<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
--------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- --------------
Commission file number 0-3658
------
THE FIRST AMERICAN FINANCIAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Incorporated in California 95-1068610
--------------------------------------------- ---------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
114 East Fifth Street, Santa Ana, California 92701-4699
---------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(714)558-3211
----------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports to be filed by Section 12,13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
$1 par value - 17,965,313 as of May 12, 1998
<PAGE>
INFORMATION INCLUDED IN REPORT
------------------------------
Part I: Financial Information
Item 1. Financial Statements
A. Condensed Consolidated Balance Sheets
B. Condensed Consolidated Statements of Income
C. Condensed Consolidated Statements of Cash Flows
D. Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Items 1-3, and 5 have been omitted because they are not applicable
with respect to the current reporting period.
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 thereunto duly authorized.
THE FIRST AMERICAN FINANCIAL CORPORATION
----------------------------------------
(Registrant)
/s/ Thomas A. Klemens
---------------------
Thomas A. Klemens
Executive Vice President
Chief Financial Officer
(Principal Financial Officer and Duly
Authorized to Sign on Behalf of
Registrant)
Date: May 14, 1998
1
<PAGE>
Part I: Financial Information
---------------------
Item 1. Financial Statements
--------------------
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
----------------------------------------
Condensed Consolidated Balance Sheets
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 211,687,000 $ 181,531,000
-------------- --------------
Accounts and accrued income receivable, net 169,159,000 128,017,000
-------------- --------------
Investments:
Deposits with savings and loan
associations and banks 26,428,000 29,029,000
Debt securities 140,933,000 151,503,000
Equity securities 20,481,000 13,904,000
Other long-term investments 36,419,000 35,047,000
-------------- --------------
224,261,000 229,483,000
-------------- --------------
Loans receivable 66,573,000 63,378,000
-------------- --------------
Property and equipment, at cost 390,776,000 323,065,000
Less-accumulated depreciation (161,195,000) (122,688,000)
-------------- --------------
229,581,000 200,377,000
-------------- --------------
Title plants and other indexes 146,975,000 100,626,000
-------------- --------------
Assets acquired in connection with claim
settlements (net of valuation reserves
of $10,199,000 and $11,135,000) 20,228,000 21,119,000
-------------- --------------
Deferred income taxes 16,943,000 31,563,000
-------------- --------------
Goodwill and other intangibles, net 134,142,000 132,361,000
-------------- --------------
Deferred policy acquisition costs 25,171,000 25,016,000
-------------- --------------
Other assets 54,235,000 54,673,000
-------------- --------------
$1,298,955,000 $1,168,144,000
============== ==============
Liabilities and Stockholders' Equity
Demand deposits $ 61,993,000 $ 62,475,000
-------------- --------------
Accounts payable and accrued liabilities 195,344,000 168,133,000
-------------- --------------
Deferred revenue 104,482,000 104,124,000
-------------- --------------
Reserve for known and incurred but not
reported claims 252,927,000 250,826,000
-------------- --------------
Income taxes payable 18,425,000 3,987,000
-------------- --------------
Notes and contracts payable 39,149,000 41,973,000
-------------- --------------
Minority interests in consolidated
subsidiaries 63,286,000 25,214,000
-------------- --------------
Guaranteed Preferred Beneficial Interests
in Company's Junior Subordinated
Deferrable Interest Debentures 100,000,000 100,000,000
-------------- --------------
Stockholders' equity:
Preferred stock, $1 par value
Authorized - 500,000 shares;
Outstanding - none
Common stock, $1 par value
Authorized - 36,000,000 shares;
Outstanding - 17,581,000 and
17,374,000 shares 17,581,000 17,374,000
Additional paid-in capital 52,934,000 43,953,000
Retained earnings 386,968,000 344,645,000
Net unrealized gain on securities 5,866,000 5,440,000
-------------- --------------
463,349,000 411,412,000
-------------- --------------
$1,298,955,000 $1,168,144,000
============== ==============
</TABLE>
2
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
----------------------------------------
Condensed Consolidated Statements of Income
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
------------ ------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues
Operating revenues $561,614,000 $376,425,000
Investment and other income 43,435,000 6,452,000
------------ ------------
605,049,000 382,877,000
------------ ------------
Expenses
Salaries and other personnel costs 199,122,000 140,787,000
Premiums retained by agents 140,045,000 122,193,000
Other operating expenses 135,000,000 84,470,000
Provision for title losses and other claims 27,328,000 18,592,000
Depreciation and amortization 13,706,000 6,475,000
Premium taxes 4,154,000 4,161,000
Interest 3,576,000 1,122,000
------------ ------------
522,931,000 377,800,000
------------ ------------
Income before income taxes and minority interests 82,118,000 5,077,000
Income taxes 29,400,000 1,900,000
------------ ------------
Income before minority interests 52,718,000 3,177,000
Minority interests 7,753,000 311,000
------------ ------------
Net income $ 44,965,000 $ 2,866,000
============ ============
Net income per share:
Basic $ 2.57 $ .17
============ ============
Diluted $ 2.49 $ .16
============ ============
Cash dividends per share $ .15 $ .12
============ ============
Weighted average number of shares:
Basic 17,466,000 17,351,000
============ ============
Diluted 18,072,000 17,733,000
============ ============
</TABLE>
3
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
----------------------------------------
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 44,965,000 $ 2,866,000
Adjustments to reconcile net income to cash provided by (used for)
operating activities-
Provision for title losses and other claims 27,328,000 18,592,000
Depreciation and amortization 13,706,000 6,475,000
Minority interests in net income 7,753,000 311,000
Investment gain (Note 2) (32,449,000)
Other, net (2,287,000) (1,040,000)
Changes in assets and liabilities excluding effects of
company acquisitions and noncash transactions-
Claims paid, including assets acquired, net of recoveries (24,336,000) (16,953,000)
Net change in income tax accounts 28,829,000 (1,044,000)
(Increase) decrease in accounts and accrued income receivable (25,765,000) 1,753,000
Increase (decrease) in accounts payable and accrued liabilities 15,522,000 (13,874,000)
Decrease in deferred revenue (5,954,000) (1,344,000)
Other, net 5,495,000 (2,556,000)
------------ ------------
Cash provided by (used for) operating activities 52,807,000 (6,814,000)
------------ ------------
Cash flows from investing activities:
Net cash effect of company acquisitions (3,396,000) (10,884,000)
Net decrease in deposits with banks 2,601,000 2,116,000
Net increase in loans receivable (3,195,000) (2,275,000)
Purchases of debt and equity securities (15,625,000) (9,155,000)
Proceeds from sales of debt and equity securities 14,679,000 8,624,000
Proceeds from maturities of debt securities 5,594,000 6,504,000
Net decrease in other investments 1,001,000 369,000
Capital expenditures (21,539,000) (16,448,000)
Proceeds from sale of property and equipment 204,000 548,000
------------ ------------
Cash used for investing activities (19,676,000) (20,601,000)
------------ ------------
Cash flows from financing activities:
Net change in demand deposits (482,000) 3,213,000
Repayment of debt (4,954,000) (6,742,000)
Proceeds from exercise of stock options 1,007,000 (268,000)
Proceeds from issuance of stock to employee savings plan 4,096,000
Cash dividends (2,642,000) (2,088,000)
------------ ------------
Cash used for financing activities (2,975,000) (5,885,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents 30,156,000 (33,300,000)
Cash and cash equivalents - Beginning of year 181,531,000 173,439,000
------------ ------------
- End of first quarter $211,687,000 $140,139,000
============ ============
Supplemental information:
Cash paid during the first quarter for:
Interest $ 1,129,000 $ 1,056,000
Premium taxes $ 4,223,000 $ 6,505,000
Income taxes $ 5,097,000 $ 4,197,000
Noncash investing and financing activities:
Shares issued for stock bonus plan $ 2,623,000 $ 2,185,000
Liabilities incurred in connection with company acquisitions $ 66,078,000 $ 3,011,000
Net unrealized gain (loss) on securities $ 426,000 $ (845,000)
Company acquisitions in exchange for common stock $ 1,462,000
</TABLE>
4
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
(Unaudited)
Note 1 - Basis of Condensed Consolidated Financial Statements
- -------------------------------------------------------------
The condensed consolidated financial information included in this report has
been prepared in conformity with the accounting principles and practices
reflected in the consolidated financial statements included in the annual report
filed with the Commission for the preceding calendar year. All adjustments are
of a normal recurring nature and are, in the opinion of management, necessary to
a fair statement of the consolidated results for the interim periods. This
report should be read in conjunction with the Company's Annual Report on Form
10-K for the year ended December 31, 1997. Certain 1997 interim amounts have
been reclassified to conform with the 1998 presentation.
Note 2 - Business Combination
- -----------------------------
On January 1, 1998, the Company formed a limited liability corporation (LLC)
with Experian Group (Experian). The purpose of the LLC is to combine certain
operations of the Company's subsidiary, First American Real Estate Information
Services, Inc., with Experian's Real Estate Solutions division (RES). The LLC
is 80% owned by the Company and 20% owned by Experian. RES is a supplier of
core real estate data, providing, among other things, property valuation
information, title and tax information and imaged title documents.
This business combination has been accounted for under the purchase method of
accounting, and accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on the estimated fair values at January
1, 1998. In addition, as a result of the transaction, the Company recognized an
investment gain of $32.4 million in the first quarter 1998. The operating
results of the LLC are included in the Company's consolidated financial
statements commencing January 1, 1998.
Note 3 - Other Comprehensive Income
- -----------------------------------
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement requires
the reporting of comprehensive income in addition to net income. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income. Currently, the only comprehensive
income item that affects the Company is unrealized gains and losses on debt and
equity securities.
The Company reported net unrealized gains of $0.4 million and net unrealized
losses of $0.8 million for the three month period ended March 31, 1998 and 1997,
respectively. Accordingly, comprehensive income for the two respective periods
was $45.4 million and $2.0 million.
Note 4 - Subsequent Events
- --------------------------
On March 31, 1998, the Company entered into an agreement to acquire Data Tree
Corporation, a California company in the business of providing database
management and document imaging systems to county recorders, governmental
agencies and the title industry. This transaction is expected to close during
the second quarter 1998 and will be accounted for using the purchase method of
accounting.
On April 7, 1998, the Company issued and sold $100.0 million of 7.55%
debentures, due April 1, 2028. The 30-year bonds were issued at 99.456% of the
principal amount. Net proceeds will be used for general corporate purposes,
including, without limitation, repayment of certain debt and the financing of
the construction of new corporate facilities.
On April 16, 1998, the Company acquired California-based Contour Software, a
supplier of mortgage origination software and services to the mortgage loan
industry. This acquisition will be reflected in the Company's second quarter
1998 financial statements and will be accounted for using the pooling method of
accounting.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
Any statements in this document looking forward in time involve risks and
uncertainties, including but not limited to the following risks: the effect of
interest rate fluctuations; changes in the performance of the real estate
markets; the effect of changing economic conditions; the demand for and the
acceptance of the Company's products; and contingencies associated with the Year
2000 issue.
RESULTS OF OPERATIONS
Three months ended March 31:
OVERVIEW
Low mortgage interest rates and an improving national real estate economy
resulted in relatively strong revenues for the first quarter 1997. However,
first quarter 1997 profits were adversely affected by the need for title
operations to increase staffing levels in order to service the substantial
increase in residential orders which subsequently closed in the second quarter
1997. Furthermore, the Company's information services operations experienced
higher overhead in the quarter as they integrated acquisitions and transitioned
new accounts to their systems. Favorable real estate conditions continued
throughout 1997 and, coupled with market share increases in all of the Company's
primary business segments, culminated in the best year overall in the Company's
history. Starting in the fourth quarter 1997 and into the first quarter 1998,
lower mortgage interest rates and higher consumer confidence lead to
record-setting residential resale activity as well as a substantial increase in
refinance transactions nationwide. This, coupled with the particularly strong
California real estate market, contributed to record-setting revenues, net
income and net income per share for the first quarter 1998. Net income and net
income per diluted share for the first quarter 1998 (excluding an investment
gain of $19.6 million on an after-tax basis) was $25.4 million and $1.40,
respectively. See Note 2 to the condensed consolidated financial statements for
a description of the investment gain.
OPERATING REVENUES
Set forth below is a summary of operating revenues for each of the Company's
segments.
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------
($000)
1998 % 1997 %
-------- --- -------- ---
<S> <C> <C> <C> <C>
Title Insurance:
Direct operations $225,719 40 $147,674 39
Agency operations 176,536 32 152,106 40
-------- --- --------- ---
402,255 72 299,780 79
Real Estate Information 140,360 25 62,047 17
Home Warranty 13,173 2 10,068 3
Trust and Banking 5,826 1 4,530 1
-------- --- -------- ---
Total $561,614 100 $376,425 100
======== === ======== ===
</TABLE>
Title Insurance. Operating revenues from direct title operations increased
52.8% when compared with the same period of the prior year. This increase was
primarily attributable to an increase in the number of title orders closed by
the Company's direct operations as well as an increase in the average revenues
per order closed. The Company's direct operations closed 260,600 title orders
during the current quarter, an increase of 43.6% when compared with 181,500
title orders closed during the same period of the prior year. This increase was
primarily due to the factors mentioned above, primarily the strong real estate
market in California, a state heavily concentrated with direct operations, as
well as an increase in the Company's national market share. The average revenues
per order closed were $866 for the current three month period, as compared with
$814 for the same period of the prior year. This increase was primarily due to
appreciating residential real estate values. Operating revenues from agency
operations increased 16.1% when compared with the same period of the prior year.
This increase was primarily due to the same factors affecting direct operations
mentioned above, offset in part by the inherent delay in reporting by agents.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (Continued)
-------------------------
Real Estate Information. Real estate information operating revenues increased
126.2% when compared with the same period of the prior year. This increase was
primarily attributable to the same economic factors affecting title insurance
mentioned above, as well as $38.2 million of operating revenues contributed by
new acquisitions.
Home Warranty. Home warranty operating revenues increased 30.8% when compared
with the same period of the prior year. This increase was primarily
attributable to improvements in the residential resale markets in which this
business segment operates.
INVESTMENT AND OTHER INCOME
Investment and other income totaled $43.4 million and $6.5 million for the first
quarter 1998 and 1997, respectively. The increase of $36.9 was primarily
attributable to an investment gain of $32.4 million relating to the joint
venture agreement with Experian (see Note 2 to the condensed consolidated
financial statements), other investment gains of $3.4 million, and $1.0 million
increase in equity in earnings of unconsolidated subsidiaries.
TOTAL OPERATING EXPENSES
Title Insurance. Salaries and other personnel costs were $144.9 million, an
increase of 33.2% when compared with the same period of the prior year. This
increase was primarily due to costs incurred servicing the record-setting number
of orders opened during the period, offset in part by personnel efficiencies.
The Company's direct operations opened 397,800 title orders during the current
period, an increase of 53.9% when compared with the same period of the prior
year.
Agents retained $140.0 million, or 79.3%, and $122.2 million, or 80.3%, of the
title premiums generated by agency operations for the first quarter 1998 and
1997, respectively. The percentage of title premiums retained by agents varies
from region to region. Accordingly, the geographical mix of revenues from
agency operations accounts for the variation in the percentage amount of title
premiums retained by agents.
Other operating expenses were $68.0 million, an increase of 28.1% when compared
with the same period of the prior year. This increase was primarily
attributable to the impact of certain incremental costs associated with
processing the record-setting title order volume, as well as marginal price
level increases.
The provision for title losses as a percentage of title insurance operating
revenues was 3.9% for the current period and 3.8% for the same period of the
prior year. This relatively constant loss percentage was due to stable claims
experience.
Premium taxes for title insurance were $4.0 million for both the first quarter
1998 and 1997. Expressed as a percentage of title insurance operating revenues,
premium taxes were 1.0% for the first quarter 1998 and 1.3% for the first
quarter 1997. The decrease in percentage was primarily due to changes in the
geographical mix of title insurance operating revenues, as well as changes in
the Company's non-insurance title subsidiaries' contribution to revenues.
Real Estate Information. Real estate information personnel and other operating
expenses were $105.8 million, an increase of 110.1% when compared with the same
period of the prior year. This increase was primarily due to $33.2 million of
costs associated with new acquisitions, costs incurred servicing the increased
business volume and slightly higher overhead costs attributable to the
integration of the new acquisitions.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (Continued)
-------------------------
Home Warranty. Home warranty personnel and other operating expenses were $4.2
million, an increase of 29.6% when compared with the same period of the prior
year. This increase was primarily attributable to costs incurred servicing the
increased business volume and expansion into other states. The provision for
home warranty losses expressed as a percentage of home warranty operating
revenues was 51.4% and 58.2% for the first quarter 1998 and 1997, respectively.
The decrease in loss ratio was primarily due to a decrease in the average number
of claims per contract.
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS
Set forth below is a summary of income before income taxes and minority
interests for each of the Company's segments.
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------------
($000)
<S> <C> <C> <C> <C>
1998 % 1997 %
------- --- ------- ---
Title Insurance $30,261 52 $ (57) (1)
Real Estate Information 23,535 40 7,823 76
Home Warranty 3,026 5 1,636 16
Trust and Banking 1,588 3 915 9
------- --- ------- ---
Total before corporate 58,410 100 10,317 100
=== ===
Corporate 23,708 (5,240)
------- -------
Total $82,118 $ 5,077
======= =======
</TABLE>
In general, the title insurance business is a lower profit margin business when
compared to the Company's other segments. The lower profit margins reflect the
high cost of producing title evidence whereas the corresponding revenues are
subject to regulatory and competitive pricing restraints. Due to this
relatively high proportion of fixed costs, title insurance profit margins
generally improve as closed order volumes increase. In addition, title
insurance profit margins are affected by the composition (residential or
commercial) and type (resale, refinancing or new construction) of real estate
activity. Profit margins from resale and new construction transactions are
generally higher than from refinancing transactions because in many states there
are premium discounts on, and cancellation rates are higher for, refinance
transactions. Title insurance profit margins are also affected by the percentage
of operating revenues generated by agency operations. Profit margins from
direct operations are generally higher than from agency operations due primarily
to the large portion of the premium that is retained by the agent. Real estate
information pretax profits are generally unaffected by the type of real estate
activity but increase as the volume of residential real estate loan transactions
increase. Included in corporate for the three months ended March 31, 1998 was an
investment gain of $32.4 million (See Note 2 to the condensed consolidated
financial statements).
INCOME TAXES
The effective income tax rate was 35.8% for the current quarter and 37.4% for
the same period of the prior year. The decrease in effective rate was primarily
attributable to changes in the ratio of permanent differences to income before
income taxes.
MINORITY INTERESTS
Minority interest expense was $7.8 million and $0.3 million for the first
quarter 1998 and 1997, respectively. The increase of $7.5 million was primarily
attributable to the strong operating results of the Company's recently formed
80% joint venture with Experian, as well as the strong operating results of
other less than 100% owned subsidiaries
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations (Continued)
-------------------------
NET INCOME
Net income for the current quarter was $45.0 million, or $2.49 per diluted
share, which included an investment gain of $32.4 million, or $1.09 per diluted
share, compared with net income of $2.9 million, or $0.16 per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Total cash and cash equivalents increased $30.2 million for the three months
ended March 31, 1998, and decreased $33.3 million for the same period of the
prior year. The increase for the current period was primarily due to cash
generated by operating activities, offset in part by capital expenditures and
repayment of debt. The decrease for the prior year period was primarily
attributable to cash used for operating activities, capital expenditures and
repayment of debt.
Notes and contracts payable as a percentage of total capitalization decreased to
5.9% at March 31, 1998, from 7.3% at December 31, 1997. The decrease was
primarily attributable to net income for the period and an increase in minority
interest in consolidated subsidiaries (primarily due to the joint venture with
Experian).
The Company's management has initiated a program to evaluate the Year 2000 issue
as it relates to its internal computer systems and third party computer systems
with which the Company interacts. The Company is currently in the inventory and
assessment phase of the program, with the remaining phases (renovation, testing
and implementation) expected to be completed by midyear 1999. The Company has
incurred to date nominal costs related to this issue. The majority of the costs
are expected to be incurred in the final three phases of the program. These
costs, which include internal staff costs as well as consulting and other
expenses, will be expensed as incurred. At this time, the Company is unable to
reasonably estimate the total costs for the Year 2000 issue.
On April 7, 1998, the Company issued and sold $100.0 million of 7.55% senior
debentures, due April 1, 2028. The 30-year bonds were issued at 99.456% of the
principal amount. Net proceeds will be used for general corporate purposes,
including, without limitation, repayment of certain debt and the financing of
the construction of new corporate facilities.
Management believes that all of its anticipated cash requirements for the
immediate future will be met from internally generated funds and proceeds from
the issuance and sale of its 30-year bonds.
9
<PAGE>
Part II: Other Information
-----------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The annual meeting of shareholders (the "Meeting") of The First
American Financial Corporation (the "Company") was held on
Thursday, April 23, 1998.
(b) The names of the persons who were nominated to serve as directors
of the Company for the ensuing year are listed below, together with
a tabulation of the results of the voting with respect to each
nominee. Each of the persons named was nominated by management of
the Company and all such nominees were elected.
<TABLE>
<CAPTION>
Name of Nominee Votes For Votes Withheld
--------------- --------- --------------
<S> <C> <C>
George L. Argyros 13,117,545 166,772
Gary J. Beban 13,124,129 160,188
J. David Chatham 13,124,134 160,183
William G. Davis 13,123,593 160,724
James L. Doti 13,123,279 161,038
Lewis W. Douglas, Jr. 13,099,469 184,848
Paul B. Fay, Jr. 13,098,509 185,808
Dale F. Frey 13,125,084 159,233
D. P. Kennedy 13,123,346 160,971
Parker S. Kennedy 13,122,961 161,356
Anthony R. Moiso 13,124,408 159,909
R. J. Munzer 13,088,940 195,377
Frank E. O'Bryan 11,696,790 1,587,527
Roslyn B. Payne 13,105,818 178,499
D. Van Skilling 13,124,554 159,763
Virginia M. Ueberroth 13,124,408 159,909
</TABLE>
(c) At the Meeting, the proposal to amend the Company's 1996 Stock
Option Plan (to increase by 1,000,000 the number of Common shares
available for grant thereunder) was approved by the holders of a
majority of the Company's Common shares represented at the Meeting
and entitled to vote.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld Broker Nonvotes
--------- ------------- -------------- ---------------
<S> <C> <C> <C>
7,342,100 3,343,215 107,741 2,491,261
</TABLE>
No other matters were voted upon at the Meeting or during the
quarter for which this report is filed.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
(2) Agreement and Plan of Merger, dated as of March 27, 1998, by
and among The First American Financial Corporation, Image
Acquisition Corp., Data Tree Corporation and Harish Chopra,
incorporated by reference herein from Exhibit 2.1 of
Registration Statement on Form S-4 dated May 7, 1998.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K (Continued).
---------------------------------------------
(10)(a) Contribution and Joint Venture Agreement By and Among The
First American Financial Corporation and Experian
Information Solutions, Inc., et al., dated November 30,
1997.
(10)(b) Operating Agreement for First American Real Estate
Solutions LLC, a California Limited Liability Company, By
and Among The First American Real Estate Information
Services, Inc. and Experian Information Solutions, Inc., et
al., dated November 30, 1997.
(10)(c) FAREISI Transition Agreement
(10)(d) Data License Agreement
(10)(e) Interim Operating Agreement By and Among The First American
Financial Corporation and Experian Information Solutions,
Inc., et al., dated November 30, 1997.
(10)(f) Experian Transition Agreement
(10)(g) Reseller Services Agreement
(10)(h) Amendment to Reseller Services Agreement For Resales to
Consumers
(10)(i) Trademark License Agreement
(10)(j) Amendment to Section 5.1 of The First American Financial
Corporation 1996 Stock Option Plan, incorporated by
reference herein from definitive Proxy Statement dated
March 23, 1998.
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the quarterly period covered by this report, the
Company filed reports on Form 8-K dated January 23, 1998
(reporting on the declaration and payment of a "3 for 2"
stock split and amendment of the Company's articles of
incorporation to increase the authorized number of Common
shares in connection therewith), January 27, 1998
(reporting on the formation of a joint venture between the
Company and Experian Information Solutions, Inc.), March
18, 1998 (reporting on the Company's having entered into a
definitive agreement to acquire Contour Software, Inc.),
and March 31, 1998 (reporting on the Company's having
entered into a definitive agreement to acquire Data Tree
Corporation). Subsequent to such quarterly period, the
Company filed a report on Form 8-K dated April 7, 1998
(reporting on the Company's issuance of $100,000,000
aggregate principal amount of 7.55% senior debentures due
2028).
11
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(2) Agreement and Plan of Merger, dated as of March 27, 1998, By and
Among The First American Financial Corporation, Image Acquisition
Corp., Data Tree Corporation and Harish Chopra, incorporated by
reference herein from Exhibit 2.1 of Registration Statement on
Form S-4 dated May 7, 1998.
(10)(a) Contribution and Joint Venture Agreement By and Among The First
American Financial Corporation and Experian Information
Solutions, Inc., et al., dated November 30, 1997.
(10)(b) Operating Agreement for First American Real Estate Solutions LLC,
a California Limited Liability Company, By and Among The First
American Real Estate Information Services, Inc. and Experian
Information Solutions, Inc., et al., dated November 30, 1997.
(10)(c) FAREISI Transition Agreement
(10)(d) Data License Agreement
(10)(e) Interim Operating Agreement By and Among The First American
Financial Corporation and Experian Information Solutions, Inc.,
et al., dated November 30, 1997.
(10)(f) Experian Transition Agreement
(10)(g) Reseller Services Agreement
(10)(h) Amendment to Reseller Services Agreement For Resales to Consumers
(10)(i) Trademark License Agreement
(10)(j) Amendment to Section 5.1 of The First American Financial
Corporation 1996 Stock Option Plan, incorporated by reference
herein from definitive Proxy Statement dated March 23, 1998.
(27) Financial Data Schedule
12
<PAGE>
Exhibit (10)(a)
================================================================================
CONTRIBUTION AND JOINT VENTURE AGREEMENT
By and Among
THE FIRST AMERICAN FINANCIAL CORPORATION,
FIRST AMERICAN REAL ESTATE INFORMATION SERVICES, INC.,
FIRST AMERICAN APPRAISAL SERVICES, INC.,
FIRST AMERICAN APPRAISAL CONSULTING SERVICES, INC.,
FIRST AMERICAN CREDCO, INC.,
FIRST AMERICAN FIELD SERVICES, INC.,
FIRST AMERICAN FLOOD DATA SERVICES, INC.,
FIRST AMERICAN PROPERTY SERVICES, INC.,
FIRST AMERICAN REAL ESTATE TAX SERVICE, INC.,
PASCO ENTERPRISES, INC.,
PRIME CREDIT REPORTS, INC.,
PROPERTY FINANCIAL SERVICES OF NEW ENGLAND, INC.,
DOCS ACQUISITION CORP.,
STRATEGIC MORTGAGE SERVICES, INC. (TEXAS),
and
EXPERIAN INFORMATION SOLUTIONS, INC.
November 30, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS/1/
-----------------
Page
----
ARTICLE I
DEFINITIONS............................................................ 2
1.01. Defined Terms............................................ 2
-------------
1.02. Principles of Construction............................... 8
--------------------------
ARTICLE II
ORGANIZATION OF NEWCO;
CLOSING; SCOPE OF BUSINESS............................................. 8
2.01. Organization............................................. 8
------------
2.02. Capital Contributions; Closing........................... 9
------------------------------
2.03. Certain Obligations Not Transferred...................... 10
-----------------------------------
2.04. Effective Time........................................... 10
--------------
2.05. Instruments of Transfer and Conveyance................... 10
--------------------------------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EXPERIAN............................. 11
3.01. Authorization and Validity of Agreement.................. 11
---------------------------------------
3.02. Existence and Good Standing.............................. 11
---------------------------
3.03. EXPERIAN Financial Statements............................ 12
-----------------------------
3.04. Title to Interests....................................... 12
------------------
3.05. Leases................................................... 12
------
3.06. Real Property............................................ 12
-------------
3.07. Material Contracts....................................... 13
------------------
3.08. Consents and Approvals; No Violations.................... 13
-------------------------------------
3.09. Litigation............................................... 14
----------
3.10. Taxes.................................................... 14
-----
3.11. Conduct of Business...................................... 15
-------------------
3.12. Compliance with Laws; Permits............................ 15
-----------------------------
3.13. Intellectual Properties.................................. 16
-----------------------
3.14. Labor Matters............................................ 17
-------------
3.15. Employee Benefit Plans................................... 17
----------------------
3.16. Environmental Laws and Regulations....................... 17
----------------------------------
3.17. Books and Records........................................ 18
-----------------
3.18. Nature of Investment..................................... 18
--------------------
3.19. Transactions with Affiliates............................. 18
----------------------------
3.20. Broker's or Finder's Fees................................ 18
-------------------------
/1/ This Table of Contents is provided for convenience only, and does not
-
form a part of the attached Contribution and Joint Venture Agreement.
(i)
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE FAFCO PARTIES.................... 19
4.01. Authorization and Validity of Agreement.................. 19
---------------------------------------
4.02. Existence and Good Standing.............................. 19
---------------------------
4.03. FAFCO Financial Statements............................... 20
--------------------------
4.04. Title to Interests....................................... 20
------------------
4.05. Leases................................................... 20
------
4.06. Real Property............................................ 20
-------------
4.07. Material Contracts....................................... 21
------------------
4.08. Consents and Approvals; No Violations.................... 21
-------------------------------------
4.09. Litigation............................................... 22
----------
4.10. Taxes.................................................... 22
-----
4.11. Conduct of Business...................................... 23
-------------------
4.12. Compliance with Laws; Permits............................ 24
-----------------------------
4.13. Intellectual Properties.................................. 24
-----------------------
4.14. Labor Matters............................................ 25
-------------
4.15. Employee Benefit Plans................................... 25
----------------------
4.16. Environmental Laws and Regulations....................... 25
----------------------------------
4.17. Books and Records........................................ 26
-----------------
4.18. Nature of Investment..................................... 26
--------------------
4.19. Transactions with Affiliates............................. 26
----------------------------
4.20. Broker's or Finder's Fees................................ 26
-------------------------
ARTICLE V
COVENANTS.............................................................. 26
5.01. Ordinary Course.......................................... 26
---------------
5.02. NEWCO Business Opportunities............................. 27
----------------------------
5.03. Best Efforts............................................. 28
------------
5.04. Consents and Further Assurances.......................... 28
-------------------------------
5.05. Notices of Certain Events................................ 29
-------------------------
5.06. Access to Information Concerning Business and Records.... 30
-----------------------------------------------------
5.07. Exclusive Dealing........................................ 30
-----------------
5.08. FAFCO Board Representation............................... 31
--------------------------
5.09. Guarantees............................................... 31
----------
5.10. Certain Fees............................................. 31
------------
5.11. Certain Covenants........................................ 31
-----------------
ARTICLE VI
EXPERIAN PUT OPTION; FAFCO CALL OPTION.............. 32
6.01. EXPERIAN Put Option...................................... 32
-------------------
6.02. FAFCO Call Option........................................ 33
-----------------
6.03. FAFCO Change of Control Put Option....................... 34
----------------------------------
6.04. EXPERIAN Change of Control Call Option................... 35
--------------------------------------
6.05. Extraordinary Put Option................................. 35
------------------------
6.06. Put/Call Adjustment...................................... 36
-------------------
6.07. General Put/Call Provisions.............................. 36
---------------------------
(ii)
<PAGE>
6.08. Dispute Resolution....................................... 37
------------------
ARTICLE VII
CONDITIONS PRECEDENT................................................... 38
7.01. Conditions Precedent to the Obligations of Each of the
------------------------------------------------------
Parties.................................................. 38
-------
7.02. Conditions Precedent to the Obligations of the FAFCO
----------------------------------------------------
Parties.................................................. 40
-------
7.03. Conditions Precedent to the Obligations of EXPERIAN...... 41
---------------------------------------------------
ARTICLE VIII
SURVIVAL OF REPRESENTATION; INDEMNIFICATION............................ 43
8.01. Survival of Representations.............................. 43
---------------------------
8.02. Indemnification.......................................... 43
---------------
8.03. Post-Effective-Time Tax Indemnification.................. 43
---------------------------------------
ARTICLE IX
TERMINATION............................................................ 44
9.01. Events of Termination.................................... 44
---------------------
9.02. Effect of Termination.................................... 44
---------------------
ARTICLE X
MISCELLANEOUS.......................................................... 44
10.01. Fees and Expenses........................................ 44
-----------------
10.02. Extension; Waiver........................................ 44
-----------------
10.03. Confidentiality.......................................... 44
---------------
10.04. Public Announcements..................................... 45
--------------------
10.05. Records Retained by FAFCO, EXPERIAN and NEWCO............ 45
---------------------------------------------
10.06. Notices.................................................. 45
-------
10.07. Entire Agreement......................................... 46
----------------
10.08. Binding Effect; Benefit; Assignment...................... 46
-----------------------------------
10.09. Amendment and Modification............................... 47
--------------------------
10.10. Further Actions.......................................... 47
---------------
10.11. Counterparts............................................. 47
------------
10.12. Applicable Law; Submission to Jurisdiction............... 47
------------------------------------------
10.13. Severability............................................. 47
------------
SCHEDULES
---------
SCHEDULE 2.02(a) FAFCO MEMBERS Excluded Assets and Liabilities
SCHEDULE 2.02(b) EXPERIAN Excluded Assets and Liabilities
SCHEDULE 3.03 Material Adverse Effect (EXPERIAN)
SCHEDULE 3.04 Title to Interests (EXPERIAN)
SCHEDULE 3.05 Leases (EXPERIAN)
SCHEDULE 3.06 Real Property (EXPERIAN)
SCHEDULE 3.07(a) Material Contracts (EXPERIAN)
SCHEDULE 3.07(c) Existing or Potential Defaults (EXPERIAN)
(iii)
<PAGE>
SCHEDULE 3.08 Necessary Consents (EXPERIAN)
SCHEDULE 3.09 Litigation (EXPERIAN)
SCHEDULE 3.10 Tax Matters (EXPERIAN)
SCHEDULE 3.13(b) Copyrights (EXPERIAN)
SCHEDULE 3.13(d) Adverse Claims (EXPERIAN)
SCHEDULE 3.14 Labor (EXPERIAN)
SCHEDULE 3.15 Employee Benefit Plans (EXPERIAN)
SCHEDULE 3.17 Books and Records (EXPERIAN)
SCHEDULE 3.19 Transactions with Affiliates (EXPERIAN)
SCHEDULE 4.03 Material Adverse Effect (FAFCO)
SCHEDULE 4.04 Title to Interests (FAFCO)
SCHEDULE 4.05 Leases (FAFCO)
SCHEDULE 4.06 Real Property (FAFCO)
SCHEDULE 4.07(a) Material Contracts (FAFCO)
SCHEDULE 4.07(c) Existing or Potential Defaults (FAFCO)
SCHEDULE 4.08 Necessary Consents (FAFCO)
SCHEDULE 4.09 Litigation (FAFCO)
SCHEDULE 4.10 Tax Matters (FAFCO)
SCHEDULE 4.13(b) Copyrights (FAFCO)
SCHEDULE 4.13(d) Adverse Claims (FAFCO)
SCHEDULE 4.14 Labor (FAFCO)
SCHEDULE 4.15 Employee Benefit Plans (FAFCO)
SCHEDULE 4.17 Books and Records (FAFCO)
SCHEDULE 4.19 Transactions with Affiliates (FAFCO)
SCHEDULE 5.01 Approved Transactions
EXHIBITS
--------
Exhibit A Form of $3MM Note
Exhibit B Form of Operating Agreement
Exhibit C-1 Form of Experian Transition Agreement
Exhibit C-2 Form of FAFCO Transition Agreement
Exhibit D Form of Data License Agreement
Exhibit E Form of EXPERIAN/CREDCO Agreement
Exhibit F Form of Trademark License Agreement
Exhibit G Form of Interim Operating Agreement
(iv)
<PAGE>
CONTRIBUTION AND JOINT VENTURE AGREEMENT, made as of November 30, 1997
(this "Agreement"), by and among THE FIRST AMERICAN FINANCIAL CORPORATION, a
California corporation ("FAFCO"), FIRST AMERICAN REAL ESTATE INFORMATION
SERVICES, INC., a California corporation, ("FAREISI"), FIRST AMERICAN APPRAISAL
SERVICES, INC., a California corporation ("FAREISI Subsidiary 1"), FIRST
AMERICAN APPRAISAL CONSULTING SERVICES, INC., a California corporation ("FAREISI
Subsidiary 2"), FIRST AMERICAN CREDCO, INC., a Washington corporation ("FAREISI
Subsidiary 3"), FIRST AMERICAN FIELD SERVICES, INC., a New Jersey corporation
("FAREISI Subsidiary 4"), FIRST AMERICAN FLOOD DATA SERVICES, INC., a Texas
corporation ("FAREISI Subsidiary 5"), FIRST AMERICAN PROPERTY SERVICES, INC., a
New York corporation ("FAREISI Subsidiary 6"), FIRST AMERICAN REAL ESTATE TAX
SERVICE, INC., a Florida corporation ("FAREISI Subsidiary 7"), PASCO
ENTERPRISES, INC., a Texas corporation ("FAREISI Subsidiary 8"), PRIME CREDIT
REPORTS, INC., a California corporation ("FAREISI Subsidiary 9"), PROPERTY
FINANCIAL SERVICES OF NEW ENGLAND, INC., a Delaware corporation ("FAREISI
Subsidiary 10"), DOCS ACQUISITION CORP., a Nevada corporation ("DOCS"),
STRATEGIC MORTGAGE SERVICES, INC. (TEXAS), a Texas corporation ("SMS"), and
EXPERIAN INFORMATION SOLUTIONS, INC., an Ohio corporation ("EXPERIAN").
W I T N E S S E T H :
-------------------
WHEREAS, FAFCO, FAREISI, FAREISI Subsidiary 1, FAREISI Subsidiary 2,
FAREISI Subsidiary 3, FAREISI Subsidiary 4, FAREISI Subsidiary 5, FAREISI
Subsidiary 6, FAREISI Subsidiary 7, FAREISI Subsidiary 8, FAREISI Subsidiary 9,
FAREISI Subsidiary 10, DOCS, SMS (FAREISI, the foregoing FAREISI Subsidiaries,
DOCS and SMS, collectively, the "FAFCO Members"), and EXPERIAN (each a "Party"
and, collectively, the "Parties") desire to combine the FAREISI Business and the
RES Business;
WHEREAS, the Parties desire that EXPERIAN and each of the FAFCO Members
become the joint owners of a California limited liability company to be formed
pursuant to Section 2.01 of this Agreement ("NEWCO") to own and operate the
combined FAREISI Business and RES Business;
WHEREAS, to effectuate their intent the Parties deem it advisable for
EXPERIAN and each of the FAFCO Members to make a contribution of certain assets
and liabilities to NEWCO; and
WHEREAS, in order to set forth certain terms and conditions upon which
NEWCO will be owned and operated, the Parties desire to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the Parties agree as follows:
1
<PAGE>
ARTICLE
I
DEFINITIONS
1.01. Defined Terms. As used in this Agreement, the following terms
-------------
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Adjusted Earnings" means, for any period, the profits of NEWCO for such
period, assuming an effective tax rate of 40% (which percentage the Parties may
from time to time hereafter agree to adjust to reflect material changes in tax
rates), as determined in accordance with US GAAP and excluding extraordinary
gains and charges, restructuring charges and other unusual or infrequently
occurring items.
"Affiliate" shall mean and include, with reference to any Person, any
other Person, other than NEWCO, Controlling, Controlled by or under common
Control with such Person.
"Agreement" shall mean this Contribution and Joint Venture Agreement, as
the same may be amended, modified and/or supplemented from time to time.
"Balance Sheet Date" shall mean September 30, 1997 in the case of FAFCO
and November 19, 1997 in the case of EXPERIAN.
"Business" shall mean the FAREISI Business and/or the RES Business, as
the context may require.
"Business Day" shall mean any day, excluding Saturday, Sunday or any day
which shall be a legal holiday in the State of California.
"Business Record" shall have the meaning set forth in Section 10.05.
"Call Election Notice" has the meaning given thereto in Section 6.02(a)
hereof.
"Call Exercise Date" has the meaning given thereto in Section 6.02(a)
hereof.
"Call Option" has the meaning given thereto in Section 6.02(a) hereof.
"Call Price" has the meaning given thereto in Section 6.02(b) hereof.
"Capital Account" shall have the meaning given thereto in Section 1.01 of
the Operating Agreement.
"Closing" shall mean the closing of the transactions contemplated herein
and shall take place at the offices of White & Case, 633 West Fifth Street, Los
Angeles, California 90071, at 10:00 A.M. local time on a Business Day occurring
not more than ten Business Days after the
2
<PAGE>
satisfaction or waiver of all the conditions to the effectiveness of this
Agreement set forth in Article VII or such other place or time as the Parties
may agree, not later than November 30, 1997 (the date of the Closing being
referred to as the "Closing Date"); it being understood that the Parties
anticipate that the Closing will occur on or before November 30, 1997.
"Code" shall have the meaning set forth in Section 3.15.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Control" shall mean the power to vote more than 50% of the Voting
Interests of an Entity or to otherwise control the management and affairs of
such Entity (including by way of the power to veto any material act or
decision).
"Effective Date" shall mean January 1, 1998.
"Effective Time" shall mean 00:01 (local time) on January 1, 1998.
"Encumbrances" shall mean all liens, encumbrances, restrictions and claims
of every kind and character.
"End Date" shall have the meaning set forth in Section 6.01(a).
"Environmental Claims" shall have the meaning set forth in Section 3.16.
"Environmental Laws" shall have the meaning set forth in Section 3.16.
"Entity" shall mean any Person that is not a natural Person.
"ERISA" shall have the meaning set forth in Section 3.15.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
"EXPERIAN" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"EXPERIAN Change of Control" means an event as a result of which (a) any
Person or group of Persons (within the meaning of Section 13 or 14 of the
Exchange Act) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Commission under the Exchange Act) of 51% or more
of the outstanding shares of common stock of Great Universal Stores, Inc.
("GUS") (on a fully diluted basis), other than existing shareholders of GUS
beneficially holding as of the date hereof in the aggregate more than 5% of the
outstanding shares of common stock of GUS, or (b) GUS shall fail to own,
directly or indirectly, at least 51% of the economic and voting interest in the
capital stock of EXPERIAN other than as a result of a public offering of the
capital stock of EXPERIAN; provided, however, that an EXPERIAN Change of Control
-------- -------
shall not occur as a result of the merger of EXPERIAN into GUS or an Affiliate
of GUS so long as (x) EXPERIAN is the surviving entity or (y) the surviving
entity, in the event that
3
<PAGE>
EXPERIAN is not the surviving entity, shall have expressly assumed in writing
each obligation of EXPERIAN under this Agreement, the Operating Agreement and
each other agreement relating to NEWCO to which EXPERIAN is a party.
"EXPERIAN Change of Control Notice" has the meaning given thereto in
Section 6.04 hereof.
"EXPERIAN Interests" shall have the meaning set forth in Section 2.02(b).
"EXPERIAN Plan" and "EXPERIAN Plans" shall have the meaning set forth in
Section 3.15.
"FAFCO" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"FAFCO Balance Sheet" shall have the meaning set forth in Section 4.03(a).
"FAFCO Change of Control" means an event as a result of which (a) any
Person or group of Persons (within the meaning of Section 13 or 14 of the
Exchange Act) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Commission under the Exchange Act) of 51% or more
of the outstanding shares of common stock of FAFCO (on a fully diluted basis) or
(b) FAFCO shall fail to own, directly or indirectly, at least 51% of the
economic and voting interest in the capital stock of each of the FAFCO Members.
"FAFCO Change of Control Notice" has the meaning given thereto in Section
6.03 hereof.
"FAFCO Financial Statements" shall have the meaning set forth in Section
4.03(a).
"FAFCO Interests" shall have the meaning set forth in Section 2.02(a).
"FAFCO Member" shall have the meaning given thereto in the first WHEREAS
clause of this Agreement.
"FAFCO Plan" and "FAFCO Plans" shall have the meaning set forth in Section
4.15.
"FAREISI" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"FAREISI Business" shall mean the collective businesses of each of the
FAFCO Members.
"FAREISI Material Contract" shall have the meaning set forth in Section
4.07(b).
"FAREISI Permitted Encumbrances" shall have the meaning set forth in
Section 4.04.
4
<PAGE>
"FAREISI Pro-Forma Balance Sheet" shall have the meaning set forth in
Section 4.03(a).
"FAREISI Property" shall have the meaning set forth in Section 4.16.
"Hazardous Materials" shall have the meaning set forth in Section 3.16.
"Implementing Agreements" shall have the meaning set forth in Section
7.01(d).
"Indemnifiable Taxes" shall have the meaning set forth in Section 8.03(a).
"Intellectual Property" means all patents, patent applications, registered
and unregistered trademarks and service marks, registered and unregistered
copyrights, computer programs, databases, trade secrets and proprietary
information.
"Interests" shall mean the FAFCO Interests and/or the EXPERIAN Interests,
as the context may require.
"Interim Operating Agreement" shall mean an Interim Operating Agreement by
and among FAFCO, each of the FAFCO Members and EXPERIAN in substantially the
form of Exhibit G attached hereto.
"License" shall have the meaning set forth in Section 3.12.
"Losses" shall have the meaning set forth in Section 8.02.
"Major Exchange" shall mean any one of the following securities exchanges
or quotation systems: New York Stock Exchange, NASDAQ, American Stock Exchange
or Pacific Stock Exchange.
"Management Committee" shall have the meaning given thereto in Section 1.01
of the Operating Agreement.
"Manager" shall have the meaning given thereto in Section 1.01 of the
Operating Agreement.
"Material Adverse Effect" shall have the meaning set forth in Section 3.02.
"Membership Interest" shall mean, with respect to each of the FAFCO Members
and EXPERIAN, its respective interest in NEWCO as determined in accordance with
the Operating Agreement.
"NEWCO" shall mean the California limited liability company to be formed
pursuant to Article II.
"NEWCO Development Opportunity" shall have the meaning given to the term
"Company Development Opportunity" in Section 1.01 of the Operating Agreement.
5
<PAGE>
"NEWCO Business" shall mean the business owned and operated by NEWCO after
the Closing which shall include, without limitation, the combined FAREISI
Business and the RES Business.
"Notes" shall have the meaning set forth in Section 2.02(a).
"Notice Date" has the meaning given thereto in Section 6.06(c) hereof.
"Operating Agreement" shall mean an Operating Agreement by and among each
of the FAFCO Members and EXPERIAN in substantially the form of Exhibit B
attached hereto.
"Panel" shall have the meaning set forth in Section 6.08(b).
"Panel Date" shall have the meaning set forth in Section 6.08(b).
"Party" and "Parties" shall have the meaning set forth in the first WHEREAS
clause of this Agreement.
"Percentage Interest" shall mean, with respect to EXPERIAN, the percentage
set forth in Section 2.02(f) of the Operating Agreement with respect to
EXPERIAN, as such percentage may be adjusted from time to time pursuant to the
terms of the Operating Agreement.
"Permitted Encumbrances" shall mean the FAREISI Permitted Encumbrances
and/or the RES Permitted Encumbrances, as the context may require.
"Person" shall mean and include any individual, partnership, association,
joint stock company, joint venture, corporation, trust, limited liability
company, unincorporated organization, government, agency or political
subdivision thereof.
"Pre-Closing Period" shall have the meaning set forth in Section 3.10(a).
"Prime Rate" means, as of any date of determination, the per annum rate of
interest specified as the Prime Rate in the Wall Street Journal published on
such date, provided that for any date on which the Wall Street Journal is not
--------
published, "Prime Rate" means the per annum rate of interest specified as the
Prime Rate in the Wall Street Journal last published before such date.
"Put Election Notice" has the meaning given thereto in Section 6.01(a)
hereof.
"Put Exercise Date" has the meaning given thereto in Section 6.01(a)
hereof.
"Put Option" has the meaning given thereto in Section 6.01(a) hereof.
"Put Price" has the meaning given thereto in Section 6.01(b) hereof.
"Registration Date" shall have the meaning set forth in Section 6.01(a).
6
<PAGE>
"Release" shall have the meaning set forth in Section 3.16.
"RES Business" shall mean the business of EXPERIAN commonly known as
Experian Real Estate Solutions (including, without limitation, the businesses
commonly known as Experian Title Information Services and Experian Property
Data).
"RES Material Contract" shall have the meaning set forth in Section
3.07(b).
"RES Permitted Encumbrances" shall have the meaning set forth in Section
3.04.
"RES Pro-Forma Balance Sheet" shall have the meaning set forth in Section
3.03(a).
"RES Pro-Forma Financials" shall have the meaning set forth in Section
3.03(a).
"RES Property" shall have the meaning set forth in Section 3.16.
"Returns" shall have the meaning set forth in Section 3.10(a).
"Securities Act" shall mean the U.S. Securities Act of 1933, as amended.
"Subsidiary" shall mean, with respect to any Person, (a) any partnership of
which such Person is a general partner or of which such Person's Subsidiary is a
general partner or (b) any other Entity which, at the time as of which any
determination is being made, is Controlled by such Person; provided, that for
--------
purposes of this Agreement, Excelis, Inc. and shall not be deemed to be a
Subsidiary of FAREISI.
"Taxes" shall mean all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including, without limitation, all Federal, state,
county, local, foreign and other income, franchise, profits, capital gains,
capital stock, transfer, sales, use, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of any
kind whatsoever (whether payable directly or by withholding and whether or not
requiring the filing of a Return), all estimated taxes, deficiency assessments,
additions to tax, penalties and interest and shall include any liability for
such amounts as a result either of being a member of a combined, consolidated,
unitary or affiliated group or of a contractual obligation to indemnify any
person or other entity.
"Transactional Taxes" shall have the meaning set forth in Section
2.01(b)(ii).
"Trigger Date" shall mean November 30, 2002.
"US GAAP" means United States generally accepted accounting principles
applied on a consistent basis.
"Voting Interest" shall mean with respect to any Entity, any equity
interest of such Entity having general voting power under ordinary circumstances
to participate in the election of a majority of the governing body of such
Entity (irrespective of whether at the time any other class
7
<PAGE>
or classes of equity interest of such Entity shall have or might have voting
power by reason of the happening of any contingency).
"$3MM Note" shall have the meaning set forth in Section 2.02(b).
"$25MM Note" shall have the meaning set forth in Section 7.01(e)(ii).
1.02. Principles of Construction.
--------------------------
(a) All references to Articles, Sections, subsections, Schedules and
Exhibits are to Articles, Sections, subsections, Schedules and Exhibits in or to
this Agreement unless otherwise specified. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The term "including" is not limiting and means "including without
limitation."
(b) All accounting terms not specifically defined herein shall be
construed in accordance with US GAAP.
(c) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words "to"
and "until" each mean "to but excluding"; and the word "through" means "to and
including."
(d) The Table of Contents hereto and the Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
(e) This Agreement and the Implementing Agreements are the result of
negotiations among and have been reviewed by counsel to the Parties and are the
products of all Parties. Accordingly, they shall not be construed against any
Party merely because of such Party's involvement in their preparation.
ARTICLE II
ORGANIZATION OF NEWCO;
CLOSING; SCOPE OF BUSINESS
2.01. Organization.
------------
(a) NEWCO shall be a limited liability company established under the
laws of the State of California, (i) having as its registered name such name as
from time to time is set forth in NEWCO's Articles of Organization and (ii)
having its principal offices located in St. Petersburg, Florida or such location
as from time to time is set forth in NEWCO's Articles of Organization.
8
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(b) (i) All out-of-pocket costs of the establishment of NEWCO as a
limited liability company as contemplated by Section 2.01(a) (including
organizational changes and amendments to organizational documents that may be
made on or before the Closing Date) shall be shared eighty percent (80%) by the
FAFCO Members and twenty percent (20%) by EXPERIAN.
(ii) Except as otherwise provided in clause (iii) below, each Party
shall bear its own (A) costs incurred as a result of the transfer of any
Interests to NEWCO, including payments to third parties, if any, to obtain their
consent to such transfer (it being understood and agreed that each Party shall
determine, in its sole discretion, whether or not to obtain any such consent),
(B) attorneys' fees and related costs incurred by it in connection with the
preparation, execution and delivery of this Agreement and the Implementing
Agreements and the transactions contemplated hereby or thereby, except as may
otherwise expressly be provided herein or therein and (C) sales, use, transfer,
conveyance, bulk transfer, business and occupation, value added or income taxes,
or other taxes, duties, excises or governmental charges imposed by any taxing
jurisdiction with respect to the transfer, assignment or conveyance of its
Interests or otherwise on account of this agreement or the transactions
contemplated hereby including, without limitation, those arising from its
corporate reorganizations and intercompany transactions in contemplation of such
transactions (the foregoing taxes described in this clause (C) being
hereinafter referred to as "Transactional Taxes").
(iii) Notwithstanding anything in this Section 2.01(b) to the
contrary, the Parties hereby agree to share as provided in Section 2.01(b)(i)
the reasonable legal fees and expenses of White & Case in connection with the
establishment of NEWCO as a limited liability company.
2.02. Capital Contributions; Closing.
------------------------------
(a) At or prior to the Effective Time, FAFCO and FAREISI shall cause
each FAFCO Member to transfer to NEWCO, and each FAFCO Member shall transfer to
NEWCO, free and clear of all Encumbrances, other than FAREISI Permitted
Encumbrances, all of the assets (which assets will include, without limitation,
cash in an amount that, when aggregated with the cash, if any, contributed by
all other FAFCO Members, will not be less than $15,000,000), properties, rights,
services and interests constituting its share of the FAREISI Business (other
than such assets, properties, rights, services and interests set forth on Part 1
of Schedule 2.02(a) attached hereto under the name of such FAFCO Member),
together with all liabilities and obligations of any nature of such FAFCO
Member, whether absolute, accrued, contingent or otherwise, and whether due or
to become due, arising out of or relating to such assets, properties, rights,
services and interests (other than the liabilities and obligations set forth in
Part 2 of Schedule 2.02(a) attached hereto under the name of such FAFCO Member)
(all such assets, properties, rights, services, liabilities, obligations and
interests being transferred are hereinafter collectively referred to as the
"FAFCO Interests"). In consideration for such transfer, NEWCO shall in
accordance with Section 2.02 of the Operating Agreement, credit the respective
Capital Accounts of the FAFCO Members and issue to the FAFCO Members Membership
Interests in NEWCO in an aggregate amount equal to 80% of the Membership
Interests to be issued at the Effective Time.
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(b) At or prior to the Effective Time, EXPERIAN shall transfer or cause to
be transferred to NEWCO, (i) free and clear of all Encumbrances, other than RES
Permitted Encumbrances, all of the assets (which assets will include, without
limitation, not less than $3,000,000 in cash), properties, rights, services and
interests constituting the RES Business (other than such assets, properties,
rights, services and interests set forth in Part 1 of Schedule 2.02(b) attached
hereto), together with all liabilities and obligations of any nature of
EXPERIAN, whether absolute, accrued, contingent or otherwise, and whether due or
to become due, arising out of or relating to such assets, properties, rights,
services and interests (other than the liabilities and obligations set forth in
Part 2 of Schedule 2.02(b) attached hereto) (all such assets, properties,
rights, services, liabilities, obligations and interests being transferred
hereunder are hereinafter referred to as the "EXPERIAN Interests") and (ii) cash
in the amount of $10,000,000, by wire transfer of immediately available funds to
an account designated by NEWCO. In consideration of such transfer, NEWCO shall
(x) in accordance with Section 2.02 of the Operating Agreement, credit the
Capital Account of EXPERIAN and issue to EXPERIAN a Membership Interest in NEWCO
equal to 20% of the Membership Interests to be issued at the Effective Time and
(y) deliver or cause to be delivered to EXPERIAN a promissory note, dated the
Effective Date, in the principal amount of $3,000,000 in the form attached
hereto as Exhibit A duly executed by NEWCO (the "$3MM Note").
2.03. Certain Obligations Not Transferred. Notwithstanding Sections
-----------------------------------
2.02(a) and 2.02(b) hereof, any obligation of FAFCO, FAREISI, EXPERIAN or any
other FAFCO Member, or their respective Affiliates, to lend money, extend
credit, make advances to, purchase or acquire any securities or other interest
in or make any capital contribution to any other Person, which requires FAFCO,
FAREISI, EXPERIAN or such other FAFCO Member, or such Affiliates, to advance
funds prior to the Effective Time in full or partial satisfaction of such
obligation, shall, to the extent of such requirement to lend money, extend
credit, make advance to, purchase or acquire any securities or other interest in
or make any capital contribution to any other Person prior to the Effective
Time, remain the sole obligation of FAFCO, FAREISI, EXPERIAN or such other FAFCO
Member, or such Affiliates, as the case may be, and shall not be directly or
indirectly assumed by NEWCO.
2.04. Effective Time. The transactions referred to in Sections 2.02(a),
--------------
2.02(b) and 2.03 shall be deemed, as between the Parties, to occur at the
Effective Time.
2.05. Instruments of Transfer and Conveyance. The sale, transfer and
--------------------------------------
conveyance of the Interests shall be effected by delivery on or prior to the
Closing Date by each Party hereto of such deeds, transfers in registrable form,
endorsements, assurances, conveyances, releases, discharges, assignments,
certificates, drafts, checks or other instruments of transfer and conveyance,
duly executed by such Party or such other Person, as the case may be, as any
other Party reasonably deems necessary to vest in NEWCO all right, title and
interest in and to the Interests, free and clear of any Encumbrance of any kind,
except Permitted Encumbrances.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EXPERIAN
EXPERIAN hereby represents and warrants to FAFCO, FAREISI and each of the
other FAFCO Members and to NEWCO (which shall be an intended beneficiary of such
representations and warranties upon its acknowledgement of this Agreement) as
follows:
3.01. Authorization and Validity of Agreement.
---------------------------------------
(a) It has full corporate power and authority to execute and deliver
this Agreement and each of the Implementing Agreements to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by it of this Agreement and the Implementing Agreements to which it
is a party and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by its Board of Directors and,
if applicable, shareholder(s), and no other corporate or shareholder action is
necessary to authorize the execution, delivery and performance by it of this
Agreement and the Implementing Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby. This Agreement
and each of the Implementing Agreements to which it is a party have been duly
executed and delivered by it and, assuming the due execution of this Agreement
and each of the Implementing Agreements by the other parties hereto and thereto,
are valid and binding obligations of it, enforceable against it in accordance
with their terms, except to the extent that their en forceability may be subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors' rights generally and to general
equitable principles.
(b) Each document and instrument (including, but not limited to, the
Implementing Agreements) executed by it as contemplated by this Agreement, when
executed and delivered by it in accordance with the terms hereof, shall have
been duly executed and delivered by it and, assuming due execution and delivery
by the other parties thereto, shall be valid and binding upon it and enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and to general equitable principles.
3.02. Existence and Good Standing. It is a corporation duly organized,
---------------------------
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
It is duly qualified or licensed to conduct its business, and is in good
standing in each jurisdiction in which the character or location of the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so duly
qualified or licensed would not have a material adverse effect on the business,
properties, assets, liabilities, condition (financial or otherwise), results of
operations or prospects (a "Material Adverse Effect") of the RES Business, taken
as a whole.
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3.03. EXPERIAN Financial Statements.
-----------------------------
(a) EXPERIAN has heretofore furnished FAFCO with its pro-forma
balance sheet as at November 19, 1997 (such balance sheet being hereinafter
referred to as the "RES Pro-Forma Balance Sheet"), and related pro-forma
statements of operations and cash flows for the period then ended, together with
all explanatory notes thereto, for the RES Business showing the effects of the
elimination of EXPERIAN's businesses and operations not included in the EXPERIAN
Interests being transferred to NEWCO (such pro-forma statements, together with
the RES Pro-Forma Balance Sheet, the "RES Pro-Forma Financials"). The RES Pro-
Forma Financials, including the footnotes thereto, are based upon currently
available information and upon certain assumptions therein disclosed that
EXPERIAN believes in good faith to be reasonable under current circumstances.
(b) Except as set forth on Schedule 3.03 attached hereto, since the
Balance Sheet Date, the RES Business has experienced no Material Adverse Effect.
3.04. Title to Interests. It possesses good and marketable title to
------------------
all of the properties and assets (real and personal, tangible or intangible)
comprising the EXPERIAN Interests, free and clear of all Encumbrances, except
for Encumbrances which (i) are set forth on Schedule 3.04, (ii) are for taxes,
assessments or governmental charges not yet due, (iii) were incurred in the
ordinary course of business and which do not in the aggregate materially detract
from the value of the EXPERIAN Interests or materially impair the use thereof in
the operation of the RES Business or (iv) are reflected on the RES Pro-Forma
Financial Statements, as the case may be. Encumbrances of the type described in
clauses (i) through (iv) are sometimes referred to as "RES Permitted
Encumbrances".
3.05. Leases. Except as otherwise set forth in Schedule 3.05, each
------
lease to which it is a party included in the RES Business is in full force and
effect; all rents and additional rents due to date from it on each such lease
have been paid; in each case, it has not received notice that it is in material
default thereunder; and, to its knowledge, there exists no material event,
occurrence, condition or act (including the transactions contemplated by this
Agreement) which, with the giving of notice, the lapse of time or the happening
of any further event or condition, would constitute a material default by it or
any other party under such lease.
3.06. Real Property. Schedule 3.06 attached hereto contains a list of
-------------
all real property owned by it constituting part of the RES Business and includes
the name of the record title holder thereof and a list of all indebtedness
secured by a lien, mortgage or deed of trust thereon. It has good and marketable
title in fee simple to all the real property specified as owned by it in
Schedule 3.06, free and clear of all Encumbrances, except for RES Permitted
Encumbrances or as set forth on Schedule 3.06. All of the buildings, structures
and appurtenances situated on the real property listed on Schedule 3.06 are in
good operating condition and in a state of good maintenance and repair (normal
wear and tear excepted) and are adequate and suitable for the purposes for which
they are presently being used.
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3.07. Material Contracts.
------------------
(a) Schedule 3.07(a) attached hereto sets forth a complete list of all
RES Material Contracts related to the operation of the RES Business.
(b) Except as set forth in Schedule 3.07(a) attached hereto, in
connection with the ownership or operation of the RES Business, it neither has
nor is bound by (i) any agreement or contract relating to the employment of any
Person with total annual compensation in excess of $300,000, or any bonus,
deferred compensation, pension, profit sharing, stock option, employee stock
purchase, retirement or other employee benefit plan, (ii) any agreement,
indenture or other instrument which contains restrictions with respect to
payment of dividends or any other distribution tion, (iii) any agreement,
contract or commitment relating to capital expenditures in excess of $1,000,000,
(iv) any loan or advance to, or investment in, any Person or agreement, contract
or commitment relating to the making of any such loan, advance or investment,
(v) any guarantee or other contingent liability in respect of any indebtedness
or obligation of any Person (other than the endorsement of negotiable
instruments for collection in the ordinary course of business), (vi) any
management service, consulting or any other similar type contract which is not
cancelable without penalty within 30 days and involves estimated payments in
excess of $50,000 in any twelve-month period, (vii) any agreement, contract or
commitment limiting the ability of the RES Business to engage in any line of
business or to compete with any Person, (viii) any agreement, contract or
commitment not entered into in the ordinary course of business which is not
cancelable without penalty within 30 days or (ix) any agreement, contract or
commitment which is reasonably expected to have a Material Adverse Effect on the
RES Business, taken as a whole (each of the agreements, contracts or commitments
in clauses (i) to (ix) above, a "RES Material Contract").
(c) Except as set forth on Schedule 3.07(c), each contract or
agreement set forth on Schedule 3.07(a) (or required to be set forth thereon) is
in full force and effect and there exists no default or event of default or
event, occurrence, condition or act (including the transfer of the EXPERIAN
Interests hereunder) attributable to it or of which it has knowledge which, with
the giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default thereunder. It has not
violated any of the terms or conditions of any contract or agreement set forth
on Schedule 3.07(a) (or required to be set forth thereon) in any material
respect, and, to its knowledge, all of the covenants to be performed by any
other party thereto have been fully performed.
3.08. Consents and Approvals; No Violations. Assuming the making and/or
-------------------------------------
obtaining, to the reasonable satisfaction of the Parties, of such applications,
registrations, declarations, filings, authorizations, orders, consents and
approvals as are set forth in Schedule 3.08 hereto, the execution and delivery
of this Agreement and the Implementing Agreements by it and the consummation of
the transactions contemplated hereby and thereby (a) will not violate the
provisions of the Articles of Incorporation or By-Laws or similar organizational
documents of it, (b) will not violate any statute, rule, regulation, order or
decree of any public body or authority applicable to it or by which its
Interests may be bound, (c) will not require any filing with, or permit, consent
or approval of, or the giving of any notice to, any governmental or regulatory
body, agency or authority, and (d) will not result in a violation or breach by
it of, conflict with, constitute (with or without due notice or lapse of time or
both) a default by it under, or result in
13
<PAGE>
the creation of any Encumbrance upon any of the EXPERIAN Interests under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease, franchise agreement or any other
instrument or obligation to which it is a party, or by which the EXPERIAN
Interests may be bound, excluding from the foregoing clauses (c) and (d)
filings, notices, permits, consents and approvals the absence of which, and
violations, breaches, defaults, conflicts and liens which, individually, would
not have a Material Adverse Effect on the RES Business, taken as a whole.
3.09. Litigation. Except as set forth in Schedule 3.09 attached hereto,
----------
there is no action, suit or proceeding at law or in equity by any Person, or any
arbitration or any administrative or other proceeding by or before or, to its
knowledge, any investigation by, any governmental body, instrumentality or
agency, pending or to its knowledge threatened, against it which, if adversely
determined, would have a Material Adverse Effect on the RES Business, taken as a
whole. Except as set forth in Schedule 3.09 attached hereto, it is not subject
to any judgment, order or decree entered in any lawsuit or proceeding which may
have a Material Adverse Effect on the RES Business, taken as a whole. There are
no such suits, actions, claims, proceedings or investigations pending or, to its
knowledge, threatened, seeking to prevent or challenging the transactions
contemplated by this Agreement or the Implementing Agreements.
3.10. Taxes. (a) Tax Returns. It has timely filed or caused to be timely filed
----- -----------
with the appropriate taxing authorities all returns, statements, forms and
reports for Taxes ("Returns") that are required to be filed by, or with respect
to, the RES Business on or prior to the Closing Date. The Returns have
accurately reflected all liability for Taxes of the RES Business for the periods
covered thereby.
(b) Payment of Taxes. Except as set forth on Schedule 3.10, all Taxes and
----------------
Tax liability ities of EXPERIAN (to the extent attributable to the RES Business)
for all taxable years or periods that end on or before the Closing Date and,
with respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year or period ending on and including
the Closing Date ("Pre-Closing Period") have been timely paid or accrued and ade
quately disclosed and fully provided for on the books and records of EXPERIAN in
accordance with US GAAP.
(c) Other Tax Matters.
-----------------
(i) Except as set forth on Schedule 3.10, EXPERIAN has not been the
subject of an audit or other examination of Taxes by the tax authorities of
any nation, state or locality nor has EXPERIAN or the RES Business received
any notices from any taxing authority relating to any issue which could
affect the Tax liability of the RES Business.
(ii) Except as set forth on Schedule 3.10, as of the Closing Date,
EXPERIAN (A) has not entered into an agreement or waiver or been requested
to enter into an agreement or waiver extending any statute of limitations
relating to the payment or collection of Taxes of the RES Business or (B)
is not presently contesting the Tax liability of the RES Business before
any court, tribunal or agency.
14
<PAGE>
(iii) Except as set forth on Schedule 3.10, EXPERIAN has not been
included in any "consolidated," "unitary" or "combined" Return provided for
under the law of the United States, any foreign jurisdiction or any state
or locality with respect to Taxes for any taxable period for which the
statute of limitations has not expired.
(iv) All Taxes related to the RES Business which EXPERIAN or the RES
Business is (or was) required by law to withhold or collect have been duly
withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable.
(v) None of the RES Business consists of any United States real
property interests within the meaning of Section 897 of the Code and
EXPERIAN is not a United States real property holding company within the
meaning of Section 897(c)(2) of the Code.
(vi) There are no tax sharing, allocation, indemnification or similar
agreements in effect under which the RES Business could be liable for any
Taxes or other claims of any party.
(vii) EXPERIAN has not applied for, been granted, or agreed to any
accounting method change for which the RES Business will be required to
take into account any adjustment under Section 481 of the Code or any
similar provision of the Code or the corresponding tax laws of any nation,
state or locality.
(viii) The RES Business is not a party to any agreement that would
require it to make any payment that would constitute an "excess parachute
payment" for purposes of Sections 280G and 4999 of the Code.
3.11. Conduct of Business. Since the Balance Sheet Date, except as
-------------------
contemplated or expressly required or permitted by this Agreement or as set
forth on Schedule 3.11 attached hereto, (i) the RES Business has been conducted
only in the ordinary course; (ii) the RES Business has not incurred any material
liabilities (direct, contingent or otherwise) or engaged in any material
transaction or entered into any material agreement outside the ordinary course
of business; (iii) it has not increased the compensation of any officer or
granted any general salary or benefits increase to the employees of the RES
Business other than in the ordinary course of business; and (iv) it has not
taken any action which, if taken subsequent to the execution of this Agreement
and on or prior to the Closing Date, would constitute a breach of its agreements
set forth in Section 5.01.
3.12. Compliance with Laws; Permits.
-----------------------------
(a) Subject to the qualifications set forth on Schedule 3.12(a) attached
hereto, it is in compliance with all applicable laws, regulations, orders,
judgments and decrees relating to the RES Business except where the failure to
so comply would not have a Material Adverse Effect on the RES Business, taken as
a whole.
(b) EXPERIAN possesses all franchises, licenses, certificates of authority,
permits or other authorizations (each, a "License") necessary for the RES
Business, except where the failure
15
<PAGE>
to possess such a License would not have a Material Adverse Effect on the RES
Business, taken as a whole. All such Licenses are in full force and effect and
it has not received any written notice of any event, inquiry, investigation or
proceeding threatening the validity of such Licenses, except where the failure
of such Licenses to be in full force and effect or such event, inquiry,
investigation or proceeding would not have a Material Adverse Effect on its RES
Business, taken as a whole.
3.13. Intellectual Properties.
-----------------------
(a) The operation of the RES Business as currently conducted requires no
rights under patents, registered or unregistered trademarks or registered or
unregistered service marks other than rights under patents, trademarks and
service marks owned by EXPERIAN (or its predecessors-in-interest), and rights
granted for the benefit of the RES Business pursuant to license agreements that
are in full force and effect. Within the three-year period immediately
preceding the date of this Agreement, the RES Business made use of no rights
under any patents, trademarks or service marks other than those owned by
EXPERIAN (or its predecessors-in-interest), and rights granted for the benefit
of the RES Business under license agreements.
(b) Except as disclosed on Schedule 3.13(b) attached hereto, the operation
of the RES Business as currently conducted requires no rights under copyrights,
other than rights under copyrights owned by EXPERIAN, and rights granted for the
benefit of the RES Business pursuant to license agreements that are in full
force and effect. Within the three-year period immediately preceding the date
of this Agreement, the RES Business made no use of rights under any copyright,
other than those owned by EXPERIAN (or its predecessors-in-interest), and rights
granted for the benefit of the RES Business under license agreements.
(c) To the best of its knowledge, the operation, development and
maintenance of the RES Business as currently conducted requires no rights under
trade secrets or proprietary information (including but not limited to those in
computer software and databases and to those disclosed in patent applications)
other than rights under trade secrets and proprietary information owned by
EXPERIAN, and rights granted for the benefit of the RES Business pursuant to
license agreements that are in full force and effect. To the best of its
knowledge, within the three-year period immediately preceding the date of this
Agreement, the RES Business made use of no rights under any trade secret or
proprietary information other than those owned by EXPERIAN (or its predecessors-
in-interest), and rights granted for the benefit of the RES Business under
license agreements.
(d) Except as set forth on Schedule 3.13(d), no claim adverse to its or
the RES Business' interests in the Intellectual Property used in the RES
Business or its license agreements with respect thereto has been made in
litigation. To the best of its knowledge, no such claim has been threatened or
asserted, no reasonable basis exists for any such claim, and no Person has
infringed or otherwise violated its or the RES Business' right in any of such
Intellectual Property or its license agreements with respect thereto.
3.14. Labor Matters. No work stoppage involving the RES Business is pending
-------------
or, to its knowledge, threatened which reasonably could be expected to have a
Material Adverse Effect
16
<PAGE>
on the RES Business. It is not involved in, or threatened with or affected by,
any labor dispute, arbitration, law suit or administrative proceeding relating
to the RES Business which reasonably could be expected to have a Material
Adverse Effect on the RES Business. Except as set forth on Schedule 3.14
attached hereto, it is not a party to any collective labor agreement or similar
agreement.
3.15. Employee Benefit Plans. Each "employee benefit plan" (as defined in
----------------------
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained or contributed to by it and/or any organization which
together with it would be treated as a "single employer" within the meaning of
Section 414(b) or (c) of the Internal Revenue Code of 1986, as amended (the
"Code"), or to which it or any such organization has an obligation to contribute
(each, an "EXPERIAN Plan" and collectively, the "EXPERIAN Plans") is listed on
Schedule 3.15 attached hereto. Except as set forth in such Schedule 3.15, or to
the extent that any breach of the representations set forth in this sentence
would not have a Material Adverse Effect on the RES Business, taken as a whole:
(a) each EXPERIAN Plan is in compliance with applicable law and has been
administered and operated in accordance with its terms; (b) each EXPERIAN Plan
which is intended to be "qualified" (within the meaning of Section 401(a) of the
Code) has received a favorable determination letter from the Internal Revenue
Service and, to its knowledge, no event has occurred and no condition exists
which could reasonably be expected to result in the revocation of any such
determination letter; (c) no EXPERIAN Plan is covered by Title IV of ERISA or
subject to Section 412 of the Code or Section 302 of ERISA; (d) to its
knowledge, no "disqualified person" or "party in interest" (as defined in
Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has
engaged in any transaction in connection with an EXPERIAN Plan that could
reasonably be expected to result in the imposition of a penalty pursuant to
Section 502(i) of ERISA or a tax pursuant to Section 4975(a) of the Code; and
(e) no liability, claim, action or litigation, has been made, commenced or, to
its knowledge, threatened with respect to any EXPERIAN Plan (other than routine
claims for benefits payable submitted in the ordinary course and appeals of such
claims).
3.16. Environmental Laws and Regulations. Except as set forth on Schedule
----------------------------------
3.16:
(a) Hazardous Materials have not been (i) generated, used, treated
or stored on, or transported to or from, any RES Property by it, or (ii)
Released or disposed of on any RES Property by it, except in the case of clause
(i) or (ii) in compliance with Environmental Law and so as not to give rise to
an Environmental Claim;
(b) The RES Business is in compliance with all applicable
Environmental Laws and with the requirements of any permits issued under such
laws; and
(c) There are no past, pending or, to its knowledge, threatened
Environmental Claims against the RES Business and, to the best of its knowledge
after, there are no facts, circumstances, conditions or occurrences that could
reasonably be anticipated to form the basis of a claim under or a violation of,
or require the expenditure of funds for compliance with, any Environmental Law
that individually or in the aggregate could have a Material Adverse Effect on
the RES Business, taken as a whole.
17
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For purposes of this Agreement, the following terms shall have the
following meanings: (A) "RES Property" means any real property and improvements
owned, leased, or operated by EXPERIAN in connection with the RES Business; (B)
"Hazardous Materials" means (i) any petroleum or petroleum products, radioactive
materials or friable asbestos; (ii) any chemicals, materials or substances
defined as "hazardous substances," under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601
et seq. ("CERCLA"); (C) "Environmental Law" means any federal, state or local
- -- ----
statute, law, rule, regulation, ordinance or code in effect and in each case as
amended as of the Closing Date, relating to the environment or Hazardous
Materials, including without limitation CERCLA, the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. (S) 6901 et seq.; the Federal Water
-- ----
Pollution Control Act, as amended, 33 U.S.C. (S) 1251 et seq.; the Toxic
-- ----
Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C.
-- ----
(S) 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 3808 et seq.; and
-- ---- -- ----
(D) "Environmental Claims" means regulatory or judicial actions, suits, claims,
notices of noncompliance or violation, or proceedings arising under
Environmental Law (for purposes of this subclause (D), "Claims") including (i)
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial actions or damages pursuant to applicable
Environmental Law and (ii) Claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials or arising from injury the environment; and
(E) "Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like,
into or upon any land or water or air, or otherwise entering into the
environment.
3.17. Books and Records. Except as set forth on Schedule 3.17 attached
-----------------
hereto, the RES Business has no records, systems, controls, data or information
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control
of the RES Business.
3.18. Nature of Investment. EXPERIAN is acquiring its Membership Interest
--------------------
in NEWCO for its own account, for investment only and not with a view to, or
sale in connection with, a distribution thereof within the meaning of the
Securities Act.
3.19. Transactions with Affiliates. Schedule 3.19 attached hereto
----------------------------
identifies all contracts, commitments and agreements in effect as of the date
hereof by and between the RES Business on the one hand and EXPERIAN or any of
its Affiliates (other than the RES Business) on the other.
3.20. Broker's or Finder's Fees. No agent, broker, Person or firm acting on
-------------------------
behalf of it is, or will be, entitled to any commission or broker's or finder's
fees from any of the Parties hereto, or from any Affiliate of any of the Parties
hereto, in connection with any of the transac tions contemplated hereby.
18
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE FAFCO PARTIES
Each of FAFCO, FAREISI and each other FAFCO Member hereby represents and
warrants, jointly and severally, to EXPERIAN and to NEWCO (which shall be an
intended benefi ciary of such representations and warranties upon its
acknowledgement of this Agreement) as follows:
4.01. Authorization and Validity of Agreement.
---------------------------------------
(a) It has full corporate power and authority to execute and deliver this
Agreement and each of the Implementing Agreements to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by it of this Agreement and the Implementing Agreements to which it
is a party and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by its Board of Directors and,
if applicable, shareholder(s), and no other corporate or shareholder action is
necessary to authorize the execu tion, delivery and performance by it of this
Agreement and the Implementing Agreements to which it is a party it and the
consummation of the transactions contemplated hereby and thereby. This
Agreement and each of the Implementing Agreements to which it is a party have
been duly executed and delivered by it and, assuming the due execution of this
Agreement and of each of the Implementing Agreements by the other parties hereto
and thereto, are valid and binding obliga tions of it, enforceable against it
in accordance with their terms, except to the extent that their en forceability
may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors' rights generally and to
general equitable principles.
(b) Each document and instrument (including, but not limited to, the
Implementing Agreements) executed by it as contemplated by this Agreement, when
executed and delivered by it in accordance with the terms hereof shall have been
duly executed and delivered by it and, assuming due execution and delivery by
the other parties thereto, shall be valid and binding upon it and enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and to general equitable principles.
4.02. Existence and Good Standing. It is a corporation duly organized,
---------------------------
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
It is duly qualified or licensed to conduct its business, and is in good
standing in each jurisdiction in which the character or location of the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so duly
qualified or licensed would not have a Material Adverse Effect on the FAREISI
Business, taken as a whole.
19
<PAGE>
4.03. FAFCO Financial Statements.
--------------------------
(a) FAFCO has heretofore furnished EXPERIAN with its balance sheet as
at December 31, 1996 (such balance sheet being hereinafter referred to as the
"FAFCO Balance Sheet"), and related statements of operations, stockholders'
equity, and cash flows for the period then ended, together with all explanatory
notes thereto (such statements, together with the FAFCO Balance Sheet, the
"FAFCO Financial Statements"), audited by Price Waterhouse LLP. Such FAFCO
Financial Statements, including the footnotes thereto, except as indicated
therein, have been prepared in accordance with US GAAP, and fairly present in
all material respects the consolidated financial condition and consolidated
results of operations of FAFCO and the changes in the consolidated financial
position of FAFCO at such dates and for the period(s) covered thereby.
Additionally, FAFCO has heretofore furnished EXPERIAN with its pro-forma balance
sheet as at September 30, 1996 together with all explanatory notes thereto, for
the FAREISI Business showing the effects of the elimination of operations not
included in the FAFCO Interests being transferred to NEWCO (such balance sheet
being hereinafter referred to as the "FAREISI Pro-Forma Balance Sheet"). The
FAREISI Pro-Forma Balance Sheet, including the footnotes thereto, are based upon
currently available information and upon certain assumptions therein disclosed
that FAFCO believes in good faith to be reasonable under current circumstances.
(b) Except as set forth on Schedule 4.03 attached hereto, since the
Balance Sheet Date, the FAREISI Business has experienced no Material Adverse
Effect.
4.04. Title to Interests. The FAFCO Members possess good and marketable
------------------
title to all of the properties and assets (real and personal, tangible or
intangible) comprising the FAFCO Interests, free and clear of all Encumbrances,
except for Encumbrances which (i) are set forth on Schedule 4.04 attached
hereto, (ii) are for current taxes, assessments or governmental charges not yet
due, (iii) were incurred in the ordinary course of business and which do not in
the aggregate materially detract from the value of the FAFCO Interests or
materially impair the use thereof in the operation of the FAREISI Business or
(iv) are reflected on the FAREISI Pro-Forma Balance Sheet, as the case may be.
Encumbrances of the type described in clauses (i) through (iv) are sometimes
referred to as "FAREISI Permitted Encumbrances.
4.05. Leases. Except as otherwise set forth in Schedule 4.05 attached
------
hereto, each lease to which it is a party that is included in the FAREISI
Business is in full force and effect; all rents and additional rents due to date
from it on each such lease have been paid; in each case, it has not received
notice that it is in material default thereunder; and, to its knowledge, there
exists no material event, occurrence, condition or act (including the
transactions contemplated by this Agreement) which, with the giving of notice,
the lapse of time or the happening of any further event or condition, would
constitute a material default by it or any other party under such lease.
4.06. Real Property. Schedule 4.06 attached hereto contains a list of all
-------------
real property owned by it constituting part of the FAREISI Business and includes
the name of the record title holder thereof and a list of all indebtedness
secured by a lien, mortgage or deed of trust thereon. Each FAFCO Member has good
and marketable title in fee simple to all the real property specified as owned
by it in Schedule 4.06, free and clear of all Encumbrances, except for FAREISI
Permitted Encumbrances or as set forth on Schedule 4.06. All of the buildings,
structures and
20
<PAGE>
appurtenances situated on the real property listed on Schedule 4.06 are in good
operating condition and in a state of good maintenance and repair (normal wear
and tear excepted) and are adequate and suitable for the purposes for which they
are presently being used.
4.07. Material Contracts.
------------------
(a) Schedule 4.07(a) attached hereto sets forth a complete list of all
FAREISI Material Contracts related to the operation of the FAREISI Business.
(b) Except as set forth in Schedule 4.07(a) attached hereto, in
connection with the ownership or operation of the FAREISI Business, it neither
has nor is bound by (i) any agreement or contract relating to the employment of
any Person with total annual compensation in excess of $300,000, or any bonus,
deferred compensation, pension, profit sharing, stock option, employee stock
purchase, retirement or other employee benefit plan, (ii) any agreement,
indenture or other instrument which contains restrictions with respect to
payment of dividends or any other distribu tion, (iii) any agreement, contract
or commitment relating to capital expenditures in excess of $1,000,000, (iv) any
loan or advance to, or investment in, any Person or agreement, contract or
commitment relating to the making of any such loan, advance or investment, (v)
any guarantee or other contingent liability in respect of any indebtedness or
obligation of any Person (other than the endorsement of negotiable instruments
for collection in the ordinary course of business), (vi) any management service,
consulting or any other similar type contract which is not cancelable without
penalty within 30 days and involves estimated payments in excess of $50,000 in
any twelve-month period, (vii) any agreement, contract or commitment limiting
the ability of the FAREISI Business to engage in any line of business or to
compete with any Person, (viii) any agreement, contract or commitment not
entered into in the ordinary course of business which is not cancelable without
penalty within 30 days or (ix) any agreement, contract or commitment which is
reasonably expected to have a Material Adverse Effect on the FAREISI Business,
taken as a whole (each of the agreements, contracts or commitments in clauses
(i) to (ix) above, a "FAREISI Material Contract").
(c) Except as set forth on Schedule 4.07(c), each contract or agreement
set forth on Schedule 4.07(a) (or required to be set forth thereon) is in full
force and effect and there exists no default or event of default or event,
occurrence, condition or act (including the transfer of the FAFCO Interests
hereunder) attributable to it or of which it has knowledge which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default thereunder. It has not
violated any of the terms or conditions of any contract or agreement set forth
on Schedule 4.07(a) (or required to be set forth thereon) in any material
respect, and, to its knowledge, all of the covenants to be performed by any
other party thereto have been fully performed.
4.08. Consents and Approvals; No Violations. Assuming the making and/or
-------------------------------------
obtaining, to the reasonable satisfaction of the Parties, of such applications,
registrations, declarations, filings, authorizations, orders, consents and
approvals as are set forth in Schedule 4.08 hereto, the execution and delivery
of this Agreement and the Implementing Agreements by it and the consummation of
the transactions contemplated hereby and thereby (a) will not violate the
provisions of the Articles of Incorporation or By-Laws or similar organizational
documents of it,
21
<PAGE>
(b) will not violate any statute, rule, regulation, order or decree of any
public body or authority applicable to it or by which its Interests may be
bound, (c) will not require any filing with, or permit, consent or approval of,
or the giving of any notice to, any governmental or regulatory body, agency or
authority, and (d) will not result in a violation or breach by it of, conflict
with, constitute (with or without due notice or lapse of time or both) a default
by it under, or result in the creation of any Encumbrance upon any of the FAFCO
Interests under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, franchise, permit, agreement, lease, franchise
agreement or any other instrument or obligation to which it is a party, or by
which the FAFCO Interests may be bound, excluding from the foregoing clauses (c)
and (d) filings, notices, permits, consents and approvals the absence of which,
and violations, breaches, defaults, conflicts and liens which, individually,
would not have a Material Adverse Effect on the FAREISI Business, taken as a
whole.
4.09. Litigation. Except as set forth in Schedule 4.09 attached hereto,
----------
there is no action, suit or proceeding at law or in equity by any Person, or any
arbitration or any administrative or other proceeding by or before or, to its
knowledge, any investigation by, any governmental body, instrumentality or
agency, pending or to its knowledge threatened, against it which, if adversely
determined, would have a Material Adverse Effect on the FAREISI Business, taken
as a whole. Except as set forth in Schedule 4.09 attached hereto, it is not
subject to any judgment, order or decree entered in any lawsuit or proceeding
which may have a Material Adverse Effect on the FAREISI Business, taken as a
whole. There are no such suits, actions, claims, proceedings or in
vestigations pending or, to its knowledge, threatened, seeking to prevent or
challenging the transactions contemplated by this Agreement or the Implementing
Agreements.
4.10. Taxes. (a) Tax Returns. It has timely filed or caused to be timely filed
----- -----------
with the appropriate taxing authorities all Returns that are required to be
filed by, or with respect to, the FAREISI Business on or prior to the Closing
Date. The Returns have accurately reflected all lia bility for Taxes of the
FAREISI Business for the periods covered thereby.
(b) Payment of Taxes. All Taxes and Tax liabilities of FAFCO and the FAFCO
----------------
Members (to the extent attributable to the FAREISI Business) for all taxable
years or periods that end on or before the Closing Date and with respect to the
Pre-Closing Period have been timely paid or accrued and adequately disclosed and
fully provided for on the books and records of the FAREISI Business in
accordance with US GAAP.
(c) Other Tax Matters.
-----------------
(i) Except as set forth on Schedule 4.10, none of the FAFCO Members
has been the subject of an audit or other examination of Taxes by the tax
authorities of any nation, state or locality nor have the FAFCO Members or
the FAREISI Business received any notices from any taxing authority
relating to any issue which could affect the Tax liability of the FAREISI
Business.
(ii) Except as set forth on Schedule 4.10, none of the FAFCO Members
has, as of the Closing Date, (A) entered into an agreement or waiver or
been requested to enter
22
<PAGE>
into an agreement or waiver extending any statute of limitations relating
to the payment or collection of Taxes of the FAREISI Business or (B) is
presently contesting the Tax liability of the FAREISI Business before any
court, tribunal or agency.
(iii) Except as set forth on Schedule 4.10, none of the FAFCO Members
has been included in any "consolidated," "unitary" or "combined" Return
provided for under the law of the United States, any foreign jurisdiction
or any state or locality with respect to Taxes for any taxable period for
which the statute of limitations has not expired.
(iv) All Taxes which FAFCO, the FAFCO Members or the FAREISI Business
are (or were) required by law to withhold or collect have been duly
withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable.
(v) None of the FAREISI Business consists of any United States real
property interests within the meaning of Section 897 of the Code and none
of the FAFCO Members is a United States real property holding company
within the meaning of Section 897(c)(2) of the Code.
(vi) There are no tax sharing, allocation, indemnification or similar
agreements in effect under which the FAREISI Business could be liable for
any Taxes or other claims of any party.
(vii) None of the FAFCO Members has applied for, been granted, or
agreed to any accounting method change for which the FAREISI Business will
be required to take into account any adjustment under Section 481 of the
Code or any similar provision of the Code or the corresponding tax laws of
any nation, state or locality.
(viii) The FAREISI Business is not a party to any agreement that
would require it to make any payment that would constitute an "excess
parachute payment" for purposes of Sections 280G and 4999 of the Code.
4.11. Conduct of Business. Since the Balance Sheet Date, except as
-------------------
contemplated or expressly required or permitted by this Agreement or as set
forth on Schedule 4.11 attached hereto, (i) the FAREISI Business has been
conducted only in the ordinary course; (ii) the FAREISI Business has not
incurred any material liabilities (direct, contingent or otherwise) or engaged
in any material transaction or entered into any material agreement outside the
ordinary course of business; (iii) it has not increased the compensation of any
officer or granted any general salary or benefits increase to the employees of
the FAREISI Business other than in the ordinary course of business; and (iv) it
has not taken any action which, if taken subsequent to the execution of this
Agreement and on or prior to the Closing Date, would constitute a breach of its
agreements set forth in Section 5.01.
4.12. Compliance with Laws; Permits.
-----------------------------
(a) Subject to the qualifications set forth on Schedule 4.12(a), it is in
compliance with all applicable laws, regulations, orders, judgments and decrees
relating to the FAREISI Business
23
<PAGE>
except where the failure to so comply would not have a Material Adverse Effect
on the FAREISI Business, taken as a whole.
(b) The FAFCO Members possess all Licenses necessary for the FAREISI
Business, except where the failure to possess such a License would not have a
Material Adverse Effect on the FAREISI Business, taken as a whole. All such
Licenses are in full force and effect and it has not received any written notice
of any event, inquiry, investigation or proceeding threatening the validity of
such Licenses, except where the failure of such Licenses to be in full force and
effect or such event, inquiry, investigation or proceeding would not have a
Material Adverse Effect on the FAREISI Business, taken as a whole.
4.13. Intellectual Properties.
-----------------------
(a) The operation of the FAREISI Business as currently conducted requires
no rights under patents, registered or unregistered trademarks or registered or
unregistered service marks other than rights under patents, trademarks and
service marks owned by the FAFCO Members, and rights granted for the benefit of
the FAREISI Business pursuant to license agreements that are in full force and
effect. Within the three-year period immediately preceding the date of this
Agreement, the FAREISI Business made use of no rights under any patents,
trademarks or service marks other than those owned by the FAFCO Members, and
rights granted for the benefit of the FAREISI Business under license agreements.
(b) Except as disclosed on Schedule 4.13(b) attached hereto, the
operation of the FAREISI Business as currently conducted requires no rights
under copyrights other than rights under copyrights owned by the FAFCO Members,
and rights granted for the benefit of the FAREISI Business pursuant to license
agreements that are in full force and effect. Within the three-year period
immediately preceding the date of this Agreement, the FAREISI Business made no
use of rights under any copyright other than those owned by the FAFCO Members,
and rights granted for the benefit of the FAREISI Business under license
agreements.
(c) To the best of its knowledge, the operation, development and
maintenance of the FAREISI Business as currently conducted requires no rights
under trade secrets or proprietary information (including but not limited to
those in computer software and databases and to those disclosed in patent
applications) other than rights under trade secrets and proprietary information
owned by the FAFCO Members, and rights granted for the benefit of the FAREISI
Business pursuant to license agreements that are in full force and effect. To
the best of its knowledge, within the three-year period immediately preceding
the date of this Agreement, the FAREISI Business made use of no rights under any
trade secret or proprietary information other than those owned by the FAFCO
Members, and rights granted for the benefit of the FAREISI Business under
license agreements.
(d) Except as set forth on Schedule 4.13(d), no claim adverse to the
FAFCO Members' or the FAREISI Business' interests in the Intellectual Property
used in the FAREISI Business or the FAFCO Members' license agreements with
respect thereto has been made in litigation. To the best of its knowledge, no
such claim has been threatened or asserted, no reasonable basis exists for any
such claim, and no Person has infringed or otherwise violated the FAFCO Members'
or
24
<PAGE>
the FAREISI Business' rights in any of such Intellectual Property or the FAFCO
Members' license agreements with respect thereto.
4.14. Labor Matters. No work stoppage involving the FAREISI Business is
-------------
pending or, to its knowledge, threatened which reasonably could be expected to
have a Material Adverse Effect on the FAREISI Business. It is not involved in,
or threatened with or affected by, any labor dispute, arbitration, law suit or
administrative proceeding relating to the FAREISI Business which reasonably
could be expected to have a Material Adverse Effect on the FAREISI Business.
Except as set forth on Schedule 4.14 attached hereto, it is not a party to any
collective labor agreement or similar agreement.
4.15. Employee Benefit Plans. Each "employee benefit plan" (as defined in
----------------------
Section 3(3) of ERISA) maintained or contributed to by it and/or any
organization which together with it would be treated as a "single employer"
within the meaning of Section 414(b) or (c) of the Code or to which it or any
such organization has an obligation to contribute (each, a "FAFCO Plan" and
collectively, the "FAFCO Plans") is listed on Schedule 4.15 attached hereto.
Except as set forth in such Schedule 4.15, or to the extent that any breach of
the representations set forth in this sentence would not have a Material Adverse
Effect on the FAREISI Business, taken as a whole: (a) each FAFCO Plan is in
compliance with applicable law and has been administered and operated in
accordance with its terms; (b) each FAFCO Plan which is intended to be
"qualified" (within the meaning of Section 401(a) of the Code) has received a
favorable determination letter from the Internal Revenue Service and, to its
knowledge, no event has occurred and no condition exists which could reasonably
be expected to result in the revocation of any such determination letter; (c) no
FAFCO Plan is covered by Title IV of ERISA or subject to Section 412 of the Code
or Section 302 of ERISA; (d) to its knowledge, no "disqualified person" or
"party in interest" (as defined in Section 4975(e)(2) of the Code and Section
3(14) of ERISA, respectively) has engaged in any transaction in connection with
a FAFCO Plan that could reasonably be expected to result in the imposition of a
penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975(a)
of the Code; and (e) no liability, claim, action or litigation, has been made,
commenced or, to its knowledge, threatened with respect to any FAFCO Plan (other
than routine claims for benefits payable submitted in the ordinary course and
appeals of such claims).
4.16. Environmental Laws and Regulations. (a) Hazardous Materials have
----------------------------------
not been (i) generated, used, treated or stored on, or transported to or from,
any FAREISI Property by it, or (ii) Released or disposed of on any FAREISI
Property by it, except in the case of clause (i) or (ii) in compliance with
Environmental Law and so as not to give rise to an Environmental Claim.
(b) The FAREISI Business is in compliance with all applicable
Environmental Laws and with the requirements of any permits issued under such
laws.
(c) There are no past, pending or, to its knowledge, threatened
Environmental Claims against the FAREISI Business and, to the best of its
knowledge, there are no facts, circumstances, conditions or occurrences that
could reasonably be anticipated to form the basis of a claim under or a
violation of, or require the expenditure of funds for compliance with, any
Environmental Law that individually or in the aggregate could have a Material
Adverse Effect on the FAREISI Business, taken as a whole.
25
<PAGE>
For purposes of this Agreement, the term "FAREISI Property" means any
real property and improvements owned, leased, or operated by any of the FAFCO
MEMBERS in the FAREISI Business.
4.17. Books and Records. Except as set forth on Schedule 4.17 attached
-----------------
hereto, the FAREISI Business has no records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the FAREISI Business.
4.18. Nature of Investment. Each of the FAFCO Members represents for itself
--------------------
that it is acquiring its Membership Interest in NEWCO for its own account, for
investment only and not with a view to, or sale in connection with, a
distribution thereof within the meaning of the Securities Act.
4.19. Transactions with Affiliates. Schedule 4.19 attached hereto
----------------------------
identifies all contracts, commitments and agreements in effect as of the date
hereof relating to the FAREISI Business by and between any FAFCO Member on the
one hand and FAFCO or any of its Affiliates (other than the other FAFCO Members)
on the other.
4.20. Broker's or Finder's Fees. No agent, broker, Person or firm acting on
-------------------------
behalf of it is, or will be, entitled to any commission or broker's or finder's
fees from any of the Parties hereto, or from any Affiliate of any of the Parties
hereto, in connection with any of the transactions contemplated hereby.
ARTICLE V
COVENANTS
5.01. Ordinary Course. Each of FAFCO and EXPERIAN hereby covenants and
---------------
agrees that, except as set forth on Schedule 5.01 attached hereto or as
otherwise permitted, required or specifically contemplated by this Agreement and
the Interim Operating Agreement or as otherwise consented to or approved by each
of the other Parties, during the period commencing on the date hereof and ending
on the Effective Date, it will operate or cause to be operated its Business
substantially as presently operated and only in the ordinary course (which shall
include the ordinary course payment of accounts payable and billing and
collection of accounts receivable consistent with the current operations of its
Business), and consistent with such operation, will use its reasonable best
efforts to maintain present business organizations and relationships with
persons having business dealings with its Business and to retain the services of
its key operating employees engaged in operating its Business (it being
understood and agreed that operation of the Businesses during the period
commencing on the date hereof and ending on the Effective Date in accordance
with the terms of the Interim Operating Agreement shall be in compliance with
the terms of this Section 5.01). Each of FAFCO and EXPERIAN hereby further
covenants and agrees that from the date hereof to the Effective Date, in
connection with the operation of its Business, except as
26
<PAGE>
provided in the immediately preceding sentence, it will not, and it will not
permit any of its Subsidiaries to, without the consent of each of the other
Parties (which consent shall not unreasonably be withheld), (a) enter into any
material transactions, other than those in the ordinary course of its Business
as theretofore conducted and those set forth on Schedule 5.01 attached hereto,
(b) create or otherwise become liable with respect to money borrowed or purchase
money indebted ness, or voluntarily incur any other material liability or
obligation (direct or contingent), except liabilities in the ordinary course of
the operation of its Business, (c) increase the rate of compensation payable or
to become payable to any employee employed in its Business, who would receive,
after giving effect to such increase, aggregate compensation at an annual rate
exceeding $300,000, or make any material increase in any bonus, insurance,
profit sharing or other employee benefit plan, grant any general wage or salary
increase, except as required by amendments to plans applicable to its employees
generally and which are applicable to employees of its Business only as a
consequence thereof, (d) make any capital expenditures in excess of $500,000
individually or $1,000,000 in the aggregate, (e) terminate or waive any right of
substantial value to its Business, (f) make any material change in accounting
methods except as required by law or applicable generally accepted accounting
principles, (g) settle, compromise or admit liability in any material action,
suit or proceeding at law or equity or any material arbitration or any material
administrative or other proceeding before any administrative or governmental
body in respect of its Business or (h) agree to do any of the foregoing, whether
or not in writing.
5.02. NEWCO Business Opportunities. Each of the Parties expressly
----------------------------
acknowledges that, as a result of the development of the RES Business and the
FAREISI Business, respectively, certain business opportunities may arise after
the execution of this Agreement but prior to the Effective Date that would be
within the scope of NEWCO's business (as described in the Operating Agreement).
If any business opportunity which, if the Operating Agreement were in
effect, would constitute a NEWCO Development Opportunity, arises prior to the
Effective Date, the Party to whom such business opportunity is presented
promptly shall notify the other Parties in writing of such business opportunity
and shall confer with the other Parties regarding whether or not such business
opportunity should be contributed to NEWCO on the Effective Date. If, however,
a business opportunity arises prior to the Effective Date which would not
constitute a NEWCO Development Opportunity, the Party to whom such business
opportunity is presented may, at its option, notify the other Parties in writing
of such business opportunity and, if such notice is delivered, shall confer with
the other Parties regarding whether or not such business opportunity should be
contributed to NEWCO on the Effective Date.
In either event, if the Parties agree that such business opportunity should
be contributed to NEWCO, then such business opportunity shall be contributed to
NEWCO on the Effective Date and the Parties shall adjust the principal amount of
the promissory notes to be payable by NEWCO to FAFCO or EXPERIAN, as the case
may be, as follows: (i) if such business opportunity is contributed to NEWCO on
the Effective Date by FAFCO or any FAFCO Member, then the principal amount of
the $25MM Note shall be increased by an amount equal to the fair market value of
any capital contributions and development costs made or incurred by FAFCO or any
of its Affiliates with respect to such opportunity prior to the Effective Date
and (ii) if such business opportunity is contributed to NEWCO on the Effective
Date by EXPERIAN, then the principal
27
<PAGE>
amount of the $3MM Note shall be increased by an amount equal to the fair market
value of capital contributions and other development costs made or incurred by
EXPERIAN or any of its Affiliates with respect to such opportunity prior to the
Effective Date. If the Parties cannot agree within 20 days after the delivery
of such notice on whether or not the business opportunity should be contributed,
then, notwithstanding anything to the contrary contained in any Implementing
Agreement, the Party possessing such business opportunity shall be free to
pursue such business opportunity in such manner as such Party determines and
neither NEWCO nor the other Parties shall have any right, claim or interest in
or to any revenues resulting therefrom.
5.03. Best Efforts. Except to the extent specifically provided in Section
------------
5.04, each Party shall, and shall cause its respective Subsidiaries and
Affiliates to, cooperate and use its respective reasonable best efforts to take,
or cause to be taken, all appropriate action and to make, or cause to be made,
all filings necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, its respective reasonable best efforts
to obtain, prior to the Closing, all Licenses, consents, approvals,
authorizations, qualifications and orders of governmental authorities and,
subject to the last sentence of Section 5.04(a), parties to contracts with or
affecting, in the case of EXPERIAN, the RES Business, and in the case of FAFCO,
FAREISI and the other FAFCO Members, the FAREISI Business, as are necessary for
consummation of the transactions contemplated by this Agreement and to fulfill
the conditions to the Closing; provided, that, except as otherwise specifically
--------
required by this Agreement, no loan agreement or contract for borrowed money
shall be repaid except as currently required by its terms, in whole or in part,
and no contract shall be amended to increase the amount payable thereunder or
otherwise to be more burdensome to the RES Business or the FAREISI Business in
order to obtain any such consent, approval or authorization without first
obtaining the written approval of the other Parties and no Party shall be
required to make any cash payment, provide any guaranty or relinquish any
property or contractual rights to obtain any such consent, approval or
authorization except for filing fees and fees and expenses of attorneys,
accountants and other professional advisors and payments in accordance with the
terms of contracts in existence as of the date hereof.
5.04. Consents and Further Assurances.
-------------------------------
(a) Subject to the proviso to Section 5.03, the Parties agree that they
will use their best efforts to obtain the written consent of any other necessary
party to the assignment of any contract, lease, commitment, sales order,
purchase order or undertaking constituting a part of any Interest to be
transferred hereunder and, to the extent that any such contract, lease,
commitment, sales order, purchase order or undertaking requiring such consent is
transferred or assigned pursuant to the terms of this Agreement without such
consent, the Parties will cooperate with each other and with NEWCO in any lawful
arrangement designed to provide each Party and NEWCO the benefits under any such
Interest. Notwithstanding Section 5.03 and any other provision of this Section
5.04(a) to the contrary, (i) none of FAFCO, FAREISI or any other FAFCO Member
shall be required to seek the consent to the transfer of the FAFCO Interests of
any party to a contract with FAFCO, FAREISI or any other FAFCO Member pursuant
to which a consent is required, provided that, in lieu of seeking and obtaining
any such required consent, FAFCO agrees to indemnify and hold NEWCO harmless
from all Losses suffered or paid, directly or indirectly, through application of
NEWCO's assets or otherwise, as a result of or arising out of the failure
28
<PAGE>
of FAFCO, FAREISI or any other FAFCO Member to seek or obtain any such required
consent and (ii) FAFCO may request that EXPERIAN not seek the consent to the
transfer of the EXPERIAN Interests of any party to a contract with EXPERIAN
pursuant to which a consent is required, and, so long as FAFCO agrees to
indemnify and hold EXPERIAN harmless from all Losses suffered or paid, directly
or indirectly, through application of EXPERIAN's assets or otherwise, as a
result of or arising out of the failure of EXPERIAN to seek or obtain any such
required consent in accordance with the FAFCO request, EXPERIAN will not seek
the consent of such party to the transfer of the EXPERIAN Interests unless it
determines, in its sole and absolute discretion, that obtaining such consent is
in the best interests of its businesses other than the RES Business.
(b) Subject to the proviso to Section 5.03, on or after the Closing Date
and without further consideration, each Party shall, from time to time, execute
and deliver such further instruments of conveyance, assignment and transfer and
shall take, or cause to be taken, such other action as NEWCO or any other Party
may reasonably request for the more effective conveyance, assignment and
transfer to NEWCO of any of the Interests, and each Party shall lend its
assistance to NEWCO or any other Party in the collection and reduction to
possession of the Interests, in the exercise of rights with respect thereto and
otherwise in the effectuation of the intentions and purposes of this Agreement.
5.05. Notices of Certain Events. Each Party hereto shall promptly notify
-------------------------
the other Parties of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement or the Implementing Agreements;
(b) any notice or other communication from any governmental entity
in connection with the transactions contemplated by this Agreement or the
Implementing Agreements;
(c) any actions, suits, claims (or to its knowledge, investigations)
or proceedings commenced or, to its knowledge threatened against, relating
to or involving or otherwise affecting the consummation of the transactions
contemplated by this Agreement or the Implementing Agreements; and
(d) such Party's obtaining knowledge of the occurrence, or failure
to occur, of any event which occurrence or failure to occur will be likely
to cause (i) any representation or warranty contained in this Agreement
(including, without limitation, the representations contained in Sections
3.03(b) and 4.03(b)), or in the Implementing Agreements to be untrue and
inaccurate in any material respect, or (ii) any material failure of any
Party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or the Implementing
Agreements; provided, that no such notification shall affect the
--------
representations, warranties or obligations of the Parties or the conditions
to the obligations of the Parties hereunder or thereunder.
29
<PAGE>
5.06. Access to Information Concerning Business and Records. During the
-----------------------------------------------------
period commencing on the date hereof and ending on the Closing Date, each Party
shall, upon reasonable notice, afford to the other and the other's counsel,
accountants and other authorized representatives, full access during normal
business hours to the employees, properties, books and records of itself and its
Subsidiaries relating to the RES Business or the FAREISI Business, respectively,
in order that they may have the opportunity to make such reasonable
investigations as they shall desire of the affairs of each such business. Each
Party agrees to cause its officers and employees to furnish such additional
financial and operating data and other information and respond to such inquiries
concerning the RES Business or the FAREISI Business, respectively, as any other
Party shall from time to time reasonably request. Any such investigation or
review, however, shall not affect the representations and warranties made by the
Parties in this Agreement or any Implementing Agreement or any remedy for breach
of any such representations and warranties.
5.07. Exclusive Dealing. Until the Effective Date, neither FAFCO nor
-----------------
EXPERIAN shall, directly or indirectly, take (and neither FAFCO nor EXPERIAN
shall authorize or permit its or its Subsidiaries' officers, directors,
employees, representatives, investment bankers, attorneys, accountants or other
agents, to so take) any action to encourage, solicit, initiate or, subject to
the fiduciary duties of its respective Board of Directors under applicable law
as advised by counsel, participate in any way in discussions or negotiations
with, or furnish any information to, any Person (other than the Parties hereto
or their respective officers, directors, representatives, agents, affiliates or
associates) in connection with any possible or proposed (a) merger or other
business combination, sale or other disposition of assets constituting the RES
Business or the FAREISI Business, as the case may be, (b) sale of shares of
capital stock if, as a result of such sale of shares of capital stock, an
EXPERIAN Change of Control or a FAFCO Change of Control would occur or (c)
similar transactions involving (i) in the case of EXPERIAN, the EXPERIAN
Interests or the RES Business and (ii) in the case of FAFCO, FAREISI or the
other FAFCO Members, the FAFCO Interests or the FAREISI Business; provided, that
--------
nothing contained in this Section 5.07 shall restrict or prohibit any disclosure
by any Party that is required on the advice of counsel in any document to be
filed with the Commission after the date of this Agreement or any disclosure
that, in the opinion of the Chief Executive Officer of such Party on advice of
counsel, is otherwise required under applicable law. Each of FAFCO and EXPERIAN
will promptly communicate to the other Parties the terms of any proposal or
inquiry that it may receive in respect of any such transaction, or of any such
information requested from it or of any such negotiations or discussions being
sought to be initiated with it.
5.08. FAFCO Board Representation. So long as EXPERIAN shall own at least a
--------------------------
10% Membership Interest in NEWCO, FAFCO will recommend one nominee of EXPERIAN
to the FAFCO Board of Directors nominating committee as a candidate for election
to the Board of Directors of FAFCO.
5.09. Guarantees. If, in accordance with Section 4.03(l) of the Operating
----------
Agreement, NEWCO requests that FAFCO and EXPERIAN provide a guaranty to a third
party in order to secure NEWCO's obligations to such third party, FAFCO and
EXPERIAN shall provide such guaranty on a several basis, with FAFCO guaranteeing
that portion of NEWCO's obligations equal
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<PAGE>
to the sum of the Membership Interests held by the FAFCO Members, and EXPERIAN
guaranteeing that portion of NEWCO's obligations equal to its Membership
Interest.
5.10. Certain Fees. NEWCO, by its execution of the acknowledgment on the
------------
signature page hereto, agrees to pay the following fees:
(a) so long as any FAFCO Member is a Member of NEWCO, a fee to FAFCO
in respect of management services provided by FAFCO from time to time by NEWCO
in an amount equal to 0.80% of NEWCO's gross revenues, as determined in
accordance with US GAAP, which fee shall be paid in arrears for each calendar
quarter within 30 days of the conclusion of the previous quarter; and
(b) so long as EXPERIAN is a Member of NEWCO, a fee to EXPERIAN in
respect of management services provided by EXPERIAN from time to time by NEWCO
in an amount equal to 0.20% of NEWCO's gross revenues, as determined in
accordance with US GAAP, less the amount of any royalty payments payable by
----
NEWCO pursuant to Section 3 of the Trademark License Agreement, which fee, if
any, shall be paid in arrears for each calendar quarter within 30 days of the
conclusion of the previous quarter.
5.11. Certain Covenants. (a) FAREISI Subsidiary 8 hereby covenants and
-----------------
agrees that, upon the request of EXPERIAN at any time prior to the Effective
Date, it shall transfer and convey to NEWCO on the Effective Date or promptly
thereafter, all of the real property (or any portion thereof so requested) owned
by it and listed under its name on Part 1(I) of Schedule 2.02(a) attached
hereto, free and clear of all Encumbrances, except for FAREISI Permitted
Encumbrances and, in connection therewith, it shall deliver to NEWCO such deeds
in recordable form, endorsements, assurances, conveyances, releases, discharges,
assignments, certificates or other instruments of transfer and conveyance, duly
executed by FAREISI Subsidiary 8 or such other Person, as the case may be, as
NEWCO and/or EXPERIAN reasonably deems necessary to vest in NEWCO all right,
title and interest in and to such real property, free and clear of any
Encumbrance of any kind, except FAREISI Permitted Encumbrances.
(b) FAREISI Subsidiary 7 hereby covenants and agrees that, upon the
request of EXPERIAN at any time prior to the Effective Date, it shall transfer
and convey to NEWCO on the Effective Date or promptly thereafter, all of the
assets (or any portion thereof so requested) owned by it and listed under its
name on Part 1(H) of Schedule 2.02(a) attached hereto, free and clear of all
Encumbrances, except for FAREISI Permitted Encumbrances and, in connection
therewith, it shall deliver to NEWCO such endorsements, assurances, conveyances,
releases, discharges, assignments, certificates or other instruments of transfer
and conveyance, duly executed by FAREISI Subsidiary 7 or such other Person, as
the case may be, as NEWCO and/or EXPERIAN reasonably deems necessary to vest in
NEWCO all right, title and interest in and to such assets, free and clear of any
Encumbrance of any kind, except FAREISI Permitted Encumbrances.
31
<PAGE>
ARTICLE VI
EXPERIAN PUT OPTION; FAFCO CALL OPTION
6.01. EXPERIAN Put Option.
-------------------
(a) EXPERIAN shall have the right, at any one time (and only once)
following the Trigger Date, so long as FAFCO has not exercised the Call Option
pursuant to Section 6.02 and so long as the value of the Membership Interest
then owned by EXPERIAN is greater than $80,000,000 and less than $160,000,000
(such value determined, as at such date, in accordance with the formula set
forth in the last sentence of Section 6.01(b) below), to sell to FAFCO (the "Put
Option") 100% of the Membership Interest then owned by EXPERIAN by delivering to
FAFCO a written notice specifying its election to exercise the Put Option
hereunder (the "Put Election Notice"). At any time thereafter as FAFCO shall
elect, FAFCO shall deliver to EXPERIAN a written notice specifying (i) the date,
not later than 30 days after the date of such notice to EXPERIAN, on which the
Put Option shall be exercised (the "Put Exercise Date"), (ii) the aggregate Put
Price determined in accordance with Section 6.01(b) below, and (iii) FAFCO's
election, in its sole and unfettered discretion, to pay the Put Price (w) in
cash, (x) by delivering to EXPERIAN its unsecured promissory note in an
aggregate principal amount equal to the Put Price, which promissory note shall
have a three year maturity, shall bear interest at the Prime Rate, shall be
payable in equal quarterly installments of principal, together with accrued
interest thereon, shall be subject to acceleration upon default and shall
otherwise be in a form reasonably acceptable to EXPERIAN, (y) by delivering to
EXPERIAN unrestricted registered shares of FAFCO common stock then listed on a
Major Exchange and having a value (determined by reference to the closing price
of the FAFCO common stock on the New York Stock Exchange (or, if not listed
thereon, on such other securities exchange or quotation system upon which such
common stock is listed or quoted) for the Business Day immediately preceding the
Put Exercise Date) on the Put Exercise Date equal to the Put Price, provided
--------
that if the Put Exercise Date occurs at any time within the 120-day period
following the date of the Put Election Notice, then FAFCO may deliver to
EXPERIAN unregistered shares of FAFCO common stock having a value as aforesaid
together with an undertaking (1) to cause the registration of such FAFCO common
stock under the Securities Act and the listing of such stock on a Major Exchange
within the 90-day period following the Put Exercise Date and (2) to deliver to
EXPERIAN on the date the registration and listing of such FAFCO common stock is
effective (the "Registration Date"), in the event that the Put Price exceeds the
value of such registered FAFCO common stock (determined by reference to the
closing price of the FAFCO common stock on the New York Stock Exchange (or, if
not listed thereon, on such other securities exchange or quotation system upon
which such common stock is listed or quoted) for the Business Day immediately
preceding the Registration Date) on the Registration Date, its unsecured
promissory note in a principal amount equal to such excess, which promissory
note shall have the same terms as set forth in clause (x) above and shall
otherwise be in a form reasonably acceptable to EXPERIAN, or (z) any combination
of cash and FAFCO common stock in accordance with the foregoing; provided, that
--------
in no event shall FAFCO specify a Put Exercise Date occurring later than two
years after the date of delivery of the Put Election Notice; provided, further,
-------- -------
that in the event that FAFCO fails to deliver such written notice, the Put
Exercise Date shall occur on the date (the "End Date") which is two years after
the date of delivery of the Put Election Notice (it being understood and agreed
32
<PAGE>
that EXPERIAN may, not earlier than 30 days prior to the End Date, request that
FAFCO specify in writing the consideration that FAFCO will use to pay the Put
Price and, unless FAFCO notifies EXPERIAN of its election within 10 days after
its receipt of EXPERIAN's request, FAFCO shall be deemed to have elected to pay
the Put Price in cash).
(b) On the Put Exercise Date, (i) EXPERIAN shall deliver to FAFCO the
certificates, if any, properly endorsed, representing 100% of the Membership
Interest of EXPERIAN, together with such other duly executed instruments of
transfer reasonably requested by FAFCO to give effect to the purchase and sale
of EXPERIAN's Membership Interest pursuant to this Section 6.01, (ii) FAFCO
shall deliver to EXPERIAN, in immediately available funds or as otherwise
permitted in paragraph (a) above, the applicable Put Price, (iii) EXPERIAN shall
be released from, or otherwise indemnified to its reasonable satisfaction
against, any liabilities in respect of guarantees provided by EXPERIAN in
accordance with Section 5.09 and (iv) any and all indebtedness of NEWCO to
EXPERIAN shall be paid to NEWCO in immediately available funds. For purposes of
this Section 6.01(b), the "Put Price" shall be an amount equal to (A)(1) the
Percentage Interest of EXPERIAN subject to the Put Option multiplied by (2) the
---------- --
product of (I) the average annualized Adjusted Earnings for the eight fiscal
quarters immediately preceding the Notice Date for which financial information
has been reported multiplied by (II) 12.5; plus (B) any distributions on the
---------- -- ----
Membership Interest of EXPERIAN which have been declared or have accrued but
have not been paid as of the Put Exercise Date; provided that, in the event that
--------
the Put Price as determined in accordance with the foregoing formula is less
than $80,000,000, is understood and agreed that the Put Price shall be
$80,000,000.
6.02. FAFCO Call Option.
-----------------
(a) FAFCO shall have the right, at any one time (and only once) following
the Trigger Date, so long as EXPERIAN has not exercised the Put Option pursuant
to Section 6.01, to purchase from EXPERIAN (the "Call Option") 100% of the
Membership Interest then owned by EXPERIAN by delivering to EXPERIAN a written
notice specifying its election to exercise the Call Option hereunder (the "Call
Election Notice"). At any time thereafter as EXPERIAN shall elect, EXPERIAN
shall deliver to FAFCO a written notice specifying (i) the date, not later than
30 days after the date of such notice to FAFCO, on which the Call Option shall
be exercised (the "Call Exercise Date") and (ii) the Call Price; provided, that
--------
in no event shall EXPERIAN specify a Call Exercise Date occurring later than two
years after the date of delivery of the Call Election Notice; provided, further,
-------- -------
that in the event that EXPERIAN fails to deliver such written notice, the Call
Exercise Date shall occur on the date which is two years after the date of
delivery of the Call Election Notice.
(b) On the Call Exercise Date (i) EXPERIAN shall deliver to FAFCO the
certificates, if any, properly endorsed, representing 100% of the Membership
Interest of EXPERIAN, together with such other duly executed instruments of
transfer reasonably requested by FAFCO to give effect to the purchase and sale
of EXPERIAN's Membership Interest pursuant to this Section 6.02, (ii) FAFCO
shall deliver to EXPERIAN, in immediately available funds, the applicable Call
Price in cash, (iii) EXPERIAN shall be released from, or otherwise indemnified
to its reasonable satisfaction against, any liabilities in respect of guarantees
provided by EXPERIAN in accordance with Section 5.09 and (iv) any and all
indebtedness of NEWCO to EXPERIAN shall be paid to
33
<PAGE>
NEWCO in immediately available funds. For purposes of this Section 6.02(b) the
"Call Price" shall be an amount equal to (A) (1) the Percentage Interest of
EXPERIAN subject to the Call Option multiplied by (2) the product of (I) the
---------- --
average annualized Adjusted Earnings for the eight fiscal quarters immediately
preceding the Notice Date multiplied by (II) 12.5; plus (B) any distributions on
---------- -- ----
the Membership Interest of EXPERIAN which have been declared or have accrued but
have not been paid as of the Call Exercise Date; provided that, in the event
--------
that the Call Price as determined in accordance with the foregoing formula is
less than $80,000,000, is understood and agreed that the Call Price shall be
$80,000,000.
(c) Notwithstanding anything to the contrary contained in this Section
6.02, in the event that the Experian Managers (as such term is defined in the
Operating Agreement) fail to consent to any proposed acquisition described in
clause (a) of such Section 4.03 of the Operating Agreement, FAFCO shall have the
right, for the 90-day period immediately following the date upon which such
consent was withheld, to exercise the Call Option with respect to all (but not
less than all) of the Membership Interest then owned by EXPERIAN in accordance
with the provisions of Section 6.02(a) and (b) above, without regard to the two-
year period provided for therein; provided that if such Call Option is exercised
--------
at any time prior to the completion of eight fiscal quarters by NEWCO, the
applicable Call Price shall be determined utilizing the average annualized
Adjusted Earnings for that number of fiscal quarters completed prior to the
Notice Date; provided, further, that the applicable Call Price shall be paid in
-------- -------
cash in immediately available funds.
6.03. FAFCO Change of Control Put Option. Promptly (and in any event within
----------------------------------
five (5) days) following the occurrence of a FAFCO Change of Control, FAFCO
shall give written notice thereof (a "FAFCO Change of Control Notice") to
EXPERIAN and NEWCO. From the occurrence of any such FAFCO Change of Control
through the thirty (30) day period following EXPERIAN's receipt of a FAFCO
Change of Control Notice, EXPERIAN shall have the right to sell to FAFCO 100% of
the Membership Interest then owned by EXPERIAN by delivering to FAFCO and NEWCO
written notice thereof specifying (i) EXPERIAN's election to sell to FAFCO 100%
of its Membership Interest pursuant to this Section 6.03 and (ii) the cash price
at which such Membership Interest is to be purchased (which price shall be
determined, as of the close of business on the business day immediately
preceding the date on which such FAFCO Change of Control occurred, in accordance
with the formula set forth in the last sentence of Section 6.01(b) above and
without regard to the proviso thereto). In the event EXPERIAN elects to sell
its Membership Interest pursuant to this Section 6.03, EXPERIAN shall deliver
the certificates, if any, representing such Membership Interest, in proper form
for transfer (together with such other duly executed instruments of transfer
reasonably requested by FAFCO to give effect to the purchase and sale of
EXPERIAN's Membership Interest pursuant to this Section 6.03), to FAFCO against
receipt of the purchase price therefor in immediately available funds no later
than five (5) days after such election is made.
6.04. EXPERIAN Change of Control Call Option. Promptly (and in any event
--------------------------------------
within five (5) days) following the occurrence of an EXPERIAN Change of Control,
EXPERIAN shall give written notice thereof (an "EXPERIAN Change of Control
Notice") to FAFCO and NEWCO. From the occurrence of any such EXPERIAN Change of
Control through the thirty (30) day period following FAFCO's receipt of an
EXPERIAN Change of Control Notice, FAFCO
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<PAGE>
shall have the right to purchase from EXPERIAN 100% of the Membership Interest
then owned by EXPERIAN by delivering to EXPERIAN and NEWCO written notice
thereof specifying (i) FAFCO's election to purchase from EXPERIAN 100% of its
Membership Interest pursuant to this Section 6.04 and (ii) the cash price at
which such Membership Interest is to be purchased (which price shall be
determined, as of the close of business on the business day immediately
preceding the date on which such EXPERIAN Change of Control occurred, in
accordance with the formula set forth in the last sentence of Section 6.02(b)
above and without regard to the proviso thereto). In the event FAFCO elects to
purchase from EXPERIAN its Membership Interest pursuant to this Section 6.04,
EXPERIAN shall deliver the certificates, if any, representing such Membership
Interest, in proper form for transfer (together with such other duly executed
instruments of transfer reasonably requested by FAFCO to give effect to the
purchase and sale of EXPERIAN's Membership Interest pursuant to this Section
6.03), to FAFCO against receipt of the purchase price therefor in immediately
available funds no later than five (5) days after such election is made.
6.05. Extraordinary Put Options.
-------------------------
(a) Notwithstanding anything to the contrary contained in this Article
VI, in the event that on the third anniversary of the Closing Date the value of
the Membership Interest then owned by EXPERIAN (such value determined, as at
such date, in accordance with the formula set forth in the last sentence of
Section 6.01(b) above) is less than $80,000,000 solely as a result of damages,
costs, payments, losses, interest, fines and penalties suffered or paid by NEWCO
as a result of or arising out of the matters set forth in Items 2, 3 and 4 on
Schedule 4.09 hereto, EXPERIAN shall have the right, at any one time during the
forty-five (45) day period thereafter, so long as FAFCO has not exercised the
Call Option pursuant to Section 6.04, to sell to FAFCO 100% of the Membership
Interest then owned by EXPERIAN by delivering to FAFCO a written notice
specifying (i) EXPERIAN's election to sell to FAFCO 100% of its Membership
Interest pursuant to this Section 6.05(a) and (ii) the date, not earlier than 45
days and not later than 60 days after the date of such notice, on which the sale
hereunder shall be exercised. Upon the date specified by EXPERIAN in accordance
with clause (ii) of the preceding sentence, (w) FAFCO shall deliver to EXPERIAN
the cash purchase price in the amount of $80,000,000 in immediately available
funds, (x) EXPERIAN shall deliver to FAFCO the certificates, if any,
representing 100% of the Membership Interest then owned by EXPERIAN, in proper
form for transfer, together with such other duly executed instruments of
transfer reasonably requested by FAFCO to give effect to the purchase and sale
of EXPERIAN's Membership Interest pursuant to this Section 6.05(a), (y) EXPERIAN
shall be released from, or otherwise indemnified to its reasonable satisfaction
against, any liabilities in respect of guarantees provided by EXPERIAN in
accordance with Section 5.09 and (z) any and all indebtedness of NEWCO to
EXPERIAN shall be paid to NEWCO in immediately available funds.
(b) Notwithstanding anything to the contrary contained in this Article
VI, in the event that at any time on of after the Trigger Date the value of the
Membership Interest then owned by EXPERIAN (such value determined, as at such
date, in accordance with the formula set forth in the last sentence of Section
6.01(b) above) is less than $80,000,000 solely as a result of damages, costs,
payments, losses, interest, fines and penalties suffered or paid by NEWCO as a
result of or arising out of the matters (or any of them) set forth in Items 2, 3
and 4 on Schedule 4.09
35
<PAGE>
hereto, EXPERIAN shall have the right, at any one time (and only once), so long
as FAFCO has not exercised the Call Option pursuant to Section 6.02 or 6.04, to
sell to FAFCO 100% of the Membership Interest then owned by EXPERIAN by
delivering to FAFCO a written notice specifying (i) EXPERIAN's election to sell
to FAFCO 100% of its Membership Interest pursuant to this Section 6.05(b) and
(ii) the date, not earlier than 45 days and not later than 60 days after the
date of such notice, on which the sale hereunder shall be exercised. Upon the
date specified by EXPERIAN in accordance with clause (ii) of the preceding
sentence, (w) FAFCO shall deliver to EXPERIAN the cash purchase price in the
amount of $80,000,000 in immediately available funds, (x) EXPERIAN shall deliver
to FAFCO the certificates, if any, representing 100% of the Membership Interest
then owned by EXPERIAN, in proper form for transfer, together with such other
duly executed instruments of transfer reasonably requested by FAFCO to give
effect to the purchase and sale of EXPERIAN's Membership Interest pursuant to
this Section 6.05(b), (y) EXPERIAN shall be released from, or otherwise
indemnified to its reasonable satisfaction against, any liabilities in respect
of guarantees provided by EXPERIAN in accordance with Section 5.09 and (z) any
and all indebtedness of NEWCO to EXPERIAN shall be paid to NEWCO in immediately
available funds.
6.06. Put/Call Adjustment Upon a Major Acquisition. In the event that NEWCO
--------------------------------------------
consummates any acquisition of any business of another Person, or of any
property, securities, rights or other assets in one or a series of related
transactions for consideration (including, without limitation, the reasonably
estimated present value of deferred purchase compensation) exceeding, in the
aggregate, US $50,000,000, each of the Parties hereto agrees to negotiate in
good faith to amend, modify or supplement the provisions of this Article VI
(which may include adjusting the Put Price, the Call Price, the Trigger Date,
the Put Option ceiling set forth in Section 6.01(c) and the Call Option floor
set forth in Section 6.02(c)), taking into account any such acquisition and the
accounting treatment thereof, in order to give effect to the Put Option and the
Call Option and each of the parties respective rights relating thereto on
economic terms comparable to those set forth herein.
6.07. General Put/Call Provisions.
---------------------------
(a) In the event NEWCO is subject to any voluntary or involuntary
bankruptcy proceeding at any time after the Trigger Date (unless, in the case of
any involuntary proceeding, such proceeding is dismissed within 60 days), the
Put Option and the Call Option, respectively, shall terminate.
(b) The place of payment of the Put Price or the Call Price, as the case
may be, shall be the principal offices of NEWCO or at such other location as
shall be agreed upon in writing by EXPERIAN and FAFCO no later than 3 Business
Days prior to the time of payment.
(c) For purposes of this Article VI, a "Notice Date" shall be the date on
which any notice hereunder specifying the Put Exercise Date or the Call Exercise
Date, as the case may be, is given or deemed given in accordance with the
provisions of Section 10.06.
6.08. Dispute Resolution.
------------------
36
<PAGE>
(a) In the event of any dispute arising out of or relating to this
Article VI (including, without limitation, any dispute involving (i) the
determination of the Put Price, the Call Price or any other amount (including,
without limitation, the Adjusted Earnings upon which the Put Price, the Call
Price or any such other amount is based) to be paid in connection with the
purchase of Experian's Membership Interest pursuant to any provision of this
Article VI or (ii) appropriate amendments, modifications or supplements to the
provisions of this Article VI in accordance with Section 6.06), FAFCO or
EXPERIAN, as the case may be, shall provide written notice to the other party of
the dispute, which notice shall specify the notifying party's position. Each of
FAFCO and EXPERIAN agree to attempt in good faith to resolve any such dispute
within 30 days following the receipt of the written notice thereof.
(b) If the dispute cannot be resolved within the 30 day period described
in Section 6.08(a) above, either FAFCO or EXPERIAN may, by delivering written
notice to the other, submit any such dispute to the following resolution
procedure. A panel (the "Panel") shall be created to resolve the dispute and
shall be composed of three members who shall be appointed as follows: (i) one
Panel member shall be appointed by each of FAFCO and EXPERIAN as designated by
written notice to the other within 15 days after receipt of the notice
submitting the disputes to the resolution procedure and (ii) the third, who
shall serve as chairperson, shall be appointed by the two Panel members so
appointed pursuant to preceding clause (i) within 10 days after the second
appointment pursuant to such clause (i). If a Person, or Persons, entitled to
appoint a Panel member fails to appoint such Panel member within the time period
permitted therefor, such Panel member shall at the written request of either
Party be appointed by the American Arbitration Association. The date on which
all Panel members shall have been selected is hereinafter referred to as the
"Panel Date". The place of the dispute resolution proceedings and all other
matters to be determined by the Panel will be determined by the majority vote of
the Panel. Except as provided in Section 6.08(c) below, each of FAFCO and
EXPERIAN shall bear their respective costs and expenses (including attorneys'
fees) in connection with the dispute resolution proceedings and shall be
responsible for one-half of the fees, costs and expenses of the Panel.
(c) The Panel shall render a written decision with reasons therefor
within 30 days of the Panel Date. The Panel may award fees, costs and expenses
(including attorneys' fees and Panel costs) to the prevailing Party and may
award interest on any amount determined to be owing. Any determination by the
Panel shall be final and binding upon the Parties and may be enforced by any
court of competent jurisdiction in the same manner as a judgment in such court.
(d) Notwithstanding anything to the contrary contained in this Section
6.08, each of FAFCO and EXPERIAN hereby covenant and agree that, in the event of
a dispute involving the determination of the Put Price, the Call Price or any
other amount to be paid in connection with the purchase of Experian's Membership
Interest pursuant to any provision of this Article VI, (i) each such Party
shall, within the time limit prescribed in Section 6.08(b)(i) above, appoint a
representative from its independent certified public accountants as its Panel
member and (ii) the third Panel member shall, within the time limit prescribed
in Section 6.08(b)(ii) above, be appointed by the two Panel members appointed by
the Parties pursuant to clause (i) of this Section 6.08(d) from a firm of
independent certified public accountants of nationally recognized standing. If a
Person, or Persons, entitled to appoint a Panel member pursuant to this Section
6.08(d) fails
37
<PAGE>
to appoint such Panel member within the time period permitted therefor, such
Panel member shall at the written request of either Party be appointed by the
American Arbitration Association.
ARTICLE VII
CONDITIONS PRECEDENT
7.01. Conditions Precedent to the Obligations of Each of the Parties. The
--------------------------------------------------------------
obligation of each of the Parties to consummate the transactions contemplated
hereby is subject to the satisfaction or waiver by such Party on or before the
Closing, of the following conditions precedent:
(a) Formation of NEWCO.
------------------
(i) NEWCO shall have been duly established under the laws of
the State of California and, in connection therewith, the Articles of
Organization of NEWCO and any amendments thereto shall have been filed with
the Secretary of State of the State of California; and
(ii) On or prior to the Closing Date, the Management Committee
of NEWCO shall be appointed in accordance with the terms of the Operating
Agreement.
(b) No Injunction. No preliminary or permanent injunction or other
-------------
order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of
the transactions contemplated by this Agreement or the Implementing
Agreements or has the effect of making the transactions contemplated by
this Agreement or the Implementing Agreements illegal and which is in
effect at the Closing Date (each Party agreeing to use its reasonable best
efforts to have any such injunction or order lifted).
(c) Statutes. No statute, rule, regulation, executive order, decree
--------
or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the
consummation of the transactions contemplated by this Agreement or the
Implementing Agreements or has the effect of making the transactions
contemplated by this Agreement or the Implementing Agreements illegal.
(d) Implementing Agreements; Assignments. On or before the Closing
------------------------------------
Date, the following agreements (all such agreements, the "Implementing
Agreements") shall have been duly executed and delivered by each of the
respective parties thereto:
(i) the Operating Agreement in substantially the form of
Exhibit B;
(ii) the Experian Transition Agreement in substantially the
form of Exhibit C-1;
38
<PAGE>
(iii) the FAFCO Transition Agreement in substantially the form
of Exhibit C-2;
(iv) the Data License Agreement in substantially the form of
Exhibit D;
(v) the EXPERIAN/CREDCO Agreement in substantially the form of
Exhibit E;
(vi) the Trademark License Agreement in substantially the form
of Exhibit F; and
(vii) the Interim Operating Agreement in substantially the form
of Exhibit G.
(e) Assumption of FAFCO Notes. NEWCO shall have duly executed and
-------------------------
delivered to FAFCO an assumption agreement, in form and substance
reasonably satisfactory to FAFCO and EXPERIAN, pursuant to which NEWCO
shall assume all liabilities of FAREISI under (i) that certain promissory
note, dated November 19, 1997, made by FAREISI and payable to FAFCO in the
principal amount of $10,000,000 and (ii) that certain promissory note,
dated November 30, 1997, made by FAREISI and payable to FAFCO in the
principal amount of $25,000,000 (the "$25MM Note"), and FAFCO shall have
duly executed and delivered to NEWCO an acknowledgement, in form and
substance reasonably satisfactory to NEWCO and EXPERIAN, pursuant to which
FAFCO shall acknowledge that all rights of FAFCO to amounts payable by
NEWCO under such $25,000,000 promissory note shall be subject and
subordinate to the prior payment in full of all amounts payable by NEWCO to
EXPERIAN under the $3MM Note.
(f) Chase Waiver. The Chase Manhattan Bank ("Chase") shall have
------------
delivered to FAFCO its written waiver of the covenant(s) contained in its
agreement(s) with FAFCO that limit or prohibit FAFCO from consummating the
transactions contemplated by this Agreement and the Implementing
Agreements.
7.02. Conditions Precedent to the Obligations of the FAFCO Parties. The
------------------------------------------------------------
obligation of each of FAFCO, FAREISI and the other FAFCO Members to consummate
the transactions contemplated hereby and in the Implementing Agreements is
additionally subject to the satisfaction or waiver on or before the Closing Date
of the following conditions precedent (other than the condition precedent
specified in clause (h) below which shall be satisfied at or prior to the
Effective Time):
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of EXPERIAN contained herein and in each of the Implementing
Agreements shall be true and correct in all material respects as of the
date hereof and at and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date.
39
<PAGE>
(b) Performance by EXPERIAN. EXPERIAN shall have performed in all
-----------------------
material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this
Agreement and the Implementing Agreements to be performed or complied with
by it prior to the Closing Date.
(c) Consents and Approvals. All consents, approvals and other action
----------------------
by, all notices to and all filings with all Persons, including all courts
and administrative and governmental bodies that are required to have been
obtained, taken or made to consummate the transactions contemplated by this
Agreement and the Implementing Agreements (including those disclosed in
Schedule 3.08 attached hereto) shall have been obtained, undertaken or
made, except for such consents, approvals, notices and filings, the failure
to obtain which would not have a Material Adverse Effect on NEWCO after
giving effect to the transactions contemplated hereby and by the
Implementing Agreements.
(d) No Material Adverse Effect. Prior to the Closing, no event shall
--------------------------
have occurred or failed to occur, which occurrence, or failure to occur, as
the case may be, has had or is reasonably likely to have a Material Adverse
Effect on the EXPERIAN Interests or the RES Business, taken as a whole,
whether as a result of any legislative or regulatory change, revocation of
any license or rights to do business, fire, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or act of God or
other public force or otherwise.
(e) Good Standing and Other Certificates. EXPERIAN shall have
------------------------------------
delivered to FAFCO (i) copies of EXPERIAN's charter or similar
organizational documents, including all amendments thereto, in each case
certified by the appropriate official of their respective jurisdiction of
organization, (ii) a certificate from the appropriate official of their
respective jurisdictions of organization to the effect that EXPERIAN is in
good standing or subsisting in such jurisdiction and listing all charter or
similar organizational documents of EXPERIAN on file and (iii) a
certificate as to the tax status of EXPERIAN from the appropriate official
in its respective jurisdiction of organization.
(f) Officer's Certificate. EXPERIAN shall have delivered to FAFCO a
---------------------
certificate of the President or any Vice President of EXPERIAN, dated the
Closing Date certifying that the conditions specified in Sections 7.01(b),
7.02(a), 7.02(b) and 7.02(d) have been satisfied.
(g) Cash Transfer. At or before the Effective Time, EXPERIAN shall
-------------
have delivered US $10,000,000 to NEWCO by wire transfer of immediately
available funds to an account designated by NEWCO.
(h) Due Diligence Completed. On or prior to the Closing Date, FAFCO
-----------------------
shall have completed its due diligence review of the RES Business and shall
be satisfied, it its sole and unfettered discretion, with all aspects
thereof.
(i) Proceedings. All proceedings to be taken in connection with the
-----------
transactions contemplated by this Agreement and all documents incident
thereto shall be satisfactory
40
<PAGE>
in form and substance to FAFCO and its counsel, and FAFCO shall have
received copies of all such documents and other evidences as it or its
counsel may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection
therewith.
7.03. Conditions Precedent to the Obligations of EXPERIAN. The obligation
---------------------------------------------------
of EXPERIAN to consummate the transactions contemplated hereby and in the
Implementing Agreements is additionally subject to the satisfaction, at or
before the Closing, of the following conditions precedent:
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of FAFCO, FAREISI and each of the other FAFCO Members
contained herein, and in each of the Implementing Agreements, shall be true
and correct in all material respects as of the date hereof and on and as of
the Closing Date, with the same force and effect as though made on and as
of the Closing Date.
(b) Performance by the FAFCO Parties. Each of FAFCO, FAREISI and
--------------------------------
each of the other FAFCO Members shall have performed in all material
respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement and
the Implementing Agreements to be performed or complied with by it prior to
the Closing Date.
(c) Consents and Approvals. All consents, approvals and other action
----------------------
by, all notices to and all filings with all Persons, including all courts
and administrative and governmental bodies that are required to have been
obtained, taken or made to consummate the transactions contemplated by this
Agreement and the Implementing Agreements (including those disclosed in
Schedule 4.08 attached hereto) shall have been obtained, undertaken or
made, except for such consents, approvals, notices and filings, the failure
to obtain which (i) would not have a Material Adverse Effect on NEWCO,
after giving effect to the transactions contemplated hereby and by the
Implementing Agreements and/or (ii) is the subject of the indemnification
obligation of FAFCO contained in Section 5.04(a).
(d) No Material Adverse Effect. Prior to the Closing Date no event
--------------------------
shall have occurred or failed to occur, which occurrence, or failure to
occur, as the case may be, has had, or is reasonably likely to have, a
Material Adverse Effect on the FAFCO Interests or the FAREISI Business,
taken as a whole, whether as a result of any legislative or regulatory
change, revocation of any license or rights to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise.
(e) Charter Documents; Good Standing and Other Certificates. FAFCO
-------------------------------------------------------
shall have delivered to EXPERIAN (i) copies of FAFCO'S charter or similar
organizational documents and the charter or similar organizational
documents of FAREISI and each of the other FAFCO Members, including all
amendments thereto, in each case certified by the appropriate official of
its jurisdiction of organization, (ii) a certificate from the appropriate
official of their respective jurisdictions of organization to the effect
that each
41
<PAGE>
of FAFCO, FAREISI and each of the other FAFCO Members are in good standing
or subsisting in such jurisdiction and listing all charter or similar
organizational documents of FAFCO, FAREISI and each of the other FAFCO
Members on file and (iii) a certificate as to the tax status of each of
FAFCO, FAREISI and each of the other FAFCO Members from the appropriate
official in its respective jurisdiction of organization.
(f) Officer's Certificate. FAFCO shall have delivered to EXPERIAN a
---------------------
certificate of the President or any Vice President of FAFCO, dated the
Closing Date certifying that the conditions set forth in Sections 7.01(b),
7.03(a), 7.03(b) and 7.03(d) have been satisfied.
(g) EXPERIAN Note. EXPERIAN shall have received the $3MM Note, duly
-------------
authorized and executed by NEWCO and dated the Effective Date.
(h) Due Diligence Completed. On or prior to the Closing Date,
-----------------------
EXPERIAN shall have completed its due diligence review of the FAREISI
Business and shall be satisfied, it its sole and unfettered discretion,
with all aspects thereof.
(i) Proceedings. All proceedings to be taken in connection with the
-----------
transactions contemplated by this Agreement and all documents incident
thereto shall be satisfactory in form and substance to EXPERIAN and its
counsel, and EXPERIAN shall have received copies of all such documents and
other evidences as it or its counsel may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VII
SURVIVAL OF REPRESENTATION; INDEMNIFICATION
8.01. Survival of Representations. The respective representations and
---------------------------
warranties of the Parties hereto contained in this Agreement or in any Schedule,
Exhibit or certificate delivered together herewith or pursuant hereto shall
survive until January 1, 1999; provided, that the representations contained in
--------
Sections 3.10 and 4.10 shall survive until the applicable statutes of
limitations under the Code have expired; provided further, that the obligations
----------------
to indemnify specified in Section 8.02 hereof shall not terminate at the time
provided above if, prior to such time, a notice of claim relating to Losses
specifying in detail the nature thereof (although the amount of Losses, if not
yet determinable, need not be specified) has been given to FAFCO or EXPERIAN,
as the case may be; and provided further, that the obligations to indemnify
----------------
specified in Section 8.03 hereof shall not terminate until such time as the
liability for Taxes of NEWCO and each Party hereto has been conclusively
determined.
8.02. Indemnification.
---------------
(a) The EXPERIAN Parties and the FAFCO Parties agree to indemnify and
hold NEWCO and each other Party harmless from all claims, expenses, obligations,
damages, costs,
42
<PAGE>
payments, liabilities, losses, interest, fines and penalties, including, without
limitation, costs and expenses of litigation (including costs of investigation),
reasonable attorney's fees and reasonable consultants' fees, but excluding any
special or consequential or indirect damages (collectively, "Losses") suffered
or paid, directly or indirectly, through application of NEWCO's or the other
indemnified party's assets or otherwise, as a result of or arising out of the
failure of any representation and warranty contained in this Agreement made by
the FAFCO Parties or the EXPERIAN Parties, as the case may be, to be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date; it being understood that NEWCO's right to indemnification under
this Section 8.02 shall terminate at such time as FAFCO's and EXPERIAN's rights
under this Section 8.02 shall terminate.
(b) Each Party's and NEWCO's right to indemnification pursuant to this
Section 8.02 shall not be limited in amount, except that each Party shall only
have liability in respect of any Losses in excess of $1,000,000 in the
aggregate.
8.03. Post-Effective-Time Tax Indemnification.
---------------------------------------
(a) All Taxes relating or attributable to the RES Business and the
FAREISI Business (other than Transactional Taxes) ("Indemnifiable Taxes") for
all periods from or after the Effective Time shall be for the account of NEWCO.
(b) The Parties agree that they shall take all necessary action to cause
NEWCO to indemnify and hold the Parties harmless from all Indemnifiable Taxes
relating or attributable to the RES Business and the FAREISI Business for all
periods from or after the Effective Time, through application of NEWCO's assets
or otherwise.
(c) Upon signing the acknowledgment required by Section 10.08(b) hereof,
and as partial consideration for receiving the benefits of this Agreement, NEWCO
shall become bound by the obligations of Section 5.10 and this Section 8.03 as
if a party hereto.
ARTICLE IX
TERMINATION
9.01. Events of Termination. This Agreement may be terminated and the
---------------------
transactions contemplated hereby may be abandoned at any time prior to the
Closing by mutual consent of the Parties.
9.02. Effect of Termination. In the event that this Agreement shall be
---------------------
terminated pursuant to Section 9.01, all further obligations of the Parties
hereto under this Agreement shall terminate without further liability or
obligation of either Party to the other Parties hereunder; provided, however,
-------- -------
that no Party shall be released from liability hereunder if this Agreement is
terminated and the transactions abandoned by reason of (i) willful failure of
such Party to have performed its obligations hereunder or (ii) any knowing
misrepresentation made by such Party of any matter set forth herein.
43
<PAGE>
ARTICLE X
MISCELLANEOUS
10.01. Fees and Expenses. Except as provided in Section 2.01 above, all
-----------------
costs and expenses incurred in connection with this Agreement and the
Implementing Agreements and the consummation of the transactions contemplated
hereby and thereby shall be paid by the Party incurring such costs and expenses.
10.02. Extension; Waiver. At any time prior to the Closing, the Parties
-----------------
hereto, by action taken by or on behalf of the respective Boards of Directors or
other governing body of such Parties, may (i) extend the time for the
performance of any of the obligations or other acts of the other Parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any of the Implementing Agreements of the other Parties or in any
document, certificate or writing delivered pursuant hereto or thereto by the
other Parties or (iii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of any Party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party.
10.03. Confidentiality. Subject to the requirements of applicable law, each
---------------
Party shall maintain in confidence all information (i) transferred to NEWCO by
reason of the transfer of Interests and (ii) all information received from the
other Party as a result of any due diligence investigation conducted relative to
the execution of the Agreement and shall use such information only for the
benefit of NEWCO and or in connection with evaluating the transactions
contemplated hereby, except in accordance with the immediately succeeding
sentence, shall not disclose any such information to a third party or make any
unauthorized use thereof. The obligation of confidentiality and non-use shall
not apply to any information which (a) is or becomes generally available to the
public through no fault of the receiving party, (b) is independently developed
by the receiving party or (c) is received in good faith from a third party who
is lawfully in possession of such information and has the lawful right to
disclose or use it.
10.04. Public Announcements. The Parties agree to consult promptly with
--------------------
each other prior to issuing any press release or otherwise making any public
statement with respect to the transactions contemplated hereby or by the
Implementing Agreements, and shall not issue any such press release or make any
such public statement prior to such consultation and review by the other Party
of a copy of such release or statement, unless required by applicable law.
10.05. Records Retained by FAFCO, EXPERIAN and NEWCO. Except as may
---------------------------------------------
otherwise be provided in this Agreement, FAFCO and EXPERIAN shall transfer and
deliver, or cause to be transferred and delivered, and FAFCO and EXPERIAN shall
cause their Affiliates to transfer and deliver to NEWCO after the Closing all
data, records and other information which pertain to its respective Interests
(with the exception of documents created for this transaction) including,
without limitation, tax records and personnel records necessary for NEWCO to
conduct the NEWCO Business (all of the foregoing being hereinafter called the
"Business Records"). To the extent that the original copies of any such
Business Records also contain information relating to any Party or any of its
Subsidiaries not relating to its Interests, said Party may deliver to
44
<PAGE>
NEWCO copies deleting such information but shall not destroy the original
Business Records except in accordance with normal record retention policies (or
otherwise take action to make such original Business Records unavailable to
NEWCO). Any Business Records which any Party requires in connection with
pending or threatened litigation, or which are otherwise subject to hold orders
as provided in said Party's record retention and protection policies, may be
retained by said Party and copies thereof delivered to NEWCO.
10.06. Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
by mail, postage prepaid, sent by telecopier, as follows:
(a) if to EXPERIAN, to it at:
Experian Information Solutions, Inc.
505 City Parkway West
Orange, California 92868
Telephone: (714) 385-8296
Telecopier: (714) 938-2513
Attention: General Counsel
(b) if to FAFCO, FAREISI or any other FAFCO Member, to it at:
The First American Financial Corporation
114 East Fifth Street
Santa Ana, California 92702
Telephone: (714) 558-3211
Telecopier: (714) 647-2242
Attention: Parker S. Kennedy
with a copy to:
White & Case
633 West Fifth Street, 19th Floor
Los Angeles, California 90071
Telephone: (213) 620-7700
Telecopier: (213) 687-0758
Attention: Neil W. Rust
or to such other Person or address as any Party shall specify by notice in
writing to each of the other Parties. Except for a notice of a change of
address, which shall be effective only upon receipt thereof, all such notices,
requests, demands, waivers and communications properly addressed shall be
effective: (i) if sent by U.S. mail, three Business Days after deposit in the
U.S. mail, postage prepaid; (ii) if sent by FedEx or other overnight delivery
service, two Business Days
45
<PAGE>
after delivery to such service; (iii) if sent by personal courier, upon receipt;
and (iv) if sent by facsimile, upon receipt.
10.07. Entire Agreement. This Agreement and the Schedules, Exhibits and
----------------
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the Parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto unless specifically set
forth to the contrary herein.
10.08. Binding Effect; Benefit; Assignment.
-----------------------------------
(a) This Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the Parties hereto without the prior written consent
of each other Party. Nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the Parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
(b) Notwithstanding anything stated in the foregoing paragraph (a), upon
acknowledging this Agreement by its execution of the signature page hereto,
NEWCO will be, for all purposes, treated as third party beneficiary to the
representations and warranties of each Party in this Agreement, and subject to
the limitations of Sections 8.01 and 8.02 shall be entitled to the benefits of
Article VIII with respect to any breach thereof; provided, that NEWCO may not
--------
assign such benefits without the written consent of each Party.
10.09. Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified and supplemented in writing by the Parties
hereto in any and all respects before the Closing (notwithstanding any
shareholder approval), by action taken by the respective Boards of Directors of
such Parties, or by the respective officers authorized by such Boards of
Directors, provided, that after any such shareholder approval, no amendment may
--------
be made which by law requires further approval by such shareholders without such
further approval.
10.10. Further Actions. Each of the Parties hereto agrees that, subject to
---------------
its legal obligations, it will use its reasonable best efforts to fulfill all
conditions precedent specified herein, to the extent that such conditions are
within its control, and to do all things reasonably necessary to consummate the
transactions contemplated hereby.
10.11. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
46
<PAGE>
10.12. Applicable Law; Submission to Jurisdiction.
------------------------------------------
(a) This Agreement and the legal relations between the Parties hereto
shall be governed by and construed in accordance with the laws of the State of
California, without regard to the conflict of laws rules thereof.
(b) Each of the Parties agrees that any legal action or proceeding with
respect to this Agreement may be brought in the Courts of the State of
California or the United States District Court for the Central District of
California and, by execution and delivery of this Agreement, each Party hereby
irrevocably submits itself in respect of its property, generally and
unconditionally to the non-exclusive jurisdiction of the aforesaid courts in any
legal action or proceeding arising out of this Agreement. Each of the Parties
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement brought in the courts referred to in the
preceding sentence. Each Party consents to process being served in any such
action or proceeding by the mailing of a copy thereof to the address for notices
to it set forth in Section 10.06 and agrees that such service upon receipt shall
constitute good and sufficient service of process or notice thereof. Nothing in
this paragraph shall affect or eliminate any right to serve process in any other
matter permitted by law.
10.13. Severability. If any term, provision, covenant or restriction
------------
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
47
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed in their respective corporate names by their respective officers, each
of whom is duly and validly authorized and empowered, all as of the day and year
first above written.
THE FIRST AMERICAN FINANCIAL
CORPORATION
By /s/ Parker S. Kennedy
------------------------------------
Name: Parker S. Kennedy
Title:
FIRST AMERICAN REAL ESTATE
INFORMATION SERVICES, INC.
By /s/ John Long
------------------------------------
Name: John Long
Title:
FIRST AMERICAN APPRAISAL SERVICES,
INC.
By /s/ Anand Nallathambi
------------------------------------
Name: Anand Nallathambi
Title:
FIRST AMERICAN APPRAISAL CONSULTING
SERVICES, INC.
By /s/ Anand Nallathambi
------------------------------------
Name: Anand Nallathambi
Title:
48
<PAGE>
FIRST AMERICAN CREDCO, INC.
By /s/ Donald A. Robert
------------------------------------
Name: Donald A. Robert
Title: President
FIRST AMERICAN FIELD SERVICES, INC.
By /s/ Shari Nott
------------------------------------
Name: Shari Nott
Title: Vice President
FIRST AMERICAN FLOOD DATA
SERVICES, INC.
By /s/ Robert Douglas
------------------------------------
Name: Robert Douglas
Title: Senior Vice President
FIRST AMERICAN PROPERTY SERVICES,
INC.
By /s/ John Long
------------------------------------
Name: John Long
Title:
FIRST AMERICAN REAL ESTATE TAX
SERVICE, INC.
By /s/ David C. Yavorsky
------------------------------------
Name: David C. Yavorsky
Title: President
49
<PAGE>
PASCO ENTERPRISES, INC.
By /s/ John Long
------------------------------------
Name: John Long
Title:
PRIME CREDIT REPORTS, INC.
By /s/ Donald A. Robert
------------------------------------
Name: Donald A. Robert
Title: Senior Vice President
PROPERTY FINANCIAL SERVICES OF NEW
ENGLAND, INC.
By /s/ Anand Nallathambi
------------------------------------
Name: Anand Nallathambi
Title:
DOCS ACQUISITION CORP.
By /s/ John Long
------------------------------------
Name: John Long
Title:
STRATEGIC MORTGAGE SERVICES,
INC. (TEXAS)
By /s/ Mark B. Rogers
------------------------------------
Name: Mark B. Rogers
Title: President
50
<PAGE>
EXPERIAN INFORMATION SOLUTIONS, INC.
By /s/ D.V. Skilling
------------------------------------
Name: D. Van Skilling
Title:
51
<PAGE>
ACKNOWLEDGED AND AGREED TO:
FIRST AMERICAN REAL ESTATE SOLUTIONS LLC
By /s/ Parker S. Kennedy
-------------------------------------
Name: Parker S. Kennedy
Title:
52
<PAGE>
Exhibit (10)(b)
================================================================================
OPERATING AGREEMENT
FOR
FIRST AMERICAN REAL ESTATE SOLUTIONS LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
By and Among
FIRST AMERICAN REAL ESTATE INFORMATION SERVICES, INC.,
FIRST AMERICAN APPRAISAL CONSULTING SERVICES, INC.,
FIRST AMERICAN APPRAISAL SERVICES, INC.,
FIRST AMERICAN CREDCO, INC.,
FIRST AMERICAN FIELD SERVICES, INC.,
FIRST AMERICAN FLOOD DATA SERVICES, INC.,
FIRST AMERICAN PROPERTY SERVICES, INC.,
FIRST AMERICAN REAL ESTATE TAX SERVICE, INC.,
PASCO ENTERPRISES, INC.,
PRIME CREDIT REPORTS, INC.,
PROPERTY FINANCIAL SERVICES OF NEW ENGLAND, INC.,
DOCS ACQUISITION CORP.,
STRATEGIC MORTGAGE SERVICES, INC. (TEXAS)
and
EXPERIAN INFORMATION SOLUTIONS, INC.
Dated as of November 30, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS/1/
--------------------
Page
----
ARTICLE I
DEFINED TERMS; CONSTRUCTION ...................... 2
1.01. Defined Terms .................................................. 2
------------
1.02. Construction ................................................... 6
------------
ARTICLE II
ORGANIZATIONAL MATTERS ......................... 7
2.01. Formation of the Company....................................... 7
------------------------
2.02. Capital Contributions; Membership Interests.................... 7
-------------------------------------------
2.03. Name of the Company............................................ 8
-------------------
2.04. Effectiveness; Term............................................ 9
-------------------
2.05. Principal Office and Registered Agent.......................... 9
-------------------------------------
2.06. Addresses of the Members and the Managers...................... 9
-----------------------------------------
2.07. Purpose and Business of the Company............................ 9
-----------------------------------
ARTICLE III
THE MEMBERS................................ 9
3.01. Limited Liability.............................................. 9
-----------------
3.02. Admission of Additional Members................................ 9
-------------------------------
3.03. Termination of Membership Interest............................. 9
----------------------------------
3.04. Absence of Management Powers................................... 9
----------------------------
3.05. Unanimous Consent of Members................................... 10
----------------------------
ARTICLE IV
MANAGEMENT COMMITTEE; MAJOR DECISIONS................... 10
4.01. Management By Management Committee............................. 10
----------------------------------
4.02. Management Committee Representation; Officers.................. 10
---------------------------------------------
4.03. Major Decisions................................................ 11
---------------
4.04. Acquisition Approval; Additional Capital....................... 13
----------------------------------------
4.05. Voluntary Loans................................................ 14
---------------
ARTICLE V
ALLOCATIONS OF NET PROFITS AND NET LOSSES; DISTRIBUTIONS.......... 15
5.01. Allocations of Net Profit and Net Loss......................... 15
--------------------------------------
5.02. Special Allocations............................................ 15
-------------------
5.03. Code Section 704(c) Allocations................................ 17
-------------------------------
- ---------------------------
/1/ This Table of Contents is provided for convenience only, and does not
form a part of the attached Operating Agreement.
(i)
<PAGE>
5.04. Allocations of Net Profits and Losses and Distributions
-------------------------------------------------------
in Respect of a Transferred Interest........................... 17
------------------------------------
5.05. Distributions by the Company................................... 18
----------------------------
5.06. Form of Distribution........................................... 18
--------------------
5.07. Restriction on Distributions................................... 19
----------------------------
5.08. Return of Distributions........................................ 19
-----------------------
ARTICLE VI
MEMBERSHIP INTEREST TRANSFER RESTRICTIONS................. 19
6.01. Transfer Restrictions.......................................... 19
---------------------
6.02. Further Restrictions on Transfer of Interests.................. 20
---------------------------------------------
6.03. Void Transfer.................................................. 20
-------------
6.04. Permitted Transfers............................................ 20
-------------------
6.05. Third-Party Offers............................................. 21
------------------
ARTICLE VII
BUSINESS OPPORTUNITIES........................... 22
7.01. Business Opportunities......................................... 22
----------------------
ARTICLE VIII
CONSEQUENCES OF DISSOLUTION EVENTS;
TERMINATION OF MEMBERSHIP INTEREST..................... 23
8.01. Dissolution Event.............................................. 23
-----------------
8.02. Withdrawal..................................................... 23
----------
8.03. Purchase Price................................................. 23
--------------
8.04. Notice of Intent to Purchase................................... 23
----------------------------
8.05. Purchase Pro Rata.............................................. 23
-----------------
8.06. Winding Up the Company......................................... 24
----------------------
8.07. Final Statement................................................ 24
---------------
ARTICLE IX
BOOKS AND RECORDS; TAX RETURNS; ACCESS BY MEMBERS.............. 24
9.01. Company Books and Records...................................... 24
--------------------------
9.02. Tax Returns.................................................... 24
-----------
ARTICLE X
MISCELLANEOUS............................... 26
10.01. Specific Performance........................................... 26
--------------------
10.02. Amendments and Modifications................................... 26
----------------------------
10.03. Notices........................................................ 26
-------
10.04. Attorneys' Fees................................................ 27
---------------
10.05. Further Assurances............................................. 27
------------------
10.06. Counterparts................................................... 27
------------
10.07. Governing Law.................................................. 27
-------------
10.08. Successors..................................................... 27
----------
10.09. Severability................................................... 28
------------
(ii)
<PAGE>
10.10. Entire Agreement................................................ 28
----------------
10.11. Confidentiality................................................. 28
---------------
SCHEDULES
Schedule 1 Officers
Schedule 2 Approved Transactions
Schedule 3 Existing Borrowing Facilities
(iii)
<PAGE>
OPERATING AGREEMENT
FOR
FIRST AMERICAN REAL ESTATE SOLUTIONS LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
OPERATING AGREEMENT FOR FIRST AMERICAN REAL ESTATE SOLUTIONS LLC, a
California limited liability company (the "Company"), dated as of November 30,
1997, by and among FIRST AMERICAN REAL ESTATE INFORMATION SERVICES, INC., a
California corporation ("FAREISI"), FIRST AMERICAN APPRAISAL CONSULTING
SERVICES, INC., a California corporation ("FAREISI Subsidiary 1"), FIRST
AMERICAN APPRAISAL SERVICES, INC., a California corporation ("FAREISI Subsidiary
2"), FIRST AMERICAN CREDCO, INC., a Washington corporation ("FAREISI Subsidiary
3"), FIRST AMERICAN FIELD SERVICES, INC., a New Jersey corporation ("FAREISI
Subsidiary 4"), FIRST AMERICAN FLOOD DATA SERVICES, INC., a Texas corporation
("FAREISI Subsidiary 5"), FIRST AMERICAN PROPERTY SERVICES, INC., a New York
corporation ("FAREISI Subsidiary 6"), FIRST AMERICAN REAL ESTATE TAX SERVICE,
INC., a Florida corporation ("FAREISI Subsidiary 7"), PASCO ENTERPRISES, INC., a
Texas corporation ("FAREISI Subsidiary 8"), PRIME CREDIT REPORTS, INC., a
California corporation ("FAREISI Subsidiary 9"), PROPERTY FINANCIAL SERVICES OF
NEW ENGLAND, INC., a Delaware corporation ("FAREISI Subsidiary 10"), DOCS
ACQUISITION CORP., a Nevada corporation ("DOCS"), STRATEGIC MORTGAGE SERVICES,
INC. (TEXAS), a Texas corporation ("SMS") and EXPERIAN INFORMATION SOLUTIONS,
INC., an Ohio corporation ("EXPERIAN").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to that certain Contribution and Joint Venture Agreement,
dated as of November 30, 1997 (the "JV Agreement"), by and among The First
American Financial Corporation, a California corporation ("FAFCO"), FAREISI,
FAREISI Subsidiary 1, FAREISI Subsidiary 2, FAREISI Subsidiary 3, FAREISI
Subsidiary 4, FAREISI Subsidiary 5, FAREISI Subsidiary 6, FAREISI Subsidiary 7,
FAREISI Subsidiary 8, FAREISI Subsidiary 9, FAREISI Subsidiary 10, DOCS, SMS,
(FAREISI, the foregoing FAREISI Subsidiaries, DOCS and SMS, collectively, the
"FAFCO Members") and EXPERIAN, the parties thereto have agreed that the FAFCO
Members and EXPERIAN shall become the joint owners of the Company which is being
formed hereunder to own and operate the combined FAREISI Business and RES
Business (each such term used herein as defined in the JV Agreement);
WHEREAS, in furtherance of the transactions contemplated in the JV
Agreement, the Company, the FAFCO Members and EXPERIAN desire to define in this
Agreement certain of their rights, duties and obligations with respect to the
ownership, operation and management of the Company;
NOW, THEREFORE, in order to carry out their intent as expressed above, and
in consideration of the mutual covenants and agreements hereinafter contained,
the parties hereto hereby covenant and agree as follows:
1
<PAGE>
ARTICLE I
DEFINED TERMS; CONSTRUCTION
1.011. Defined Terms. As used in this Agreement, the following terms
-------------
shall have the following meanings:
"Act" means the Beverly-Killea Limited Liability Company Act, codified in
the California Corporations Code, Section 17000 et seq., as the same may be
-- ---
amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the applicable Fiscal Year after (i) crediting thereto any amounts which such
Member is, or is deemed to be, obligated to restore pursuant to Treasury
Regulations (S) 1.704-2(g)(1) and (S) 1.704-2(i)(5) and (ii) debiting such
Capital Account by the amount of the items described in Treasury Regulations (S)
1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of Treasury
Regulation (S) 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"Affiliate" has the meaning given thereto in Section 1.01 of the JV
Agreement.
"Agreement" means this Operating Agreement, as the same may be amended,
modified and/or supplemented from time to time.
"Articles" means the Articles of Organization for the Company originally
filed with the California Secretary of State and as amended from time to time.
"Bankruptcy" means, with respect to any Person, the occurrence of one or
more of the following events: (i) such Person commences a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); (ii) an involuntary case is commenced against such Person
and the petition is not controverted within 10 days, or is not dismissed within
60 days, after commencement of the case; (iii) a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of, such Person; (iv) such Person commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect; (v) there is commenced against such Person
any such proceeding which remains undismissed for a period of 60 days; (vi) such
Person is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (vi) such Person suffers
the appointment of a custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; (vii)
such Person makes a general assignment for the benefit of creditors; or (viii)
any corporate or partnership action is taken by such Person for the purpose of
effecting any of the foregoing.
2
<PAGE>
"Business Day" shall mean any day, excluding Saturday, Sunday or any day
which shall be a legal holiday in the State of California.
"By-Laws" means the By-Laws as initially adopted by the Management
Committee and as the same may be amended from time to time.
"Capital Account" means with respect to any Member the capital account
which the Company establishes and maintains for such Member pursuant to Section
2.02(b).
"Capital Contribution" means, with respect to any Member, the total amount
of cash and the fair market value of property contributed (net of liabilities
secured by such contributed property that the Company is considered to assume or
take subject to under Section 752 of the Code) to the Company by such Member.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, the provisions of any succeeding law.
"Company" has the meaning given thereto in the introductory paragraph of
this Agreement.
"Company Development Opportunity" means any business opportunity related to
real estate lending specifically involving the acquisition, development,
construction, operation or management of merged credit reporting, appraisal
services, flood compliance, real estate tax reporting, tax certification, tax
outsourcing, mortgage assignments, tax valuation, real property field services
and real estate transaction document preparation.
"Company Minimum Gain" has the meaning given to the term "partnership
minimum gain" in the Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
"Corporations Code" means the California Corporations Code, as amended from
time to time, and the provisions of succeeding law.
"Dissolution Event" means, with respect to any Member, the withdrawal from
this Agreement, the Bankruptcy, the dissolution or the termination of such
Member.
"Distributable Cash" means the amount of cash which the Management
Committee deems available for distribution to the Members, taking into account
all debts, liabilities, and obligations of the Company then due, and working
capital and other amounts which the Management Committee deems necessary for the
Company's business or to place into reserves for customary and usual claims with
respect to such business.
"Effective Time" has the meaning given thereto in Section 1.01 of the JV
Agreement.
"EXPERIAN" has the meaning given thereto in the first WHEREAS clause of
this Agreement.
3
<PAGE>
"Experian Managers" has the meaning given thereto in Section 4.02(a)
hereof.
"FAFCO" has the meaning given thereto in the first WHEREAS clause of this
Agreement.
"FAFCO Managers" has the meaning given thereto in Section 4.02(a) hereof.
"FAFCO Members" has the meaning given thereto in the first WHEREAS clause
of this Agreement.
"Fiscal Year" means the Company's fiscal year, which shall be the calendar
year.
"Former Member" has the meaning given thereto in Section 8.01 hereof.
"Former Member's Interest" has the meaning given thereto in Section 8.01
hereof.
"GAAP" means generally accepted accounting principles in the United States
of America applied on a consistent basis and reasonable under the circumstances.
"JV Agreement" has the meaning given thereto in the first WHEREAS clause of
this Agreement.
"Major Decision" has the meaning given thereto in Section 4.03 hereof.
"Manager" has the meaning given thereto in Section 4.01 hereof.
"Management Committee" means the Management Committee of the Company.
"Member" means each Person who is an initial signatory to this Agreement
or has been admitted to the Company as a Member in accordance with the Articles
or this Agreement and has not become the subject of a Dissolution Event or
ceased to be a Member in accordance with Article VIII or for any other reason.
"Member Minimum Gain" shall mean an amount, determined in accordance with
Regulations Section 1.704-2(i)(3) with respect to any Member Nonrecourse Debt,
equal to the Company Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a Nonrecourse Liability.
"Member Nonrecourse Debt" has the meaning given to the term "partner
nonrecourse debt" in Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Deductions" has the meaning given to the term "partner
nonrecourse deductions" in Regulations Section 1.704-2(i).
"Membership Interest" means a Member's entire interest in the Company,
including, without limitation, the right to receive distributions of the
Company's assets and allocations of
4
<PAGE>
income, gain, loss, deduction, credit and similar items from the Company
pursuant to this Agreement and the Act, the right to vote on or participate in
the management, and the right to receive information concerning the business and
affairs, of the Company.
"Net Profits" and "Net Losses" mean, for any Fiscal Year, the net income or
net loss, respectively, of the Company for such Fiscal Year.
"Nonrecourse Deduction" has the meaning given to such term in Regulations
Section 1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Offer" has the meaning given thereto in Section 6.04(c) hereof.
"Offered Interest" has the meaning given thereto in Section 6.04(c) hereof.
"Offering Price" has the meaning given thereto in Section 6.04(c) hereof.
"Offer Notice" has the meaning given thereto in Section 6.04(c) hereof.
"Offer Rejection" has the meaning given thereto in Section 6.04(d) hereof.
"Offer Terms" has the meaning given thereto in Section 6.04(c) hereof.
"Percentage Interest" means, with respect to a Member, the percentage set
forth in Section 2.02(f) with respect to such Member, as such percentage may be
adjusted from time to time pursuant to the terms of this Agreement.
"Permitted Transfer" has the meaning given thereto in Section 6.04(a)
hereof.
"Permitted Transferee" has the meaning given thereto in Section 6.04(a)
hereof.
"Person" means and includes any individual, partnership, association, joint
stock company, joint venture, corporation, trust, limited liability company,
unincorporated organization or other enterprise or any government or political
subdivision or any agency, department or instrumentality thereof.
"Prime Rate" means, as of any date of determination, the per annum rate of
interest specified as the Prime Rate in the Wall Street Journal published on
such date, provided that for any date on which the Wall Street Journal is not
--------
published, "Prime Rate" means the per annum rate of interest specified as the
Prime Rate in the Wall Street Journal last published before such date.
"Proposed Transferee" has the meaning given thereto in Section 6.04(c)
hereof.
5
<PAGE>
"Regulations" shall, unless the context clearly indicates otherwise, mean
the regulations in force as final or temporary that have been issued by the U.S.
Department of Treasury pursuant to its authority under the Code, and any
successor regulations.
"Remaining Members" has the meaning given thereto in Section 8.01 hereof.
"Requested Amount" has the meaning given thereto in Section 4.04(b) hereof.
"RES Data" has the meaning given thereto in the Data License Agreement in
the form of Exhibit D to the JV Agreement.
"Secretary" means the Secretary of the Company appointed by the Management
Committee.
"Tax Matters Member" has the meaning given thereto in Section 9.02(b)
hereof.
"Third-Party Offer" has the meaning given thereto in Section 6.05 hereof.
"Third-Party Terms" has the meaning given thereto in Section 6.05 hereof.
"Trademark License Agreement" means the Trademark License Agreement in
substantially the form of Exhibit G to the JV Agreement.
"Transfer" means any sale, transfer, assignment, donation, pledge,
hypothecation, encumbrance or other disposition in any manner whatsoever,
voluntarily or involuntarily, including, without limitation, any attachment,
assignment for the benefit of creditors or transfer by operation of law or
otherwise.
"Transfer Notice" has the meaning given thereto in Section 6.04(e) hereof.
"Voluntary Loans" has the meaning given thereto in Section 4.05(a) hereof.
"$3MM Note" has the meaning given thereto in Section 1.01 of the JV
Agreement.
"$25MM Note" has the meaning given thereto in Section 1.01 of the JV
Agreement.
1.012. Construction.
------------
(a) To the fullest extent permissible, each of the FAFCO Members, EXPERIAN
and the Company hereby waives such provisions of the California Corporations
Code as are inconsistent with the terms hereof.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Article, Section,
subsection and Schedule references are to this Agreement unless otherwise
specified.
6
<PAGE>
(c) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.
(d) The meanings given to terms used herein shall be equally applicable to
both the singular and plural forms of such terms.
(e) The Table of Contents hereto and the Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
(f) This Agreement is the result of negotiations among and have been
reviewed by counsel to the Members and is the product of all the Members.
Accordingly, this Agreement shall not be construed against any Member merely
because of such Member's involvement in its preparation.
ARTICLE II
ORGANIZATIONAL MATTERS
2.021. Formation of the Company. The Members have formed a California
------------------------
limited liability company under the laws of the State of California by filing
the Articles with the California Secretary of State and entering into this
Agreement, which Agreement shall at the Effective Time be deemed effective as of
the date the Articles were so filed. The rights and liabilities of the Members
shall be determined pursuant to the Act and this Agreement. To the extent that
the rights or obligations of any Member are different by reason of any provision
of this Agreement than they would be in the absence of such provision, this
Agreement shall, to the extent permitted by the Act, control.
2.022. Capital Contributions; Membership Interests.
-------------------------------------------
(a) Each Member or an Affiliate of such Member shall contribute to the
Company the assets and liabilities described in Section 2.02 of the JV Agreement
as its respective initial Capital Contribution. No Member shall be required to
make any additional Capital Contributions; provided, however, that the Members
-------- -------
may be permitted to make additional Capital Contributions if and to the extent
they so desire, in accordance with the provisions of Section 4.04.
(b) The Company shall establish and maintain a separate Capital Account
for each Member in accordance with Regulations Section 1.704-1(b)(2)(iv). Each
Member shall receive a credit to its Capital Account in the amount of (i) the
amount of any Capital Contribution made in cash, (ii) the fair market value (net
of liabilities that the Company is considered to assume, or take subject to,
under Section 752 of the Code) of any Capital Contribution made in property
other than cash, and (iii) allocations to such Member of Net Profits. Each
Member's Capital Account shall be debited with (i) the amount of any cash and
the fair market value of property distributed to such Member (net of liabilities
that such Member is considered to assume or take subject to Section 752 of the
Code), all as may be determined in accordance with this Agreement, and (ii)
allocations of Net Losses. If a Member transfers all or a part of
7
<PAGE>
its Membership Interest in accordance with this Agreement, such Member's Capital
Account attributable to the transferred Membership Interest shall carry over to
the new owner of such Membership Interest pursuant to Regulations Section 1.704-
1(b)(2)(iv)(l). If any property other than cash is distributed to a Member, the
Capital Accounts of the Members shall be adjusted as if the property had instead
been sold by the Company for a price equal to its fair market value and the
proceeds distributed. Upon liquidation and winding-up of the Company, any
unsold Company property shall be valued to determine the gain or loss which
would result if such property were sold at its fair market value at the time of
such liquidation. The Capital Accounts of the Members shall be adjusted to
reflect how any such gain or loss would have been allocated under Article V if
such property had been sold at the assigned values.
(c) The Capital Accounts of the Members shall be increased or decreased in
accordance with Regulations Section 1.704-1(b)(2)(iv)(f) to reflect a
revaluation of the property of the Company on the Company's books as of the
following times: (i) the acquisition of an additional interest in the Company
by any new or existing Member in exchange for more than a de minimis capital
----------
contribution; (ii) the distribution by the Company to a Member of more than a de
--
minimis amount of money or other property as consideration for an interest in
- -------
the Company; and (iii) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g).
(d) Except as provided herein, no Member shall be entitled to receive any
interest or other earnings on its Capital Contributions.
(e) Except upon the dissolution of the Company or as may be specifically
provided in this Agreement, no Member shall have the right to demand or receive
the return of all or any part of its Capital Account or its capital
contributions to the Company.
(f) The Percentage Interests of the Members at the Effective Time shall be
___% with respect to FAREISI Subsidiary 1, ___% with respect to FAREISI
Subsidiary 2, ___% with respect to FAREISI Subsidiary 3, ___% with respect to
FAREISI Subsidiary 4, ___% with respect to FAREISI Subsidiary 5, ___% with
respect to FAREISI Subsidiary 6, FAREISI Subsidiary 7, ___% with respect to
FAREISI Subsidiary 8, ___% with respect to FAREISI Subsidiary 9, ___% with
respect to FAREISI Subsidiary 10, ___% with respect to DOCS, ___% with respect
to SMS and 20% with respect to EXPERIAN. Immediately following any additional
Capital Contributions, the Percentage Interests shall be adjusted by the
Management Committee to reflect the new relative proportions of the Capital
Accounts of the Members.
2.023. Name of the Company. The name of the Company shall be "First
-------------------
American Real Estate Solutions LLC." The business of the Company may be
conducted under that name or, upon compliance with applicable laws, any other
name that the Management Committee deems appropriate or advisable. The Managers
shall file any fictitious name certificates and similar filings, and any
amendments thereto, that the Management Committee considers appropriate or
advisable. Notwithstanding the foregoing, the Company shall not use the name
"Experian" in the conduct of its business except as expressly permitted by the
Trademark License Agreement or as otherwise agreed to in writing by EXPERIAN.
8
<PAGE>
2.024 Effectiveness; Term. Notwithstanding any other provision of this
-------------------
Agreement to the contrary, this Agreement shall be effective as between the
Members at the Effective Time and shall continue in effect until November 30,
2027, unless extended or sooner terminated as hereinafter provided; provided
--------
that at the Effective Time the term of this Agreement shall be deemed to have
commenced on the filing of the Articles.
2.025. Principal Office and Registered Agent. The Company shall
-------------------------------------
continuously maintain an office and registered agent in the State of California.
The principal office of the Company shall be located at 150 Second Avenue, Suite
1600, St. Petersburg, Florida 33701 or as the Management Committee may otherwise
determine. The Company may also have such offices, anywhere within and without
the State of California, as the Management Committee may determine from time to
time, or the business of the Company may require. The registered agent shall be
as stated in the Articles or as otherwise determined by the Management
Committee.
2.026. Addresses of the Members and the Managers. The respective addresses
-----------------------------------------
of the Members and the Managers are set forth on Exhibit A. A Member shall
notify the Management Committee of any change in its address by delivering
written notice thereof to the Management Committee.
2.027. Purpose and Business of the Company. The purpose of the Company is
-----------------------------------
to engage in any lawful activity for which a limited liability company may be
organized under the Act.
ARTICLE III
THE MEMBERS
3.001. Limited Liability. Except as expressly set forth in this Agreement
-----------------
or required by law, no Member shall be personally liable for any debt,
obligation, or liability of the Company, whether that liability or obligation
arises in contract, tort, or otherwise.
3.002. Admission of Additional Members. Except for the admission of
-------------------------------
substitute Members in accordance with Article VI, no additional Members shall be
admitted to the Company.
3.003. Termination of Membership Interest. Upon the transfer of a Member's
----------------------------------
Membership Interest in violation of Article VI or the occurrence of a
Dissolution Event as to such Member which does not result in the dissolution of
the Company under Article VIII, the Membership Interest of a Member shall be
terminated by the Management Committee and thereafter that Member shall be
entitled only to the amounts set forth in Section 8.03. Each Member acknowledges
and agrees that such termination or purchase of a Membership Interest upon the
occurrence of any of the foregoing events is not unreasonable under the
circumstances existing as of the date hereof.
9
<PAGE>
3.004. Absence of Management Powers. The Members shall have no power to
----------------------------
participate in the management of the Company except as expressly authorized by
this Agreement or the Articles and except as expressly required by the Act. No
Member, acting solely in the capacity of a Member, is an agent of the Company
nor does any Member, unless expressly and duly authorized in writing to do so by
the Management Committee, have any power or authority to bind or act on behalf
of the Company in any way, to pledge its credit, to execute any instrument on
its behalf or to render it liable for any purpose.
3.005. Unanimous Consent of Members. Notwithstanding Section 3.04 and
----------------------------
Article IV, the following matters shall require the unanimous vote, approval or
consent of all Members who are not the subject of a Dissolution Event:
(a) a decision to dissolve the Company or voluntarily terminate this
Agreement or voluntarily commence a case concerning itself under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect;
(b) a decision to continue the business of the Company after the
occurrence of a Dissolution Event;
(c) any amendment of the Articles, By-Laws or, in accordance with
Section 10.02, this Agreement; and
(d) a decision to compromise the obligation of a Member to make a
Capital Contribution or return money or property paid or distributed in
violation of the Act.
ARTICLE IV
MANAGEMENT COMMITTEE; MAJOR DECISIONS
4.001. Management By Management Committee. The business, property and
----------------------------------
affairs of the Company shall be managed exclusively by the Management Committee.
The Management Committee shall consist of ten managers (each, a "Manager").
Except for situations in which the approval of the Members is expressly required
by the Articles, the Act or this Agreement, the Management Committee shall have
full, complete and exclusive authority, power, and discretion to manage and
control the business, property and affairs of the Company, to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business, property and
affairs. Without limiting the generality of the foregoing, but subject to
Section 2.04 and to the express limitations set forth elsewhere in this
Agreement, the Management Committee shall have the power to exercise on behalf
and in the name of the Company all of the powers described in Corporations Code
Section 17003.
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4.002. Management Committee Representation; Officers.
---------------------------------------------
(a) So long as EXPERIAN shall own at least a 10% Membership Interest in
the Company, the number of Managers of the Company shall be ten, and the FAFCO
Members shall designate eight Managers (the "FAFCO Managers") and EXPERIAN shall
designate two Managers of the Company (the "Experian Managers"). The FAFCO
Members shall be entitled to remove or replace any FAFCO Manager in their sole
discretion upon written notice to EXPERIAN and the Company. EXPERIAN shall be
entitled to remove or replace any Experian Manager in its sole discretion upon
written notice to FAFCO and the Company. Each Manager of the Company so
designated shall hold office, subject to the applicable provisions of the
Articles and By-Laws of the Company, until the next annual meeting of the
Members and until their respective successors shall be duly elected or appointed
and qualified. Each member of the Management Committee shall have one vote, and
the vote of the majority of the members of the Management Committee
participating in a meeting of the Management Committee (subject to the quorum
requirements set forth in the By-Laws) shall constitute the act of the
Management Committee, unless otherwise expressly set forth herein.
(b) The Members acknowledge that the Managers are appointed to represent
and serve the interests of the Members who appointed such Managers. The Members
agree that no such Manager shall have any liability (including, without
limitation, for any claim of breach of fiduciary duty) to the Company or to any
Member as a result of taking any action as a Manager, or as an officer or
director of a Member, which action the Manager reasonably believes to be in the
best interests of the Member he or she represents.
(c) At the Effective Time, each individual listed on Schedule 1 hereto
shall become an officer of the Company holding the office(s) of the Company set
forth opposite his or her name on Schedule 1 hereto and shall, subject to the
applicable provisions of the Articles and By-Laws of the Company, hold such
office(s) until his or her successor shall be duly elected or appointed and
qualified. Without limiting the foregoing, John Long shall be elected the
President and Chief Executive Officer of the Company until his successor shall
be duly elected or appointed and qualified.
4.003. Major Decisions. Except for the transactions described on Schedule 2
---------------
which are hereby approved, so long as EXPERIAN shall own at least a 10%
Membership Interest in the Company, and subject to the provisions of Sections
4.04 and 4.05 below, the Company shall not take, or permit to occur, any action
which would constitute a Major Decision without the prior written consent of the
Experian Managers. Notwithstanding the preceding sentence, if the Company seeks
the written consent of the Experian Managers to take, or permit to occur, any
action which would constitute a Major Decision and the Experian Managers fail to
respond to such consent request by the thirtieth (30th) day after such written
consent is delivered to the Experian Managers via registered mail, return
receipt requested, then the Company shall, without further action, be entitled
to take, or permit to occur, any such action. Each of the following acts, events
or occurrences shall constitute a "Major Decision":
(a) any acquisition by the Company of any business of another Person, or
of any property, securities, rights or other assets in one or a series of
related transactions
11
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if (i) the consideration for such acquisition exceeds, in the aggregate, US
$5,000,000 or (ii) the Company is required to make a cash down-payment in excess
of $1,250,000 in connection with such acquisition (regardless of the aggregate
consideration involved in such acquisition).
(b) any sale, transfer or other disposition of assets of the Company,
other than in the ordinary course of business, with a fair market value at
the time of such sale, transfer or disposition exceeding, in the aggregate,
US $5,000,000.
(c) the adoption, filing or amendment of any designation of rights,
preferences and privileges with respect to any equity security of the
Company;
(d) the issuance, redemption or repurchase by the Company of any
Membership Interest or any other equity security of the Company to any
Person;
(e) other than borrowings made, or permitted to be made, under the
Company's borrowing facilities listed on Schedule 3 hereto (together with
any extensions or refinancings thereof which do not increase the aggregate
principal amount of borrowings permitted to be made thereunder) and
Voluntary Loans, the borrowing of any sums of money;
(f) the creation of any liens or encumbrances on any of the Company's
assets, other than the creation of liens and encumbrances (i) securing
borrowings permitted under paragraph (e) above; (ii) liens for taxes not yet
due, or liens for taxes being contested in good faith and by appropriate
proceedings for which adequate reserves have been established; (iii) liens in
respect of property or assets of the Company imposed by law, which were incurred
in the ordinary course of business, including without limitation, carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business and (x) which do not in the aggregate materially
detract from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company or (y) which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established, which proceedings have the effect of preventing
the forfeiture or sale of the property or assets subject to any such lien; (iv)
pledges or deposits in connection with worker's compensation, unemployment
insurance and other social security legislation; or (v) constituting purchase
money security interests;
(g) except as provided in paragraphs (a) and (b) of this Section 4.03, any
loan or other use of the Company's assets with a fair market value in excess of
$1,250,000 to, or the Company making an investment in, any Person not a Member
or an Affiliate of a Member; provided, however, the Company may loan or permit
the use of the Company's assets if the fair market value thereof does not
singularly or in the aggregate exceed $1,250,000;
12
<PAGE>
(h) any change in the character of the business of the Company or the
undertaking of any new ventures or transactions or the engaging in any type
of business not incidental and directly related to the Company's present
business;
(i) the sale or other disposition of all or substantially all of the
assets and property of the Company;
(j) the merger or consolidation of the Company with or into any other
limited liability company or any corporation or other entity;
(k) except as contemplated by Sections 4.04 and 4.05, any transaction,
whether or not evidenced by a written agreement, between the Company, on the one
hand, and FAFCO or its Affiliates, on the other hand, involving estimated
consideration in excess of $25,000 over any twelve-month period;
(l) any determination by the Company to require that each of FAFCO and
EXPERIAN provide a guaranty to a third party in accordance with the provisions
of Section 5.09 of the JV Agreement; provided that if the Experian Managers fail
to consent to a request for such guaranties, then the FAFCO Members and their
Affiliates (including, without limitation, FAFCO) shall nevertheless have the
right, but not the obligation, to provide any such guaranties upon such terms
and conditions as they (or any of them) shall determine in their (or its) sole
and absolute discretion; or
(m) any sale or other transfer by the Company of RES Data to an
entity in a market served by EXPERIAN.
4.004. Acquisition Approval; Additional Capital.
----------------------------------------
(a) Upon the approval of any acquisition described in clause (a) of
Section 4.03 in accordance with the provisions of Section 4.03, any action
thereafter necessary or desirable in respect of such acquisition and any
additional terms of such acquisition (including, without limitation, the source
and the nature of the capital needed, if any), may be approved by the
affirmative vote of a majority of the Managers (whether or not such majority
includes the Experian Managers). Without limiting the generality of the
foregoing, if, in connection with any such approved acquisition, the Management
Committee shall determine that additional capital is required by the Company,
the Management Committee may request that each of the Members contribute such
additional capital in proportion to the Percentage Interests then held by each
of them. Subject to clause (b) below, the Company shall accept from each of the
FAFCO Members and EXPERIAN a contribution only in the full amount of its share
of the additional capital requested. The contribution shall be in such form,
cash or otherwise, as the Management Committee shall determine.
(b) Upon receipt by EXPERIAN of any request from the Management Committee
for an additional capital contribution pursuant to clause (a) above, EXPERIAN
shall have the option to contribute or decline to contribute such additional
capital by delivering a written notice to the Company and each of the FAFCO
Members specifying its election not more than
13
<PAGE>
30 days after its receipt of such request for additional capital (it being
understood and agreed that if such written notice is not delivered within the 30
day period provided, EXPERIAN shall be deemed to have elected not to contribute
such additional capital). In the event that EXPERIAN elects not to contribute
its proportionate share of additional capital as requested (the "Requested
Amount"), the FAFCO Members (or any of them) shall have the right, but not the
obligation, to contribute to the Company for their (or its) own account as an
additional capital contribution the Requested Amount. EXPERIAN shall not be
considered in breach of this Agreement as a result of its election not to
contribute the Requested Amount.
(c) If any of the Members makes an additional contribution as provided in
this Section 4.04, then each such Member shall receive a credit to its
respective Capital Account in the amount of any additional capital which it has
contributed to the Company. Immediately following such Capital Contributions,
the Percentage Interests of the Members shall be adjusted by the Management
Committee to reflect the new relative proportions of the Capital Accounts of the
Members. Such adjustment shall be made by: first, adjusting the Capital
Accounts of all of the Members to reflect the fair market value of the Company's
assets and shall include any unrealized income, gain, loss or deduction in
Company assets immediately prior to the additional Capital Contributions;
second, determining relative proportions of the Capital Accounts, taking into
account the new Capital Contributions; and third, adjusting the Percentage
Interests to reflect the relative portions of the Capital Accounts as so
adjusted.
(d) In the event that the Experian Managers fail to consent pursuant to
Section 4.03 hereof to any acquisition described in clause (a) of such Section
4.03 that is proposed by the FAFCO Members or the FAFCO Managers, the FAFCO
Members and their Affiliates (including, without limitation, FAFCO) shall be
free to pursue such proposed acquisition and neither the Company nor EXPERIAN
nor its Affiliates shall have any right, claim or interest in or to any revenues
resulting therefrom. In the event that the FAFCO Managers fail to consent
pursuant to Section 4.03 hereof to any acquisition described in clause (a) of
such Section 4.03 that is proposed by EXPERIAN or the Experian Managers,
EXPERIAN and its Affiliates shall be free to pursue such proposed acquisition
and neither the Company nor the FAFCO Members shall have any right, claim or
interest in or to any revenues resulting therefrom. In the event that the
Company fails to diligently pursue any acquisition described in clause (a) of
Section 4.03 that is approved by the Management Committee in accordance with the
terms of such Section 4.03, then the party that proposed such acquisition to the
Company shall be free to pursue such acquisition (so long as the Company's
failure to diligently pursue such acquisition is not attributable to such
party's actions) and neither the Company nor any other Member nor any of such
Member's Affiliates shall have any right, claim or interest in or to any
revenues resulting therefrom.
4.005. Voluntary Loans.
---------------
(a) If, at any time or times hereafter, the Management Committee shall
determine that additional financing is required by the Company to conduct its
business and operations according to its ordinary and usual course of business
or in connection with any acquisition described in clause (a) of Section 4.03
and approved in accordance with the provisions of Section 4.03, the Management
Committee may request that each of the FAFCO Members and
14
<PAGE>
EXPERIAN make one or more loans on a voluntary basis to the Company ("Voluntary
Loans"). The timing, terms and conditions of each such Voluntary Loan shall be
subject to the approval of each of the parties hereto; provided that in no event
--------
shall any Voluntary Loan bear interest in excess of the Prime Rate.
(b) Notwithstanding any other provision of this Agreement, for the three
year period from and after the Effective Time until the third anniversary
thereof, the FAFCO Members (or any of them) may at any time and from time to
time, without the consent of EXPERIAN or the Experian Managers, borrow money
from or lend money to the Company. Such borrowings and loans shall bear
interest at the Prime Rate and shall be disregarded for purposes of the
declaration and payment of distributions by the Management Committee of the
Company pursuant to Section 5.05. In the event that borrowings by any FAFCO
Member from the Company exceed loans made by such FAFCO Member to the Company
(in each case taking into account accrued but unpaid interest) at the time any
distribution is declared, the amount of the distribution to such FAFCO Member
shall be reduced by the amount of such excess.
ARTICLE V.
ALLOCATIONS OF NET PROFITS AND NET LOSSES; DISTRIBUTIONS
5.001. Allocations of Net Profit and Net Loss.
--------------------------------------
(a) Net Loss. Net Loss shall be allocated to the Members in proportion to
--------
their Percentage Interests.
Notwithstanding the previous sentence, losses allocated to a Member shall
not exceed the maximum amount of losses that can be allocated without causing a
Member to have an Adjusted Capital Account Deficit at the end of any Fiscal
Year. In the event that any Member would have an Adjusted Capital Account
Deficit as a consequence of an allocation of losses in proportion to Percentage
Interests, the amount of losses that would be allocated to such Member but for
such allocation shall be allocated to the other Members to the extent that such
allocations would not cause such other Members to have an Adjusted Capital
Account Deficit and allocated among such other Members in proportion to their
Percentage Interests. Any allocation of items of loss pursuant to this Section
5.01(a) shall be taken into account in computing subsequent allocations pursuant
to this Article V, and prior to any allocation of items in such Section so that
the net amount of any items allocated to each Member pursuant to this Article V
shall, to the maximum extent practicable, be equal to the net amount that would
have been allocated to each Member pursuant to this Article V if no reallocation
of losses had occurred under this Section 5.01(a).
(b) Net Profit. Net Profit shall be allocated to the Members in
----------
proportion to their Percentage Interests.
5.002. Special Allocations. Notwithstanding Section 5.01, the following
-------------------
special allocations shall be made in the following order:
15
<PAGE>
(a) Minimum Gain Chargeback. If there is a net decrease in Company
-----------------------
Minimum Gain during any Fiscal Year, each Member shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary, in
subsequent fiscal years) in an amount equal to the portion of such Member's
share of the net decrease in Company Minimum Gain that is allocable to the
disposition of Company property subject to a Nonrecourse Liability, which share
of such net decrease shall be determined in accordance with Regulations Section
1.704-2(g)(2). Allocations pursuant to this Section 5.02(a) shall be made in
proportion to the respective amounts required to be allocated to each Member
under this Section 5.02(a). The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 5.02(a) is intended to comply with the minimum gain chargeback
requirement contained in Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith. To the extent permitted by such Regulations and for
purposes of this Section 5.02(a) only, each Member's net decrease in Company
Minimum Gain shall be determined prior to any other allocations pursuant to this
Article V with respect to such Fiscal Year and without regard to any net
decrease in Company Minimum Gain during such Fiscal Year.
(b) Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt.
------------------------------------------------------------------
If there is a net decrease in Member Minimum Gain attributable to Member
Nonrecourse Debt, during any Fiscal Year, each member who has a share of the
Member Minimum Gain attributable to such Member Nonrecourse Debt (which share
shall be determined in accordance with Regulations Section 1.704-2(i)(5)) shall
be specially allocated items of Company income and gain for such Fiscal Year
(and, if necessary, in subsequent Fiscal Years) in an amount equal to that
portion of such Member's share of the net decrease in Member Minimum Gain
attributable to such Member Nonrecourse Debt that is allocable to the
disposition of Company property subject to such Member Nonrecourse Debt (which
share of such net decrease shall be determined in accordance with Regulations
Section 1.704-2(i)(5)). Allocations pursuant to this Section 5.02(b) shall be
made in proportion to the amounts required to be allocated to each Member under
this Section 5.02(b). The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii). This
Section 5.02(b) is intended to comply with the minimum gain chargeback
requirement contained in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith. Solely for purposes of this Section
5.02(b), each Member's net decrease in Member Minimum Gain shall be determined
prior to any other allocations pursuant to this Article V with respect to such
Fiscal Year, other than allocations pursuant to Section 5.02(a).
(c) Qualified Income Offset. If a Member unexpectedly receives any
-----------------------
adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be
specifically allocated to such Member in an amount and manner sufficient to
eliminate such excess deficit balance as quickly as possible. Any specific
allocations of items of income and gain pursuant to this Section 5.02(c) shall
be taken into account in computing subsequent allocations of income and gain
pursuant to this Article V so that the net amount of any item so allocated and
the income, gain, and losses allocated to each Member pursuant to this Article V
to the extent possible, shall be equal to the net amount that would have been
allocated to each such Member pursuant to the provisions of this Section 5.02(c)
if such unexpected adjustments, allocations, or distributions had not
16
<PAGE>
occurred, provided that an allocation pursuant to this Section 5.02(c) shall be
made if and only to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Article V have
been tentatively made as if this Section 5.02(c) were not in this Agreement.
The foregoing provision is intended to comply with Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted and applied in a manner consistent with
such Regulations.
(d) Gross Income Allocation. In the event that any Member has an Adjusted
-----------------------
Capital Account Deficit at the end of any Fiscal Year, then each such Member
shall be specially allocated items of income in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section
5.02(d) shall be made if and only to the extent that such Member would have an
Adjusted Capital Account Deficit in excess of such sum after all other
allocations provided for in this Article V have been tentatively made as if this
Section 5.02(d) were not in this Agreement.
(e) Nonrecourse Deductions. Any nonrecourse deductions (as defined in
----------------------
Regulations Section 1.704-2(b)(1)) for any Fiscal Year or other period shall be
specially allocated to the Members in proportion to their then respective
Percentage Interests.
(f) Member Nonrecourse Deductions. Those items of Company loss,
-----------------------------
deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to
Member Nonrecourse Debt for any Fiscal Year or other period shall be specially
allocated to the Member who bears the economic risk of loss with respect to the
Member Nonrecourse Debt to which such items are attributable in accordance with
Regulations Section 1.704-2(i).
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted
-----------------------
tax basis of any Company asset is required to be taken into account in
determining Capital Accounts pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m), the amount of such adjustment to the Capital Account shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such gain or loss shall be
specially allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Regulations Section.
(h) Subsequent Allocations. Any special allocation of items of income or
----------------------
gain pursuant to Section 5.02(a), (b), (c) or (d) shall be taken into account in
computing subsequent allocations pursuant to this Article V, so that the net
amount of any items allocated to each Member shall, to the extent practicable,
be equal to the net amount that would have been allocated to each such Member
pursuant to the provisions of this Article V if such special allocations under
this Section 5.02 had not occurred.
5.03. Code Section 704(c) Allocations. Notwithstanding any other provision
-------------------------------
in this Article V, in accordance with Code Section 704(c) and the Regulations
promulgated thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its fair market value on the date of contribution. Allocations
17
<PAGE>
pursuant to this Section 5.03 are solely for purposes of federal, state and
local taxes. As such, they shall not affect or in any way be taken into account
in computing a Member's Capital Account or share of profits, losses, or other
items of distributions pursuant to any provision of this Agreement.
5.04. Allocations of Net Profits and Losses and Distributions in Respect of
---------------------------------------------------------------------
a Transferred Interest. If any Membership Interest is transferred, or is
- ----------------------
increased or decreased by reason of the admission of a new Member or otherwise,
during any Fiscal Year of the Company, Net Profit or Net Loss for such Fiscal
Year shall be assigned pro rata to each day in the particular period of such
Fiscal Year to which such item is attributable (i.e., the day on or during which
it is accrued or otherwise incurred) and the amount of each such item so
assigned to any such day shall be allocated to the Member based upon its
respective Membership Interest at the close of such day.
5.05. Distributions by the Company.
----------------------------
(a) Subject to applicable law and any limitations contained elsewhere in
this Agreement (including, without limitation, Section 4.05(b)), the Management
Committee (i) shall, at the time of any payment by the Members in respect of
their income tax obligations attributable to their respective Membership
Interests, distribute to the Members, based upon their then respective
Percentage Interests, 40% (which percentage the Management Committee may from
time to time hereafter, upon the unanimous vote of the Managers, adjust to
reflect material changes in tax rates) of the Net Profits and (ii) may, in its
sole discretion, elect from time to time to otherwise distribute Distributable
Cash to the Members; provided that, except as contemplated by clause (i), (x)
--------
the Management Committee shall not make any distribution unless the Company's
obligation to EXPERIAN under the $3MM Note shall have been satisfied in full and
(y) subject to satisfaction of the condition set forth in preceding subclause
(x), (1) for the three year period from and after the Effective Time until the
third anniversary thereof, the Management Committee shall not make any
distribution unless (A) the Company's obligation to FAFCO under the $25MM Note
shall have been satisfied in full and (B) the Company shall have, both before
and after giving effect to such distribution, operating cash balances of not
less than $35,000,000 (as such amount may from time to time hereafter be
adjusted in good faith by the Management Committee to reflect the average
monthly expenses of the Company) and (2) for the four year period from and after
the third anniversary of the Effective Time until the seventh anniversary of the
Effective Time, the Management Committee shall distribute for each year of such
period an amount equal to not less than one-half of the difference of (A) the
Net Profits for the applicable year minus (B) any distribution made pursuant to
-----
clause (i) above for such year.
(b) All distributions hereunder shall be made in the following order of
priority:
(i) To the Members in proportion to their unreturned Capital
Contributions until each Member has received cumulative distributions from
the Effective Date through the date of such distribution equal to its
Capital Contributions; and
(ii) To the Members in proportion to their Percentage Interests.
18
<PAGE>
All such distributions shall be made only to the Persons who, according to the
books and records of the Company, are the holders of record of the Membership
Interests in respect of which such distributions are made on the actual date of
distribution.
5.06. Form of Distribution. A Member, regardless of the nature of the
--------------------
Member's Capital Contribution, has no right to demand and receive any
distribution from the Company in any form other than money. Except as provided
in Article VIII, no Member may be compelled to accept from the Company a
distribution of any asset in kind in lieu of a proportionate distribution of
money being made to other Members.
5.07. Restriction on Distributions.
----------------------------
(a) Except for distributions to the Members in accordance with Section
5.05(a)(i), no distribution shall be made if, after giving effect to the
distribution:
(i) The Company would not be able to pay its debts as they become
due in the usual course of business; or
(ii) The Company's total assets would be less than the sum of its
total liabilities plus, unless this Agreement provides otherwise, the
amount that would be needed, if the Company were to be dissolved at the
time of the distribution, to satisfy the preferential rights of other
Members, if any, upon dissolution that are superior to the rights of the
Member receiving the distribution.
(b) The Management Committee may base a determination that a distribution
is not prohibited on any of the following:
(i) Financial statements prepared in accordance with GAAP;
(ii) A fair valuation; or
(iii) Any other method that is reasonable in the circumstances.
5.08. Return of Distributions. Members who receive distributions made in
-----------------------
violation of the Act or this Agreement shall return such distributions to the
Company. Except for those distributions made in violation of the Act or this
Agreement, no Member shall be obligated to return any distribution to the
Company or pay the amount of any distribution for the account of the Company or
to any creditor of the Company. The amount of any distribution returned to the
Company by a Member or paid by a Member for the account of the Company or to a
creditor of the Company shall be added to the account or accounts from which it
was subtracted when it was distributed to the Member.
19
<PAGE>
ARTICLE VI
MEMBERSHIP INTEREST TRANSFER RESTRICTIONS
6.01. Transfer Restrictions. EXCEPT FOR TRANSFERS REQUIRED OR PERMITTED
---------------------
PURSUANT TO ARTICLE VI OF THE JV AGREEMENT OR THIS ARTICLE VI, EACH MEMBER
AGREES THAT IT WILL NOT IN ANY WAY, DIRECTLY OR INDIRECTLY, TRANSFER ITS
MEMBERSHIP INTEREST (WHETHER NOW OWNED OR HEREAFTER ACQUIRED), OR ANY RIGHT OR
INTEREST THEREIN, WHETHER VOLUNTARILY OR BY OPERATION OF LAW.
6.02. Further Restrictions on Transfer of Interests. In addition to other
---------------------------------------------
restrictions found in this Agreement, no Member shall Transfer all or any part
of its Membership Interest: without compliance with all federal and state
securities laws, and if the Membership Interest to be transferred, when added
to the total of all other Membership Interests transferred in the preceding
twelve (12) consecutive months prior thereto, would cause the tax termination of
the Company under Code Section 708(b)(1)(B).
6.03. Void Transfer. Any purported transfer of any Member's Membership
-------------
Interest in violation of Sections 6.01 and 6.02 shall be void and the Company
shall not give effect to any such purported transfer or recognize any such
purported transferee. In the event of any such purported transfer, the Company
shall continue to recognize as a Member only those persons whose names appear in
the records of the Company.
6.04. Permitted Transfers.
-------------------
(a) Notwithstanding anything to the contrary contained in this Article
VI, any Member may effect a Transfer upon the terms and conditions of this
Section 6.04 set forth below (each a "Permitted Transfer" and each transferee
thereof, a "Permitted Transferee").
(b) The Membership Interest of any Member may be transferred to any other
Member, subject to compliance with Section 6.02, and without the prior written
consent of the other Members or the Management Committee.
(c) If any Member desires to sell all or any part of its Membership
Interest (other than pursuant to Section 6.04(b)) and (i) is not otherwise
prohibited from doing so under this Section 6.04 and (ii) identifies a proposed
Transferee that is willing to purchase all or part of such Membership Interest
for cash (a "Proposed Transferee"), such Member shall first offer to sell the
Offered Interest to the other Members (the "Offer") by giving the other Members
written notice thereof (an "Offer Notice") specifying (A) the identity of the
Proposed Transferee, (B) the Membership Interest offered (the "Offered
Interest"), (C) the price at which the Proposed Transferee is willing to
purchase the Offered Interest (the "Offering Price") and (D) any other terms of
the Offer (the "Offer Terms"). Following its receipt of an Offer Notice, each
Member shall have a ten (10) day period during which it may elect to accept the
Offer and acquire all or a portion of the Offered Interest at the Offering Price
and upon the Offer Terms. The failure of any Member to deliver a written
election notice within
20
<PAGE>
the applicable period shall constitute an election on the part of that Member
not to purchase any of the Offered Interest. Each Member so electing to acquire
shall be entitled to purchase a portion of the Offered Interest in the same
proportion that the Percentage Interest of such Member bears to the aggregate of
the Percentage Interests of all of the Members electing to so purchase the
Offered Interest. In the event any Member elects to purchase none or less than
all of its pro rata share of the Offered Interest, then each other Member can
elect to purchase any such remaining portion of the Offered Interest in the same
proportion that the Percentage Interest of such Member bears to the aggregate of
the Percentage Interests of all of the Members electing to so purchase the
remaining portion of the Offered Interest.
(d) In the event the other Members elect not to purchase or obtain all of
the Offered Interest (an "Offer Rejection"), the transferring Member shall be
free, subject to compliance with the tag-along provisions of Section 6.04(e)
below, if applicable, to sell the Offered Interest to the Permitted Transferee
at the Offering Price and upon the Offer Terms. If such sale is not consummated
at the Offering Price and upon the Offer Terms within sixty (60) days from the
date of the Offer Rejection, then the provisions of Section 6.04(c) shall once
again apply.
(e) In the event that any FAFCO Member proposes to effect a Permitted
Transfer of all or any part of its Membership Interest pursuant to Section
6.04(d) above, such transferring FAFCO Member shall promptly give written notice
(such notice, a "Transfer Notice") thereof to EXPERIAN setting forth the name
of, and the portion of its Membership Interest to be purchased by, the Permitted
Transferee, the purchase price of the Membership Interest to be sold, any other
significant terms of such sale and the date such proposed sale will be
consummated. EXPERIAN shall have the right, exercisable upon irrevocable written
notice to the transferring FAFCO Member within ten (10) days after receipt of a
Transfer Notice, to participate in such sale on the same terms and conditions as
set forth in the Transfer Notice and to sell all or any portion of its
Membership Interest. EXPERIAN shall effect its participation in the sale by
delivering on the date scheduled for such sale to the transferring FAFCO Member
for delivery to the Permitted Transferee one or more certificates, if any,
representing the Membership Interest which EXPERIAN desires to sell in
accordance with this Section 6.04(e) and/or any other duly executed instruments
of transfer necessary to effect the transfer of its Membership Interest. Such
certificate or certificates and/or instruments of transfer delivered by EXPERIAN
to the transferring FAFCO Member shall be delivered on such date to such
Permitted Transferee in consummation of the sale of EXPERIAN's Membership
Interest pursuant to the terms and conditions specified in the Transfer Notice,
and the transferring FAFCO Member shall concurrently therewith remit to EXPERIAN
that portion of the sale proceeds or other consideration to which EXPERIAN is
entitled by reason of its participation in such sale. A transferring FAFCO
Member's sale of all or any portion of its Membership Interest shall be effected
on the terms and conditions set forth in the applicable Transfer Notice. In no
event shall a transferring FAFCO Member receive special consideration in such
sale. The exercise or non-exercise of the rights of EXPERIAN hereunder to
participate in one or more sales of a Membership Interest made by a FAFCO Member
shall not adversely affect its right to participate in subsequent sales of any
Membership Interest subject to this Section 6.04.
21
<PAGE>
6.05. Third-Party Offers. Notwithstanding anything to the contrary
------------------
contained in this Article VI, in the event that an offer is made by an unrelated
third-party to purchase the entire Company (a "Third-Party Offer") and such
Third-Party Offer is acceptable to the FAFCO Members, then the FAFCO Members
shall first offer to sell 100% of their Membership Interests to EXPERIAN by
giving EXPERIAN written notice thereof specifying the terms of the Third-Party
Offer upon which the FAFCO Members are willing to sell their Membership
Interests (the "Third-Party Terms"). Following its receipt of such notice
pursuant to this Section 6.05, EXPERIAN shall have a thirty (30) day period
during which it may elect to acquire all of the Membership Interests of the
FAFCO Members upon the Third-Party Terms. In the event that EXPERIAN rejects the
offer of the FAFCO Members hereunder or fails to deliver a written notice
accepting such offer within the applicable period, (a) the FAFCO Members shall
be free to sell their Membership Interests to such third-party purchaser upon
the Third-Party Terms and (b) EXPERIAN shall be obligated to sell its Membership
Interest to such third-party purchaser upon the Third-Party Terms and otherwise
upon terms no less favorable than those given by the third-party purchaser to
the FAFCO Members (pro rata based upon the relative size of the Membership
--- ----
Interest of EXPERIAN vis-a-vis the aggregate Membership Interests of the FAFCO
Members).
ARTICLE VII
BUSINESS OPPORTUNITIES
7.01. Business Opportunities.
----------------------
(a) If the Company becomes aware of any Company Development Opportunity,
the Management Committee will give due consideration to the desirability of
pursuing such Company Development Opportunity. Except as provided in Section
7.01(c), if the Company does not promptly pursue such Company Development
Opportunity, each of the Members and their respective Affiliates shall be free
to pursue such Company Development Opportunity and the Company shall not have
any right, claim or interest in or to any revenues or assets resulting
therefrom.
(b) Should any Member or any of its Affiliates discover, develop or be
offered a Company Development Opportunity, such Person will first offer such
Company Development Opportunity to the Company. Except as provided in Section
7.01(c), if the Management Committee does not promptly pursue such Company
Development Opportunity, then the Person discovering, developing or being
offered such Company Development Opportunity and its Affiliates shall be free to
pursue such Company Development Opportunity and neither the Company nor any
other Member shall have any right, claim or interest in or to any revenues or
assets resulting therefrom.
(c) Notwithstanding anything in Sections 7.01(a) and 7.01(b) to the
contrary, no FAFCO Member nor any of its Affiliates shall be free to pursue any
Company Development Opportunity offered to but not promptly pursued by the
Company if (i) such Company Development Opportunity was offered to the Company
by a FAFCO Member or any of its
22
<PAGE>
Affiliates and (ii) the Experian Managers voted to pursue such Company
Development Opportunity. Notwithstanding anything in Sections 7.01(a) and
7.01(b) to the contrary, neither EXPERIAN nor any of its Affiliates shall be
free to pursue any Company Development Opportunity offered to but not promptly
pursued by the Company if (i) such Company Development Opportunity was offered
to the Company by EXPERIAN or any of its Affiliates and (ii) the FAFCO Managers
voted to pursue such Company Development Opportunity.
(d) Notwithstanding anything in Sections 7.01(a), 7.01(b) or 7.01(c) to
the contrary, to the extent any provision of this Agreement regarding Company
Development Opportunities conflicts with the Data Services Agreement referenced
in Section 7.01(d) of the JV Agreement, the provisions of the Data Services
Agreement shall control.
ARTICLE VII
CONSEQUENCES OF DISSOLUTION EVENTS;
TERMINATION OF MEMBERSHIP INTEREST
8.01. Dissolution Event. Upon the occurrence of a Dissolution Event, the
-----------------
Company shall dissolve unless the remaining Members ("Remaining Members")
holding a majority of the Percentage Interests which all Remaining Members hold,
consent within ninety (90) days of the Dissolution Event to the continuation of
the business of the Company. If the requisite majority of the Remaining Members
consents to the continuation of the business of the Company, the Company and/or
the Remaining Members shall have the right to purchase, and if such right is
exercised, the Member whose actions or conduct resulted in the Dissolution Event
("Former Member") or such Former Member's legal representative shall sell, the
Former Member's Membership Interest ("Former Member's Interest") as provided in
this Article VIII.
8.02. Withdrawal. Notwithstanding Section 8.01, upon the termination of a
----------
Member's Membership Interest in accordance with Section 3.03, such Member shall
be treated as a Former Member, and, unless the Company is to dissolve, the
Company and/or the Remaining Members shall have the right to purchase, and if
such right is exercised, the Former Member shall sell, the Former Member's
Interest as provided in this Article VIII.
8.03. Purchase Price. The purchase price for the Former Member's Interest
--------------
shall be calculated using the formula for determining the Put Price (as defined
in the JV Agreement), provided that such purchase price shall not be subject to
--------
the limitations contained in Sections 6.01(c) and 7.01(c) of the JV Agreement,
and shall be paid in cash.
8.04. Notice of Intent to Purchase. Within thirty (30) days after the
----------------------------
Management Committee has notified the Remaining Members as to the purchase price
of the Former Member's Interest determined in accordance with Section 8.03, each
Remaining Member shall notify the Management Committee in writing of its desire
to purchase all or a portion of the Former Member's Interest. The failure of
any Remaining Member to submit a notice within the applicable period shall
constitute an election on the part of such Member not to purchase any of the
Former Member's Interest. Each Remaining Member so electing to purchase shall
23
<PAGE>
be entitled to purchase a portion of the Former Member's Interest in the same
proportion that the Percentage Interest of the Remaining Member bears to the
aggregate of the Percentage Interests of all of the Remaining Members electing
to purchase the Former Member's Interest.
8.05. Purchase Pro Rata. If any Remaining Member elects to purchase none or
-----------------
less than all of its pro rata share of the Former Member's Interest, then each
other Remaining Member may elect to purchase any such remaining portion of the
Former Member's Interest in the same proportion that the Percentage Interest of
such Remaining Member bears to the aggregate of the Percentage Interests of all
of the Remaining Members electing to so purchase the remaining portion of the
Former Member's Interest. If the Remaining Members fail to purchase the entire
Membership Interest of the Former Member, the Company shall purchase any
remaining share of the Former Member's Interest.
8.06. Winding Up the Company. If, upon the occurrence of a Dissolution
----------------------
Event, the requisite majority of the Remaining Members fails to consent to the
continuation of the business of the Company, the Management Committee shall
promptly notify the Members of such dissolution and shall wind up the affairs of
the Company and liquidate the Company assets. Such winding up and liquidation
shall be accomplished as soon as practicable giving due regard to the prudent
liquidation of the Company's assets in such a manner as to preserve the value of
the Company's assets to the extent that the Management Committee deems
practicable. Distributions made with respect to the liquidation of the Company
shall be made to the Members no later than ninety days following completion of
the liquidation. The proceeds of such liquidation shall be paid in the
following order:
(a) First, in payment of the debts and liabilities of the Company
and the expenses of liquidation;
(b) Then, to the establishment of such reserves as may be deemed
reasonably necessary by the Management Committee for any contingent or
unforeseen liabilities or obligations of the Company; and
(c) Then, after making all allocations required by Section 5.01, to
Members, in proportion to the positive balance in the Members' respective
Capital Accounts after satisfaction of each Member's obligation to the
Company.
8.07. Final Statement. Each of the Members shall be furnished with a
---------------
statement which shall set forth the assets and liabilities of the Company (as of
the date of complete liquidation) and an accounting of the manner in which the
assets of the Company were distributed.
24
<PAGE>
ARTICLE IX
BOOKS AND RECORDS; TAX RETURNS; ACCESS BY MEMBERS
9.01. Company Books and Records. Proper and complete records and books of
-------------------------
account of the Company business shall be kept by the Company under the
supervision of the Management Committee and shall be audited by certified public
accountants selected by the Management Committee. The financial books of the
Company shall be maintained in accordance with GAAP.
9.02. Tax Returns.
-----------
(a) Preparation; Filing. At the expense of the Company, the Tax Matters
-------------------
Member shall prepare or cause to be prepared all federal and state Company tax
returns required to be file. Except as otherwise expressly provided in this
Agreement, all positions and elections reflected on all Company tax returns
shall be taken, and all Company tax returns shall be filed, only after
consultation with the Members. For federal income tax purposes only, the
Members agree that their relationship under this Agreement shall constitute a
partnership within the meaning of Section 761(a) of the Code. Tax allocations
shall be made in accordance with Article V hereof. The Members agree to take
all action, including the amendment of this Agreement and the execution of other
documents as may be required to qualify for such tax treatment. Each Member
shall bear the sole expense and cost of preparing its separate tax return. Each
Member shall agree to file its separate federal income tax returns in a manner
consistent with the provisions of this Agreement and in accordance with
applicable federal income tax law. The Members shall provide each other with
copies of all correspondence or summaries of other communications with the
Internal Revenue Service or U.S. Treasury regarding any aspect of items of
Company income, gain, loss or deduction and no Member shall enter into
settlement negotiations with the Internal Revenue Service or U.S. Treasury with
respect to the federal income tax treatment of any Company item of income, gain,
loss or deduction without first giving reasonable written advance notice of such
intended action to the other Member.
(b) Tax Matters Member. FAREISI is hereby designated as the "tax matters
------------------
partner", as that term is defined in Section 6231(a)(7) of the Code (the "Tax
Matters Member"). The Tax Matters Member shall furnish promptly to the Internal
Revenue Service a written statement, in accordance with Temporary Treasury
Regulations (S) 301.6223(c)-IT (or any successor thereto) in order to cause the
Internal Revenue Service to mail to each Member all notices described in Section
6223(a) of the Code or any corresponding provision of any successor federal
internal revenue law (and comparable provisions of state and local income tax
laws).
(c) Duties of the Tax Matters Member. The Tax Matters Member shall
--------------------------------
cooperate with the other Members and shall promptly provide the other Members
with copies of notices or other materials from, and inform the other Member of
discussions engaged in with, any federal, state, local or international taxing
authority and shall provide the other Members with notice of all scheduled
administrative proceedings, including meetings with agents of any
25
<PAGE>
federal, state, local or international taxing authority, technical advice
conferences and appellate hearings, as soon as possible after receiving notice
of the scheduling of such proceedings. The Tax Matters Member will schedule
such proceedings only after consulting the other Members with a view to
accommodating the reasonable convenience of both the Tax Matters Member and the
other Members. The Tax Matters Member shall not take any action of any nature
whatsoever including, without limitation, agreeing to extend the period of
limitations for assessments, filing a petition or complaint in any court, filing
a request for an administrative adjustment of Company items after any return has
been filed, or entering into any settlement agreement with the Internal Revenue
Service, the U.S. Treasury or any other federal, state, local or international
taxing authority with respect to Company items of income, gain, loss or
deduction, in any such case without first consulting each other Member. The Tax
Matters Member may request extensions to file any tax return or statement
without consulting with, but shall so inform, the Management Committee. The
provisions of this Agreement regarding the Company's tax returns shall survive
the termination of the Company and the transfer of any Member's Membership
Interest and shall remain in effect for the period of time necessary to resolve
any and all matters regarding the federal, state, local and international income
taxation of the Company and items of Company income, gain, loss and deduction.
9.03. Inspection, Audit and Copies of Records. Each Member shall have the
---------------------------------------
right to inspect, make a separate audit and make copies of the books and records
of the Company. The Member exercising such right shall bear all expenses
incurred in the exercise of these rights.
9.04. Access. Each Member shall have access at reasonable times and upon
------
reasonable notice, without undue disruption of the business and operations of
the Company, to such properties, employees, agents, representatives and
information of the Company as it deems reasonably necessary in connection with
the ownership of its Membership Interest.
ARTICLE X
MISCELLANEOUS
10.01. Specific Performance. Due to the fact that the parties hereto will
--------------------
be irreparably damaged in the event that this Agreement is not specifically
enforced, in the event of a breach or threatened breach of the terms, covenants
and/or conditions of this Agreement by any of the parties hereto, the other
parties shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof.
10.02. Amendments and Modifications. The provisions of this Agreement may
----------------------------
be waived, altered, amended, modified, or repealed, in whole or in part, only on
the written consent of all parties to this Agreement. Any oral representations
or modifications concerning this instrument shall be of no force or effect
unless contained in a subsequent written modification signed by all parties to
this Agreement.
26
<PAGE>
10.03. Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be addressed as follows:
If to the Company:
First American Real Estate Solutions LLC
150 Second Avenue, Suite 1600
St. Petersburg, Florida 33701
Attn: Mr. John Long
Telephone: (800) 449-8732
Telecopy: (813) 895-3619
If to the FAFCO Members:
c/o The First American Financial Corporation
114 East Fifth Street (P.O. Box 267)
Santa Ana, California 92702
Attn: Mr. Parker Kennedy
Telephone: (714) 558-3211
Telecopy: (714) 647-2242
With a copy to:
White & Case
633 West Fifth Street, 19th Floor
Los Angeles, CA 90071
Attn: Neil W. Rust
Telephone: (213) 620-7700
Telecopy: (213) 687-0758
If to EXPERIAN:
Experian Information Solutions, Inc.
505 City Parkway West
Orange, California 92868
Attn: General Counsel
Telephone: (714) 385-8296
Telecopy: (714) 938-2513
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties hereto. Except for a notice of a change of
address, which shall be effective only upon receipt thereof, all such notices,
requests, demands, waivers and communications properly addressed shall be
effective: (i) if sent by U.S. mail, three Business Days after deposit in the
U.S. mail, postage prepaid; (ii) if sent by FedEx or other overnight delivery
27
<PAGE>
service, two Business Days after delivery to such service; (iii) if sent by
personal courier, upon receipt; and (iv) if sent by facsimile, upon receipt.
10.04. Attorneys' Fees. Should any litigation be commenced between the
---------------
parties hereto concerning any provision of this Agreement or the rights and
duties of any person in relation thereto, the party or parties prevailing in
such litigation shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for attorneys' fees in such litigation.
10.05. Further Assurances. Each of the parties hereto does hereby covenant
------------------
and agree on behalf of itself and its successors and assigns, without further
consideration, to execute and deliver such other instruments, documents and
statements, and to take such other action, as may be required by law or as are
necessary effectively to carry out the purposes of this Agreement.
10.06. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
10.07. Governing Law. This Agreement, including its existence, validity,
-------------
construction and operating effect, and the rights of each of the parties hereto,
shall be governed by and construed in accordance with the internal laws of the
State of California.
10.08. Successors. Subject to the restrictions against Transfer as herein
----------
contained, the provisions of this Agreement shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
the parties hereto. Nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
10.09. Severability. If any term, provision, covenant, or condition of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the rest of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired, or invalidated.
10.10. Entire Agreement. This Agreement, including all Schedules attached
----------------
hereto and any agreements referred to herein (including, without limitation, the
JV Agreement), constitutes the entire agreement of the parties pertaining to the
subject matter hereof, and fully supersedes any and all prior agreements or
understandings between the parties pertaining to the subject matter hereof.
10.11. Confidentiality. Subject to the requirements of applicable law, each
---------------
party shall maintain in confidence all information received from the Company
and, except as may otherwise be expressly permitted by a separate written
agreement, shall use such information only for the benefit of the Company, and
shall not disclose any such information to any third
28
<PAGE>
party or make any unauthorized use thereof. Each party shall treat all such
information with the same degree of care against disclosure or unauthorized use
which it affords to its own confidential information. The obligation of
confidentiality and non-use shall not apply to any information which (a) is or
becomes generally available to the public through no fault of the receiving
party, (b) is independently developed by the receiving party or (c) is received
in good faith from a third party who is lawfully in possession of such
information and has the lawful right to disclose or use it.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
FIRST AMERICAN REAL ESTATE INFORMATION
SERVICES, INC.
By /s/ John Long
------------------------------------
Name: John Long
Title:
FIRST AMERICAN APPRAISAL SERVICES,
INC.
By /s/ Anand Nallathambi
------------------------------------
Name: Anand Nallathambi
Title:
FIRST AMERICAN APPRAISAL CONSULTING
SERVICES, INC.
By /s/ Anand Nallathambi
------------------------------------
Name: Anand Nallathambi
Title:
FIRST AMERICAN CREDCO, INC.
By /s/ Donald A. Robert
------------------------------------
Name: Donald A. Robert
Title: President
FIRST AMERICAN FIELD SERVICES, INC.
By /s/ Shari Nott
------------------------------------
Name: Shari Nott
Title: Vice President
30
<PAGE>
FIRST AMERICAN FLOOD DATA
SERVICES, INC.
By /s/ Robert Douglas
------------------------------------
Name: Robert Douglas
Title: Senior Vice President
FIRST AMERICAN PROPERTY SERVICES,
INC.
By /s/ John Long
------------------------------------
Name: John Long
Title:
FIRST AMERICAN REAL ESTATE TAX
SERVICE, INC.
By /s/ David C. Yavorsky
------------------------------------
Name: David C. Yavorsky
Title: President
PASCO ENTERPRISES, INC.
By /s/ John Long
------------------------------------
Name: John Long
Title:
PRIME CREDIT REPORTS, INC.
By /s/ Donald A. Robert
------------------------------------
Name: Donald A. Robert
Title: Senior Vice President
31
<PAGE>
PROPERTY FINANCIAL SERVICES OF NEW
ENGLAND, INC.
By /s/ Anand Nallathambi
------------------------------------
Name: Anand Nallathambi
Title:
DOCS ACQUISITION CORP.
By /s/ John Long
------------------------------------
Name: John Long
Title:
STRATEGIC MORTGAGE SERVICES,
INC. (TEXAS)
By /s/ Mark B. Rogers
------------------------------------
Name: Mark B. Rogers
Title: President
EXPERIAN INFORMATION SOLUTIONS, INC.
By /s/ D. V. Skilling
-----------------------------------
Name: D. Van Skilling
Title:
32
<PAGE>
Schedule 1 to
Operating Agreement
-------------------
Officers of
First American Real Estate Solutions LLC
John W. Long -- President and Chief Executive Officer
John Lamson -- Chief Financial Officer and Treasurer
Parker Kennedy -- Senior Vice President
Craig J. Zinda -- Secretary
<PAGE>
Schedule 2 to
Operating Agreement
-------------------
Approved Transactions
1. Experian is in the process of selling the real property located at
1700/1800 N.W. 66th Avenue, Plantation, Florida.
2. Experian has amended an Agreement with COMPS Infosystems, Inc. to
provide for the sale of its C&I Data Extract Business in Florida and
Georgia.
<PAGE>
Schedule 3 to
Operating Agreement
-------------------
Existing Borrowing Facilities
1. Intercompany indebtedness in the amount of $33,500,000 owing by
FAREISI to its sister company, First American Title Insurance Company
("FATICO"), resulting in an accounts payable balance in the aforesaid
amount owing to FATICO.
<PAGE>
EXHIBIT (10)(c)
FAREISI TRANSITION AGREEMENT
This FAREISI TRANSITION AGREEMENT (this "Agreement") is made as of the 30th
day of November, 1997 by and among First American Real Estate Solutions LLC, a
California limited liability company ("NEWCO"), First American Real Estate
Information Services, Inc., a California corporation ("FAREISI"), for itself and
each of the FAFCO Members (as such term is defined in the Joint Venture
Agreement described below), and The First American Financial Corporation, a
California corporation ("FAFCO").
RECITALS
A. NEWCO was formed on or before November 30, 1997 as a limited liability
company with FAREISI, certain affiliates of FAREISI, and EXPERIAN INFORMATION
SOLUTIONS, INC. ("EXPERIAN"), as members. The FAFCO Members contributed the
assets, liabilities and going business of their respective Real Estate
Information Service businesses (collectively, the "FAREISI Business") to NEWCO
in return for issuance of an eighty percent (80%) membership interest in NEWCO.
EXPERIAN contributed the assets, liabilities and going business of its Real
Estate Solutions business (the "RES Business") and Ten Million Dollars
($10,000,000) cash to NEWCO in return for issuance of a twenty percent (20%)
membership interest in NEWCO. These contributions and membership interests are
the subject of a Contribution and Joint Venture Agreement dated as of November
30, 1997 (the "Joint Venture Agreement") and an Operating Agreement dated as of
November 30, 1997 (the "Operating Agreement").
B. The parties have agreed to enter into this Agreement to provide for
certain matters relating to the operation of the FAREISI Business by NEWCO
following the Closing Date, subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration for the forgoing and for other good and
valuable consideration, and intending to be legally bound hereby, the parties
hereby agree as follows:
TERMS AND CONDITIONS
ARTICLE I
Definitions and Construction
----------------------------
1.1 Definitions: The Joint Venture Agreement and the Operating Agreement
define certain terms. Such terms shall, to the extent not inconsistent with the
definitions contained in this Agreement have the meanings set forth in those
agreements, where used herein and identified with initial capital letters.
1
<PAGE>
1.2 Other Definitions, Meanings and Interpretations: For purposes of this
Agreement, the term "parties" means (except where the context otherwise
requires) NEWCO, FAREISI and FAFCO; the term "person" includes any natural
person, firm, association, partnership, corporation, limited liability company,
governmental agency or other entity other than the parties; and the words
"hereof," "herein," "hereby" and other words of similar import refer to this
Agreement as a whole. The headings of the Articles and Sections of this
Agreement have been included herein for convenience of reference only and shall
not be deemed to affect the meaning of the operative provisions of this
Agreement. The meanings given to defined terms (whether defined herein or in
the Joint Venture and Operating Agreements) shall apply equally to both the
singular and plural forms of such terms.
1.3 Relationship with the Joint Venture and Operating Agreements: This
Agreement is intended to support and supplement the Joint Venture and Operating
Agreements. Wherever possible, this Agreement and the Joint Venture and
Operating Agreements shall be construed as being consistent. Where particular
matters are addressed expressly in this Agreement, the terms and conditions of
this Agreement, and not those of the Joint Venture or Operating Agreement, shall
govern. Otherwise, the terms and conditions of the Joint Venture and Operating
Agreements shall govern.
ARTICLE II
Human Resource Matters
----------------------
2.1 Transition of Hired Employees: Except as otherwise specifically
provided in Section 2.2, all employees of the FAREISI Business shall, at the
Effective Time, automatically become employees of NEWCO as of the Effective
Time. All employees of the FAREISI Business automatically hired by NEWCO as of
the Effective Time shall be referred to herein as the "Hired Employees." Except
as otherwise specifically provided in this Agreement, no FAFCO Member shall have
any obligation with respect to the Hired Employees after the Effective Time.
2.2 Inactive Employees: Notwithstanding anything in this Agreement, the
Joint Venture Agreement or the Operating Agreement to the contrary, FAREISI
shall cause each FAFCO Member (subject to such FAFCO Member's policies and
procedures) to retain all of its employees engaged in the FAREISI Business who
are on leave of absence status (whether paid or unpaid) as of the Effective Time
(together with all liabilities related to such retained employees), until such
time as such FAFCO Member has determined, in good faith and consistent with past
practices, that any such person may return to active status. Upon making such
determination, the FAFCO Member shall promptly notify NEWCO and such employee
shall thereafter, upon reporting to work, automatically become an employee of
NEWCO and shall be treated as a Hired Employee for the purposes of this
Agreement (and all liabilities related to such employee shall then be
automatically assumed by NEWCO).
2.3 Insurance Plans: FAFCO acknowledges and agrees that NEWCO does not
intend to establish its own medical, vision, dental, life, accidental death and
dismemberment,
2
<PAGE>
and long-term disability plans (collectively, "Insurance Plans") for the Hired
Employees. Accordingly, from and after the Effective Time, for so long as NEWCO
desires, FAFCO shall ensure that the Hired Employees and, to the extent NEWCO so
desires, any other employees hired from time to time by NEWCO after the
Effective Time (collectively, the "NEWCO Employees") are eligible to participate
in FAFCO's Insurance Plans upon terms and conditions substantially similar to
those offered to employees of FAFCO and its subsidiaries. NEWCO agrees to
reimburse FAFCO for FAFCO's direct costs, if any, incurred in making the
Insurance Plans available to the NEWCO Employees.
2.4 Accrued Vacation: Each FAFCO Member will transfer to NEWCO the
liability for accrued vacation pay of the Hired Employees as of the Effective
Time. NEWCO will credit to each Hired Employee the accrued vacation such Hired
Employee accrued with FAREISI prior to the Effective Time.
2.5 401(k) Plans: FAFCO acknowledges and agrees the NEWCO does not
intend to establish its own 401(k) plan for the NEWCO Employees. Accordingly,
from and after the Effective Time, for so long as NEWCO desires, FAFCO shall
ensure that the NEWCO Employees are eligible to participate in FAFCO's 401(k)
plan upon substantially terms and conditions substantially similar to those
offered to employees of FAFCO and its subsidiaries. NEWCO agrees to reimburse
FAFCO for FAFCO's direct costs, if any, incurred in making the 401(k) plan
available to the NEWCO Employees.
ARTICLE III
Treasury, Banking and Tax Matters
---------------------------------
3.1 Disbursement Accounts:
(a) During the period from the Closing Date through the Effective Time
(the "Interim Operating Period"), FAREISI shall cause each FAFCO
Member to (i) retain control over any disbursement account presently
under the control of a FAFCO Member and (ii) continue to issue checks
on behalf of the FAREISI Business in the ordinary course of business.
FAREISI shall cause each FAFCO Member to separately account for
amounts distributed by such FAFCO Member on behalf of the FAREISI
Business.
(b) In the event that NEWCO does not have a disbursement system or
disbursement bank account in place by the Effective Time, FAREISI
shall cause each FAFCO Member to assist NEWCO in processing NEWCO
payments subsequent to the Effective Time, as follows:
Prior to the Effective Time, those FAFCO Members which need to do so
will open a new disbursement bank account ("NEWCO's FAREISI
Disbursement Bank Account") to process post-Effective Time payments
relating to the FAREISI Business. Each FAFCO Member will continue to
process such
3
<PAGE>
accounts payable after the Effective Time and shall be entitled to be
reimbursed for its direct costs incurred in connection therewith. The
checks for these payments will be written from NEWCO's FAREISI
Disbursement Bank Account. This bank account will not be run as a
controlled disbursement account. No FAFCO Member will fund this
account. The FAFCO Members will issue checks from NEWCO's FAREISI
Disbursement Bank Account only to the extent that funding has been
provided to this account by NEWCO in advance. There will be no
interest credited to this account. All bank costs, expenses, fees and
earnings credits relating to the opening and operation of NEWCO's
FAREISI Disbursement Bank Account will be the responsibility of NEWCO
and will be charged directly to such account.
(c) Within ninety (90) days after the Effective Date (the last day of such
ninety (90) day period to be known as the "Bank Account Cut-off
Date"), NEWCO will have completed all necessary actions to transfer
the ownership of NEWCO's FAREISI Disbursement Bank Account to NEWCO.
Regardless of whether the transfer of ownership of FAREISI's NEWCO
Disbursement Bank Account to NEWCO has been completed by the Bank
Account Cut-off Date, FAREISI shall cause the FAFCO Members to cease
issuing checks from this account as of the end of the Bank Account
Cut-Off Date.
3.2 Lock Box Accounts: FAREISI shall cause the FAFCO Members to assist
NEWCO in working work with FAFCO Members' banks to cause the lock boxes and
related bank accounts of the FAREISI Business in existence on the date hereof to
transfer to NEWCO as of the Effective Time. All cleared funds received into
these lock boxes prior to the Effective Time will be the property of the FAFCO
Members; provided, however that (i) if the cleared funds received into these
-------- -------
accounts during the Interim Operating Period exceed the cash disbursements
(including, without limitation, payroll disbursements) of the FAREISI Business
during the Interim Operating Period, FAREISI shall cause an aggregate amount
equal to such difference to be deposited in such lock box accounts within (2)
business days following the Effective Date and such amounts will become the
property of NEWCO, or (ii) if the cleared funds received into these accounts
during the Interim Operating Period are less than the cash disbursements
(including, without limitation, payroll disbursements) of the FAREISI Business
during the Interim Operating Period, NEWCO shall within two (2) business days
following the Effective Date reimburse FAREISI for such difference. All cleared
funds received after the Effective Time will be the property of NEWCO.
3.3 Payroll Accounts:
(a) During the Interim Period, FAREISI shall cause each FAFCO Member to
retain its payroll bank accounts in existence on the date hereof.
FAREISI shall cause the FAFCO Members to (with respect to the FAREISI
Business) issue paychecks and make direct payroll deposits from this
account for the period from the Closing Date through the end of the
last payroll period ending prior to
4
<PAGE>
the Effective Time. All payroll liabilities of the FAREISI Business
for Hired Employees accrued after such time will be transferred to
NEWCO at the Effective Time.
(b) In the event that NEWCO does not have a payroll system or payroll bank
account in place by the Effective Time, FAREISI shall cause each FAFCO
Member to assist NEWCO in processing NEWCO's payroll related to the
FAREISI Business subsequent to the Effective Time, as follows:
Prior to the Effective Time, those FAFCO Members which need to do so
will open a new payroll bank account ("NEWCO's FAREISI Payroll Bank
Account") to process NEWCO payroll relating to the FAREISI Business.
Each FAFCO Member shall continue to process such payroll after the
Effective Time and shall be entitled to be reimbursed for its direct
costs incurred in connection therewith. These payments will be issued
from NEWCO's FAREISI Payroll Bank Account. This bank account will not
be run as a controlled disbursement account. No FAFCO Member will
fund this account. NEWCO must deposit funds into the account for
payroll taxes paid and net payroll one day before each pay day. There
will be no interest credited to this account. All bank costs,
expenses, fees and earnings credits relating to the opening and
operation of NEWCO's FAREISI Payroll Bank Account will be the
responsibility of NEWCO and will be charged directly to such account.
(c) By the Bank Account Cut-off Date, NEWCO will have completed all
necessary actions to transfer the ownership of NEWCO's FAREISI Payroll
Bank Account to NEWCO. Regardless of whether the transfer of
ownership of NEWCO's FAREISI Payroll Bank Account to NEWCO has been
completed by the Bank Account Cut-off Date, FAREISI will cause the
FAFCO Members to cease issuing checks and making payments from this
account as of the end of the Bank Account Cut-Off Date.
3.4 Escrow and Petty Cash Accounts: FAREISI shall cause the FAFCO Members
to assist NEWCO in working with FAREISI's banks to cause the escrow and petty
cash bank accounts applicable to the FAREISI Business in existence on the date
hereof to transfer to NEWCO as of the Effective Time. Funds in these accounts
as of the Effective Time will be the property of NEWCO. FAREISI shall cause the
FAFCO Members to operate and fund these accounts in the ordinary course of
business until the Effective Date.
3.5 Tax and Wage Information: Each Hired Employee will receive one W-2
and one 1099 from each FAFCO Member by which such employee was employed for
calendar year 1997.
5
<PAGE>
ARTICLE IV
Financial Coordination
----------------------
4.1 Bonuses: FAREISI shall cause the account balances of such accounts as
are kept by each FAFCO Member for the purpose of awarding bonuses and/or
commissions to such FAFCO Members' employees under any applicable bonus or
commission plans, if any, as funded through the Effective Time with respect to
the Hired Employees to be transferred to NEWCO at the Effective Time. FAREISI
shall cause each FAFCO Member to determine, in good faith and generally
consistent with past practice, the actual payout amounts for the Hired Employees
under such plans, if any, for that portion of fiscal year 1997/1998 up to the
Effective Time in accordance with that FAFCO Members' normal practices and
processes and thereafter deliver such payout information to NEWCO. NEWCO shall
distribute such bonuses/commissions, as instructed by the FAFCO Member, to the
appropriate recipients at such times as NEWCO shall determine (but in no event
prior to January 1, 1998). Within five (5) business days following any payment
of such bonuses/commissions, FAREISI shall cause the FAFCO Member to reimburse
NEWCO for the total costs related to such bonuses/commissions to the extent they
relate to the period through November 30, 1997.
4.2 Surety Bonds: As promptly as possible after the Effective time,
NEWCO shall take any and all action necessary to have each surety bond relating
to the FAREISI Business which was provided by any FAFCO Member to be replaced by
a surety bond obtained by NEWCO. If, after the Effective Time, any FAFCO Member
is required to pay any amounts under any surety bond for actions or inactions on
the part of NEWCO or any of its affiliates, then NEWCO shall reimburse such
FAFCO Member for all amounts paid by such FAFCO Member under such surety bond
within five (5) business days of receipt from the FAFCO Member of a request for
the payment of such amounts.
ARTICLE V
Corporate Purchase Agreements
-----------------------------
5.1 Certain Existing Purchase Agreements: Prior to the Effective Date,
the FAREISI Business received goods and services pursuant to purchase agreements
entered into by the FAFCO Members on behalf of all of their business units (the
"Existing Purchase Agreements"). The Joint Venture and Operating Agreements do
not contemplate that NEWCO will be able to continue to obtain goods and services
after the Effective Time pursuant to the Existing Purchase Agreements.
Therefore, NEWCO shall use its reasonable best efforts to obtain new contracts
from such vendors or other, lenders on a stand-alone basis as promptly as
possible after the Effective Time. In the meantime, however, in order to
provide NEWCO with an opportunity to solicit new bids and negotiate new
contracts for the goods and services provided under the Existing Purchase
Agreements, FAREISI shall cause the FAFCO Members to, if and only to the extent
expressly permitted by the terms of the Existing Purchase Agreements, allow
NEWCO to purchase goods and services pursuant to the Existing Purchase
Agreements for, except as provided below, a period not to exceed one hundred
eighty (180)
6
<PAGE>
days after the Effective Date (the "Transition Period"). During the Transition
Period, NEWCO shall pay all vendors providing goods or services to it under the
Existing Purchase Agreements pursuant to separate purchase orders. Upon
expiration of the Transition Period, NEWCO's right to purchase goods and
services pursuant to the Existing Purchase Agreements shall terminate and
FAREISI shall have no other obligations to NEWCO with respect to such
agreements.
ARTICLE VI
Additional Agreements
---------------------
6.1 Excelis Agreement: During the Interim Operating Period, FAFCO,
FAREISI and NEWCO shall, subject to the terms of the Operating Agreement as
incorporated into the Interim Operating Agreement, use their best efforts to
document the relationship that Excelis, Inc. will have with NEWCO from and after
the Effective Time.
6.2 Dallas Property: During the Interim Operating Period, FAREISI and
NEWCO shall, subject to the terms of the Operating Agreement as incorporated
into the Interim Operating Agreement, use their best efforts to document the
relationship that FAREISI will have with NEWCO from and after the Effective Time
in respect of that certain real property owned by FAREISI and located at 8435
Stemmons Freeway, Dallas, Texas (the "Dallas Property"), which relationship
shall require FAREISI (i) to sublease to NEWCO that space currently utilized in
connection with the FAREISI Business and (ii) to make available to NEWCO certain
tenant improvements at the Dallas Property, which tenant improvements shall be
paid for on a monthly basis over a ten-year period.
ARTICLE VII
General Support Services
------------------------
7.1 Post-Effective Date Support Arrangements: Each of FAREISI and NEWCO
anticipate that occasional requests for services regarding tax, payroll,
treasury and other matters (including requests to answer specific questions
related thereto) may be made by the other party after the Effective Date.
Subject to the terms of the Operating Agreement, such services shall be provided
without charge unless the party receiving such request determines, in its sole
discretion, that satisfaction of such request would involve the expenditure of a
significant amount of time and/or resources, in which case, such party shall
provide to the requesting party an estimate of the costs anticipated to be
incurred in satisfying the request, which costs shall include (a) the pro rata
portion of the salary and bonus of the employees actually providing the services
requested pursuant hereto, (b) reasonable out-of-pocket expenses (evidenced by
appropriate documentation) and (c) a payroll expense charge in an amount equal
to 23% of the amount of salary billed and 11% of bonus billed, pursuant to
clause (a) above. Upon receipt of such estimate, the requesting party shall
have two (2) business days in which to notify the other party whether such party
should undertake to
7
<PAGE>
provide the requested services. If such services are provided, the party
providing the services shall deliver to the requesting party an invoice on a
monthly basis containing a description of the services performed and the
aggregate costs actually incurred in performing such services (which amount may
exceed the estimate provided to the requesting party, provided that in such
case, the party providing the services shall provide reasonable detail to the
requesting party as to the nature of such excess). The invoice shall be paid by
the requesting party within thirty (30) days of receipt thereof. Notwithstanding
the foregoing, FAREISI and NEWCO may from time to time require personnel and
other data from the other party related to or required in connection with their
maintenance of human resources databases, which information shall be provided to
the requesting party without charge. The parties obligation to provide support
services pursuant to this Section 6.1 is in addition to any other specific
support services commitments agreed to by the parties pursuant to any other
agreements, including the Joint Venture and Operating Agreements, and nothing in
this Section 6.1 is intended or shall be construed to obligate any party to pay
or reimburse any amounts with respect to such other commitments.
ARTICLE VIII
Miscellaneous
-------------
8.1 Cooperation: The parties will cooperate in good faith to carry out
the purposes of this Agreement. Without limiting the generality of the
foregoing, each party will assist the other party and furnish the other party
with such information and documentation as the other party may reasonably
request.
8.2 Enforcement Against the FAFCO Members: FAREISI shall cause each FAFCO
Member to comply with its obligations under this Agreement.
8.3 Indemnity:
(a) NEWCO agrees to defend, indemnify and hold harmless each FAFCO Member
and its subsidiaries and affiliates (including, without limitation,
their respective officers, directors, employees, shareholders and
agents) (the "FAFCO Parties") against any and all liabilities,
damages, losses, claims, costs and expenses (including, without
limitation, costs of collection and reasonable attorneys' fees)
(collectively, "Damages") arising out of or resulting from any demand,
claim, lawsuit or other cause of action brought by a third party as a
result of or in connection with the post-closing services rendered by
employees of any FAFCO Party pursuant to this Agreement, provided that
no FAFCO Party shall be entitled to indemnification in respect of its
or his own gross negligence or wilful misconduct.
(b) FAREISI hereby agrees to defend, indemnify and hold harmless NEWCO and
its subsidiaries and affiliates (including, without limitation, their
respective
8
<PAGE>
officers, directors, employees, shareholders and agents) (the "NEWCO
Parties") against any and all Damages arising out of or resulting from
any demand, claim, lawsuit or other cause of action brought by a third
party as a result of or in connection with the postclosing services
rendered by employees of any NEWCO Party pursuant to this Agreement,
provided that no NEWCO Party shall be entitled to indemnification in
respect of its or his own gross negligence or wilful misconduct.
8.4 No Liability:
(a) In providing services hereunder, no FAFCO Party shall be liable to any
NEWCO Party for any error or omission except to the extent that any
such error or omission results from the willful failure of a FAFCO
Party's employee to perform the services required hereunder or from
the gross negligence or willful misconduct of any such FAFCO Party
employee. In no event shall any FAFCO Party be liable to any NEWCO
Party or any third party for any special or consequential damages,
including, without limitation, lost profits or injury to the goodwill
of any NEWCO Party, in connection with the performance, misfeasance or
nonfeasance hereunder of any FAFCO Party. Neither FAREISI nor any
FAFCO Party makes any representation or warranty under this Agreement
as to the accuracy or completeness of any information provided to
NEWCO pursuant to the terms of this Agreement; provided; however, that
nothing in this Agreement is intended to limit or otherwise affect the
representations and warranties made under the Joint Venture and
Operating Agreements or in any certificate or other document delivered
pursuant thereto.
(b) In providing services hereunder, no NEWCO Party shall be liable to any
FAFCO Party for any error or omission except to the extent than any
such error or omission results from the willful failure of a NEWCO
Party's employee to perform the services required hereunder or from
the gross negligence or willful misconduct of any such FAFCO Party
employee. In no event shall any NEWCO Party be liable to any FAFCO
Party or any third party for any special or consequential damages,
including, without limitation, lost profits or injury to the goodwill
of any FAFCO Party, in connection with the performance, misfeasance or
nonfeasance hereunder of any NEWCO Party. Neither NEWCO nor any Newco
Party makes any representation or warranty under this Agreement as to
the accuracy or completeness of any information provided to any FAFCO
Party pursuant to the terms of this Agreement; provided; however, that
nothing in this Agreement is intended to limit or otherwise affect the
representations and warranties made under the Joint Venture and
Operating Agreements or in any certificate or other document delivered
pursuant thereto.
8.5 Confidentiality: The parties acknowledge that information concerning
the business or operations of any of the other parties received as a result of
the operation of this
9
<PAGE>
Agreement constitutes confidential information subject to the terms and
conditions of the Joint Venture and Operating Agreements.
8.6 Severability: If any provision of this Agreement shall finally be
determined to be unlawful, then such provision shall be deemed to be severed
from this Agreement and every other provision of this Agreement shall remain in
full force and effect.
8.7 Notices: Any notice or other communication required or permitted to
be given under this Agreement shall be given in the manner provided in the Joint
Venture Agreement.
8.8 Assignment: This Agreement shall be binding upon and inure to the
benefit of the successors of each of the parties, but shall not be assigned by
any party without the prior written consent of the other parties.
8.9 No Third Parties: This Agreement is not intended to, and shall not,
create any rights in or confer any benefits upon any person other than the
parties hereto.
8.10 Governing Law: This Agreement will be governed by and construed in
accordance with the internal substantive laws of the State of California, except
where the substantive laws of another jurisdiction mandatorily apply.
8.11 Counterparts: More than one counterpart of this Agreement may be
executed by the parties hereto, and each fully executed counterpart shall be
deemed an original without production of the others.
8.12 Complete Agreement: This Agreement, together with the EXPERIAN
Transition, Joint Venture and Operating Agreements, sets forth the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior letters of intent, agreements, covenants, arrangements,
communications, representations, or warranties, whether oral or written, by any
officer, employee, or representative or either party relating thereto.
10
<PAGE>
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
FIRST AMERICAN REAL ESTATE
SOLUTIONS LLC
By: /s/ Parker S. Kennedy
----------------------------
Title:
-------------------------
FIRST AMERICAN REAL ESTATE
INFORMATION SERVICES, INC.
By: /s/ John Long
----------------------------
Title:
-------------------------
THE FIRST AMERICAN FINANCIAL
CORPORATION
By: /s/ Parker S. Kennedy
----------------------------
Title:
-------------------------
11
<PAGE>
Exhibit (10)(d)
First American Real Estate Solutions, LLC
150 Second Avenue, Suite 1600, St. Petersburg, Florida 33701
November 30, 1997
Mr. John Peace
Chief Executive
CCN Experian
Talbot House
Talbot Street
Nottingham NG1 5HF
United Kingdom
Mr. D. Van Skilling
Chairman and Chief Executive Officer
Experian
505 City Parkway West
Orange, California 92868
Dear John and Van:
This letter constitutes the data license agreement between First American Real
Estate Solutions, LLC ("Newco") and Experian Information Solutions, Inc.
("Experian").
An integral part of the creation of Newco has been the ongoing obligation of
Newco to provide to Experian the data currently held by the Real Estate
Solutions ("RES") division of Experian. We refer to this data as the RES Data.
Because it is difficult to cover all issues we may face in the future in a
document prepared today, we collectively developed a set of guiding principles
to cover the present and future issues. These principles cover (1) Access and
Royalties and (2) Limitations on Use of RES data. Each guiding principle is set
forth in bold print followed by an expansion of its meaning, where needed.
Following that are provisions relative to use restrictions, payments, disputes,
limitation of liability and disclaimer of warranties.
1. Access.
------
EXPERIAN WILL HAVE FULL AND FREE ACCESS TO THE RES DATA FOR USE IN ITS
CURRENT MARKETS AND/OR PRODUCTS. FOR ALL NEW MARKETS OR PRODUCTS, EXPERIAN
WILL PAY A ROYALTY.
<PAGE>
Mr. John Peace
Mr. D. Van Skilling
November 30, 1997
Page 2
Newco hereby grants to Experian and its affiliate credit reporting agencies a
nonexclusive, nontransferable right and license to use the RES Data at cost,
except in the cases where a royalty applies (as set forth below), so long as
Experian is a member of Newco and for ten years thereafter. Experian will pay
Newco the incremental costs ("Costs") incurred by Newco in the course of
reproduction and/or delivery of the RES Data. Reimbursement of these Costs is
intended to result in neither profit nor loss to Newco.
Subject to the terms of this letter, the use of the data would include the sale,
application, compilation, storage, copying, employment, exploitation,
management, manipulation, packaging, sorting or other utilization of the RES
Data. Any party who receives the RES Data from Experian may not resell such
data except in the case of an affiliate credit bureau or other authorized
Experian reseller. In providing the information, Newco reserves its rights in
the RES Data, in the software programs which compile and manipulate this data
and in any copyrights, proprietary information or trademarks which relate to the
data or software.
The RES Data will be provided to Experian at cost and for no royalty, for use by
Experian in its current markets and/or products as of the date hereof.
As detailed below, Newco may charge Experian a fair and reasonable royalty for
all other markets or products.
Where Newco is required to provide to Experian for no royalty the RES Data, the
use by Experian of the programs and systems which compile and sort the data and
put it into a usable form must also be provided to Experian at no royalty.
Experian shall not have royalty-free access to new programs which apply rules-
based technology, such as artificial intelligence, to the data.
Notwithstanding, access to Value Point and future enhancements thereof shall be
provided at no royalty.
As the RES Data is improved or enhanced, Experian's no royalty access shall
continue so long as the data bases continue to be generically similar to the RES
Data Base or any portion thereof.
For instance, the addition to the property data base of data elements not
currently taken from the tax assessor records would be generically similar,
while geographically expanded title plant data would not be.
Experian's rights to the various elements of the RES Data will continue so long
as a particular element is made available to regular commercial buyers of such
data. Newco will have the right to discontinue any element of the RES Data
after first offering to transfer the data and the updating function to Experian.
Experian shall pay Newco for the cost of such transfer.
<PAGE>
Mr. John Peace
Mr. D. Van Skilling
November 30, 1997
Page 3
The RES Data may be delivered in a variety of forms and media including, but not
limited to, magnetic tape, CPU-to-CPU access, gateway access to an on-line
service and CD Rom, so long as such form or media is regularly available to
Newco's commercial clients.
2. Limitations on Use of RES Data.
------------------------------
ANY SALE BY NEWCO OF RES DATA TO A COMPETITOR OF EXPERIAN IS SUBJECT TO THE
SUPER-MAJORITY RIGHTS OF EXPERIAN. EXCEPT FOR EXPERIAN'S CURRENT MARKETS
AND/OR PRODUCTS, IF EXPERIAN USES OR SELLS THE RES DATABASE IN A MARKET
SERVED BY NEWCO, EXPERIAN WILL PAY A ROYALTY.
Newco may not sell RES Data to competitors of Experian that are credit
repositories or other providers of raw credit data (such as Equi-Fax and
Transunion) or other direct marketing companies (such as Axiom or Metromail)
without Experian's approval. Experian will not sell RES Data to competitors of
Newco such as DataQuick or Datascan without paying a royalty. For instance,
Experian may not sell RES Data to the real estate industry without paying a
royalty, for instance sale to Bank of America of a product using RES Data
without paying a royalty where the product was to be used by Bank of America in
making a second mortgage loan. In no event will Experian be required to pay a
royalty for the sale of any credit report.
The "super-majority rights" referred to in the principle above are defined in
the operating agreement for Newco. As Experian and Newco enter new markets and
develop new products, we will continue to be guided by the above principles.
3. Use Restrictions.
----------------
Experian's use of the RES Data shall be subject to any third party limitations
imposed upon Newco's use of such data. Experian and its affiliates shall be
solely responsible for the security, distribution, and use of RES Data delivered
to Experian or its affiliates. Experian shall apply to the RES Data the same
compliance with laws restrictions, security, and confidentiality measures that
Experian applies to its own data.
4. Payments.
--------
Newco will bill Experian for any royalties or Costs due under this agreement.
Experian and Newco will, upon request of the other party, cooperate in
determining the amount of royalties due.
<PAGE>
Mr. John Peace
Mr. D. Van Skilling
November 30, 1997
Page 4
5. Disputes.
--------
In the unlikely event of a dispute under this agreement, each party will have
available to it at its unilateral request the dispute resolution procedures
established in Section 6.05 of the joint venture agreement. Whether we
arbitrate or resort to litigation, the prevailing party will be entitled to
collect attorney fees from the other party.
6. Limitation of Liability.
-----------------------
Neither party shall have any obligation or liability to the other hereunder for
any special, incidental, consequential or punitive damages incurred by the other
party in connection with the performance of this agreement. Experian will
indemnify, defend and hold harmless Newco, its employees, agents and
representatives from and against any losses, claims, suits, costs and/or
expenses, including attorney fees, arising out of any claim by any third party
arising out of Experian's use of the RES Data. Newco will indemnify, defend and
hold harmless Experian, its employees, agents and representatives from and
against any losses, claims, suits, costs and/or expenses, including attorney
fees, arising out of any claim by any third party that Experian does not have
the right to use the RES Data.
7. Disclaimer of Warranties.
------------------------
Newco warrants to Experian that Newco has the right to license to Experian the
RES Data.
NEWCO PROVIDES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS,
COMPLETENESS, CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OF THE RES DATA FURNISHED BY IT OR THE MEDIA ON OR THROUGH WHICH SUCH RES DATA
IS PROVIDED.
We look forward to a long and prosperous joint venture.
FIRST AMERICAN REAL ESTATE SOLUTIONS, LLC
By: /s/ Parker S. Kennedy
--------------------------------------
Parker S. Kennedy
Senior Vice President
<PAGE>
Mr. John Peace
Mr. D. Van Skilling
November 30, 1997
Page 5
AGREED AN ACCEPTED:
EXPERIAN INFORMATION SOLUTIONS, INC.
By: D.V.Skilling
-------------------------------
Name: D. Van Skilling
-------------------------------
Its:
-------------------------------
<PAGE>
Exhibit (10)(e)
================================================================================
INTERIM OPERATING AGREEMENT
By and Among
THE FIRST AMERICAN FINANCIAL CORPORATION,
FIRST AMERICAN REAL ESTATE INFORMATION SERVICES, INC.,
and
EXPERIAN INFORMATION SOLUTIONS, INC.
Dated as of November 30, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS/1/
Page
ARTICLE I
DEFINITIONS................................ 2
1.01. Defined Terms........................................................ 2
1.02. Principles of Construction........................................... 3
ARTICLE II
TERM; INCORPORATION OF OPERATING AGREEMENT.................. 4
2.01. Term................................................................. 4
2.02. Incorporation of Operating Agreement By Reference.................... 4
2.03. Exceptions........................................................... 4
2.04. Controlling Document................................................. 4
ARTICLE III
MISCELLANEOUS............................... 5
3.01. Specific Performance................................................. 5
3.02. Amendments and Modifications......................................... 5
3.03. Notices.............................................................. 5
3.04. Attorneys' Fees...................................................... 6
3.05. Further Assurances................................................... 6
3.06. Counterparts......................................................... 6
3.07. Governing Law........................................................ 6
3.08. Successors........................................................... 6
3.09. Severability......................................................... 6
3.10. Entire Agreement..................................................... 7
3.11. Confidentiality...................................................... 7
- ---------------
/1/ This Table of Contents is provided for convenience only, and does not
form a part of the attached Interim Operating Agreement.
(i)
<PAGE>
INTERIM OPERATION AGREEMENT, made as of November 30, 1997 (this "Agreement"), by
and among THE FIRST AMERICAN FINANCIAL CORPORATION, a California corporation
("FAFCO"), FIRST AMERICAN REAL ESTATE INFORMATION SERVICES, INC., a California
corporation, ("FAREISI"), and EXPERIAN INFORMATION SOLUTIONS, INC., an Ohio
corporation ("EXPERIAN") (each a "Party" and, collectively, the "Parties").
W I T N E S S E T H :
-------------------
WHEREAS, FAFCO, FAREISI, First American Appraisal Consulting Services,
Inc., a California corporation ("FAREISI Subsidiary 1"), First American
Appraisal Services, Inc., a California corporation ("FAREISI Subsidiary 2"),
First American Credco, Inc., a Washington corporation ("FAREISI Subsidiary 3"),
First American Field Services, Inc., a New Jersey corporation ("FAREISI
Subsidiary 4"), First American Flood Data Services, Inc., a Texas corporation
("FAREISI Subsidiary 5"), First American Property Services, Inc., a New York
corporation ("FAREISI Subsidiary 6"), First American Real Estate Tax Service,
Inc., a Florida corporation ("FAREISI Subsidiary 7"), Pasco Enterprises, Inc., a
Texas corporation ("FAREISI Subsidiary 8"), Prime Credit Reports, Inc., a
California corporation ("FAREISI Subsidiary 9"), Property Financial Services Of
New England, Inc., a Delaware corporation ("FAREISI Subsidiary 10"), Docs
Acquisition Corp., a Nevada corporation ("DOCS"), Strategic Mortgage Services,
Inc. (Texas), a Texas corporation ("SMS") (FAREISI, FAREISI Subsidiary 1,
FAREISI Subsidiary 2, FAREISI Subsidiary 3, FAREISI Subsidiary 4, FAREISI
Subsidiary 5, FAREISI Subsidiary 6, FAREISI Subsidiary 7, FAREISI Subsidiary 8,
FAREISI Subsidiary 9, FAREISI Subsidiary 10, DOCS and SMS, collectively, the
"FAFCO Members") and EXPERIAN have entered into that certain Contribution and
Joint Venture Agreement, of even date herewith (as the same may be amended,
modified and supplemented from time to time, the "JV Agreement"; capitalized
terms used in this Agreement and not otherwise defined herein shall, unless the
context otherwise requires, have the meaning given thereto in the JV Agreement),
in order to combine the FAREISI Business and the RES Business;
WHEREAS, in connection with the JV Agreement, the FAFCO Members and
EXPERIAN have entered into that certain Operating Agreement For First American
Real Estate Solutions LLC, of even date herewith (as the same may be amended,
modified and supplemented from time to time, the "Operating Agreement"),
pursuant to which each of the FAFCO Members and EXPERIAN have established First
American Real Estate Solutions LLC, a California limited liability company
("Newco");
WHEREAS, Section 2.02 of the JV Agreement and Section 2.02(a) of the
Operating Agreement contemplate that at 00:01 (Pacific Standard Time) on January
1, 1998 (the "Effective Time") (i) the FAFCO Members will contribute the FAREISI
Business to Newco and (ii) EXPERIAN will contribute the RES Business to Newco;
and
WHEREAS, the Parties intend for Newco to commence operations from and after
the date of this Agreement as if the contributions described in the preceding
paragraph had occurred on the date of this Agreement.
1
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.01. Defined Terms. As used in this Agreement, the following terms shall
-------------
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Agreement" shall mean this Interim Operating Agreement, as the same may be
amended, modified and/or supplemented from time to time.
"Commencement Time" shall mean 00:01 (Pacific Standard Time) on December 1,
1997.
"Effective Time" shall have the meaning set forth in the third WHEREAS
clause of this Agreement.
"EXPERIAN" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"FAFCO" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"FAFCO Member" shall have the meaning given thereto in the first WHEREAS
clause of this Agreement.
"FAREISI" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"FAREISI Business" shall mean the collective businesses of each of the
FAFCO Members.
"Implementing Agreements" shall have the meaning set forth in Section
7.01(d) of the JV Agreement.
"Interim Period" shall have the meaning set forth in Section 2.03 hereof.
"JV Agreement" shall have the meaning set forth in the first WHEREAS clause
of this Agreement.
"Newco" shall have the meaning set forth in the second WHEREAS clause of
this Agreement.
2
<PAGE>
"Operating Agreement" shall have the meaning set forth in the second
WHEREAS clause of this Agreement.
"Party" and "Parties" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Person" shall mean and include any individual, partnership, association,
joint stock company, joint venture, corporation, trust, limited liability
company, unincorporated organization, government, agency or political
subdivision thereof.
"Prime Rate" shall have the meaning set forth in the JV Agreement.
"RES Business" shall mean the business of EXPERIAN commonly known as
Experian Real Estate Solutions (including, without limitation, the businesses
commonly known as Experian Title Information Services and Experian Property
Data).
"US GAAP" means United States generally accepted accounting principles
applied on a consistent basis.
1.02. Principles of Construction.
--------------------------
(a) All references to Articles, Sections and subsections are to Articles,
Sections and subsections in this Agreement unless otherwise specified. The
words "hereof," "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The term "including" is not limiting
and means "including without limitation."
(b) All accounting terms not specifically defined herein shall be construed
in accordance with US GAAP.
(c) In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including"; the words "to" and
"until" each mean "to but excluding"; and the word "through" means "to and
including."
(d) The Table of Contents hereto and the Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
(e) This Agreement and the Implementing Agreements are the result of
negotiations among and have been reviewed by counsel to the Parties and are the
products of all Parties. Accordingly, they shall not be construed against any
Party merely because of such Party's involvement in their preparation.
3
<PAGE>
ARTICLE II
TERM; INCORPORATION OF OPERATING AGREEMENT
2.01. Term. The term of this Agreement shall commence on the date hereof
----
and shall end immediately prior to the Effective Time.
2.02. Incorporation of Operating Agreement By Reference. Each of FAFCO and
-------------------------------------------------
FAREISI, on its own behalf and on behalf of the FAFCO Members, and EXPERIAN
agrees that (a) the terms and conditions of the Operating Agreement are, by this
reference, incorporated in this Agreement in their entirety as if set forth
herein in full, together with all related defined terms, and (b) it will, except
as provided in Section 2.03, comply (and, in the case of FAFCO and FAREISI, will
cause the FAFCO Members to comply) with the terms and conditions of the
Operating Agreement as incorporated herein by reference as if (i) the Effective
Time had occurred at 00:01 (Pacific Standard Time) on December 1, 1997 (the
"Commencement Time"), (ii) the contributions contemplated by Section 2.02 of the
JV Agreement and Section 2.02(a) of the Operating Agreement had been made at the
Commencement Time, notwithstanding that such contributions will actually be made
at the Effective Time, and (iii) the references in the Operating Agreement to
the term "Effective Date" were references to "Commencement Time."
2.03. Exceptions. Notwithstanding Section 2.02(b), (a) the credits to the
----------
Capital Accounts described in Section 2.02(b) of the Operating Agreement shall
not occur until the contributions contemplated by Section 2.02(a) of the
Operating Agreement are actually made; (b) 80% of Newco's Net Profits or Net
Loss, as the case may be, for the period from December 1, 1997 to January 1,
1998 (the "Interim Period") shall be allocated among the FAFCO Members according
--------------
to their Percentage Interests and credited to their respective Capital Accounts,
and 20% of Newco's Net Profits or Net Loss, as the case may be, for the Interim
Period shall be allocated to EXPERIAN and credited to its Capital Account; (c)
the employees of the FAFCO Members engaged in the FAREISI Business shall remain
employees of the respective FAFCO Members until the Effective Time; (d) the
employees of EXPERIAN engaged in the RES Business shall remain employees of
EXPERIAN until the Effective Time; (e) all Taxes, if any, related to the FAREISI
Business from the date hereof through the Effective Time shall be paid by the
respective FAFCO Members; (f) all Taxes, if any, related to the RES Business
from the date hereof through the Effective Time shall be paid by EXPERIAN; and
(g) until the Effective Time, no officer of the Newco may terminate the
employment of any employee of the RES Business without the prior written consent
of EXPERIAN.
2.04. Controlling Document. Prior to the Effective Time, if any conflict
--------------------
exists among the terms of this Agreement and the terms of the Operating
Agreement, the terms of this Agreement shall control. From and after the
Effective Time, if any conflict exists among the terms of this Agreement and the
terms of the Operating Agreement, the terms of the Operating Agreement shall
control.
4
<PAGE>
ARTICLE III
MISCELLANEOUS
3.01. Specific Performance. Due to the fact that the parties hereto will be
--------------------
irreparably damaged in the event that this Agreement is not specifically
enforced, in the event of a breach or threatened breach of the terms, covenants
and/or conditions of this Agreement by any of the parties hereto, the other
parties shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof.
3.02. Amendments and Modifications. The provisions of this Agreement may be
----------------------------
waived, altered, amended, modified, or repealed, in whole or in part, only on
the written consent of all parties to this Agreement. Any oral representations
or modifications concerning this instrument shall be of no force or effect
unless contained in a subsequent written modification signed by all parties to
this Agreement.
3.03. Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be addressed as follows:
If to Newco:
First American Real Estate Solutions LLC
150 Second Avenue, Suite 1600
St. Petersburg, Florida 33701
Attn: Mr. John Long
Telephone:
Telecopy:
If to the FAFCO Members:
c/o The First American Financial Corporation
114 East Fifth Street (P.O. Box 267)
Santa Ana, California 92702
Attn: Mr. Parker Kennedy
Telephone: (714) 558-3211
Telecopy: (714) 647-2242
With a copy to:
5
<PAGE>
White & Case
633 West Fifth Street, 19th Floor
Los Angeles, CA 90071
Attn: Neil W. Rust
Telephone: (213) 620-7700
Telecopy: (213) 687-0758
If to EXPERIAN:
Experian Information Solutions, Inc.
505 City Parkway West
Orange, California 92868
Attn: General Counsel
Telephone: (714) 385-8296
Telecopy: (714) 938-2513
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties hereto. Except for a notice of a change of
address, which shall be effective only upon receipt thereof, all such notices,
requests, demands, waivers and communications properly addressed shall be
effective: (i) if sent by U.S. mail, three Business Days after deposit in the
U.S. mail, postage prepaid; (ii) if sent by FedEx or other overnight delivery
service, two Business Days after delivery to such service; (iii) if sent by
personal courier, upon receipt; and (iv) if sent by facsimile, upon receipt.
3.04. Attorneys' Fees. Should any litigation be commenced between the
---------------
parties hereto concerning any provision of this Agreement or the rights and
duties of any person in relation thereto, the party or parties prevailing in
such litigation shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for attorneys' fees in such litigation.
3.05. Further Assurances. Each of the parties hereto does hereby covenant
------------------
and agree on behalf of itself and its successors and assigns, without further
consideration, to execute and deliver such other instruments, documents and
statements, and to take such other action, as may be required by law or as are
necessary effectively to carry out the purposes of this Agreement.
3.06. Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed to be an original, and all of which together shall
be deemed to be one and the same instrument.
3.07. Governing Law. This Agreement, including its existence, validity,
-------------
construction and operating effect, and the rights of each of the parties hereto,
shall be governed by and construed in accordance with the internal laws of the
State of California.
3.08. Successors. Subject to the restrictions against transfer as
----------
incorporated herein, the provisions of this Agreement shall inure to the benefit
of and shall be binding upon the respective successors and permitted assigns of
each of the parties hereto. Nothing in this Agreement, ex-
6
<PAGE>
pressed or implied, is intended to confer on any Person other than the parties
hereto or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
3.09. Severability. If any term, provision, covenant, or condition of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the rest of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired, or invalidated.
3.10. Entire Agreement. This Agreement, including all agreements referred
----------------
to herein (including, without limitation, the Operating Agreement and the JV
Agreement), constitutes the entire agreement of the parties pertaining to the
subject matter hereof, and fully supersedes any and all prior agreements or
understandings between the parties pertaining to the subject matter hereof.
3.11. Confidentiality. Subject to the requirements of applicable law, each
---------------
party shall maintain in confidence all information received from Newco and,
except as may otherwise be expressly permitted by a separate written agreement,
shall use such information only for the benefit of Newco, and shall not disclose
any such information to any third party or make any unauthorized use thereof.
Each party shall treat all such information with the same degree of care against
disclosure or unauthorized use which it affords to its own confidential
information. The obligation of confidentiality and non-use shall not apply to
any information which (a) is or becomes generally available to the public
through no fault of the receiving party, (b) is independently developed by the
receiving party or (c) is received in good faith from a third party who is
lawfully in possession of such information and has the lawful right to disclose
or use it.
7
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed in their respective corporate names by their respective officers, each
of whom is duly and validly authorized and empowered, all as of the day and year
first above written.
THE FIRST AMERICAN FINANCIAL
CORPORATION
By /s/ Parker S. Kennedy
----------------------------
Name: Parker S. Kennedy
Title:
FIRST AMERICAN REAL ESTATE
INFORMATION SERVICES, INC.
By /s/ John Long
--------------------------------
Name: John Long
Title:
EXPERIAN INFORMATION SOLUTIONS, INC.
By /s/ D.V. Skilling
--------------------------------
Name: D. Van Skilling
Title:
8
<PAGE>
EXHIBIT (10)(f)
EXPERIAN TRANSITION AGREEMENT
This TRANSITION AGREEMENT ("Transition Agreement") is made as of the 30th
day of November, 1997 by and among First American Real Estate Solutions LLC, a
California limited liability company ("NEWCO"), and EXPERIAN Information
Solutions, Inc., an Ohio corporation ("EXPERIAN").
RECITALS
A. NEWCO was formed on or before November 30, 1997 as a limited liability
company with First American Real Estate Information Services, Inc. ("FAREISI")
and certain of its affiliates, and EXPERIAN, as members. EXPERIAN contributed
the assets, liabilities and going business of its Real Estate Solutions business
(the "RES Business") and Ten Million Dollars ($10,000,000) cash to NEWCO in
return for issuance of a twenty percent (20%) membership interest in NEWCO to
EXPERIAN. FAREISI and its affiliates contributed the assets, liabilities and
going business of their respective Real Estate Information Service businesses
(collectively, the "FAREISI Business") to NEWCO in return for issuance of an
eighty percent (80%) membership interest in NEWCO. These contributions and
membership interests are the subject of a Contribution and Joint Venture
Agreement dated as of November 30, 1997 (the "Joint Venture Agreement") and an
Operating Agreement dated as of November 30, 1997 (the "Operating Agreement").
B. The parties have agreed to enter into this Transition Agreement to
provide for certain matters relating to the operation of the RES Business by
NEWCO following the Closing Date, subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, and intending to be legally bound hereby, the parties
hereby agree as follows:
TERMS AND CONDITIONS
ARTICLE I
General Provisions
------------------
1.1 Definitions: The Joint Venture Agreement and the Operating Agreement
define certain terms. Such terms shall, to the extent not inconsistent with the
definitions
1
<PAGE>
contained in this Transition Agreement have the meanings set forth in those
agreements, where used herein and identified with initial capital letters.
1.2 Other Definitions, Meanings and Interpretations: For purposes of this
Transition Agreement, the term "parties" means (except where the context
otherwise requires) NEWCO and EXPERIAN; the term "person" includes any natural
person, firm, association, partnership, corporation, limited liability company,
governmental agency or other entity other than the parties; and the words
"hereof," "herein," "hereby" and other words of similar import refer to this
Transition Agreement as a whole. The headings of the Articles and Sections of
this Transition Agreement have been included herein for convenience of reference
only and shall not be deemed to affect the meaning of the operative provisions
of this Transition Agreement. The meanings given to defined terms (whether
defined herein or in the Joint Venture and Operating Agreements) shall apply
equally to both the singular and plural forms of such terms.
1.3 Relationship with the Joint Venture and Operating Agreements: This
Transition Agreement is intended to amplify and supplement the Joint Venture and
Operating Agreements. Wherever possible, this Transition Agreement and the
Joint Venture and Operating Agreements shall be construed as being consistent.
Where particular matters are addressed expressly in this Transition Agreement,
the terms and conditions of this Transition Agreement, and not those of the
Joint Venture or Operating Agreement, shall govern. Otherwise, the terms and
conditions of the Joint Venture and Operating Agreements shall govern.
ARTICLE II
Human Resource Matters
-----------------------
2.1 Transition of Hired Employees: Except as otherwise specifically
provided in Section 2.2, all employees of the RES Business shall, at the
Effective Time, automatically become employees of NEWCO as of the Effective
Time. All employees of the RES Business automatically hired by NEWCO as of the
Effective Time shall be referred to herein as the "Hired Employees." Except as
otherwise specifically provided in this Agreement, EXPERIAN shall have no
obligations with respect to the Hired Employees after the Effective Time.
2.2 Inactive Employees: Notwithstanding anything in this Transition
Agreement, the Joint Venture Agreement or the Operating Agreement to the
contrary, EXPERIAN shall (subject to EXPERIAN's policies and procedures) retain
all employees of the RES Business who are on leave of absence status (whether
paid or unpaid) as of the Effective Time (together with all liabilities related
to such retained employees), until such time as EXPERIAN has determined, in good
faith and consistent with past practices, that any such person may return to
active status. Upon making such determination, EXPERIAN shall promptly notify
NEWCO and such employee shall thereafter, upon
2
<PAGE>
reporting to work, automatically become an employee of NEWCO and shall be
treated as a Hired Employee for the purposes of this Transition Agreement (and
all liabilities thereafter related to such employee shall then be automatically
assumed by NEWCO).
2.3 Flexible Spending Accounts: All amounts contributed by Hired Employees
for calendar year 1997 into their respective flexible spending accounts
maintained under EXPERIAN's Flexible Spending Account Plan (the "EXPERIAN
Flexible Spending Accounts") shall be retained as assets of EXPERIAN's Flexible
Spending Account Plan. All proper claims for costs incurred prior to the
Effective Time submitted by Hired Employees after the Effective Time with
respect to their EXPERIAN Flexible Spending Accounts shall be made to, and
processed and paid by, EXPERIAN.
2.4 Insurance Plans:
(a) On or before the Effective Time, NEWCO will have set up its own long-
medical, vision, dental, life, accidental death and dismemberment, and
term disability plans for the Hired Employees (the "NEWCO Plans"), the
terms of which plans will be substantially the same as those offered
under the insurance plans offered by EXPERIAN (the "EXPERIAN Plans"). As
of the Effective Time, EXPERIAN will cease coverage of the Hired
Employees under the EXPERIAN Plans and it shall be NEWCO's sole
responsibility to cover the Hired Employees under the NEWCO Plans at its
expense.
(b) NEWCO hereby acknowledges that neither EXPERIAN nor any of its
subsidiaries or affiliates will be at any time with respect to any NEWCO
Plan (i) a "fiduciary" (as defined in ERISA) with respect to any NEWCO
Plan or (ii) a guarantor of performance of NEWCO with respect to any
NEWCO Plan or any administrator, health maintenance organization or other
entity providing services to any NEWCO Plan.
2.5 Accrued Vacation: EXPERIAN will transfer to NEWCO the liability for
accrued vacation pay of the Hired Employees as of the Effective Time. NEWCO
will credit to each Hired Employee the accrued vacation such Hired Employee
accrued with EXPERIAN prior to the Effective Time.
2.6 401(k) Plans: As of the Effective Time, the Hired Employees will no
longer be entitled to participate in EXPERIAN's 401(k) plan. NEWCO will use its
best efforts to cause the Hired Employees to be eligible for a 401(k) plan
within ninety (90) days following the Effective Time.
3
<PAGE>
ARTICLE III
Treasury, Banking and Tax Matters
---------------------------------
3.1 Disbursement Accounts:
(a) During the period from the Closing Date through the Effective Time
(the "Interim Operating Period"), EXPERIAN shall (i) retain the
controlled disbursement account maintained by EXPERIAN at First
Chicago/National Bank of Detroit and (ii) continue to issue checks on
behalf of the RES Business in the ordinary course of business.
EXPERIAN will separately account for amounts distributed on behalf of
the RES Business.
(b) It is anticipated that NEWCO will not have a disbursement system
or disbursement bank account in place by the Effective Time. EXPERIAN
will assist NEWCO in processing NEWCO payments subsequent to the
Effective Time, as follows:
Prior to the Effective Time, EXPERIAN will open a new disbursement
bank account ("EXPERIAN's NEWCO Disbursement Bank Account") to process
post-Effective Time payments relating to the RES Business transferred
to NEWCO. EXPERIAN will continue to process such accounts payable
after the Effective Time, for a fee to be agreed by the parties prior
to the Effective Time. The checks for these payments will be written
from EXPERIAN's NEWCO Disbursement Bank Account. This bank account
will not be run as a controlled disbursement account, and EXPERIAN
will not fund this account. EXPERIAN will issue checks from
EXPERIAN's NEWCO Disbursement Bank Account only to the extent that
funding has been provided to this account by NEWCO in advance. There
will be no interest credited to this account. All bank costs and
expenses, and earnings credits, relating to the opening and operation
of EXPERIAN's NEWCO Disbursement Bank Account will be the
responsibility of NEWCO and will be charged directly to the account.
(c) Within ninety (90) days after the Effective Date (the last day of
such ninety (90) day period to be known as the "Bank Account Cut-off
Date"), NEWCO will have completed all necessary actions to transfer
the ownership of EXPERIAN's NEWCO Disbursement Bank Account to NEWCO.
Regardless of whether the transfer of ownership of EXPERIAN's NEWCO
Disbursement Bank Account to NEWCO has been completed by the Bank
Account Cut-off Date, EXPERIAN will cease issuing checks from this
account as of the end of the Bank Account Cut-Off Date.
4
<PAGE>
3.2 Lock Box Accounts: EXPERIAN and NEWCO shall work with EXPERIAN's
banks to cause the lock boxes and related bank accounts of the RES Business to
transfer to NEWCO as of the Effective Time. These accounts are National City
Bank accounts No. 3793309 and No. 4886531 (for lock box 931516) and Wells Fargo
Bank accounts No. 4159403435 (for lock boxes 71147 and 77747) and No.
4159777671. All cleared funds received into these lock boxes prior to the
Effective Time will be the property of EXPERIAN; provided, however, that (i) if
-------- -------
the cleared funds received into these accounts during the Interim Operating
Period exceed the cash disbursements (including, without limitation, payroll
disbursements) of the RES Business during the Interim Operating Period, EXPERIAN
shall cause an aggregate amount equal to such difference to be deposited in such
lock box accounts within (2) business days following the Effective Date and such
amounts will become the property of NEWCO, or (ii) if the cleared funds received
into these accounts during the Interim Operating Period are less than the cash
disbursements (including, without limitation, payroll disbursements) of the RES
Business during the Interim Operating Period, NEWCO shall within two (2)
business days following the Effective Date reimburse EXPERIAN for such
difference. All cleared funds received after the Effective Time will be the
property of NEWCO. EXPERIAN and NEWCO will cause Wells Fargo Bank to cease the
automatic transfer to EXPERIAN's main bank account of the monies received in the
Wells Fargo Bank lock box account as of the Effective Time.
3.3 Payroll Accounts:
(a) During the Interim Period, EXPERIAN shall retain the payroll bank
account maintained by EXPERIAN with Bank of America as of the Closing
Date. EXPERIAN will (with respect to the RES Business) issue
paychecks and make direct payroll deposits from this account for the
period from the Closing Date through the end of last payroll period
ending prior to the Effective Time. All payroll liabilities of the
RES Business for Hired Employees accrued after such time will be
transferred to NEWCO at the Effective Time.
(b) It is anticipated that NEWCO will not have a payroll system or
payroll bank account in place by the Effective Time. In such event,
EXPERIAN will assist NEWCO in processing NEWCO's payroll related to
the RES Business subsequent to the Effective Time, as follows:
5
<PAGE>
Prior to the Effective Time, EXPERIAN will open a new payroll bank
account ("EXPERIAN's NEWCO Payroll Bank Account") to process NEWCO
payroll relating to the RES Business. EXPERIAN will continue to
process such payroll after the Effective Time for a fee to be agreed
by the parties prior to the Effective Time. These payments will be
issued from EXPERIAN's NEWCO Payroll Bank Account. This bank account
will not be run as a controlled disbursement account, and EXPERIAN
will not fund this account. NEWCO must deposit funds into the account
for payroll taxes paid and net payroll one day before each pay day.
There will be no interest credited to this account. All bank costs
and expenses, and earnings credits, relating to the opening and
operation of EXPERIAN's NEWCO Payroll Bank Account will be the
responsibility of NEWCO and will be charged directly to the account.
(c) By the Bank Account Cut-off Date, NEWCO will have completed all
necessary actions to transfer the ownership of EXPERIAN's NEWCO
Payroll Bank Account to NEWCO. Regardless of whether the transfer of
ownership of EXPERIAN's NEWCO Payroll Bank Account to NEWCO has been
completed by the Bank Account Cut-off Date, EXPERIAN will cease
issuing checks and making payments from this account as of the end of
the Bank Account Cut-Off Date.
3.4 Petty Cash Accounts: EXPERIAN and NEWCO agree to work with EXPERIAN's
banks to cause the escrow and petty cash bank accounts applicable to the RES
Business to transfer to NEWCO as of the Effective Time. These accounts are
Wells Fargo accounts No. 4159777689, No. 4159777697 and No. 4091219493; US West
account No. 5447041194; and Texas Commerce Bank account No. 1816247. Funds in
these accounts as of the Effective Time will be the property of NEWCO. EXPERIAN
will operate and fund these accounts in the ordinary course of business until
the Effective Date.
3.5 Tax and Wage Information: Each Hired Employee will receive one
W-2 and one 1099 from EXPERIAN for calendar year 1997.
6
<PAGE>
ARTICLE IV
Financial Coordination
----------------------
4.1 Bonuses/Commissions: EXPERIAN's Employee Incentive Plan, Executive
Incentive Plan and Sales Compensation Plan accrual account balances through the
Effective Time with respect to the Hired Employees shall be transferred to NEWCO
at the Effective Time. EXPERIAN shall determine, in good faith and generally
consistent with past practice, the actual payout amounts for the Hired Employees
under such plans for that portion of fiscal year 1997/1998 up to the Effective
Time in accordance with EXPERIAN's normal practices and processes and thereafter
deliver such payout information to NEWCO. NEWCO shall distribute such
bonuses/commissions, as instructed by EXPERIAN, to the appropriate recipients at
such times as NEWCO shall determine (but in no event prior to January 1, 1998).
Within five (5) business days following any payment of such bonuses/commissions,
EXPERIAN shall reimburse NEWCO for the total costs related to such
bonuses/commissions to the extent they relate to the period through November 30,
1997.
4.2 Surety Bonds: As promptly as possible after the Effective Time, NEWCO
shall take any and all action necessary to have each surety bond relating to the
RES Business which was provided by EXPERIAN to be replaced by a surety bond
obtained by NEWCO. If, after the Effective Time, EXPERIAN is required to pay
any amounts under any surety bond for actions or inactions on the part of NEWCO
or any of its affiliates, then NEWCO shall reimburse EXPERIAN for all amounts
paid by EXPERIAN under such surety bond within five (5) business days of receipt
from EXPERIAN of a request for the payment of such amounts.
ARTICLE V
Corporate Purchase Agreements
-----------------------------
5.1 Certain Existing Purchase Agreements: Prior to the Effective Date,
the RES Business received goods and services pursuant to purchase agreements
entered into by EXPERIAN on behalf of all of its business units (the "Existing
Purchase Agreements"). The Joint Venture and Operating Agreements do not
contemplate that NEWCO will be able to continue to obtain goods and services
after the Effective Time pursuant to the Existing Purchase Agreements.
Therefore, NEWCO shall use its reasonable best efforts to obtain new contracts
from such vendors or other vendors on a stand-alone basis as promptly as
possible after the Effective Time. In the meantime, however, in order to
provide NEWCO with an opportunity to solicit new bids and negotiate new
contracts for the goods and services provided under the Existing Purchase
Agreements, EXPERIAN shall, if and only to the extent expressly permitted by the
terms of the Existing Purchase Agreements, allow NEWCO to purchase goods and
services pursuant to the Existing Purchase Agreements for, except as provided
below, a period not
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to exceed one hundred eighty (180) days after the Effective Date (the
"Transition Period"). During the Transition Period, NEWCO shall pay all vendors
providing goods or services to it under the Existing Purchase Agreements
pursuant to separate purchase orders. Upon expiration of the Transition Period,
NEWCO's right to purchase goods and services pursuant to the Existing Purchase
Agreements shall terminate and EXPERIAN shall have no further obligations to
NEWCO with respect to such agreements. Notwithstanding the foregoing, the
Existing Purchase Agreements identified below will be subject to the following
specific arrangements:
(a) EXPERIAN shall instruct American Express promptly after the Effective
Time that all American Express Corporate Cards (travel and procurement)
issued to employees of the RES Business who will become Hired Employees
shall be transferred to NEWCO effective as of the Effective Date, and that
EXPERIAN shall thereafter have no liability of any kind related to or
arising from such credit cards.
(b) The Transition Period with respect to EXPERIAN's Existing Purchase
Agreement with AT&T (AT&T Contract Tariff Order dated August 22, 1997)
shall expire on the first anniversary of the Effective Date. After the
Effective Date and prior to the expiration of the relevant Transition
Period, EXPERIAN shall provide NEWCO with an invoice on a monthly basis for
AT&T services actually used by NEWCO during such month, plus EXPERIAN's
incremental costs, if any, associated with providing the AT&T's services to
NEWCO. NEWCO shall reimburse EXPERIAN within thirty (30) days of each such
invoice therefor.
ARTICLE VI
Intercompany Contractual Arrangements
-------------------------------------
6.1 EXPERIAN Support: Prior to the Effective Date, the RES Business
purchased software development, engineering and administrative support services
from EXPERIAN. As of the Effective Time, EXPERIAN's obligations to provide such
services to the RES Business pursuant to these arrangements shall automatically
terminate. NEWCO may, however, upon written notice to EXPERIAN within five (5)
business days of the Effective Date, request to have the existing arrangements
with the RES Business converted into purchase orders with NEWCO. EXPERIAN shall
issue such purchase orders provided EXPERIAN and NEWCO agree upon the terms and
conditions of such purchase orders.
6.2 Plantation, Florida Lease: EXPERIAN is in the process of selling real
property located at 1700/1800 N.W. 66th Avenue, Plantation, Florida (two
buildings) (the "Property") to a third party ("Buyer"). The Property will be
excluded from the assets of the RES Business being transferred to NEWCO pursuant
to the terms of the JV
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Agreement. EXPERIAN will be leasing back the portion of the Property located at
1800 N.W. 66th St. (approx. 57,566 square feet) (the "1800 Building") from the
Buyer. Pursuant to the term sheet executed by EXPERIAN and the Buyer, the lease
on the 1800 Building will be for a two year period commencing on the date of the
sale, with the Buyer having the ability to terminate the lease on six months
notice after the first year. The lease rate is $7.00 per square foot per annum,
triple net. EXPERIAN also will be leasing back the portion of the Property
located at 1700 N.W. 66th St. (approx. 41,250 square feet) (the "1700 Building")
from the Buyer for a ten (10) week period commencing on the date of the sale,
with an option to extend for an additional thirty (30) day period, to be
exercised at any time not later than thirty (30) days prior to the expiration of
the initial term. The lease rate on the 1700 Building also will be $7.00 per
square foot per annum, triple net. EXPERIAN anticipates that the closing of the
sale of the Property will take place prior to the Effective Date. As part of the
transfer of the EXPERIAN Interests to NEWCO, EXPERIAN's rights as tenant under
both of the above-referenced leases will be assigned to NEWCO, and EXPERIAN will
be released from all liabilities and obligations under the leases. If the sale
of the Property has not closed prior to the Effective Date, EXPERIAN will
execute leases with NEWCO substantially on the terms provided for above, which
leases will also include the right of EXPERIAN to assign the leases to any buyer
of the Property.
ARTICLE VII
General Support Services
------------------------
7.1 Post-Effective Date Support Arrangements: Each of EXPERIAN and
NEWCO anticipate that occasional requests for services regarding tax,
payroll, treasury and other matters (including requests to answer specific
questions related thereto) may be made by the other party after the
Effective Date. Such services shall be provided without charge unless the
party receiving such request determines, in its sole discretion, that
satisfaction of such request would involve the expenditure of a significant
amount of time and/or resources, in which case, such party shall provide to
the requesting party an estimate of the costs anticipated to be incurred in
satisfying the request, which costs shall include (a) the pro rata portion
of the salary and bonus of the employees actually providing the services
requested pursuant hereto, (b) reasonable out-of-pocket expenses (evidenced
by appropriate documentation) and (c) a payroll expense charge in an amount
equal to 23% of the amount of salary billed and 11% of bonus billed,
pursuant to clause (a) above. Upon receipt of such estimate, the requesting
party shall have two (2) business days in which to notify the other party
whether such party should undertake to provide the requested services. If
such services are provided, the party providing the services shall deliver
to the requesting party an invoice on a monthly basis containing a
description of the services performed and the aggregate costs actually
incurred in performing such services (which amount may exceed the estimate
provided to the
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requesting party, provided that in such case, the party providing services
shall provide reasonable detail to the requesting party as to the nature of
such excess). The invoice shall be paid by the requesting party within
thirty (30) days of receipt thereof. Notwithstanding the foregoing,
EXPERIAN and NEWCO may from time to time require personnel and other data
from the other party related to or required in connection with their
maintenance of human resources databases, which information shall be
provided to the requesting party without charge. The parties obligation to
provide support services pursuant to this Section 7.1 is in addition to any
other specific support services commitments agreed to by the parties
pursuant to any other agreements, including the Joint Venture and Operating
Agreements, and nothing in this Section 7.1 is intended or shall be
construed to obligate any party to pay or reimburse any amounts with
respect to such other commitments.
ARTICLE VIII
Miscellaneous
-------------
8.1 Cooperation: The parties will cooperate in good faith to carry out
the purposes of this Transition Agreement. Without limiting the generality of
the foregoing, each party will assist the other party and furnish the other
party with such information and documentation as the other party may reasonably
request.
8.2 Indemnity:
(a) NEWCO agrees to defend, indemnify and hold harmless EXPERIAN and
its subsidiaries and affiliates (including, without limitation, their
respective officers, directors, employees, shareholders and agents)
(collectively, "EXPERIAN Parties") against any and all liabilities,
damages, losses, claims, costs and expenses (including, without
limitation, costs of collection and reasonable attorneys' fees)
(collectively, "Damages") arising out of or resulting from any demand,
claim, lawsuit or other cause of action brought by a third party as a
result of or in connection with the post-closing services rendered by
employees of any EXPERIAN Party pursuant to this Transition Agreement,
provided that no EXPERIAN Party shall be entitled to indemnification
in respect of its or his gross negligence or willful misconduct.
(b) EXPERIAN hereby agrees to defend, indemnify and hold harmless
NEWCO and its subsidiaries and affiliates (including, without
limitation, their respective officers, directors, employees,
shareholders and agents) (collectively, "NEWCO Parties") against any
and all Damages arising out of or resulting from any demand, claim,
lawsuit or other cause of action
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brought by a third party as a result of or in connection with the
post-closing services rendered by employees of any NEWCO Party
pursuant to this Transition Agreement, provided that no NEWCO Party
shall be entitled to indemnification in respect of its or his gross
negligence or willful misconduct.
8.3 No Liability:
(a) In providing services hereunder, no EXPERIAN Party shall be liable to
any NEWCO Party for any error or omission except to the extent that any
such error or omission results from the willful failure of a EXPERIAN
Party's employee to perform the services required hereunder or from the
gross negligence or willful misconduct of any such EXPERIAN Party employee.
In no event shall any EXPERIAN Party be liable to any NEWCO Party or any
third party for any special or consequential damages, including, without
limitation, lost profits or injury to the goodwill of any NEWCO Party, in
connection with the performance, misfeasance or nonfeasance hereunder of
any EXPERIAN Party. EXPERIAN (on behalf of itself and all EXPERIAN
Parties) makes no representation or warranty under this Transition
Agreement as to the accuracy or completeness of any information provided to
NEWCO pursuant to the terms of this Transition Agreement; provided;
--------
however, that nothing in this Transition Agreement is intended to limit or
-------
otherwise affect the representations and warranties made under the Joint
Venture and Operating Agreements or in any certificate or other document
delivered pursuant thereto.
(b) In providing services hereunder, no NEWCO Party shall be liable to any
EXPERIAN Party for any error or omission except to the extent that any such
error or omission results from the willful failure of a NEWCO Party's
employee to perform the services required hereunder or from the gross
negligence or willful misconduct of any such EXPERIAN Party employee. In
no event shall any NEWCO Party be liable to any EXPERIAN Party or any third
party for any special or consequential damages, including, without
limitation, lost profits or injury to the goodwill of any EXPERIAN Party,
in connection with the performance, misfeasance or nonfeasance hereunder of
any NEWCO Party. NEWCO (on behalf of itself and all NEWCO Parties) makes
no representation or warranty under this Transition Agreement as to the
accuracy or completeness of any information provided to any EXPERIAN Party
pursuant to the terms of this Transition Agreement; provided; however, that
-------- -------
nothing in this Transition Agreement is intended to limit or otherwise
affect the representations and warranties made under the Joint Venture and
Operating Agreements or in any certificate or other document delivered
pursuant thereto.
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8.4 Confidentiality: The parties acknowledge that information concerning
the business or operations of any of the other parties received as a result of
the operation of this Transition Agreement constitutes confidential information
subject to the terms and conditions of the Joint Venture and Operating
Agreements.
8.5 Severability: If any provision of this Transition Agreement shall
finally be determined to be unlawful, then such provision shall be deemed to be
severed from this Transition Agreement and every other provision of this
Transition Agreement shall remain in full force and effect.
8.6 Notices: Any notice or other communication required or permitted to
be given under this Transition Agreement shall be given in the manner provided
in the Joint Venture and Operating Agreements.
8.7 Assignment: This Transition Agreement shall be binding upon and inure
to the benefit of the successors of each of the parties, but shall not be
assignable by any party without the prior written consent of the other parties.
8.8 No Third Parties: This Transition Agreement is not intended to, and
shall not, create any rights in or confer any benefits upon any person other
than the parties hereto.
8.9 Governing Law: This Transition Agreement will be governed by and
construed in accordance with the internal substantive laws of the State of
California, except where the substantive laws of another jurisdiction
mandatorily apply.
8.10 Counterparts: More than one counterpart of this Transition Agreement
may be executed by the parties hereto, and each fully executed counterpart shall
be deemed an original without production of the others.
8.11 Complete Agreement: This Transition Agreement, together with the
FAREISI Transition, Joint Venture and Operating Agreements, sets forth the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all prior letters of intent, agreements, covenants, arrangements,
communications, representations, or warranties, whether oral or written, by any
officer, employee, or representative or either party relating thereto.
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IN WITNESS WHEREOF, the parties have each caused this Transition Agreement
to be executed by their respective duly authorized officers as of the date first
above written.
FIRST AMERICAN REAL ESTATE SOLUTIONS LLC
By: /s/ Parker S. Kennedy
---------------------
Title:
---------------------
EXPERIAN INFORMATION SOLUTIONS, INC.
By: /s/ T.A. Gasparini
---------------------
Title:
---------------------
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Exhibit (10)(g)
RESELLER SERVICES AGREEMENT
This Reseller Services Agreement (this "Agreement") is entered into
effective as of November __, 1997, by and between First American CREDCO, a
Washington corporation, having a principal address as set forth at the end of
this Agreement ("FAC"), and Experian Information Solutions, Inc., an Ohio
corporation acting through its Information Solutions Division ("Experian").
Experian and FAC agree as follows:
Article 1
Term
1.1 Term. Subject to Section 7.2 of this Agreement, this Agreement will
continue in force, without any fixed date of termination ("Term").
Article 2
Credit Reporting Services
2.1 Generally. During the Term, FAC may request that Experian provide FAC with
the services listed on the attached pricing schedule (hereinafter referred to,
together with the information therein, as the "Services") to the extent offered
from time to time by Experian and permitted by this Agreement. The Services may
consist of consumer identifying information and/or consumer credit information
on individual consumers ("Consumers"). Experian hereby grants FAC a
nonexclusive, nontransferable limited license to resell the Services consistent
with the terms and conditions of this Agreement.
2.2 Method of Performance. FAC will request the Services from Experian by
electronic means. Each such request will contain sufficient identifying
information concerning the Consumer about whom the information is requested to
enable Experian to perform the Services, and will identify in the manner
specified by Experian, the fact that the request is being made by FAC.
2.3 Status As Consumer Reporting Agency. For purposes of this Agreement, the
parties agree that FAC certifies that it is a "consumer reporting agency" as
such term is defined in the federal Fair Credit Reporting Act.
Article 3
Fees
3.1 Generally. With respect to each response from Experian (including each "no
record" response) to a request for Services made by FAC, FAC will pay Experian
the fees set forth in the attached pricing schedule. Experian and FAC agree to
renegotiate the fees on an annual basis (except as agreed on a particular
pricing schedule) during the Term based on the calendar year. FAC's payment to
Experian is due not later than thirty (30) days after FAC's receipt of
Experian's invoice. If FAC does not pay invoiced amounts within this time
period, it may, at Experian's option, also pay interest on the unpaid amount at
the rate of one and one-half percent (1.5%) per month or the maximum rate
allowed by law, whichever is less. FAC's obligation to pay invoiced amounts is
absolute and unconditional and not subject to any offset, defense or
counterclaim.
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3.2 Taxes. The prices and rates for the Services do not include applicable
federal, state or local taxes. FAC will be solely responsible for all federal,
state, and local taxes levied or assessed in connection with Experian's
performance of Services, other than income taxes assessed with respect to
Experian's net income. Experian may separately reflect on its invoices to FAC
the amount of any taxes paid by Experian on FAC's behalf, and FAC shall pay
Experian for such amounts.
Article 4
Use of Experian Information
4.1 Compliance with Law. FAC certifies and warrants that it will comply with
all federal, state and local statutes, regulations, and rules applicable to it,
including, without limitation, the federal Fair Credit Reporting Act, 15 U.S.C.
(S)1681 et seq., as amended ("FCRA"). FAC further warrants that it will require
by written contract that its customers comply with the same obligations of
compliance with laws.
4.2 Use of Information. FAC agrees to comply with all of the following:
4.2.1 FAC hereby certifies that it will request the Services and the
information therein from Experian and resell such to its customers solely for
said customers' use in connection with credit granting, collections, employment,
insurance underwriting, or governmental licensing transactions between the
customer and the Consumer about whom the credit information relates, and will
not request, use or resell any such Services or information for any other
purpose, regardless of whether permitted by law. FAC will, in reselling the
Services, faithfully transmit the information accurately and in its entirety
(except to the extent as may be otherwise required by this Agreement or agreed
to by Experian in writing for approved merged reports.) FAC certifies that it
will provide Experian, at the time it requests the Services or information, the
name of the ultimate end user of the credit information and each FCRA
permissible purpose for which such information is furnished.
4.2.2 FAC agrees not to resell or otherwise transfer the Services in
whole or in part to bail bond companies, investigative companies (i.e., private
investigators), attorneys (other than attorneys whose sole and exclusive
practice is collections), news agencies or journalists, businesses which operate
out of a residence (except as permitted by Experian policies and procedures),
credit clinics, credit repair organizations, credit counseling services (except
as otherwise set forth in this Agreement), to any company or individual who is
known to have been involved in credit fraud or other unethical business
practices or to other types of organizations identified by Experian to FAC in
writing. Notwithstanding the foregoing, Experian may permit on a case-by-case
basis the resale of consumer identifying information to certain of the foregoing
in a manner consistent with Experian policy and procedure on the sale of
identifying information.
4.2.3 FAC hereby warrants that it will not, either directly or
indirectly, itself or through any agent or third party: (a) request, compile,
store, maintain or use the Services (including any of the information therein)
to build its own database (other than for file comparison purposes as approved
by Experian from time to time); (b) copy or otherwise reproduce the Services
(including any of the information therein) except to the minimal extent
necessary to provide standard consumer assistance or file comparison activities;
(c) resell or transfer the Services (including any of the information) to more
than one person or entity or to any person or entity who is not solely an end
user of the Services (including any of the information therein); (d) resell,
transmit or otherwise make available to any person the Services (including any
of the information therein) on or through the Internet or other generally
accessible network or delivery method without Experian's prior written consent;
or (e) resell or otherwise provide the Services (including any of the
information therein) pursuant to 15 U.S.C. (S)1681u (FCRA Section 625); or (f)
merge the Services (or any of the information therein) with any information from
a consumer reporting agency
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other than for the creation of a merged report to be used solely for mortgage
reporting, tenant screening, or consumer disclosure pursuant to Section 4.2.5.
FAC will disclose to Experian the purpose for which the Services will be used.
Based on such disclosure, the pricing set forth in the attached Exhibit A shall
apply. FAC shall be solely responsible for assuring the delivery or
transmission of information to its customers in a manner that is secure and in
compliance with this Agreement.
4.2.4 FAC agrees to verify that each customer who is provided Services
is the end user and does not intend to resell or otherwise provide or transfer
the Services in whole or in part to any other person or entity. Notwithstanding
the foregoing, Exhibit B hereto lists those agents of FAC that are permitted to
resell the Services one additional time. The parties must mutually agree in
writing to the addition of agents to Exhibit B.
4.2.5 Experian hereby grants to FAC a nonexclusive, nontransferable,
limited license to resell directly to the Consumer(s) pursuant to the terms and
conditions of the Amendment to Reseller Services Agreement For Resales to
Consumers which is attached hereto and made a part hereof. FAC may provide a
disclosure copy to a subject Consumer who has been denied a benefit and
requested disclosure; provided, however, that FAC will provide only a copy of
the information that was provided by FAC to its customer, and will not attempt
to access Experian's systems to obtain additional information or copies of the
previously provided services. FAC will refer all Customers who have questions
or disputes about information in the Services or in Experian's consumer credit
files to the telephone number and/or address for Experian's National Consumer
Assistance Center (as such are provided to FAC from time to time by Experian,
and not to Experian's telephone number for complimentary credit reports). In no
event will FAC attempt to, or hold itself out to the consumer or to the public
as being able to, handle disputes on behalf of Experian or to reinvestigate
information in Experian's files. In no event will FAC attempt to have
information on a Consumer's credit or identifying information changed or altered
in any way other than by forwarding the customer to Experian's National Consumer
Assistance Center.
4.2.6 FAC agrees to sign a "Experian Reseller Employment Report
Addendum" before reselling credit information for employment purposes, and FAC
agrees to complete and sign the "End User Investigation Requirements - Tenant
Screening" before reselling information for tenant screening. FAC certifies
that reports on its employees will only be requested by its designated
representative approved by Experian, and that its employees will not request
Services relating to themselves, their families or friends, or request consumer
report information on other persons other than as permitted by the FCRA and
Experian policies.
4.2.7 FAC will not act or provide at any time or in any way, and will
not hold itself out as providing credit clinic, credit repair, credit counseling
or similar services.
4.3 Experian Policies and Procedures. In addition to the requirements set
forth in Section 4.2, FAC agrees to the following:
4.3.1 FAC agrees to comply with Experian's policies and procedures as
announced by Experian from time to time, including those attached to this
Agreement entitled "Experian Permissible Purpose Guidelines for Resellers" and
"Experian Permissible Purpose Type Codes." FAC also agrees to conduct a
thorough investigation of its customers and potential customers to confirm that
each has a "permissible purpose" for receiving the Services, and otherwise
complies with applicable laws and Experian policies. FAC's investigation will
include at a minimum all of the actions listed on the "End User Investigation
Requirements" form, a copy of which is attached hereto, before giving a customer
access to the Services. FAC agrees to provide to Experian at Experian's request
all materials and information relating to its investigations of its customers.
4.3.2 FAC acknowledges and agrees that Experian may itself, or may
require that FAC, block display of account numbers or other information to FAC
and FAC's customers, and FAC agrees to not provide such information to its
customers.
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4.3.3 Experian may from time to time notify FAC of additional, updated
or new requirements compliance with which will be a condition of Experian's
continued provision of Services to FAC. FAC agrees to comply with such
requirements as to which it has received notice from Experian and such shall be
incorporated into this Agreement by this reference.
4.3.4 FAC understands and agrees that Experian may require evidence,
including a certification, that FAC understands and will comply with applicable
laws and Experian policies and procedures.
4.3.5 FAC agrees to obtain at its expense such training and education
concerning applicable legal requirements and Experian policies and procedures as
Experian may reasonably request. Training made available to FAC by Experian is
provided as a service to FAC, and does not replace or waive FAC's compliance
obligations under the law or this Agreement. Such training does not constitute,
or substitute for, legal advice, and FAC should consult with its own legal
counsel.
4.3.6 FAC will institute and maintain strict procedures for assuring
that its employees do not furnish the Services (or information therein) except
in compliance with the requirements of the FCRA and this Agreement. FAC will
provide training and training materials to its customers to the extent necessary
to assure compliance with the FCRA and this Agreement. FAC will provide
Experian the opportunity to review and approve or disapprove all such materials
prior to their use. FAC will enter into written agreements executed by each of
FAC's customers requiring compliance by such customers with the terms and
conditions of this Agreement. FAC will monitor its customers on an ongoing
basis to assure the continued compliance with the requirements of this Agreement
by the customer and by FAC and will immediately discontinue the Services to any
customer who is not in compliance.
4.3.7 FAC will not mislead consumers or the public, or demean directly
or indirectly Experian Inc., its successors or assigns, the Services, other
services provided by Experian, the consumer reporting industry, direct marketing
industry or other industries in which Experian, its successors and assigns do
business. FAC will provide Experian the opportunity to review and approve or
disapprove prior to their use or dissemination any and all advertising,
marketing, sales and promotional materials, pamphlets, brochures and similar
disclosures that relate directly or indirectly to Experian Inc., its successors
or assigns, the Services, other services provided by Experian, the consumer
reporting industry, direct marketing industry or other industries in which
Experian, its successors and assigns do business, or that mention Experian by
name.
Article 5
Intellectual Property
5.1 No License. Experian does not transfer, and FAC does not obtain, any
patent rights, copyright interest or other right, claim or interest in the
computer programs, systems, forms, formats, schedules, manuals or other
proprietary items utilized or provided by Experian.
5.2 Restrictions on Use of Proprietary Designations. Neither party will use,
or permit their respective employees, agents and subcontractors to use, the
trademarks, service marks, logos, names, or any other proprietary designations
of the other party, or the other party's affiliates, whether registered or
unregistered, without such other party's prior written consent.
5.3 Ownership of Data. FAC acknowledges that Experian has expended substantial
time, effort, and funds to collect, arrange and compile Experian's consumer
information database and to create and deliver the Services (including the
information therein). The Services, the information contained therein, and the
data in Experian's consumer information databases are and will continue to be
the exclusive property of
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Experian. Nothing contained in this Agreement shall be deemed to convey to FAC,
or to any other party, any right, title, or interest, including any patent,
copyright, or other proprietary right, in or to the data in Experian's consumer
information database(s), any database(s) itself or (except to the extent of the
limited license granted in Section 2.1 of this Agreement) to the Services and
the information therein.
5.4 Confidential Treatment. FAC hereby acknowledges that the Services it
receives from Experian under this Agreement include personal information about
individual Consumers and, as such, require confidential treatment. In addition,
FAC acknowledges that it may receive other proprietary and confidential
information of Experian including but not limited to technical, developmental,
operating, computer system, software, performance, cost, know-how and process
information. FAC warrants to Experian that (a) except as otherwise permitted by
this Agreement, it will maintain the information obtained through Experian in
strict confidence and will not disclose such information other than to its
employees who have a need to know and (b) will use the information only for
purposes of this Agreement. Upon termination of this Agreement or at the
request of Experian, FAC will promptly return to Experian all Experian
confidential information and any copies thereof provided to it. FAC warrants
that it will require by written contract that customers receiving such
information from FAC comply with the same obligations of nondisclosure.
Article 6
Indemnification and Limitations
6.1 Disclaimer of Warranty. Because the Services involve conveying information
provided to Experian by other sources, Experian cannot and will not, for the fee
charged for the Services, be an insurer or guarantor of the accuracy or
reliability of the Services, data contained in its database, or in the Services.
EXPERIAN DOES NOT GUARANTEE OR WARRANT THE ACCURACY, TIMELINESS, COMPLETENESS,
CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
SERVICES, INFORMATION IN THE SERVICES OR THE MEDIA ON OR THROUGH WHICH THE
SERVICES ARE PROVIDED AND SHALL NOT BE LIABLE TO RESELLER OR TO ANY OF THE
RESELLER'S CUSTOMERS FOR ANY LOSS OR INJURY ARISING OUT OF OR CAUSED IN WHOLE OR
IN PART BY EXPERIAN'S ACTS OR OMISSIONS, WHETHER NEGLIGENT OR OTHERWISE, IN
PROCURING, COMPILING, COLLECTING, INTERPRETING, REPORTING, COMMUNICATING OR
DELIVERING THE SERVICES OR INFORMATION THEREIN.
6.2 Indemnification. FAC will indemnify, defend, and hold Experian harmless
from and against any and all liabilities, damages, losses, claims, costs and
expenses, including reasonable attorneys fees, which may be asserted against or
incurred by Experian, arising out of or resulting from the use, disclosure, sale
or transfer of the Services (or information therein) by FAC or its customers, or
FAC's breach of this Agreement. FAC covenants not to sue or maintain any cause
of action, claim, demand, cross-claim, third party action or other form of
litigation or arbitration against Experian, its officer's directors, employees,
contractors, agents, affiliated bureaus or subscribers arising out of or
relating in any way to the Services (or information therein) being blocked by
Experian or not being accurate, timely, complete or current.
6.3 Limitation of Liability. FAC acknowledges that Experian maintains a
database, updated on a periodic basis, from which FAC obtains and resells
Services, and that Experian does not undertake a separate investigation for each
inquiry or request for Services made by FAC. FAC also acknowledges that the
prices Experian charges FAC for the Services are based upon Experian's
expectation that the risk of any loss or injury that may be incurred by use of
the Services will be borne by FAC and not Experian. FAC therefore agrees that
it is responsible for determining that the Services are in accordance with
Experian's obligations under this Agreement. If FAC reasonably determines that
the Services do not meet Experian's obligations under this Agreement, FAC shall
so notify Experian in writing within ten (10) days after receipt of the Services
in question. FAC's failure to so notify Experian shall mean that FAC accepts
the Services as is, and Experian will have no liability whatsoever for the
Services. If FAC so notifies Experian within ten (10) days after receipt of the
Services, then, unless Experian disputes FAC's claim, Experian will, at its
option, either reperform the Services in question or issue FAC a credit for the
amount
-5-
<PAGE>
FAC paid to Experian for the nonconforming Services. This reperformance or
credit constitutes FAC's sole remedy and Experian's maximum liability for any
breach of this Agreement by Experian. If, notwithstanding the above, liability
is imposed on Experian, then FAC agrees that Experian's total liability for any
or all of FAC's losses or injuries from Experian's acts or omissions under this
Agreement, regardless of the nature of the legal or equitable right claimed to
have been violated, shall be the lesser of the amount paid by FAC to Experian
under this Agreement during the six month period preceding the alleged breach by
Experian of this Agreement or Ten Thousand Dollars ($10,000). FAC covenants that
it will not sue Experian for any amount greater than permitted by this Agreement
and will not seek punitive damages. IN NO EVENT SHALL EXPERIAN BE LIABLE TO
RESELLER OR TO ANY CUSTOMER OR THIRD PARTY FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES (INCLUDING BUT NOT LIMITED TO DAMAGES TO
BUSINESS REPUTATION, LOST BUSINESS OR LOST PROFITS), WHETHER FORESEEABLE OR NOT
AND HOWEVER CAUSED, EVEN IF EXPERIAN IS ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
Article 7
Amendments and Termination
7.1 Amendments. This Agreement may be amended only by a written instrument
signed by both parties.
7.2 Termination. Notwithstanding any other term in this Agreement, (a) either
party may terminate this Agreement by providing ninety (90) days advance written
notice to the other; and (b) Experian may unilaterally terminate this Agreement
immediately, or take any lesser action Experian believes is appropriate,
including but not limited to blocking FAC's access to the Services and/or
charging FAC a fee for auditing FAC to ensure compliance, if Experian believes
in its sole judgment, that FAC has failed to comply with any of its obligations
hereunder, including any obligation under Article 4 of this Agreement.
7.3 Effect of Termination. Upon expiration or termination of this Agreement,
the license granted herein will automatically terminate, FAC will cease
reselling the Services (and the information therein) and return any Services in
its possession to Experian. No termination or expiration will relieve either
party of any liability for monetary sums owing to the other. The provisions of
Articles 3, 4, 5, 6 and 8 and Sections 7.3 shall survive the expiration or
termination of this Agreement.
Article 8
Miscellaneous
8.1 Status. The parties will perform their obligations hereunder as
independent contractors. Nothing contained in this Agreement shall be deemed to
create any association, partnership, joint venture, or relationship of principal
and agent or master and servant between the parties. The parties acknowledge
that any and all rights not expressly granted pursuant to this Agreement are
reserved to the respective party and that neither party will have any right,
power or authority to obligate the other to any contract, term or condition.
8.2 Excusable Delays. Neither party will be liable to the other for any delay
or failure in its performance of any of the acts required by this Agreement
(other than for payment obligations hereunder) if and to the extent that such
delay or failure arises beyond the reasonable control of such party, including,
without limitation, acts of God or public enemies, labor disputes, equipment
malfunctions, computer downtime, material or component shortages, supplier
failures, embargoes, earthquakes, rationing, acts of local, state or national
governments or public agencies, utility or communication failures or delays,
fire, flood, epidemics, riots and strikes.
-6-
<PAGE>
8.3 Governing Law, Venue and Attorney's Fees. This Agreement will be governed
by and construed in accordance with the internal substantive laws of the State
of California, which are intended to supersede any choice of laws rules which
might require the application of the laws of another jurisdiction. Both parties
hereby consent to the jurisdiction of the courts of California, whether federal,
state or local, with respect to actions brought to enforce or interpret this
Agreement. Venue for all actions shall be in Orange County, California. The
prevailing party in any arbitration, or permitted legal or equitable action,
shall be entitled to an award of its reasonable attorneys' fees and costs.
8.4 Severability. This Agreement shall be deemed to be severable and, if any
provision of this Agreement shall be finally determined to be void, illegal or
unenforceable, then it is the parties' desire and intention that such provision
be deemed automatically adjusted to the minimum extent necessary to conform to
applicable requirements of validity, legality and enforceability and, as so
adjusted, be deemed a provision of this Agreement as if it were originally
included herein; provided, however, if such provision cannot be adjusted without
substantially and materially altering the rights and duties hereunder and
fundamentally depriving one party of the benefit of the bargain (taken as a
whole) contemplated by this Agreement, then the parties will seek to reform this
Agreement through the procedure outlined in Section 8.7 (Dispute Resolution)
hereof so as to restore, as nearly as possible, the parties' respective rights,
duties, and bargain. In any case, the remaining provisions of this Agreement
shall remain in effect.
8.5 Successors and Assigns. This Agreement will be binding upon and inure to
the benefit of the parties hereto and to their respective heirs,
representatives, successors, and permitted assignees. This Agreement may not be
assigned, transferred, shared or divided in whole, or in part, by FAC without
Experian's prior written consent. The dissolution, merger, consolidation,
reorganization, sale or other transfer of assets, properties, or controlling
interest of FAC constitutes an assignment of this Agreement for purposes of this
Section 8.5.
8.6 Audit Rights. Experian will have the right to audit FAC and FAC's
customers to assure compliance with the terms of this Agreement. FAC will
provide full cooperation, and will be responsible for assuring full cooperation
by its employees and customers, in connection with such audits. FAC will
provide Experian or obtain for Experian access to such properties, records and
personnel as Experian may reasonably require for such purpose.
8.7 Dispute Resolution. With the exception of any action taken under Articles
4 and 5 of this Agreement, the parties will resolve any dispute arising out of
or relating to this Agreement in a binding arbitration conducted under the
auspices of the American Arbitration Association in Orange County, California.
Notwithstanding the foregoing, FAC agrees that its failure to comply with the
provisions of Articles 4 and 5 will cause irreparable harm to Experian that
cannot be adequately compensated in damages and that Experian may seek equitable
relief and pursue other remedies to prevent such noncompliance.
8.8 Waiver. Either party may at any time waive compliance by the other with
any covenant or condition contained in this Agreement, but only by written
instrument signed by the party waiving such compliance. No waiver of any
provision of this Agreement shall be deemed to be, or shall constitute, a waiver
of any other provision hereof, nor shall such waiver constitute a waiver in any
other instance.
8.9 Retention of Rights. Nothing in this Agreement is intended to or shall
limit or restrict Experian's ability to market and sell its services, the
geographic areas in which or the customers to whom Experian may market or sell
its services.
8.10 Publicity. Except as specifically permitted by Experian in writing, under
no circumstances will FAC disclose to any third party, directly or indirectly,
the terms and conditions of this Agreement.
-7-
<PAGE>
8.11 No Third Parties. Nothing in this Agreement, whether express or implied,
is intended to confer upon any person other than the parties hereto and their
respective heirs, representatives, successors and permitted assigns, any rights
or remedies under or by reason of this Agreement, nor is anything in this
Agreement intended to relieve or discharge the liability of any party hereto.
8.12 Notice. All notices required or permitted to be provided to a party under
this Agreement must be in writing and sent to the address for the party set
forth on the last page of this Agreement, unless such address has been changed
by prior written notice to the other party to the Agreement.
8.13 Subject Headings. The subject headings or captions of the articles and
sections of this Agreement are included solely for purposes of convenience and
reference and will not be deemed to explain, modify, limit, amplify or aid in
the meaning, construction or interpretation of any of the provisions of this
Agreement.
8.14 Contract in Entirety. This Agreement (including the exhibits, amendments
and addenda hereto which are incorporated herein by this reference) sets forth
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous letters of intent,
agreements, covenants, negotiations, arrangements, communications,
representations, understandings or warranties, whether oral or written, by any
officer, employee, or representative of either party relating thereto. There
are no other understandings, statements, promises or inducements, oral or
otherwise, contrary to the terms of this Agreement.
[Signatures follow]
-8-
<PAGE>
IN WITNESS WHEREOF, each of FAC and Experian has caused this Reseller
Services Agreement to be executed by its duly authorized representative as of
the date first above written.
<TABLE>
<CAPTION>
First American CREDCO Experian Information Solutions, Inc., By and
"FAC" Through Its Information Solutions Division
<S> <C>
By: /s/ Parker S. Kennedy By: D.V. Skilling
------------------------------------- ----------------------------------------
(Signature) (Signature)
Name: Parker S. Kennedy Name: D. Van Skilling
----------------------------------- -------------------------------------
(Print or Type Name of Signer) (Print or Type Name of Signer)
Title: Title:
------------------------------------ -------------------------------------
(Print or Type) (Print or Type)
Address: Address: Experian National Resource Center
------------------------------------ 425 Martingale Road, Suite 600
- -------------------------------------------- Schaumburg, Illinois 60173
- -------------------------------------------- Telephone: (800) 831-5614
- -------------------------------------------- Facsimile: (847) 240-9149
</TABLE>
-9-
<PAGE>
EXHIBIT A
TO
RESELLER SERVICES AGREEMENT
Pricing
- -------
* Risk Scores $ .09 per score
* Address Update $ .72 per unit
* Social Search $ .72 per unit
* Direct to Consumer Report $1.90
* Direct to Consumer FACS+ $ .10 (mandatory use)
* All other FACS+ $ .05
* Quest - Rates quoted 5/15/96 (No Charge if "late")
- Credit Reports
Annual Volume Per Report Rate
First 5,000,000 Reports $ .99
Next 1,500,000 Reports $ .94
Next 1,500,000 Reports $ .89
Next 1,500,000 Reports $ .84
Over 9,500,000 Reports $1.50
General Conditions
- ------------------
* Three (3) year term for this pricing schedule beginning 07/97.
* Close coordination to ensure prompt payment of receivables.
* CREDCO provides management focal point for security issues.
* CREDCO will provide two (2) years of historical Residential Mortgage Credit
Report employment data plus new RMCR employment data developed during the
term of the agreement. A mutually agreed upon format, and media will be
worked out.
* Experian will receive 10 metropolitan area file comparisons per year from
CREDCO's CBAS system.
* CREDCO will pay the Experian surcharge for Colorado reports of $1.39.
* A zip table review of Experian utilization in major U.S. markets will be
collaborated upon.
Miscellaneous
- -------------
* CREDCO acknowledges receipt of a $52,000 credit for SMS billing in May and
June of 1997.
* CREDCO acknowledges payment by Experian of all penalties due for system
outages.
Additional Terms
- ----------------
The following agreements are effective until October 31, 1998. The parties will
meet on or about July 1, 1998 to negotiate in good faith with respect to the
continuation of such provisions:
* There will be no vendor penalties to Experian for system downtime.
* Experian shall be the default vendor in the automotive single file
environment.
* The parties agree to allow for "Direct to Consumer" price negotiations in
certain competitive situations.
* The charge for all credit reports over 8,000,000 reports in annual volume will
be $0.84.
<PAGE>
EXHIBIT B
TO
RESELLER SERVICES AGREEMENT
The following agents of FAC are permitted to resell the Services one
additional time:
Reynolds & Reynolds
CreditCheck, Inc.
Comp-U-Card
American Bankers Insurance
<PAGE>
Exhibit (10)(h)
AMENDMENT TO RESELLER SERVICES AGREEMENT
----------------------------------------
FOR RESALES TO CONSUMERS
------------------------
This Amendment To Reseller Services Agreement For Resales To Consumers (the
"Amendment") is entered into effective as of November __, 1997, by and between
the undersigned FAC and the Information Solutions Division of Experian
Information Solutions, Inc.
A. WHEREAS, the parties have entered into a Reseller Services Agreement
(the "Agreement"), which prohibits FAC from selling Experian Services (and the
information contained therein) to consumers; and
B. WHEREAS, the parties wish to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, and intending to be legally bound, Experian and FAC
hereby agree as follows:
1. License. Section 4.2.5 of the Agreement is hereby amended such that
FAC is permitted and granted a nonexclusive, nontransferable, limited license to
resell, on the terms and conditions set forth in this Amendment, Services
obtained by FAC from Experian under the Agreement directly to the Consumer(s)
about whom the information in the Services relate (each such Consumer, the
"Inquiring Consumer").
2. Method of Delivery. FAC may only provide the Services (i) by hand
delivery to an Inquiring Consumer who is requesting his or her consumer credit
information in person at FAC's place of business or (ii) by United States mail
service or nationally recognized overnight delivery service to the then most
current address in the Experian Services for such Inquiring Consumer (or most
reliable address otherwise available from Experian or one of the other two
national consumer reporting agencies for the Inquiring Consumer). FAC is
specifically prohibited from providing the Services (a) to a person other than
the Inquiring Consumer; (b) other than to the address for the Inquiring Consumer
obtained as provided in this Amendment; or (c) by facsimile transmission,
Internet transmission or other method not expressly permitted in this Agreement
or previously approved in writing by Experian. FAC agrees to maintain trained
personnel at each of its places of business authorized to resell directly to
Consumers, and to have one or more toll free telephone numbers and lines
dedicated to supporting resales to Consumers as may be necessary to assure
prompt and proficient service levels. FAC's personnel must at a minimum meet
the training requirements established by Experian.
3. Authorization of Consumer. FAC agrees that it shall only request
Services for resale directly to an Inquiring Consumer after FAC has obtained
from the Inquiring Consumer written instructions, signed by the Inquiring
Consumer, authorizing FAC to request and receive from Experian that Consumer's
credit information for resale to the Inquiring Consumer. FAC agrees to maintain
originally executed copies of such written instructions for a minimum of two (2)
years.
4. Verification of Consumer Identity. FAC agrees to verify the identity
of the Inquiring Consumer prior to reselling or otherwise providing the Services
to such Inquiring Consumer. FAC agrees that it will follow at a minimum those
procedures for verifying identification set forth in Experian's policies and
procedures, as such are amended from time to time (or as is previously approved
in writing by Experian), including but not limited to purchasing the Experian
FACS+ Service with each inquiry.
5. Fees. For each response from Experian to a request for Services to be
resold by FAC to an Inquiring Consumer, FAC will pay to Experian the fees set
forth on the pricing schedule attached to the Agreement or to this Amendment, as
applicable. Each FAC who engages in transactions with Consumers other than or
in addition to face-to-face transactions agrees to purchase from, and to pay
Experian for, at least Two Thousand Five Hundred Dollars ($2,500.00) per month
for Services to be resold to Consumers. Payments to Experian hereunder shall be
made pursuant to the terms of Article 3 of the Agreement.
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<PAGE>
6. Restriction on Use. FAC will fully and accurately convey the Services
(and the information therein) to the Inquiring Consumer, and will do so as
quickly as reasonably possible, but in no event later than three (3) business
days after receipt of the Services from Experian. FAC will maintain, display
and furnish the Services (and the information therein) separate and distinct
from all information and services not provided by Experian unless FAC has
obtained Experian's prior written approval. FAC will not copy any of the
Services (or the information therein) provided to FAC by Experian for resale to
an Inquiring Consumer and, once the Services are provided to the Inquiring
Consumer, FAC will not retain the Services (or information therein) in any
manner or form except to the extent necessary to, and for the sole purpose of,
demonstrating compliance with legal requirements. FAC agrees and certifies that
it will not reuse or use in whole or in part for any other purpose, the Services
provided to it for resale to an Inquiring Consumer.
7. Referral of Consumer Disputes and Questions. FAC will fully comply
with the provisions of Section 4.2.5 of the Agreement related to referral of
Consumer disputes and questions.
8. Disclosures to Consumers. FAC will implement adequate safeguards and
measures to assure Consumers' privacy with respect to the Services and to inform
Consumers of their rights under the FCRA and companion state and local laws and
regulations. FAC will provide notice(s) to Consumers to the extent and in the
manner required by Experian, for example to comply with state and federal
deceptive trade practices acts or similar laws and regulations. Specifically,
FAC will provide a notice to each Inquiring Consumer, simultaneously with
providing the Services to the Inquiring Consumer, that sets forth in prominent,
bold-faced type the following:
8.1 The FCRA allows the Consumer to obtain a copy of his or her credit
report from any consumer credit reporting agency for a reasonable charge;
8.2 If the Consumer has been rejected for credit in the past thirty
(30) days as a result of his or her consumer credit report, the Consumer is
entitled to receive a disclosure of the nature and substance of all information
in his or her file directly from the consumer credit reporting agency free of
charge;
8.3 The FCRA permits Consumers to dispute inaccurate information in
their credit file. Accurate information cannot be changed;
8.4 Experian's policy is to make available to Consumers one
complimentary copy of the consumer credit report per year upon request of the
Consumer;
8.5 The Consumer does not have to purchase the Services or other
information or services from FAC to dispute inaccurate information in the
Consumer's Experian file or to receive a copy of the Consumer's Experian
consumer credit report;
8.6 Experian's National Consumer Assistance Center provides
proprietary consumer disclosure in the form of a "consumer friendly" report that
is different from the report provided by FAC as part of the Services. The
proprietary "consumer friendly" report must be obtained by the Inquiring
Consumer directly from Experian.
8.7 Consumer's residing in the States of Massachusetts, Maryland and
Vermont may receive a free copy of their consumer credit report once per year
and residents of the State of Georgia may receive two copies per year.
9. Form of Advertising. In addition to the requirements on advertising
set forth in Section 4.3.7 of the Agreement, FAC will not use scare tactics or
play upon the fears of Consumers, whether in its advertising materials or
otherwise, in an effort to directly or indirectly sell the Services or other
goods or services offered by FAC.
10. Advertising Approval. Notwithstanding the requirements in Section
4.3.7 of the Agreement, FAC will actually submit to Experian for Experian's
prior written approval, written copies of all of FAC's
-2-
<PAGE>
advertising, promotional, and marketing materials, pamphlets, brochures and
similar disclosures, and any changes thereto, related to Experian Inc., its
successors or assigns, the Services, other services provided by Experian, the
consumer reporting industry, direct marketing industry or other industries in
which Experian, its successors and assigns do business, or that mention Experian
by name. Experian may approve or disapprove of any submission, in whole or in
part, in its sole and absolute discretion. If Experian disapproves of a
submission, FAC will not continue to resubmit the submission without changes
designed to address the causes of Experian's disapproval. FAC will not
disseminate, communicate or otherwise disclose any advertising, promotional, and
marketing materials, pamphlets, brochures and similar disclosures until it has
obtained Experian's prior written approval. FAC agrees to comply with any
additional advertising policies or related guidelines requested of it by
Experian.
11. Information Suppression. Experian will have the right to block or
otherwise prevent the display or disclosure of information, including but not
limited to Experian account numbers, subcodes and social security numbers, and
to otherwise change the format of Services provided to FAC for resale to
Consumers.
12. Policies and Procedures. FAC agrees to comply with all Experian
policies and procedures as announced by Experian from time to time related to
the sale of Services directly to Consumers, even if such policies and procedures
are in addition to legal requirements and/or Experian policies and procedures
applicable to the sale of Services to other persons.
13. Training and Certification. FAC may only resell Services to Inquiring
Consumers if FAC meets the applicable requirements of the Agreement, including
all training and certification requirements. FAC understands that Experian may
require training and certification of FAC in addition to that required of FAC
under the Agreement and agrees to obtain all such training and certifications
prior to reselling or otherwise providing Services to Consumers. FAC agrees
that Experian may change such training and certification at any time, and FAC
agrees to obtain such additional training and certification as soon as
reasonably possible after request by Experian.
14. Amendment Termination. Notwithstanding any other term in this
Amendment, (a) either party may terminate this Amendment by providing thirty
(30) days advance written notice to the other; and (b) Experian may unilaterally
terminate this Amendment immediately, or take any lesser action Experian
believes is appropriate, including but not limited to blocking FAC's access to
the Services and/or charging FAC a fee for auditing FAC to ensure compliance, if
Experian believes in its sole judgment that FAC has failed to comply with any of
its obligations hereunder or under the Agreement. In the event of such
termination, FAC will cease selling or otherwise providing Services to
Consumers. Failure to cease such activities shall be a breach of the Agreement
permitting Experian to terminate the Agreement in whole or in part pursuant to
Section 7.2 thereof. In addition, this Amendment will automatically terminate
without additional action upon termination of the Agreement.
15. Miscellaneous. All terms and conditions of the Agreement not
specifically addressed in this Amendment shall remain unchanged and in full
force and effect. In the event of any express conflict or inconsistency between
the provisions of this Amendment and the provisions of the Agreement, the
provisions of this Amendment will govern and control; provided, however, that
the provisions of this Amendment will be so construed to give effect to the
applicable provisions of the Agreement to the fullest extent possible. All
terms not defined herein beginning with an initial capital letter will have the
meaning set forth in the Agreement (or an Appendix thereto).
16. Entire Agreement. This Amendment sets forth the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior agreements (except the Agreement to the extent indicated in Section 15
above), letters, covenants, arrangements, communications, representations,
whether oral or written, by any representative of either party.
[Signatures follow]
-3-
<PAGE>
IN WITNESS WHEREOF, each of FAC and Experian has caused this Amendment to
be executed by its respective duly authorized officer as of the date first
written above.
First American CREDCO Experian Information Solutions, Inc.
By and Through Its
Information Solutions Division
By: /s/ Parker S. Kennedy By: /s/ D.V. Skilling
--------------------- ----------------------
Signature Signature
Name: Parker S. Kennedy Name: D. Van Skilling
-------------------- ---------------------
Print or Type Print or Type
Title: Title:
------------------- --------------------
Print of Type Print or Type
-4-
<PAGE>
EXHIBIT (10)(i)
TRADEMARK LICENSE AGREEMENT
This TRADEMARK LICENSE AGREEMENT ("Agreement") is made this ___ day of
November, 1997 by and between Experian Information Solutions, Inc., an Ohio
corporation ("Licensor"), and First American Real Estate Solutions, LLC, a
California limited liability company ("Licensee").
RECITALS
WHEREAS, Licensor and The First American Financial Corporation ("FAFCO"),
First American Real Estate Information Services, Inc. ("FAREISI") and various
subsidiaries and affiliates of FAREISI (FAREISI and its subsidiaries and
affiliates are collectively referred to as the "FAFCO Members") are parties to
a Contribution and Joint Venture Agreement dated as of November ___, 1997 (the
"JV Agreement") whereby Licensor and the FAFCO Members will jointly contribute
assets to, and jointly own, Licensee; and
WHEREAS, Licensor has been engaged in developing and marketing a broad
range of information products and services, and is the owner of the "Experian"
name and the "Experian" trademark and service mark and logo associated therewith
(such Experian mark and logo and the use of the Experian mark as a prefix in a
secondary mark with another component used by Experian or its related and
affiliated entities shall hereinafter be collectively referred to as the
"Trademark") that identifies its various businesses, products and services
including those of the RES Business (as defined in the JV Agreement) and
symbolizes the goodwill and reputation of the business connected therewith
throughout the world; and
WHEREAS, Licensee recognizes the worldwide marketing value of Licensor's
goodwill and reputation as symbolized by the Trademark and is desirous of using
the Trademark in the RES Business that is being contributed to Licensee pursuant
to the JV Agreement and benefiting from its goodwill and reputation in
connection with Licensee's business; and
WHEREAS, Licensee acknowledges that the reputation and goodwill as
symbolized by the Experian name and Trademark are of great value to Licensor and
that Licensor will suffer great and irreparable damage if Licensee engages in
any activity or course of conduct which threatens to diminish or negatively
impact Licensor's goodwill or reputation; and
WHEREAS, the execution and delivery of this Agreement is a condition to the
Closing of the transactions contemplated by the JV Agreement; and
WHEREAS, Licensor has imposed certain terms and conditions as to the use of
the Trademark which Licensee has accepted in order to protect Licensor's rights;
and
1
<PAGE>
WHEREAS, the Parties wish to provide formal evidence of their agreement.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is mutually agreed as follows:
1. Definitions. Terms defined in the JV Agreement and not otherwise
defined herein are used herein as such terms are defined in the JV Agreement.
"Products and/or Services" shall mean the products and services sold or
provided by Licensee in the conduct of the RES Business following the Closing
that are (i) the products and services sold or provided by Licensor through its
RES Business prior to the Closing, (ii) the products and services of Licensor
substantially developed by Licensor through its RES Business as of the Closing,
and (iii) with Licensor's prior written approval, products or services that are
substantially similar to the products and services sold or provided and/or
substantially developed for sale by Licensor prior to the Closing.
2. Grant of License. Subject to the terms and conditions hereinafter set
forth, Licensor hereby grants to Licensee the right to use the Trademark in
association with selling the Products and/or Services. Licensee shall during
the term of this Agreement, identify itself by stating its organized or trade
name on all the Products and/or Services and related promotions, advertising and
public announcements.
3. Royalty. So long as Licensee shall have the right to use the
Trademark as provided for herein (whether or not Licensee actually uses the
Trademark), Licensee shall pay to Licensor .2% of Licensee's gross revenues, as
computed under US GAAP. Such royalty payments shall be made each calendar
quarter, within thirty (30) days of the conclusion of the previous quarter.
4. Term. This Agreement shall continue in full force and effect so long
as Licensor or an affiliate of Licensor maintains an ownership interest in
Licensee, unless sooner terminated as provided below.
5. Limitations. Notwithstanding anything in this Agreement, expressed or
implied, to the contrary:
(a) Except as provided in Section 2, Licensee may not use the
Trademark as part of any corporate, business or trading name.
(b) Licensee may not use the Trademark other than in connection
with the Products and/or Services and as allowed under Section
2 hereof. With respect to any other products or services,
Licensee shall use its own name and marks.
(c) Licensee may not change, modify or alter the Trademark in any
manner in connection with Licensee's use of the Trademark as
provided for herein.
2
<PAGE>
(d) Licensee may not assign its rights or obligations under this
Agreement to any other person or entity without the express
prior written approval of Licensor, which Licensor may
withhold in its sole and absolute discretion.
(e) Any and all use of the Trademark by Licensee shall inure to
the benefit of Licensor and Licensee acknowledges that
Licensor owns all right, title and interest to the Trademark
and, except as set forth in this Agreement, reserves all
rights thereto, specifically including, without limitation,
all rights to license or authorize use of the Trademark.
(f) Following the Closing, Licensee shall be permitted to utilize
in the conduct of the RES Business all inventories, existing
as of the Closing, of marketing materials related to the RES
Business, including brochures, product and service
descriptions, catalogs and similar material, manuals,
instruction materials, packaging and other printed material
with or without modifying the same, provided that Licensee
uses reasonable efforts to advise the users and/or recipients
that the new source of such Products and/or Services is
Licensee and not Licensor.
6. Quality Control. In order to assure the quality and nature of the
Products and/or Services bearing the Trademark and protect the reputation of
Licensor:
(a) Licensor acknowledges that the quality standards,
specifications, and related policies, procedures and processes
for products and/or services bearing the Trademark as of the
Closing (the "Standards") are deemed acceptable to Licensor
and, for so long as Licensee continues to use the Trademark,
Licensee agrees to continue to maintain the quality of the
Products and/or Services bearing the Trademark consistent with
Licensor's Standards in effect prior to the Closing.
(b) For so long as Licensee continues to use the Trademark, and
upon request of Licensor, but not more than once each calendar
quarter during the term of this Agreement, Licensee shall make
available for Licensor's review copies of all material
complaints, claims, suggestions and regulatory or judicial
inquiries, requests, recommendations, actions or orders
("Comments") as to the Products and/or Services bearing the
Trademark as embodied in any medium of tangible expression
from third parties received by Licensee, and all
correspondence from or to such third party concerning any
Comments received during the preceding quarter.
(c) For so long as Licensee continues to use the Trademark,
Licensor shall have the right to enter Licensee's premises,
upon reasonable prior notice during regular business hours,
and have the right to inspect and examine the Products and/or
Services bearing the Trademark and to review all records of
Licensee
3
<PAGE>
relating to the quality of the Products and/or Services
bearing the Trademark. Licensor shall be able to exercise such
right, as a minimum, every four months and in any case where
an event may arise that, in its reasonable good faith
judgment, requires such on-site review. Licensor shall conduct
such activities in a manner not to interfere with Licensee's
business operations.
(d) In the event that any Products and/or Services bearing the
Trademark are found by Licensor or its designee not to meet
the Standards, Licensor shall so notify Licensee in writing.
Licensor shall specify to Licensee in reasonable detail the
respects in which the Standards are not being met and, unless
Licensee, within sixty (60) days of its receipt of such
notice, takes corrective measures which reasonably rectify the
deficiency, Licensee's right to use the Trademark shall
immediately terminate upon notice to that effect from Licensor
and this Agreement shall thereupon terminate.
7. Intellectual Property Control. (i) For so long as Licensee continues
to use the Trademark, Licensee undertakes to use reasonable efforts to cooperate
with Licensor, at Licensor's expense, in protecting the Trademark. In
furtherance of such purposes Licensee shall:
(a) Use the Trademark only in accordance with the terms of this
Agreement;
(b) Affix appropriate trademark and service mark notations (e.g.,
"TM" or "(R)") and wording and otherwise make proper use of
the Trademark by using it as a proprietary trademark and/or
service mark, and indicating that the Trademark is owned by
Licensor and used by Licensee with Licensor's permission on
all promotional and advertising materials and Products and/or
Services;
(c) Not use any name, mark, device, symbol, insignia, designation,
labeling or packaging in connection with the Trademark, other
than such of the foregoing as Licensee may from time to time
use in the ordinary course of Licensee's conduct of the RES
Business, without the prior written approval of Licensor, and
not apply to register the Trademark in any manner anywhere in
the world, with or without a secondary component;
(d) Comply with all applicable laws and regulations with respect
to the production, distribution and sale of the Products
and/or Services; and
(e) Execute such documents and take such reasonable actions as may
be required by Licensor in connection with the protection of
the Trademark and the registrations thereof, including,
without limitation, cooperate with Licensor in executing and
filing Registered User Agreements as necessary or desirable,
and in applying to register and renew registrations of the
Trademark in such classes and countries as Licensor may wish
to do so in its sole discretion.
4
<PAGE>
(ii) For so long as Licensee continues to use the Trademark, each of Licensee
and Licensor shall promptly provide the other written notice in the event either
party becomes aware of any actual or threatened use of the Trademark by any
third party. In such event, Licensor shall have the first right at its own
expense, to take such action, including the initiation of legal proceedings, to
prevent and terminate such use. If within ninety (90) days, Licensor elects not
to pursue any action, Licensee shall then have the right, at its own expense, to
take such action, including the initiation of legal proceedings, to prevent and
terminate such use. The party conducting such action shall control its conduct
and the other party shall cooperate in any such proceeding, such cooperation to
include, without limitation, the joining of the other party as a party to the
action when either party is required to do so by law in order to bring the
action. Any recovery in any such action or proceeding shall first be paid to
reimburse the parties for their respective out-of-pocket expenses associated
with such action or proceeding (such amounts to be paid on a pro rata basis in
the event any recovery is less than the total of the parties' out-of-pocket
expenses) and any remaining recovery shall be paid to Licensor.
(iii) Licensor shall, at its own expense, file all applications, affidavits and
other documents necessary to maintain the effective registration of the
Trademark in the United States Patent and Trademark Office and in each other
country in which the Trademark is registered on the date of the Closing, but
Licensor and/or Licensee shall not apply to register any marks that include the
Trademark in connection with the RES Business.
8. Termination. Notwithstanding anything to the contrary, this Agreement
shall automatically terminate without notice immediately upon Licensor or any
affiliate of Licensor no longer having an ownership interest in Licensee, or
upon notice by Licensor to Licensee upon the occurrence of any of the following
events:
(a) Breach by Licensee of the Royalty payment provision contained in
Section 3 of this Agreement, which breach is not cured within ten (10)
days after Licensee's receipt of written notice setting forth the
particular breach.
(b) Breach by Licensee of any other term or condition of this Agreement,
which breach is not cured within sixty (60) days after Licensee's
receipt of written notice setting forth the particular breach. It is
expressly understood that breach of the Standards shall be governed by
the provisions of Section 6(d).
(c) Any assignment of Licensee's assets or business for the benefit of
creditors, or appointment of a trustee or receiver, or like official
to administer or conduct the business of Licensee or adjudication in
any legal proceeding that Licensee is either insolvent or otherwise
unable to meet its financial obligations as they become due or is a
voluntary or involuntary bankrupt.
(d) Licensee or all or substantially all of its operations or assets are
sold or assigned, or are confiscated, nationalized or expropriated or
in any other manner controlled, either
5
<PAGE>
directly or indirectly, by any government, national, state or
municipal, or any agency thereof.
(e) Licensee engages in any course of conduct or activities which generate
materially negative publicity asserting that Licensee's business
practices do not conform to applicable law or standard industry
practices and the Trademark or Experian name, mark and/or logo is
referenced in a negative manner in two or more print or television or
radio media over the course of any week or is the subject of
significant use on the Internet over the course of any week and which
negative publicity is not responded to by Licensee in a reasonable
period after Licensee receives notice of such from Licensor with
Licensee's press releases and written responses directly to the media
outlets creating such publicity, and if appropriate, to the customer,
consumer or government agency that is the subject of such publicity
and/or with published advertisements of Licensee. Such press releases,
responses and/or advertisements of Licensee shall (i) announce that
corrective action is being undertaken, if in Licensee's reasonable
judgment that is necessary or desirable to maintain legal and industry
standards, and (ii) clarify, among other things, that Licensee is a
separate legal entity that has acquired the RES Business which was
formerly Licensor's and which RES Business is no longer operated by
Licensor.
9. Rights Upon Termination. The parties expressly agree that upon
termination or expiration of this Agreement, Licensee's right to make any use
whatsoever of the Trademark shall immediately and permanently cease. Licensee
shall thereafter immediately and permanently discontinue any and all further use
of the Trademark and take any further steps, at Licensor's expense, reasonably
required to effectuate and confirm the exclusive rights of Licensor in and to
the Trademark throughout the world. To that end, Licensee shall immediately
execute any and all appropriate documents and shall also assist Licensor in
terminating any agreements and registrations by which any other party has used
the Trademarks. Specifically, without limitation of the foregoing, Licensee
shall cooperate fully and assist Licensor, at Licensor's expense, in protecting
the Trademark and the registrations thereof throughout the world.
10. Failure to Enforce Agreement. Any failure by Licensor to enforce at
any time or for any period of time any term or condition of this Agreement shall
not be deemed a waiver of such term or condition or of any other term or
condition or of any subsequent breach of any term or condition.
11. Notice. All notices and communications required or permitted to be
given under this Agreement will be deemed to have been duly given at the time of
receipt if delivered by hand or communicated by electronic transmission or, if
mailed, three (3) days after deposit in the U. S. mail as registered or
certified, postage prepaid and addressed to the other party at their respective
addresses set forth below, unless a different person or address shall have been
designated by notice:
6
<PAGE>
To Licensee: First American Real Estate Solutions LLC
150 Second Avenue, Suite 1600
St. Petersburg, Florida 33701
Telefax: (813) 895-3619
Attention: President
To Licensor: Experian Information Solutions, Inc.
505 City Parkway West, 10th Floor
Orange, California 92868
Telefax: (714) 938-2513
Attention: General Counsel
12. Successors. This Agreement shall be binding on the successors to the
parties hereto subject to the provisions of Paragraph 5(c).
13. Entire Agreement. This Agreement, which may not be amended or
modified, except in writing executed by both parties, is the entire Agreement
between the parties with respect to its subject matter hereof and supersedes all
prior agreements, covenants, arrangements, communications, representations or
warranties between the parties with respect to the subject matter hereof,
whether written or oral.
14. Survival of Obligations. Other provisions hereof notwithstanding, any
obligation of a party incurred under this Agreement prior to the termination or
expiration hereof will survive such termination or expiration.
15. Headings. The headings and titles to the paragraphs of this Agreement
are inserted for convenience only and will not be deemed a part hereof or affect
the construction or interpretation of any provision hereof.
16. Controlling Law. This Agreement shall be construed, interpreted and
enforced according to the laws of the State of California.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
Licensor:
Experian Information Solutions, Inc.
By: /s/ D. V. Skilling
--------------------------------
Name: D. Van. Skilling
--------------------------------
Title:
--------------------------------
Licensee:
First American Real Estate Solutions LLC
By: /s/ Parker S. Kennedy
---------------------------------
Name: Parker S. Kennedy
---------------------------------
Title:
---------------------------------
8
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