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EXHIBIT 1.5
CUSTODY AGREEMENT
CUSTODY AGREEMENT, effective as of the ___ day of March, 1998, by and
among each of the shareholders (the "Shareholders or "Shareholder") of Factual
Data Corp., a Colorado corporation, (the "Company"), Xxxxxxxxx Securities, Inc.
(the "Representative") and American Securities Transfer & Trust Incorporated
(the "Custodian").
WHEREAS, the Shareholders are the record and beneficial owners of
Common Stock of the Company, as more fully reflected on Exhibit A hereto, all
of which are "restricted securities" as defined under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, the Company and the Representative of the several
underwriters (the "Underwriters") intend to enter into an Underwriting
Agreement (the "Underwriting Agreement"; certain terms used herein which are
not defined herein and which are defined in the Underwriting Agreement are used
herein as therein defined) pursuant to which the Company will sell in a public
offering pursuant to the registration provisions of the 1933 Act, shares of
Common Stock (the "Common Stock") and Warrants (the "Warrants");
WHEREAS, as a condition to closing the proposed initial public
offering of the Company (the "Offering"), the Representative has required the
Shareholders to deposit an aggregate of 500,000 shares of Common Stock, on a
pro rata basis, owned by such Shareholders in the Company in custody with the
Custody Agreement (the "Custodial Shares"); and
WHEREAS, the Shareholders wish to deposit their pro rata share of the
Custodial Shares in custody in order to fulfill the requirements of the
Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, terms and conditions hereinafter set forth, the parties hereto
hereby agree as follows:
Section 1. Designation and Deposit of Custodial Shares.
a. The Custodial Shares of the Company to be deposited
in custody pursuant to this Agreement consist of 500,000 shares of
Common Stock of the Company and are owned of record as of March ___,
1998 by the Shareholders identified on Exhibit A attached hereto.
b. On or before the date on which the Securities and
Exchange Commission declares the Company's Registration Statement on
Form SB-2 (Reg. No. 333-_____) effective under the 1933 Act (the
"Effective Date"), the Shareholders shall deliver to the Custodian any
and all certificates representing the Custodial Shares and a stock
power endorsed in blank. Promptly after the effective date of the
Offering, the Custodian shall deliver a receipt therefor and a new
certificate representing the Shareholder's shares of Common Stock not
subject to this Custody Agreement.
Section 2. Title of Account. All certificates representing the
Custodial Shares delivered to the Custodian pursuant to this Agreement shall be
deposited on the Effective Date by the Custodian in an account designated
substantially as follows: "Factual Data Corp. Stock Certificate Custody
Account" (the "Custody Account").
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Section 3. Transfer of Custodial Shares During Custody Period.
a. During the Custody Period (hereinafter defined) none
of the Custodial Shares deposited in the Custody Account shall be
sold, pledged, hypothecated or otherwise transferred or delivered out
of the Custody Account except as follows:
i. Transfers by operation of law occasioned by
the death or incapacity of the Shareholder shall be recorded
upon presentation to the Company by the personal
representative or guardian of a deceased or incapacitated
Shareholder of appropriate documents regarding the necessity
for transfer and of which transfer the Company has notified
the Custodian and the Representative; or
ii. Transfers of ownership of certificates
representing the Custodial Shares, certificates for which have
been deposited to the Custody Account, shall remain subject to
the restrictions imposed hereby, including those persons, if
any, who become holders, by any means provided herein, of the
Custody Shares during the Custody Period.
Section 4. Duration of Custody Period.
a. The Custody Period shall commence on the Effective
Date and shall terminate on the earlier of the date on which all
500,000 shares have been returned to the Shareholders pursuant to
Sections 6(a), 6(b) or 6(c) below or March ___, 2005.
b. This Agreement shall be of no force or effect in the
event the Underwriting Agreement is not executed on the Effective Date
in accordance with its terms.
Section 5. Receipt of Distributions and Dividends. During the
term of the Custody Period, if the Company issues any distributions, dividends,
rights or other property with respect to the Common Stock, then, in such event,
the Company shall be authorized to send evidence of such distributions,
dividends, rights or other property directly to the Custodian, which is hereby
authorized to hold and retain possession of all such evidences of
distributions, dividends, rights or other property until termination of the
Custody Period in accordance with Section 6 below. In the event the Custodial
Shares are distributed to the Shareholders pursuant to Sections 6(a), 6(b) or
6(c) below, then the Custodian will distribute evidences of such distributions,
dividends, rights, or other property in the form the Custodian received such
distributions, dividends, rights or other property from the Company. In the
event the Custody Period terminates pursuant to Section 6(d) below, the
Custodian is hereby authorized, empowered and instructed to deliver all such
evidences of distributions, dividends, rights or other property to the Company,
which is hereby authorized to cancel the same on the books of the Company at
the time of receipt thereof from the Custodian. If the Company recapitalizes,
splits or combines its shares, such shares shall be substituted, on a pro rata
basis for the Custodial Shares.
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Section 6. Release and Delivery of Custodial Shares.
a. In the event the Custodian receives written advice
from the Representative and the Company confirming the Company had
pre-tax net income (excluding extraordinary items) of $3 million or
more in the four complete calendar quarters immediately subsequent to
the Effective Date, the Custodian shall return to each Shareholder a
certificate for his or her pro rata share of the Custodial Shares.
The Custodian shall return each certificate only to the person named
as the holder of record in Exhibit A hereto, as modified by any
transfers made pursuant to Section 3 above.
b. In the event the Custodian receives written advice
from the Representative and the Company confirming the Company had
pre-tax net income (excluding ordinary items) of $8 million or more in
the four complete calendar quarters commencing one year after the
Effective Date, the Custodian shall return to each Shareholder a
certificate for his or her pro rata share of the Custodial Shares.
The Custodian shall return each certificate only to the person named
as the holder of record in Exhibit A hereto, as modified by any
transfers made pursuant to Section 3 above.
c. In the event the Custodian receives written advice
from the Representative and the Company confirming that the Company
has been merged or consolidated with another company which is the
survivor to the transaction, or that the Company has sold all or
substantially all of its assets and the relevant transaction was
approved by the holders of a majority of the Company's outstanding
voting securities exclusive of any such securities held by any party
to this Agreement, the Custodian shall immediately prior to the
closing of any such transaction return to each Shareholder a
certificate for his or her pro rata share of the Custodial Shares.
The Custodian shall return each certificate only to the person named
as the holder of record in Exhibit A hereto, as modified by any
transfers made pursuant to Section 3 above.
d. In the event none of the criteria for release
specified in subparagraphs (a), (b) or (c) above is not reached by the
Company, the Custodial Shares shall remain in the Custody Account
until March ___, 2005. Upon termination of the Custody Period
pursuant to the provisions of this Section 6(d), the Custodian shall,
as promptly as possible, return to each Shareholder a certificate for
his or her pro rata share of the Custodial Shares remaining in the
Custody Account by means of registered mail, return receipt requested.
The Custodian shall return each certificate only to the person named
as the holder of record in Exhibit A hereto, as modified by any
transfers made pursuant to Section 3 above.
e. At such time as the Custodian shall have returned all
certificates as provided in this Section, the Custodian shall be
discharged completely and released from any and all further
liabilities and responsibilities under this Agreement.
f. The determination of net income achieved by the
Company in the periods described above shall be solely the
responsibility of the Company and the Representative, and the
Custodian shall have no liability or responsibility therefor. The
Company and the Representative agree that the determination of net
income shall not include the
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effect of any extraordinary items and shall be based on fully diluted
net income in accordance with Financial Accounting Standard Board
Opinion No. 128. Further, the Company and the Representative agree
that any expense or charge to earnings incurred by the Company as a
result of the release of the Custodial Shares to the Shareholders will
be excluded from the calculation of whether the Company achieved or
exceeded the net income targets. The determination of net income will
be made in accordance with generally accepted accounting principles
and will be based upon the audited financial statements of the
Company.
Section 7. Voting Rights. During the custody Period, the
Shareholder, or any transferee receiving all or a portion of the Custody Shares
pursuant to Section 3 herein, shall have the right to vote the Custodial Shares
in the Custodial Account at any and all shareholder meetings without
restriction.
Section 8. Limitation of Liability of Custodian. In acting
pursuant to this Agreement, the Custodian shall be protected fully in every
reasonable exercise of its discretion and shall have no obligation hereunder to
either the Shareholder or to any other party except as expressly set forth
herein. In performing any of its duties hereunder, the Custodian shall not
incur any liability to any person for any damages, losses or expenses, except
for willful default or negligence and it shall, accordingly, not incur any such
liability with respect to (1) any action taken or omitted in good faith upon
advice of its counsel, counsel for the Company or counsel for the
Representative given with respect to any question relating to the duties and
responsibilities of the Custodian under this Agreement, and (2) any action
taken or omitted in reliance upon any instrument, including written notices
provided for herein, not only to its due execution and validity and
effectiveness of its provisions, but also to the truth and accuracy of any
information contained therein, which the Custodian shall in good faith believe
to be genuine, to have been signed and presented by a proper person or persons
and to be in compliance with the provisions of this Agreement.
Section 9. Indemnification. The Company, the Representative and
the Shareholders shall indemnify and hold harmless the Custodian against any
and all losses, claims, damages, liabilities and expenses, including reasonable
costs of investigation and counsel fees and disbursements, which may be imposed
upon the Custodian or incurred by the Custodian in connection with its
acceptance of appointment as Custodian or the performance of its duties
hereunder, including any litigation arising from this Agreement or involving
the subject matter hereof.
Section 10. Payment of Fees. The Company shall be responsible
for all reasonable fees and expenses of the Custodian incurred by it in the
course of performing hereunder.
Section 11. Change of Custodian. In the event the Custodian
notifies the Company and the Representative that its acceptance of the duties
of Custodian has been terminated by the Custodian, or in the event the
Custodian files for protection under the United States Bankruptcy Code or is
liquidated or ceases operations for any reason, the Company and the
Representative shall have the right to jointly designate a replacement
Custodian who shall succeed to the rights and duties of the Custodian
hereunder. Any such replacement Custodian shall be a trust or stock transfer
company experienced in stock transfer, escrow and related
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matters and shall have a minimum net worth of $1 million. Upon appointment of
such successor Custodian, the Custodian shall be discharged from all duties and
responsibilities hereunder.
Section 12. Power of Attorney. The undersigned Shareholders
recognize that the Company may change the terms and provisions of the offering
prior to effectiveness, which may necessitate any amendment hereto. Each
undersigned Shareholder, by execution hereof, hereby appoints Xxxxxx X. Xxxxxx
his attorney-in-fact to execute any amendment to this Agreement that Xx. Xxxxxx
deems necessary or appropriate to effect such change, provided however, that
such attorney-in-fact shall not agree to an escrow of more shares than those to
which the undersigned has herein agreed.
Section 13. Notices. All notices, demands or requests required
or authorized hereunder shall be deemed given sufficiently if in writing and
sent by registered mail or certified mail, return receipt requested and postage
prepaid, or by telex, telegram or cable to, in the case of the Shareholder, the
address as set forth in the records of the Custodian:
In the case of the Representative to:
Xxxxxxxxx Securities, Inc.
The Chancery
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. X'Xxxxxx, President
With a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxxx, Esq.
Berliner Xxxxxx Xxxxxx & Xxxxxxxx PC
One Norwest Center, Suite 4700
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
In the case of the Custodian to:
American Securities Transfer & Trust Incorporated
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
In the case of the Company to:
Xxxxxx X. Xxxxxx, President
Factual Data Corp.
0000 XXX Xxxxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxx 00000
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With a copy to (which shall not constitute notice):
Xxxxxx X. Xxxx, Esq.
Xxxxx & Xxxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Section 14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement. Facsimile signatures shall be
accepted by the parties hereto as original signatures for all purposes.
Section 15. Governing Law. The validity, interpretation and
construction of this Agreement and of each part hereof shall be governed by the
laws of the State of Colorado.
IN WITNESS WHEREOF, the Shareholders, the Company, the Representative
and the Custodian have executed this Custody Agreement to be effective as of
the day and year first above written.
AMERICAN SECURITIES TRANSFER &
TRUST, INC.
By:
---------------------------------
Title:
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FACTUAL DATA CORP.
By:
---------------------------------
Title:
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XXXXXXXXX SECURITIES, INC.
By:
---------------------------------
Title:
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THE SHAREHOLDERS:
By:
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Xxxxxx X. Xxxxxx
By:
---------------------------------
Xxxxxx X. Xxxxxx
By:
---------------------------------
Xxxxxxx X. Xxxxxx
By:
---------------------------------
Xxxxx X. Xxxxxx
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EXHIBIT A
TO CUSTODY AGREEMENT
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Shares Total
Name Total Shares Not Subject Number of
of Shareholder Owned to Custody Custody Shares
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Xxxxxx X. Xxxxxx 630,000 455,000 175,000
Xxxxxx X. Xxxxxx 630,000 455,000 175,000
Xxxxxxx X. Xxxxxx 270,000 195,000 75,000
Xxxxx X. Xxxxxx 270,000 195,000 75,000
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TOTAL 1,800,000 1,300,000 500,000
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