UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 26, 1999
CFI ProServices, Inc.
(Exact name of registrant as specified in its charter)
Oregon 0-21980 93-0704365
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 S.W. Sixth Avenue, Portland, Oregon 97204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 274-7280
This Form 8-K consists of 46 pages. Exhibits are indexed on page 4.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective as of January 1, 1999, CFI ProServices, Inc. (the
"Company"), acquired substantially all of the assets of Modern Computer Systems,
Inc., a Minnesota corporation ("MCS"), and certain related corporations
(collectively, the "Assets"). MCS, whose principal executive offices are located
in Burnsville, Minnesota, provides back office ("host") data processing and
related services to financial institutions. In accordance with the terms of an
Asset Purchase and Sale Agreement (the "Agreement") executed on January 26, 1999
by the Company, MCS, Ronald L. Ingersoll (the sole shareholder of MCS,
"Ingersoll"), and BankServ, Inc., Inasyst, Inc. and Dealer Computer Systems,
Inc. (all Minnesota corporations owned by Mr. Ingersoll either solely or in
joint tenancy with his spouse, and collectively with Ingersoll and MCS, the
"Sellers"), the Company agreed to pay a combination of cash and shares of the
Company's common stock (the "CFI Stock") in the aggregate amount of $6,550,000
(the "Purchase Price") to MCS for the Assets, and $100,000 to Ingersoll as
consideration for a non-compete agreement.
The Agreement provides for the payment of the Purchase Price as
follows:
(a) Cash in the aggregate net amount of approximately $5,400,000
($6,000,000 less cash received of approximately $600,000).
(b) 50,000 shares of CFI Stock, having an aggregate market value on
that date equal to approximately $650,000. The CFI Stock is not registered
and, as such, is a "restricted security" as that term is defined in Rule
144 of the Securities Act of 1933, as amended.
The Purchase Price of the Assets was determined by negotiation
between the Company and Ingersoll. Prior to entering into the Agreement, there
was no relationship between the Company and any of the Sellers.
MCS does not own a significant amount of assets categorized as
property and equipment and MCS leases the facilities out of which it currently
operates. The Company intends that it will continue to utilize these facilities
and equipment (primarily computer equipment) in the same manner MCS utilized
them prior to the Company's acquisition of the Assets. The other corporate
Sellers do not own any assets categorized as property and equipment and do not
lease any operating facilities.
The Company's acquisition of the Assets was financed through working
capital. The Company does not expect to borrow any funds in connection with its
payment obligations pursuant to the acquisition.
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In connection with this acquisition, the Company believes it will
likely take a pre-tax charge in the first quarter of 1999 representing the
value, to be determined by independent appraisal, of acquired in-process
research and development.
The Agreement is being filed as Exhibit 2.1, and is incorporated
into this Current Report on Form 8-K by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired. The Company's
acquisition of the Assets does not qualify as the acquisition of a significant
business pursuant to Item 2, Instruction 4 of Form 8-K and Rule 11-01(b) of
Regulation S-X. As such, financial statements are not required pursuant to Rule
3-05(b)(2)(i).
(b) Pro forma financial information. The Company's acquisition of
the Assets does not qualify as the acquisition of a significant business
pursuant to Item 2, Instruction 4 of Form 8-K. As such, pro forma financial
information is not required pursuant to Rule 11-01 of Regulation S-X.
(c) Exhibits.
Exhibit No. Description
2.1 Asset Purchase and Sale Agreement,
dated effective January 1, 1999,
among CFI ProServices, Inc., Modern
Computer Systems, Inc., BankServ,
Inc., Inasyst, Inc., Dealer Computer
Systems, Inc., and Ronald L.
Ingersoll
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CFI PROSERVICES, INC.
Date: February 10, 1999 By: /s/ Jeffrey P. Strickler
--------------------------------
Jeffrey P. Strickler
Vice President and General Counsel
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INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit Number Description Page
- -------------- ---------------------------------------- ------------
2.1 Asset Purchase and Sale Agreement, dated -5-
effective January 1, 1999, among
CFI ProServices, Inc., Modern Computer
Systems, Inc., BankServ, Inc., Inasyst, Inc.,
Dealer Computer Systems, Inc., and Ronald L.
Ingersoll
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ASSET PURCHASE AND SALE AGREEMENT
This ASSET PURCHASE AND SALE AGREEMENT ("Agreement") is dated effective as
of January 1, 1999 (the "Effective Date"), by and among Modern Computer Systems,
Inc., a Minnesota corporation ("MCS"); BankServ, Inc., a Minnesota corporation
("BankServ"); Dealer Computer Systems, Inc., a Minnesota corporation ("DCS");
Inasyst, Inc., a Minnesota corporation ("Inasyst"); Ronald L. Ingersoll, an
individual ("Ingersoll"); and CFI ProServices, Inc., an Oregon corporation
("CFI"). In this Agreement, MCS, BankServ, DCS, Inasyst and Ingersoll are
sometimes individually referred to as "Principal" and collectively as the
"Principals." All capitalized terms used herein and not previously defined shall
have the meaning ascribed thereto in Section 10.14 of this Agreement.
RECITALS
WHEREAS, Ingersoll owns one hundred percent (100%) of the issued and
outstanding capital stock of each of MCS and Inasyst, and, together in joint
tenancy with his wife, one hundred percent (100%) of the issued and outstanding
capital stock of BankServ and DCS; and
WHEREAS, MCS is in the business of marketing, selling and/or licensing,
and providing certain software and hardware products, and related services to
financial institutions and other customers; and
WHEREAS, BankServ, DCS and Inasyst are each the owners of certain software
products, listed in Exhibit 1.1 hereof, which BankServ, DCS and Inasyst license
to MCS to market for use by financial institutions and other customers; and
WHEREAS, CFI desires to purchase the software products and related rights
from each of BankServ, DCS and Inasyst, to purchase certain assets from MCS, and
to employ the existing employees of MCS, all as described, and upon the terms
and subject to the conditions, set forth herein; and
WHEREAS, the Principals each desire to enter into the transactions
contemplated herein.
NOW, THEREFORE, in consideration of the foregoing premises and of the
respective representations, warranties, covenants, agreements, and conditions
contained herein, the parties hereto agree as follows:
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AGREEMENT
ARTICLE I: PURCHASED ASSETS
Section 1.1 Purchase of Assets.
On the terms and subject to the conditions herein stated, the Principals
hereby agree to sell, assign, transfer, convey, and deliver to CFI as of the
Effective Date, and CFI hereby agrees to purchase from the Principals as of the
Effective Date, all of the assets and properties described below (collectively,
the "Purchased Assets"):
(a) all Intellectual Property related to the products described in Exhibit
1.1 (the "Products"), including, without limitation, all modifications and
versions of such Intellectual Property that may exist as of the Closing Date (as
hereinafter defined), and all related Licenses and Records. In furtherance of
the foregoing, each of the Principals, as applicable, hereby assigns, sells and
transfers to CFI all right, title, interest and good will in and associated with
the Marks (listed in Exhibit 3.6(c)), together with all other trademarks used by
the Principals in connection with the Business, including all registrations and
applications for registrations associated therewith. The Intellectual Property
is described more fully on Exhibit 3.6(c);
(b) all tangible personal property used by MCS in connection with the
development, marketing, distribution and support of the Products, including
inventory, unless otherwise excluded and set forth on Exhibit 1.3 hereof
(collectively, "Purchased Tangible Personal Property"). A listing of all of the
Purchased Tangible Personal Property is set forth on Exhibit 1.1(b). The
Purchased Tangible Personal Property constitutes substantially all of the
tangible personal property used by the Principals in connection with the
Business;
(c) all of MCS's assignable rights and obligations under Contracts that
are related to or entered into in connection with the development, marketing,
distribution and/or support of the Products, which Contracts are set forth on
Exhibit 1.1(c) (collectively, "Purchased Contracts");
(d) all indebtedness and obligations due any of the Principals with
respect to the Products, including payment obligations of third parties pursuant
to Contracts ("Accounts Receivable") existing on and related to periods on and
after the Effective Date, as such obligations are described (and allocated among
the parties) in Exhibit 1.1(d), and excluding any intercorporate obligations
between the Principals, which obligations have been fully and clearly identified
to CFI prior to the Closing Date.
(e) all deposits (including cash and other liquid assets), accounts,
prepayments, and similar payments held or made by or on behalf of the Principals
in connection with or relating to the Purchased Assets or the Business; and
(f) all assignable rights and obligations of MCS under any
confidentiality, noncompetition, proprietary information or similar agreement
between any of the Principals and any third party (excluding for purposes of
this Section 1.1 only, each employee listed on
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Exhibit 3.9 hereof, which rights shall be assigned and transferred to CFI
pursuant to Section 1.2, below); provided, that with respect to Ingersoll only,
that such agreement relates to the Business.
The parties intend and acknowledge that the Purchased Assets represent and
comprise the complete business of MCS, as such business was conducted prior to
the Effective Date by all Principals (the "Business").
Section 1.2 MCS Employees.
On the terms and subject to the conditions herein stated, the parties
hereto acknowledge and agree that, effective as of and immediately after close
of business on January 22, 1999, CFI will employ all of the employees of MCS,
and MCS shall assign, transfer, convey, and deliver to CFI all rights and
obligations of MCS under any confidentiality, noncompetition, proprietary
information or similar agreement between any of the Principals and such
employees. The parties acknowledge and agree that such employment shall be "at
will" (except as otherwise may be agreed between CFI and any employee) and
pursuant to CFI's standard employment terms and conditions.
Section 1.3 Excluded Assets.
The assets and properties of the Principals of every nature, kind and
description, tangible and intangible, real and personal, wherever located, other
than the Purchased Assets, are referred to collectively as the "Excluded
Assets." The Excluded Assets are described in Exhibit 1.3. The Excluded Assets
shall be retained by the Principals.
Section 1.4 Assumed Obligations and Excluded Liabilities.
At the Closing, CFI shall assume and agree to pay or perform, promptly as
they become due, only those obligations and liabilities of the Principals
expressly set forth on Exhibit 1.4 (collectively, the "Assumed Obligations").
Except for the Assumed Obligations, CFI is not assuming, and shall not be deemed
to have assumed, any liability and shall not have any obligation for or with
respect to any liability or obligation of any of the Principals of any nature
whatsoever, whether accrued or fixed, absolute or contingent, known or unknown,
or determined or determinable, and whether incurred prior to, on, or after the
Effective Date (collectively, the "Excluded Liabilities"). To the extent not
satisfied prior to the Closing Date, the Excluded Liabilities shall be retained
by the Principals.
Section 1.5 Closing.
The closing of the purchase and sale of the Purchased Assets shall take
place at 10:00 a.m. at the offices of MCS's broker, Cherry Tree Co. LLC ("Cherry
Tree") on January 26, 1999 or at such other time, date, and location as the
parties hereto mutually agree. Such time and date of the closing are herein
referred to as the "Closing Date."
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ARTICLE II: PURCHASE PRICE AND PAYMENT TERMS.
Section 2.1 Purchase Price.
(a) Payment Amounts. On the Closing Date, CFI shall deliver (i) to MCS the
aggregate amount of Five Million Nine Hundred Thousand Dollars ($5,900,000) (the
"MCS Cash Payment") and (ii) to Ingersoll, in consideration of the agreements
set forth in Article VI hereof, the aggregate amount of One Hundred Thousand
Dollars ($100,000) (the "Ingersoll Cash Payment"). The Cash Payments shall be
made by wire transfer of immediately available funds. MCS shall hold the MCS
Cash Payment on behalf of the Principals for allocation in the manner set forth
in Exhibit 2.4.
(b) Shares. On the Closing Date, CFI shall issue to MCS Fifty Thousand
(50,000) shares of CFI common stock (the "Shares"). The Shares will be
"restricted shares" within the meaning of the Securities Act of 1933, as
amended. CFI shall agree to register the Shares solely upon the terms and
conditions, and under the circumstances, set forth in Appendix A. A certificate
representing the Shares shall be delivered to MCS on or promptly after the
Closing Date.
The Cash Payment and the value of the Shares are herein
collectively referred to as the "Purchase Price."
Section 2.2 Taxes.
The Principals shall be jointly and severally responsible for any and all
Taxes (as hereinafter defined) which have accrued or which may accrue in the
future as a result of any of such Principal's possession, ownership, or use of
any of the Purchased Assets prior to the Effective Date, other than Taxes
accrued on the MCS Balance Sheet. Insofar as reasonably possible, all such
payments of Taxes, due on or before the Effective Date, shall be made and paid
on or before the Closing Date, with settlement of any remaining items to be made
within thirty (30) days following the Closing Date. CFI shall be solely
responsible for any and all Taxes (as hereinafter defined) which are accrued on
the MCS Balance Sheet or which accrue as a result of CFI's possession,
ownership, or use of the Purchased Assets on and after the Effective Date. The
Principals have determined that no sales Taxes are payable as a result of the
transactions contemplated herein.
Section 2.3 Full Compensation.
Payment of the amounts specified in Section 2.1 shall constitute full
compensation to the Principals for the Purchased Assets and full performance of
the Principals' various obligations under this Agreement.
Section 2.4 Allocation of Purchase Price.
The Principals and CFI hereby agree that the Purchase Price shall be
allocated to the various components of the Purchased Assets in accordance with
this Section 2.4 and the
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appropriate provisions of the Internal Revenue Code of 1986, as amended, and
applicable regulations thereunder, substantially as set forth in Exhibit 2.4
hereof. Within ninety (90) days after the Closing Date, the parties shall
mutually agree to allocate the Section 197 intangible assets among the
appropriate sub-categories in an appropriate manner. CFI shall make an
allocation of the Section 197 intangible assets consistent with its past
practice, and shall deliver the allocation to Ingersoll. Ingersoll shall, within
ten (10) business days after receipt thereof and behalf of each of the
Principals, provide CFI with either (i) written acknowledgment and approval of
such allocation or (ii) written objection to such appraisal and allocation
(specifying Ingersoll's reasons therefor). If the parties are unable to agree on
the allocation of the purchase price, they will submit the issue to an
independent arbitrator. The parties hereto agree to timely file all tax forms,
schedules, and returns required with respect to the transaction and the
allocation of the Purchase Price. None of the Principals nor CFI shall file any
tax return, form, or schedule that is inconsistent with the allocation derived
pursuant to this Section 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS
Except as set forth in the attached Schedule of Exceptions, any Exhibits
or other applicable schedule, appendix or exhibit hereto, each of the
Principals, individually and jointly, hereby represents and warrants to CFI that
the following statements are true and correct as of the date hereof.
Section 3.1 Corporate Formalities; Enforceability.
(a) Corporate Status. MCS, BankServ, DCS and Inasyst (the "Corporate
Sellers") are each corporations, duly organized, validly existing, and in good
standing under the laws of the State of Minnesota. None of the Corporate Sellers
is, and will not be with the passage of time, in violation of any provision of
their respective Articles of Incorporation and Bylaws as currently in effect
(respectively, the "Charter Documents") as a result of the execution and
delivery of this Agreement and each document contemplated hereby, and the
consummation of the transactions contemplated herein.
(b) Corporate Power and Authority. Each of the Corporate Sellers has all
requisite corporate power and authority to own, lease, possess, and operate its
assets; to engage in the business in which it is and was engaged prior to the
Closing Date; to execute, deliver, and carry out the terms and provisions of
this Agreement and each document contemplated hereby; and to consummate the
transactions contemplated herein and therein. The Board of Directors of each of
the Corporate Sellers has duly approved, and, on the Closing Date, each of the
Principals will have taken or caused to be taken all other proper and necessary
action to authorize the execution, delivery, and performance of this Agreement
and each document contemplated hereby. Each of the Corporate Sellers is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where
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the failure to be so qualified would not, individually or in the aggregate, have
a Material Adverse Effect on the Business or the Purchased Assets.
(c) Enforceability of Acquisition Agreement and Related Documents. The
Principals have each duly executed and delivered this Agreement, and this
Agreement constitutes the legal, valid, and binding obligation of each of the
Principals, enforceable in accordance with its terms. Each document contemplated
hereby, when executed and delivered by the Principals in accordance with the
provisions hereof and thereof, shall be a legal, valid and binding obligation of
the executing party, enforceable in accordance with its terms.
(d) Authority to Sell; Subsidiaries and Other Interests. Ingersoll, either
solely or in joint tenancy with his spouse, owns one hundred percent (100%) of
the outstanding capital stock of each of the Corporate Sellers, free and clear
of all Liens, and has the right to vote the stock of each Corporate Seller in
favor of, and to take any other actions necessary to effect, the transactions
contemplated by this Agreement without the consent, waiver or action of any
other person. None of the Corporate Sellers owns or controls any capital stock
or ownership interest in any other corporation, partnership or entity, either
directly or indirectly.
Section 3.2 Non-Contravention.
The execution and delivery by the Principals of this Agreement and of the
documents contemplated hereby; the performance by the Principals of the terms
and provisions hereof and thereof; the consummation of the transactions
contemplated herein and therein; the operation of the Business prior to the
Closing Date; and CFI's ownership of the Purchased Assets (other than as a
result of any action or omission of CFI), does not and will not (with the
passage of time or the giving of notice or both):
(a) conflict with any Law or with any Approval (notwithstanding that
compliance with any such Law or Approval is not required until a future date) or
any proposed or pending change in any Law or Approval;
(b) conflict with, contravene, result in a breach of, constitute a default
under, or give rise to any right of termination, cancellation, acceleration, or
loss of right under any Corporate Seller's Charter Documents or under any
Contract;
(c) result in the creation or imposition of any Lien, restriction or
encumbrance of any kind (other than those caused directly or indirectly by CFI)
upon the Purchased Assets; or
(d) to the best knowledge of the Principals, require any Approval (except
as set forth in Exhibit 3.2).
Section 3.3 Financial Condition.
(a) Financial Statements. Ingersoll has delivered to CFI unaudited balance
sheets of MCS (the "MCS Balance Sheet"), dated as of October 31, 1998, October
31, 1997 and
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December 31, 1998 (the "MCS Balance Sheet Date"), and the related unaudited
statements of income and cash flows for the periods ended October 31, 1998,
October 31, 1997 and December 31, 1998, together with any notes thereto and/or
reports thereon (collectively, the "MCS Financial Data"). The MCS Balance Sheet:
(i) has not been audited; (ii) is in accordance with the Records of MCS; and
(iii) to the best knowledge of Ingersoll and MCS, fairly presents the financial
condition of MCS as of the MCS Balance Sheet Date.
(b) No Material Adverse Effects. Except as expressly allowed or
contemplated by this Agreement, since the MCS Balance Sheet Date, MCS has
conducted its business in the ordinary course and there has not occurred:
(i) Any Material Adverse Effect;
(ii) Any amendments or changes in any of the Corporate Seller's
Charter Documents that would have any impact on MCS or the Purchased Assets.
(iii) Any redemption, repurchase or other acquisition of shares of
capital stock of MCS by MCS or any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the capital stock of MCS;
(iv) Any increase in or modification of the compensation or benefits
payable or to become payable by MCS to any of its employees;
(v) Any acquisition or sale of property or assets by or of any of
the Corporate Sellers, except in the ordinary course of business;
(vi) Any entry into, amendment of, relinquishment, termination or
non-renewal by a Corporate Seller of any Contracts, lease transaction,
commitment or other right or obligation, other than in the ordinary course of
business;
(vii) Any labor dispute, other than routine individual grievances,
or, to the best knowledge of the Principals, any activity or proceeding by a
labor union or representative thereof to organize any employees of any Corporate
Seller; or
(viii) Any agreement or arrangement made by any Principal to take
any action after the date hereof which, if taken prior to the date hereof, would
have made any representation or warranty set forth in this Section 3.3 untrue or
incorrect as of the date hereof.
(c) Allocated Payment Amounts. The amounts reflected in the MCS Financial
Data as obligations of licensees of the Products arose in the ordinary course of
business and are valid obligations reflecting sums due for the provision of
goods and services by MCS prior to the Effective Date.
(d) Undisclosed Liabilities. There are no liabilities or obligations of
any nature of any Principal (with respect to Ingersoll only, related to the
Business), due or to become due,
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determined or determinable, absolute, accrued, contingent, or otherwise, and
there are no conditions, situations, or circumstances that could reasonably be
expected to result in any such liabilities or obligations, except, in any such
event, liabilities and/or obligations of MCS that do not relate to the Purchased
Assets and are not being acquired by CFI pursuant to this Agreement; or, with
respect to the Purchased Assets, (i) as, and to the extent, set forth or
specifically reserved against in the MCS Financial Data, (ii) liabilities
incurred after the MCS Balance Sheet Date and before the Closing Date in the
ordinary and usual course of business consistent with past practice (none of
which is a material uninsured liability for breach of contract, breach of
warranty, tort or infringement claim, violation of law or lawsuit) and (iii)
liabilities incurred in connection with or contemplated by this Agreement. No
lien or security interest exists that names any of the Corporate Sellers as
debtor, lessee, licensee or otherwise with respect to any of the Purchased
Assets.
(e) Records. The Records contain, in all material respects, true,
complete, and correct entries of all dealings or transactions of or in relation
to the Business and have been continually and consistently maintained in
accordance with good business practices. There have been no transactions that
will have, or that could reasonably be expected to have, a Material Adverse
Effect thereon, other than as has been accurately set forth in the Records.
Section 3.4 Tax Returns and Payments.
(a) The Corporate Sellers have duly and timely filed when due, or will
have timely filed on or before the Closing Date, all returns, reports,
declarations and applications ("Returns"), relating to all Taxes required to be
filed by the Corporate Sellers (including, without limitation, with respect to
estimated Taxes, excise Taxes and informational returns). All such Returns are
true, accurate, and complete and reflect all Taxes payable. Each of the
Corporate Sellers has paid all Taxes due with respect to such entity's
activities on or before the Effective Date.
(b) No Return required to be filed by any of the Corporate Sellers has
been audited by any taxing authority. There is no action, suit, proceeding,
audit, investigation, or claim pending or threatened in respect of any Taxes for
which any Corporate Seller is or may become liable, nor has any deficiency or
claim for any Taxes been imposed or assessed. There are no outstanding notices
of Deficiencies, adjustments, changes in assessments, or increases in tax rates
with respect to any Taxes. There is no agreement, waiver, or consent providing
for an extension of time with respect to the assessment of any Taxes against any
of the Corporate Sellers.
(c) Each of the Corporate Sellers has timely paid, withheld or otherwise
collected, or made provision on its books for all Taxes due and payable with
respect to all taxable periods ending on or prior to the Effective Date and for
the relevant portion (ending on the Effective Date) of any taxable period
beginning prior to the Effective Date and ending after the Effective Date. There
are no Liens for Taxes upon the assets of any of the Corporate Sellers, except
Liens for current Taxes not yet due.
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Section 3.5 Agreements.
(a) AGREEMENTS. All material agreements, commitments, contracts,
arrangements, mortgages, deeds of trust, instruments, leases, licenses or any
other understandings, oral or written, that presently are in effect, including
all amendments, modifications, and waivers with respect thereto, related to the
Business or the Purchased Assets (collectively, "Contracts"), are listed in
Exhibit 3.5, including, without limitation:
(i) Any plan, contract or arrangement with any officer, director,
consultant or employee of any Corporate Seller, providing for future
compensation (including, without limitation, bonuses, pensions, deferred
compensation, severance pay or benefits, retirement payments, profit sharing, or
the like), whether written or oral;
(ii) Any joint venture contract or arrangement or any other
agreement relating to the Assets which has involved or is expected to involve a
sharing of profits with other persons;
(iii) Any distribution agreement, sales agreement, volume purchase
agreement, or other similar agreement that presently is in effect relating to
the Business or the Purchased Assets;
(iv) Any lease for real or personal property used by the Corporate
Sellers in connection with the Business;
(v) Any material agreement, license, permit, concession,
arrangement, commitment or authorization which may be, by its terms, terminated
or breached by reason of the execution of this Agreement, CFI's acquisition of
the Purchased Assets, or any other transactions contemplated hereby;
(vi) Any instrument evidencing or related in any way to indebtedness
by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise and which would be affected by, or
would have an effect on, the execution of this Agreement, CFI's acquisition of
the Purchased Assets, or any other transactions contemplated hereby;
(vii) Any material license agreement, either as licensor or
licensee, involving the Products or the Intellectual Property;
(viii) Any other agreement, contract or commitment which is material
to the Business or the Purchased Assets.
(b) NO DEFAULTS. With respect to each of the Contracts (i) a true and
correct copy has previously been delivered to CFI, (ii) it is valid and binding
on an identified Corporate Seller and is in full force and effect, (iii) the
unperformed obligations ascertainable from the face thereof are the existing
unperformed obligations thereunder, (iv) the Corporate Seller party is not in
violation of the terms of or in default thereunder, and, to the best knowledge
of the Principals, no
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other person is in violation of the terms thereof or in default thereunder, (v)
none of the Corporate Sellers has received a notice of termination with respect
thereto, and, (vi) no condition exists or event has occurred (including, without
limitation, the consummation of the transactions contemplated hereunder) that,
with the giving of notice, the lapse of time, or both, would become a default or
permit early termination thereunder. Neither Corporate Sellers nor any Principal
is aware that any of Corporate Sellers's rights or obligations under any
Contract would not be assignable to CFI pursuant to the terms thereof, and has
not received any notice that the other party will, or has threatened to, contest
the assignability of any Contract to CFI pursuant to the terms hereof.
SECTION 3.6 PROPERTY.
(a) ASSETS. Exhibit 3.6(a) represents (in all material respects) a
complete and accurate list of all of the Purchased Assets. Collectively, the
Corporate Sellers have good and marketable title to the Purchased Assets, free
and clear of all Liens. With respect to tangible Purchased Assets, (i) there is
no condition, restriction, or reservation affecting the title to or utility of
any such assets which would prevent CFI from occupying, utilizing, or enjoying
any such assets (or any part thereof) to the same extent that the relevant
Corporate Seller is entitled; (ii) none of the Purchased Assets are held on
consignment, nor is the title thereof in the possession of others; (iii) such
Purchased Assets are all in good operating condition and repair, ordinary wear
and tear excepted; and (iv) such Purchased Assets are reasonably current and
up-to-date, and are suitable for the purposes used. The Products have been
developed and, as of the Effective Date, are at a level of quality reasonably
acceptable to the customers and potential customers to which MCS is targeting
the Products and, at a minimum, perform in substantial conformance with the
functionality and specifications pursuant to which MCS has traditionally
marketed such Products.
(b) REAL PROPERTY. MCS has no title to or ownership interest (other than a
leasehold estate) in any real property. Exhibit 3.6(b) includes a description of
the lease currently in place for MCS (the "Real Property Lease"). The Principals
have previously delivered to CFI a true and complete copy of the Real Property
Lease, including all material amendments, modifications, and waivers with
respect thereto. The Real Property Lease is valid, in full force and effect, and
all rents and additional rents due as of the Effective Date on such lease have
been paid. MCS has been in peaceable possession since the commencement of the
original term of such lease and is not in material default thereunder and no
waiver, indulgence, or postponement of MCS's obligations thereunder has been
granted by the lessor; and there exists no event of default or event,
occurrence, condition, or act that, with the giving of notice, the lapse of
time, or both, would become a default under such lease. MCS has not violated any
of the terms or conditions under such Real Property Lease in any material
respect, and, to the knowledge of the Principals, all of the material covenants
to be performed by any other party under any such lease have been fully
performed.
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(c) INTELLECTUAL PROPERTY.
(i) All of the Intellectual Property which is or has been used, or
may be necessary or useful, in connection with the Business is described in
Exhibit 3.6(c), including (without limitation) Corporate Sellers's trademarks,
service marks, trade names and copyrights (herein, "Marks"), which Marks have
been registered with applicable governmental authorities to the extent described
in Exhibit 3.6(c) (as used herein, the term "trademarks" includes trademarks,
service marks and trade names).
(ii) The Corporate Sellers each own, have the right to use, sell,
license, dispose of, and to bring actions for the misappropriation of, all such
Corporate Seller's Intellectual Property, without any conflict with or
infringement of the rights of others, free and clear of all liens, charges,
encumbrances or other restrictions of any kind. None of the Corporate Sellers
has assigned or licensed rights to any third party (except intercompany
assignments or licenses to other Corporate Sellers) to the Marks.
(iii) The execution, delivery and performance of this Agreement and
the documents contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, will not breach, violate or conflict with any
Contract governing any Intellectual Property, will not cause the forfeiture or
termination of any Intellectual Property or in any way impinge on the rights
held in such Intellectual Property, whether before or after the Closing Date.
(iv) None of the Intellectual Property infringes on any patents,
trademarks, copyrights, trade secrets or any other intellectual property right
of any third party.
(v) There is no pending or, to the best knowledge of the Principals,
threatened Claim contesting the validity, ownership or right to use, sell,
license, dispose of, or to bring actions for the misappropriation of, any
Intellectual Property or any product, process or technology incorporating the
Intellectual Property nor, to the best knowledge of the Principals, is there any
basis for, or awareness by the Principals of, any such Claim. None of the
Principals has received any notice asserting that any Intellectual Property (or
the proposed use, sale, license, or disposition thereof) conflicts with or will
conflict with the rights of any other party, nor, to the best knowledge of the
Principals, is there any basis for any such assertion.
(vi) The Principals have taken all steps reasonably necessary,
appropriate or desirable to safeguard and maintain the secrecy and
confidentiality of the Intellectual Property (including, without limitation,
entering into appropriate confidentiality and nondisclosure agreements with all
employees and other parties with access to or knowledge of the Intellectual
Property). To the best knowledge of the Principals, no MCS employees are
obligated under any Contract or subject to any judgment, decree or order of any
court or administrative agency that would conflict with CFI's ownership and use
of the Intellectual Property from and after the Effective Date. The Principals
have provided to CFI a copy of each confidentiality or other agreement which
Corporate Sellers has entered into with any of its employees regarding any of
the Intellectual Property.
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(vii) None of the Corporate Sellers has infringed on or otherwise
violated, and is not infringing on or otherwise violating, any Contract or
rights of others, and the use by CFI from and after the Effective Date of the
Intellectual Property, to the best knowledge of the Principals, will not
infringe on or otherwise violate any Contract or rights of others.
(viii) None of the Principals and, to the best knowledge of the
Principals, none of the MCS employees, has published or disclosed any
confidential aspect of any Intellectual Property to any other party except in
accordance with and as permitted by any license, lease or similar agreement
relating to the Intellectual Property, and except pursuant to contracts
requiring such other parties to keep the Intellectual Property confidential. To
the best knowledge of the Principals, no party to whom the Intellectual Property
has been disclosed in accordance with this paragraph has breached such
obligation of confidentiality.
SECTION 3.7 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS AND
LICENSES.
(a) COMPLIANCE WITH LAW. Each of the Corporate Sellers is in compliance in
all material respects with and has conducted its business so as to comply in all
material respects with all laws, rules and regulations, judgments, decrees or
orders of any court, administrative agency, commission, regulatory authority or
other governmental authority or instrumentality, domestic or foreign (a
"Governmental Authority") applicable to its operations and with respect to which
compliance is a condition of engaging in the business thereof. There are no
judgments or orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration), including any
such actions relating to affirmative action claims or claims of discrimination,
against any of the Principals or against any of its properties or businesses
related to the Business, which are continuing in effect and could reasonably be
expected to have a Material Adverse Effect on the Business or the Purchased
Assets.
(b) GOVERNMENTAL AUTHORIZATIONS AND LICENSES. The Principals possess all
governmental licenses, franchises, certificates, consents, permits and other
governmental authorizations (collectively, "Licenses") legally required to
enable them to operate the Business as now conducted and necessary or desirable
for them to own and use the Purchased Assets (in any event, free from
restrictions materially burdensome to the operation of the Business), all of
which Licenses are described in Exhibit 3.6(b). All such Licenses are valid and
existing on the Effective Date and will be so between the date hereof and the
Closing Date. No material violations exist or have been recorded in respect of,
and no proceeding is pending or threatened looking toward the revocation or
limitation of, any such License. The Principals are in full compliance with the
terms and conditions of such Licenses (in all material respects). The Principals
have complied in all material respects with, and are not now, nor have they ever
been, in violation of, any laws, rules, regulations, ordinances or codes
applicable to the Business.
SECTION 3.8 ENVIRONMENTAL COMPLIANCE.
(a) None of the Principals has ever received any written notice, demand,
citation, summons, complaint or order or any notice of any penalty, Lien or
assessment, and to the best of its knowledge, no investigation or review is
pending by any governmental entity, with respect to
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any material (i) alleged violation by any of the Corporate Sellers of any
Environmental Law, (ii) alleged failure by the Corporate Sellers to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with the conduct of its business or (iii)
Regulated Activity; to the best knowledge of the Principals, none of the
Corporate Sellers has violated, or is in violation, of any Environmental Law.
(b) The Principals have delivered to CFI copies of all environmental
audits and other similar reports which have been prepared by or for the
Principals with respect to any property owned or leased by the Corporate
Sellers.
SECTION 3.9 EMPLOYEES.
(a) Employees. Exhibit 3.9 sets forth a list showing the names of all
persons employed by MCS as of the Effective Date. BankServ, DCS and Inasyst do
not have any employees. None of the MCS employees is a party to any employment
or similar agreement with MCS relating to such employment (other than "at will"
employment agreements or agreements with the principal purpose of providing for
the confidentiality of the Intellectual Property and the prosecution of patent
claims). None of the Principals is a party to any effective consulting agreement
(either with employees of Corporate Sellers or third parties) with respect to
the Business. All employees of MCS are citizens of the United States. As of the
Closing Date, MCS has fully paid to each of the employees all compensation owed
by MCS to such employees, and has paid or performed all other obligations owed
to such employees.
(b) LEGAL MATTERS. MCS is in compliance with all currently applicable laws
and regulations respecting employment, discrimination in employment,
verification of immigration status, terms and conditions of employment and wages
and hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice. There is neither pending nor, to the
best knowledge of the Principals, threatened, any investigation or hearing
arising out of or based upon any such laws, regulations or practices.
SECTION 3.10 LITIGATION.
There are no Claims pending, or, to the best knowledge of the Principals,
threatened by, against or affecting the Principals, or any officers, directors,
or employees of the Corporate Sellers, the Purchased Assets, or the consummation
of the transactions contemplated by this Agreement. To the best knowledge of the
Principals, there exists no set of facts or conditions that could reasonably be
expected to give rise to any such Claims.
SECTION 3.11 CUSTOMERS.
Exhibit 3.11 sets forth a list of all customers of MCS that, during all
periods prior to the Effective Date, purchased one or more of the Products.
Except as set forth in Exhibit 3.11, to the best knowledge of the Principals,
none of such customers, nor any person purporting to represent such customers,
has indicated a material dispute, dissatisfaction with MCS's products or
services, or an intention to terminate any ongoing contractual business
relationship with MCS.
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SECTION 3.12 BROKERS.
The Principals have engaged Cherry Tree, to assist in the transactions
contemplated herein and will incur certain obligations to Cherry Tree as a
result of such transactions. The Principals hereby agree to indemnify and hold
harmless CFI with respect to any such obligations (including costs and
attorneys' fees). Other than Cherry Tree, none of the Principals, nor, to the
best knowledge of the Principals, any officer, director or affiliate of the
Corporate Sellers, has employed or retained any broker or similar agent or
become in any way obligated for such person's fee in connection with the
transactions contemplated herein.
SECTION 3.13 YEAR 2000.
The Principals hereby warrant and represent that all of the Products are
Year 2000 compliant. With respect to Purchased Assets (excluding the Products),
software, hardware, firmware, equipment, goods, or systems created or utilized
or material to the Business, the Principals, to the best knowledge of the
Principals, have taken all reasonable steps to reduce the risks to the Business,
its assets and its customers, suppliers, vendors in connection with a potential
Year 2000 compliance problem. "Reasonable steps to reduce the risks" means that
the Principals' efforts in reducing risks have been reasonable given the risks
involved, the effect of the risks on the Business, and the feasibility of
reducing or eliminating the risks. For example, the Principals have made a
substantial investment in making the Products Year 2000 compliant but may not
have taken steps to make items that do not perform date-sensitive functions Year
2000 compliant. As used in this Section, "Year 2000 compliant" means that the
designated software, hardware, firmware, equipment, goods, or systems created or
utilized or material to the Business will properly perform date sensitive
functions before, during, and after the year 2000. The Principals have provided
documentation and or other evidence of their efforts within the terms of this
Section 3.13.
SECTION 3.14 ACCURACY AND COMPLETENESS OF INFORMATION.
The representations and warranties, written data, documents, reports,
written statements, financial statements, and other written information
furnished by the Principals to CFI or its representatives in connection with
this Agreement or any of the transactions contemplated herein are complete and
correct in all material respects, do not contain any material misstatement of
fact and do not omit to state any material fact necessary to make the statements
herein and therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CFI
Except as set forth in the attached Exhibits, CFI hereby represents and
warrants to the Principals that the following statements are true and correct as
of the date hereof.
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SECTION 4.1 CORPORATE FORMALITIES; ENFORCEABILITY.
(a) CORPORATE STATUS. CFI is a corporation, duly organized, validly
existing, and in good standing under the laws of the State of Oregon.
(b) CORPORATE POWER AND AUTHORITY. CFI has all requisite corporate power
and authority to execute, deliver and carry out the terms and provisions of this
Agreement and each document contemplated hereby; and to consummate the
transactions contemplated herein and therein. The Board of Directors of CFI has
duly approved and CFI has taken all other proper and necessary corporate action
to authorize the execution, delivery, and performance of this Agreement and each
document contemplated hereby.
(c) ENFORCEABILITY OF ACQUISITION DOCUMENTS. CFI has duly executed and
delivered this Agreement and this Agreement constitutes a legal, valid, and
binding obligation of CFI, enforceable in accordance with its terms. Each
document contemplated hereby, when executed and delivered by CFI in accordance
with the provisions hereof and thereof, shall be a legal, valid and binding
obligation of CFI, enforceable in accordance with its terms.
SECTION 4.2 NON-CONTRAVENTION.
The execution and delivery by CFI of this Agreement and of the documents
contemplated hereby; the performance by CFI of the terms and provisions hereof
and thereof; and the consummation of the transactions contemplated herein and
therein, does not and will not (with the passage of time or the giving of notice
or both):
(a) conflict with any Law or any Approval (notwithstanding that compliance
with any such Law or Approval is not required until a future date) or, to the
best knowledge of CFI, any proposed or pending change in any Law or Approval;
(b) conflict with, contravene, result in a breach of, constitute a default
under, or give rise to any right of termination, cancellation, acceleration, or
loss of right under CFI's corporate charter or bylaws or under any agreement,
commitment, contract, arrangement, mortgage, deed of trust, instrument, lease,
license, or any other understanding, oral or written, to which CFI is a party or
by which CFI may be bound or affected;
(c) to the best knowledge of CFI, require any Approval.
SECTION 4.3 CAPITALIZATION.
(a) The authorized capital stock of CFI consists of 10,000,000 shares of
CFI Common Stock, no par value, 10,300 shares of Series A Preferred Stock, no
par value ("CFI Series A Preferred Stock"), and 5,000,000 shares of Series
Preferred Stock, no par value ("CFI Series Preferred Stock"). As of December 31,
1998, there were outstanding:
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(i) 5,032,977 shares of CFI Common Stock;
(ii) 7705.43 shares of CFI Class A Preferred Stock; and
(iii) no shares of CFI Series Preferred Stock.
(b) All outstanding shares of CFI Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth in
Section 4.3(a), above, and Section 4.3(c), below, and as otherwise contemplated
by this Agreement, there are no outstanding:
(i) shares of capital stock or other voting securities of
CFI;
(ii) securities, subscriptions, options, warrants, rights,
securities, contracts, commitments, understandings or other arrangements
(herein, "CFI Securities") pursuant to which CFI is bound to issue any
additional shares of its capital stock or other voting securities, or
rights to purchase such shares;
(iii) obligations of CFI to repurchase, redeem or otherwise acquire
any CFI Securities; or
(iv) agreements between CFI, on the one hand, and any other person
or entity, on the other hand, regarding the capital stock or other voting
securities of CFI, other than as contemplated by this Agreement.
(c) Notwithstanding the representations contained in subsection (b),
above:
(i) CFI is obligated to redeem a certain percentage of the Class A
Preferred Stock, rounded to the nearest whole number of shares, each year
through the year 2018 at a fixed redemption price of $262.14 per share. As
of December 31, 1998, 2594.57 shares of a total of 10,300 shares of Class
A Preferred Stock had been redeemed. CFI may redeem all or part of the
Series A Preferred Stock at any time. Upon the occurrence of: (a) the
voluntary or involuntary dissolution, liquidation, or winding up of CFI;
(b) a sale of substantially all of its assets; or (c) a merger or exchange
of shares with another corporation in which CFI is not the survivor,
holders of Class A Preferred Stock are entitled to receive out of the
assets of CFI, prior to any payment or distribution to holders of common
stock, an amount equal to $262.14 per Class A share.
(ii) CFI currently has in effect a 1999 Consolidated Restated Stock
Option Plan, an Amended and Restated Outside Director Restricted Stock
Plan, a Restated Outside Director Compensation and Stock Option Plan, and
an Employee Stock Purchase Plan (collectively, for purposes of this
subsection, the "Plans"). All of the securities underlying these Plans
have been registered pursuant to a Form S-8 filed with the SEC on October
19, 1993, a Post-Effective Amendment No. 1 to Form S-8, filed with the SEC
on May 26, 1994, a Post-Effective Amendment No. 2 to Form S-8, filed with
the SEC on March 1,
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1995, and a Form S-8 filed with the SEC on September
4, 1996 to register an additional 500,000 shares under the Plans. The
Plans have been summarized in the 1999 Amended Information Statement,
dated January 20, 1999, a copy of which is attached hereto as Exhibit
4.3(c). As of January 1, 1999, the Plans together permitted future
issuances of up to 987,591 shares of common stock, of which 60,837 shares
had not been granted as of that date. Since January 1, 1999, options to
purchase 175,000 shares have been granted pursuant to the Plans (however,
of these, options representing 35,633 shares are contingent upon approval
by the CFI shareholders at the annual shareholders' meeting in May 1999).
(d) All shares of CFI Common Stock to be issued in connection with the
transactions contemplated hereby shall, upon issuance, be duly authorized, fully
paid, validly issued and nonassessable. CFI has reserved sufficient shares of
CFI Common Stock for issuance in connection with the transactions contemplated
hereby.
SECTION 4.4 SEC FILINGS.
(a) CFI has delivered to Ingersoll:
(i) its annual report on Form 10-K for its fiscal years ended
December 31, 1996 and 1997.
(ii) its quarterly report on Form 10-Q for its fiscal quarters
ending March 31, 1998, June 30, 1998 and September 30, 1998.
(iii) its proxy statement relating to a meeting of the shareholders
of CFI held on May 15, 1998.
(iv) all of its other reports, statements, schedules and
registration statements filed with the SEC since December 31, 1998.
The documents described in subparagraphs (i) through (iv) above are hereinafter
collectively referred to as the "Filed SEC Documents." The Principals
acknowledge that the information set forth in the 1997 Form 10-K and the Forms
10-Q referred to above is superseded by the Form 10-K for CFI's fiscal year
ended December 31, 1998, a copy of which shall be provided to Ingersoll promptly
after it has been filed with the SEC.
(b) As of its filing date, no such report or statement filed pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act") contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) For the past twelve months, CFI has filed with the SEC in a timely
manner all reports, schedules, forms and other documents required under the
Securities Act or the Exchange Act.
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SECTION 4.5 FINANCIAL STATEMENTS.
The audited consolidated financial statements and unaudited interim
financial statements of CFI included in its annual reports on Form 10-K and
quarterly reports on Form 10-Q referred to in Section 4.4 present fairly, in
conformity with GAAP (except as may be indicated in the notes thereto), the
consolidated financial position of CFI and its consolidated subsidiaries as of
the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject to normal year-end adjustments in the case
of any interim financial statements).
SECTION 4.6 COMPLIANCE WITH LAWS.
CFI is in compliance in all material respects with and has conducted its
business so as to comply in all material respects with all laws, rules and
regulations, judgments, decrees or orders of any Governmental Authority
applicable to its operations and with respect to which compliance is a condition
of engaging in the business thereof. There are no judgments or orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration), including any such actions relating to
affirmative action claims or claims of discrimination, against CFI or against
any of its properties or businesses, which are continuing in effect and could
reasonably be expected to have a Material Adverse Effect on CFI.
SECTION 4.7 NO BROKERS.
CFI has not employed or retained any broker or similar agent or become in
any way obligated for such person's fee in connection with the transactions
contemplated herein.
SECTION 4.8 ACCURACY AND COMPLETENESS OF INFORMATION.
The representations and warranties, written data, documents, reports,
written statements, financial statements, and other written information
furnished by CFI to the Principals, or their representatives, in connection with
this Agreement or any of the transactions contemplated herein are complete and
correct in all material respects, do not contain any material misstatement of
fact and do not omit to state any material fact necessary to make the statements
herein and therein not misleading.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 APPROVALS.
The Principals shall take all commercially reasonable steps to obtain all
Approvals and Licenses necessary to consummate the transactions contemplated by
this Agreement. In the event that any such Approval or License (including,
without limitation, those related to the assignment of the Contracts and the
Real Property Lease) has not been obtained on or before the Closing Date, the
Principals shall work together and cooperate in good faith with CFI in
attempting to expeditiously obtain such Approvals and Licenses.
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SECTION 5.2 TAXES.
The Corporate Sellers shall timely file true, accurate, and complete
federal, state, local, foreign, or other returns, reports, declarations of
estimated tax and license, or excise tax applications relating to any Taxes, for
all periods up to and including the Effective Date. The Principals shall pay all
Taxes owed or owing by the Corporate Sellers when due.
SECTION 5.3 EMPLOYMENT.
(a) Ingersoll shall, if requested by CFI, encourage those employees listed
on Exhibit 3.9 to continue their employment with CFI after the Effective Date.
MCS shall pay each of those employees listed on Exhibit 3.9 all compensation (at
the rates then paid by MCS as of the Effective Date, or as otherwise disclosed
to CFI in the Schedule of Exceptions attached hereto) due such persons through
the January 22, 1999.
(b) The parties have reviewed the compensation and benefits offered by CFI
to its employees generally (the "CFI Benefits") and believe that, overall, such
CFI benefits compare favorably to the benefits currently being offered by MCS to
the employees listed in Section 3.9. CFI will take commercially reasonable steps
to allow each MCS employee to "rollover" all amounts held in such employee's MCS
401(k) plan account into CFI's 401(k) plan (such obligation may require the
termination of the MCS 401(k) plan and the execution of all reasonable transfer
documentation by the participants in such plan). CFI will use best efforts to
cause its health insurance plan provider to waive all pre-existing condition
exclusions with respect to the employees listed on Exhibit 3.9.
(c) In furtherance of Section 3.9(a) hereof, in the event that any
employee of MCS shall make a claim for any unpaid obligations arising during
such employee's employment with MCS (including, without limitation, unpaid
salary, commissions, PTO, ERISA plan contribution, etc.), MCS shall indemnify
CFI against any Loss resulting therefrom in accordance with the terms of Section
9.2 hereof; provided, however, that any such indemnification obligation shall
not be subject to the provisions of clause (ii) of Section 9.2(d).
SECTION 5.4 ADDITIONAL DELIVERIES.
(a) At the Closing, CFI shall enter into a Transition Services Letter
Agreement with Ingersoll and Lois J. Ingersoll in the form set forth as Appendix
B.
(b) At or promptly after the Closing, the Principals shall promptly take,
or cause to be taken, all necessary action to effect the transfer of all bank
deposit and/or savings accounts, certificates of deposit and other fund accounts
to be transferred to CFI. Any claim made by CFI as a result of the Principal's
failure to satisfy the covenants in this Section 5.4(b) shall not be subject to
the limitations of clause (ii) of Section 9.2(d) or the penultimate sentence of
Section 9.2(d).
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(c) At or promptly after the Closing, the Principals shall promptly take,
or cause to be taken, all necessary action to obtain and effect the proper
filing of a UCC-3 Termination Statement with respect to the lien on the
Purchased Assets held by Bank Windsor. Any claim made by CFI as a result of the
Principal's failure to satisfy the covenants in this Section 5.4(c) shall not be
subject to the limitations of clause (ii) of Section 9.2(d) or the penultimate
sentence of Section 9.2(d).
(c) If requested by CFI, the Principals each will use good faith efforts
to assist CFI in obtaining an assignment of all of such Principals' Marks with
respect to the Products, to the extent applicable.
ARTICLE VI
NONCOMPETITION; NONSOLICITATION; NONDISCLOSURE
SECTION 6.1 NONCOMPETITION.
During the period commencing on the Effective Date and terminating on the
later to occur of two (2) years from the Effective Date (the "Restrictive
Period"), each of the Principals, severally, hereby agrees that he, she or it
will not join, control or participate in the ownership, management, operation or
control of or be connected with in any manner, any business located in the
United States or Canada which provides software products providing any of the
following services to the financial services industry:
(i) Host processing services.
(ii) Lending origination and documentation system.
(iii) Call Centers.
(iv) Branch Automation.
(v) Home Banking.
(vi) Marketing customer information files.
(vii) Customer profitability analysis.
(viii) ATM software.
including, without limitation, any business whose commercial products are in
competition with the Purchased Assets or which is developing products which will
be in competition with the Purchased Assets (herein, "Restricted Products"),
unless released from such obligation by the Board of Directors of CFI. Each
Principal agrees that he, she or it shall be deemed to be connected with such
business if such business is carried on by a partnership in which he, she or it
is a general or limited partner or employee or a corporation or association of
which he, she or it is a shareholder, officer, director, employee member,
consultant or agent; provided, that nothing herein shall prohibit the purchase
or ownership by a Principal of shares of less than five percent (5%) in a
publicly or privately held corporation.
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SECTION 6.2 NONSOLICITATION.
During the Restrictive Period, none of the Principals will solicit for
employment, directly or indirectly, or cause to be employed by another, any
person who is at any time during the Restrictive Period, an employee, officer or
director of the other party, or any of such other party's respective
subsidiaries or affiliates, nor form any partnership with or establish any
business venture in cooperation with such person, without the express written
consent of the Board of Directors of such other party.
SECTION 6.3 NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Any information furnished to or obtained by any Principal or, if
applicable, any of such Principal's officers, attorneys, accountants,
consultants, representatives or agents (collectively, "Principal's
Representatives"), as a result of pursuing the transactions contemplated by this
Agreement, shall be treated as confidential information. The Principals each
shall not disclose such information and shall use their respective best
commercial efforts to keep the Principal's Representatives from disclosing such
information, except that a Principal may disclose the confidential information
or portions thereof (i) to Principal's Representatives who need to know such
information for the purpose of advising such Principal in connection with the
transactions contemplated by this Agreement; (ii) if, at the time of the
disclosure or thereafter, the confidential information is generally available to
and known by the public (other than as a result of disclosure directly or
indirectly in violation of any duty of confidentiality); or (iii) if the
information has been independently acquired or developed by such Principal
without violating a duty of confidentiality. To the extent that a Principal or
one of such Principal's Representatives may become legally compelled to disclose
any confidential information not encompassed by (i), (ii), or (iii) above, such
Principal or such Principal's Representative may disclose such information if
the Principal has used his or its best commercial efforts, and has afforded CFI
the opportunity, to obtain an appropriate protective order or other satisfactory
assurance of confidential treatment for the information required to be
disclosed. In the event that the transactions contemplated by this Agreement are
not consummated, the Principals and all of such Principal's Representatives
shall return to CFI all written information furnished by CFI.
(b) After the Closing Date, the Principals shall not, and shall use
commercially reasonable efforts to cause their Principal Representatives to not,
use or disclose to third parties, any trade or business secrets, confidential
information, knowledge, data or other information relating to the Business or
the Purchased Assets.
SECTION 6.4 REMEDIES; CONSENT TO INJUNCTION.
Each of the Principals hereby agrees that CFI will or would suffer
immediate and irreparable injury if any of the Principals were to compete with
the business of CFI or its subsidiaries in violation of this Article VI, and it
is and will be impossible to estimate and determine the damage that will be
suffered by CFI or its successors and assigns in the event of a breach by a
Principal of any such covenant. Therefore, each of the Principals hereby further
agrees that CFI shall be entitled to injunctive relief in a court of appropriate
jurisdiction
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restraining any further violation of such covenant or covenants by a Principal,
its employers, employees, partners, agents or other associates or any of them,
and each of the Principals hereby stipulates to the entering of such injunctive
relief. CFI's right to injunctive relief is cumulative and in addition to
whatever other remedies it, including its successors or assigns, may have at law
or in equity.
SECTION 6.5 SEVERABILITY.
The parties intend that the covenants contained in this Article VI be
deemed to be separate covenants as to each county and state, and that if in any
judicial proceeding a court shall refuse to enforce all of the separate
covenants included herein because, taken together, they cover too extensive a
geographic area or because any one includes too large an area or because they
cover too long a period of time, the parties intend that such covenants shall be
reduced in scope to the extent required by law or, if necessary, eliminated from
the provisions hereof, and that all of the remaining covenants hereof not so
affected shall remain fully effective and enforceable.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PRINCIPALS TO CLOSE
The obligations of each Principal under this Agreement are subject to the
fulfillment at or prior to the Closing Date of each of the following conditions
(any one or more of which may be waived in whole or in part by all of the
Principals in writing):
SECTION 7.1 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT.
All representations and warranties of CFI contained herein or in any
certificate or other instrument delivered pursuant to the provisions hereof
shall be true and correct on the Closing Date with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date.
SECTION 7.2 COMPLIANCE WITH COVENANTS.
All of the terms, covenants, agreements and conditions of this Agreement
to be complied with and performed by CFI on or prior to the Closing Date shall
have been complied with and performed.
SECTION 7.3 NO LITIGATION.
No suit, action, investigation, claim, or legal, administrative,
arbitration or other proceeding, at law or in equity, shall have been instituted
or threatened which (individually or in the aggregate) would materially
adversely affect CFI's assets (including the Purchased Assets), the title or
interest of CFI in any of such assets, CFI's business, or the consummation of
the transactions contemplated hereby.
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SECTION 7.4 DELIVERY OF DOCUMENTS, ETC.
CFI shall have delivered to the Principals (as specified below), on or
prior to the Closing Date, a wire transfer in the aggregate amount of the Cash
Payment Amount to MCS in accordance with Section 2.1(a) hereof, and a
certificate representing the Shares, properly endorsed by the authorized
officers or agent of CFI.
SECTION 7.5 PROCEEDINGS.
All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incidental thereto, shall be
reasonably satisfactory in form and substance to the Principals and their
respective counsel.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF CFI TO CLOSE
The obligations of CFI under this Agreement are subject to the fulfillment
at or prior to the Closing Date of each of the following conditions (any one or
more of which may be waived in whole or in part by CFI in writing):
SECTION 8.1 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT.
All representations and warranties of the Principals contained herein or
in any certificate or other instrument delivered pursuant to the provisions
hereof shall be true and correct on the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date.
SECTION 8.2 COMPLIANCE WITH COVENANTS.
All of the terms, covenants agreements, and conditions of this Agreement
to be complied with and performed by the Principals on or prior to the Closing
Date shall have been complied with and performed.
SECTION 8.3 NO MATERIAL ADVERSE EFFECT; NO LITIGATION.
MCS shall have suffered no Material Adverse Effect since the Effective
Date. No suit, action, investigation, claim, or legal, administration,
arbitration or other proceeding, at law or in equity, shall have been instituted
or threatened which (individually or in the aggregate) would materially
adversely affect the Purchased Assets, the title or interest of any Principal in
any of such assets, CFI's use of such assets after the Effective Date on
substantially the same terms as used by the Principals prior to the Effective
Date, or the consummation of any of the transactions contemplated hereby.
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SECTION 8.4 DELIVERY OF DOCUMENTS, ETC.
The Principals shall deliverto CFI all of the following:
(a) Consents. On or immediately after the Closing Date, the consent of the
landlord (or landlord's agent) under the Real Property Lease.
(c) Termination Statement. On or immediately after the Closing Date,
evidence satisfactory to CFI that the UCC-3 Termination Statement has been filed
with all appropriate governmental agencies.
(d) Bill of Sale. On or prior to the Closing Date, each of MCS, BankServ,
DCS and Inasyst shall have delivered to CFI a bill of sale, in the form of
Exhibit 8.4(b) hereof, with respect to the Purchased Assets owned by such
Corporate Seller, as identified in Exhibit 1.1.
8.5 PROCEEDINGS.
All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incidental thereto, shall be
reasonably satisfactory in form and substance to CFI and its counsel.
ARTICLE IX
SURVIVAL; INDEMNITY; OFFSET
SECTION 9.1 SURVIVAL.
The respective representations and warranties, covenants and agreements of
the Principals, and of CFI contained herein or in any other document
contemplated hereby, shall survive the Closing.
SECTION 9.2 INDEMNIFICATION.
(a) From and after the Effective Date, subject to the conditions
hereinafter set forth, the Principals, jointly and severally, shall defend,
indemnify and hold harmless CFI and its successors and assigns (collectively,
"CFI's Indemnified Persons"), and shall reimburse CFI's Indemnified Persons,
for, from, and against each and every Loss, imposed on or incurred by CFI's
Indemnified Persons, directly or indirectly, relating to, resulting from or
arising out of (i) the operation of the Business or the ownership or use of the
Purchased Assets prior to the Closing Date, but expressly excluding any
liability reflected or reserved against in the MCS Balance Sheet and any
warranty obligations under any Licenses or contractual obligations to be
performed after the Effective Date (which obligations have been fully disclosed
to CFI in Exhibit 1.1(c)); or (ii) any inaccuracy in any representation or
warranty in any respect, whether or not CFI's Indemnified Persons relied thereon
or had knowledge thereof, or nonfulfillment of any covenant, agreement or other
obligation of the Principals made as of the date hereof or as of the Closing
Date under this Agreement or any other document contemplated hereby.
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(b) From and after the Closing Date, subject to the conditions hereinafter
set forth, CFI shall defend, indemnify and hold harmless the Principals, and
their heirs, successors and assigns (herein, "MCS Indemnified Persons"), and
shall reimburse the MCS Indemnified Persons, for, from, and against each and
every Loss imposed on or incurred by a MCS Indemnified Person, directly or
indirectly, relating to, resulting from or arising out of (i) the operation of
the Business or the ownership or use of the Purchased Assets after the Closing
Date, or (ii) any inaccuracy in any representation or warranty in any respect,
whether or not any MCS Indemnified Person relied thereon or had knowledge
thereof, or nonfulfillment of any covenant, agreement or other obligation of CFI
made as of the Closing Date under this Agreement or any other document
contemplated hereby.
(c) Promptly after receipt by a party (the "Indemnified Party") of notice
of any complaint or the commencement of any action or proceeding by a party
which is the subject of indemnification hereunder, the Indemnified Party will
notify each party required to indemnify the Indemnified Party (the "Indemnifying
Party") in writing of such complaint or with the commencement of such action or
proceeding and furnish such Indemnifying Party with copies of all claims,
demands, documents, pleadings, and other writings in connection therewith and,
if such Indemnifying Party so elects or is requested in writing by the
Indemnified Party, such Indemnifying Party will assume the defense of such
complaint, claim, action or proceeding, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all expenses
and costs, as such expenses and costs are incurred, with respect thereto.
Notification by the Indemnified Party to the Indemnifying Party must be made
orally within three business days following receipt by the Indemnified Party of
knowledge of such claim and in writing within five business days following
receipt by the Indemnified Party of knowledge of such claim. In the event that
notification to the Indemnifying Party is not made within the time periods
required by the immediately preceding sentence, recovery by the Indemnified
Party shall be reduced to the extent that such delay has prejudiced the
Indemnifying Party or hampered in any way its ability to remedy such situation.
The Indemnified Party shall have the right to employ its own separate counsel,
but the fees and expenses of such separate counsel shall be at its expense
unless any of the following provisions shall apply: (i) the employment of such
counsel shall have been authorized in writing by the Indemnifying Party in
connection with the defense of such complaint, claim, action or proceeding; (ii)
the Indemnifying Party shall not have employed counsel reasonably satisfactory
to the Indemnified Party to have charge of the defense of such complaint, claim,
action or proceeding; (iii) the Indemnified Party shall have reasonably
concluded that there are defenses available to him, her or it which are
materially different from or additional to those available to the Indemnifying
Party; or (iv) the Indemnified Party's legal counsel shall advise the
Indemnified Party in writing, with a copy to the Indemnifying Party, that there
is a conflict of interest that would make it inappropriate under applicable
standards of professional conduct to have common counsel. If clause (i), (ii),
(iii) or (iv) in the immediately preceding sentence is applicable, then the
Indemnified Party may employ separate counsel at the expense of the Indemnifying
Party to represent or defend him, her or it, but in no event shall such
Indemnifying Party be obligated to pay the costs and expenses of more than one
such separate counsel for any one such complaint, claim, action, or proceeding
in any one jurisdiction.
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(d) Notwithstanding anything to the contrary, Principals shall not be
obligated to indemnify, defend or hold harmless CFI's Indemnified Persons
against any breach of any representation, warranty or covenant to be made or
performed by such Principals or any of them before the Closing Date (a "Covered
Breach") unless (i) CFI delivers to a Principal within one (1) year following
the Closing Date (or, with respect to a claim related to Taxes only, within the
applicable limitations period; in either case, the "Claims Period"), a written
claim for indemnification for Losses actually incurred by CFI's Indemnified
Persons within such Claims Period ("Indemnification Claim"); provided that if
CFI's Indemnified Persons deliver an Indemnification Claim within the Claims
Period, the Principals shall indemnify, defend and hold harmless CFI's
Indemnified Persons against any Losses with respect to such Claim through and
after the date of the Indemnification Claim if such Indemnification Claim
relates to a third party claim that is reasonably likely to result in actual
Loss to CFI's Indemnified Persons, which Loss is reasonably determinable by the
parties as qualifying for indemnification pursuant to this Article 8 at the
conclusion of the Claims Period; provided further that the CFI Indemnified
Persons agree not to perform any audit or other review for the purpose of
detecting or uncovering losses solely in order to bring such notice within the
Claims Period, and (ii) the aggregate Losses suffered by CFI's Indemnified
Persons in connection with all such Covered Breaches exceed a Fifty Thousand and
No/100 Dollars ($50,000.00) aggregate deductible, after which the Principals
shall be obligated to indemnify and hold harmless CFI's Indemnified Persons from
and against all Losses in excess of the deductible amount. Notwithstanding
anything to the contrary contained in this Agreement, in the event that,
notwithstanding the limitations contained in this Section 9.2(d) or elsewhere in
this Agreement, the Principals nevertheless become liable to CFI's Indemnified
Persons for any reason other than as a result of fraud or bad faith, in no event
shall the aggregate amount of such liability of the Principals (including all
costs, expenses and attorneys' fees paid or incurred by CFI's Indemnified
Persons in connection therewith or the curing of any and all misrepresentations
or breaches of warranties or covenants under this Agreement) exceed the sum of
One Million Five Hundred Thousand Dollars ($1,500,000). In the event of fraud or
other intentional misrepresentation or deceit, liability under this Section
9.2(d) shall not be limited by the foregoing sentence.
(e) Notwithstanding anything else to the contrary contained herein and in
addition to the other limitations set forth herein, the Principals shall not be
required to indemnify the CFI Indemnified Persons, and the CFI Indemnified
Persons shall not seek indemnity from the Principals, for any of the following:
(i) Losses which arise from or in connection with any claim made by
CFI against any of the Principals for consequential damages, including, without
limitation, lost profits, lost investment or business opportunity, damages to
reputation, exemplary damages, treble damages, nominal damages and operating
Losses, unless any of the Principals engage in fraud or bad faith;
(ii) Losses attributable to or arising from overhead allocations,
internal costs (including employee expenses and general and administrative
costs) and the internal costs of administering the requirements imposed by or
under this Agreement;
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(iii) Losses with respect to which, after the Effective Date, CFI
fails in any material respect to comply with its obligations under this
Agreement, provided, however, that CFI's noncompliance with such obligations
after the Effective Date shall not limit CFI's ability to recover Losses
otherwise indemnifiable by the Principals hereunder unless such noncompliance
(A) adversely affects the Principals' ability to administer a claim made by CFI
against the Principals, in which case the Principals may withhold payment on
that portion, if any, of the claims for which CFI seeks reimbursement until CFI
complies with its obligations hereunder, or (B) adversely affects the ability to
cure a breach, mitigate a Loss or defend a claim, or (C) otherwise results in or
increases the amount of a Loss, in which case the Principals shall not be
obligated to indemnify CFI with respect to any such increase in the amount of a
Loss;
(iv) Losses to the extent resulting from the acts or omissions of
CFI, including, without limitation, defects generated, embellished or increased
by any new release of or any modification to the Products.
(g) Each of the parties shall use commercially reasonable efforts at all
times to minimize the Losses for which the other party may be liable under this
Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES.
All notices required or permitted to be given under this Agreement shall
be in writing, mailed or delivered to the parties set forth below:
If to any Principal: Ronald L. Ingersoll
16305 Knolls Path
Lakeville, Minnesota 55044
Telephone: (612) 892-3508
Facsimile: (612) 435-7095
If to CFI: CFI ProServices, Inc.
400 S.W. Sixth Avenue
Portland, OR 97204
Attention: Jeffrey P. Strickler
Vice President and General
Counsel
Telephone: (503) 274-7280
Facsimile: (503) 790-9229
Notices may be served by certified or registered mail, postage paid with return
receipt requested; by private courier, prepaid; by telex, facsimile, or other
telecommunication device capable of transmitting or creating a written record;
or personally. Mailed notices shall be deemed delivered five (5) days after
mailing, properly addressed. Couriered notices shall be deemed delivered on the
date that the courier warrants that delivery will occur. Telex or
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telecommunicated notices shall be deemed delivered when receipt is either
confirmed by confirming transmission equipment or acknowledged by the addressee
or its office. Personal delivery shall be effective when accomplished. Unless a
party changes its address by giving notice to the other party as provided
herein, notices shall be delivered to the parties at the addresses set forth on
the signature pages hereof.
SECTION 10.2 INTERPRETATION.
(a) INCORPORATION OF EXHIBITS AND SCHEDULES. All schedules and exhibits
referenced in and attached hereto are by this reference incorporated into and
made a part of this Agreement.
(b) GOVERNING LAW. THE PARTIES INTEND THAT THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON
APPLICABLE TO CONTRACTS MADE AND WHOLLY PERFORMED WITHIN OREGON BY PERSONS
DOMICILED IN OREGON.
(c) INCONSISTENCIES; COLLATERAL DOCUMENTS. In the event of any
inconsistency or of any conflict between the terms of this Agreement and any of
the terms of any other document contemplated hereby, the terms of this Agreement
shall absolutely govern and control. No provision of this Agreement shall be
construed against any party on the ground that such party or its counsel drafted
the provision.
(d) HEADINGS AND CAPTIONS. All headings and captions have been inserted
for convenience only and shall not affect the interpretation of this Agreement.
SECTION 10.3 INTEGRATION; AMENDMENT.
This Agreement, together with the other documents contemplated hereby,
constitutes the entire agreement of the parties relating to the subject matter
hereof. There are no promises, terms, conditions, obligations, or warranties
other than those contained in this Agreement or in the other documents
contemplated hereby. This Agreement, and the other documents contemplated
hereby, supersede all prior communications, representations, or agreements,
verbal or written, among the parties relating to the subject matter hereof. This
Agreement may not be amended except in a writing executed by the parties.
SECTION 10.4 WAIVER.
No provision of this Agreement shall be deemed to have been waived unless
such waiver is in writing signed by the waiving party. No failure by any party
to insist upon the strict performance of any provision of this Agreement, or to
exercise any right or remedy consequent upon a breach thereof, shall constitute
a waiver of any such breach, of such provision or of any other provision. No
waiver of any provision of this Agreement shall be deemed a waiver of any other
provision of this Agreement or a waiver of such provision with respect to any
subsequent breach, unless expressly provided in writing.
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SECTION 10.5 ATTORNEYS' FEES.
If any suit, arbitration or action arising out of or related to this
Agreement is brought by any party, the prevailing party or parties shall be
entitled to recover the reasonable costs and fees (including, without
limitation, attorney fees, the fees and costs of experts and consultants,
copying, courier and telecommunication costs, deposition costs, and all other
costs of discovery) incurred by such party or parties in such suit, arbitration
or action, including without limitation any post-trial or appellate proceeding.
SECTION 10.6 CONTINUING AGREEMENT; ASSIGNMENT; BINDING EFFECT.
This Agreement is a continuing agreement and shall remain in full force
and effect until all obligations of the parties hereunder have been fully
performed or otherwise discharged. Neither party may assign this Agreement, in
whole or in part, without the prior written consent of the other party.
Notwithstanding the foregoing, this Agreement shall bind and inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors, heirs, and permitted assigns.
SECTION 10.7 COSTS AND EXPENSES.
Except as otherwise set forth herein, each of the parties hereto shall
bear its own fees, costs, charges, and expenses incurred by such party in
connection with the transactions contemplated hereby, including, but not limited
to fees of their respective counsel, accountants, and other advisors.
SECTION 10.8 NO THIRD-PARTY BENEFICIARY RIGHTS.
No person not a party to this Agreement is an intended beneficiary of this
Agreement, and no person not a party to this Agreement shall have any right to
enforce any term of this Agreement; provided, however, that each of CFI's
Indemnified Persons and each of the Principals' Indemnified Persons shall have
the benefits expressly set forth for such persons in this Agreement.
SECTION 10.9 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, all of which
when taken together shall constitute one agreement binding on all parties,
notwithstanding that all parties are not signatories to the same counterpart.
SECTION 10.10 ARBITRATION.
All controversies, claims and disputes arising out of or relating to this
Agreement, or the breach of such Agreement, except as otherwise provided herein,
shall be decided by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect; provided, however,
this agreement to arbitrate shall not apply to any disputes if either
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party is a debtor in a proceeding under the Federal bankruptcy laws. The parties
agree that the location of all arbitration hearings or other court appearances
related to this Agreement shall be in Multnomah County, Oregon, and the parties
submit to the jurisdiction of the Oregon courts for entry of judgment on the
arbitration award. Nothing in this Agreement shall prevent any party from
seeking and obtaining preliminary injunctive relief pending the entry of a
judgment or arbitration award against any other party provided such relief is
sought and obtained in a United States District Court located in Multnomah
County, Oregon.
SECTION 10.11 NO PUBLICITY.
No party shall make any public disclosure or publicity release pertaining
to the existence of this Agreement or of the subject matter contained herein
without the consent of the other parties hereto (which consent may be
unreasonably withheld by CFI with respect to the Purchase Price and all other
confidential terms and information pertaining to the transactions contemplated
herein, but which consent shall not be unreasonably withheld in all other
circumstances). Notwithstanding the foregoing, each party shall be permitted to
make such specific disclosures to the public or to governmental agencies as its
counsel shall deem necessary to maintain compliance with and to prevent
violation of applicable federal or state laws.
SECTION 10.12 FURTHER ASSURANCES.
Each party agrees, at the request of any other party hereto, at any time
and from time to time after the date hereof, whether before or after the Closing
Date, promptly to execute and deliver all such further documents, and promptly
to take and forbear from all such action as may be reasonably necessary or
appropriate in order to more effectively to confirm or carry out the provisions
of this Agreement and the intent of the parties hereto.
SECTION 10.13 KNOWLEDGE OF PARTIES.
Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the knowledge, information or belief of the
party making such representation or warranty, it is intended to mean that, after
such party shall have made reasonable inquiry as to the matters that are the
subject of such representation and warranty (including reasonable diligence to
ascertain the materiality or effect of any information that is obtained as a
result of or in connection with such inquiry), no information has come to the
conscious awareness of such party that would give such party actual knowledge of
the existence or absence of such facts.
SECTION 10.14 DEFINITIONS.
As used herein, the following defined terms shall have the meanings
ascribed below:
"Accounts Receivable" shall be as defined in Section 1.1(d).
"Approval" shall mean any approval or consent required by any
person or governmental authority.
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"Business" shall mean the combined businesses of MCS, BankServ, DCS and
Inasyst, as such companies were operated prior to the Effective Date, which the
Principals represent is substantially as described in the Recitals to this
Agreement.
"Charter Documents" shall be as defined in Section 3.1(a).
"Claims" shall mean, collectively, any claim, action or suit; any
investigation, inquiry or other proceeding by any administrative, governmental,
arbitration or judicial body; or any order, decree, or judgment issued or
rendered by any such body.
"Contracts" shall be as defined in Section 3.5(a).
"Environmental Laws" shall mean any and all foreign and domestic federal,
state and local laws (including case law), regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions relating
to human health, the environment or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" shall mean all liabilities, whether vested or
unvested, contingent or fixed, which (i) arise under or relate to Environmental
Laws and (ii) relate to actions occurring or conditions existing on or prior to
the Effective Date.
"Excluded Assets" shall be as defined in Section 1.3.
"Excluded Liabilities" shall be as defined in Section 1.4.
"Intellectual Property" shall mean all intellectual property rights
directly related to the Products or the Business, and owned by the Principals or
in which any of the Principals has any rights or licenses. Intellectual Property
shall include, without limitation, all trademarks, service marks, trade names,
copyrights (or any applications for any of the foregoing); patents, industrial
models, processes, designs, formulas or applications for patents; inventions
(whether or not patentable); designs, drawings, mask works, algorithms,
specifications or test information; computer programs or other software
(including the human-readable source code and the machine-executable object code
of any such software); engineering and associated design data; know-how;
manufacturing and marketing information; user documentation and other product
literature; and other similar information.
"Hazardous Substances" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance regulated by any Environmental Law, including
petroleum, its derivatives, by-products and other hydrocarbons, or any substance
having any material constituent elements displaying any of the foregoing
characteristics.
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"Law" shall mean, collectively, any statute, rule, common law, ordinance,
regulation, order, writ, judgment, injunction, decree, determination, or award
enacted or promulgated by any governmental authority of any nature whatsoever
"Licenses" shall be as defined in Section 3.7(b).
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Loss" or "Losses" shall mean any demand, claim, loss, liability, damage,
obligation, cost and expense, actually incurred by the affected party (including
interest, penalties, costs of preparation and investigation, attorney fees, fees
and costs of experts and consultants, copying, courier and telecommunication
costs, deposition costs and all other costs of discovery incurred by such party
or parties in connection therewith including, in any post-trial or appellate
proceeding).
"Marks" shall be as defined in Section 3.6(c)(i).
"Material Adverse Effect" shall mean any change, effect or occurrence that
has, or is reasonably likely to have, individually or in the aggregate, a
material adverse impact on (i) the condition (financial or otherwise) or
prospects of MCS, the Business or the Purchased Assets, or (ii) the operation of
the Business before or after the Effective Date, or the ownership or other use
of the Purchased Assets by CFI thereafter.
"MCS Financial Data" shall be as defined in Section 3.3(a).
"Person" means, as the context may require, an individual, partnership,
joint venture, corporation, association or any other entity.
"Purchased Assets" shall be as defined in Section 1.1.
"Purchased Contracts" shall be as defined in Section 1.1(c).
"Real Property Lease" shall be as defined in Section 3.6(b).
"Records" shall mean all books of account, forms, records, files,
invoices, customers lists, suppliers lists, business records and plans,
catalogs, brochures, other selling material, manuals, correspondence, memoranda,
and other data (in all mediums) used by MCS in connection with the Business or
otherwise pertaining to the Purchased Assets.
"Regulated Activity" shall mean any generation, treatment, storage,
recycling, transportation, disposal or release of any Hazardous Substances.
"Restrictive Period" shall be as defined in Section 6.1.
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"Taxes" shall mean any and all federal, state, local, foreign, or other
taxes (including all those related to income, gross receipts, franchise, excise,
sales and use, social security, unemployment, workers' compensation, ad valorem,
and property taxes).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed effective as of January 1, 1999.
"MCS" "BankServ"
Modern Computer Systems, Inc. BankServ, Inc.
By: /S/ Ronald L. Ingersoll By: /S/ Ronald L. Ingersoll
----------------------- -----------------------
Name: Ronald L. Ingersoll Name: Ronald L. Ingersoll
Title: President and sole shareholder Title: President and shareholder
"DCS" "Inasyst"
Dealer Computer Systems, Inc. Inasyst, Inc.
By: /S/ Ronald L. Ingersoll By: /S/ Ronald L. Ingersoll
----------------------- -----------------------
Name: Ronald L. Ingersoll Name: Ronald L. Ingersoll
Title: President and shareholder Title: President and sole shareholder
"CFI"
CFI ProServices, Inc.
By: /S/ Jeffrey P. Strickler
------------------------
Name: Jeffrey P. Strickler
Title: Vice President and
General Counsel
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EXHIBIT AND APPENDIX LIST TO
ASSET PURCHASE AND SALE AGREEMENT
APPENDIX NO. DESCRIPTION
- ----------- -----------
A Registration Rights
B Transition Services Letter Agreement
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1 Products
1.1(b) Purchased Tangible Personal Property
1.1(c) Purchased Contracts
1.1(d) Allocation of Accounts Receivable and Other
Obligations
1.3 Excluded Assets
1.4 Assumed Liabilities
2.4 Allocation of Purchase Price
3.2 Required Approvals
3.5 Contracts
3.6(a) Assets
3.6(b) Real Property Lease
3.6(c) Intellectual Property, including Marks
3.7(b) Licenses
3.9 List of Employees
3.11 Customers
4.3(c) Stock Option Plan Information Statement
8.4(c) Bill of Sale
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Appendix A
REGISTRATION RIGHTS
1. If, but without any obligation to do so, CFI proposes to register any shares
of its Common Stock under the Securities Act of 1933 (the "Act") in connection
with a public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a CFI
stock plan, or a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Shares), CFI shall, at such time, promptly
notify Ingersoll of such registration. Upon Ingersoll's written request given
within 15 days after the date of CFI's notice, CFI shall, subject to the
provisions of Section 5, below, cause to be registered under the Act all of the
Shares that Ingersoll has requested to be registered.
2. CFI shall not be required to effect a registration of the Shares pursuant to
this Appendix A, if at any time prior to the effective date of the applicable
registration statement, Ingersoll is able to sell the Shares within any three
month period under the Act's Rule 144.
3. In connection with any registration pursuant to this Appendix A, CFI shall
(i) furnish Ingersoll with a reasonable number of copies of the prospectus
(including the preliminary prospectus) to facilitate the disposition of the
registered Shares; (ii) use best efforts to register and qualify the Shares
covered by the registration statement under such other securities laws of such
jurisdictions as Ingersoll shall reasonably request (provided that, in
connection with this obligation, CFI shall not be required to qualify to do
business or file a general consent to service of process in any such
jurisdiction); and (iii) during all times that such registration statement is
effective or a prospectus is required to be delivered under the Act, notify
Ingersoll of any event or circumstance that would cause the prospectus to
contain an untrue statement of a material fact, or omit to state a material fact
required to be stated or necessary to make the statements therein not
misleading.
4. In connection with any registration pursuant to this Appendix A, Ingersoll
shall (i) furnish to CFI such information regarding himself, the Shares, and the
intended method of disposition of such securities as shall be reasonably
required to effect the registration of the Shares; (ii) execute such documents
in connection with such registration as CFI or the underwriters shall reasonably
request; (iii) enter into and perform his obligations under the underwriting
agreement that CFI shall have entered into with respect to such registration and
offering.
5. In connection with any underwritten offering, CFI shall be required to
include in such offering only such number of securities, including the Shares,
that the underwriters reasonably believe will not jeopardize the success of such
offering (the securities to be included to be apportioned according to the
direction of the underwriters, but with an effort to apportion pro rata between
CFI, Ingersoll and any other selling shareholder, if any); provided, however,
that the Shares to be included in such offering may not be reduced by
application of this sentence to less than fifteen percent (15%) of the total
value of securities actually included in such offering.
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6. In the event any Shares are included in a registration statement under
Appendix A:
(i) The Company will indemnify and hold harmless Ingersoll, his agents and
representatives and any underwriters against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the Securities Exchange Act of 1934, as amended (the "1934 Act"), or damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and CFI will reimburse Ingersoll, agent, representative, or
underwriter for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Subparagraph (i) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of CFI (which consent shall not be unreasonably withheld),
nor shall CFI be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
Ingersoll or underwriter.
(ii) Ingersoll will indemnify and hold harmless CFI, each of its
directors, each of its officers who have signed the registration statement, each
person, if any who controls CFI within the meaning of the Act or the 1934 Act,
any agent, representative of CFI, any underwriter and any other person selling
securities in such registration statement against any losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon an in conformity with written information
furnished by Ingersoll expressly for use in connection with such registration.
Ingersoll will reimburse any legal or other expenses reasonably incurred by CFI
or any such director, officer, agent, representative, controlling person,
underwriter in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Subparagraph (ii) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Ingersoll, which consent shall not
be unreasonably withheld; provided further that the maximum liability of
Ingersoll under this Subparagraph (ii) in regard to any registration statement
shall in no event exceed the amount of the proceeds received by Ingersoll from
the sale of securities under such registration statement.
(iii) Promptly after receipt by an indemnified party under this Section 6
of Appendix A of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate therein, and, to the
extent, the indemnifying party so desires, jointly with any other indemnifying
party
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similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under Section 6, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 6.
(iv) The obligations of CFI and Ingersoll under this Section 6 shall
survive the completion of any offering of the Shares in a registration statement
prepared and filed pursuant to this Appendix A.
7. All incremental expenses (including underwriting discounts and commissions
relating to the Shares) incurred in connection with (but only with respect to)
the registration, filing and qualification of the Shares (including, without
limitation, all fees and disbursements to Ingersoll's counsel), shall be borne
by Ingersoll. "Incremental expenses" shall mean any costs directly and
distinctly (separately identifiable) applicable to the inclusion of the Shares
into the offering.
8. The rights granted pursuant to this Appendix A are not assignable.
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Appendix B
TRANSITION SERVICES AGREEMENT
January 26, 1999
Ronald L. Ingersoll
Lois J. Ingersoll
16305 Knolls Path
Lakeville, Minnesota 55044
RE: TRANSITION SERVICES
Dear Ron and Lois,
This letter agreement will confirm our discussions regarding your
continued assistance in transitioning the operations and business of Modern
Computer Systems, Inc. ("MCS") to CFI ProServices, Inc. ("CFI") in connection
with CFI's acquisition of MCS.
Each of you agree to provide transition assistance services to CFI for so
long as there is productive work to accomplish in the transition, from the
Closing Date of the acquisition through April 15, 1999 (the "Employment
Period"). During the transition, you will work with CFI management to ensure
full and complete transition of your knowledge of the Business (as such term is
defined in the acquisition agreement). In particular, Ron will provide
professional support to the CFI sales organization, and will report to Lois
Roberts. Lois will provide support to the HR, finance and contract
administration departments, and will report to Lois Oliver.
During the Employment Period, CFI will compensate you at the base salary
levels each of you were being paid by MCS as at the Closing Date. As of April
15, 1999, your employment with CFI shall cease; you will not be eligible for any
severance payment upon termination of your employment.
You have agreed that you will not participate in the CFI health care and
insurance benefits. During the period of your employment with CFI, CFI will
reimburse you for any COBRA payments for insurance coverage for such period that
you may make with respect to your COBRA election under the MCS plan. As an
employee of CFI, you may effect a roll-over of your MCS 401(k) plan assets into
CFI's 401(k) plan if you wish; you will not be eligible to participate in any
program providing CFI contributions to such 401(k) or any other benefit plan.
You understand and agree that, if the foregoing agreements establishing an
employment relationship would adversely impact CFI (or the 401(k) plan or other
benefits offered by CFI) beyond the stated intent to provide you with the
benefits described, or if such employment relationship would adversely impact
CFI's treatment of your salaries and other costs as acquisition expenses, CFI
and you will enter into a consulting agreement on substantially the same terms
as stated above.
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In addition, each of you have agreed to remain available for reasonable
consultation regarding the Business through December 31, 1999. You agree to
provide such service without additional compensation.
At CFI's request, Ron also agrees to provide CFI reasonable consulting
services to assist CFI in researching and analyzing other businesses, primarily
in the host processing area. For these additional services, CFI will compensate
Ron at a rate of One Thousand Dollars ($1,000) per day, plus documented
expenses.
If you are in agreement with the foregoing, please sign this letter in the
spaces set forth below, and return a copy of this letter to me at your earliest
convenience. Thank you.
Very truly yours,
Jeffrey P. Strickler
Vice President & General Counsel
Acknowledged and Agreed:
- ---------------------------- ------------------------------
Ronald L. Ingersoll Lois J. Ingersoll
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