially adversely affects or will materially adversely affect FDC
or Acquisition which has not been set forth in writing in this Agreement or
disclosed in the other documents, certificates or written statements
furnished to MCSI by or on behalf of FDC or Acquisition in connection
herewith.
6.8 Consents and Approvals. The execution and delivery by FDC and Acquisition
of this Agreement, and the performance by them of their obligations
hereunder, do not require FDC or Acquisition to obtain any consent,
approval or action of, or make any filing with or give any notice to, any
corporation, person or firm or any public, governmental or judicial
authority except (i) such as have been duly obtained or made, as the case
may be, and are in full force and effect on the date hereof and will
continue to be in full force and effect on the Closing Date, and (ii) those
which the failure to obtain would have no material adverse effect on the
transactions contemplated hereby.
6.9 Brokers. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by representatives of FDC
directly with MCSI, without the intervention of any person on behalf of FDC
in such manner as to give rise to any valid claim by any person against
MCSI for a finder's fee, brokerage commission or similar payment. All
rights of indemnity under Article X hereof shall apply to any claim
relating to a Loss (hereinafter defined) arising out of this Agreement for
any fee, commission or similar payment.
6.10 Representations as to Knowledge. The representations and warranties
contained in Article VI hereof shall in each and every event whereby an
exercise of discretion or a statement to the "best knowledge", "best of
knowledge" or "knowledge" is required on behalf of any party to this
Agreement be deemed to require that such exercise of discretion or
statement be in good faith, with due diligence, to the best efforts of each
such party and be exercised always in a reasonable manner and within
reasonable times.
6.11 Authorization of Common Stock. The shares of Stock to be issued pursuant to
Section 1.2 and any other shares of FDC common stock to be issued in
connection therewith shall, upon issuance thereof, be duly authorized,
fully paid and nonassessable shares of FDC's restricted common stock, and
will be of the same class as that presently quoted or listed for sale in
any public market, exchange or listing organization.
6.12 FDC's Public Documents and Access to Information. FDC has delivered to
shareholders of MCSI a true and complete copy of (i) FDC's definitive
prospectus dated May 13, 1998, its I0-Q Reports for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998 which represent
material filings made with the Securities and Exchange Commission to the
date hereof (collectively, the "SEC Documents"). FDC agrees to provide to
shareholders of MCSI a true and complete copy of each other document filed
with the SEC between the date hereof and the date of the Closing ("Current
SEC Documents"). In addition to the SEC Documents and the Current SEC
Documents, FDC will provide, through its Chief Financial Officer,
shareholders of MCSI with opportunities to become familiar with the
business, financial condition, management, prospects and operations of FDC,
including reasonable opportunities to ask questions of, receive answers
from and obtain information regarding FDC and its business which is
material to his investment decision. Neither the SEC Documents nor the
Current SEC Documents contain any untrue statement of material fact or omit
to state a material fact necessary to make the statement therein not
misleading.
18
6.13 Reports Under the Exchange Act. With a view to make available to the
shareholders of MCSI the benefits of Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), and any other
rules or regulation of the SEC that may at any time permit shareholders of
MCSI to sell the FDC common stock to the public without registration, FDC
agrees to:
(a) File with the SEC in a timely manner all reports and other documents
required of FDC under the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
(b) Furnish to the shareholders of MCSI, forthwith upon request (i) a
written statement by FDC that it has complied with the reporting
requirements of Rule 144 and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report on FDC and such other reports or
documents so filed by FDC, and (iii) such other information as may be
reasonably requested in availing shareholders of MCSI of any rule or
regulation of the SEC which permits the selling of any such securities
without registration; and
(c) Take any other action reasonably within FDC's control to make the
benefits of Rule 144 available to the holders of the Stock.
6.14 Nasdaq Market Listing. FDC shall cause, as soon as possible after Closing,
the Stock issuable to shareholders of MCSI hereunder to be authorized for
listing on the Nasdaq SmallCap Market upon official notice of issuance.
6.15 Financial Statements. FDC has delivered to MCSI copies of FDC's 10-Q
Reports as set forth in Article 6.12 above ("the Reports"). The Reports are
based upon the information contained in the books and records of FDC and
fairly and accurately present, in all material respects, the matters
represented therein.
6.16 Absence of Undisclosed or Contingent Liabilities. FDC has no liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether
due or to become due) whether known or unknown, and regardless of when
asserted in excess of $50,000 except as otherwise set forth in the SEC
Documents.
6.17 No Material Adverse Changes. Since the date of the most recent SEC
Documents, there has been no change materially adverse to FDC, its
financial condition, gross profit, operating results, business condition or
prospects, except as otherwise disclosed on Exhibit 6.17 hereto.
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ARTICLE VII
COVENANTS OF FDC AND ACQUISITION
FDC and Acquisition covenant and agree as follows:
7.1 Other Contracts. From and after the date of this Agreement, FDC and
Acquisition will not enter into or become subject to any agreement or
commitment which would restrict or in any way impair the obligation of FDC
and Acquisition to comply with all of the terms of this Agreement.
7.2 Additional Disclosure. From the date of this Agreement to and including the
Closing, FDC and Acquisition will, promptly upon the occurrence thereof,
advise MCSI of each event subsequent to the date hereof which would have
had to be disclosed by FDC or Acquisition on any exhibit to this Agreement
had it occurred prior to the date hereof.
7.3 Notice of Breach. In the event of and promptly after becoming actually
aware of the occurrence or threatened occurrence of any event which would
cause or constitute a material breach of any warranty, representation,
covenant or agreement of FDC or Acquisition contained herein, FDC shall
give notice in writing of such event or threatened event to MCSI and use
all commercially reasonable efforts to prevent or promptly remedy such
breach or threatened breach.
7.4 Nondisclosure. FDC agrees that any publicity release, security filing, or
any other communication, whether written or oral, identifying this proposed
transaction shall not identify MCSI any time prior to Closing unless
required by applicable securities laws or regulations.
7.5 Commercially Reasonable Efforts. FDC and Acquisition agree to use their
commercially reasonable efforts in good faith to satisfy the various
conditions to Closing and to consummate the transactions provided for
herein as expeditiously as possible. Neither FDC nor Acquisition will take
or knowingly permit to be taken any action that would be contrary to or in
breach of the terms or provisions of this Agreement or that would cause any
of the representations and warranties of FDC or Acquisition contained
herein to be or become untrue.
7.6 Regulatory Filings. FDC shall make any filings or submissions under any
laws or regulations applicable to FDC or Acquisition for the consummation
of the transactions contemplated herein. FDC has advised MCSI that the
transaction contemplated hereby will require FDC to file disclosure, in the
form of a periodic report or amendments thereto, with the United States
Securities and Exchange Commission, which report may include such
disclosure concerning, and the financial statements of, MCSI. MCSI hereby
consents to the inclusion of disclosure concerning MCSI, the financial
statements of MCSI and the representations and warranties made by MCSI in
the course of this transaction, in such periodic report or amendment, in
order to allow FDC to discharge its disclosure obligations under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. FDC agrees to provide Executive Shareholders upon request a
copy of such periodic report or any amendment thereto at least three
business days prior to filing. FDC will make all required filings with the
Securities and Exchange Commission that relate to this transaction.
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7.7 Non-Compete and Confidentiality Agreements. At or prior to Closing,
Executive Shareholders shall enter into non-compete and confidentiality
agreements with FDC substantially in the form of Exhibit 7.7 hereto.
7.8 Employment Agreements. At or prior to Closing, MCSI shall have terminated
all employment agreements to which it or CPS is a party. Except as
otherwise provided in Section 5.3 hereof, with respect to any employees
retained by Acquisition, FDC's personnel policies and procedures, including
those relating to tenure, will obtain. New employment agreements with Xxxxx
X. Xxxxxx and Xxxxx X. Xxxxxx will be negotiated by Acquisition and will be
executed at Closing on terms and conditions as mutually agreed between the
parties.
7.9 Assumption of Certain Leases. CPS currently leases 8,948 square feet, more
or less, of office space in Houston, Texas at $8,575 per month and 408
square feet of office space in Oklahoma City, Oklahoma at $289 per month
(collectively the "Office Leases"). The Office Leases expire on April 30,
2003 and January 31, 1999, respectively. Acquisition will accede to such
leases upon Closing of the Merger. If Acquisition, in its sole discretion,
decides to reduce the size of the offices, or relocate them, Executive
Shareholders will assist Acquisition in negotiating lease termination or
reduction arrangements at Acquisition's cost.
Acquisition also agrees that if the Closing occurs on or before December
15, 1998, it will assume and honor the Minolta copier lease ($9,029 over 29
remaining months); the seven fax leases ($30,468 over 39 remaining months);
and the Pitney Xxxxx postage meter lease ($328 per quarter) under each of
which CPS is named as lessee.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions Precedent to Obligations of MCSI and Executive Shareholders. The
obligations of MCSI and Executive Shareholders to consummate and effect
this Agreement are subject to the satisfaction in all material respects, on
or before the Closing Date, of the following conditions (unless waived by
MCSI and Executive Shareholders in writing in the manner provided in
Section 8.1(d) hereof):
(a) Representations and Warranties of FDC and Acquisition; Performance by
FDC and Acquisition. (i) The representations and warranties of FDC and
Acquisition set forth in Article VI hereof shall (except where stated
to be as of an earlier date) be accurate in all material respects on
and as of the Closing as though made on and as of the Closing, except
for any changes resulting from activities or transactions which may
have taken place after the date hereof which are expressly permitted
by this Agreement or which have been entered into in the ordinary
course of business and are not expressly prohibited by this Agreement;
(ii) FDC and Acquisition shall have, in all material respects,
performed all obligations and complied with all covenants required to
be performed or to be complied with by them under this Agreement prior
to or at the Closing Date including specifically Section 13.12 of this
Agreement and including the delivery of all documents required at the
Closing; (iii) MCSI shall have received a certificate dated the
Closing and signed by the Presidents of FDC and Acquisition to the
effect that the representations and warranties made by FDC and
Acquisition in this Agreement are true and accurate in all material
respects as of the Closing (or, where applicable, as of the earlier
specified date), which certificates shall be in the form of Exhibit
8.1; and (iv) Acquisition shall have entered into employment
agreements with Executive Shareholders in accordance with the
provisions of Section 7.8 hereof, which shall commence on Closing.
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(b) Action. All action necessary to authorize the execution, delivery and
performance of this Agreement by FDC and Acquisition and the
consummation of the transactions contemplated hereby shall have been
duly and validly taken by FDC and Acquisition. FDC and Acquisition
shall have furnished MCSI with copies of all consents or resolutions
adopted or executed by FDC and Acquisition in connection with such
actions, certified by the Secretaries of FDC and Acquisition.
(c) No Action or Proceeding. As of the Closing, no action or proceeding by
any public authority or person shall be pending before any court or
administrative body or overtly threatened to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the
transactions contemplated herein. There shall not be threatened,
instituted or pending any action or proceeding, before any court or
governmental authority or agency, domestic or foreign, (i) challenging
or seeking to make illegal, or to delay or otherwise directly or
indirectly restrain or prohibit, the consummation of the transactions
contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or
indirect ownership or operation by FDC of all or a material portion of
the business of MCSI, or to compel MCSI or FDC to dispose of all or a
material portion of the business or assets of MCSI, as a result of the
transactions contemplated hereby, (iii) seeking to require direct or
indirect transfer or sale by FDC of any of MCSI's assets, (iv) seeking
to invalidate or render unenforceable any material provision of this
Agreement or any of the other agreements attached hereto as Exhibits,
or otherwise contemplated hereby, (v) seeking relief against FDC under
any federal or state law or regulation relating to bankruptcy,
insolvency, reorganization or moratorium or creditors' rights
generally, (vi) otherwise relating to and materially adversely
affecting the transactions contemplated hereby, or (vii) which could
reasonably be expected to result in any material adverse change in the
business, operations, financial condition or properties of FDC.
(d) Waiver of Conditions Precedent. MCSI may waive any or all of the
conditions precedent set forth in this Article VIII, either
prospectively or retroactively, by giving written notice of such
waiver to FDC. No waiver of any condition precedent pursuant to this
Section 8.1(d) shall, unless otherwise expressly stated in such
written notice of waiver, extend to any covenant or agreement
contained herein or to any other condition precedent.
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(e) Breach or Violation. FDC shall have obtained, or caused to be
obtained, each consent and approval necessary in order that the
transactions contemplated herein not constitute a breach or violation
of, or result in a right of termination or acceleration of, any
agreement, arrangement or undertaking of or affecting FDC or any
license, franchise or permit of or affecting FDC.
(f) Governmental Filings. All material governmental filings,
authorizations and approvals that are required for the consummation of
the transactions contemplated hereby shall have been duly made and
obtained by FDC (except filings required by FDC pursuant to applicable
securities laws).
(g) No Adverse Changes. There shall have been no event or change occurring
between the execution of this Agreement and the Closing which in the
aggregate may be deemed to have a material adverse effect on the
business, operations, financial condition or properties of FDC.
(h) Litigation. Except as described on Exhibit 6.5, there shall be no
actions, proceedings or investigations pending, threatened against FDC
or its officers or directors before any court, any administrative
agency or administrative officer or executive, which could result in
any material adverse change in the business, operations, financial
condition or properties of FDC.
(i) No Damage. There shall have been no damage, destruction or loss of or
to any property or properties owned or used by FDC whether or not
covered by insurance which, in the aggregate, has or would be
reasonably likely to have, a material adverse effect on FDC.
(j) Discovery of Facts or Circumstances. MCSI shall not have discovered
any fact or circumstance existing as of the date of this Agreement
which has not been disclosed to MCSI as of the date of this Agreement
regarding the business, assets, liabilities, properties, condition
(financial or otherwise), results of operations or prospects of FDC
which is, individually or in the aggregate with other such facts and
circumstances, materially adverse to FDC.
(k) Opinion of Counsel. MCSI shall have received from counsel to FDC and
Acquisition an opinion dated the Closing, to the following effect:
(i) FDC and Acquisition are corporations duly organized, validly
existing and in good standing under the laws of the State of
Colorado and Texas, respectively.
(ii) Execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action, on the
part of FDC and Acquisition; this Agreement and the documents
referenced therein is a legal, valid and binding obligation of
FDC and Acquisition, enforceable against FDC and Acquisition in
accordance with their terms except as enforcement can be limited
by general equitable principles and by bankruptcy, insolvency or
similar laws affecting creditor's rights generally.
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(iii)The execution and delivery of this Agreement and the documents
referred to therein will not violate or conflict with the
Articles of Incorporation or Bylaws of FDC or Acquisition or any
agreement, identified to such counsel by FDC or Acquisition as
all of its material agreements, to which either FDC or
Acquisition is a party or by which FDC or Acquisition or their
assets are bound.
(iv) No consent, approval, authorization or order of, and no notice to
or filing with, any governmental agency or body or any court is
required to be obtained or made by FDC or Acquisition pursuant to
this Agreement except such as has been obtained or made.
(v) Except as disclosed in this Agreement or the Exhibits hereto,
such counsel is not aware of any pending or threatened action,
suit, proceeding or investigation before any court or any public,
regulatory or governmental agency, authority or body, involving
FDC or Acquisition or any of its officers or directors, and such
counsel does not know of any legal matter or government
proceedings regarding FDC or Acquisition.
(vi) The Stock to be issued into escrow for the benefit of
shareholders of MCSI pursuant to Section 1.2 is duly authorized,
fully paid and nonassessable shares of FDC's common stock and
shall not be subject to any preemptive rights.
(vii)The Stock upon issuance will not be subject to any liens,
restrictions or encumbrances on transfer other than Rule 144 of
the Securities and Exchange Commission and the Escrow Agreement.
(l) Listing. FDC shall file an application to list and diligently pursue
listing of the Stock on The Nasdaq SmallCap Market no later than 5
days following the Closing of this transaction.
(m) Miscellaneous. No party shall have initiated action seeking monetary
damages or claims in connection with, or seeking to prohibit or enjoin
the transactions described in this Agreement.
8.2 Conditions Precedent to Obligations of FDC and Acquisition. The obligation
of FDC and Acquisition to consummate and effect this Agreement are subject
to the satisfaction in all material respects, on or before the Closing
Date, of the following conditions (unless waived by FDC and Acquisition in
writing in the manner provided in Section 8.2(f) hereof):
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(a) Representations and Warranties of MCSI and Executive Shareholders;
Performance by MCSI. (i) The representations and warranties of MCSI
and Executive Shareholders set forth in Article III hereof shall
(except where stated to be as of an earlier date) be accurate in all
material respects on and as of the Closing as though made on and as of
the Closing, except for any changes resulting from activities or
transactions which may have taken place after the date hereof which
are expressly permitted by this Agreement or which have been entered
into in the ordinary course of business and are not expressly
prohibited by this Agreement; (ii) MCSI shall have, in all material
respects, performed all obligations and complied with all covenants
required to be performed or to be complied with by it under this
Agreement prior to or at the Closing Date including specifically
Section 13.12 of this Agreement and including the delivery of all
documents required at the Closing; (iii) FDC shall have received a
certificate dated as of the Closing and signed by the President of
MCSI and the Executive Shareholders to the effect that the
representations and warranties made by MCSI and the Executive
Shareholders in this Agreement are true and accurate in all material
respects as of the Closing (or, where applicable, as of the earlier
specified date) in the form attached as Exhibit 8.2; and (iv)
Executive Shareholders shall have entered into non-compete and
confidentiality agreements with FDC in the form attached as Exhibit
7.7, which shall commence on Closing.
(b) Action. All action necessary to authorize the execution, delivery and
performance of this Agreement by MCSI and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by MCSI and Executive Shareholders. MCSI and Executive
Shareholders shall have furnished FDC with copies of all consents or
resolutions adopted or executed by MCSI and Executive Shareholders in
connection with such actions, certified by the Secretary of MCSI.
(c) No Action or Proceeding. As of the Closing, no action or proceeding by
any public authority or person shall be pending before any court or
administrative body or overtly threatened to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the
transactions contemplated herein. Further, except as described on
Exhibit 3.10, there shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make
illegal, or to delay or otherwise directly or indirectly restrain or
prohibit, the consummation of the transactions contemplated hereby or
seeking to obtain material damages in connection with such
transactions, (ii) seeking to prohibit direct or indirect ownership or
operation by FDC of all or a material portion of the business or
assets of MCSI, or to compel FDC or MCSI to dispose of or to hold
separately all or a material portion of the business or assets of
MCSI, as a result of the transactions contemplated hereby, (iii)
seeking to require direct or indirect transfer or sale by FDC of any
of MCSI's assets, (iv) seeking to invalidate or render unenforceable
any material provision of this Agreement or any of the other
agreements attached hereto as Exhibits, or otherwise contemplated
hereby, (v) seeking relief against MCSI under any federal or state law
or regulation relating to bankruptcy, insolvency, reorganization or
moratorium or creditors' rights generally, (vi) otherwise relating to
and materially adversely affecting the transactions contemplated
hereby, or (vii) which could reasonably be expected to result in any
material adverse change in the business, operations, financial
condition or properties of MCSI.
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(d) No Adverse Changes. There shall have been no event or change occurring
between the execution of this Agreement and the Closing which in the
aggregate may be deemed to have a material adverse effect on the
business, operations, financial condition or properties of MCSI.
(e) Litigation. Except as described on Exhibit 3.10, there shall be no
actions, proceedings or investigations pending, threatened against
MCSI or its officers or directors before any court, any administrative
agency or administrative officer or executive, which could result in
any material adverse change in the business, operations, financial
condition or properties of MCSI.
(f) Waiver of Conditions Precedent. FDC may waive any or all of the
conditions precedent set forth in this Section 8.2, either
prospectively or retroactively, by giving written notice of such
waiver to MCSI. No waiver of any condition precedent pursuant to this
Section 8.2(f) shall, unless otherwise expressly stated in such
written notice of waiver, extend to any other covenant or agreement
contained herein or to any other condition precedent.
(g) Breach or Violation. MCSI shall have obtained, or caused to be
obtained, each consent and approval necessary in order that the
transactions contemplated herein not constitute a breach or violation
of, or result in a right of termination or acceleration of, or
creation of any encumbrance on any of MCSI assets, pursuant to the
provisions of any agreement, arrangement or undertaking of or
affecting MCSI or any license, franchise or permit of or affecting
MCSI.
(h) Governmental Filings. All material governmental filings,
authorizations and approvals that are required for the consummation of
the transactions contemplated hereby shall have been duly made and
obtained by MCSI (except filings required by FDC pursuant to
applicable securities laws).
(i) Discovery of Facts or Circumstances. FDC shall not have discovered any
fact or circumstance existing as of the date of this Agreement which
has not been disclosed to FDC as of the date of this Agreement
regarding the business, assets, liabilities, properties, condition
(financial or otherwise), results of operations or prospects of MCSI
which is, individually or in the aggregate with other such facts and
circumstances, materially adverse to MCSI, its financial position,
results of operations or the value of its assets.
(j) Damage. There shall have been no damage, destruction or loss of or to
any property or properties owned or used by MCSI, or to its assets,
whether or not covered by insurance which, in the aggregate, has or
would be reasonably likely to have, a material adverse effect on MCSI.
26
(k) Office Lease. The Office Leases shall have been assumed, terminated,
renegotiated or otherwise modified to the mutual satisfaction of FDC
and Acquisition and the respective landlords of such leases.
(l) Opinion of Counsel. FDC shall have received from counsel to MCSI, an
opinion dated the Closing, to the following effect:
(i) MCSI is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Texas.
(ii) Execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, on the part of MCSI
and by the Executive Shareholders; this Agreement is a legal,
valid and binding obligation of MCSI, enforceable against MCSI in
accordance with its terms except as enforcement can be limited by
general equitable principles and by bankruptcy, insolvency or
similar laws affecting creditor's rights generally.
(iii)The execution and delivery of this Agreement by MCSI will not
violate or conflict with the Articles of Incorporation or Bylaws
of MCSI or any agreements or instruments identified to such
counsel by MCSI as all of its material agreements to which MCSI
is a party or by which MCSI is bound, except as may be listed in
the Exhibits hereto.
(iv) No consent, approval, authorization or order of, and no notice to
or filing with, any governmental agency or body or any court is
required to be obtained or made by MCSI in regard to this
Agreement, except such as have been obtained or made.
(v) Except as disclosed in this Agreement or the Exhibits hereto,
such counsel is not aware of any pending or threatened action,
suit, proceeding or investigation before any court or any public,
regulatory or governmental agency, authority or body, involving
MCSI or any of its officers or directors.
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ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Except as otherwise stated below, the representations, warranties, covenants and
agreements made by the respective parties in this Agreement or in a certificate
executed and delivered in connection with the transactions contemplated hereby
shall survive the Closing for a period of three years. The foregoing shall be
subject to the exception that any claims relating to tax matters covered in
Sections 3.23 and 3.24 hereof shall survive for the period of the applicable
statute of limitations pertaining to tax claims. All covenants, agreements,
representations and warranties made herein or pursuant hereto shall be deemed to
be material and to have been relied upon by the parties hereto, notwithstanding
any investigation heretofore or hereinafter made by or on behalf of the parties
prior to the Closing, provided, however, that no legal remedy, at law or in
equity, shall be available with respect to any loss, liability, or breach of
agreement or warranty or misrepresentation if the party alleging such loss,
liability, breach, or misrepresentation had actual knowledge of the existence,
nature and extent thereof on the Closing and, despite such knowledge, proceeded
with the Closing without objection.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification. Subject to the provisions of Article IX and this Article
X, Executive Shareholders agree to indemnify in respect of, and hold FDC
and Acquisition harmless against, any and all damages, claims,
deficiencies, losses, and expenses (collectively "Damages") resulting from
any misrepresentation, breach of warranty, or nonfulfillment or failure to
perform any covenant or agreement on the part of MCSI or Executive
Shareholders made as a part of or contained in this Agreement or in any
certificate executed and delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby, except for Damages
resulting from any such misrepresentations, breach of warranty or
nonfulfillment or failure to perform any such covenant or agreement known
to FDC and waived in writing by FDC as of the Closing. Subject to the
provisions of Article IX and this Article X, FDC and Acquisition agree to
indemnify in respect of, and hold Executive Shareholders harmless against,
any and all Damages resulting from any misrepresentation, breach of
warranty, or nonfulfillment or failure to perform any covenant or agreement
on the part of FDC or Acquisition made as a part of or contained in this
Agreement or in any certificate executed and delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby except
for Damages resulting from any such misrepresentations, breach of warranty
or nonfulfillment or failure to perform any such covenant or agreement
known to Executive Shareholders and waived in writing by Executive
Shareholders as of the Closing. The party claiming indemnification
hereunder is hereinafter referred to as the "Indemnified Party" and the
party against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party". Damages for which a claim or
action may be asserted hereunder are hereinafter referred to as a "Loss".
10.2 Limitation of Liability. Neither party shall be liable to the other party
to this Agreement except to the extent that the aggregate amount of Losses
for which they would otherwise (but for this provision) be liable under
this Article X exceeds in the aggregate the sum of $10,000 and then only to
the extent of such excess. Claims for indemnification by either party shall
be limited to the lesser of (i) the amount of the Purchase Price received
by the Executive Shareholders pursuant to Section 1.2, or (ii) the amount
of any damages, claims, deficiencies, losses and expenses paid by the
Indemnified Party to a third party.
28
10.3 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under this Article X shall be asserted and resolved as
follows:
(a) In the event that any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against
or sought to be collected from such Indemnified Party by a third
party, said Indemnified Party shall, within twenty (20) days of such
claim or demand being made, notify the Indemnifying Party of such
claim or demand, specifying the nature of and specific basis for such
claim or demand and the amount or the estimated amount thereof to the
extent then feasible (the "Claim Notice"). The estimate of Loss
contained in the Claim Notice shall not limit the amount of the
Indemnifying Party's ultimate liability under the claim. The
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to any such claim or demand if the Indemnified
Party fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement within said twenty (20) day
period. The Indemnifying Party shall have thirty (30) days from the
personal delivery or mailing of the Claim Notice (the "Notice Period")
to notify the Indemnified Party (i) whether or not the liability of
the Indemnifying Party to the Indemnified Party hereunder with respect
to such claim or demand is disputed, and (ii) whether or not the
Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such claim
or demand; provided, however, that any Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion,
answer or other pleading which it shall deem necessary or appropriate
to protect its interest or those of the Indemnifying Party and not
unreasonably prejudicial to the Indemnifying Party. In the event that
the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against
such claim or demand, then, except as hereinafter provided, the
Indemnifying Party shall have the right to defend by all appropriate
proceedings, which proceedings shall be promptly settled or prosecuted
by it to a final conclusion. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement it may
do so at its sole cost and expense. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the Indemnifying
Party and its counsel in contesting any claim or demand which the
Indemnifying Party elects to contest, or, if appropriate and related
to the claim in question, in making any counterclaim against the
person asserting the third party claim or demand, or any cross
complaint against any person but in any such case at the sole cost and
expense of the Indemnifying Party. No claim may be settled without the
consent of the Indemnifying Party, unless such settlement includes the
complete release of the Indemnifying Party.
29
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder which does not involve a claim or demand
being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to
such claim to the Indemnifying Party. If the Indemnifying Party does
not notify the Indemnified Party within the Notice Period that it
disputes such claim, the amount of such claim shall be conclusively
deemed a liability of the Indemnifying Party hereunder. If the
Indemnifying Party has disputed such claim, as provided above, such
dispute shall be resolved by arbitration as provided in Section 13.11.
10.4 Payment of Claim. Upon the determination of the liability of Executive
Shareholders or FDC and Acquisition under Section 10.1, 10.2 and 10.3, as
the case may be, after payment by the Indemnified Party of, or upon entry
of final judgment or reaching of a settlement in respect of, an
Indemnifiable Claim, or determination of a Loss to the Indemnified Party
occasioned by the breach of a representation and warranty by the
Indemnifying Party, and notice thereof to the Indemnifying Party, the
Indemnifying Party shall within thirty (30) days after receipt of such
notice pay to the Indemnified Party the amount of the payment, judgment,
settlement or Loss, as the case may be.
10.5 Sole Rights and Remedies. The indemnification rights of the parties under
this Article X are independent of and in addition to such rights and
remedies as the parties may have at law or in equity or otherwise for any
misrepresentation, breach of warranty or failure to fulfill any agreement
or covenant hereunder on the part of any party hereto including without
limitation the right to seek specific performance, rescission or
restitution, none of which rights or remedies shall be affected or
diminished hereby. The rights and remedies the parties are, however,
limited by the specific terms of this Agreement, including, but not limited
to those set forth in Section 10.2.
ARTICLE XI
AMENDMENT, TERMINATION AND BREACH
11.1 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by an instrument in writing, executed after the date
hereof, making specific reference to this Article and to each Article and
paragraph hereof to which such amendment, modification or supplement
applies, which document shall be signed by an authorized officer of FDC and
Acquisition and by MCSI and Executive Shareholders.
11.2 Termination and Abandonment. This Agreement may be terminated and the
transaction provided for by this Agreement may be abandoned without
liability on the part of any party to any other party:
(a) At any time before the Closing Date, by mutual consent of FDC,
Acquisition and MCSI;
30
(b) Commencing five days prior to Closing Date and until the Closing, by
FDC and Acquisition, if any of the conditions provided for in Section
8.2 of this Agreement have not been met and have not been waived by
FDC in writing;
(c) Commencing five days prior to Closing Date and until the Closing, by
MCSI, if any of the conditions of Section 8.1 of this Agreement have
not been met and have not been waived by MCSI in writing;
(d) By either party if the mutual conditions to Closing provided for in
Section 8.2 of this Agreement have not been met at time of Closing;
and
(e) Automatically if the Closing has not occurred by December 31, 1998.
In the event of the termination and abandonment of this Agreement by any party
as above provided in this Article XI, written notice shall forthwith be given to
the other party, and each party shall be solely responsible to pay its own
expenses incident to preparation for the consummation of this Agreement and the
transactions contemplated hereunder (except as otherwise provided herein).
ARTICLE XII
CLOSING
12.1 Closing. The closing of this Agreement (the "Closing") shall be December
15, 1998 or as soon thereafter as practicable but not later than December
31, 1998 ("Closing Date"), unless a later time and date is mutually agreed
upon by the parties hereto.
12.2 Allocations. The accounting, adjustments and allocations required under
Section 2.4 shall be determined as of 11:59 p.m. on the last day of the
month preceding the Effective Date defined in Section 1.3.
12.3 MCSI's and Executive Shareholders' Deliveries at Closing. At the Closing
MCSI or Executive Shareholders will deliver the following documents to FDC
all of which shall be reasonably satisfactory in form and substance to FDC
and its counsel:
(a) Articles and Plan of Merger. The Articles and Plan of Merger attached
hereto as Exhibit 1.1 as duly executed by MCSI.
(b) Opinion of Counsel. An opinion from counsel to MCSI, dated the Closing
Date, in the form described in Section 8.2 of this Agreement.
(c) Consents and Approvals. All consents, approvals and authorizations,
all notices and all registrations and filings required to be obtained,
given or made under any law, statute, rule, regulation, judgment,
order, injunction, contract, agreement or other instrument to which
MCSI is subject, bound or a party, or by which MCSI or any of its
properties is bound or subject, in each case which is required to
permit the consummation of the transactions contemplated by this
Agreement without contravention, violation or breach by MCSI of any of
the terms thereof.
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(d) Certificates. Certificate of existence for MCSI from the Secretary of
State of the state of incorporation of MCSI dated as of a date
reasonably prior to the Closing Date.
(e) Resolutions. Certified copy of resolutions of the Board of Directors
and the shareholder of MCSI authorizing, inter alia, the execution and
delivery of this Agreement, shareholder's stock certificates, the
Merger and the other transactions contemplated under this Agreement.
(f) Non-Compete and Confidentiality Agreements. The non-compete agreements
of Executive Shareholders in the form annexed as Exhibit 7.7 hereto.
(g) Employment Agreements. The employment agreements of Executive
Shareholders as contemplated in Section 7.8 hereto.
(h) Delivery of Corporate and Business Records. All corporate and business
records of MCSI as may be reasonably requested by FDC including
without limitation employee and personnel folders and applications,
payroll, tax related records and financial data.
(i) Officer's and Executive Shareholder's Certificates in the form
described in Section 8.2 of this Agreement.
(j) Other documents. Such documents, instruments, all stock certificates
of MCSI owned by shareholders of MCSI, the Stock Escrow Agreement
signed by all shareholders of MCSI, and other agreements as FDC and
its counsel may reasonably request, including specifically all
Exhibits referred to herein.
12.4 FDC's and Acquisition's Deliveries at Closing. At the Closing, FDC and
Acquisition shall deliver the following documents to MCSI or Executive
Shareholders, as appropriate, all of which shall be in a form reasonably
acceptable to MCSI or Executive Shareholders, as appropriate, and their
counsel:
(a) Purchase Price. The purchase price referred to in Section 1.2
including the Cash Consideration (by official bank check or wire
transfer) and the Stock Escrow Agreement in Exhibit 1.2 and related
common stock.
(b) Articles and Plan of Merger. The Articles and Plan of Merger attached
hereto as Exhibit 1.1 as duly executed by FDC and Acquisition.
(c) Consents and Approval. All consents, approvals and authorizations, all
notices and all registrations and filings required to be obtained,
given or made under any law, statute, rule, regulation, judgment,
order, injunction, contract, agreement or other instrument to which
FDC or Acquisition is a party, or by which it or any of their
properties are bound or subject, in each case which is required to
permit the consummation of the transactions contemplated by this
Agreement without contravention, violation or breach by FDC or
Acquisition of any of the terms thereof.
32
(d) Opinion of Counsel. An opinion from counsel to FDC and Acquisition,
dated the Closing Date, in the form described in Section 8.1 of this
Agreement.
(e) Certificates. Certificates of existence/good standing, as appropriate,
dated as of a date reasonably prior to the date of Closing, from the
Secretary of State of the State of Colorado and State of Texas as to
the existence and good standing of FDC and Acquisition, respectively.
(f) Resolutions. Certified copy of resolutions of the Board of Directors
of FDC and Acquisition and the shareholder of Acquisition authorizing,
inter alia, the execution and delivery of this Agreement, the Merger,
and the other transactions contemplated hereby.
(g) Employment Agreements. The employment agreements of Executive
Shareholders as contemplated in Section 7.8 hereto.
(h) Officer's Certificate in the form described in Section 8.1 of this
Agreement.
(i) Assumption of Office Leases. An assumption of lease for each of the
Office Leases, respectively, each in form and substance reasonably
acceptable to Acquisition and the respective landlords under each such
lease.
(j) Other Documents. Such other documents, instruments, certificates and
agreements, as MCSI and its counsel may reasonably request, including
specifically all Exhibits referred to herein.
12.5 Removal of Personal Effects Following Closing. In the event the Executive
Shareholders maintain assets which are the personal property of Executive
Shareholders on the premises and Executive Shareholders desire to remove
such personal property, the Executive Shareholders shall have a period of
30 days following the Closing to remove such personal property. As to any
such personal property removed, the Executive Shareholders shall provide
FDC with a schedule of such property prior to the removal of the same from
the premises.
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ARTICLE XIII
MISCELLANEOUS
13.1 Notice. All notices and communications required or permitted to be given
hereunder shall be in writing, signed by the sender, and delivered by
personal delivery overnight courier service or by registered or certified
mail to:
If to FDC: Xxxxxx X. Xxxxxx, President
Factual Data Corp.
0000 Xxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
with a copy to: Xxxxxx X. Xxxx, Esq.
Xxxxx & Xxxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
If to MCSI: Xxxxx X. Xxxxxx
Mortgage Credit Services, Inc.
00000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
If to Executive
Shareholders: Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Mortgage Credit Services, Inc.
00000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
with a copy to: Xxxxx X. Xxxxxx, Esq.
Looper, Reed, Xxxx & McGraw, Incorporated
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
or such other address as shall have been furnished in writing. Receipt by, or
filing with, the respective parties of any communications shall be deemed to
have occurred for the purpose of this Agreement, when personally delivered, or
next business day if sent by overnight courier, or two days after deposit
thereof, postage prepaid, properly addressed, in the United States mail.
13.2 Entire Agreement. This Agreement, including all Exhibits hereto and
documents referenced herein, constitutes the entire agreement between the
parties and as of Closing supersedes all agreements, representations,
warranties, statements, promises and understandings, whether oral or
written, with respect to the subject matter hereof. After Closing neither
party shall be bound by or charged with any oral or written agreements,
representations, warranties, statements, promises or understandings not
specifically set forth in this Agreement or in the certificates or
documents delivered in connection herewith.
34
13.3 Successors and Assigns. Except as otherwise provided in this Agreement, all
covenants and agreements of the parties contained in this Agreement shall
be binding upon and inure to the benefit of the respective successors and
permitted assigns of the parties hereto and the heirs, personal
representatives, executors and assigns of the Executive Shareholders. This
Agreement may not be assigned by any party hereto without the prior express
written consent of the other parties hereto.
13.4 Expenses. Whether or not the transactions contemplated hereby shall be
consummated, each party shall be solely responsible for payment of all
expenses incurred by it in connection with the consummation of this
Agreement and the transactions contemplated hereunder except as otherwise
provided herein.
13.5 Severability. Should any one or more of the provisions of this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be affected
thereby.
13.6 Governing Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Colorado without regard to
conflicts of laws principles.
13.7 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
13.8 Amendments. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing in accordance with Section 11.1 hereof.
13.9 No Third Party Beneficiary. The terms and provisions of this Agreement are
intended solely for the benefit of the parties hereto, and it is not the
intention of the parties to confer third-party beneficiary rights upon any
other person or entity.
13.10Headings. The headings in this Agreement are for purposes of convenience
and easy reference only and shall not limit or otherwise affect the meaning
hereof.
13.11Disputes. In the event of any dispute which arises between the parties and
which relates to the subject matter of this Agreement, the parties
acknowledge and agree that any such dispute shall be submitted for binding
arbitration in Denver, Colorado, in accordance with the Commercial
Arbitration Rules procedures established by the American Arbitration
Association or, if such association is not then in existence, an
independent association of arbitrators which may be designated by agreement
of the parties. In the event the parties are unable to agree on an
independent association of arbitrators from which arbitrators, however,
such application will only be made in the event the American Arbitration
Association is not then in existence. The arbitrator(s) shall make detailed
written findings to support their award. The prevailing party in any such
arbitration proceeding shall be awarded such costs and expenses (including
reasonable attorney's and expert witness' fees) as were incurred by the
prevailing party as a result of the institution and prosecution of the
arbitration proceeding including all costs and expenses (including
reasonable attorney's fees and expert witness' fees) to enter judgment upon
or enforce any such award including all appellate proceedings.
35
13.12Delivery of Exhibits. All Exhibits to be delivered by either of the parties
hereto upon execution of this Agreement which are not so delivered shall be
delivered to the other party not later than 10 days after the date of the
execution of this Agreement; in any event, all Exhibits shall be fully
completed and attached to this Agreement at Closing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
FACTUAL DATA CORP.
By: /s/Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, President
FDC ACQUISITION, INC.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, President
MORTGAGE CREDIT SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, President
36
Joined for Purposes of ARTICLE III and
ARTICLE X above:
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
EXHIBITS
No. Description
--- -----------
1.1 Articles of Merger
1.2 Stock Escrow Agreement
2.4 Accounting, Adjustments and Allocations
2.5 Procedures for Resolving Accounting, Adjustments and Allocations
Disputes
3.1(a) Articles of Incorporation of MCSI
3.1(b) Bylaws of MCSI
3.3(a) Certificate with Attached Resolution re: Shareholder Approval
3.3(b) Certified Board Resolution of MCSI
3.4 Conflicting Agreements
3.5 Notice of Regulatory Violations
3.7 No Known Adverse Effects
3.9 List of Subsidiaries of MCSI
3.10 List of Legal Actions of MCSI
3.13(a) List of Assets Owned by MCSI
3.13(b) List of Encumbrances of MCSI
3.14(a) List of Customers of MCSI
3.14(b) Customer Contracts of MCSI
3.14(c) Problem Customer Contracts of MCSI
3.14(d) Delinquent Accounts of MCSI
3.15 License Agreements of MCSI
3.16 Intellectual Property of MCSI
3.17 Contracts, Obligations, etc. of MCSI
3.19 Unrecorded Liabilities of MCSI
3.20 Adverse Changes of MCSI
3.22 Lease Agreement of MCSI
3.23 List of Tax Returns of MCSI
3.24 Tax Notices of MCSI
3.25 Employment Matters of MCSI
3.26 Employee Benefit Plans of MCSI
5.3(b) Employee Accrued Benefits of MCSI
6.2(a) FDC Consent of Board of Directors
6.2(b) Acquisition Consent of Board of Directors
6.2(c) Acquisition Consent of Shareholders
6.4 Compliance with Law of FDC
6.5 Legal Actions of FDC
6.7 No Adverse Effect of FDC
6.17 No Adverse Changes of FDC
7.7 Non-Compete Agreement
8.1 Officer's Certificate of FDC and Acquisition
8.1(k) Opinion of Xxxxx & Xxxxxx, P.C.
8.2 Officer's Certificate of MCSI; Certificate of Shareholder
8.2(l) Opinion of Looper, Reed, Xxxx & McGraw, Incorporated
