SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported):
SEPTEMBER 16, 1998
FACTUAL DATA CORP.
(Exact name of registrant as specified in its charter)
COLORADO 0-24205 84-1449911
(State of (Commission File (I.R.S. Employer
Incorporation) No.) Identification
No.)
5200 HAHNS PEAK DRIVE
LOVELAND, COLORADO 80538
(Address of principal executive offices)
(970) 663-5700
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 16, 1998, Factual Data Corporation (the "Company") closed its
acquisition of the assets of Factual Data Minnesota, Inc. ("FD Minnesota")
pursuant to an Asset Purchase Agreement (the "Agreement") executed on September
16, 1998 and effective August 31, 1998. The Company and its franchisees and
licensees provide information services, including mortgage credit reports, to
mortgage and consumer lenders, employment screening services ("EMPfacts") and
credit and tenant screening services ("QUICKpeek Tenant"). Since 1990, FD
Minnesota had been a franchisee of the Company located in the Saint Paul,
Minnesota area and operating in Minnesota and Iowa.
Pursuant to the Agreement, the Company acquired the fixed assets, contract
rights, intellectual property rights to trade names and computer software,
personnel files, books and records, deposits, prepaid assets and the goodwill of
FD Minnesota in exchange for $353,243 cash paid at closing and a non-interest
bearing promissory note in the principal amount of $353,243 payable in
twenty-four equal monthly installments commencing September 1, 1998. The note is
secured by a lien on all of the assets purchased pursuant to the Agreement. The
Company also assumed the lease obligations on the FD Minnesota facility and
intends to continue operations of FD Minnesota at such facility. In connection
with the purchase, the Company entered into two year non-competition agreements
with the two shareholders of FD Minnesota.
Abdul Rajput, one of the shareholders of FD Minnesota, has been a director of
the Company since February 1998. Mr. Rajput disclosed all of the material facts
as to his relationship and interest in FD Minnesota and abstained from voting on
the acquisition. The acquisition was approved by all of the remaining directors
of the Company and the acquisition was made on terms believed by the Board to be
no less favorable than could have been obtained from an unaffiliated party. The
Company retained an independent firm of certified public accountants to appraise
the fair market value of the operating assets, excluding cash and accounts
receivable, of FD Minnesota. Based on such firm's study and analytical review
procedures such firm concluded that a reasonable estimate of the fair market
value of the operating assets, excluding cash and accounts receivable, of FD
Minnesota as of May 31, 1998 was $720,000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) It is impracticable to provide the required financial statements
relative to FD Minnesota at this time. In accordance with Item
7(a)(1), the Registrant will file the required financial statements
as an amendment to this Form 8-K as soon as practicable, but not
later than 60 days after this report on Form 8-K must be filed.
(b) It is impracticable to provide the required pro forma financial
information relative to FD Minnesota and the Registrant at this time.
In accordance with Item 7(b)(2), the Registrant will file the
required financial statements as an amendment to this Form 8-K as
soon as practicable, but not later than 60 days after this report on
Form 8-K must be filed.
(c) Exhibits
2.1 Asset Purchase Agreement between Factual Data Corp. and FD Minnesota, Inc.
dated as of July 31, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FACTUAL DATA CORPORATION
Date: September 30, 1998 By: /S/ JERALD H. DONNAN
Jerald H. Donnan,
Chief Executive Officer
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
FACTUAL DATA CORP.
AND
FACTUAL DATA MINNESOTA, INC.
DATED AS OF AUGUST 31, 1998
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ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
RECITALS ...........................................................1
ARTICLE I ...........................................................1
DEFINITIONS.....................................................1
ARTICLE II ...........................................................4
ACQUISITION OF THE ASSETS.......................................4
2.1 DELIVERY OF ASSETS.......................................4
2.2 PURCHASE PRICE FOR ASSETS................................5
ARTICLE III .........................................................7
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS.......7
3.1 ORGANIZATION AND QUALIFICATION OF SELLER.................7
3.2 AUTHORIZED CAPITALIZATION................................7
3.3 AUTHORIZATION............................................8
3.4 PRODUCT RIGHTS...........................................8
3.5 BULK SALE LAW............................................8
3.6 NO CONFLICTING AGREEMENTS................................8
3.7 COMPLIANCE WITH APPLICABLE LAW...........................9
3.8 MATERIAL MISSTATEMENTS OR OMISSIONS......................9
3.9 NO KNOWN ADVERSE EFFECTS.................................9
3.10 CONSENTS AND APPROVALS...................................9
3.11 LITIGATION..............................................10
3.12 BROKERS.................................................10
3.13 TAXES...................................................10
3.14 OWNERSHIP...............................................10
3.15 ACCOUNTS................................................10
3.16 LICENSE AGREEMENTS......................................11
3.17 INTELLECTUAL PROPERTY...................................11
3.18 CONTRACTS...............................................11
3.19 FINANCIAL STATEMENTS....................................11
3.20 ABSENCE OF UNDISCLOSED OR CONTINGENT LIABILITIES........11
3.21 NO MATERIAL ADVERSE CHANGES.............................12
3.22 ABSENCE OF DEVELOPMENTS.................................12
3.23 TITLE TO PROPERTIES.....................................12
3.24 TAX MATTERS.............................................13
3.25 TAX NOTICES.............................................13
3.26 EMPLOYEES...............................................14
3.27 EMPLOYEE BENEFIT PLANS..................................14
3.28 GIFTS...................................................15
3.29 EMPLOYEE HEALTH AND SAFETY..............................15
3.30 REPRESENTATIONS AS TO KNOWLEDGE.........................15
3.31 REPRESENTATIONS CONCERNING SOLVENCY.....................15
3.32 EMPLOYMENT AGREEMENTS...................................15
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ARTICLE IV ........................................................16
PRE-CLOSING COVENANTS OF SELLER................................16
4.1 INSPECTION OF PROPERTIES AND BOOKS......................16
4.2 OTHER CONTRACTS.........................................16
4.3 ONGOING OPERATIONS......................................16
4.4 INDEBTEDNESS............................................17
4.5 RECORDS.................................................17
4.6 ARTICLES OF INCORPORATION; BYLAWS.......................17
4.7 DISTRIBUTIONS OR DIVIDENDS..............................17
4.8 NOTICE OF BREACH........................................17
4.9 NONDISCLOSURE...........................................17
4.10 EMPLOYMENT MATTERS......................................17
4.11 INSURANCE...............................................18
4.12 PRESERVATION OF BUSINESS................................18
4.13 REGULATORY FILINGS......................................18
4.14 NO NEGOTIATIONS.........................................19
4.15 ASSIGNMENT OF CONTRACTS, LEASES AND OTHER AGREEMENTS....19
4.16 BEST EFFORTS............................................19
4.17 ADDITIONAL DISCLOSURE...................................19
4.18 NON-COMPETE AND CONFIDENTIALITY AGREEMENTS..............19
ARTICLE V ........................................................20
POST-CLOSING COVENANTS.........................................20
5.1 FURTHER ASSURANCES......................................20
5.2 LITIGATION SUPPORT......................................20
ARTICLE VI ........................................................20
REPRESENTATIONS AND WARRANTS OF PURCHASER......................20
6.1 ORGANIZATION AND QUALIFICATION OF PURCHASER.............20
6.2 AUTHORIZATION...........................................20
6.3 NO CONFLICTING AGREEMENTS...............................21
6.4 COMPLIANCE WITH APPLICABLE LAW..........................21
6.5 LITIGATION..............................................21
6.6 MATERIAL MISSTATEMENTS OR OMISSIONS.....................21
6.7 CONSENTS AND APPROVALS..................................21
6.8 BROKERS.................................................21
6.9 REPRESENTATIONS AS TO KNOWLEDGE.........................21
ARTICLE VII ........................................................22
COVENANTS OF PURCHASER.........................................22
7.1 OTHER CONTRACTS.........................................22
7.2 ADDITIONAL DISCLOSURE...................................22
7.3 NOTICE OF BREACH........................................22
7.4 NONDISCLOSURE...........................................22
7.5 BEST EFFORTS............................................22
7.6 REGULATORY EFFORTS......................................22
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ARTICLE VIII ........................................................23
CONDITIONS PRECEDENT TO CLOSING................................23
8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...........23
8.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER........25
ARTICLE XI ........................................................29
SURVIVIAL OF REPRESENTATIONS AND WARRANTS......................29
ARTICLE X ........................................................29
INDEMNIFICATION................................................29
10.1 INDEMNIFICATION.........................................29
10.2 METHOD OF ASSERTING CLAIMS..............................30
10.3 PAYMENT OF CLAIM........................................31
10.4 OTHER RIGHTS AND REMEDIES NOT AFFECTED..................31
10.5 POST-CLOSING ADJUSTMENTS AND RIGHT OF OFFSET............31
ARTICLE XI ........................................................31
AMENDMENT, TERMINATION AND BREACH..............................31
11.1 AMENDMENT AND MODIFICATION..............................31
11.2 TERMINATION AND ABANDONMENT.............................31
ARTICLE XII ........................................................32
CLOSING........................................................32
12.1 CLOSING.................................................32
12.2 ALLOCATIONS.............................................32
12.3 SELLER'S DELIVERIES AT CLOSING..........................32
12.4 PURCHASER'S DELIVERIES AT CLOSING.......................33
12.5 FORWARDING OF RECEIVABLES AND PAYMENT OF EXPENSES.......34
12.6 REMOVAL OF PERSONAL EFFECTS FOLLOWING CLOSING...........34
13.1 NOTICE..................................................35
13.2 ENTIRE AND SOLE AGREEMENT...............................35
13.3 SUCCESSORS AND ASSIGNS..................................36
13.4 EXPENSES................................................36
13.5 SEVERABILITY............................................36
13.6 GOVERNING LAW...........................................36
13.7 COUNTERPARTS............................................36
13.8 AMENDMENTS..............................................36
13.9 NO THIRD PARTY BENEFICIARY..............................36
13.10HEADINGS................................................36
13.11DISPUTES................................................37
13.12DELIVERY OF EXHIBITS....................................37
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into effective this 31st day of August, 1998,
by and between FACTUAL DATA CORP., a Colorado corporation ("Purchaser"), and
FACTUAL DATA MINNESOTA, INC.
("Seller").
RECITALS
WHEREAS, on or about July 23, 1998, Purchaser issued a term sheet to Seller
("Term Sheet") pursuant to which Purchaser indicated its desire to proceed with
the acquisition of certain assets of Seller; and
WHEREAS, the Term Sheet contemplated the parties would enter into a definitive
Asset Purchase Agreement which definitive agreement is as set forth below (the
"Agreement") and which shall supersede the Term Sheet in its entirety; and
WHEREAS, Purchaser desires to purchase, and Seller desires to sell, the assets
of Seller as described on EXHIBIT 2.1 hereto (the "Assets");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and in reliance upon the representations and warranties
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall, unless the context requires
otherwise, have the meanings designated below:
ASSETS means the assets set forth on EXHIBIT 2.1 hereto.
CLAIM NOTICE has the meaning given to it in Article 10.3(a).
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CLOSING has the meaning given to it in Article 12.1.
CLOSING DATE has the meaning given to it in Article 12.1.
CODE means the Internal Revenue Code of 1986, as amended.
COMMUNICATION means collectively any publicity release, security filing, private
placement memorandum or any other communication.
DAMAGES means any and all damages, claims, deficiencies, losses and expenses, as
further defined in Article 10.1.
ERISA means the Employee Retirement Income Security Act of 1974, as amended, and
any regulations, rules or orders promulgated thereunder.
EVALUATION MATERIAL means Seller's documents, financial statements, information
and materials which shall be used in connection with a due diligence review.
FINANCIAL STATEMENTS has the meaning given to it in Article 3.20.
INDEMNIFIED PARTY means the party claiming indemnification under Article X.
INDEMNIFYING PARTY means the party against whom indemnification claims are
asserted under Article X.
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INTELLECTUAL PROPERTY means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, (b) all trademarks, services marks, trade dress, logos,
trade names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connections
therewith, (c) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all mask works and all
applications, registration and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
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LOSS means Damages for which any claim may be asserted under Article X.
OTHER COMPANY AGREEMENTS means the Non-Compete and Confidentiality
Agreements.
NOTE shall have the meaning given it in Article 2.2
NOTICE means the thirty day period which the indemnifying party shall have from
the personal delivery or mailing of the Claim Notice.
OSHA means the Occupational Safety and Health Act of 1970, as amended, and any
regulations, rules or orders promulgated thereunder.
PURCHASE PRICE has the meaning given it in Article 2.2.
PURCHASER means Factual Data Corp., a Colorado corporation, or its assigns.
RETAINED ACCOUNTS RECEIVABLE means accounts receivable retained by Seller and
shall include receivables due for all work, labor and services performed by
Seller and billed by Seller in the normal course of business through and
including the day before Closing.
SELLER means Factual Data Minnesota, Inc.
SHAREHOLDERS means all owners of capital stock of Seller at the date hereof and
as of Closing.
TAX OR TAXES means any federal, state, local or foreign income, gross receipt,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A), custom
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimating or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not.
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TAX RETURN means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
UNIFORM COMMERCIAL CODE means the Uniform Commercial Code applicable in the
state of organization of the Seller.
ARTICLE II
ACQUISITION OF THE ASSETS
Subject to the terms and conditions set forth in this Agreement:
2.1 DELIVERY OF ASSETS. At the Closing, as defined below, Seller shall endorse
and deliver such instruments, documents, certificates or instructions as
may be necessary to vest title to the Assets set forth on EXHIBIT 2.1
hereto in Purchaser. Upon receipt of such documents, instruments,
certificates or instructions, and upon the Closing, Purchaser shall become
the beneficial and record holder of the Assets and entitled to all of the
rights, benefits and privileges with respect thereto. The Assets shall be
delivered by Seller to Purchaser at the Closing and will be free of all
encumbrances, liens, security interests or other claims. At the Closing,
the Assets which will be transferred to Purchaser, and their value, shall
be as follows:
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ASSET CATEGORY VALUATION(1)
Fixed Assets $ 23,500
--------
Contract Rights(2) ________
Intellectual Property(3) 656,336
-------
Personnel Files ________
Books and Records ________
Non-Compete and Confidentiality Agreement 25,000
-------
Deposits 1,650
-------
Prepaid Assets ________
Goodwill
- -------------------------
(1) The parties acknowledge and agree that the valuation of the Assets if not
determined at the date of execution of this Agreement, shall be made by
the parties not later than twenty (20) days prior to Closing.
(2) To the extent assignable.
(3) The Intellectual Property to be transferred, to the extent assignable,
shall include all rights to trade names of Seller and all computer
software programs, designed, written or used by Seller, including but not
limited to the source codes for all programs.
Each of Seller and the Purchaser covenant that it will not take a position on
any income tax return or before any governmental agency or in any judicial
proceeding that is inconsistent in any way with this allocation.
2.2 PURCHASE PRICE FOR ASSETS. The aggregate purchase price for the Assets
shall consist of $706,486, consisting of $353,243 cash and a promissory
note for an aggregate amount of $353,243 which shall be executed and
delivered to Seller at the Closing subject to and upon the terms and
conditions hereof and the representations and warranties contained herein,
in the following manner:
(a) At the Closing, Purchaser shall pay an AGGREGATE cash consideration
of $353,243 to the Seller, which shall be paid in the form of a
cashier's check or a wire transfer to a financial institution
designated by the Seller. Such payment shall represent $353,243 in
currency of the United States of America.
(b) Purchaser shall deliver to, and execute in favor of, Seller a
non-negotiable promissory note in the aggregate principal amount of
$353,243 (the "Note"). The Note shall be issued by Purchaser on the
following terms and conditions:
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(i) The Note shall bear no interest and shall be due and payable in
24 equal monthly installments of principal commencing September
1, 1998.
(ii) The Note, a copy of which is attached hereto as EXHIBIT
2.2(C)(I), shall be secured by a perfected lien on all of the
Assets sold pursuant to this Agreement. If requested by a senior
institutional bank or other lender providing credit arrangements
to Purchaser, the lien securing payment of the Note shall be
subordinated to such senior institutional bank or other lender
providing credit arrangements to Purchaser at any time prior to
or after the execution of this Agreement and Seller agrees to
execute a subordination agreement and intercreditor agreement in
form satisfactory to the senior debt lender at such time as a
senior credit facility is obtained by Purchaser. A security
agreement (the "Security Agreement") and UCC-1 setting forth the
security interest in the form attached as EXHIBIT 2.2(C)(II)
shall be executed at the Closing by Purchaser and filed by
Seller with the Minnesota Secretary of State or other required
regulatory agencies or governmental entities in each state and
entity in which a UCC filing may be required.
(c) The parties contemplate that, subsequent to the Closing, an audit of
the financial records of Seller may be performed in accordance with
generally accepted accounting principles by independent certified
public accountants designated by the Purchaser, and at Purchaser's
sole cost and expense.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Seller and Shareholders represent and warrant to Purchaser that the statements
contained in this Article III 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:
3.1 ORGANIZATION AND QUALIFICATION OF SELLER. The Seller 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 the Purchaser's use of the Assets. The
Seller 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
the Seller, both as amended to date, which have been delivered to
Purchaser and attached hereto as EXHIBITS 3.1(A) AND 3.1(B), respectively,
are complete and correct, and the Seller 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 the Seller, as
delivered to Purchaser, are correct and complete.
3.2 AUTHORIZED CAPITALIZATION. The authorized capital stock of the Seller
consists of 24,000 shares of Common Stock, of which 1,000 shares are
issued and outstanding as of the date of this Agreement. All shares issued
and outstanding as of the date of this Agreement have been duly authorized
and validly issued and are fully pad and nonassessable. No shares of the
Seller's capital stock are held in treasury. The Seller has no authorized
or outstanding stock or securities convertible into or exchangeable for,
or any authorized or outstanding option, warrant or other right to
subscribe for or to purchase, or convert any obligation into, any unissued
shares. There are no authorized or outstanding stock appreciation, phantom
stock, profit participation or similar rights with respect to the Seller.
There are no voting trusts, voting agreements, proxies or other agreements
or understandings with respect to the voting of the capital stock of the
Seller.
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3.3 AUTHORIZATION. This Agreement has been duly and validly executed and
delivered by Seller and the Shareholders and the agreements,
representations and warranties contained herein constitute valid and
binding obligations, representations and warranties of Seller and the
Shareholders enforceable in accordance with their terms. Attached hereto
as EXHIBIT 3.2(A) is a Certificate which shall evidence the approval and
authorization of the shareholder(s) of Seller and which shall be attested
to by the President of Seller. This Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and
unanimously approved by the board of directors of Seller. Attached hereto
as EXHIBIT 3.2(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 the Seller will when
executed and delivered constitute, the legal, valid and binding
obligations of, and be enforceable in accordance with their respective
terms against, the Seller.
3.4 PRODUCT RIGHTS. As of the Closing, subject to those limitations set forth
in this Agreement, Seller has no rights with respect to any trademarks and
trade names.
3.5 BULK SALE LAW. Seller will comply with notice requirements of
applicable Minnesota law.
3.6 NO CONFLICTING AGREEMENTS. The execution and delivery of this Agreement by
Seller does not, and consummation by Seller 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 Seller or the 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 Seller or of any agreement or instrument to
which Seller is a party, or (c) result in the creation or imposition of
any lien, charge, security interest, encumbrance, restriction or claim
upon the Assets.
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3.7 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in EXHIBIT 3.7(A),
Seller has not received any notice or information of any violation,
probable violation or default by Seller under any applicable law,
regulation or order of any governmental department, commission, board or
agency or instrumentality, domestic or foreign, having jurisdiction over
Seller's operations which could materially adversely affect the business,
operations, financial condition, properties or assets of Seller, or the
ability to consummate the transaction contemplated hereby. To the best of
Seller's knowledge after diligent inquiry, Seller has operated its
business, and will continue to operate its business, in compliance with
the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act,
the Fair Debt Collection Act and applicable state law. Additionally,
Seller has given notice of the sale of Assets to all government entities
that require such notice.
3.8 MATERIAL MISSTATEMENTS OR OMISSIONS. Neither this Agreement nor any other
document, certificate or statement furnished to Purchaser by or on behalf
of Seller 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 or therein not misleading in light of the
context in which they were made.
3.9 NO KNOWN ADVERSE EFFECTS. There is no fact known to Seller, its officers,
directors or shareholders which materially adversely affects or will
materially adversely affect the Assets which has not been set forth in
writing in this Agreement or disclosed in the other documents,
certificates or written statements furnished to Purchaser by or on behalf
of Seller in connection herewith.
3.10 CONSENTS AND APPROVALS. The execution and delivery by Seller of this
Agreement, and the performance by Seller of its obligations hereunder,
does not require Seller 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 Assets or the transactions contemplated
hereby, and (iii) approval of the Seller's Shareholders, which shall be
obtained prior to the execution hereof.
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3.11 LITIGATION. Except as described in EXHIBIT 3.11, there are no actions,
proceedings or investigations pending or threatened against Seller or the
Assets before any court or administrative agency which could result in any
material adverse change in the operations or financial condition of Seller
other than as identified therein.
3.12 BROKERS. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Seller directly with
representatives of Purchaser, without the intervention of any person in
such manner as to give rise to any valid claim by any person against
Purchaser 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.
3.13 TAXES. Seller shall pay all Taxes arising out of the transfer of the
Assets and shall be responsible for all personal property taxes for the
business of Seller through the date of the Closing. Purchaser shall not be
responsible for any business, occupation, withholding or similar Tax, or
any Taxes of any kind related to the Assets or the business of Seller for
any period prior to the Closing.
3.14 OWNERSHIP. Seller is the owner, beneficially and of record, of all of the
Assets as identified on EXHIBIT 2.1 hereto, free and clear of all liens,
encumbrances, security agreements, equities, options, claims, charges and
restrictions, except as otherwise described on EXHIBIT 3.14 hereto.
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3.15 ACCOUNTS. The list of customers attached hereto as EXHIBIT 3.15(A)
represents the customers with which Seller now does business, principally
in the area of mortgage credit reporting. The customers with which Seller
maintains a contract or agreement are identified on EXHIBIT 3.16(B)
hereto. Except as described on EXHIBIT 3.15(C), all such contracts or
agreements are valid and enforceable contracts or agreements and are not
currently, and will not be at Closing as a result of any action by Seller,
in default, invalid or unenforceable in any manner, or where termination
is threatened or imminent to the actual knowledge of Seller. Seller 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 counterclaim or set-off and such contracts
are in full force and effect and will continue, subject to applicable
termination rights therein, in full force and effect following the Closing
(assuming continuing performance by Purchaser following the Closing, which
is not warranted or represented by Seller). Except as described on EXHIBIT
3.15(D), Seller has no reason to believe that amounts payable under such
contracts or agreements, assuming due performance by Purchaser in the
future (which is not warranted or represented by Seller), will not be paid
in accordance with the terms of such contracts or agreements. Seller 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
Purchaser.
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3.16 LICENSE AGREEMENTS. Attached as EXHIBIT 3.16 is a complete and accurate
list of any license agreements to which Seller is a party as of the date
hereof. Also stated on EXHIBIT 3.16 is the expiration date of each such
license agreement. Except as described on EXHIBIT 3.16, all such license
agreements are valid and enforceable contracts or agreements and are not
currently, and will not be at Closing, in material default, invalid or
unenforceable in any manner. To the extent the transfer of any license
agreement hereunder requires the consent of any third party, Seller and
Shareholders shall use their best efforts to obtain such consents. Seller
has not received any written notices of default, claims or any other type
of written notice 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 Purchaser.
3.17 INTELLECTUAL PROPERTY. Attached as EXHIBIT 3.17 to this Agreement is a
schedule of all trade names, trademarks, service marks, copyrights,
computer software, source code and their registrations, owned by Seller or
in which Seller has any right, license, or for which Seller has made
application, together with a brief description of each (hereinafter
collectively the "Intellectual Property"). To the best of Seller's
knowledge, Seller has not infringed, and by its use of its Intellectual
Property, is not now infringing on any United States or Minnesota trade
name, trademark, service mark or copyright belonging to any other person,
firm or corporation and, to the best of Seller's knowledge, the use of the
Intellectual Property by Purchaser will not conflict with, infringe on or
otherwise violate the rights of others.
3.18 CONTRACTS. Except as set forth in EXHIBIT 3.18, Seller is not a party to,
nor is the property of Seller 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, security agreement, loan agreement or instrument which Purchaser
would succeed to by its purchase of the Assets, nor will the purchase of
the Assets by Purchaser create any default by Seller as to any of such
agreements which will materially adversely affect the Purchaser's use of
the Assets.
3.19 FINANCIAL STATEMENTS. Seller has delivered to Purchaser copies of Seller's
balance sheet as of the end of the most recent fiscal year and the
statements of income and retained earnings for the years ended for the two
most recent fiscal years and, to the extent available, the interim period
ending within 60 days prior to the date hereof (collectively, the
"Financial Statements"). The Financial Statements are based upon the
information contained in the books and records of Seller and fairly and
accurately present the financial condition of Seller as of the dates
thereof and results of operations for the periods referred to therein. The
monthly financial statements generated by Seller from and after the
interim period delivered to Purchaser will be prepared on a basis
consistent with the methods and procedures used to prepare the Financial
Statements. If requested by Purchaser, Seller will deliver such monthly
financial statements from and after the interim period to Purchaser within
60 days of the end of each month from the date hereof to Closing.
3.20 ABSENCE OF UNDISCLOSED OR CONTINGENT LIABILITIES. Seller 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) except as otherwise set forth in the
Financial Statements, the monthly financial statements and EXHIBIT 3.20
hereto.
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3.21 NO MATERIAL ADVERSE CHANGES. Since the date of the most recent Financial
Statements, there has been no change materially adverse to Seller in its
Assets, financial condition, gross profit, operating results, customer,
employee or supplier relations, business condition or prospects, except as
otherwise disclosed on EXHIBIT 3.21 hereto.
3.22 ABSENCE OF DEVELOPMENTS. Since the date of the Term Sheet by and between
Seller and Purchaser, Seller has and will until Closing:
(a) Conducted its business and operations only in the regular
and ordinary course; maintained reasonable business
insurance; committed no waste of the Assets; disposed or
otherwise changed 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 best efforts to maintain and
preserve its business organization intact and maintain 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 materially alter or affect operations,
except as otherwise have been approved in writing by Purchaser;
(c) Except from the assets to be retained by Seller, 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
(d) Maintained title to, and refrained from making or permitting, any
transfer, sale, pledge, encumbrance on, lien or other disposition of
the Assets of Seller except in the ordinary course of business.
3.23 TITLE TO PROPERTIES. Seller does not own any real property. The lease to
which Seller is a party, a true and complete copy of which is attached
hereto as EXHIBIT 3.23, is in full force and effect, and Seller holds a
valid and existing leasehold interest in such lease for the term set forth
in such lease. Seller shall utilize its best efforts to obtain an
assignment of the property lease if requested to do so by Purchaser.
Seller shall have delivered complete and accurate copies of such lease to
Purchaser, and such lease shall not have been modified in any material
respect except to the extent that such modifications are disclosed in
writing delivered to Purchaser. Seller is not in default, and no
circumstances exist which, if unremedied would, either with or without
notice or the passage of time or both, result in a default under such
lease, nor is Seller in default under the lease. The fixed assets
necessary for the conduct of Seller's businesses 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. Seller owns, or leases
under valid leases, all equipment and other tangible assets necessary for
the conduct of its business.
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3.24 TAX MATTERS.
(a) The Seller has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by the Seller (whether or not
shown on any Tax Return) have been paid. The Seller is not
currently the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made
by an authority in a jurisdiction where the Seller does not
file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no encumbrances on any of
the Assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Taxes.
(b) The Seller 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) 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 the Seller (i) claimed or raised by
any authority in writing or orally with any directors,
officers or employees of the Seller, or (ii) as to which
any such person has knowledge based upon personal contact
with any agent of such authority. EXHIBIT 3.24 lists all
-------------
federal, state, local and foreign income Tax Returns filed
with respect to the Seller for taxable periods ended on or
after December 31, 1995, indicates those Tax Returns that
have been audited and indicates those Tax Returns that
currently are the subject of audit. The Seller has
delivered to the Purchaser correct and complete copies of
all federal income Tax Returns, examination reports, and
statements of deficiencies filed, assessed against or
agreed to by the Seller since December 31, 1995.
3.25 TAX NOTICES. Except as set forth on EXHIBIT 3.25 hereto, no deficiency for
any Taxes has been proposed, asserted or assessed against Seller that has
not been resolved and paid in full. No waiver, extension or comparable
consent given by Seller regarding the application of the statute of
limitations with respect to any Taxes outstanding, nor is any request for
any such waiver or consent pending. Except as described in EXHIBIT 3.25
hereto, there has been no tax audit or other administrative proceeding or
court proceeding with respect to any Taxes, nor is any such Tax audit or
other proceeding pending, nor has there been any notice to Seller by any
taxing authority regarding any such Tax, audit or other proceeding or, to
the best knowledge of Seller, is any such Tax audit or other proceeding
threatened with regard to any Taxes. Seller does not expect the assessment
of any additional Taxes and is not aware of any unresolved questions,
claims or disputes concerning the liability for Taxes which would exceed
the estimated reserves established on its books and records. For the
purposes hereof, the term "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 Seller.
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3.26 EMPLOYEES. Except as described on EXHIBIT 3.26, (a) Seller has no actual
notice that any executive employee of Seller or any group of Seller's
employees has any plan or intention to terminate his, her or its
employment following the Closing; (b) to the best of Seller's knowledge,
Seller has complied 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 the best of Seller's knowledge, Seller has no material labor
relations problem pending and its labor relations are satisfactory; (d)
there are no workmen's compensation, sexual harassment, or discrimination
claims pending against Seller nor is Seller aware of any facts that would
give rise to such claims; (e) to the best of Seller's knowledge, no
employee of Seller 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 Seller; and (f) to the best of
Seller's knowledge, no employee or former employee of Seller has any claim
with respect to any intellectual property rights of Seller.
3.27 EMPLOYEE BENEFIT PLANS.
(a) Except as provided in writing to Purchaser and as listed on
EXHIBIT 3.27, with respect to all employees and former
-------------
employees of Seller and all dependents and beneficiaries of
such employees and former employees, (i) Seller does not
maintain or contribute to any non-qualified deferred
compensation or retirement plans, contracts or
arrangements, (ii) Seller 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)
Seller 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) Seller does not
maintain or contribute to any employee welfare benefit
plans as defined in Section 3(1) of ERISA.
(b) To the best of Seller's 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 Seller 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) there have been no prohibited
transactions as defined in Section 406 of ERISA or Section
4975 of the Code.
(c) Seller does not contribute (and has not ever contributed)
to any multi-employer plan, as defined in Section 3(37) of
ERISA. Seller has no actual or potential liabilities under
Section 4201 of ERISA for any complete or partial
withdrawal from a multi-employer plan. Seller 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 Purchaser, and (ii) health care continuation
benefits described in Section 4980B of the Code.
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<PAGE>
3.28 GIFTS. Neither Seller nor 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 Seller in connection with
any actual or proposed business transaction.
3.29 EMPLOYEE HEALTH AND SAFETY. Seller 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 the best of Seller's knowledge,
regulating or otherwise affecting employee health and safety.
3.30 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.
3.31 REPRESENTATIONS CONCERNING SOLVENCY. At the date hereof and within one
year prior to the date hereof, the Seller 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.
Seller has, and will continue to have, assets greater than Seller's debts,
based upon a fair valuation and has paid, and will pay, its debts as they
become due. Purchaser may rely on such representations in asserting that
Purchaser has no reasonable cause to believe that Seller is or will become
insolvent as a result of the transactions contemplated hereby. Seller has
undertaken the transactions described herein in good faith, considering
its obligations to any person or entity to whom Seller 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. Seller will not, and has not, concealed this transaction or the
proceeds of such transaction from any of its creditors. Seller 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 Seller in the ordinary course.
Seller does not contemplate and has no reason to contemplate it will seek
protection under the bankruptcy laws and believes in good faith that it
will receive consideration reasonably equivalent to the value of the
Assets being purchased by the Purchaser.
3.32 EMPLOYMENT AGREEMENTS. The Seller has no written employment agreements
with any individual currently employed by the Seller.
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ARTICLE IV
PRE-CLOSING COVENANTS OF SELLER
Seller 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 Purchaser may otherwise consent in writing.
4.1 INSPECTION OF PROPERTIES AND BOOKS. Seller shall assist any individual or
individuals designated by Purchaser with reasonable prior notice to visit
or inspect any property of Seller, at reasonable times acceptable to both
parties, including books of accounts and records of Seller, to make
extracts or copies of such books and records and to discuss the affairs,
finances and accounts of Seller with its officers, and shall use its best
efforts to obtain access for Purchaser to Seller's accountants' work
papers. As a condition to the Closing, the parties acknowledge and agree
that Seller shall furnish to Purchaser Evaluation Material which shall be
used in connection with a due diligence review. The parties agree that
Purchaser shall treat the Evaluation Material confidentially, shall not
use the Evaluation Material for any purpose other than the purposes for
which such Evaluation Material is given, 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 Purchaser is
authorized to disclose the Evaluation Material to its investment banker,
counsel and accountants for their review. Purchaser shall instruct its
officers, directors, employees, agents or representatives 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 shall be returned to Seller, within ten days of a request
therefor, with the understanding that Purchaser shall retain no copies of
the Evaluation Material 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 Purchaser, or (ii) information included
in the Evaluation Material which is first disclosed by a third party not
bound by a confidentiality agreement with Seller 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, Seller shall
not enter into or become subject, and shall not cause Seller to enter into
or become subject, to any agreement, transaction, or commitment which
would restrict or in any way impair the obligation or ability of Seller to
comply with all of the terms of this Agreement.
4.3 ONGOING OPERATION. Seller shall carry on its business diligently and
substantially in the same manner as heretofore conducted. The business of
Seller shall be conducted only in the ordinary course and neither the
shareholders of Seller nor Seller shall take any action except in the
ordinary course of Seller's business, on an arm-length basis and in
accordance in all material respects with all applicable laws, rules and
regulations and Seller's past custom and industry practice.
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4.4 INDEBTEDNESS. Seller will not create, incur, assume, guarantee or
otherwise become liable with respect to any indebtedness related or
connected with, or secured by, the Assets, except in the ordinary course
of its business and subject to prior written notice to Purchaser. Except
in the ordinary course of its business, and subject to prior written
notice to Purchaser, Seller will not sell, pledge, encumber or otherwise
subject the Assets to any claim or indebtedness.
4.5 RECORDS. Seller shall maintain its books, accounts and records in the
usual, regular and ordinary manner.
4.6 ARTICLES OF INCORPORATION; BYLAWS. Seller will not amend its Articles of
Incorporation or Bylaws or otherwise alter its corporate existence or
powers in any way which would adversely affect the rights of Purchaser
hereunder.
4.7 DISTRIBUTIONS OR DIVIDENDS. Seller will not declare or pay any dividend,
make any distribution on shares of its capital stock or repurchase any
shares of its capital stock in any way which would adversely affect the
rights of Purchaser hereunder.
4.8 NOTICE OF BREACH. In the event of and promptly after becoming aware of the
occurrence or threatened occurrence of any event which would cause or
constitute a breach of any warranty, representation, covenant or agreement
of Seller contained herein, Seller shall give notice in writing of such
event or threatened event to Purchaser and use all 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 Seller at any time prior to Closing unless
required by applicable securities laws or regulations. Seller shall timely
review and approve any public communication prepared by Purchaser before
its dissemination and release.
4.10 EMPLOYMENT MATTERS. Seller shall not, directly or indirectly, except in
the ordinary course of business and with prior notice to Purchaser (which
notice shall not entitle Purchaser to approve or disapprove) (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 action with respect to the grant of any bonuses, salary
increases, severance or termination pay or with respect to any increase of
benefits payable in effect on the date hereof. Seller 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.
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4.11 INSURANCE. Without providing Purchaser 30 days' prior written notice,
Seller 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. To the extent Seller has paid premiums for
insurance coverage that will continue in effect on a post-Closing basis,
the Purchaser will reimburse Seller within 15 days of Closing the prorated
portion of post-Closing insurance coverage based upon the time period
covered by such insurance both prior to, and subsequent to, Closing.
4.12 PRESERVATION OF BUSINESS. Seller and the Shareholders shall (i) use their
best efforts to preserve intact Seller's business organization and
goodwill, keep available the services of Seller's officers and employees
as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with
Seller, (ii) confer on a regular and weekly basis with representatives of
Purchaser to report operational matters and the general status of ongoing
operations, (iii) not intentionally take any action which would render, or
which reasonably may be expected to render, any representation or warranty
made by Seller in the Agreement untrue at the Closing, (iv) notify
Purchaser of any emergency or other change in the normal course of
Seller's business or in the operation of Seller's properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would be material,
individually or in the aggregate, to the business, operations or financial
condition of Seller or the ability of Seller to consummate the
transactions contemplated by this Agreement, and (v) promptly notify
Purchaser in writing if Seller or its representatives shall discover that
any representation or warranty made by Seller in this Agreement was when
made, or has subsequently become, untrue in any respect.
4.13 REGULATORY FILINGS. Seller 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 Seller for the consummation of the
transactions contemplated herein. Seller shall make all filings necessary
such that, after the Closing, Purchaser may file for and obtain use of
Seller's corporate name identified on page one of this Agreement.
Purchaser has advised Seller that the execution of this Agreement and
closing of the transaction contemplated hereby may require the Purchaser
to provide certain disclosure concerning the business and the financial
statements of Seller to the United States Securities and Exchange
Commission. Seller hereby consents to the inclusion of disclosure
concerning Seller, the financial statements of Seller and the
representations and warranties made by Seller in the course of this
transaction, in a periodic report or any amendment thereto, in order to
allow Purchaser to discharge its disclosure obligations under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
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<PAGE>
4.14 NO NEGOTIATIONS. None of Seller, its officers, directors or the
Shareholders shall cause Seller 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, Seller, or any similar transaction or business combination
involving Seller, 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. Seller shall within five business days notify
Purchaser of any such proposal or offer, or any inquiry from or contact
with any person with respect thereto, and shall promptly provide Purchaser
with such information regarding such proposal, offer, inquiry or contact
as Purchaser may request.
4.15 ASSIGNMENT OF CONTRACTS, LEASES AND OTHER AGREEMENTS. Seller agrees that,
prior to the Closing, it will secure the approval of all parties with
which Seller has customer, supplier or other agreements as to which
consent is expressly required and assignment is contemplated to Purchaser
and, should Purchaser desire to assume any other contract, lease,
agreement or right, Seller shall use its best efforts to secure the
approval of the remaining party to the contract, lease, agreement or right
such that Purchaser may succeed to rights and obligations of Seller under
such contracts, leases, agreements or rights.
4.16 BEST EFFORTS. Seller agrees to use its best efforts in good faith to
satisfy the various conditions to Closing and to consummate the
transactions provided for herein as expeditiously as possible. Seller 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 its representations and warranties contained herein to be or become
untrue.
4.17 ADDITIONAL DISCLOSURE. From the date of this Agreement to and including
the Closing Date, Seller promptly upon the occurrence thereof, will advise
Purchaser 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.
4.18 NON-COMPETE AND CONFIDENTIALITY AGREEMENTS. At or prior to Closing, Abdul
Rajput and Rashid Khan shall enter into non-compete and confidentiality
agreements with Purchaser substantially in the form of EXHIBIT 4.18
hereto.
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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 the Seller, 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 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).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller 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 PURCHASER. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Colorado, is authorized to do business in the State of
Minnesota, and has the full corporate power and authority to own and
operate its properties and to carry on its business.
6.2 AUTHORIZATION. This Agreement has been duly and validly executed by
Purchaser and the agreements, representations, and warranties contained
herein constitute valid and binding obligations, representations, and
warranties of Purchaser enforceable in accordance with their terms.
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6.3 NO CONFLICTING AGREEMENTS. The execution and delivery of this Agreement by
Purchaser does not, and consummation by Purchaser 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 Purchaser, (b) conflict with or result in a breach of any of
the terms, conditions or provisions of the Articles of Incorporation or
Bylaws of Purchaser or of any agreement or instrument to which Purchaser
is a party, or (c) result in the creation or imposition of any lien,
charge, security interest, encumbrance, restriction or claim upon
Purchaser or any of its assets.
6.4 COMPLIANCE WITH APPLICABLE LAW. Purchaser has not received any notice or
information of any violation, probable violation or default by Purchaser
under any applicable law, regulation or order of any governmental
department, commission, board or agency or instrumentality, domestic or
foreign, having jurisdiction over Purchaser's operations which could
materially adversely affect the business, operations, financial condition,
properties or assets of Purchaser or the ability to consummate the
transaction contemplated hereby.
6.5 LITIGATION. There are no actions, proceedings or investigations pending,
or to the knowledge of Purchaser, threatened against Purchaser or its
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 Seller by or on behalf of
Purchaser 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.
6.7 CONSENTS AND APPROVALS. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of Purchaser's obligations
hereunder, do not require Purchaser 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.
6.8 BROKERS. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by representatives of Purchaser
directly with Seller, without the intervention of any person on behalf of
Purchaser in such manner as to give rise to any valid claim by any person
against Seller 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.
6.9 REPRESENTATIONS AS TO KNOWLEDGE. The representations and warranties
contained in Article VI hereof shall in each and every event whereby and
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.
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ARTICLE VII
COVENANTS OF PURCHASER
Purchaser covenants and agrees as follows:
7.1 OTHER CONTRACTS. From and after the date of this Agreement, Purchaser will
not enter into or become subject to any agreement or commitment which
would restrict or in any way impair the obligation of Purchaser 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, Purchaser will, promptly upon the occurrence thereof, advise
Seller of each event subsequent to the date hereof which would have had to
be disclosed by Purchaser 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 aware of the
occurrence or threatened occurrence of any event which would cause or
constitute a breach of any warranty, representation, covenant or agreement
of Purchaser contained herein, Purchaser shall give notice in writing of
such event or threatened event to Seller and use all reasonable efforts to
prevent or promptly remedy such breach or threatened breach.
7.4 NONDISCLOSURE. The Purchaser agrees that any publicity release, security
filing, or any other communication (collectively "Communications"),
whether written or oral, identifying this proposed transaction shall not
identify Seller any time prior to Closing unless required by applicable
securities laws or regulations.
7.5 BEST EFFORTS. Purchaser agrees to use its best efforts in good faith to
satisfy the various conditions to Closing and to consummate the
transactions provided for herein as expeditiously as possible. Purchaser
will not 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 Purchaser
contained herein to be or become untrue.
7.6 REGULATORY FILINGS. Purchaser has advised Seller that the transaction
contemplated hereby will require Purchaser 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 disclosure
concerning, and the financial statements of, Seller. Seller hereby
consents to the inclusion of disclosure concerning Seller, the financial
statements of Seller and the representations and warranties made by Seller
in the course of this transaction, in such periodic report or amendment,
in order to allow Purchaser to discharge its disclosure obligations under
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder. Purchaser agrees to provide Seller a copy of such
periodic report or any amendment thereto related to the transactions
contemplated hereby or pursuant to any agreement contemplated hereby at
least three business days prior to filing. Purchaser will make all
required filings with the Securities and Exchange Commission that relate
to this transaction.
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ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of Seller
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 Seller in writing in the manner provided in
Paragraph 8.1(d) hereof):
(a) REPRESENTATIONS AND WARRANTIES OF PURCHASER; PERFORMANCE BY
-----------------------------------------------------------
PURCHASER. (i) The representations and warranties of
---------
Purchaser 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) Purchaser shall have
performed all obligations and complied with all covenants
required to be performed or to be complied with by
Purchaser under this Agreement prior to or at the Closing
Date including the delivery of all documents required at
the Closing; and (iii) Seller shall have received a
certificate dated the Closing and signed by the President
of Purchaser to the effect that the representations and
warranties made by Purchaser 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
certificate shall be in the form of EXHIBIT 8.1(A).
--------------
(b) ACTION. All action necessary to authorize the execution,
------
delivery and performance of this Agreement by Purchaser and
the consummation of the transactions contemplated hereby
shall have been duly and validly taken by Purchaser.
Purchaser shall have furnished Seller with copies of all
consents or resolutions adopted or executed by Purchaser in
connection with such actions, certified by the Secretary of
Purchaser.
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<PAGE>
(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 Purchaser of all or a
material portion of the business or Assets of Seller, or to
compel Seller or Purchaser to dispose of or to hold
separately all or a material portion of the business or
assets of Seller, as a result of the transactions
contemplated hereby, (iii) seeking to require direct or
indirect transfer or sale by Purchaser of any of the
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 Purchaser
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 result in any
material adverse change in the business, operations,
financial condition or properties of Purchaser.
(d) WAIVER OF CONDITIONS PRECEDENT. Seller 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 Purchaser. No waiver of
any condition precedent pursuant to this paragraph 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.
(e) DISCOVERY OF FACTS OR CIRCUMSTANCES. Seller shall not have
------------------------------------
discovered any fact or circumstance existing as of the date
of this Agreement which has not been disclosed to Seller as
of the date of this Agreement regarding the business,
assets, liabilities, properties, condition (financial or
otherwise), results of operations or prospects of Purchaser
which is, individually or in the aggregate with other such
facts and circumstances, materially adverse to Purchaser.
(f) OPINION OF COUNSEL. Seller shall have received from counsel to
Purchaser, an opinion dated the Closing, to the following effect:
i Purchaser is a corporation duly organized, validly existing in a
good standing under the laws of the State of Colorado and
authorized to do business as a foreign corporation in the State
of Minnesota.
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<PAGE>
(ii) Execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by all necessary action, corporate and otherwise, by
Purchaser, this Agreement, the Note and the Security Agreement
are valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms
except as enforcement can be limited by general equitable
principles or bankruptcy, insolvency or similar laws affecting
creditor's rights generally.
(iii)The execution and delivery of the Agreement, the Note and the
Security Agreement will not violate or conflict with the
Articles of Incorporation or ByLaws of Purchaser or any
agreement known to such counsel to which Purchaser is a party or
by which Purchaser or its 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 Purchaser 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
Purchaser or any of its officers or directors, and
such counsel does not know of any legal matter or
government proceedings regarding Purchaser.
(vi) Nothing has come to such counsel's attention in connection with
such counsel's representation of Purchaser that has caused such
counsel to believe that this Agreement or the Exhibits thereto
contain an untrue statement of a material fact or omits to state
a material fact required to be stated therein, or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(g) 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 PURCHASER. The obligation of
Purchaser 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 Purchaser in writing in the
manner provided in paragraph 8.2(f) hereof):
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<PAGE>
(a) REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS;
----------------------------------------------------------
PERFORMANCE BY SELLER. (viii) The representations and
-----------------------
warranties of Seller and its 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; (ix) Seller shall have performed all obligations
and complied with all covenants required to be performed or
to be complied with by it under this Agreement prior to the
Closing; (x) Purchaser shall have received a certificate
dated as of the Closing and signed by the President of
Seller to the effect that the representations and
warranties made by Seller 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(A); and (xi) Purchaser shall
---------------
have entered into non-compete and confidentiality
agreements with Abdul Rajput and Rashid Khan in the form
attached as EXHIBIT 4.18, which shall commence by their
-------------
terms on Closing of the purchase of the Assets.
(b) ACTION. All action necessary to authorize the execution, delivery and
performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by Seller. Seller shall have furnished Purchaser with copies of
all consents or resolutions adopted or executed by Seller in
connection with such actions, certified by the Secretary of Seller.
(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 3.7(A), there shall not be threatened, instituted
---------------
or pending any action or proceeding, before any court or
governmental authority or agency, domestic or foreign,
(xii) 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, (xiii) seeking to prohibit direct or indirect
ownership or operation by Purchaser of all or a material
portion of the business or assets of Seller, or to compel
Purchaser or Seller to dispose of or to hold separately all
or a material portion of the business or assets of Seller,
as a result of the transactions contemplated hereby, (xiv)
seeking to require direct or indirect transfer or sale by
Purchaser of any of the Assets, (xv) 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, (xvi) seeking
relief against Seller under any federal or state law or
regulation relating to bankruptcy, insolvency,
reorganization or moratorium or creditors' rights
generally, (xvii) otherwise relating to and materially
adversely affecting the transactions contemplated hereby,
or (xviii) which could result in any material adverse
change in the business, operations, financial condition or
properties of Seller or the Assets.
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<PAGE>
(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 Seller or the Assets.
(e) LITIGATION. Except as described on EXHIBIT 3.11, there shall be no
actions, proceedings or investigations pending, threatened against
Seller 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 Seller or the
Assets.
(f) WAIVER OF CONDITIONS PRECEDENT. Purchaser may waive any or
-------------------------------
all of the conditions precedent set forth in this Article
8.2, either prospectively or retroactively, by giving
written notice of such waiver to Seller. No waiver of any
condition precedent pursuant to this paragraph 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. Seller 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 the Assets, pursuant to the
provisions of any agreement, arrangement or undertaking of
or affecting Seller or any license, franchise or permit of
or affecting Seller.
(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 Seller (except filings required by Purchaser pursuant to
applicable securities laws).
(i) DISCOVERY OF FACTS OR CIRCUMSTANCES. Purchaser shall not
-------------------------------------
have discovered any fact or circumstance existing as of the
date of this Agreement which has not been disclosed to
Purchaser as of the date of this Agreement regarding the
business, assets, liabilities, properties, condition
(financial or otherwise), results of operations or
prospects of Seller which is, individually or in the
aggregate with other such facts and circumstances,
materially adverse to Seller or the value of the Assets.
(j) DAMAGE. There shall have been no damage, destruction or loss of or to
any property or properties owned or used by Seller, or to the Assets,
whether or not covered by insurance which, in the aggregate, has or
would be reasonably likely to have, a material adverse effect on
Seller.
(k) OPINION OF COUNSEL. Purchaser shall have received from counsel to
Seller, an opinion dated the Closing, to the following effect:
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<PAGE>
(i) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota.
(ii) Upon the consummation of the transactions described herein,
Purchaser will own the Assets free and clear of all adverse
claims and charges, encumbrances, claims, liens or other
encumbrances whatsoever, except as otherwise disclosed herein or
except for those resulting from the actions of Purchaser.
(iii)Execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by all necessary action, corporate or otherwise, by
Seller, this Agreement is a valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms
except as enforcement can be limited by general equitable
principles or bankruptcy, insolvency or similar laws affecting
creditor's rights generally.
(iv) The execution and delivery of this Agreement and the sale of the
Assets by Seller will not violate or conflict with the Articles
of Incorporation or ByLaws of Seller or any agreement or
instrument to which Seller is a party or by which Seller or its
Assets are bound.
(v) 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 Seller for the sale of the
Assets pursuant to this Agreement, except such as have been
obtained or made.
(vi) Except as disclosed in this Agreement or the Exhibits hereto,
such counsel is not aware, after reasonable investigation, of
any pending or threatened action, suit, proceeding or
investigation before any court or any public, regulatory or
governmental agency, authority or body, involving Seller or any
of its officers or directors, and such counsel does not know of
any legal matter or government proceedings regarding Seller.
(vi) Nothing has come to such counsel's attention in connection with
such counsel's representation of Seller that has caused such
counsel to believe that this Agreement or the Exhibits thereto
contain an untrue statement of a material fact or omits to state
a material required to be stated therein, or necessary in order
to make the statements therein, in light of the circumstances
under which they are made, not misleading.
(l) BUSINESS VALUATION. The Purchaser shall have received a
-------------------
valuation of the Assets by an independent third party
retained by Purchaser for the purpose of providing such
valuation, which valuation shall support the Purchase Price
to be paid by the Purchaser to the Seller. In the event
the business valuation does not so support the Purchase
Price, then this Agreement may be terminated by either
party upon ten days' written notice to the other party,
notwithstanding any other language to the contrary set
forth herein.
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<PAGE>
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 (3) years. The foregoing shall
be subject to the exception that any claims relating to tax matters covered in
paragraphs 3.25 and 3.26 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, Seller and Shareholders agree to indemnify in respect of, and hold
Purchaser harmless against, any and all damages, claims, deficiencies,
losses, and expenses (collectively "Damages") resulting from (i) any
misrepresentation, breach of warranty, or nonfulfillment or failure to
perform any covenant or agreement on the part of Seller or the
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 Purchaser and waived in writing by Purchaser as of the Closing and (ii)
Seller's operation of its business through the date of Closing. Subject to
the provisions of Article IX and this Article X, Purchaser agrees to
indemnify in respect of, and hold Seller harmless against, any and all
Damages resulting from (i) any misrepresentation, breach of warranty, or
nonfulfillment or failure to perform any covenant or agreement on the part
of Purchaser 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 Seller and waived in writing by Seller as of the Closing and (ii)
Purchaser's operation of the purchased business after the date of 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".
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<PAGE>
10.2 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 sixty (60) 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 sixty (60) day period. The
Indemnifying Party shall have 30 days from the personal
delivery or mailing of the Claim Notice (the "Notice
Period") to notify the Indemnified Party (xix0 whether or
not the liability of the Indemnifying Party to the
Indemnified Party hereunder with respect to such claim or
demand is disputed, and (xx) 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.
(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 Article 13.11.
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<PAGE>
10.3 PAYMENT OF CLAIM. Upon the determination of the liability of Seller or
Purchaser under Article 10.1 and 10.2, 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.
10.4 OTHER RIGHTS AND REMEDIES NOT AFFECTED. 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.
10.5 POST-CLOSING ADJUSTMENTS AND RIGHT OF OFFSET. As promptly as practicable,
but in no event later than 120 days following the Closing, the Purchaser
may audit and calculate the actual results of operations from January 1,
1998 through the Closing (as well as the prior fiscal year), taking into
account the transaction expenses paid by the Seller through the date of
Closing. In the event of a material variation in revenues between the
results of such audit and the financial statements provided by Seller to
Purchaser prior to the Closing (such material variation in revenues to be
defined as a variation of more than the lesser of (i) 2% of revenues, or
(ii) $10,000), then the Purchaser shall have the right to offset 55% of
such material variation in excess of either of the above-described amounts
against the promissory note payment due in the quarter immediately
following the determination of such material variation. The Note shall
also contain provisions which shall permit the Purchaser to offset
indemnification claims under Article X against payments due under the
Note. The right of offset shall survive the Closing for a period of three
years, provided that the right of offset regarding tax matters will
survive the Closing until expiration of the applicable statute of
limitations.
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
Purchaser and by Seller.
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
Purchaser and Seller;
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(b) At or prior to the Closing, by Purchaser, if any of the conditions
provided for in paragraph 8.2 of this Agreement have not been met and
have not been waived by Purchaser in writing;
(c) At or prior to the Closing, by Seller, if any of the
conditions of Paragraph 8.1 of this Agreement have not been
met and have not been waived by Seller in writing; and 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 become
effective August 31, 1998 unless a later time and date is mutually agreed
upon by the parties hereto. The date of Closing shall follow satisfaction
of the condition precedent set forth in Article 8.2(l) herein, subject to
the effective date of August 31, 1998.
12.2 ALLOCATIONS. At the Closing, the parties shall allocate or prorate all the
portion attributable to Seller of the water, sewer, electric, other
utilities and rent through the date of Closing and shall make closing
adjustments, if necessary, to take into account such allocations and
prorations. For purposes of income and expense all income and expenses
incurred on or before the day of Closing shall be billed and collected by,
and paid for, respectively, by Seller. The effective time of the Closing
shall be 12:01 a.m. on the day following the Closing date.
12.3 SELLER'S DELIVERIES AT CLOSING. At the Closing Seller will deliver the
following documents to the Purchaser all of which shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel:
(a) BILL OF SALE. Bill of Sale for the Assets in the form
-------------
annexed as EXHIBIT 12.3 hereto, together with such deeds,
-------------
instruments, conveyances, certificates of title,
assignments, assurances and other documents as may be
required to sell, convey and transfer title to the Assets
from Seller to the Purchaser free and clear of any and all
liens, claims, charges, taxes, encumbrances, pledges,
security interests, options or other restrictions of any
kind.
(b) ASSIGNMENT OF INTELLECTUAL PROPERTY. Assignment of Intellectual
Property annexed as EXHIBIT 3.17 together with assurances and other
documents as may be required to transfer all of Seller's right, title
and interest in the Intellectual Property.
(c) ASSIGNMENT OF CONTRACTS, LEASES AND OTHER AGREEMENTS. Assignment of
contracts, leases and other agreements, annexed as EXHIBIT 3.18
together with assurances and other documents as may be required to
transfer all of Seller's right, title and interest in the contracts,
leases and other agreements.
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(d) OPINION OF COUNSEL. An opinion from Tyson & Bromander, P.A., counsel
to Seller, dated the Closing Date, in the form described in Article
8.2 of this Agreement.
(e) 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 Seller is subject, bound or a party, or by which
Seller or any of its properties is bound or subject, in
each case which is required to permit the consummation of
the transactions contemplated by the Agreement without
contravention, violation or breach by the Seller of any of
the terms thereof.
(f) CERTIFICATES. Certificate of good standing for Seller from the
Secretary of State of the state of incorporation of Seller dated as
of a date reasonably prior to the Closing Date.
(g) RESOLUTIONS. Certified copy of resolutions of the Board of Directors
and the Shareholders of Seller authorizing, inter alia, the execution
and delivery of this Agreement, the sale of the Assets and the other
transactions contemplated under this Agreement.
(h) NON-COMPETE AND CONFIDENTIALITY AGREEMENTS. The non-compete
agreements of Abdul Rajput and Rashid Khan in the form annexed as
EXHIBIT 4.18 hereto.
(i) DELIVERY OF CORPORATE AND BUSINESS RECORDS. Copies of such other
corporate and business records related to the Assets as may be
reasonably requested by the Purchaser.
(j) OFFICER'S CERTIFICATE in the form described in Article 8.2 of this
Agreement.
(k) OTHER DOCUMENTS. Such other documents, instruments, certificates and
agreements including assignment of space lease to Purchaser, as
Purchaser and its counsel may reasonably request.
(l) LICENSE AGREEMENT. The license agreement by and between the Seller
and the Purchaser shall be delivered to Purchaser and, upon such
delivery, Seller shall be released from any and all further
obligation and liability under such license agreement.
12.4 PURCHASER'S DELIVERIES AT CLOSING. At the Closing, Purchaser shall deliver
the following documents to Seller all of which shall be in a form
reasonably acceptable to Seller and their counsel:
(a) PURCHASE PRICE. The purchase price for the Assets referred to in
Article 2.2 including the cash portion and the Note.
(b) 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 the Purchaser is a party, or by which it 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 the Purchaser of any of the terms
thereof.
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(c) OPINION OF COUNSEL. An opinion from counsel to the Purchaser, dated
the Closing Date, in the form described in Article 8.1 of this
Agreement.
(d) CERTIFICATES. Certificate of good standing, dated as of a date
reasonably prior to the date of Closing, from the Secretaries of
State of the State of Colorado as to the good standing of the
Purchaser.
(e) RESOLUTIONS. Certified copy of resolutions of the Board of Directors
of the Purchaser authorizing, inter alia, the execution and delivery
of this Agreement and the Note, the purchase of the Assets, and the
other transactions contemplated hereby.
(f) OFFICER'S CERTIFICATE in the form described in Article 8.1 of this
Agreement.
(g) OTHER DOCUMENTS. Such other documents, instruments, certificates and
agreements including without limitation, if assumed, the assumption
of the lease, as Seller and its counsel may reasonably request.
12.5 FORWARDING OF RECEIVABLES AND PAYMENT OF EXPENSES. Following the Closing,
in the event the Purchaser receives payment of receivables which were
billed by Seller, and are the property of Seller, the Purchaser shall take
prompt action (defined to mean not less than every seven calendar days),
to forward to Seller such checks or other remittances as Purchaser shall
have received and which are the property of Seller. Likewise, in the event
payments are received by Seller which are the property of Purchaser and
which relate to receivables created after the purchase of the Assets, the
Seller shall promptly forward (not later than seven calendar days after
receipt thereof) such checks or other remittances to the Purchaser
representing payments on receivables which are the property of Purchaser.
Any such payments shall be credited to the receivable(s) which been
outstanding for the longest period of time. In addition, any expenses
incurred by the Seller in the operation of its business from and after
August 1, 1998 which are paid by Seller shall be reimbursed by Purchaser
within ten days of Seller submitting invoices and receipts with respect to
any such expenses incurred and paid for by Seller for expenses incurred
and paid for from and after August 1, 1998.
12.6 REMOVAL OF PERSONAL EFFECTS FOLLOWING CLOSING. In the event the Seller
maintains assets which are the personal property of Seller on the premises
and Seller desires to remove such personal property, the Seller shall have
a period of sixty days following the Closing to remove such personal
property. As to any such personal property removed, the Seller shall
provide the Purchaser 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 Purchaser: Jerald H. Donnan, President
Factual Data Corp.
5200 Hahns Peak Drive
Loveland, Colorado 80538
With a copy to: Robert W. Walter, Esq.
Berliner Zisser Walter &
Gallegos, P.C.
1700 Lincoln Street, Suite
4700
Denver, Colorado 80203-4547
If to Seller: Abdul Rajput, President
Factual Data Minnesota, Inc.
P.O. Box 8310
16444 Avenida Cuesta Del Sol
Rancho Santa Fe, California
92067
With a copy to: Bruce Bromander,Esq.
Tyson & Bromander, P.A.
3601 Minnesota Drive, Suite
880
Minneapolis, Minnesota 55435
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 AND SOLE AGREEMENT. This Agreement, including all Exhibits hereto
(which by this reference shall incorporate herein all such Exhibits as if
more fully set forth 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.
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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 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 paragraph 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.
13.10 HEADINGS. The headings in this Agreement are for purposes of convenience
and easy reference only and shall not limit or otherwise affect the
meaning hereof.
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<PAGE>
13.11 DISPUTES. 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 Arbitration
Commercial 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 may be
drawn, either party may apply to a court of competent jurisdiction for
appointment of 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 and expert witness
fees) to enter judgment upon or enforce any such award including all
appellate proceedings.
13.12 DELIVERY 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 20 days from the date
of the execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
PURCHASER:
FACTUAL DATA CORP.
By: /S/ JERALD H. DONNAN
Jerald H. Donnan, Chairman of the Board
SELLER:
FACTUAL DATA MINNESOTA, INC.
By: /S/ ABDUL RAJPUT
Abdul Rajput, President
SHAREHOLDERS, but only with respect
to Articles III and X
/S/ ABDUL RAJPUT....
Abdul Rajput
/S/ RASHID KHAN.....
Rashid Khan
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TABLE OF ATTACHMENTS
Exhibit Description
2.1 List of Acquired Assets
2.2(c)(i) Form of Promissory Note
2.2(c)(ii) Form of Security Agreement
3.1(a) Articles of Incorporation, as amended
3.1(b) ByLaws, as amended
3.2(a) Certificate of Seller Shareholder Approval
3.2(b) Directors' Consent
3.7(a) Governmental Notices
3.11 Litigation
3.14 Exceptions to Title of Assets
3.15(a) Customer Accounts
3.15(b) Customer Contracts or Agreements
3.15(c) Impaired Customer Contracts
3.15(d) Slow Pay Contracts or Agreements
3.16 License Agreements
3.17 Intellectual Property
3.18 Seller's Customers
3.18 Contracts
3.21 Liabilities not on Financial Statements
3.22 Material Adverse Changes
3.23 Leases
3.24 Tax Returns
3.25 Tax Notices
3.26 Employment Matters
3.27 Benefit Plans
4.18 Form of Non-Compete and Confidentiality
Agreements
8.1(a) Form of Certificate of Purchaser
8.2(a) Form of Certificate of Seller
12.3 Bill of Sale
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