Micro General Form 10-K405 December 31, 2001

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. þ

As of March 5, 2002, 15,666,097 shares of common stock ($.05 par value) were outstanding, and the aggregate market value of the shares of the common stock held by non-affiliates of the Registrant was $62,463,739.

Location of Exhibit Index: The index to exhibits is contained in Part IV herein on page number 62.

The information in Part III hereof is incorporated herein by reference to the Registrant’s Proxy Statement on Schedule 14A for the fiscal year ended December 31, 2001, to be filed within 120 days after the close of the fiscal year that is the subject of this Report.

This report contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined below under the caption “Risk Factors.” These factors may cause our actual events to differ materially from any forward-looking statement. We do not undertake to update any forward-looking statement.

We provide industry leading software solutions and services to real estate services providers, such as title insurers, escrow companies and lenders, that enable them to work more efficiently and cost-effectively. Our software solutions and services address many of the inefficiencies of real estate services providers in processing and settling real estate transactions by automating many of the tasks involved in this process, and by integrating their tasks into a more unified workflow. Our software solutions range from pre-packaged desktop software to enterprise class networked systems. Fidelity National Financial, Inc. (“Fidelity National”), the nation’s largest title insurance company, uses our software solutions and services to manage its title and escrow functions and accounts for 95% of our revenues in 2001. We are currently developing next generation software solutions that use the internet to provide added levels of automation and integration for our customers. In addition, we believe we operate the largest electronic data exchange for mortgage originators and settlement services providers.

On May 14, 1998, we along with Fidelity National completed the merger of Micro General with ACS Systems, Inc, (“ACS”), a wholly-owned subsidiary of Fidelity National. As a result of the merger, all of the outstanding shares of ACS were exchanged for 4.6 million shares of Micro General common stock. The transaction was appraised at $1.3 million. Following the merger of Micro General and ACS, Fidelity National owned 81.4% of our common stock on an undiluted basis. The transaction has been accounted for as a reverse merger with ACS, with Micro General as the legal surviving entity and ACS as the surviving entity for accounting purposes. At December 31, 2000, ACS was formally merged into Micro General. Fidelity National owned 61.7% of our outstanding common stock at December 31, 2001. Prior to the ACS transaction, our operations consisted of the design, manufacture and sale of computerized postal and shipping systems. The acquisition of ACS shifted our focus to software solutions and information technology services.

On November 17, 1998, we completed the acquisition of LDExchange.com, Inc. (“LDExchange”), a carrier focused primarily on the international long distance market. LDExchange was a facilities-based, wholesale long distance carrier providing low cost international telecommunication services primarily to U.S. based long distance carriers. In 2000, LDExchange obtained the necessary stated certifications to begin offering domestic long distance services across the country. The LDExchange purchase price was $3.1 million, payable $1.1 million in cash and $2.0 million in Micro General restricted common stock (1,000,000 shares). In December 2001, we discontinued the international wholesale division of LDExchange. We have also recorded a loss on disposal of discontinued operations in 2001, which is separately disclosed on our fiscal 2001 Statement of Operations included herein.

On August 20, 2001, we acquired SoftPro Corporation (“SoftPro”), for $1.75 million in cash and 336,034 shares of our common stock valued at $3.9 million. SoftPro, established in 1984, is based in Raleigh, North Carolina and is a leading provider of real estate closing and title insurance automation software for the independent title agent marketplace. It has an installed base of more than 6,300 sites nationwide and a user base of more than 23,000.

On November 1, 2001, we signed an agreement with Beyond Ventures, LLC and MGEN Tech Fund I, L.P. and transferred 30,779 and 123,114 shares, to Beyond Ventures and MGEN Tech Fund, respectively, of our common stock in exchange for all of RealEC Technologies’ common stock. The consideration for the acquisition was determined based on a per share price of $10.24 for our common stock, which was the average per share price of our common stock less a 10% discount for the restricted nature of the shares granted to effect the purchase. Combined with our convertible preferred stock position in RealEC Technologies, we now own approximately 56% of RealEC Technologies on a diluted basis assuming conversion of all convertible preferred stock. RealEC Technologies provides a standardized, electronic platform which lenders and realtors can utilize to order and receive products and services from multiple vendors such as credit, flood, appraisal, title and closing.

As of December 31, 2001, we have three reportable business segments: Micro General Enterprise Software Solutions, SoftPro and RealEC Technologies. For additional information on these segments, see note 8, Segment Information, in the notes to the consolidated financial statements.

In recent years real estate transaction volume has increased as a result of lower mortgage interest rates and other factors, including a greater demand for housing and general economic conditions. The increase in real estate transaction volume has resulted in a strain on the capacity of many real estate services providers. At the same time, increased competition in the real estate services industry has resulted in additional pressure on real estate services providers to improve profitability by lowering overhead costs and increasing productivity. Faced with these pressures, services providers in the real estate services industry have tried to improve the efficiency of their operations. These services providers have identified and made substantial investments in their information technology systems as a primary means of becoming more efficient.

The successful settlement of real estate transactions depends on the processing and coordination of tasks provided by multiple real estate services providers. Because the real estate services industry is largely decentralized, consisting of numerous independent services providers, the performance of these tasks often occur in a disorganized manner. Moreover, real estate transactions involve the generation and delivery of a large amount of documents by these real estate services providers. As a result, coordination of the real estate transaction settlement process is difficult. Inefficiencies in the management of the real estate transaction settlement process result in substantial costs to real estate services providers, poor customer service and loss of productivity. These inefficiencies include:


	•	Reliance on manual processes.

	•	Labor intensive coordination of tasks.

	•	Inaccuracies in documentation.

	•	Inadequate access to documentation.

	•	Burdensome regulatory compliance.

We provide a broad-based suite of software solutions for real estate services providers, which automate many of the tasks involved in the real estate transaction settlement process, and integrate these tasks into a more unified workflow. Our software solutions range from pre-packaged desktop software to enterprise class networked systems. Our software solutions allow real estate services providers to generate and manage information more efficiently, and to more effectively coordinate their tasks with other real estate services providers. As a result, our software solutions allow real estate services providers to reduce costs, increase


	•	Online ordering and delivery of documents. By ordering services and receiving the corresponding documentation online, real estate services providers can reduce their labor, delivery and distribution costs.

	•	Automated coordination of tasks. Our customers are able to transmit products in electronic form, which can be managed and organized into a more unified workflow.

	•	Increased accuracy. Real estate services providers are able to reduce the potential for miscommunication and error as a result of a reduction in the level of reliance on the manual processing and verification of information, thereby reducing delays in the real estate transaction settlement process.

	•	Electronic document review. Mortgage lenders and their customers are able to review documents in a secure online environment, and are therefore afforded a greater opportunity to review and correct documents prior to the closing of the real estate transaction.

	•	Assistance with regulatory compliance. Real estate services providers can use our software solutions to help them comply with a wide range of federal and state regulations, thereby substantially reducing their legal and administrative costs in ensuring regulatory compliance.

Our objective is to be the leading provider of software solutions that enable our customers in the real estate services industry to operate more efficiently and competitively. To accomplish this objective, we intend to:


	•	Leverage our market position in the real estate information technology market. We have experience developing some of the most widely used workflow automation software solutions in the real estate services industry. With over 600 real estate technology professionals, we believe that we have the largest number of qualified employees dedicated to providing automated solutions to the real estate industry. We intend to leverage the knowledge and expertise of our employees to develop leading solutions that address our customers needs.

	•	Continue to leverage our relationship with Fidelity National. We believe that our close relationship with Fidelity National will help us continue to develop and expand our business. Among other factors, we expect that maintaining our relationship with Fidelity National will allow us to increase our revenues as Fidelity National’s transaction volume increases, to market our software solutions to Fidelity National’s large and diverse customer base of lenders and agents, and to expand our suite of software solutions by leveraging the software development projects we perform for Fidelity National.

	•	Continue to develop and expand our software solutions. We are continuously adding features to our software solutions that better serve the needs of our customers. We are developing software solutions that enable lenders to securely acquire, store and remotely access selected loan data and documents. Once completed, we believe Net Global Solutions, or NGS, will be a highly scalable modular platform that can be used to develop custom applications for a broad range of real estate and financial services providers.

	•	Leverage our established industry relationships. We have formed relationships with some of the key leaders in the real estate and financial services providers market. We provide to Fannie Mae MORNETPlus 2000, its online services ordering technology. In addition, we have formed a strategic alliance with Stewart Information Services Corporation (“Stewart Title”) and LandAmerica Financial Group, Inc. (“LandAmerica”) to develop the RealEC Exchange. We intend to expand our relationships with industry leaders to capture additional market share.

	•	Expand our customer base. We plan to expand and diversify our customer base and increase our revenue sources by aggressively marketing our software solutions. We believe our enterprise solutions


		will be able to address the needs of a larger segment of the title insurance and escrow industry than our existing software solution, SIMON. We believe that SoftPro will allow us to further penetrate the market of small to mid-size customers consisting of independent title agents and attorneys. We also believe that we have significant advantages in marketing our software solutions created by our access to Fidelity National’s customer base and the existing customer base for the RealEC Exchange.

	•	Pursue strategic acquisitions and alliances. We believe opportunities exist in the fragmented real estate and financial information technology services market to expand our business through strategic acquisitions and alliances. We believe the acquisition of one or more complementary businesses, products, product rights or technologies will enable us to expand our product offerings and enter new markets. We also believe our relationship with Fidelity National and our access to its large customer base will provide us with the opportunity to maximize the value of our acquisitions.

We provide a broad-based suite of software solutions to the real estate services industry designed to address the different workflow requirements of multiple real estate services providers in the real estate transaction settlement process.

We provide enterprise software solutions targeted at the automation needs of large title insurance and escrow companies. Our enterprise software solutions are designed to coordinate the multiple tasks involved in the real estate transaction settlement process into a unified workflow throughout our customers’ businesses. Our enterprise software solutions primarily consist of SIMON, which has been in use since 1994, and will include NGS, which is being designed to provide increased levels of automation and efficiency to real estate services providers.

We provide SIMON, an industry leading title workflow, escrow closing and trust accounting software, to the real estate services industry. SIMON is a client server-based software system that allows our customers to manage workflow and share data within their organizations. SIMON has processed over $1 trillion in real estate transactions and manages $2 billion in daily balances. Fidelity National, the largest title insurance company in the United States, uses SIMON for its real estate settlement workflow management. In addition to Fidelity National, over 150 independent companies use SIMON to manage their escrow closing and trust accounting processes.

We are currently developing NGS, our next generation enterprise software solution. NGS is being built to operate on a web-based technology platform. This technology platform allows NGS to receive and transmit data over the internet and to be seamlessly linked with the internal systems of multiple real estate services providers. We are using our experience in developing and supporting SIMON in our current development of NGS. Once NGS is fully implemented, we plan to market NGS instead of SIMON as our enterprise software solution to large real estate services providers. We believe that the web-based technology platform on which NGS is being built will enable us to develop software applications that further integrate and streamline the real estate transaction settlement process. Once completed, we expect NGS will provide the following features:


	•	Integrated online ordering and delivery of products. Through seamless integration of NGS with the RealEC Exchange, real estate services providers can order and receive products online, such as credit reports, title reports and flood certifications, from third party service providers within a single application, providing a unified workflow.


	•	Title report and policy production. Through seamless integration of NGS with title search databases, real estate services providers will be able to more efficiently generate title products within the NGS application, eliminating duplicative connectivity to title plant records and the continual maintenance and update of in house title plants while increasing productivity.

	•	Secure, centralized information and document repository. Real estate services providers can receive and store information and documents in a secure, centralized, electronic location that can be accessed for internal use and resale throughout an enterprise and the internet.

	•	Electronic funds management. Real estate services providers can automate positive pay, reverse positive pay and bank reconciliation functions, which eliminates the need to manually tabulate incoming deposits and initiate fund disbursements.

	•	Integrated financial and customizable reporting tools. Daily revenue accompanied by supporting financial reports from all cost centers are dynamically uploaded into the corporate accounting divisions of real estate services providers. Profitability and productivity reports enable efficient management of a national company from a single application from one or more locations.

In addition to enabling more robust software applications, we believe that the NGS technology platform provides our customers with significant advantages over enterprise software solutions based on client server platforms. These advantages include:


	•	Lower cost of ownership. Because we offer NGS on an application service provider, or ASP, basis we are able to reduce the amount of network infrastructure that our customers must acquire and maintain, such as servers and related hardware.

	•	Rapid deployment. Because NGS requires less infrastructure build-up by our customers, we can deploy NGS faster than client server-based systems.

	•	Integrated Training. Integrated on-line training tools provide uniform training from a corporate level to meet the time sensitive needs of NGS users prior to deployment of the initial application and for future releases.

	•	Scalability. NGS is based on a flexible technology platform, which allows us to deploy NGS in modules to meet the automation and cost requirements of our customers and to efficiently add new features and functionality.

We expect that Fidelity National will begin rolling out NGS on a state by state basis in 2002. We currently derive revenues from the development of NGS. With the completion of the initial NGS software system, our revenues for NGS development will be reduced, however, we anticipate deriving new revenues from the deployment and implementation of NGS and ultimately plan to charge a monthly per seat service fee. The monthly service fee will include ongoing technical support, bandwidth usage and upgrades.

We also offer our customers a portfolio of related services within the broad categories of professional services, managed application services and information technology. For example, last year we derived substantial revenues from the management of Team and other software systems and processes owned by Fidelity National. These services include systems development, integration, business process management and consulting. We provide personnel with substantial cross-disciplines in the areas of technology and real estate services, such as lending, title insurance and escrow services. In addition, we maintain a substantial repository of software applications, many of which we believe can be customized to meet the specific needs of our customers. We continually explore opportunities to commercialize and apply these software applications to meet the needs of our customers. We believe we can continue to provide our customers with highly specialized information technology solutions.

We continue to develop software solutions to better meet the needs of our customers. In particular, we are developing software solutions based on iLumin technology. In December 2001, we entered into a technology license with iLumin Corporation under which we acquired exclusive licensing rights, within the real estate industry, to iLumin’s secure transactions technology. The iLumin technology suite, from which no revenues have yet been generated, includes the following individual software components:


	•	Digital Credential Authority: an out-of-the-box, digital certificate issuance and management application, designed to give flexibility to the issuance, validation maintenance and management of digital certificates.

	•	Digital Business Composer: a flexible electronic form and graphic business process design toolset.

	•	Digital Handshake: a web-based business transaction engine that enables companies to execute business rules that govern secure, private and legally binding online transactions, absent of any paperwork or manual steps.

	•	Digital Content Exchange: a family of extended personal key infrastructure, or PKI, solutions that integrate with existing e-mail applications and networks to allow companies to dynamically encrypt and digitally manage access and usage privileges for all forms of content, files and email communications.

	•	Digital Content Authority: a robust secure web-vault, complete with privilege and rights management tools, multi-source content contribution methods, and structure management capabilities.

We are currently developing an application platform we call eTransaction, which uses iLumin technology together with our custom software to create a tailored software solution that addresses the specific needs of mortgage lenders. We believe that our solution will help lenders more efficiently close mortgage loans and package loan documents for loan servicing arrangements and sales into the secondary markets.

SoftPro is our pre-packaged, turnkey software application that provides automation tools and back-office support to independent title agents and attorneys for the management of real estate transaction settlements. SoftPro includes features such as automated generation of closing and title insurance forms, order tracking and management reporting, trust accounting management and reconciliation, title plant indexing, 1099-S IRS magnetic media reporting, advanced amortization calculations and schedules, and custom document design.

We have recently released SoftPro SQL, which is a networked software application based on SoftPro which enables title and escrow companies to connect hundreds of users in one location, or hundreds of offices around the country, to use the software. SoftPro SQL has been designed to be used by large, multi-office title and escrow companies. Because of the broad capabilities of SoftPro SQL, we believe we can market this product to larger offices of agents thereby increasing our average order size and revenue derived from these products.

We charge a one-time license fee per site and a monthly per seat fee for SoftPro.

The RealEC Exchange is an online marketplace whereby over 800 mortgage lending institutions can order online, from over 2,000 service providers located across the United States, products and services in connection with loan originations. Companies, such as lenders and realtors, can place orders for products using customized parameters or through our intelligent ordering subsystem, which manages the task of identifying the appropriate product and service provider. Orders are transmitted to vendors of those products and services electronically through the internet and other private networks. Those service providers can in turn deliver the desired product, such as credit reports, title reports and flood certifications, directly to the requesting company


	•	title reports and insurance policies.

	•	closing and escrow services.

	•	appraisal services.

	•	automated property valuations.

	•	flood determinations.

	•	credit reports.

	•	property inspections.

	•	tax notifications.

We believe the utility of the RealEC Exchange will increase as additional real estate services providers adopt this platform as part of their workflow, which we expect will allow us to derive additional revenue from this product. We charge a fee to vendors that receive and fill orders through the RealEC Exchange. Our fees are based on the type of service being offered, with the more expensive and complex services generating higher fees. We also charge per use transaction fee to customers who use our intelligent ordering system.

Our customers range from major financial and real estate services providers to independent agents and attorneys. Fidelity National and its affiliates use SIMON for their real estate transaction settlement services and accounted for approximately 95% of our revenues in 2001. Fidelity National, operating under the brands Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title, is the largest title insurance company in the United States. Also included in Fidelity National affiliates are Fidelity National Information Systems (“FNIS”) and American Title, both public companies in which Fidelity National has ownership interests. Besides Fidelity National, we have over 150 independent companies using SIMON to manage their escrow closing and trust accounting processes.

SoftPro is used primarily by independent title agents and attorneys. SoftPro is installed in approximately 6,300 sites and used by approximately 23,000 users. We have also entered into 18 cooperative ventures involving Softpro with different underwriters. Softpro SQL was released in April of 2001 and is being used by approximately 56 customers, including Watson Title and North American Title’s Lennar division.

The RealEC Exchange is used primarily by mortgage lenders and settlement services providers. Mortgage lenders initiate transactions through the RealEC Exchange and service providers pay the transaction fees. Five of the largest ten mortgage lenders in the United States use the RealEC Exchange, including Wells Fargo, Countrywide Insurance, Chase Home Finance, Bank of America and ABN AMRO Mortgage Group. Through our contractual arrangements, the RealEC Exchange is used by Fidelity National, Stewart Title Company, Old Republic Title Insurance Company and LandAmerica Financial Group, Inc., collectively representing four of the five largest title insurance companies in the United States.

We utilize different marketing models depending on the software solutions being marketed. We recently significantly increased the size of our sales and marketing department, and we currently have a direct sales and marketing staff of 15 people.

We have marketed SIMON through direct sales calls. We have recently scaled back our marketing efforts for SIMON and expect to phase out SIMON with the rollout of NGS.

We market custom applications to major real estate and financial services providers through our direct sales force. In addition, once NGS is complete, we plan to market NGS to national title insurance and escrow companies and to the approximately 200 largest regional independent title insurance agents.

We market SoftPro to independent title agencies and real estate attorneys through our sales staff and cooperative marketing ventures, including 18 title insurance underwriters nationwide, and to users of SIMON. Marketing by us and through these ventures consists of a combination of direct mail, fax and email campaigns, print advertisements, and trade show attendance, both locally and nationally. We believe the target market for SoftPro consists of approximately 20,000 independent title agencies in more than 100,000 offices in the United States.

We market the RealEC Exchange through our sales staff, strategic partners, such as title insurance companies who use the RealEC Exchange to deliver their services, and aggregator partners, such as Fannie Mae, who market and sell their order-entry portals to lenders and mortgage brokers who, in turn, utilize the RealEC Exchange to deliver orders to real estate services providers. Our marketing targets the approximately 100 largest lenders in the country and consists of industry trade shows, industry publications and direct selected, focused telephone calls.

We provide technical support to our customers depending on contractual service levels purchased as part of the acquisition of our software solutions. Technical support for our software solutions are provided by our call center for SIMON located in Santa Ana, California and for SoftPro located in Raleigh, North Carolina. We maintain a customer service staff of approximately 41 persons. Our technical support personnel are required to complete support training and certification classes to help ensure appropriate levels of customer support. In addition, we employ a number of technologies in our call centers to enable us to more efficiently provide support to our customers. These technologies include call routing and merging systems, providing our customers with the convenience of a single number to obtain a wide range of support, and a back-end system that assists us in monitoring and coordinating our response levels. We are currently implementing technologies that will enable our customers to use the internet to submit and monitor their support requests, as well as search knowledge databases.

The market for information technology is intensely competitive and involves aggressive technological development. We believe that the market for companies providing real estate transaction closing solutions consists of only a limited number of companies. Our competitors vary in size and in the scope and breadth of the products they offer. In addition, because many of our potential customers have historically developed real estate transaction closing systems in-house and therefore view their system requirements from a make-versus-buy perspective, we often compete against our potential customers’ in-house capabilities.

As of January 31, 2002, we employed approximately 728 full-time employees, consisting of approximately 529 in technology development, support and maintenance, 61 dedicated to SoftPro, 41 dedicated to RealEC, 41 in customer service, 41 in administrative services and 15 in sales and marketing. None of our employees are represented by a collective bargaining agreement and management considers relations with our employees to be excellent.

We rely on Fidelity National for a significant portion of our revenues and we expect that reliance to continue for the foreseeable future.

Fidelity National, operating under the Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title brands, and its affiliates accounted for approximately 89% of our revenues in 2001. Our billings to Fidelity National Information Solutions (“FNIS”), a public company 79% owned by Fidelity National, accounted for an additional 6% of our 2001 revenues. Discontinuing the operations of LDExchange has eliminated most of our non-Fidelity related revenues. Fidelity National is not required to use our software solutions or technology services in any minimum amount or for any period of time. Fidelity National may, in its sole discretion, obtain products and services from other providers. Any substantial decrease in Fidelity National’s purchase of our software solutions and technology services would have a material adverse affect on our overall financial condition, results of operations and cash flows. We may not be able to establish alternative sources of revenues at the levels provided to us by Fidelity National.

We are subject to restrictions under our master services agreement with Fidelity National that could prevent or deter us from providing NGS for a period of time to certain potential customers.

We have a master services agreement with Fidelity National which formalizes the terms of our development and other technology services for Fidelity National, including the development, ownership and use of NGS. Under the master services agreement we are prohibited from providing NGS to Stewart Title Company, LandAmerica Financial Group, Inc. and Old Republic National Title Company in a state for a period of 90 days following Fidelity National’s rollout of NGS in that state and to First American Corporation in a state for a period of three years following Fidelity National’s rollout of NGS in that state. In addition, if we license NGS to an entity in the real estate industry, we are required to pay to Fidelity National a royalty equal to 10% of our licensing revenues until the royalties equal the aggregate amount paid by Fidelity National to us for the development of NGS, and a royalty equal to 2% of our licensing revenues until Fidelity National has recovered 125% of the NGS development costs. These provisions may impair our ability to expand our customer base and cause us to continue our reliance on Fidelity National for a significant portion of our revenues. They may also allow our competitors to license their software solutions before us in various areas of the country, which harms our competitive position and may decrease our market share.

We have historically lacked product and business diversification and the market may not accept our new software solutions.

Our information technology business has historically focused almost exclusively on our SIMON software solution. In addition, our professional services business has largely focused on servicing the information technology needs of Fidelity National. Any downturn in the demand for SIMON or our technology services would materially harm our business.

The growth of our business is dependent on expanding and diversifying our software solutions and our customer base. We have marketed SIMON to the title insurance and escrow industries. We have only recently acquired a second software product line, SoftPro, which we market to independent title agents and attorneys. We are developing NGS and plan to market NGS to large real estate services providers. Market acceptance of these software solutions is uncertain and the real estate services industry has historically been reluctant to adopt new technologies. Our close relationship with Fidelity National may also make competitors of Fidelity National reluctant to purchase our software solutions. In addition, adopting our software solutions may require our customers to make substantial investments in time and capital, significantly changing their operating procedures and displacing existing internal information technology departments. If our new software solutions fail to gain market acceptance our business will be harmed.

Many of the software solutions that we plan to provide to the real estate services industry, including NGS, are under development. We do not assure you that these software solutions will be developed as expected, without delays or unexpected cost, or at all. We may encounter technical, legal, competitive or other barriers in connection with the development and launch of our software solutions that may hamper or prevent us from offering these software solutions.

In particular, the successful implementation of NGS could be affected by a number of factors. NGS is designed to be a feature rich, complex system that requires the integration of various software applications into a new web-based technology platform. Our technology platform will be managed out of a data center that is under construction and has not been tested in an operational environment. Our data center may contain “bugs” or other technical problems that could prove costly or burdensome to fix and could delay the rollout of NGS. Our data center also requires the connectivity of potentially thousands of locations nationwide through the network of a major telecommunications company. We will rely on hardware, software and network vendors to support and maintain our systems, and, as a result, problems may arise that are specific to these vendors that are beyond our control and that could have an adverse effect on the deployment and operation of NGS. Our customers’ needs and the real estate market may change in ways that make our software more expensive to develop and maintain. These factors may have a substantial negative effect on the timing and amount of revenues that we will ultimately derive from NGS.

Our future revenues and operating results are unpredictable, which may adversely affect the price of our common stock.

Our revenues and operating results may fluctuate significantly from quarter to quarter as a result of a number of factors, many of which are outside of our control. These factors include:


	•	fluctuations in the volume of real estate transactions;

	•	unexpected expenses related to software solutions implementation and maintenance, and customer service;

	•	a decrease in the use of our software solutions by Fidelity National;

	•	the timing and market acceptance of our new software solutions;

	•	technical difficulties we face in implementing our new software solutions; and

	•	potential changes in contractual arrangements with Fidelity National.

In addition, our future revenues and operating results may fluctuate as a result of changes in pricing for our software solutions in response to customer demand and competitive pressures. As a result of the foregoing factors, in future periods our revenues and operating results may fall below the expectations of market analysts and investors, which could adversely affect the price of our common stock.

We intend to pursue acquisitions in the future that may prove to be unsuccessful.

We intend to pursue the acquisition of businesses, products, services or technologies that complement or expand our existing business and software solutions. Acquisitions involve a number of risks that could adversely affect our operating results, including the following:


	•	diversion of management’s attention from our other business concerns;

	•	difficulties and increased costs in connection with the integration of the products, operations and personnel of the acquired companies;

	•	the potential loss of key employees and the failure to hire additional management and other critical personnel;


	•	adverse effects on existing business relationships with our customers, including Fidelity National, or the acquired company’s customers;

	•	lack of synergy or inability to realize expected synergies resulting from the acquisition;

	•	the risk that the issuance of our common stock in a transaction could be dilutive to our stockholders if anticipated synergies are not realized;

	•	acquired assets becoming impaired as a result of technological advancements or worse-than-expected performance by the acquired company;

	•	assumption of unknown or unexpected liabilities;

	•	increasing the scope, geographic diversity and complexity of our operations; and

	•	difficulties in consolidating the facilities and transferring processes and know-how from the acquired companies.

We do not assure you that any acquisitions made by us will not materially and adversely affect us or that any acquisition will enhance our existing business.

We have rapidly expanded our operations, including the founding and development of two subsidiary companies. We will need to increase and expand many aspects of our operations under our business model, including developing and expanding our software solutions and completing the construction of our data center, hiring additional employees and obtaining additional financing. We do not assure you that our systems, procedures or controls will be adequate to support our current or future operations. We do not assure you that management will be able to manage expansion effectively. If we fail to manage growth effectively, our business will be harmed.

Our performance is greatly dependent on the performance of our senior management and key employees. The loss of the services of any of our executive officers or other key employees could harm our business. Our performance also greatly depends on our ability to retain and motivate our officers and key employees. Rapid growth of our business may place a significant strain on our management and on our technical, operational and financial resources.

We must also identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, marketing and customer service personnel. Competition for qualified personnel is intense. If we fail to retain and attract the necessary personnel, our business could be harmed. We do not maintain key-man life insurance for any of our executive officers and do not expect to do so for the foreseeable future.

We intend to continue to develop and market new software solutions to the real estate industry. Complex software and systems, such as NGS, frequently contain undetected errors or “bugs” that are discovered only after implementation and use by our customers. We do not assure you that errors will not be found in our software solutions in the future or that any errors, or difficulties in installing, maintaining or training customers and their staffs on the use of our software solutions, will not result in a delay or loss of revenue, diversion of development resources, damage to our reputation, increased service costs or impaired market acceptance of our software solutions, any of which could have a material adverse effect on our business, financial position, results of operations and cash flows.

Our customers will rely on our software solutions for their core operations. Errors or defects in our software solutions could give rise to liability claims against us. We do not assure you that the limitations of

liability set forth in our agreements will be enforceable in all instances or will otherwise protect us from liability for damages. We do not assure you that our general liability insurance coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, would have a material adverse affect on our business, results of operations and financial condition.

The success of our business is highly dependent on our proprietary technology and intellectual property, none of which is protected through patents, and on our exclusive license to NGS.

We regard the proprietary technology and other intellectual property underlying our software solutions as critical to our success. We rely on trademark, trade secret and copyright law to protect our technology and our brand. We also rely on confidentiality, license and other agreements with employees and others to protect our proprietary rights. We have no patents. A third party may copy or otherwise obtain and use our technology or other intellectual property without authorization. In addition, effective copyright, trademark, trade secret and patent protection may be unavailable or limited in various foreign countries. Information and internet technologies are evolving rapidly, and third parties may also develop similar or superior technologies independently. Any unauthorized use of our proprietary information could result in costly and time-consuming litigation to enforce our proprietary rights. If we are unable to prevent infringement of our technologies, or if other parties are able to develop superior technologies without infringement of our technologies, our ability to compete in the real estate services market would be harmed.

Under the master services agreement with Fidelity, we have an exclusive license to NGS for a period of ten years from the date of completion of beta testing for NGS. Our exclusive license expires upon the earlier of the expiration of the ten year period or the termination of the master services agreement caused by a breach by us, at which time we will have a perpetual nonexclusive license. If our license ceases to be exclusive, Fidelity National or its sublicensees could offer NGS, or software solutions based on NGS, in competition with us.

We are dependent on the stability and growth of the real estate services market.

Our software solutions are designed solely for the management of the real estate transaction settlement process. The real estate market is affected by a number of economic factors, including mortgage interest rates, which can cause significant fluctuations in real estate transaction volume. To the extent there is a slowdown in the real estate market that reduces the number of real estate transactions, the demand for our software solutions may weaken and real estate and financial services companies may become more reluctant to make capital investments in information technology.

Changes in the regulation of title insurance, escrow and other financial services could harm our business.

Although our software solutions are not directly regulated, the title insurance, escrow and lending industries are heavily regulated both at the federal and state levels. The content and delivery of documentation during the real estate transaction settlement process is also heavily regulated. To be successful, our software solutions must enable our customers to remain in compliance with these regulations. If our software solutions cause our customers to fail to comply with applicable regulations, we may be liable to our customers for damages and fines that they may suffer. Moreover, changes in these regulations could make the development of our software solutions more costly and require us to make costly changes to the software solutions being used by our customers. Under our fixed fee maintenance agreements with our customers, we would not be able to defer these additional costs to our customers.

Our market is intensely competitive and there are only a limited number of potential customers for NGS.

The market for information technology is intensely competitive and involves aggressive technological development. We believe that the market for large, enterprise real estate information technology solutions, such as SIMON and NGS, consists of only a limited number of companies. Our competition primarily

consists of lending institutions and title insurance companies, which may maintain substantial internal information technology departments and may have developed their own software solutions. Many of these companies have substantially greater financial resources than we do. Our ability to compete in our market will depend on:


	•	our ability to offer desirable features and solutions.

	•	the reliability, effectiveness and compatibility of our software solutions.

	•	price.

	•	access to strategic customer bases.

	•	customer service and support.

	•	brand recognition.

Rapid technological change, characterized by the increased processing power of computers, product obsolescence, evolving industry standards, the proliferation of networks and the rapid growth in the usage of the internet and intranets are all challenges we face. We must react to these changes by using these new technologies to develop software solutions as existing software solutions become obsolete. We do not assure you that we will be successful in adapting to continued rapid technological change, that we will be able to develop new software solutions, or that we will develop new software solutions that are both price and feature competitive with those software solutions that may be developed by our competitors. In addition, we do not assure you that in the future we will be successful in attracting and retaining key personnel with the technological skills and expertise necessary to develop new software solutions.

Many of our software solutions depend on the internet for communication and data transfers and we expect that we will continue to develop software solutions that rely on the internet. Our systems may be interrupted if the internet experiences periods of poor performance, if our computer systems or the systems of our third party service providers contain defects or are disabled, or if real estate services providers are reluctant to use, or have inadequate connectivity to, the internet.

We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission of confidential information through our network systems. We do not assure you that advances in computer capabilities, new discoveries in the field of cryptography or other events or developments will not result in a compromise or breach of the security systems that we use to protect our customers’ information transmitted over the internet or other networks. Parties who are able to circumvent our security measures may be able to misappropriate confidential information transmitted through our systems. If any such compromise of our security were to occur, we may be required to expend significant capital and other resources to protect against the threat of such security breaches or to alleviate problems caused by such breaches, be subject to litigation and possible liability, and suffer harm to our reputation.

Furthermore, increased government regulation of the internet, including the imposition of taxes, could also adversely affect our use of the internet in unanticipated ways and discourage our customers from using our software solutions. If our ability to use the internet in providing our software solutions is impaired, our business may be hampered.

Our ability to provide reliable and effective software solutions depends on the efficient and uninterrupted operation of our computer and communications systems. NGS is expected to operate on a technology platform served by our data center located in Chicago, Illinois. Portions of our data center are under construction, and,

as such, are untested in an operational environment. Our systems and operations are vulnerable to damage and interruption from fire, flood, telecommunications failure, break-ins, power disruptions, earthquake and similar events and systems capacity constraints. We do not maintain alternative power sources. We have a formal disaster recovery plan, but we do not assure you that our plan is adequate. Our insurance may be inadequate to compensate us for any losses that may occur. Furthermore, our security mechanisms may be inadequate to prevent security breaches to our computer systems, including from computer viruses, electronic break-ins and similar disruptions. Any security breaches or operational failures could expose us to liability, impair our operations and harm our reputation.

Other parties may assert claims against us that we are infringing upon their intellectual property rights.

We cannot be certain that our software solutions do not infringe upon the intellectual property rights of others. Authorship of intellectual property rights can be difficult to verify. Because patent applications in the United States are not publicly disclosed until the patent is issued, applications may have been filed which relate to software solutions similar to those offered by us. We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property rights of third parties. If our software solutions violate third-party proprietary rights, we do not assure you we would be able to obtain licenses to continue offering our software solutions on commercially reasonable terms, or at all. Any claims against us relating to the infringement of third-party proprietary rights, even if not meritorious, could result in the expenditure of significant financial and managerial resources and injunctions, preventing us from providing services or using our trademarks. These claims could severely harm our financial condition and ability to compete.

We lease approximately 49,000 square feet of space at our headquarters in Santa Ana, California pursuant to a lease expiring in June 2007, approximately 38,078 square feet of space at two facilities located in Chicago, Illinois under leases expiring in July 2004, and approximately 31,000 square feet of space at our facility in Raleigh, North Carolina under a lease expiring in July 2007. Additional leased space includes locations in Houston, Texas; Los Angeles, California; Ft. Lauderdale, Florida; and San Diego, California.

We believe that the material terms of our leases are commercially reasonable terms typically found in each of the respective areas in which we lease space. We believe that our facilities are adequate to support our current needs and that additional facilities will be available at competitive rates as needed.

We may be involved in legal proceedings from time to time in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, as of the date of this prospectus, there are no material legal proceedings pending or, to our knowledge, threatened against us except as described below.

In 1999 Barry B. Kaufman and Vans, Inc. filed a class action complaint against ACS Systems, Datamart Information Services Corp. and Joe Girdwood, in the Superior Court of the County of Los Angeles, California. We assumed this litigation after our acquisition of ACS. The complaint alleges that ACS and Datamart violated state and federal law when Datamart made advertisements on behalf of ACS. The complaint seeks damages totaling $12.3 million. We believe we have defenses to these allegations and will vigorously defend this action. In addition, we have filed a cross-complaint against Datamart and Datamart has filed a cross-complaint against us.

We did not submit any matters to a vote of security holders in the fourth quarter of 2001.

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Our common stock is traded on the Nasdaq National Market under the symbol “MGEN.” Before April 25, 2000, our common stock was traded on the Nasdaq OTC Bulletin Board. The following table sets forth, for the period indicated, the high and low sale prices per share of our common stock as reported on the Nasdaq National Market and the Nasdaq OTC Bulletin Board, as applicable, and are adjusted to take into account our 10% stock dividend declared on May 2, 2001. The prices set forth for periods preceding April 25, 2000 reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

The foregoing amounts have been adjusted to reflect a 10% stock dividend declared on May 2, 2001 and paid on June 1, 2001 to stockholders of record as of May 18, 2001.

The last reported sale price of our common stock on the Nasdaq National Market on March 5, 2002 was $7.84 per share. As of March 5, 2002, there were approximately 2,426 holders of our common stock based on the records of our transfer agent which do not include beneficial owners of common stock.

On May 2, 2001 we declared a stock dividend of 10% which was paid on June 1, 2001 to stockholders of record as of May 18, 2001. We have never declared or paid any cash dividend on our common stock. Any future decision to pay dividends remains within the discretion of our board of directors. We anticipate we will retain earnings, if any, to support operations and to finance the growth and development of our business and do not anticipate paying cash dividends in the foreseeable future.

The following is a summary of transactions by us during 2001 involving sales of our securities that were not registered under the Securities Act:


	•	On August 20, 2001, we issued 336,034 shares of our common stock to Loren Harrell as partial consideration for the acquisition of all of the outstanding shares of capital stock of SoftPro Corporation. Of those shares, ten percent (10%) were being held in an escrow account until August 20, 2002 to indemnify us against any claims we may have against SoftPro relating to the representations and warranties made in connection with the acquisition. Additionally, we assumed the SoftPro Option Plan, which had 133,328 options issued and outstanding. Options under our 1999 Stock Incentive Plan were issued at a conversion rate of 0.636 Micro General options per one (1) SoftPro option outstanding.


	•	On November 1, 2001 we entered into Stock Purchase Agreements with each of MGEN Tech Fund I, L.P. and Beyond Ventures, LLC under which we sold 123,114 shares and 30,779 shares, respectively, of our common stock in exchange for 100% of the common stock of RealEC Technologies.

We did not employ any underwriters, brokers or finders in connection with any of the transactions set forth above.

The sale of securities in connection with the SoftPro transaction was exempt from registration under the Securities Act pursuant to a Section 3(a)(10) fairness hearing, however, these securities are subject to the volume limitations of Rule 144(e)(1). The sales of the remaining securities listed above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and Regulation D promulgated thereunder. The recipients of securities in the November 1, 2001 transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the instruments representing such securities issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us.

The historical operating results data, per share data and balance sheet data set forth below are derived from our historical financial statements, certain of which have been restated to reflect the discontinued operations of LDExchange, Inc. and to reflect the ACS Systems, Inc. acquisition and the related reverse merger accounting treatment (see notes 1 and 11 of the notes to consolidated financial statements). The balance sheet data includes the accounts of ACS, SoftPro and RealEC Technologies as of December 31, 2001, and only the accounts of ACS as of December 31, 2000, 1999, 1998 and 1997. Operating results and per share data for the year ended December 31, 2001 include the results of operations for ACS for the entire year, SoftPro for the period from August 20, 2001 through December 31, 2001, and RealEC for the period November 1, 2001 through December 31, 2001. Operating results and per share data for the years ended December 31, 2000 and December 31, 1999 include the results of operations for ACS for the entire year and the results of operations of the postage meter and scale division for a short period in early 1999 until the operations ceased. Operating results and per share data for the year ended December 31, 1998 include the results of operations for ACS for the year ended December 31, 1998 and the results of operations for the postage scale and meter division for the period May 14, 1998 through December 31, 1998. Operating results and per share data for the year ended December 31, 1997, include only the results of operations of ACS for the year then ended. The consolidated balance sheets at December 31, 2001 and 2000 and consolidated statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2001, 2000 and 1999, together with the related notes and the report of KPMG LLP, independent certified public accountants, are included elsewhere herein and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. Share and per share data have been retroactively adjusted for the 10% stock dividends declared on May 2, 2001.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We provide industry leading software solutions and services to real estate services providers, such as title insurers, escrow companies and lenders, that enable them to work more efficiently and cost-effectively. Our software solutions and services address many of the inefficiencies of real estate services providers in processing and settling real estate transactions by automating many of the tasks involved in the process, and by integrating their tasks into a more unified workflow. Our software solutions are designed to meet the different levels of automation desired by real estate services providers, ranging from pre-packaged desktop software to networked enterprise systems. Fidelity National, the nation’s largest title insurance company, primarily uses our software solutions and services to manage its title and escrow functions. We are developing next generation software solutions that use the Internet to provide added levels of automation and integration for our customers.

Our revenues are derived primarily from three lines of business. First, we provide to our customers software and hardware management, support and consulting services. We record revenue from these services at the time the services are provided. Second, we sell software, hardware and annual maintenance services. We record revenue on the sale of software and hardware at the completion of installation and realize maintenance revenues ratably over the life of the maintenance agreement, typically one year. Third, through our majority owned subsidiary RealEC Technologies, we provide the RealEC Exchange, which is an online marketplace where lending institutions can order products and services from vendors in connection with loan originations. RealEC Technologies primarily charges vendors a transaction fee on a per use basis. Through our consolidation of RealEC Technologies, we record these transaction fees as revenue. Revenue recognition is our most critical accounting policy. (See also note 1-k in the notes to the consolidation financial statements.)

In 2001, 2000 and 1999, Fidelity National and affiliates accounted for 95%, 95% and 92%, respectively, of our total revenues from continuing operations. Fidelity National owns 61.7% of our common stock and three of our seven directors are officers and directors of Fidelity National or its affiliates. The increase from 1999 to 2000 primarily resulted from the Fidelity National’s acquisition of Chicago Title in April 2000. We hired approximately 150 of the former Chicago Title IT personnel and began to support approximately 750 locations acquired in the Chicago Title acquisition. In addition, we began to bill Fidelity National in the last half of 2000 for the initial work on the NGS development project. For additional related party disclosures see note 6 of the notes to the consolidated financial statements.

Since 1998, our businesses, revenue composition and segments have undergone substantial change. We acquired ACS Systems from Fidelity National in 1998 pursuant to a reverse merger, for which Fidelity received shares of our common stock resulting in Fidelity National owning 81.4% of our outstanding shares at that time. Also, we acquired LDExchange in 1998, which operations we discontinued 2001. We have reclassified all prior period financial results to separate the results of continuing operations from the losses from discontinued operations.

In 1999, we closed our former postage meter and scale businesses, which contributed to less than $0.5 million of the $1.6 million loss incurred in the first three months of 2000. In addition, we formed the RealEC joint venture with Stewart Title and established escrow.com in 1999. In connection with our establishment of escrow.com, we hold a warrant that if exercised would result in a majority ownership position of escrow.com on a fully-diluted basis and a convertible promissory note in the principal amount of $4.5 million.

We formed RealEC Technologies in 2000 by contributing our interests in the RealEC joint venture and other intellectual property and own 56% of the common stock of RealEC Technologies on a fully diluted basis. Effective as of November 1, 2001, we acquired all of the voting stock of RealEC Technologies and began accounting for RealEC Technologies on a consolidated basis, resulting in recorded revenues of $0.8 million and a net loss before income taxes of $0.4 million in 2001.

We acquired SoftPro in 2001, which contributed $2.4 million in revenue and a net loss before income taxes of $0.4 million in 2001. In addition, we began to provide services to FNIS which accounted for $7.5 million of revenue in the last half of 2001. With the exception of the RealEC Technologies’ operations, all of our current sources of revenues are profitable.

In addition, we acquired and expanded our Chicago data center that supports the existing software systems of Fidelity National, and will support additions to the software systems and also NGS as they are both deployed in 2002 and 2003. Through December 31, 2001, we had spent $12.6 million on building and equipping the data center. The data center is operating at a profitable level and we expect that as additional business is brought into the data center that both revenues and profits will increase.

A substantial portion of our revenues from Fidelity National is derived from the development and deployment of NGS and from supporting SIMON at approximately 450 locations and an existing legacy software system (Team) at approximately 750 former Chicago Title locations. We expect that the development and deployment of NGS will continue for the next two years. Once completed, NGS is expected to replace these existing legacy systems. We expect that revenues derived from the development of NGS and from supporting existing software systems will be replaced by revenues from our support and maintenance of NGS. We provide services to Fidelity National under a master services agreement, which does not require Fidelity National to continue using our services. Under our master services agreement with Fidelity National, however, we have an exclusive license subject to certain restriction for a period of at least ten years to develop enhancements and updates in support of NGS. In addition, we anticipate continuing other Fidelity National development projects and to support the FNIS operations.

We plan to grow and diversify our revenues, and lessen our reliance on Fidelity National in 2002 and future years through the expansion of our software solutions and customer base. As discussed previously, we expect to continue to derive revenues for the entire year in 2002 from SoftPro, which we acquired in August 2001, and from RealEC, which we began consolidating in November 2001. Based on revenues generated by

SoftPro and RealEC and other growth initiatives, we anticipate that Fidelity National will account for approximately 70% to 80% of our 2002 revenues, and will continue to decline as a percentage of our total revenues in future years as we grow our customer base and execute our acquisition strategy. We also plan to market NGS to other large real estate services providers. We are, however, prohibited under the master services agreement with Fidelity National from licensing NGS to certain title insurance companies for a limited period of time. In addition, if we license NGS to an entity within the real estate industry, we are required to pay to Fidelity National a royalty on our revenues of up to 125% of the development cost of NGS.

We negotiated the rates that we charge Fidelity National under the master services agreement based on rates that we believe we would be able to receive from other customers. Because of the scope and continuity of work that we perform for Fidelity National the master services agreement requires that we provide services to Fidelity National at prices no higher than we charge to any other customer. Historically, certain projects have been billed to Fidelity National on a cost plus fixed percentage profit basis, which has varied between a 5% to 15% mark-up. In addition, these arrangements have been subject to renegotiation from time to time. For example, our use of outside consultants on the NGS project has changed from an initial cost plus 15% earlier in 2001 to cost plus 5% at the end of 2001. In 2001, approximately $27 million of our revenues were based on these cost-plus arrangements, all of which were attributable to our services for Fidelity National and its affiliates. The remainder of our revenues from Fidelity and its affiliates are derived from the provisioning of a variety of products and services that are billed under one of the following methods: time and expenses, annual licensing, annual maintenance, fees based on per transaction, per user and per location. Beginning in January 2002, we eliminated most of these cost-plus arrangements and implemented new billings that are contained in the new master services agreement between us and Fidelity National. This agreement outlines the scope of services to be provided to Fidelity National and certain of the pricing and billing arrangements. The former billing arrangements may not be deemed to be the result of arms length negotiations, and initially certain of the rates charged under the new master services agreement are expected to produce revenues similar to those derived in 2001, however we believe that the new fixed fee pricing should provide us with an opportunity to generate greater profits by more closely monitoring and managing our costs. In January 2002, we implemented a new PeopleSoft ERP software system that enables us to monitor revenues and costs on a per project basis. Eliminating our cost-plus arrangements also exposes us to risks relating to our ability to manage costs, which may result in reduced profits. If our profit margins are reduced as a result of these new fee arrangements, we will attempt to negotiate higher rates with Fidelity National, although we do not assure you that we would be successful in doing so.

Cost of goods sold consists of labor, outside services, materials and overhead expenses. Other costs of goods sold are depreciation of capital assets related to the provisioning of service, and amortization of capitalized software development costs related to the software that is being sold.

Operating expenses consist of selling and marketing expenses, general and administrative expenses, and amortization of goodwill. We have recently initiated a more comprehensive selling and marketing program, and anticipate that these expenses will increase in 2002 as compared to past years. General and administrative expenses have remained fairly constant as a percentage of revenues and we anticipate that they will remain constant or decline slightly as a percentage of revenues. Subject to the continuing evaluation of recoverability, we expect to realize a benefit in 2002 and future years as amortization of goodwill will cease as an operating expense due to the implementation of new accounting standards.

Depreciation expense is charged to cost of goods sold or as an operating expense. In 2001, depreciation expense totaled $3.8 million, of which $1.6 million was charged to cost of goods sold, while the remaining $2.2 million was charged to operating expenses. In addition, in 2001, amortization of software development costs was $0.1 million, all of which was charged to cost of goods sold.

Our interest expense relates to notes and capital leases resulting from the financing of hardware purchases, borrowings on our line of credit and an unsecured convertible note held by Fidelity National. Interest expense is reported net of interest income. Our interest income has grown due to our increasing cash position as a result of our continuing profitability.

Our consolidated financial information presents the net effect of the results from discontinued operations separate from the results of our continuing operations. The historical financial information has been reclassified to present consistently the results from continuing operations and the results from discontinued operations. The discussion and analysis that follows focuses on the results from continuing operations.

On December 31, 2001, we discontinued the operations of our wholly owned LDExchange subsidiary. The financial statements for 2001, 2000 and 1999 reflect our results from continuing operations, with the LDExchange revenues and expenses being combined into a single line entitled “Loss from discontinued operations”. These losses, net of tax, total $4.2 million, $7.8 million and $2.9 million in 2001, 2000 and 1999, respectively.

The following table presents, for the periods given, selected financial data as a percentage of our revenue.

Revenues. Revenues increased $45.9 million, or 64%, to $118.0 million in 2001 from $72.1 million in 2000. The majority of the increase in revenues in 2001 was attributable to the $17.5 million of management and support services for the Fidelity National business, which includes the businesses acquired by Fidelity National, including the former Chicago Title and Security Union acquisitions, and $37.0 million for development efforts related to the NGS project. Also contributing to this increase were $2.4 million in revenue from SoftPro and $0.8 million in revenue from RealEC Technologies, both acquisitions in the second half of 2001. In addition, we received $7.5 million in revenues from business with FNIS.

Gross Profit. Gross profit increased $16.6 million, or 60%, to $44.5 million in 2001 from $27.9 million in 2000. Gross profit margin was approximately the same, with a 38% gross profit margin in 2001 and a 39% gross profit margin in 2000. The increase in total gross profit was a result of higher management, support and consulting revenues, which contributed $14.9 million of additional gross profit compared to 2000.

Expenses. Selling, general and administrative expenses increased $7.9 million from $14.7 million in 2000 to $22.6 million in 2001. Contributing to this increase was $1.4 million of expenses from SoftPro and $1.0 million of selling, general and administrative expenses from RealEC Technologies. Sales and marketing expenses increased $1.1 million as a result of new 2001 marketing initiatives by us. We also realized a non-cash expense of approximately $0.5 million from the issuance of stock options to two members of our Board of Directors, who are also officers of Fidelity National. The stock options vest over a four year period through April of 2005. Pursuant to accounting provisions contained in FIN 44 and EITF 98-6 accounting pronouncements, we recognized an expense of approximately $0.5 million for the amortization of the vested portion of the fair value of the options under these grants in the amount of $2.8 million at December 31, 2001. We will continue to record compensation cost based on the fair value of the remaining unvested options at the end of each subsequent financial reporting period through April of 2005. The remaining increase is associated with administrative costs related to growth in the number of our employees to support our increased revenues. Total employee headcount at December 31, 2001 was 719, up from 400 at the end of 2000.

The amortization of goodwill relates to the intangible assets recorded during a particular period and the estimated useful life of the intangible assets. Fluctuations in the amortization of goodwill result from the amount, mix and characteristics of the intangible assets recorded as well as the circumstances surrounding our estimate of the appropriate useful life. Amortization expense decreased $1.0 million to $0.8 million in 2001 compared to $1.8 million in 2000. This decrease is attributable to lower amortization expense, from extending the goodwill life related to the ACS acquisition and from utilization of acquisition NOLs in the current year which resulted in a credit to goodwill and a reduction in the amortizable goodwill balance. For 2002, we will follow the guidelines associated with the Statement of Financial Accounting Standards No. 142, which no longer allows amortization of goodwill.

Interest income, net, is related to the use of our working capital, which is in the form of available cash and lines of credit. The decrease in interest expense to $0.6 million in 2001 from $0.9 million in 2000 can be attributed to lower interest rates in 2001, lower borrowing requirements in 2001 and increased interest income due to the larger cash balances that we had in 2001.

Income Taxes. Income tax expense is recorded based on the amounts that we estimate will be due to federal and state taxation authorities based on our taxation structure. Historically, we have paid only minimum taxes on operating results because we have not historically generated taxable earnings. In 2001, we accrued income taxes at a rate of 25.5%, which was estimated based on the utilization of net operating loss carryforwards. In 2000, a nominal income tax expense was recorded, also due to the utilization of net operating loss carryforwards. We estimate that future years income tax rates will be higher due to the limited availability of any remaining operating loss carryforwards.

Revenues. Revenues increased $35.6 million, or 98%, to $72.1 million in 2000 from $36.5 million in 1999. The increase in management, support and consulting revenues can be attributed to the additional business that was directed to us by Fidelity National as a result of its Chicago Title acquisition and the NGS development effort that began in the last half of 2000. In April 2000, we hired approximately 150 former Chicago Title information technology employees, and at the same time entered into an agreement to provide information technology services to Fidelity National for the former Chicago Title locations. Software, maintenance and other revenue decreased $1.7 million to $17.0 million from $18.7 million in the prior year. This 9% decrease resulted from us devoting many of our resources towards transitioning the over 700 Chicago Title office support services to our management, and less effort toward selling our SIMON product to new customers. In 2000, Fidelity National continued to utilize our services for the majority of its information technology needs and remains a primary source of our revenues.

Gross Profit. Gross profit increased by $13.0 million to $27.9 million, or 87%, from $14.9 million and represents a gross profit margin of 39%. This compares to a gross profit margin of 41% in 1999. Gross profit derived from software, maintenance and other revenues increased significantly from 2000 compared with 1999 primarily due to a reduction in lower margin hardware and software sales coupled with a substantial increase

in higher margin maintenance contract revenue. The increase in total gross profit from management, support and consulting revenues resulted from supporting over 700 additional Fidelity National locations as a result of Fidelity National’s acquisition of Chicago Title in April 2000, and also from new consulting services derived from the NGS development project. Management, support and consulting revenues contributed approximately $19.9 million in gross profit in 2000 versus $10.1 million in 1999.

Expenses. Selling, general and administrative expenses declined slightly to $14.8 million in 2000 compared to $15.6 million in 1999 despite the increase in revenue. Selling, general and administrative expenses generally trend consistently with revenues. However, the 150 employees that were hired in April 2000 to support Chicago Title were all revenue-producing personnel. Since this substantial increase in personnel expense is reflected in cost of sales and did not increase selling, general and administrative expenses, the 2000 results show that selling, general and administrative expenses were 20% of total revenues while selling, general and administrative expenses in 1999 were 43% of total revenues. Total employee count increased by 176 when comparing December 31, 2000 with December 31, 1999.

The amortization of goodwill relates to the intangible assets recorded during a particular period and the estimated useful life of the intangible assets. Amortization expense was unchanged at $1.8 million for both 2000 and 1999.

Interest income, net, is related to the use of our working capital, which is in the form of available cash and lines of credit. The decrease in interest expense to $0.9 million, or $0.8 million from $1.7 million, can be attributed to Fidelity National’s conversion of $18 million of debt to equity on December 15, 1999.

In 2000, we recorded a joint venture loss of $0.6 million as compared to a $42,000 loss in 1999. This loss resulted from our 50% ownership in the RealEC joint venture with Stewart Title from the time it was organized through the sale of our 50% ownership to TXMnet in May of 2000.

Income tax expense (benefit) is recorded based on the amounts that we estimate, based on our taxation structure, will be due to federal and state taxation authorities. Historically, we have paid only minimum taxes based on operating results due to the fact we have not historically generated taxable earnings.

Our current cash requirements include capital expenditures, personnel and other operating expenses, debt service and capital for acquisitions and expansion. Internally generated funds fluctuate in a pattern generally consistent with revenues. Our internal growth has historically been financed approximately equally from cash flows from operations and lines of credit and debt, primarily from Fidelity National. We base our decision on obtaining financing through lines of credit and debt depending on available terms, including interest rates. The following tables reflect our contractual cash obligations, excluding interest, due over the indicated periods.

The Company has available a $10 million revolving line of credit, $5 million of which is guaranteed by Fidelity National. The Company had available $8.4 million for borrowings at December 31, 2001. The line of credit has an interest rate calculated based on either the Imperial Bank Prime rate or 1.4 percentage points over LIBOR. The line of credit expires on July 1, 2002.

At December 31, 2001, we had $10.9 million in cash and cash equivalents, which is a $6.6 million increase from $4.3 million at December 31, 2000. Working capital increased $14.4 million to $16.7 million at December 31, 2001, from $2.3 million at December 31, 2000. These comparisons exclude the net assets and liabilities of the discontinued operations for all periods. We rely on positive cash flow from operations and on existing lines of credit to fund our cash requirements. Should our operations not continue to generate positive cash flow or we do not continue to have access to our lines of credit, we would need to find alternative sources of cash in order to fund our operations. While Fidelity National, our primary customer, is not obligated to use our services we expect that they will continue to do so. As a result of our current revenue base, improved profitability, increased margins, current cash balance and the anticipated availability of funds in the form of existing lines of credit, we believe all cash requirements will be met for at least the next twelve months.

In 2001, we generated $27.9 million in cash from operating activities. This came primarily from operating income before depreciation and amortization of $19.1 million. We used $11.6 million of cash in investing activities, primarily for the purchase of $12.9 million of property and equipment. Also, the acquisition of SoftPro required net cash of $1.5 million. Financing activities used $2.4 million of cash. This resulted from a $1.0 million pay down on the line of credit and $3.4 million in principal payments on the notes, offset by $2.2 million in stock issuances and the exercise of stock options.

In 2000, net cash provided by operating activities was $10.5 million. Net income after addback of non-cash depreciation and amortization provided $12.8 million of cash and increases in accounts payable and accrued expenses provided an additional $6.4 million of cash. Significantly offsetting these sources of cash was $10.1 million to finance increased accounts receivables, net of bad debt allowance. Investing activities used $8.5 million of cash. Purchases of property and equipment required $6.9 million of cash, and we also invested $1.5 million in the RealEC joint venture. Financing activities generated $4.5 million of cash, primarily from a $2.5 million borrowing on the line of credit and an additional $2.4 million of proceeds from the exercise of stock options and from the employee stock purchase plan. Principal payments of $0.4 million on capital lease and note payable obligations reduced the cash provided by financing activities.

In 1999, operating activities provided cash of $2.8 million. We had a net loss of $1.0 million after addback of non-cash depreciation and amortization. Cash provided by investing activities totaled $1.3 million, which resulted primarily from $0.4 million in property and equipment purchases and an investment of $0.7 million in the RealEC joint venture. Financing activities provided cash of $7.5 million, which were $6.8 million in borrowings from Fidelity National and its affiliates and $0.7 million from the exercise of stock options.

In December 2001, we discontinued the operations of our wholly owned subsidiary LDExchange, which had been a significant user of cash since its acquisition in November 1998. We recorded a charge of $5.1 million ($3.4 million net of income tax benefit) for the disposal of LDExchange, of which approximately $4.2 million was a non-cash charge related to the write-down of the goodwill and property, equipment and other assets that were owned by LDExchange. In 2001, 2000 and 1999, LDExchange recorded losses, net of income tax benefit, in discontinued operations of $4.2 million, $7.8 million and $2.9 million, respectively.

We have experienced positive cash flow from operations in 2001 and 2000. Prior to 2000, we had historically suffered losses and negative cash flows from operations, and had relied on Fidelity National as the primary source of capital. Fidelity National remains our largest customer and indirectly funds our operations through the profits derived from the revenues related to the products and services provided to Fidelity National. Fidelity National had also provided funds through financing arrangements and is a guarantor of certain of our lending arrangements. In December 1999, two significant transactions occurred with Fidelity National and other note holders that improved both our liquidity and capital resources. First, on December 15, 1999, $18.0 million of our debt was converted into common stock pursuant to a conversion election contained in the notes and exercised by the note holders. The conversion of this debt caused an improvement from negative stockholders’ equity to $12.6 million in stockholders’ equity at December 31, 1999. The conversion of this debt also substantially reduced our debt service requirements in 2000 and 2001. Second, also on December 15, 1999, we entered into a new $5.3 million five-year convertible note with Fidelity National. During 1999, we had exceeded the borrowings available under the Fidelity National note agreement. With the conversion of the $18.0 million of notes on December 15, 1999, our borrowing arrangements no longer existed.

We negotiated this new note to address the amounts borrowed in excess of the note limit. There are no other borrowings available or contemplated between Fidelity National and us.

On December 22, 1999, we entered into a $5.0 million secured revolving line of credit with Imperial Bank guaranteed by Fidelity National. This secured line of credit was expanded to $10.0 million on July 23, 2001 and extended through July 1, 2002. The additional $5.0 million expansion in the line is not guaranteed by Fidelity National. Borrowings on the Imperial Bank revolving line of credit were $1.6 million and $2.5 million at December 31, 2001 and 2000, respectively. In addition, we have entered into a number of note financing arrangements with IBM Global Credit and GE Capital, which have provided funding for the hardware and software requirements for our new data center. These notes have terms of from one to three years, and borrowings totaled $4.2 million in 2000 and an additional $3.7 million in 2001. Our financing with IBM Global Credit is secured by a first priority security interest in and to our rights, including the right to receive payment, under a software services agreement with Fidelity National. In connection with additional data center hardware requirements and the rollout of the NGS system, we estimate capital purchases for 2002 will not exceed $15 million. We believe that the necessary sources of funds are available to complete these capital purchases.

We must comply with various affirmative, negative and financial covenants related to our outstanding debt and notes payable. We were in compliance with these covenants at December 31, 2001 and have always been in compliance prior to December 31, 2001.

In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 133 was effective for all fiscal quarters for fiscal years beginning after June 15, 1999. In August 1999, the FASB issued Statement of Financial Accounting Standards No. 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No. 133” (“SFAS 137”), which defers the effective date of SFAS 133 to all fiscal quarters for fiscal years beginning after June 15, 2000. In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB Statement No. 133”. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments embedded in other contracts and for hedging activities. As we do not have any derivative instruments and do not engage in hedging activities, the application of these statements did not have a material impact on the Company’s consolidated financial position, results of operations or liquidity.

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations”, and SFAS No. 142, “Goodwill and Other Intangible Assets.” The Company is required to adopt the provisions of SFAS No. 141 immediately. SFAS No. 141 requires that all business combinations be accounted for under a single method — the purchase method. Use of the pooling-of-interests method is no longer permitted. SFAS No. 141 required that the purchase method be used for business combinations initiated after June 30, 2001. SFAS No. 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. Under SFAS No. 142, the amortization of goodwill ceases upon adoption of SFAS No. 142, is effective for fiscal years beginning after December 15, 2001 and shall be initially applied at the beginning of a fiscal year.

The Company has historically amortized its goodwill and other intangible assets over their estimated useful lives. Beginning with the adoption of SFAS No. 142, the Company will cease amortizing its goodwill and certain intangible assets. The Company will adopt SFAS No. 142 as of the beginning of fiscal year 2002 (i.e., January 1, 2002). The Company recorded amortization expense in the amount of $797,505 for the fiscal year ended December 31, 2001, $1,806,402 for fiscal year ended December 31, 2000, and $1,834,078 for fiscal year ended December 31, 1999. To the extent that no impairment charges are recorded upon adoption or application of SFAS No. 142, similar amounts of amortization will not be recorded in future periods. Because

of the extensive effort needed to comply with adopting SFAS No. 141 and No. 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company’s financial statements.

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”), No. 143, “Accounting for Asset Retirement Obligations” in September 2001. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associate asset retirement costs. Management does not believe the application of these standards will have a material effect on the Company’s financial position, results of operations or liquidity.

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment of Disposal of Long-Lived Assets” in October 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment of disposal of long-lived assets. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Management does not believe the application of these standards will have a material effect on the Company’s financial position, results of operations or liquidity.

The following discusses our exposure to market risk related to changes in interest rates. This discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors, including those set forth in the “Risk Factors” section. We are exposed to market risk related to changes in interest rates. We do not have derivative financial instruments for hedging, speculative or trading purposes.

Our borrowings are subject to interest rate risk. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions.

Caution should be used in evaluating our overall market risk from the information below. Actual results could differ materially because the information was developed using estimates and assumptions as described below.

The fair value of our notes payable approximate their carrying value at December 31, 2001 as the interest rates paid approximate the market value of borrowings of a similar nature.

The hypothetical effects of changes in market rates or prices on the fair values of financial instruments at December 31, 2001, which relate to our line of credit, would be an increase (decrease) in the fair value of approximately $16,000, if interest rates increased (decreased) 100 basis points.

All of our revenues are realized in U.S. dollars. In addition, we do not maintain any asset or cash account balances in currencies other than the United States dollar. Therefore, we do not believe we have any significant direct foreign currency exchange rate risk. If our operations expand outside of North America, the effect of currency fluctuations may have a more significant impact on our revenues and costs.

All other schedules are omitted because the required information is not applicable or the information is presented in the consolidated financial statements or notes thereto.

We have audited the consolidated financial statements of Micro General Corporation and subsidiaries (“the Company”) as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in notes 1, 5, 6, 7 and 8 to the consolidated financial statements, the Company’s financial position, results of operations and cash flows are materially affected by and are dependent on certain transactions and agreements with Fidelity National Financial, Inc. (Fidelity National), the Company’s majority owner, and Fidelity National and its affiliates.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Micro General Corporation and subsidiaries as of December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in note 1 to the consolidated financial statements, effective July 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” and certain provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” as required for goodwill and intangible assets resulting from business combinations consummated after June 30, 2001.

Micro General Corporation and subsidiaries (“the Company or Micro General”) provide production and workflow software systems to the title and real estate industries, including managed application services, application development and integration, network, data and infrastructure management and information technology services. The Company is the successor of ACS Systems, Inc. (“ACS”) formerly a wholly owned subsidiary of Fidelity National Financial, Inc. (“Fidelity National”). In 1998, ACS was merged into the Company, resulting in Fidelity National owning 81.4% of the common stock of the Company. As of December 31, 2001, Fidelity National owns 61.7% of the Company’s common stock.

The Company generated 95%, 95% and 92% of its revenue from continuing operations during the years ended December 31, 2001, 2000 and 1999, respectively, from multiple servicing arrangements with Fidelity National and its affiliates.

As a result of its acquisition of LDExchange.com, Inc. (“LDExchange”), which closed on November 17, 1998, the Company entered the international telecommunications and internet telephony markets. The LDExchange purchase price was $3.1 million; payable $1.1 million in cash and $2.0 million in Micro General restricted common stock (1,000,000 shares). The acquisition was accounted for as a purchase. In December 2001, the Company adopted a plan to discontinue the international wholesale division of LDExchange. Accordingly, the assets, liabilities and results of operations of LDExchange have been classified separately from those of continuing operations in the accompanying consolidated financial statements. (See note 11).

The Company is focused now as a provider of production and workflow software systems to the title and real estate industries. Also provided are managed application services, application development and integration, network, data and infrastructure management and information technology outsourcing. With the acquisition of RealEC Technologies, Inc. (“RealEC”), and SoftPro Corporation (“SoftPro”) in 2001, the Company has expanded into real estate closing and title insurance automation software and has acquired a standardized, electronic platform to service lenders and realtors. For 2001, 2000, and 1999, $111.9 million, $68.6 million, $33.4 million, respectively, of Micro General revenues were derived from Fidelity National and its affiliates.

On August 20, 2001, the Company acquired SoftPro, for $1.75 million in cash and 336,034 shares of the Company’s common stock valued at $3,919,500. The consideration for the acquisition was determined based on a per share price of $11.66 which was the average quoted market price of Micro General’s common stock less a 10% discount for the restricted nature of the shares granted to effect the purchase. The Company also assumed SoftPro options of 133,328 options valued at $1,131,126 using the Black Scholes option-pricing model. SoftPro is a provider of real estate closing and title insurance automation software for the independent title agent marketplace. The acquisition was accounted for as a purchase and the results of operations have been included in the Company’s results of operations since August 20, 2001.

On November 1, 2001, the Company signed an agreement with Beyond Ventures, LLC and MGEN Tech Fund I, L.P. and transferred 30,779 and 123,114 shares, respectively, of Micro General’s common stock in exchange for all of RealEC’s common stock. Beyond Ventures, LLC and MGEN Tech Fund I L.P. are controlled by members of Micro General’s Board of Directors (See note 6). The consideration for the acquisition was determined based on $10.24 per common share, which was the average quoted price of Micro General common stock less a 10% discount for the restricted nature of the shares granted to effect the purchase. The number of shares exchanged (153,893) was calculated based on a per share price of $1.305 for

RealEC’s common stock, which was the per share purchase price in RealEC’s’ latest equity financing to an outside independent party, which closed on October 25, 2001. RealEC provides a standardized, electronic platform which lenders and realtors can utilize to order and receive products and services from multiple vendors such as credit, flood, appraisal, title and closing. The acquisition was accounted for as a purchase and accordingly, the results of operations of RealEC Technologies have been included in the Company’s results of operations since November 1, 2001.

The accompanying financial statements include the consolidated accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and cash equivalents include cash on deposit with banks with original maturities of three months or less.

The carrying amounts reported in the consolidated balance sheets for accounts receivable approximate their fair value.

Inventories are stated at the lower of cost or market (net realizable value) under the first-in, first-out method of accounting for inventories.

Property and equipment are stated at cost. Depreciation is provided on a straight-line basis over estimated useful lives, which range from three to seven years. Amortization of leasehold improvements is charged to expense on a straight-line basis over the shorter of the estimated useful lives of the assets or the term of the underlying lease.

Capitalized software development costs for fiscal year 2001 consist of purchase price allocated to purchased software of $2,471,918 related to the SoftPro and RealEC acquisitions. The Company did not capitalize any internal software development costs in 2001 or 2000. The Company’s capitalized software development costs policy is to capitalize software development costs incurred after the establishment of technological feasibility, which were capitalized and later amortized using the greater of (1) the straight-line method or (2) the ratio of current revenues to total estimated revenues for that product. This policy results in the Company amortizing its capitalized software development costs over an estimated economic life of three to seven years. During 2001 and 2000, the Company amortized software development costs of $115,364 and $747,680, respectively. The Company periodically assesses the recoverability of the cost of its capitalized software development costs based on an analysis of the undiscounted cash flows generated by the underlying assets.

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired company at the date of acquisition. The Company periodically assesses the recoverability of its cost in excess of net assets acquired prior to July 1, 2001 based on an analysis of the undiscounted cash flows generated by the underlying assets. Goodwill from acquisitions prior to July 1, 2001 are being amortized ratably over a period of 5 to 25 years. The SoftPro and RealEC acquisitions have been accounted for under SFAS 141 and 142 as described in note 1q. In the opinion of management, no impairment of cost in excess of net assets acquired has occurred at December 31, 2001 (see note 10).

Other intangible assets consist of the allocated value of customer lists purchased in the SoftPro acquisition. The Company is amortizing the other intangible assets over an estimated economic life of five years. The Company recorded amortization expense in the amount of $62,133 during 2001.

All capital lease obligations are with affiliates and are recorded at the present value of the minimum lease payments at the beginning of the lease terms. The monthly payments under the leases are allocated between a reduction of the obligation and interest expense so as to produce a constant periodic rate of interest on the remaining balance of the obligation.

The Company’s revenues arise from providing: management, support and consulting services and software, maintenance and other services and products. Management services are provided primarily for the Simon and Team systems. Support consists of email, web-hosting and other IT services. Consulting revenues are derived primarily from services provided for the NGS and other Fidelity and affiliate company projects. Transaction fees are included in management, support and consulting revenues.

Software revenues consist of sales of packaged software products. Hardware and software maintenance revenues are primarily annual contracts for the support of the Simon, SoftPro and other systems. Hardware sales are related to purchases of the Simon system and other ancillary hardware.

Revenues from providing management support and consulting services are recognized as services are performed.

Revenues from software sales are recognized upon installation, provided that no significant post-contract support obligations remain outstanding and collection of the resulting receivable is deemed probable. The Company’s sales do not provide a specific right of return. At the time of sale, the Company typically provides 90-270 day initial maintenance and support to the customer. Costs relating to this initial support period, which include primarily telephone support, are accrued for at the time of sale. After the initial support period, customers may choose to purchase ongoing maintenance contracts that include telephone, e-mail and other methods of support, and the right to receive upgrades. Revenues from these maintenance contracts are deferred and recognized ratably over the life of the contract, usually twelve months.

Revenues from transaction fees are recognized as the Company’s electronic networks are utilized by customers to access various websites and are recorded on a per use basis. Revenues from these transactions are not significant in fiscal years 2001, 2000 and 1999.

Revenues from the sale of hardware and other products are recognized when delivery has occurred, the fee is fixed and determinable and the collection of any receivable is probable. Revenues from hardware and maintenance contracts are deferred and recognized ratably over the life of the contract.

Deferred revenues represent amounts received in advance of the delivery of products or services. The Company recognizes the revenues ratably over the terms of the respective contracts as the products or services are delivered.

Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period enacted.

The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Basic earnings per share are based on the weighted-average number of shares outstanding and exclude any dilutive effects of options and convertible securities. Diluted earnings per share gives effect to assumed conversions of potentially dilutive securities.

On May 2, 2001, the Company declared a stock dividend of 10 percent to shareholders of record at the close of business on May 18, 2001, payable June 1, 2001. Cash was paid in lieu of fractional shares. Accordingly, the weighted average shares outstanding used in the corresponding calculations of earnings per share have been restated to reflect a 10% stock dividend for each of the periods presented. The fair value of the additional shares of common stock issued in connection with the stock dividend was credited to additional paid-in capital and a like amount charged to accumulated deficit.

The schedule below summarizes the elements included in the calculation of basic and diluted earnings (loss) per common share from continuing operations and basic and diluted earnings (loss) per common share for the years ended December 31, 2001, 2000, 1999. For the year ended December 31, 1999, all dilutive securities were excluded from the calculations of diluted loss per share, as their effect would have been antidilutive.

Certain prior year’s amounts have been reclassified to conform to current year presentation.

In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 133 was effective for all fiscal quarters for fiscal years beginning after June 15, 1999. In August 1999, the FASB issued Statement of Financial Accounting Standards No. 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No. 133” (“SFAS 137”), which defers the effective date of SFAS 133 to all fiscal quarters for fiscal years beginning after June 15, 2000. In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB Statement No. 133”. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments embedded in other contracts and for hedging activities. As the Company does not have any derivative instruments and does not engage in hedging activities, the application of these statements did not have a material impact on the Company’s consolidated financial position, results of operations or liquidity.

(i.e., January 1, 2002). The Company recorded amortization expense in the amount of $797,505 for the fiscal year ended December 31, 2001, $1,806,402 for fiscal year ended December 31, 2000, and $1,834,078 for fiscal year ended December 31, 1999. To the extent that no impairment charges are recorded upon adoption or application of SFAS No. 142, similar amounts of amortization will not be recorded in future periods. Because of the extensive effort needed to comply with adopting SFAS No. 141 and No. 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company’s financial statements.

Total income tax expense (benefit) for the year ended December 31, 2001 was allocated as follows:

The income tax provision (benefit) attributable to income from continuing operations for the years ended December 31, 2001, 2000 and 1999 consists of the following:

The provision for income taxes attributable to income from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate of 35% for fiscal year 2001 and 34% for fiscal years 2000 and 1999 to the income (loss) before income taxes as a result of the following:

The deferred tax assets and liabilities at December 31, 2001 and 2000 consist of the following:

Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. For tax year 2000, the Company established a valuation allowance of $3,220,512 of which $1,809,869 is associated with net operating loss carryforwards and other deferred tax assets recorded from acquisitions. In 2001, it was determined that the valuation allowance was no longer necessary due to current taxable income generated and future estimated taxable income.

The Company has available for 2001 and 2000, federal net operating loss carryforwards of $6,457,757 and $10,154,059, respectively, expiring in years 2002 to 2021. The Company also had available for 2000 state net operating loss carryforwards of $1,292,998 which were completely utilized in 2001.

Construction in progress is the accumulated costs of the unfinished data center in Chicago, Illinois.

The Company leases facilities and equipment under various leases. Future minimum noncancelable operating and capital lease commitments, due primarily to Fidelity National and its affiliates, are as follows:

Rent expense was $3,248,827, $1,884,884 and $1,365,634 for the years ended December 31, 2001, 2000 and 1999, respectively. Included in rent expense for 2001, 2000 and 1999 was $1,895,268, $1,136,647 and $972,332, respectively, paid to affiliates. There are no lease agreements associated with the rent paid to affiliates, and therefore no amount has been included in the future minimum lease commitments for future rent payments to affiliates. The Company also has a commitment to pay $1,231,470 of principal payments over the next three years related to capital leases associated with discontinued operations. That amount is included in the balance sheet as part of accrued liabilities for discontinued operations.

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

As described in note 1, the Company’s primary source of revenue is fees resulting from sales and services to Fidelity National and its affiliated companies. Revenues generated from sales and services to affiliates for the years ended December 31, 2000, 1999 and 1998 accounted for 95%, 95% and 92% of revenues from continuing operations. Fidelity National owns 61.7% of our common stock and three of our seven directors are officers and directors of Fidelity National or its affiliates.

The Company provides services to Fidelity National under a master services agreement. Under the master services agreement, the Company is required to provide services to Fidelity National at prices no higher than prices charged to direct competitors of Fidelity National. Historically, certain projects have been billed to Fidelity National on a cost plus fixed percentage profit basis, which has varied between a 5% to a 15% mark-up. The cost of outside consultants on the NGS project in fiscal 2000 was billed to Fidelity National at cost plus 15%. This rate was modified to cost plus 10% in the third quarter of fiscal 2001 and then to cost plus 5% in the fourth quarter of fiscal 2001. Other revenues from Fidelity and its affiliates are derived from the provisioning of a variety of products and services that are billed under one of the following methods: time and expenses, annual licensing, annual maintenance, fees based on per transaction, per user and per location. In addition, these arrangements have been subject to renegotiation from time to time. Beginning in January 2002, these arrangements were replaced by a new master services agreement. This new agreement outlines the scope of services to be provided to Fidelity National and changes the pricing and billing arrangements to a fixed fee by type of service.

Fidelity National has consolidated Micro General in its tax returns for state tax, but not for Federal tax purposes. Fidelity National had utilized the benefit of Micro General’s net operation losses for state income taxes for which Micro General was paid $510,000 by Fidelity in fiscal year 2001.

Certain notes payable executed for the purchase of equipment are secured by an agreement which assigns like revenue streams payable to the Company from Fidelity National to the note holders in the event of a default by the Company on the respective notes payable (see note 7). In addition, the Company has long-term amounts and notes payable to affiliates amounting to $5,265,408 at both December 31, 2001 and 2000 (see note 7). The Company also has accounts payable due to affiliates of $607,700 and $326,244 as well as capital leases payable to affiliates of $142,001 and $192,122 at December 31, 2001 and 2000, respectively. The Company also has certain operating leasing arrangements with Fidelity National as described in note 5.

On October 1, 1999, Micro General entered into an intellectual property transfer agreement that provided the financing to launch escrow.com as a new company. Under the agreement, the Company sold the escrow.com name and trademark, the escrow.com internet URL, a license for the Micro General proprietary escrow trust accounting software, the Company’s computer services provider business unit and approximately $535,000 of related computer equipment. Under the terms of the intellectual property transfer agreement, the Company received from escrow.com a $4.5 million note with a term of seven years and an interest rate of three percent. The Company also received a warrant giving the Company the right to purchase 15.0 million shares of escrow.com common stock at a price of $0.40 per share.

Escrow.com offers on-line escrow-related services designed to provide buyers and sellers with a safe, secure and easy to use system for managing payment for and delivery of products and services purchased via the Intranet. As an internet transaction services provider, escrow.com provides for the secure transmission of

funds between a buyer and seller by placing the funds in escrow, confirming and verifying the receipt of merchandise by the buyer, and releasing the funds from escrow to the seller.

Because of the start-up nature of escrow.com, the Company has fully reserved the $4.5 million note receivable on its consolidated balance sheet. The gain on the sale of assets will be realized at such time escrow.com has sufficient funding in place to reasonably assure the payment of the note. While the Company has no equity interest in escrow.com as of December 31, 2001, the 15.0 million warrants give the Company the opportunity to acquire a substantial interest in escrow.com. Escrow.com is incurring substantial losses and may need to raise additional funds in order to continue its operations. The Company’s potential ownership in escrow.com may be substantially diluted if escrow.com issues additional shares to raise the necessary capital.

As previously described, the Company has warrants that, upon their exercise, will give the Company substantial ownership in escrow.com. In April 2000, escrow.com completed a private placement in which it raised gross proceeds of $30 million. As an inducement to invest, the Company assigned to two of the investors 250,000 of its 15.0 million warrants in escrow.com. As a result of this funding, escrow.com has 10,579,271 shares outstanding as of December 31, 2001. Although escrow.com has raised additional capital, those funds are not being used for repayment of the $4.5 million note receivable discussed above. Therefore, the note will be fully reserved until such time that escrow.com has sufficient funding in place to reasonably ensure payment of the note. Assuming exercise of the warrants, the Company would have a 58% ownership in escrow.com.

On October 8, 1998, the Company announced the creation of RealEC, a real estate electronic commerce network. RealEC commenced operations in mid-1999 and was a 50% owned joint venture with Stewart Title Corporation, a subsidiary of Stewart Information Services Corporation (“Stewart Title”). RealEC provides a standardized, electronic platform which lenders and realtors can utilize to order and receive products and services from multiple vendors such as credit, flood, appraisal, title and closing.

On May 19, 2000, the Company created TXMNet, Inc. and transferred its 50% ownership of the RealEC joint venture into the new entity along with certain other intellectual property in exchange for 6,650,000 shares of convertible, non-voting preferred stock. The Company’s investment in TXMNet was $1,660,893, which was the book value of its 50% ownership in the RealEC joint venture. On December 31, 2000, Stewart Title Corporation exchanged its 50% ownership position in RealEC for 2,935,000 shares of convertible, non-voting preferred stock in TXMNet, Inc., which is included in preferred stock of consolidated subsidiary, held by outside parties in the accompanying financial statements. TXMNet, Inc. changed its name to RealEC Technologies, Inc. on February 13, 2001. The Company has advanced RealEC Technologies approximately $5.3 million and has accounted for these advances using the modified equity method. Subsequent to the end of the quarter, the Company was repaid $1.5 million of these advances as a result of the transaction described below. Therefore, in anticipation of the receipt of these funds, the Company had reserved $3.8 million of the RealEC Technologies receivable.

On November 1, 2000 RealEC Technologies, Inc. issued to Micro General an additional 150,000 shares of its Series A Preferred Stock as consideration for Micro General’s assignment of certain intellectual property rights.

On October 25, 2001, LandAmerica Financial Group, Inc. (“LandAmerica”) signed an agreement with the RealEC to invest $4 million in RealEC for 3,065,000 shares of Series B preferred stock. Terms of the agreement include the payment of $1.5 million of this investment to the Company as repayment of funds advanced by the Company to RealEC.

RealEC has agreed, as of October 25, 2001, to turn the remaining $3.8 million owed to Micro General into a convertible note having a term of 20 months and bearing interest of 7% annually. The Series B preferred

stock is included in preferred stock of consolidated subsidiary held by outside parties in the accompanying financial statements. The terms of the preferred stock are described in note 10).

Effective November 1, 2001, Micro General, pursuant to stock purchase agreements with Beyond Ventures, LLC and MGEN Tech Fund I, L.P., acquired 100 percent of the common stock (1,250,000 shares) of RealEC, for $1.305 per share. In consideration for the acquisition of the common stock, Micro General transferred to Beyond Ventures, LLC 30,779 shares of Micro General’s common stock and to the MGEN Tech Fund I, L.P., 123,114 shares of Micro General’s common stock. The Managing Partner of Beyond Ventures is a director of Micro General. The MGEN Tech Fund I,L.P. is an investment group whose general partner is Ratisbon, LLC whose sole member and certain limited partners consist of officers and directors of Micro General. The consideration for the acquisition was determined based on a per share price of $10.24 for Micro General common stock, which was the average price of Micro General’s common stock less a 10% discount for the restricted nature of the shares granted to effect the purchase. The number of Micro General shares exchanged (153,893) was calculated based on a per share price of $1.305 for RealEC’s common stock, which was the per share purchase price in RealEC’s latest equity financing to an outside independent party which closed on October 25, 2001. Combined with the Company’s convertible preferred stock position, Micro General now owns 56% of RealEC on an as-if converted basis assuming conversion of all convertible preferred stock. Effective November 1, 2001, Micro General has consolidated RealEC’s results with its results of operations.

Prior to 1999, the Company had entered into various lending arrangements with Fidelity National and its affiliates. All of these arrangements were combined into $18 million of 10% convertible debt. In connection with the various lending arrangements, detachable warrants to exercise 288,750 shares of the Company’s common stock at a price of $1.36 were also issued. The warrants remain outstanding at December 31, 2001.

On December 15, 1999 the holders of $18.0 million of the Company’s convertible debt, which was the entire amount of the Company’s convertible debt outstanding on that date, exercised their conversion rights and exchanged the debt for newly issued shares of the Company’s common stock. There were 4,677,771 shares of common stock issued at an average conversion price of approximately $3.85 per share.

Also on December 15, 1999, the Company entered into with Fidelity National a new $5,265,000 five-year convertible note purchase agreement having an accrued interest rate of ten percent, payable quarterly. The note is convertible into common shares of the Company at a rate of $10.00 per share at any time during the five-year term. Fidelity National also received warrants to purchase 275,000 shares of the Company’s common stock at a price of $9.09 per share. In 1999, the Company recognized a $280,000 expense in regard to these warrants.

On December 22, 1999, the Company entered into a one-year $5.0 million revolving line of credit with Imperial Bank, guaranteed by Fidelity National. On July 23, 2001, the Company executed an amendment to this agreement which increased the available line to $10 million, added certain financial covenants and extended the expiration date to July 1, 2002. The additional $5.0 million expansion in the line is not guaranteed by Fidelity National. The Company had borrowings under this line of credit of $1.6 million and $2.5 million at December 31, 2001 and 2000, respectively. At December 31, 2001 the Company was not in default of any of the Imperial loan covenants.

Between June 9, 2000 and October 30, 2000, the Company entered into four equipment note financing arrangements with IBM Credit Corporation. Financing rates range from 7.437% to 11.30% and terms are 12 months to 36 months. Between January 30, 2001 and March 31, 2001, the Company entered into three equipment note financing arrangements with IBM Credit Corporation. Financing rates range from 8.030% to

9.670% and terms are 24 months to 36 months. Equipment financed includes both software and hardware purchases. The notes are secured by an agreement which assigns the respective revenue streams payable to the Company from Fidelity National to the note holders in the event of a default by the Company on the respective notes payable.

On March 23, 2001, the Company entered into an equipment note financing arrangement with GE Capital Lease Corporation with a financing rate of 9.883% and a term of 24 months, which financing was used for hardware purchases.

On June 2, 2001, the Company entered into a software financing arrangement with Siemens Financial Services with a financing rate of 5.662% and a term of 24 months. This financing was used for software purchases. The notes are secured by an agreement which assigns the respective revenue streams payable to the Company from Fidelity National to the note holders in the event of a default by the Company on the respective notes payable.

The notes with IBM Credit Corporation and the lease with GE Capital are collateralized by the underlying assets purchased with the notes.

Principal maturities of the notes payable and long-term debt at December 31, 2001 are as follows:

The Company’s Consolidated Financial Statements as of December 31, 2001 include three reportable segments. For 2000 and 1999, the Company had only one segment after the reclassification of the discontinued operations.


	•	Micro General Enterprise Software Solutions provides software solutions and services to the title and real estate industries. Such services include managed application services, application development and integration, network, data and infrastructure management, information technology outsourcing, telecommunications and hardware sales. Related party revenues are from Fidelity National and its affiliates.

	•	SoftPro Corporation is a software company selling applications that provide automation tools and back office support to independent title agents and attorneys for the management of real estate transaction settlements.

	•	RealEC Technologies is a real estate electronic commerce network for mortgage loan originators, realtors and settlement services providers. RealEC Technologies^TM enables the online ordering and delivery of all real estate related products and services to provide lenders and REALTORS® a complete and integrated technology solution for closing and managing real estate transactions. The biggest users include Fidelity National Title, Fidelity Information Systems, Stewart Title Mortgage Information, Fannie Mae and Wells Fargo.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Employee benefits include an employee stock purchase plan, four stock option plans and a 401(k) plan.

In 1998, the Company’s Board of Directors approved the adoption of an Employee Stock Purchase Plan (“ESPP”). Under the terms of the ESPP, there are 880,000 shares of the Company’s common stock available for purchase at current market prices by Company employees who meet certain vesting requirements. The authorized number of shares is subject to adjustment in the event of stock splits, stock dividends or certain other similar changes in the capital structure of the Company. Pursuant to the ESPP, Company employees may contribute an amount between 5% and 15% of their base salary and certain commissions. The Company contributes varying amounts as specified in the ESPP.

In 1987, stockholders also approved the adoption of a Stock Option Plan (“1987 Option Plan”). Under the terms of the 1987 Option Plan, the Company may grant stock options to certain key employees and nonemployee directors or officers. The number of shares issuable under the 1987 Option Plan is 220,000 shares of common stock at not less than fair market value on the date of grant. All options granted become exercisable at the discretion of the Board of Directors and expire five years from the date of grant. Options that lapse or are canceled prior to exercise are added to the shares authorized for future grants. The 1987 Option Plan expired in 1991, but was renewed by stockholders in 1993. There were no remaining shares available for grant at December 31, 2001 under the 1987 Option Plan.

In 1995, stockholders approved the adoption of the 1995 Stock Option Plan (“1995 Option Plan”). The number of shares reserved for issuance under the 1995 Option Plan is 220,000 shares of common stock. 177,470 shares were available for grant at December 31, 2001 under the 1995 Option Plan.

During 1998, stockholders approved the adoption of the 1998 Stock Incentive Plan (“1998 Plan”). The 1998 Plan authorizes up to 1,650,000 shares of common stock, plus an additional 330,000 shares of common stock on the date of each annual meeting of the stockholders of the Company, for issuance under the terms of the 1998 Plan. In 1999, the Board of Directors recommend and the Company’s shareholders approved an amendment to the 1998 Plan increasing the number of authorized shares of common stock for issuance to 3,300,000. The authorized number of shares is subject to adjustment in the event of stock splits, stock dividends or certain other similar changes in the capital structure of the Company. The 1998 Plan provides for grants of “incentive stock options” as defined in Section 422 of the Internal Revenue Code of 1986, as amended, nonqualified stock options and rights to purchase shares of common stock (“Purchase Rights”). Incentive stock options, nonqualified stock options and Purchase Rights may be granted to employees of the Company and its subsidiaries and affiliates. Nonqualified stock options and Purchase Rights may be granted to employees of the Company and its subsidiaries and affiliates, non-employee directors and officers, consultants and other service providers.

The Board of Directors, or a committee consisting of two or more members of the Board of Directors, administers the 1998 Plan (the “Administrator”). The Administrator has the full power and authority to interpret the 1998 Plan, select the recipients of options and Purchase Rights, determine and authorize the type, terms and conditions of, including vesting provisions, and the number of shares subject to grants under the 1998 Plan, and adopt, amend and rescind rules relating to the 1998 Plan. The term of options may not exceed 10 years from the date of grant (5 years in the case of a person who owns or is deemed to own more than 10% of the total combined voting power of all classes of stock of the Company). The option exercise price for each share granted pursuant to an incentive stock option may not be less than 100% of the fair market value of a share of common stock at the time such option is granted (110% of fair market value in the case of an incentive stock option granted to a person who owns more than 10% of the combined voting power of all classes of stock of the Company). There is no minimum purchase price for shares of common stock purchased pursuant to a Purchase Right, and any such purchase price shall be determined by the Administrator. The

maximum number of shares for which options may be granted to any one person during any one calendar year under the 1998 Plan is 1,650,000 and in no event shall the aggregate number of shares subject to incentive stock options exceed 1,650,000. The aggregate fair market value of the common stock (determined as of the date of grant) with respect to incentive stock options granted under the 1998 Plan or any other stock option plan of the Company that become exercisable for the first time by any optionee during any calendar year may not exceed $100,000. At December 31, 2001, 1,025,682 shares were available for grant under the 1998 Option Plan.

In 1999, the Board of Directors approved the adoption of the 1999 Stock Incentive Plan (“1999 Plan”). The 1999 Plan originally authorized up to 2,200,000 shares of common stock for issuance under the terms of the 1999 Plan. In 2001, the Board of Directors approved an amendment to the 1999 Plan increasing the number of authorized shares of common stock for issuance to 3,200,000. The authorized number of shares is subject to adjustment in the event of stock splits, stock dividends or certain other similar changes in the capital structure of the Company. The 1999 Plan provides for grants of nonqualified stock options to officers, directors, key employees, consultants and other service providers.

The 1999 Plan is administered by the Board of Directors or a committee consisting of two or more members of the Board of Directors (the “Administrator”). The Administrator has the full power and authority to interpret the 1999 Plan, select the recipients of options, determine and authorize the type, terms and conditions of, including vesting provisions, and the number of shares subject to grants under the 1999 Plan, and adopt, amend and rescind rules relating to the 1999 Plan. The term of options may not exceed 10 years from the date of grant. The option exercise price for each share granted may not be less than 100% of the fair market value of a share of common stock at the time such option is granted. The maximum number of shares for which options may be granted to any one person during any one calendar year under the 1999 Plan is 550,000. At December 31, 2001, 318,309 shares were available for grant under the 1999 Option Plan.

In April 2001 the Company granted 330,000 options to two of its board members, who are also officers of Fidelity National. The options were granted at an exercise price of $7.45 per share and vest over 4 years. The Company recorded compensation expense in the amount of $465,000 for the amortization of the vested portion of the fair value of the 82,500 options under these grants in the amount of $2.8 million at December 31, 2001. The Company will continue to record compensation expense based on the fair value of the remaining unvested options at the end of each subsequent financial reporting period through April 2005.

A summary of the Company’s stock option activity and related information for the years ended December 31, 2001, 2000 and 1999 is as follows (adjusted for the 10% stock dividend declared on May 2, 2001).

The following table sets forth options outstanding and exercisable by price range at December 31, 2001:

The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“Opinion 25”), and related Interpretations in accounting for its employee stock options. As discussed below, in management’s opinion, the alternative fair value accounting provided for under Statement 123, “Accounting for Stock Based Compensation,” requires use of option valuation models that were not developed for use in valuing employee stock options. Under Opinion 25, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the value of an estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

Pro forma information regarding net earnings and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions. The risk-free interest rate used in the calculation is the rate on the date the options were granted. The risk-free interest rate used for

options granted during 2001, 2000 and 1999 was 4.3%, 6.5% and 6.35%, respectively. Volatility factors for the expected market price of the common stock of 51%, 56% and 53% were used for options granted in 2001, 2000 and 1999, respectively. No dividends are paid by the Company; as a result, its expected dividend yield is 0.0%. A weighted-average expected life of 8.19 years was used for 2001, 8.58 years for 2000, and 9.32 years for 1999.

The Company applies Opinion 25 in accounting for its plans, and accordingly, no compensation cost has been recognized for its employee stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company’s net earnings for 2001, 2000 and 1999 would have been reduced to the proforma amounts indicated below:

The Company also offers a 401(k) profit sharing plan, a qualified voluntary contributory savings plan, available to substantially all employees. Eligible employees may contribute up to 15% of their pretax annual compensation, up to the amount allowed pursuant to the Internal Revenue Code. The Company matches 50% of the first 6% of contributions made by an employee.

On March 22, 1999, the Company acquired Interactive Associates, Inc., a privately held distributor of computer telephony hardware and services. This acquisition provided for the purchase of 100% of the common stock of Interactive Associates, Inc. in exchange for 50,000 shares of Micro General common stock, subject to certain conditions, including an earn out provision for up to an additional 50,000 shares. The closing price of the Company common stock on March 22, 1999, according to the NASDAQ Bulletin Board, was $3.88. This acquisition was accounted for using the purchase method. The financial position and results of operation of Interactive are not material to the Company. All 50,000 shares in the earnout provision were earned and recorded in 2000.

On August 20, 2001, the Company acquired SoftPro for $1.75 million in cash and 336,034 shares of the Company’s common stock valued at $3,919,500. The consideration for the acquisition was determined based on a per share price of $11.66 which was the average quoted market price of the of Micro General Corporation’s common stock less a 10% discount for the restricted nature of the shares granted to effect the purchase. The Company also assumed the SoftPro Option Plan, which had 133,328 options issued and outstanding. The vesting of these options accelerated upon the change in ownership. The vested options were then converted to 84,785 of the Company’s options which were valued at $1,131,126 using the Black Scholes option-pricing model. SoftPro is a provider of real estate closing and title insurance automation software for

the independent title agent marketplace. SoftPro’s acquisition will allow the company to expand its product offerings and enable the company to more rapidly enter market segments that SoftPro is currently in. The acquisition was accounted for as a purchase and the results of operations have been included in the Company’s results of operations since August 20, 2001.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition, August 20, 2001.

The acquisition was accounted for in accordance with FASB Statement No. 141, “Business Combinations”. Identifiable intangibles included capitalized software development costs and customer lists, and will be amortized over an estimated useful life of five years. Residual goodwill will not be amortized but will be subject to periodic testing of impairment at the reporting unit level in accordance with Financial Accounting Standards No. 142.

On November 1, 2001, the Company signed an agreement with Beyond Ventures, LLC and MGEN Tech Fund I, L.P. and transferred 30,779 and 123,114 shares, respectively, of Micro General’s common stock in exchange for all of RealEC Technologies’ common stock. The consideration for the acquisition was determined based on a per share price of $10.24 for Micro General common stock, which was the average quoted market price of Micro General common stock less a 10% discount for the restricted nature of the shares granted to effect the purchase. The number of Micro General shares exchanged (153,893) was calculated based on a per share price of $1.305 for RealEC Technologies’ common stock, which was the per share purchase price in RealEC’s latest equity financing to an outside independent party which closed on October 25, 2001. Combined with Micro General’s convertible preferred stock position, Micro General now owns approximately 56% of RealEC Technologies on an as-if converted basis assuming conversion of all convertible preferred stock and convertible notes. Effective November 1, 2001, Micro General consolidated RealEC Technologies’ results with its results of operations. RealEC is one of the largest real estate electronic commerce networks in the nation. The RealEC acquisition has placed Micro General as a leading provider of services in a new market segment.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition, November 1, 2001.

The acquisition was accounted for in accordance with FASB Statement No. 141, “Business Combinations”. Identifiable intangibles included capitalized software development costs, and will be amortized over its expected useful life, which is estimated to be five years. Residual goodwill will not be amortized but will be subject to periodic testing of impairment at the reporting unit level in accordance with Financial Accounting Standards No. 142.

The rights, preferences and privileges of the RealEC subsidiary Series A and Series B preferred stock are listed below.

Each share of Series A preferred stock and Series B preferred stock is convertible, at the option of the holder, into common stock at a conversion ratio of 1:1. Each share of Series A and Series B preferred stock shall automatically be converted into a share of common stock upon the (a) closing of a firm commitment underwritten public offering, (b) upon vote or written consent of holder of not less than a majority of the outstanding shares of Series A preferred stock and Series B preferred stock voting together as a class, or (c) on the fifth anniversary of the date the Series A and Series B preferred stock were issued by RealEC.

Series A and Series B preferred shareholders are entitled to receive non-cumulative dividends at the rate $.05 per annum per share of Series A preferred stock, and at the rate of $.065 per share of Series B preferred stock, when and if, declared by RealEC’s Board of Directors. In the event that a cash dividend is declared at any time prior to June 1, 2003, each holder of Series A preferred stock and Series B preferred stock may elect, at their option, to have such dividend paid in either cash or in a number of additional shares of Series A preferred stock or Series B preferred stock equal to the amount of such dividend. Both the Series A and Series B preferred stock is non-voting.

In the event of a liquidation, dissolution or winding up of RealEC, the holders of Series A preferred stock are entitled to receive the greater of $1.00 per share plus all accrued or declared but unpaid dividends, if any, but before common shareholders, or an amount that each share of outstanding Series A preferred stock would be entitled to if immediately prior to such liquidation, dissolution, or winding up of RealEC, such share is converted into common stock, plus any declared but unpaid dividends. Holders of Series B preferred stock are

entitled to receive the greater of $1.305 per share plus all accrued or declared but unpaid dividends, if any, but before common shareholders or an amount that each share of outstanding Series B preferred stock would be entitled to if immediately prior to such liquidation, dissolution, or winding up of RealEC, such share is converted into common stock plus any declared but unpaid dividends.

The Company’s consolidated financial statements for the year ended December 31, 2001 include the results of operations of SoftPro since its acquisition on August 20, 2001 and the results of operations of RealEC since its acquisition on November 1, 2001. The following selected pro forma information is being provided to present a summary of the combined results of the Company, SoftPro and RealEC as if the acquisitions had occurred as of the beginning of each period, giving effect to purchase accounting adjustments.

In December, 2001 the Company adopted a plan to discontinue the operations of its wholly owned subsidiary, LDExchange which was engaged in the wholesale international long distance business. The company recorded a charge of $5.3 million ($3.4 million net of income tax benefit) for the disposal of LDExchange. The charge consisted primarily of the write-off of discontinued assets, goodwill, and the accrual of shutdown and severance costs.

The consolidated financial statements reflect the results of operations of LDExchange reported as discontinued operations for all periods presented. The LDExchange results for 2001, 2000, and 1999 are summarized as follows:

The net assets (liabilities) of the discontinued operations in the December 31, 2001 and 2000 Consolidated Balance Sheets include:

Within 120 days after the close of its fiscal year, the Company intends to file with the Securities and Exchange Commission a definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 as amended, which will include the election of directors, the report of compensation committee on annual compensation, certain relationships and related transactions and other business.

(a)(1) Financial Statements. The following is a list of the Consolidated Financial Statements of Micro General Corporation and its subsidiaries included in Item 8 of Part II.


	Independent Auditors’ Report.

	Consolidated Balance Sheets as of December 31, 2001 and 2000.

	Consolidated Statements of Operations for the years ended December 31, 2001, 2000, and 1999.

	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2001, 2000 and 1999.

	Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999.

(a)(2) Financial Statement Schedules. The following is a list of financial statement schedules filed as part of this annual report on Form 10-K.

All other schedules are omitted because they are not applicable or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto.

(a)(3) The following exhibits are incorporated by reference or are set forth on pages to this Form 10-K:


*	This exhibit is identified as a management contract or compensatory plan or arrangement pursuant to Item 14(a) of Form 10-K.

(b) Reports on Form 8-K. The Company filed reports on Form 8-K during the fourth quarter of 2001 as follows:


	On October 11, 2000 we filed a Form 8-K (Item 5) relating to our stock repurchase plan.

	On December 19, 2001 we filed a Form 8-K (Item 2) relating to our purchase of all of the outstanding common stock of RealEC Technologies, Inc. and included the financial statements of RealEC Technologies, Inc. and pro forma financial information.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	By:	/s/ JOHN SNEDEGAR



	John Snedegar
	Chief Executive Officer, President
	(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


*	This exhibit is identified as a management contract or compensatory plan or arrangement pursuant to Item 14(a) of Form 10-K.

EX-3.2 3 a79556ex3-2.txt EXHIBIT 3.2 Exhibit 3.2 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF MICRO GENERAL CORPORATION, A DELAWARE CORPORATION MICRO GENERAL CORPORATION, a Delaware corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "Corporation"), does hereby certify: FIRST: The Board of Directors of the Corporation duly adopted resolutions proposing and declaring advisable the following amendment to the Certificate of Incorporation of the Corporation, directing that said amendment be submitted to the stockholders of the Corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that Article Fourth of the Certificate of Incorporation is hereby amended to read in full as follows: The total number of shares of stock which the Corporation shall have the authority to issue is Fifty-One Million (51,000,000), consisting of Fifty Million (50,000,000) shares of common stock, par value $.05 per share (the "Common Stock"), and One Million (1,000,000) shares of preferred stock, par value $.05 per share (the "Preferred Stock"). SECOND: That thereafter, the holders of the necessary number of shares of capital stock of the Corporation approved the foregoing amendment at a validly held stockholders meeting in accordance with the provisions of Section 211 of the Delaware General Corporation Law. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law of the State of Delaware. * * * * * * IN WITNESS WHEREOF, MICRO GENERAL CORPORATION has caused this Certificate of Amendment to be signed by its duly authorized Chief Executive Officer, John R. Snedegar, this ____ day of January, 2002. ---------------------------------------- John R. Snedegar Chief Executive Officer 2 STATE OF DELAWARE CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF MICRO GENERAL CORPORATION FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON FEBRUARY 12, 2002 Micro General Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: 1. The name of the corporation is Micro General Corporation. 2. That a Certificate of Amendment of the Certificate of Incorporation of Micro General Corporation was filed by the Secretary of State of Delaware on February 12, 2002 and that said Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware. 3. The inaccuracy or defect of said Certificate to be corrected is as follows: the holders of the necessary number of shares of capital stock of the Corporation gave their consent in favor of the amendment at a validly held stockholders meeting, instead of by written consent as erroneously indicated in the Certificate of Amendment. 4. Article SECOND of the Certificate is corrected to read as follows: SECOND: That thereafter, the holders of the necessary number of shares of capital stock of the Corporation approved the foregoing amendment at a validly held stockholders meeting in accordance with the provisions of Section 211 of the Delaware General Corporation Law. 1 IN WITNESS WHEREOF, said Micro General Corporation has caused this Certificate to be signed by its duly authorized Senior Vice President Joseph E. Root, this 4th day of March, 2002. By: ------------------------------------ Authorized Officer Name: Joseph E. Root Title: Senior Vice President 2 EX-3.3 4 a79556ex3-3.txt EXHIBIT 3.3 Exhibit 3.3 AMENDED AND RESTATED BYLAWS OF MICRO GENERAL CORPORATION, A DELAWARE CORPORATION AS ADOPTED JANUARY 17, 2002 ARTICLE I OFFICES 1 SECTION 1. REGISTERED OFFICE 1 SECTION 2. OTHER OFFICES 1 SECTION 3. BOOKS 1 ARTICLE II MEETINGS OF STOCKHOLDERS 1 SECTION 1. PLACE OF MEETINGS 1 SECTION 2. ANNUAL MEETINGS 1 SECTION 3. SPECIAL MEETINGS 1 SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING 2 SECTION 5. NOTICE; WAIVER OF NOTICE 2 SECTION 6. QUORUM; ADJOURNMENT 2 SECTION 7. VOTING 2 SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING 3 SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE 3 SECTION 10. STOCK LEDGER 3 SECTION 11. INSPECTORS OF ELECTION 3 SECTION 12. ORGANIZATION 3 SECTION 13. ORDER OF BUSINESS 4 ARTICLE III DIRECTORS 4 SECTION 1. POWERS 4 SECTION 2. NUMBER AND ELECTION OF DIRECTORS 4 SECTION 3. VACANCIES 4 SECTION 4. TIME AND PLACE OF MEETINGS 4 SECTION 5. ANNUAL MEETING 4 SECTION 6. REGULAR MEETINGS 5

SECTION 7. SPECIAL MEETINGS 5 SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT 5 SECTION 9. ACTION BY WRITTEN CONSENT 5 SECTION 10. TELEPHONE MEETINGS 5 SECTION 11. COMMITTEES 6 SECTION 12. COMPENSATION 6 SECTION 13. INTERESTED DIRECTORS 6 ARTICLE IV OFFICERS 6 SECTION 1. OFFICERS 6 SECTION 2. APPOINTMENT OF OFFICERS 7 SECTION 3. SUBORDINATE OFFICERS 7 SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS 7 SECTION 5. VACANCIES IN OFFICES 7 SECTION 6. CHAIRMAN OF THE BOARD 7 SECTION 7. VICE CHAIRMAN OF THE BOARD 7 SECTION 8. CHIEF EXECUTIVE OFFICER 7 SECTION 9. PRESIDENT 8 SECTION 10. VICE PRESIDENT 8 SECTION 11. SECRETARY 8 SECTION 12. CHIEF FINANCIAL OFFICER 8 ARTICLE V STOCK 9 SECTION 1. FORM OF CERTIFICATES 9 SECTION 2. SIGNATURES 9 SECTION 3. LOST CERTIFICATES 9 SECTION 4. TRANSFERS 9

SECTION 5. RECORD HOLDERS 9 ARTICLE VI INDEMNIFICATION 9 SECTION 1. RIGHT TO INDEMNIFICATION 9 SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT 10 SECTION 3. NON-EXCLUSIVITY OF RIGHTS 11 SECTION 4. INSURANCE 11 SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION 11 SECTION 6. INDEMNIFICATION CONTRACTS 11 SECTION 7. EFFECT OF AMENDMENT 11 ARTICLE VII GENERAL PROVISIONS 11 SECTION 1. DIVIDENDS 11 SECTION 2. DISBURSEMENTS 11 SECTION 3. FISCAL YEAR 11 SECTION 4. CORPORATE SEAL 12 SECTION 5. RECORD DATE 12 SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION 12 SECTION 7. CONSTRUCTION AND DEFINITIONS 12 SECTION 8. AMENDMENTS 12

AMENDED AND RESTATED BYLAWS OF MICRO GENERAL CORPORATION, A DELAWARE CORPORATION ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington County of New Castle. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. SECTION 3. BOOKS. The books of the Corporation may be kept within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE OF MEETINGS. All meetings of stockholders for the election of directors shall be held at such place either within or without the State of Delaware as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be held at a time and date designated by the Board of Directors for the purpose of electing directors and transacting such other business as may properly be brought before the meeting. SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called -1- by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of a stockholder or stockholders owning stock of the Corporation possessing twenty-five percent (25%) of the voting power possessed by all of the then outstanding capital stock of any class of the Corporation entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder entitled to vote at the meeting. SECTION 5. NOTICE; WAIVER OF NOTICE. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, such notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. A written waiver of any such notice signed by the person entitled thereto, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 6. QUORUM; ADJOURNMENT. Except as otherwise required by law, or provided by the Certificate of Incorporation or these Bylaws, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of enough votes to leave less than a quorum, if any action taken is approved by at least a majority of the required quorum to conduct that meeting. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. SECTION 7. VOTING. Except as otherwise required by law, or provided by the Certificate of Incorporation or these Bylaws, any question brought before any meeting of stockholders at which a quorum is present shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Unless otherwise provided in the Certificate of Incorporation, each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy, but no proxy shall be voted on or after three (3) years from its date, unless such -2- proxy provides for a longer period. Elections of directors need not be by ballot unless the Chairman of the meeting so directs or unless a stockholder demands election by ballot at the meeting and before the voting begins. SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Except as otherwise provided in the Certificate of Incorporation, any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. SECTION 10. STOCK LEDGER. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 9 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of stockholders, the Board of Directors may appoint one or more persons (who shall not be candidates for office) as inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, or if an appointed inspector fails to appear or fails or refuses to act at a meeting, the Chairman of any meeting of stockholders may, and on the request of any stockholder or his proxy shall, appoint an inspector or inspectors of election at the meeting. The duties of such inspector(s) shall include: determining the number of shares outstanding and the voting power of each; the shares represented at the meeting; the existence of a quorum; the authenticity, validity and effect of proxies; receiving votes, ballots or consents; hearing and determining all challenges and questions in any way arising in connection with the right to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all stockholders. In the event of any dispute between or among the inspectors, the determination of the majority of the inspectors shall be binding. SECTION 12. ORGANIZATION. At each meeting of stockholders the Chairman of the Board of Directors, if one shall have been elected, (or in his absence or if one shall not have been elected, the President) shall act as Chairman of the meeting. The Secretary (or in his absence or inability to -3- act, the person whom the Chairman of the meeting shall appoint secretary of the meeting) shall act as secretary of the meeting and keep the minutes thereof. SECTION 13. ORDER OF BUSINESS. The order and manner of transacting business at all meetings of stockholders shall be determined by the Chairman of the meeting. ARTICLE III DIRECTORS SECTION 1. POWERS. Except as otherwise required by law or provided by the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. SECTION 2. NUMBER AND ELECTION OF DIRECTORS. Subject to any limitations in the Certificate of Incorporation, the authorized number of directors of the Corporation shall be no less than four and no more than nine until changed by an amendment to this Bylaw adopted by the affirmative vote of a majority of the entire Board of Directors. Directors shall be elected at each annual meeting of stockholders to replace directors whose terms then expire, and each director elected shall hold office until his successor is duly elected and qualified, or until his earlier death, resignation or removal. Any director may resign at any time effective upon giving written notice to the Board of Directors, unless the notice specifies a later time for such resignation to become effective. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor prior to such effective time to take office when such resignation becomes effective. Directors need not be stockholders. SECTION 3. VACANCIES. Subject to the limitations in the Certificate of Incorporation, vacancies in the Board of Directors resulting from death, resignation, removal or otherwise and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Each director so selected shall hold office for the remainder of the full term of office of the former director which such director replaces and until his successor is duly elected and qualified, or until his earlier death, resignation or removal. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent directors. SECTION 4. TIME AND PLACE OF MEETINGS. The Board of Director shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors. SECTION 5. ANNUAL MEETING. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place, either within or without the State of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article III or in a waiver of notice thereof. -4- SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware at such date and time as the Board of Directors may from time to time determine and, if so determined by the Board of Directors, notices thereof need not be given. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President, the Secretary or by any director. Notice of the date, time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at the director's address as it is shown on the records of the Corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. In case the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. The notice need not specify the purpose of the meeting. A written waiver of any such notice signed by the person entitled thereto, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT. Except as otherwise required by law, or provided in the Certificate of Incorporation or these Bylaws, a majority of the directors shall constitute a quorum for the transaction of business at all meetings of the Board of Directors and the affirmative vote of not less than a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum to conduct that meeting. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting. SECTION 9. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. SECTION 10. TELEPHONE MEETINGS. Unless otherwise restricted by the Certificate of Incorporation, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee, as the case may be, by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. -5- SECTION 11. COMMITTEES. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of the committee. In the event of absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the committee member or members present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. Any committee, to the extent allowed by law and as provided in the resolution establishing such committee, shall have and may exercise all the power and authority of the Board of Directors in the management of the business and affairs of the Corporation, but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Each committee shall keep regular minutes of its meetings and report to the Board of Directors when required. SECTION 12. COMPENSATION. The directors may be paid such compensation for their services as the Board of Directors shall from time to time determine. SECTION 13. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or the committee thereof which authorizes the contract or transaction, or solely because his of their votes are counted for such purpose if: (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS SECTION 1. OFFICERS. The officers of the Corporation shall be a President, a Secretary and a Chief Financial Officer. The Corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer, one or more -6- Vice Presidents, one or more Assistant Financial Officers and Treasurers, one or more Assistant Secretaries and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article IV. SECTION 2. APPOINTMENT OF OFFICERS. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article IV, shall be appointed by the Board of Directors, and each shall serve at the pleasure of the Board, subject to the rights, if any, of an officer under any contract of employment. SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, and may empower the Chief Executive Officer or President to appoint, such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws or as the Board of Directors may from time to time determine. SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights of an officer under any contract, any officer may be removed at any time, with or without cause, by the Board of Directors or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights of the Corporation under any contract to which the officer is a party. SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to that office. SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an officer is elected, shall, if present, preside at meetings of the stockholders and of the Board of Directors. He shall, in addition, perform such other functions (if any) as may be prescribed by the Bylaws or the Board of Directors. SECTION 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board, if such an officer is elected, shall, in the absence or disability of the Chairman of the Board, perform all duties of the Chairman of the Board and when so acting shall have all the powers of and be subject to all of the restrictions upon the Chairman of the Board. The Vice Chairman of the Board shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws. SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Corporation shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and the officers of the Corporation. He shall exercise the duties usually vested in the chief executive officer of a corporation and perform such other powers and duties as may be assigned to him from time to time by the Board of Directors or prescribed by the Bylaws. In the absence of the Chairman of the Board and any Vice Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the stockholders and of the Board of Directors. -7- SECTION 9. PRESIDENT. The President of the Corporation shall, subject to the control of the Board of Directors and the Chief Executive Officer of the Corporation, if there be such an officer, have general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws or the Chief Executive Officer of the Corporation. In the absence of the Chairman of the Board, Vice Chairman of the Board and Chief Executive Officer, the President shall preside at all meetings of the Board of Directors and stockholders. SECTION 10. VICE PRESIDENT. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws, and the President, or the Chairman of the Board. SECTION 11. SECRETARY. The Secretary shall keep or cause to be kept, at the principal executive office or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of Directors, committees of Directors, and stockholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given, the names of those present at Directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and a summary of the proceedings. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required by the Bylaws or by law to be given, and he shall keep or cause to be kept the seal of the Corporation if one be adopted, in safe custody, and shall have such powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws. SECTION 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation. The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors. He shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all of his transactions as Chief Financial Officer and of the financial condition of the Corporation. The Chief Financial Officer shall also have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws. ARTICLE V STOCK -8- SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation (i) by the Chairman or Vice Chairman of the Board of Directors, or the President or a Vice President and (ii) by the Chief Financial Officer or the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. SECTION 2. SIGNATURES. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. LOST CERTIFICATES. The Corporation may issue a new certificate to be issued in place of any certificate theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. The Corporation may, in the discretion of the Board of Directors and as a condition precedent to the issuance of such new certificate, require the owner of such lost, stolen, or destroyed certificate, or his legal representative, to give the Corporation a bond (or other security) sufficient to indemnify it against any claim that may be made against the Corporation (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws or in any agreement with the stockholder making the transfer. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued. SECTION 5. RECORD HOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the record holder of shares to receive dividends, and to vote as such record holder, and to hold liable for calls and assessments a person registered on its books as the record holder of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law. ARTICLE VI INDEMNIFICATION SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General -9- Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that, except as provided in Section 2 of this Article VI with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Article VI or otherwise (hereinafter an "undertaking"). SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1 of this Article VI is not paid in full by the Corporation within forty-five (45) days after a written claim has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or part in any such suit or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this Article VI or otherwise shall be on the Corporation. -10- SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 4. INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VI with respect to the indemnification and advancement of expenses of directors or officers of the Corporation. SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors is authorized to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those provided for in this Article VI. SECTION 7. EFFECT OF AMENDMENT. Any amendment, repeal or modification of any provision of this Article VI by the stockholders or the directors of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such amendment, repeal or modification. ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS. Subject to limitations contained in the General Corporation Law of the State of Delaware and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, securities of the Corporation or other property. SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 4. CORPORATE SEAL. The Corporation shall have a corporate seal in such form as shall be prescribed by the Board of Directors. -11- SECTION 5. RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Stockholders on the record date are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date, except as otherwise provided by agreement or by applicable law. SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION. The Chairman of the Board, the Chief Executive Officer, the President and any other officer of the Corporation authorized by the Board of Directors shall have power, on behalf of the Corporation, to attend, vote and grant proxies to be used at any meeting of stockholders of any corporation (except this Corporation) in which the Corporation may hold stock. SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the General Corporation Law of the State of Delaware shall govern the construction of these Bylaws. SECTION 8. AMENDMENTS. Subject to the General Corporation Law of the State of Delaware, the Certificate of Incorporation and these Bylaws, the Board of Directors may by the affirmative vote of a majority of the entire Board of Directors amend or repeal these Bylaws, or adopt other Bylaws as in their judgment may be advisable for the regulation of the conduct of the affairs of the Corporation. Unless otherwise restricted by the Certificate of Incorporation, these Bylaws may be altered, amended or repealed, and new Bylaws may be adopted, at any annual meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority of the combined voting power of the then outstanding shares of capital stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting as a single class, provided that, in the notice of any such special meeting, notice of such purpose shall be given. -12- EX-10.1 5 a79556ex10-1.txt EXHIBIT 10.1 EXHIBIT 10.1 MICRO GENERAL CORPORATION 1995 STOCK OPTION PLAN 1. PURPOSE. The Plan is intended to provide incentive to key employees, consultants and directors of the Corporation, to encourage proprietary interest in the Corporation, to encourage such key employees to remain in the employ of the Corporation and its Subsidiaries, to attract new employees with outstanding qualifications, and to afford additional incentive to consultants to increase their efforts in providing significant services to the Corporation. 2. DEFINITIONS. (a) "Board" shall mean the Board of Directors of the Corporation. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the committee, if any appointed by the Board in accordance with Section 4 of the Plan. (d) "Common Stock" shall mean the Common Stock, par value $.O1 per share, of the Corporation. (e) "Corporation" shall mean Micro General Corporation, a California corporation. (f) "Director Option" shall mean an Option granted pursuant to Section 5. (g) "Disability" shall mean the condition of an Employee who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. (h) "Disinterested Director" shall mean a director of the Company who is "disinterested" within the meaning of Rule 16b-3 under the Exchange Act. (i) "Employee" shall mean an individual who is employed (within the meaning of Code Section 3401 and the regulations thereunder) by the Corporation or a Subsidiary. (j) "Exercise Price" shall mean the price per Share of Common Stock, determined by the Board or the Committee, at which an Option may be exercised. (k) "Fair Market Value" shall mean the value of one (1) Share of Common 1 Stock, determined as follows: (1) If the Shares are traded on an exchange, the price at which Shares traded at the close of business on the date of valuation; (2) If the Shares are traded over-the-counter on the NASDAQ System, the closing price if one is available, or the mean between the bid and asked prices on said System at the close of business on the date of valuation; and (3) If neither (1) nor (2) applies, the fair market value as determined by the Board or the Committee in good faith. Such determination shall be conclusive and binding on all persons. (l) "Incentive Stock Option" shall mean an option described in Section 422 of the Code. (m) "Nonstatutory Stock Option" shall mean any stock granted pursuant to the Plan. (n) "Optionee" shall mean an employee who has received an Option. (o) "Outside Director" shall mean a director of the Company who is an outside director within the meaning of 162(m) of the Code. (p) "Plan" shall mean the Micro General Corporation 1995 Stock Option Plan, as it may be amended from time to time. (q) "Retirement" shall mean the voluntary termination of employment by an Employee upon the attainment of age sixty-five (65) and the completion of not less than twenty (20) years of service with the Corporation or a Subsidiary. (r) "Share" shall mean one (1) share of Common Stock, adjusted in accordance with Section 10 of the Plan (if applicable). (s) "Subsidiary" shall mean any corporation at least fifty percent (50%) of the total combined voting power of which is owned by the Corporation or by another Subsidiary. 3. EFFECTIVE DATE. The Plan was adopted by the Board on February 9, 1995, subject to the approval by the Corporation's shareholders. The Plan is being submitted to the shareholders of the Corporation for their approval at the Annual Meeting thereof scheduled for June 8, 1995. The effective date of the Plan shall be February 9, 1995, provided that the Plan is approved by the shareholders of the Corporation at the Annual Meeting. 2 4. ADMINISTRATION. The Plan shall be administered by the Outside Directors of the Board, or by a committee appointed by the Board which shall consist of not less than three (3) members each of whom are Disinterested Directors and Outside Directors (the "Committee"). The Board shall appoint one of the members of the Committee, if there be one, as Chairman of the Committee. If a Committee has been appointed, the Committee shall hold meetings at such times and places as it may determine. Acts of a majority of the Committee at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The Board, or the Committee if there be one, shall from time to time at its discretion select the Employees and consultants who are to be granted Options, determine the number of Shares to be granted to each Optionee and designate such Options such as Incentive Stock Options or Non-statutory Stock Options, except that no Incentive Stock Option may be granted to a non-Employee consultant. The interpretation and construction by the Board, or by the Committee if there be one, of any provision of the Plan or of any Option granted thereunder shall be final. No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted thereunder. 5. PARTICIPATION. (a) Option Grants for Employees and Consultants. (1) Ten-Percent Shareholders. An Employee who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Corporation, its parent or any of its Subsidiaries shall not be eligible to receive an Option unless (1) the Exercise Price of the Shares subject to such Option is at least one hundred percent (100%) of the Fair Market Value of such Shares on the date of grant and (ii) such Option by its terms is not exercisable after the expiration of five (5) years from the date of grant. (2) Stock Ownership. For purposes of (1) above, in determining stock ownership an Employee shall be considered as owning the stock owned, directly or indirectly, by or for his brothers, sisters, spouses, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be considered as being owned proportionately by or for its shareholders, partners or beneficiaries. Stock with respect to which such Employee holds an Option shall not be counted. (3) Outstanding Stock. For purposes of (1) above, "outstanding stock" shall include all stock actually issued and outstanding immediately after the grant of the Option to the Optionee. "Outstanding stock" shall not include shares authorized for issue under outstanding Options held by the Optionee or by any other person. (b) Option Grants for Non-Employee Directors. (1) Grant. Subject to the availability of an adequate number of Shares 3 designated under the Plan, each non-Employee Director shall be granted Director Options under the Plan automatically on a non-discretionary basis according to the following provisions of this Section 5(b). Director Options shall be granted automatically to non-Employee Directors as follows: (i) each person who is a non-Employee Director on the first business day following the 1995 annual meeting of stockholders of the Company shall be granted on such date an Option to purchase 2,500 Shares; and (ii) thereafter, each person who is a non-Employee Director on the first business day following the day of a subsequent annual meeting of stockholders shall be granted on such first business day an Option to purchase 2,500 Shares. (2) Duration. Each Director Option shall terminate on the date which is the tenth anniversary of the grant date, unless terminated earlier as follows: (a) If an Optionee's service as a Director terminates for any reason other than Disability, death, or cause, the Optionee may for a period of three (3) months after such termination exercise his or her Option to the extent, and only to the extent, that such Option or portion thereof was exercisable as of the date of the Optionee's service as a Director was terminated, after which time the Option shall automatically terminate in full. (b) If an Optionee's service as a Director terminates by reason of Disability, the Optionee may, for a period of one (1) year after such termination, exercise his or her Option to the extent, and only to the extent, that such Option or portion thereof was vested and exercisable as of the date the Optionee's service as Director terminated, after which one (1) year period the Option shall automatically terminate in full. (c) If an Optionee's service as a Director terminates for cause, the Option granted to the Optionee hereunder shall immediately terminate in full and no rights thereunder may be exercised. (d) If an Optionee dies while a Director or within three (3) months after termination of service as a Director as described in clause (a) or (b) of this Section 5(b)2, the Option granted to the Optionee may be exercised at any time within twelve (12) months after the Optionee's death by the person or persons to whom such rights under the Option shall pass by will, or by the laws of descent or distribution, after which time the Option shall terminate in full; provided, however. that an Option may be exercised to the extent, and only to the extent, that the Option or portion thereof was exercisable on the date of termination of the Optionee's services as a Director. 6. STOCK. The stock subject to Options granted under the Plan shall be Shares of the Corporation's authorized but unissued or reacquired Common Stock. The aggregate number of Shares which may be issued upon exercise of Options under the Plan shall not exceed 100,000 shares. The number of Shares subject to Options outstanding at any time shall not exceed the number of Shares remaining available for issuance under the Plan. In the event that any outstanding Option for any reason expires or is terminated, the Shares allocable to the 4 unexercised portion of such Option may again be made subject to any Option. The limitations established by this Section 6 shall be subject to adjustment in the manner provided in Section 10 hereof upon the occurrence of an event specified therein. 7. TERMS AND CONDITIONS of OPTIONS. (a) Stock Option Agreements. Options shall be evidenced by written stock option agreements in such form as the Board, or the Committee if there be one, shall from time to time determine. Such agreements shall comply with and be subject to the terms and conditions set forth below. (b) Number of Shares. Each Option shall state the number of Shares to which it pertains and shall provide for the adjustment thereof in accordance with the provisions of Section 10 hereof. (c) Exercise Price. Each Option shall state the Exercise Price. The Exercise Price in the case of any Incentive Stock Option shall not be less than the Fair Market Value on the date of grant and, in the case of any Option granted to an Optionee shall not be less than one hundred percent (100%) of the Fair Market Value on the date of grant. (d) Time of Payment. The purchase price shall be payable in full in United States dollars upon the exercise of the Option. (e) Term and Nontransferability of Options. Each Option shall state the time or times which all or part thereof becomes exercisable. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted, and no Option granted to an Optionee described in Section 5(a)1 hereof shall be exercisable after the expiration of five (5) years from the date it was granted. During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable. In the event of the Optionee's death, the Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution. (f) Termination of Employment. Except by Death. Disability or Retirement. If an Optionee ceases to be an Employee for any reason other than his or her death, Disability or Retirement, such Optionee shall have the right, subject to the restrictions of (3) above, to exercise the Option at any time within three (3) months after termination of employment, but only to the extent that, at the date of termination of employment, the Optionee's right to exercise such Option had accrued pursuant to the terms of the applicable option agreement and had not previously been exercised; provided, however, that if the Optionee was terminated for cause (as defined in the applicable option agreement) any Option not exercised in full prior to such termination shall be cancelled. For this purpose, the employment relationship shall be treated as continuing intact while the Optionee is on military leave, sick leave or other bona fide leave of absence (to be determined in the sole discretion of the Committee). The foregoing 5 notwithstanding, in the case of an Incentive Stock Option, employment shall not be deemed to continue beyond the ninetieth (90th) day after the Optionee's reemployment rights are guaranteed by statute or by contract. (g) Death of Optionee. If an Optionee dies while an Employee, or after ceasing to be an Employee but during the period while he or she could have exercised the Option under this Section 7, and has not fully exercised the Option, then the Option may be exercised in full, subject to the restrictions of (3) above, at any time within twelve (12) months after the Optionee's death, by the executors or administrators of his or her estate or by any person or persons who have acquired the Option directly from the Optionee by bequest or inheritance, but only to the extent that, at the date of death, the Optionee's right to exercise such Option had accrued and had not been forfeited pursuant to the terms of the applicable Option Agreement and had not previously been exercised. (h) Disability, of Optionee. If an Optionee ceases to be an Employee by reason of Disability, such Optionee shall have the right, subject to the restrictions of (f) above, to exercise the Option at any time within twelve (12) months after termination of employment, the Optionee's right to exercise such Option had accrued pursuant to the terms of the applicable Option Agreement and had not previously been exercised. (i) Retirement of Optionee. If an Optionee ceases to be an Employee by reason of Retirement, such Optionee shall have the right, subject to the restrictions of (3) above, to exercise the Option at any time within three (3) months after termination of employment, but only to the extent that, at the date of termination of employment, the Optionee's right to exercise such Option had accrued pursuant to the terms of the applicable Option Agreement and had not previously been exercised. (j) Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by his or her Option until the date of the issuance of a stock certificate for such Shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 10 hereof. (k) Modification. Extension and Renewal of Option. Within the limitations of the Plan, the Board, or the Committee if there be one, may modify, extend or renew outstanding Options or accept the cancellation of outstanding Options (to the extent not previously exercised) for the granting of new Options in substitution thereof. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option previously granted. (l) Other Provisions. The stock option agreements authorized under the Plan may contain such other provisions not inconsistent with the terms of the Plan (including, without 6 limitation, restrictions upon the exercise of the Option) as the Board, or the Committee if there be one, shall deem advisable. 8. LIMITATION ON VALUE OF EXERCISABLE SHARES. In the case of Incentive Stock Options granted hereunder, the aggregate Fair Market Value (determined as of the date of the grant thereof) of the Shares with respect to which Incentive Stock Options become exercisable by any employee of the Company for the first time during any calendar year (under this Plan and all other plans maintained by the Corporation, its parent or its Subsidiaries) shall not exceed $100,000. 9. TERM OF PLAN. Options may be granted pursuant to the Plan until the expiration of ten (10) years from the effective date of the Plan. 10. RECAPITALIZATIONS. Subject to any required action by shareholders, the number of Shares covered by the Plan as provided in Section 6 hereof, the number of Shares covered by each outstanding Option and the Exercise Price thereof shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of Shares or the payment of a stock dividend (but only of Common Stock) or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Corporation. Subject to any required action by stockholder, if the Corporation is the surviving corporation in any merger or consolidation, each outstanding Option shall pertain and apply to the securities to which a holder of the number of Shares subject to the Option would have been entitled. In the event of a merger or consolidation in which the Corporation is not the surviving corporation, the date of exercisability of each outstanding Option shall be accelerated to a date prior to such merger or consolidation, unless the agreement of merger or consolidation provides for the assumption of the Option by the successor to the Corporation. To the extent that the foregoing adjustments relate to securities of the Corporation, such adjustments shall be made by the Board, or the Committee if there be one, whose determination shall be conclusive and binding on all persons. Except as expressly provided in this Section 10, the Optionee shall have no rights by reason of subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation, and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power to the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business assets. 11. SECURITIES LAW REQUIREMENTS. (a) Legality of Issuance. The issuance of any Shares upon the exercise of any 7 Option and the grant of any Option shall be contingent upon the following: (1) The Corporation and the Optionee shall have taken all actions required to register the Shares under the Securities Act of 1933, as amended (the "Act"), and to qualify the Option and the Shares under any and all applicable state securities or "blue sky" laws or regulations, or to perfect an exemption from the respective registration and qualification requirements thereof; (2) Any applicable listing requirement of any stock exchange on which the Common Stock is listed shall have been satisfied; and (3) Any other applicable provision of state or Federal law shall be satisfied. (b) Restrictions on Transfer. Regardless of whether the offering and sale of Shares under the Plan has been registered under the Act or has been registered or qualified under the securities laws of any state, the Corporation may impose restrictions on the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Corporation and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state or any other law. In the event that the sale of Shares under the Plan is not required an investment representation or other representation, each Optionee shall be required to represent that such Shares are being acquired for investment, and not with a view to the sale or distribution thereof, and to make such other representations as are deemed necessary or appropriate by the Corporation and its counsel. Any determination by the Corporation and its counsel in connection with any of the matter set forth in this Section 11 shall be conclusive and binding on all persons. Stock certificates evidencing Shares acquired under the Plan pursuant to an unregistered transaction shall bear the following restrictive legend and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law. "THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT." (c) Registration or Qualification of Securities. The Corporation may, but shall not be obligated to register or qualify the issuance of Options and/or the sale of Shares under the Act or any other applicable law. The Corporation shall not be obligated to take any affirmative action in order to cause the issuance of Options or the sale of Shares under the Plan to comply with any law. 8 (d) Exchange of Certificates. If, in the opinion of the Corporation and its counsel, any legend placed on a stock certificate representing shares sold under the Plan is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but lacking such legend. 12. INTERPRETATION. Unless otherwise expressly stated in the relevant Agreement, any grant of Options is intended to be performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code. The Board, or Committee if there be one, shall not be entitled to exercise any discretion otherwise authorized hereunder with respect to such Options if the ability to exercise such discretion or the exercise of such discretion itself would cause the compensation attributable to such Options to fail to qualify as performance-based compensation. 13. AMENDMENT OF THE PLAN. The Board may from time to time, with respect to any Shares at the time not subject to Options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that, without the approval of the Corporation's stockholders, no such revision or amendment shall: (a) Increase the number of Shares subject to the Plan; or (c) Amend this Section 12 to defeat its purpose. 14. APPLICATION OF FUNDS. The proceeds received by the Corporation from the sale of Common Stock pursuant to the exercise of an Option will be used for general corporate purposes. 15. EXECUTION. To record the adoption of the Plan in the form set forth above by the Board effective as of February 9, 1995, the Corporation has caused this Plan to be executed in the name and on behalf of the Corporation where provided below by an officer of the Corporation thereunto duly authorized. 9 EX-10.7 6 a79556ex10-7.txt EXHIBIT 10.7 EXHIBIT 10.7 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of April 15,1999 (the "Effective Date"), by and between MICRO GENERAL CORPORATION, a Delaware corporation (the "Company"), and JOHN SNEDEGAR (the "Employee"), and supersedes any and all prior employment agreements or understandings entered into between the parties; provided, however, this Agreement shall not supersede or otherwise affect (i) any Company options or other securities previously granted the Employee or (ii) the terms and conditions of that certain Inducement Agreement, dated August 11, 1998. In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows: 1. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve in an executive and managerial capacity as the President and Chief Executive Officer of the Company, and the Employee accepts such employment and agrees to perform such reasonable responsibilities and duties commensurate with the aforesaid positions as lawfully directed by the Company's Board of Directors (the "Board"), or as set forth in the Bylaws of the Company. 2. Term. The term of this Agreement shall commence on the Effective Date and shall continue for a period of three (3) years ending April 14, 2002, subject to prior termination as set forth in Section 7, below (the "Term"). The Term may be extended at any time upon mutual agreement of the parties. 3. Salary. During the Term, the Company shall pay the Employee a minimum base annual salary of Two Hundred Fifty Thousand Dollars ($250,000), payable at the times and in the manner dictated by the Company's standard payroll policies (the "Base salary"). The Base Salary shall be periodically reviewed and increased at the discretion of the Board to reflect, among other matters, cost of living increases and performance results. 4. Other Compensation and Fringe Benefits. During the Term, as additional compensation, the Employee shall be entitled to receive and participate in the following: (a) Incentive Bonus. A year-end bonus equal to ten percent (10%) of the "audited pre-tax profits" of the Company for each calendar year during the Term of this Agreement (the "Incentive Bonus"). For calendar year 1999 only, the Incentive Bonus calculation shall be pro-rated for the period from the Effective Date through December 31, 1999, but shall in no event be less than One Hundred Fifty Thousand Dollars ($150,000). For calendar year 2002 only, he Incentive Bonus calculation shall be pro-rated for the period from January 1, 2002 through the end of the Term. As used herein, "audited pre-tax profits" shall mean the audited pre-tax profits of the Company determined by the Company's outside accounting firm in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis and will include the results of the Company and its subsidiaries on a consolidated basis. In addition, "audited pre-tax profits" shall be determined only after the amount of the Employee's year-end Incentive Bonus has been taken into account by the Company and shall be adjusted by deduction of supplementary bonuses and/or advances paid to other "key" employee's of the Company for the applicable year (which employees shall be designated and agreed upon by the Employee and the Board). The accrual of the Incentive Bonus shall commence as of the Effective Date. Although the Incentive Bonus is deemed earned on December 31 of the year for which such bonus is being calculated, if the Employee's employment with the Company is terminated pursuant to Section 7 below, whether voluntarily or involuntarily, prior to December 31 of the year to which the Incentive Bonus relates, then the Company's obligation to pay the Employee all or a portion of the Incentive Bonus for the year in which termination occurs shall be governed by the appropriate provision of Section 7 below; provided, however, that expiration of the Term shall not constitute a voluntary or involuntary termination of employment. Any Incentive Bonus due for a given year of the term shall be paid no later than April 15th of the following year (including no later than April 15, 2003 for the pro-rated bonus earned in 2002); and (b) Transaction Bonus. In connection with the sale or transfer to a person or entity other than Fidelity National Financial Inc. ("FNFI") or its "affiliates" (as defined in Section 21 below) of (i) all or a majority of the outstanding capital stock or other equity interest of any subsidiary of the Company; or (ii) all or substantially all of the assets of any material division of the Company or any of its subsidiaries, the Company shall pay the Employee a bonus (the "Transaction Bonus") equal to five percent (5%) of "Net Transaction Proceeds." For purposes of this subsection (b), the term "Net Transaction Proceeds" shall mean (A) the value of the consideration actually received by the Company in connection with such transaction, less (B) the sum of (i) the Company's cost basis, as determined by the Company's outside accounting firm in accordance with GAAP, in the securities or assets being sold (the "Company's Investment"), plus (ii) an amount equal to a ten percent (10%) cumulative annualized rate of return on the Company's Investment. Notwithstanding anything to the contrary above, the Transaction Bonus shall not apply to a sale or transfer by the Company of the assets comprising the postal meter and/or postal scale division of the Company. The Transaction Bonus shall be paid to the Employee within ninety (90) days of the later of (i) the closing of the applicable transaction; or (ii) the date on which the Company actually receives at least eighty percent (80%) of the total consideration to be received in connection with such transaction. In addition, the Transaction Bonus will be due and payable to the Employee notwithstanding the termination of this Agreement if (i) this Agreement is terminated (a) as a result of the failure by the Company to extend the Term, (b) after the first full year of this Agreement, by either the Company pursuant to Section 7(b) or the Employee for Good Reason pursuant to Section 7(b), (c) as a result of the Employee's disability or death pursuant to Sections 7(c) and 7(d), respectively and (ii) prior to such termination, the transaction giving rise to the Transaction Bonus was reduced to a definitive written agreement and the transaction closes within six (6) months of the date of termination in substantial accordance with the terms of the written agreement. Moreover, if this Agreement is terminated by the Employee under Section 7(b) for any reason other than Good Reason, then the Transaction Bonus will be due and payable to the Employee notwithstanding the termination of this Agreement, provided the transaction in question formally closed prior to the date of termination. (c) Options. A grant on the Effective Date under the Company's Executive Stock Option Plan of options to purchase Fifty Thousand (50,000) shares of the Company's Common Stock. The exercise price for such options shall be the closing price on the Effective Date of the Company's publicly traded Common Stock. In addition, all such options shall vest options the Effective Date, after which the Employee shall have ten (10) years to exercise the options, subject to any terms to the contrary in the Company's Executive Stock Option Plan; and (d) Standard Benefits. The standard Company benefits enjoyed by the Company's other senior executives; and (e) Club Membership. Payment by the Company of the Employee's membership dues in a social and/or recreational club as deemed necessary and appropriate by the Employee (and pre-approved by the Company) to maintain various business relationships on behalf of the Company; provided, however, that the Company shall not be obligated to pay for any of the Employee's personal purchases and expenses at such club; and (f) Medical Insurance. Provision by the Company during the Term and any extensions thereof to the Employee and his dependents of the medical and other insurance coverage provided by FNFI to its senior executives; and (g) Life Insurance. The procurement of insurance on the Employee's life in the amount of one million dollars ($1,000,000). The premiums of such policy shall be paid by the Company and the Employee shall be entitled, in his sole discretion, to designate the beneficiary of such policy. At the Employee's request at the end of the Term, the Company will assign the insurance policy to the Employee and the Employee shall have no obligation to the Company in respect of premiums previously paid. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to applicable state and federal laws or by mutual agreement between the parties. 5. Vacation. For and during each year of the Term and any extensions thereof, the Employee shall be entitled to reasonable paid vacation periods consistent with his position with the Company and in accordance with the Company's standard policies, or such greater entitlement as the Board may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or such greater entitlement as the Board may approve. 6. Expense Reimbursement. In addition to the compensate and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee each month for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses. The arrangement set forth in this Section 6 is intended to constitute an accountable plan within the meaning of Section 162 of the Internal Revenue Code, as amended (the "Code"), and the accompanying regulations, and the Employee agrees to comply with all reasonable guidelines established by the Company from time to time to meet the requirements of Section 162 of the Code and the accompanying regulations. 7. Termination. (a) For Cause. Notwithstanding anything to the contrary contained herein, the Company may terminate this Agreement immediately for "cause" upon written notice to the Employee, in which event the Company shall be obligated to pay the Employee that portion of the Base Salary due him through the date of termination, and accrued and unpaid expense reimbursement pursuant to Section 6 hereof. For purposes of this Agreement, "cause" shall mean (i) a material breach by the Employee of this Agreement, which breach is not cured within thirty (30) days after written notice thereof from the Company to the Employee; (ii) the repeated failure of the Employee to comply with the Company's lawful corporate policies to the extent set forth in writing; (iii) misconduct, dishonesty, insubordination, or any other act by the Employee that in any way has a direct and substantial adverse effect on the Company's business or reputation, or its relationship with its customers or employees, including, without limitation (a) the use of alcohol such as to materially interfere with the Employee's obligations hereunder, (b) the use of illegal drugs, or (c) conviction of a felony or of any crime involving moral turpitude or theft; or (iv) the failure by the Employee to comply with applicable laws or governmental regulations pertaining to his employment hereunder which non-compliance has a material adverse effect on the Company. (b) Without Cause. Either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates under this Section 7(b) within the first (1st) full year of this Agreement, then the Company shall only be obligated to pay to the Employee that portion of the Base Salary due him through the date of termination, and accrued and unpaid expense reimbursement pursuant to Section 6 hereof. If, after the first (1st) full year of this Agreement, the Company terminates under this Section 7(b) or if the Employee resigns for "Good Reason" (as defined below), then the Company shall pay to the Employee an amount equal to the Base Salary in effect as of the date of termination multiplied by the greater of (A) the number of years (including partial years) remaining in the Term, or (B) the number two (2); (ii) any pro-rated Incentive Bonus earned by the Employee through the date of termination; (iii) any Transaction Bonus due the Employee in accordance with the terms of Section 4(b); and (iv) accrued and unpaid expense reimbursement pursuant to Section 6 hereof Such payment shall be made in a lump sum on or before the fifth (5th) day following the date of termination, or as otherwise directed by the Employee; provided, however, that the pro-rated Incentive Bonus and the Transaction Bonus, if any, shall be paid in accordance with Sections 4(a) and 4(b), respectively. For purposes of this Section 4(b), the term "Good Reason" shall mean a material and substantial reduction in the Employee's responsibilities and duties hereunder, which reduction was not preapproved in writing by the employee. If the Employee terminates under this Section 7(b) other than for Good Reason, then the Company shall only be obligated to pay the Employee (i) the Base Salary due him through the date of termination; (ii) accrued and unpaid expense reimbursement pursuant to Section 6 hereof, and (iii) any Transaction Bonus, provided the transaction in question formally closed prior to the date of termination. (c) Disability. If the Employee fails to perform his duties hereunder on account of illness or other incapacity for a period of four (4) consecutive months, then the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee (1) the Base Salary, without offset, for the remainder of the Term in a lump sum or as otherwise directed by the Employee; (ii) any pro-rated Incentive Bonus earned by the Employee through the date of termination; (iii) any Transaction Bonus due the Employee in accordance with the terms of Section 4(b); and (iv) accrued and unpaid expense reimbursement pursuant to Section 6 hereof Such payment shall be made in a lump sum on or before the fifth (5th) day following the date of termination, or as otherwise directed by the Employee; provided, however, that the pro-rated Incentive Bonus and the Transaction Bonus, if any, shall be paid in accordance with Sections 4(a) and 4(b), respectively. (d) Death. If the Employee dies during the Term, then this Agreement shall terminate immediately and the Employee's legal representatives shall be entitled to receive (i) the Base Salary through the date of death (ii) any pro-rated Incentive Bonus earned by the Employee through the date of death; (iii) any Transaction Bonus due the Employee in accordance with the terms of Section 4(b); and (iv) accrued and unpaid expense reimbursement pursuant to Section 6 hereof. Such payment shall be made in a lump sum on or before the fifth (5th) day following the date of death, or as otherwise directed by the Employee's legal representative; provided, however, that the pro-rated Incentive Bonus and the Transaction Bonus, if any, shall be paid in accordance with Sections 4(a) and 4(b), respectively. (e) Effect of Termination. Termination for any reason or for no reason shall not constitute a waiver of the Company's or the Employee's rights under this Agreement nor a release of the Employee from any obligation hereunder except his obligation to perform his day-to-day duties as an employee. The Company's payment obligations to the Employee under Section 7 shall survive any such termination. 8. Severance Payment. (a) The Employee may terminate his employment hereunder in the event of a if change in control of the Company," which, for purposes of this Agreement, shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger, or (y) any sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) any "person" (such as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than the Company, FNFI or any "person" who, on the date hereof, is a director or officer of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities, unless such "person" acquires such securities from FNFI. The Employee may only terminate this Agreement due to a change in control of the Company during the period commencing 60 days and expiring 365 days after such change in control. (b) If, after a change in control of the Company, the Company terminates the Employee's employment in breach of this Agreement or pursuant to Section 7(b), or the Employee resigns for Good Reason pursuant to Section 7(b), then: (i) the Company shall pay the Base Salary due him through the date of termination; (ii) in lieu of any further salary and bonus payments or other payments due to the Employee for periods subsequent to the date of termination, the Company shall pay, as severance to the Employee, an amount equal to the product of (A) the Employee's Base Salary in effect as of the date of termination plus the total Incentive Bonus paid or payable to the employee for the most recently ended calendar year, multiplied by (B) the number 2, such payment to be made in a lump sum on or before the fifth (5th) day following the date of termination; and (iii) the Company shall maintain in full force and effect, for the continued benefit of the Employee for the number of years (including partial years) remaining in the Term, all employee benefit plans and programs in which the Employee was entitled to participate immediately prior to the date of termination, provided that the Employee's continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Employee's participation in any such plan or program is prohibited, the Company shall, at it's expense, arrange to provide the Employee with benefits substantially similar to those which the Employee would otherwise have been entitled to receive under such plans and programs from which his continued participation is prohibited. (c) The Employee shall not be required to mitigate the amount of any payment provided for in this Section 8 or Section 7(b), above, by seeking other employment or otherwise, nor shall any compensation or other payments received by the Employee after the date of termination reduce any payments due under this Section 8 or Section 7(b), above. (d) Notwithstanding anything to the contrary herein, if any payment pursuant to this Section 8 would be a "parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended), such payment shall be limited to the largest portion of such payment as can be paid without being deemed a "parachute payment." 9. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 10. Confidential Information. The Employee acknowledges that 'n his capacity as an employee of the Company he will occupy a position of trust and confidence and he further acknowledges that he will have access to and learn substantial information about the Company and its "affiliates" (as defined in Section 21 below) and their respective operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, and the Company's and its affiliates' financial position and financing arrangements (the "Confidential Information"). The Employee agrees that all such Confidential Information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company and/or its affiliates. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or entity, any such Confidential Information, nor will the Employee advise, discuss with or in any way assist any other person or entity in obtaining or learning about any such Confidential Information; provided, however, that the Employee (i) shall be able to use the Confidential Information in the course of performing his duties hereunder; and (ii) may disclose any Confidential Information pursuant to any law, subpoena or regulation. Accordingly, the Employee agrees that during the Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company. The term "Confidential Information" shall not include (i) any information available to the general public; or (ii) any information known by the Employee prior to the date he became a member of the Board which was obtained from a source who was not bound by a confidentiality obligation to the Company. 11. Non-Competition During Employment Term. The Employee agrees that, during the Term and any extensions thereof, he will devote substantially all his business time and effort, and give undivided loyalty, to the Company. Notwithstanding anything to the contrary in the preceding sentence, the Employee shall be entitled to (i) be on the Board of Directors of the companies that are disclosed on Schedule I hereto; and (ii) spend time on charitable and community organizations that do materially not interfere with the Employee's perfon-nance of his obligations hereunder. During the Term, the Employee will not engage in any way whatsoever, directly or indirectly (other than being on the Board of Directors of the companies set forth on Schedule I hereto), in any business that is competitive with the Company or its affiliates, nor solicit, or in any other manner work for or assist any business which is competitive with the Company or its affiliates. In addition, during the Tenn and any extensions thereof, the Employee will undertake no planning for or organization of any business activity competitive with the work he perfon-ns as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 12. Non-Solicitation After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company is engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. The solicitation of the Company's customers or employees by the Employee after this Agreement is terminated would severely injure the Company. Accordingly, for a period of one (1) year after this Agreement is terminated or the Employee leaves the employment of the Company for any reason whatsoever, the Employee agrees not to solicit any person or business that was at the time of such termination and remains a customer or prospective customer, or an employee of the Company or any of its affiliates, except for the Employee's administrative assistant. 13. Return of Company Documents. Upon termination of this Agreement, Employee shall return promptly to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 14. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of his employment, which are based upon or relate to such employment, shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company, at the sole cost and expense of the Company, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for such improvements or inventions or in order to assign and convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 15. Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions nor will money damages adequately compensate for such injury. It is therefore agreed between the parties that, in the event of a breach by the Employee of any of his obligations contained in this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. The Employee agrees that this Section 14 shall survive the termination of his employment and he shall be bound by its ten-ns at all times subsequent to the termination of his employment for so long a period as Company continues to conduct the same business or businesses as conducted during the Ten-n or any extensions thereof Nothing herein contained shall in any way limit or exclude any other right granted by law or equity to the Company. 16. Indemnification. For the period commencing on the Effective Date and continuing for five (5) years following the expiration or prior termination of this Agreement, regardless of the reason therefor, the Employee shall be indemnified under the Company's Articles of Incorporation and Bylaws, and the Employee shall be covered by the directors' and officers' liability insurance, the fiduciary liability insurance and the professional liability insurance policies that are the same as, or provide coverage at least equivalent to, those applicable or made available by the Company to the senior management of the Company. Independent of the above provisions, if at any time the Employee is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, by reason of the fact that the Employee is or was a director or officer of the Company, then the Employee shall be indemnified by the Company, and the Company pay the Employee's related expenses (including, without limitation, reasonable attorneys' fees and costs) when and as incurred, all to the fullest extent permitted by law. 17. Amendment. This Agreement contains, and its terms constitute, the entire agreement of the parties, and it may be amended only by a written document signed by both parties to this Agreement. 18. Governing Law. California law shall govern the construction and enforcement of this Agreement and the parties agree that any litigation pertaining to this Agreement shall be adjudicated in courts located in California. 19. Severability. If any section, subsection or provision hereof is found for any reason whatsoever to be invalid or inoperative, that section, subsection or provision shall be deemed severed and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement. 20. Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set for the below: To the Company: Micro General Corporation 2510 North Red Hill Avenue Santa Ana, CA 92705 With a copy to: Gregory S. Lane, Esq. 3916 State Street, Suite 300 Santa Barbara, CA 93105 To the Employee: John Snedegar -------------------------------------- -------------------------------------- With a copy to: Martin Eric Weisberg, Esq. Parker Chapin Flattau & Klimpl, LLP 1211 Avenue of the Americas New York, New York 10036 20. Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. 21. Definition of "Affiliate". For purposes of this Agreement, the term "affiliate" shall mean a person or entity that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS VMEREOF the parties have executed this Agreement to be effective as of the date first set forth above. MICRO GENERAL CORPORATION By: ------------------------------------------ Its: ----------------------------------------- JOHN SNEDEGAR --------------------------------------------- [MICRO GENERAL CORPORATION LETTERHEAD] March 24, 2000 Bill Foley Fidelity National Title 3916 State Street Santa Barbara, CA 93105 Dear Bill: I should have your concurrence in writing regarding my change in compensation. As we discussed in my capacity as Chairman and/or CEO of Escrow.com, I will be paid $150,000 as an annual salary and have the right to earn a bonus of up to $100,000 per year. The bonus would be paid at the discretion of the compensation committee. My current salary at Micro General ("MGEN") will remain the same for 2000 but the bonus will be set at up to $150,000 instead of the current 2000 plan which is based on profits. The MGEN bonus will be paid based on the discretion of yourself and Pat Stone. Additionally, my employment arrangement with Escrow.com will have an additional option grant based on the following: If we are able to get Escrow.com public during the below described quarters, then the option as set out will be granted; a) 3rd quarter 2000 or before 450,000 b) 4th quarter 2000 400,000 c) 1st quarter 2001 350,000 d) Any public offering while I serve as either an officer or member of the board 300,000

The options would be set at the IPO price and vest once the stock has traded at a 20% premium to the IPO price for a 30-day period. If this fits with your understanding and concurrence, then please sign below. I will instruct the attorneys to then draw a more formal but simple employment letter. The options will have to be crafted into the employment agreement. Respectfully, /S/ JOHN R. SNEDEGAR ----------------------------- John R. Snedegar In agreement on 26 day of March, 2000. /s/ WILLIAM FOLEY ----------------------------- William Foley [FIDELITY LOGO] MEMORANDUM TO John Snedegar Date May 1, 2001 FROM Patrick F. Stone RE COMPENSATION/BONUS To finalize our discussions, please have your payroll staff make the following compensation adjustments effective April 1, 2001. Additionally, this memo details a bonus plan for the year 2001. Incentives for 2002 and a renewal of your contract will be discussed at year end. New arrangement is as follows: a. Base salary of $450,000 annually, which is currently paid $300,000 by Micro General and $150,000 by Escrow.com. The base salary shall be payable by Micro General Corporation in the event Escrow.com ceases their contribution; b. Bonuses based on pre-tax profits will be paid on the following terms: i. 5% of the first $6,000000 in pre-tax profits (300,000) ii. 10% of all profits in excess of $10,000,000 Paragraph 41B of the April 15, 1999 employment agreement refers to "Key" employees whose bonuses are subtracted from pre-tax profits to calculate my bonus and further those employees are to be designated. The designated employees used in calculating my bonus will be Nancy Nelson, Dale Christensen and Jeff Sanderson. c. Additional bonuses will be paid in the following amounts based on the criteria described accordingly: i. $100,000 based on the execution of an Acquisition strategy of acquiring up to $20,000,000 outside revenue on annualized run rate; ii. $100,000 based on securing funding for RealEC; and iii. $50,000 based on selling LDX to a third party or consolidating the operations into Micro General and reaching a cash flow positive operating model. The above-described bonuses may be prorated based upon the discretion of the Co-Chairman. /s/ PATRICK F. STONE May 2, 2001 EX-10.16 7 a79556ex10-16.txt EXHIBIT 10.16 EXHIBIT 10.16 ================================================================================ SYSTEM DEVELOPMENT, MAINTENANCE AND INFORMATION TECHNOLOGY SERVICES AGREEMENT BETWEEN FIDELITY NATIONAL FINANCIAL, INC. AND MICRO GENERAL CORPORATION ================================================================================ TABLE OF CONTENTS 1. Definitions and Construction ..............................................1 1.1 Definitions...................................................................1 1.2 References....................................................................6 1.3 Headings......................................................................6 1.4 Interpretation of Agreement and Project Scope Documents.......................6 1.5 Agreement and Schedules.......................................................7 2. Scope of Work; Services and Commitments.......................................7 2.1 Execution of Project Scope Documents..........................................7 2.2 Maintenance and Support.......................................................7 2.3 Website Hosting...............................................................8 2.4 Out-of-Scope Services.........................................................8 2.5 Systems Development Projects..................................................8 2.6 Consulting....................................................................9 2.7 Equipment Procurement.........................................................9 2.8 Acceptance Procedure.........................................................10 2.9 Change Orders................................................................11 2.10 Subcontracting...............................................................11 2.11 Licenses and Permits.........................................................11 2.12 Service Locations............................................................11 2.13 Data Migration...............................................................12 2.14 Third-Party Services.........................................................12 3. Contract Administration and Project Team.....................................12 3.1 Project Coordinators.........................................................13 3.2 Project Staff................................................................13 3.3 Restricted Positions. ......................................................13 3.4 Performance Review...........................................................13 3.5 Dispute Resolution...........................................................13 4. Service Levels...............................................................14 4.1 Service Levels...............................................................14 4.2 Measurement and Monitoring Tools.............................................14 4.3 Service Level Failures.......................................................14 4.4 Critical Failures............................................................14 4.4 Failure......................................................................14 4.5 Continuous Improvement and Best Practices....................................14 5. License and Other Grants.....................................................15 5.1 License to MGEN Software and Intellectual Property Rights....................15 5.2 Third Party Software.........................................................17 5.3 Delivery of Source Code; Use of Source Code..................................17 5.4 Facility Requirements........................................................17 5.5 Third Party Services.........................................................17 6. Access Rights and Prohibited Changes.........................................17 6.1 Fidelity System Access.......................................................17 6.2 Prohibited Changes to Software...............................................18

ii 7. Fidelity Obligations.........................................................18 8. Safeguarding Fidelity Data, Confidentiality and Audit Rights.................18 8.1 Safety and Security Procedures...............................................18 8.2 Data Security................................................................19 8.3 Security Relating to Shared MGEN Environments................................19 8.4 Conduct of MGEN Personnel....................................................19 8.5 Fidelity Data................................................................19 8.6 Definition of Confidential Information.......................................20 8.7 Disclosure Of Confidential Information.......................................20 8.8 Protection of Confidential Information.......................................20 8.9 Exceptions...................................................................21 8.10 Return of Confidential Information...........................................21 8.11 Audit Rights. ...............................................................21 8.12 Third Party Discovery........................................................21 9. Payments to MGEN.............................................................21 9.1 Fees. ......................................................................20 9.2 Time and Manner of Payment...................................................22 9.3 Detailed Invoices............................................................22 9.4 Expenses.....................................................................23 9.5 Pricing Adjustments..........................................................23 9.6 Most Favored Customer Pricing. ..............................................23 9.7 Taxes... ....................................................................23 9.8 Proration....................................................................23 9.9 Rights of Set-off............................................................23 10. Representations And Warranties...............................................23 10.1 By Fidelity..................................................................24 10.2 By MGEN......................................................................24 10.3 Disclaimer...................................................................25 11. Term And Termination.........................................................26 11.1 Term ......................................................................26 11.2 Termination for Cause........................................................26 11.3 Termination for Nonpayment...................................................26 11.4 Transition Assistance on Termination.........................................27 11.5 Right of Immediate Payment...................................................27 11.6 Survival.....................................................................27 12. Indemnities..................................................................27 12.1 Indemnity by Fidelity........................................................27 12.2 Indemnity by MGEN............................................................28 12.5 Indemnification Procedures...................................................28 12.6 Subrogation..................................................................29 12.7 Non-Exclusive Remedy.........................................................29 13. Insurance....................................................................29 13.1 Insurance Maintained by MGEN.................................................29 13.2 Insurance Documentation......................................................30 14. General Provisions...........................................................30

iii 14.1 Binding Nature and Assignment................................................30 14.2 Notices......................................................................30 14.3 Counterparts.................................................................31 14.5 Relationship of Parties......................................................31 14.6 Approvals and Similar Actions................................................31 14.7 Force Majeure................................................................31 14.8 Severability.................................................................31 14.9 Waiver ......................................................................31 14.10 Attorneys' Fees..............................................................32 14.11 Media Releases...............................................................32 14.12 No Third Party Beneficiaries.................................................32 14.13 Entire Agreement.............................................................32 14.14 Governing Law and Dispute....................................................32 Schedule 1.Support....................................................................i Schedule 2.Hosting Services..........................................................ii Schedule 3.Technology Proposal......................................................iii Schedule 4.Project Scope Documents...................................................iv Schedule 7.List of Project Coordinators and Project Area Managers...................vii Schedule 8.Rate Schedule...........................................................viii Schedule 9.Maintenance and Support Charges (Year One)................................ix Schedule 10.Website Hosting Fees (Year One)...........................................x

iv SYSTEM DEVELOPMENT, MAINTENANCE AND INFORMATION TECHNOLOGY SERVICES AGREEMENT This Agreement is made and entered into as of this 23d day of May, 2001 (the "Effective Date"), by and between Fidelity National Financial, Inc., a Delaware Corporation, and its Members, as defined below (collectively, "Fidelity"), on the one hand, and Micro General Corp., a Delaware Corporation, on behalf of itself and any subsidiary performing services hereunder (collectively, "MGEN"), on the other hand. WHEREAS, Fidelity is a real estate service company that provides title insurance and performs other title-related services such as escrow, collection and trust activities, real estate information and technology services, trustee sales guarantees, appraisals, credit reporting, attorney services, flood certification, real estate tax service, reconveyances, recordings, foreclosure publishing and posting services and exchange intermediary services (the "Business"); WHEREAS, MGEN is a comprehensive provider of business communications and information technology solutions including electronic data processing, facilities management, systems integration, systems development, telecommunications and related services; WHEREAS, the purpose of this Agreement is to establish and memorialize the general terms and conditions whereby MGEN would provide certain communications and information technology services to Fidelity; and WHEREAS, MGEN is willing to offer and provide to Fidelity, and Fidelity shall be entitled, but not obligated, to obtain from MGEN the communications and information technology services described in this Agreement on the terms and conditions set forth in this Agreement and in the accompanying Project Scope Documents (as hereinafter defined). NOW, THEREFORE, for and in consideration of the agreements of the parties set forth below, the parties hereby agree as follows: 1. DEFINITIONS AND CONSTRUCTION 1.1 DEFINITIONS "Affiliate" means any corporation, partnership, limited liability company or other entity directly or indirectly controlled by or under the common control of Fidelity. Notwithstanding the foregoing, the term shall not include MGEN (or any entity controlled by MGEN). "Best Practices" shall have the meaning set forth in Section 4.5. "Business" shall have the meaning provided in the first Recital. With respect to Fidelity, the term "Business" includes business areas into which Fidelity may expand in the future. "Change" shall mean any modification or change to System Software, Equipment or Services that would materially alter the functionality, performance standards or technical environment of such System, Software or Equipment, the manner in which the Services are provided, the composition of the Services, or the cost of the Services to Fidelity. 1 "Confidential Information" shall have the meaning provided in Section 8.6. "Deliverables" means the deliverable items (a) specified for each Milestone in an applicable Project Scope Document, or (b) otherwise identified as items to be delivered by MGEN to Fidelity. "Designated Services" shall have the meaning set forth in Section 2.1. "Developed System" means any System created in connection with a Systems Development Project or for which MGEN undertakes responsibility for the development effort, pursuant to this Agreement or any Project Scope Document. Notwithstanding anything to the contrary, the SIMON System shall not be considered a Developed System; provided, however, that any new System or Software developed by MGEN in accordance with this Agreement or any Project Scope Document which includes or incorporates any part of the SIMON System shall be considered a Developed System. "Documentation" means those operating manuals, users' manuals, programming manuals, modification manuals, flow charts, drawings and software listings designed to assist a user's understanding or application of MGEN Software, Third Party Software or such other software as the context may contemplate. "Enhancements" shall mean all improvements, additions, and any modifications to a technology. The term "Enhancements" shall include all upgrades; bug fixes; work-arounds; software patches and other fixes; Improvements; changes or additions required to integrate the technology into other applications, operating systems, or computer hardware configurations; and all works of authorship, data, know-how, technology, information, inventions and/or discoveries related thereto which are conceived, or conceived and reduced to practice by a Party, but excluding all modifications or improvements developed with third parties to the extent the right to license such modifications or improvements is not obtained, after reasonable efforts to do so. "Equipment" shall have the meaning set forth in Section 2.8. "Existing Services" means those Services that are currently being provided to Fidelity and its Affiliates, and that are listed on Schedule 5. "Fees" shall mean, collectively, fees payable to MGEN in connection with its performance of Services hereunder or pursuant to a Project Scope Document, and any other amounts payable to MGEN hereunder or pursuant to a Project Scope Document. "Fidelity Data" shall mean all data or information regarding Fidelity's business, including information relating to customers, employees, technology, operations, facilities, consumer markets, products, capacities, systems, procedures, security practices, research, development, business affairs and finances, innovations, inventions, designs, business methodologies, improvements, trade secrets, copyrightable and patentable subject matter and other similar information obtained by or disclosed to or submitted to MGEN by or on behalf of Fidelity in connection with the performance of this Agreement or any applicable Project Scope Document. It is expressly agreed and understood that Fidelity Data is "Confidential Information" under Section 8.6. 2 "Fidelity Regulatory Requirements" shall mean the laws, rules and regulations on an international, federal, state and local level to which Fidelity is required to submit or to which it voluntarily submits. "Fidelity Service Location" shall mean any site or facility owned, leased or controlled by Fidelity, and where Services shall be performed in connection with this Agreement or any Project Scope Document. "Fidelity Systems" means Systems that are being operated by or on behalf of Fidelity immediately prior to the Effective Date. Notwithstanding anything to the contrary, the SIMON System is not a Fidelity System. "Help Desk" means the service of telephone support for assisting in resolving information technology and communications problems of Fidelity. "Hosting Environment" shall mean the physical configuration, and the database environment, which is necessary to operate the Fidelity Website or a Fidelity Network in accordance with the terms and conditions of this Agreement, and any applicable Project Scope Document including without limitation descriptions of the hardware and software platforms, ancillary software, site security, and telecommunications capabilities. The Specifications for the Hosting Environment shall be as set forth in the applicable Project Scope Document. "Improvement" shall mean (i) for copyrightable or copyrighted material, any modification, correction, addition, extension, upgrade, improvement, compilation, abridgement, or other form in which an existing work may be recast, transformed, or adapted; (ii) for patentable or patented material, any improvement thereon; and (iii) for material which is protected by trade secret, any new material derived from such existing trade secret material, including new material which may be protected by copyright, patent, and/or trade secret. "Intellectual Property Rights" shall mean any and all rights existing now or in the future under patent law, copyright law, industrial design rights law, semiconductor chip and mask work production law, moral rights law, trade secret law, trademark law, unfair competition law, publicity rights law, privacy rights law, and any and all similar proprietary rights, and any and all renewals, extensions, and restorations thereof, now or hereafter in force and effect worldwide. "Internet" shall mean the global Network of interconnected computer Networks (or any part thereof), using TCP/IP or such other Network interconnection or communications protocols as may be adopted from time to time, which is used to deliver data to a computer or other digital electronic device, whether such data is delivered through on-line browsers, off-line browsers, or through electronic mail, broadband distribution, satellite, wireless or otherwise. "Losses" means all losses, liabilities, damages and claims (including taxes) to third persons or entities, and all related costs and expenses (including any and all attorneys and expert witness fees and costs of investigation, litigation, settlement, judgment, interest and penalties). "Maintain" or "Maintenance" means, collectively, the activities, services and functions identified in Section 2.2. 3 "Member" means any entity that is an Affiliate of Fidelity. "MGEN Service Location" shall mean any location owned, leased, or controlled by MGEN and from or at which MGEN provides services in connection with this Agreement or any applicable Project Scope Document, other than Fidelity Service Locations. "MGEN Software" shall mean all Software used, useful or developed by MGEN in connection with the performance of its obligations pursuant to this Agreement or any Project Scope Document, including the SIMON System. "MGEN Tools" shall mean any software development and performance testing, know-how, methodologies, processes, technologies or algorithms used by MGEN in providing Services, and based upon trade secrets or Confidential Information of MGEN, or otherwise based on Intellectual Property Rights owned or licensed by MGEN. "Milestone" means an individual task or set of tasks to be completed by a certain date as described in any Project Scope Document. "Network" shall mean a group of computers or other digital electronic devices connected by communications facilities, either through long-term connections, such as cables, or through more temporary connections, such as by telephone, by satellite, or other communications links. The term "Network" encompasses, but is not limited to, Local Area Networks ("LANs") and Wide Area Networks ("WANs"), and includes user-to-user as well as distributed communications. "New Project" shall mean any Services to be rendered by MGEN in connection with an undertaking that is not a Project as of the Effective Date. "New Project Scope Documents" shall mean any Project Scope Document executed in connection with the rendering of Services relating to a New Project. "New System" shall have the meaning set forth in Section 2.6.1. "Out-of-Scope Services" shall have the meaning set forth in Section 2.5. "Other Service Location" shall mean any location, other than an MGEN Service Location or a Fidelity Service Location, permitted in accordance with this Agreement or an applicable Project Scope Document from which, or to which, Services are provided. "Party" shall mean either Fidelity or MGEN, as the case may be. "Project" means each of the discrete tasks or undertakings to be performed by MGEN pursuant to Section 2.1 of this Agreement. This term shall include, when the context allows, all New Projects. "Project Manager" shall have the meaning set forth in Section 3.1. "Project Scope Document" shall mean the various individual written documents executed by an authorized signatory of each Party documenting the deliverables, Milestones, tasks, and other relevant responsibilities with respect to a Project Area. This term shall include, when 4 the context allows, all New Project Scope Documents executed in accordance with the procedure set forth in Section 2.6. "Project Budget" shall mean a written document that contains (a) a long-range plan and budget for a Project and (b) an annual plan and budget for a Project. "Project Coordinator" shall have the meaning set forth in Section 3.1. "Service Levels" shall have the meaning set forth in Section 4.1. "Service Location" shall mean any Fidelity Service Location, MGEN Service Location or Other Service Location. "Services" shall mean those services, activities, functions or undertakings to be performed by MGEN in connection with the discharge of its obligations hereunder and under any Project Scope Document, including, Designated Services and the general services, activities and functions outlined in Section 2. "SIMON System" means the S.I.M.O.N. system as described in the attached Schedule 3, entitled "Technology Proposal," and includes, when the context allows, future versions of such System. "Software shall mean the MGEN Software and Third Party Software, collectively. "Source Code" means computer programs, instructions and related material written in a human-readable source language in form capable of serving as the input to a compiler or assembler program, and in form capable of being modified, supported and enhanced by programmers reasonably familiar with the source language. "Specifications" means the descriptions of the technical requirements, component parts, features, functionality, performance criteria, operating conditions, interfaces, data transfer, processing parameters, and protocols, associated with the undertaking by MGEN of Services, as may be specifically set forth herein or in a Project Scope Document. "Support" shall have the meaning set forth in Section 2.2.3. "Systems" means computer programs, the tangible media on which they are recorded, their supporting documentation, including input and output formats, program listings, narrative descriptions and operating instructions, as well as the hardware upon which such computer programs are run or stored. "Systems Development Project" means, collectively, the activities, services and functions identified in Section 2.6, as well as any other work performed by MGEN with regard to a System that exceeds Maintenance or Support in terms of scope or level of effort. Systems Development Projects initially shall consist of those Projects identified in the attached Schedule 3 entitled "Technology Proposal." "Technology Proposal" shall mean the outline of Services to be performed by MGEN, together with its descriptive provisions and estimates, attached hereto as Schedule 3. 5 "Third Party Services Contracts" means the contracts pursuant to which Fidelity receives services as of the Effective Date for use in providing the Existing Services or pursuant to which Fidelity receives Third Party services during the Term. "Third Party Software" shall mean all software and related Documentation owned by a third party, validly licensed to, and used by, MGEN in connection with the performance of its obligations pursuant to this Agreement or any Project Scope Document. "Third Party System" means any System which (1) is not a Fidelity System or the SIMON System, and (2) is acquired or licensed from a third party for operation by MGEN on behalf of Fidelity under this Agreement. "Website" shall mean a series of interconnected Web Pages residing in a single directory on a single server. "Web Page" means a document or file that is intended to be accessible by Internet users. Other capitalized terms used in this Agreement are defined in the context in which they are used and shall have the meanings indicated by such use. 1.2 REFERENCES. In this Agreement and the Schedules to this Agreement, including the Project Scope Document(s) and any schedules attached thereto: 1.2.1 the Schedules to this Agreement shall be incorporated into and deemed a part of this Agreement and all references to this Agreement shall include the Schedules to this Agreement; 1.2.2 this Agreement shall be incorporated into and deemed a part of any Project Scope Documents hereafter executed by the Parties; 1.2.3 the schedules to any Project Scope Document shall be incorporated into and deemed a part of such Project Scope Document and all references to such Project Scope Document shall include the schedules to such Project Scope Document; 1.2.4 references to any law or regulation shall mean references to the law or regulation in changed or supplemented form to a newly adopted law or regulation replacing a previous law or regulation; and 1.2.5 references to the word "including" or the phrase "e.g." in this Agreement shall mean "including, without limitation." 1.3 HEADINGS. The article and Sections headings and the table of contents are for reference and convenience only and shall not be considered in the interpretation of this Agreement or any Project Scope Document. 1.4 INTERPRETATION OF AGREEMENT AND PROJECT SCOPE DOCUMENTS. The terms and conditions set forth in this Agreement shall govern MGEN's provision of Services to Fidelity under the Project Scope Documents, except as otherwise expressly set forth herein. In the event of a conflict between the terms of this Agreement and any 6 Project Scope Document, unless otherwise provided herein [or expressly stated in the Project Scope Document], the terms of this Agreement shall prevail. In the event of a conflict between a Project Scope Document and the schedules to a Project Scope Document, the terms of the Project Scope Document shall prevail. 1.5 INTERPRETATION OF AGREEMENT AND SCHEDULES. In the event of any conflict between (a) the terms of this Agreement or a Project Scope Document, on the one hand, and (b) any Schedule to this Agreement (including the Technology Proposal) on the other hand, the terms of this Agreement or the Project Scope Document shall prevail. 2. SCOPE OF WORK; SERVICES AND COMMITMENTS 2.1 EXECUTION OF PROJECT SCOPE DOCUMENTS. MGEN agrees to perform Services in connection with each Project (including any New Project) described herein or in any Project Scope Document attached hereto. Following execution of this Agreement, the Parties agree to utilize their best efforts to promptly negotiate and execute Project Scope Documents not inconsistent with the provisions of this Agreement and the Schedules hereto. Each Project Scope Document shall identify (i) the Services to be performed with respect to such Project (the "Designated Services"), (ii) the time frames and Milestones for the performance of the Designated Services, (iii) any special terms and conditions applicable to Designated Services (including Service Levels and Specifications, as appropriate) and (v) such other provisions as the Parties may agree. 2.2 MAINTENANCE AND SUPPORT. MGEN shall provide the following Support and Maintenance Services for a fixed annual fee, as specified in Section 9.1.2. 2.2.1 SYSTEMS MAINTENANCE. MGEN shall update Systems in order to meet changing information requirements, including, changing data formats, fixing bugs, adapting Software to interface with new hardware devices where feasible, and performing required file maintenance. 2.2.2 HARDWARE MAINTENANCE. MGEN shall maintain, support, and periodically test the Equipment , except where such obligations are the responsibility of an identified third party. 2.2.3 SUPPORT. MGEN shall provide Support with respect to Systems, Software, data Networks, voice Networks and platforms used or useful in connection with Fidelity's Business. The term "Support" shall include (a) inputting, connecting, and manipulating data, (b) formulating queries (c) designing and revising reports, (d) providing operator services, (e) administering a Help Desk, (f) dispatching technical service engineers, (g) revising and updating web pages, (h) training Fidelity employees (consistent with Section 2.3) and (i) such other tasks that are customarily performed by service providers similarly situated or as specified in a Project Scope Document. In addition, such Support shall include the Services specified on the attached Schedule 1, entitled "Support." 7 2.3 TRAINING. The terms and conditions regarding onsite training for Fidelity's Project Coordinator and other such employees or agents as Fidelity may select with respect to each Project shall be mutually agreed upon in good faith by the Parties in the applicable Project Scope Documents 2.4 WEBSITE HOSTING. MGEN shall provide and Maintain a Hosting Environment to host the Fidelity Website, and shall provide website hosting services for the Fidelity Website, which services may be detailed in a Project Scope Document but shall not be inconsistent with Schedule 2 ("Hosting Services"). MGEN shall be responsible for obtaining and Maintaining the computer hardware and software utilized in connection with the Hosting Services hereunder. MGEN shall be entitled to a fixed annual charge for such Hosting Services, in accordance with Section 9.1.2 2.5 OUT-OF-SCOPE SERVICES. Each Party agrees and acknowledges that the performance of Maintenance and Support Services by MGEN under Section 2.2 and Hosting Services under Section 2.4 shall be provided at fixed fees pursuant to Section 9.1.2 of this Agreement. Each Party further agrees and acknowledges, however, that during the course of MGEN's performance of Maintenance and Support Services hereunder, unforeseen circumstances could compel MGEN to propose, or Fidelity to request, that certain services not otherwise contemplated by the Parties as of the Effective Date be performed ("Out-of-Scope Services"). To allow Fidelity to manage all such Out-of-Scope Services, MGEN agrees that (a) it shall perform no Out-of-Scope Service without first obtaining Fidelity's written approval and (b) it shall detail all costs and fees for Out-of-Scope Services in accordance with Section 9.3. 2.6 SYSTEMS DEVELOPMENT PROJECTS. MGEN shall undertake Systems Development Projects in accordance with this Section 2.6. Either Party may determine that implementation of a New Project is advisable (and MGEN shall have a duty to bring such advisable New Projects to the attention of Fidelity). Accordingly, upon the initiative of either Party, and upon reasonable notice, the Parties shall meet and confer, and exchange information concerning the potential New Project. Upon completion of such information exchange, the Parties shall conduct good faith negotiations concerning (a) the scope of Services to be provided by MGEN, and (b) the projected costs of such Services and Developments, in accordance with this Section 2.6. To the extent such Project rises to the level of a New Project, the Parties agree to execute appropriate additional New Project Scope Documents. 2.6.1 SYSTEMS ANALYSIS AND DESIGN. Upon Fidelity's request, and in exchange for consulting fees provided under Section 9.1.1, MGEN shall analyze and assess all aspects of any project contemplating the addition of a new System (a "New System"), the Enhancement to an existing System, or the creation or substantial Enhancement to an Internet Website, including, undertaking a feasibility study, proposing a general design, prototyping, creating an architectural design, establishing Specifications, and preparing a detailed statement of work (collectively, "Design"). 2.6.2 DEVELOPMENT. Upon completion of the Design, and upon Fidelity's acceptance of such Design in accordance with Section 2.9, MGEN shall prepare a Quote for the Development and Implementation (as such terms are defined below) of such Design, as provided in Section 2.6.4, below. Upon 8 Fidelity's acceptance of the Quote, MGEN shall code, develop, and test ("Development") the referenced New System that shall add the required functionality, features or Enhancements. 2.6.3 IMPLEMENTATION. Upon completion of any Development obligations it may have, MGEN shall (subject to the Quote Procedure set forth in Section 2.6.4) train appropriate Fidelity employees, convert any existing Systems to the New System and install the New System ("Implementation"). 2.6.4 MGEN QUOTES; BID PROCEDURE. In connection with any Development or Implementation work requested by Fidelity or required to complete a Systems Development Project, and notwithstanding anything to the contrary in any Schedule hereto or in any Project Scope Document, MGEN shall provide Fidelity with a quote for charges it reasonably expects to incur in performing such work (a "Quote"). Consistent with Section 2.15 hereunder, Fidelity shall thereafter have the option to contract for the provision of such services with any third-party in its sole and absolute discretion. In the event Fidelity selects MGEN as its service provider, MGEN shall be bound by its Quote, Fidelity shall be entitled to rely on such Quote, and Fidelity shall be bound by such Quote under Section 9.1.3; provided, however, that adjustments to the Quote may be submitted for approval in connection with the Change Order Process specified in Section 2.10. 2.6.5 COST REDUCTION. In a situation in which MGEN is providing a fixed cost service to Fidelity, and MGEN is able to sell identical or similar services to a third party such that MGEN's fixed cost of providing such service is shared by Fidelity and such third party, then MGEN shall inform Fidelity of such eventuality and the parties shall mutually agree to a reduction of the amount paid by Fidelity for such services by an agreed amount. 2.7 CONSULTING. In addition to Maintenance, Support, Hosting, Design, Implementation and Development Services, upon Fidelity's request and in exchange for the fees set out in Section 9.1.1, MGEN shall provide Fidelity with Consulting Services. Such Consulting Services shall include, but not be limited to (at Fidelity's direction): (a) a review of Fidelity's technology needs in light of Fidelity's business plan; (b) interviewing Fidelity executives to determine and clarify Fidelity's business objectives and associated technology needs; (c) advising Fidelity on its future technology needs; (d) evaluating alternative or emerging technologies, (e) preparing a technology plan integrating Fidelity Systems and Developed Systems with new technology; (f) advising Fidelity with respect to its Networks,(g) identifying and advising Fidelity with respect to Best Practices (as such term is defined in Section 4.5), and (h) such other Consulting Services (including Out of Scope Services, as appropriate) mutually agreed to by the Parties. 2.8 EQUIPMENT PROCUREMENT. At Fidelity's request and at MGEN's reasonable and good faith discretion, MGEN shall obtain on behalf of Fidelity equipment and hardware that are related to the Services ("Equipment"). 2.8.1 PROCUREMENT SERVICES. MGEN shall (1) identify suppliers with the most favorable terms (including the lowest cost supplier) for any Equipment and 9 (2) upon Fidelity's selection and approval, acquire the Equipment on Fidelity's behalf or lease, or coordinate the leasing of, such Equipment to Fidelity. 2.8.2 PROCUREMENT COMPENSATION. MGEN shall be compensated for such procurement services at MGEN's hourly rates, in accordance with Section 9.1.1, and Fidelity shall pay to MGEN, the supplier, or any third party lessor, as applicable, the purchase or lease fees in respect of the Equipment. Except as otherwise agreed in writing by the Parties or as otherwise provided in an applicable Project Scope Document, all rights in and title to any Equipment purchased by MGEN on behalf of Fidelity pursuant to this Agreement or any Project Scope Document shall belong to Fidelity. 2.9 ACCEPTANCE PROCEDURE. The following acceptable procedure shall apply to all Deliverables MGEN provides to Fidelity under this Agreement. 2.9.1 VERIFICATION PERIOD. Following timely receipt of Deliverables from MGEN, Fidelity shall have not less than thirty (30) or more than forty-five (45) calendar days (the "Verification Period") in which to review, examine and verify such Deliverables and notify MGEN (a) of any material failure thereof to meet applicable Specifications or (b) of a material failure thereof otherwise to meet Fidelity's needs, as Fidelity may determined in the exercise of commercially reasonable judgment (a "Deliverable Failure"). Fidelity agrees to use commercially reasonable efforts to provide MGEN with all information reasonably available regarding any Deliverable Failure. If Fidelity fails to accept or reject a Deliverable within the Verification Period specified above, the Deliverable shall be deemed accepted; provided, however, that any failure by Fidelity to discover or notify MGEN of defects within any Verification Period shall not negate any of MGEN' representations or warranties, nor waive any of Fidelity's rights or remedies. 2.9.2 CORRECTION BY MGEN. Upon receipt of notice regarding the Deliverable Failure, MGEN shall use its best efforts, at MGEN's sole cost and expense, to correct any such Deliverable Failure and to resubmit the corrected applicable Deliverables to Fidelity as soon as commercially and technically practicable, but in all cases within forty-five (45) days or such time as the parties mutually agree, following MGEN's notice of a Deliverable Failure. Subject to Fidelity's rights under Section 11 of this Agreement, MGEN shall repeat the process of correction and resubmission of an applicable Deliverable until Fidelity's acceptance. 2.9.3 REMEDY. In the event MGEN is unable to provide Fidelity with an acceptable Deliverable in a timely manner and in accordance with this Section 2.9, upon request MGEN shall reimburse Fidelity for all fees, costs, and expenses Fidelity has incurred in connection with the Deliverable and associated development. The parties further agree that failure to timely correct a Deliverable Failure shall be deemed a material breach of this Agreement. 10 2.9.4 ALTERATIONS TO ACCEPTANCE PROCEDURES. A Project Scope Document may specify standards, criteria and procedures relating to the acceptance of Services or Deliverables provided that such Document is not inconsistent with this Section 2.9. 2.10 CHANGE ORDERS. All Changes shall be controlled using the following formal change control process: (1) the Party proposing a Change will document it in writing, provide technical and cost justification for the Change, and specify a desired implementation date; (2) the Party receiving the proposed Change will assess the impact of the proposed Change, considering resources required, technological implementation and other contemplated and in-process changes; (3) the Parties shall negotiate in good faith toward a mutually acceptable proposal, and shall memorialize such proposal in writing; (4) the completed proposal shall be presented to the Project Coordinators for written approval; (5) no Changes will be implemented without (a) such written approval and (b) a written agreement setting forth and defining Specifications, schedules, resources to be utilized, responsibilities of both Parties and the criteria for successful implementation of such Change. MGEN shall be responsible for ensuring that the Change Control Process established by this Section 2.10 is followed, and Fidelity shall not be obligated to pay for Changes undertaken by MGEN which do not fully comply with this Section. Additional provisions with respect to the Change Control Process for any Project may be specified in any Project Scope Document, provided such provisions are not inconsistent herewith. 2.11 SUBCONTRACTING. Prior to subcontracting any portion of the Services, MGEN shall notify Fidelity of the proposed subcontract. Fidelity shall have the right to approve such subcontractor, which approval shall not be unreasonably withheld or delayed. No subcontracting shall release MGEN from its responsibility for its obligations under this Agreement or under any Project Scope Document. MGEN shall be responsible for the work and activities of each of its subcontractors, including compliance with the applicable terms and provisions of this Agreement. MGEN shall be responsible for all payments of fees and expenses, as appropriate, to its subcontractors. 2.12 LICENSES AND PERMITS. MGEN shall obtain and maintain all necessary licenses (including, but not limited to, Software licenses), consents, approvals, and permits and any authorizations required by legislative enactments and regulations applicable to it that are legally required for MGEN to provide the Designated Services. Fidelity shall be primarily responsible for authorizations relating to Fidelity Regulatory Requirements. Subject to the foregoing, and upon request, each Party shall cooperate with and provide reasonable assistance to the other Party in obtaining any such licenses, consents, approvals, permits and authorizations. 2.13 SERVICE LOCATIONS. Unless otherwise agreed by Fidelity, the Designated Services shall be provided at (1) the Fidelity Service Locations, and (2) the MGEN Service Locations. 2.13.1 OTHER SERVICE LOCATIONS. In addition, MGEN may provide the Designated Services from Other Service Locations, upon prior approval by Fidelity provided that MGEN demonstrates to Fidelity's reasonable satisfaction that the provision of the Designated Service from such Other Location will not 11 result in any additional cost to Fidelity and that there are no increased risks to Fidelity regarding the security of Fidelity Data or the disclosure of Fidelity Confidential Information. If MGEN provides the Designated Services from an Other Service Location in accordance with this Agreement or any applicable Project Scope Document, such Other Service Locations shall be deemed to be a "MGEN Service Location" for purposes of this Agreement. MGEN and MGEN agents, representatives and subcontractors, may not provide or market services to a third party from a Fidelity Service Location without Fidelity's consent. 2.13.2 SHARED ENVIRONMENT. In the event that MGEN desires to migrate services or technology subject to this Agreement to a shared environment or from one shared environment to another shared environment, MGEN will, prior to migrating such services or technology, (1) advise Fidelity of such desire; (2) consult with Fidelity on a proposal and transition plan; (3) demonstrate to Fidelity's reasonable satisfaction that the use of such shared environment will not result in any additional cost or decreased Service Levels to Fidelity and that there are no increased risks to Fidelity regarding security of Fidelity Data or the disclosure of Fidelity's Confidential Information in contravention of Section 8; (4) when commercially reasonable, operate in parallel to demonstrate that there are no such increased risks to security, confidentiality, Service Levels or user interfaces; (5) work with Fidelity to mitigate any identified risks to Fidelity's Business; (6) review with Fidelity the effect of such migration on Fidelity Regulatory Requirements and contractual obligations and (7) obtain Fidelity's consent to the transition plan to the shared environment, as presented. 2.14 DATA MIGRATION. MGEN agrees that Fidelity Data shall be stored in industry-standard formats, and shall be readily portable to industry-standard, off-the-shelf database applications. 2.15 THIRD-PARTY SERVICES. Notwithstanding any request made to MGEN by Fidelity, Fidelity shall have the right to contract with any third party for the performance of Services. In the event Fidelity contracts with a third party to perform any Service, MGEN shall cooperate in good faith with Fidelity and any such third party to the extent reasonably required by Fidelity. To the extent such cooperation requires additional Services by MGEN, MGEN shall provide such Services and shall be compensated consistent with the provisions of this Agreement or any applicable Project Scope Document. 2.16 EMERGENCY PROJECTS. From time to time it may be necessary for Fidelity to request MGEN to undertake a Project on an emergency basis. The parties understand and acknowledge that the exigencies of such situations may mandate that MGEN take action, including commitment of time, resources and effort, to address the Project. The parties shall honor commitments and actions that were reasonable under the circumstances, and shall endeavor to comply with the New Project provisions set out above as soon as practicable. 3. CONTRACT ADMINISTRATION AND PROJECT TEAM 12 3.1 PROJECT COORDINATORS. Each Party shall appoint an individual (the "Project Coordinator") who, from the Effective Date, shall serve on a dedicated basis as the primary representative for such Party under this Agreement. A Party's appointment of a Project Coordinator shall be subject to the other Party's reasonable approval. The Project Coordinator shall (1) have overall responsibility for managing and coordinating the performance of such Party's obligations under this Agreement and the Project Scope Documents, (2) be authorized to act for and on behalf of such Party with respect to all matters relating to this Agreement and the Project Scope Documents and (3) appoint the individuals ("Project Managers") who shall be primarily responsible for supervising performance under the Project Scope Documents. A current list of Project Coordinators and Project Managers shall be maintained as Schedule 7, as such Schedule may be amended from time to time. 3.2 PROJECT STAFF. Each Party, through its Project Coordinators and Project Managers, shall only assign employees who possess the requisite training and skills to perform the Designated Services contemplated under any Project Scope Document ("Project Staff"). 3.3 RESTRICTED POSITIONS. MGEN acknowledges that certain MGEN employees, including those assigned as (i) the MGEN Project Coordinator, (ii) the MGEN Project Managers, (iii) any MGEN employee who spends over thirty percent (30%) of his or her time on Fidelity matters; and (iv) such other MGEN employees as the parties may mutually designate in writing (collectively or individually, as appropriate "Restricted Positions") may result in such MGEN employees ("Restricted Position Employees") being knowledgeable of sensitive Confidential Information. MGEN shall use its best efforts to ensure that Restricted Position Employees safeguard Fidelity confidential information. 3.4 PERFORMANCE REVIEW. The MGEN Project Coordinator and the Fidelity Project Coordinator will meet at least monthly to review the performance of both Parties under this Agreement, and shall meet when reasonably requested by either Party to review the performance of either party under this Agreement. At the request of either Party, written or taped minutes of such meetings may be kept. 3.5 DISPUTE RESOLUTION. If there is any dispute or disagreement between the Parties either in interpreting any provision of this Agreement or about the performance of either Party, then upon the written request of either Party, each of the Parties, through their respective Project Coordinators, will meet and confer to negotiate in good faith in an effort to resolve the dispute without any formal proceeding. During the course of such negotiation(s), all reasonable requests made by one Party to the other for information, including copies of relevant documents, will be honored. The specific format for such discussions will be left to the discretion of the Project Coordinators. If the Project Coordinators are unable to resolve the dispute within 30 days after their first meeting, each Party will appoint a designated officer of its corporation to attempt to resolve the dispute. No litigation for the resolution of such disputes may be commenced until the designated officers have met and either Party has concluded in good faith that amicable resolution through continued negotiation does not appear likely (unless either party fails or refuses to schedule such a meeting of officers within a reasonable time after a request to do so by the other Party). 13 4. SERVICE LEVELS. 4.1 SERVICE LEVELS. Commencing on the Effective Date, MGEN shall perform the Designated Services at the performance levels and standards (collectively, the "Service Levels") (a) set forth in the applicable Project Scope Documents, provided the same are not inconsistent with this Article 4, and (b) established by the warranties set forth in Sections 10.2.4 and 10.2.5. 4.2 MEASUREMENT AND MONITORING TOOLS. MGEN shall measure and monitor its compliance with the Service Levels. Such measurement and monitoring shall permit reporting at a level of detail sufficient for Fidelity to verify compliance with the Service Levels. On a schedule set by the parties in applicable Project Scope Documents, MGEN shall provide periodic performance and status reports to Fidelity, in a form mutually agreed by the parties, indicating the level of achievement of the Service Levels. Fidelity shall have the right to require MGEN to outsource its responsibilities with respect to monitoring any Service Level established hereunder or pursuant to any Project Scope Document. Fidelity shall have the right to audit MGEN's compliance with the Service Levels hereunder at any Service Location upon reasonable written notice. 4.3 SERVICE LEVEL FAILURES. In the event that either party identifies a failure during any calendar month of the Term to provide any of the Designated Services in accordance with the applicable Service Levels (each such failure, a "Service Level Failure"), the applicable MGEN Project Coordinator promptly shall arrange a meeting with the Fidelity Project Coordinator and provide a plan, reasonably satisfactory to Fidelity, to address and correct such failures within the timeframe set forth in such plan. Failure by MGEN to so provide and effect such plan shall be deemed a material breach of this Agreement. 4.4 CRITICAL FAILURES. In the event that a Service Level Failure either (a) has a material adverse business impact upon Fidelity's Business, or (b) represents a continued failure to correct non-critical Service Failures over a three-month period (in each case a "Critical Failure"), then MGEN shall submit a written report to the Fidelity Project Manager detailing the cause of such incident and the remedial measures taken with respect thereto within 15 business days of the Critical Failure. Failure by MGEN to provide and effect such remedial measures within such 15 business day period shall be deemed a material breach of this Agreement. In the event of any interruption in a Critical Service that does not cause a Critical Failure, the MGEN Project Manager shall submit a written report to the Fidelity Project Manager detailing the cause of the incident and the remedial measures taken with respect thereto within 30 business days thereafter. Failure by MGEN to provide and effect such remedial measures within such 30 business day period shall be deemed a material breach of this Agreement. 4.5 CONTINUOUS IMPROVEMENT AND BEST PRACTICES. MGEN agrees to use commercially reasonable efforts to: (1) on a continuous basis, as part of the total quality management processes, identify ways to improve the Service Levels, and (2) identify and apply proven techniques and MGEN Tools from other installations within operations that would benefit Fidelity either operationally or financially (collectively such efforts shall be hereinafter referred to as "Best Practices"). 14 5. LICENSE AND OTHER GRANTS 5.1 LICENSE TO MGEN SOFTWARE AND INTELLECTUAL PROPERTY RIGHTS. In consideration of Fidelity's payment of fees and other obligations hereunder, MGEN hereby grants to Fidelity during the Term and Transition Period a nonexclusive, royalty-free, irrevocable and perpetual (except as expressly limited elsewhere herein) license as follows: 5.1.1 to use all MGEN Software in connection with its Business; 5.1.2 to reproduce MGEN Software and Documentation for internal Business purposes, subject to charges assessed on a per-office basis and previously agreed to by the Parties in writing prior to the Effective Date for particular MGEN Software; 5.1.3 to execute MGEN Software on Equipment owned or controlled by Fidelity; 5.1.4 to perform and display (whether publicly or otherwise) MGEN Software and Documentation (subject to the nondisclosure obligations contained herein) for Business purposes; 5.1.5 After the termination of this Agreement, Fidelity will have the following additional rights: 5.1.5.1 to create Improvements to any MGEN Software or Documentation and to use and enjoy such Improvements; and 5.1.5.2 to create translations to other computer languages or otherwise of MGEN Software for Business purposes. 5.1.6 The licenses granted herein shall survive any termination or expiration of this Agreement, even if such termination or expiration is attributable to Fidelity's breach of a provision hereunder. 5.2 LICENSE TO NGS SOFTWARE. In accordance with Schedule 4, the Parties contemplate that MGEN will develop a "Net Global Solutions" System (the "NGS System"), such development to be governed by the procedures set out herein. 5.2.1 NGS System development and acceptance procedures shall follow the provisions set out above. 5.2.2 Fidelity shall own all right, title and interest in and to the NGS System. Inventions, processes, discoveries or the like, whether patentable or not, identified by MGEN during development of the NGS System, including software tools used solely in the production of the NGS System ("MGEN Discoveries"), shall not be considered part of the NGS System. MGEN shall grant to Fidelity any and all licenses to MGEN Discoveries as may be required to permit Fidelity the full use of the NGS System. 15 5.2.3 Fidelity hereby grants and MGEN hereby accepts a perpetual worldwide license of all rights in and to the NGS System (the "NGS License"), excepting only those rights set out in Paragraph 5.2.4 below. The NGS License shall be exclusive, with continuing exclusivity determined as follows: 5.2.3.1 If this Agreement is terminated due to an uncured breach by Fidelity, then the NGS License shall remain exclusive in perpetuity. 5.2.3.2 Upon the termination of this Agreement due to an uncured breach by MGEN, then the NGS License shall convert to a nonexclusive license, all other terms remaining in full force and effect. 5.2.3.3 Upon the termination of this Agreement for any reason except an uncured breach by a party, the NGS License shall convert to a nonexclusive license on the tenth anniversary of the completion of beta testing of NGS Version 1.0. 5.2.4 Fidelity does not license the following rights in the NGS System to MGEN but rather retains such rights for its internal use. Fidelity specifically does not retain the right to sell or license the NGS System to third parties. Retained rights are as follows: (i) to use the NGS System in connection with its Business; (ii) to reproduce the NGS System and Documentation for internal Business purposes, subject to charges assessed on a per-office basis and previously agreed to by the Parties in writing; (iii) to execute the NGS System on Equipment owned or controlled by Fidelity; (iv) to perform and display (whether publicly or otherwise) the NGS System and Documentation (subject to the nondisclosure obligations contained herein) for Fidelity Business purposes; 5.2.5 Without Fidelity's prior written consent, which consent may be granted or denied in Fidelity's sole discretion, MGEN will neither sublicense nor otherwise allow access and/or utilization of the NGS System nor negotiate or enter into any agreements in any way pertaining to the NGS System with [i] Old Republic Title (or any of its affiliates, successors or assigns) for a period of 90 days following the completion of the Fidelity roll-out of the NGS System at all sites within the state where such sale is contemplated, as set forth in the applicable Project Scope Document (the "Fidelity Roll-Out"); or (ii) First American (or any of its respective affiliates, successors or assigns) for a period of 3 years following the completion of the Fidelity Roll-Out in such state. 5.2.6 Except as provided in Section 5.2.5 above, MGEN has the unfettered ability to sublicense the NGS System. In consideration of the rights granted herein, MGEN shall pay to Fidelity a "Royalty", defined as a percentage of revenue 16 apart from any development, hardware, support or maintenance charges received by MGEN related to a sublicense of the NGS System ("License Revenue") from entities in the real estate title industry. The Royalty percentage shall be 10% of License Revenue until the aggregate sum of all Royalties equals the aggregate amount paid by Fidelity to MGEN for development of the NGS System through the completion of Version 1.0, extending to the completion of beta testing at Fidelity's Inland Empire site (the "NGS Development Cost"); thereafter, the Royalty percentage shall be 2% of License Revenue until the aggregate sum of all Royalties equals 125% of the NGS Development Cost, after which the Royalty percentage shall be zero. 5.3 THIRD PARTY SYSTEMS. MGEN grants to Fidelity solely for the purposes of this Agreement a non-exclusive license to access, use, and enjoy all of MGEN's rights in the Third Party Systems and accompanying Documentation, during the Term and during the Transition Period. 5.4 DELIVERY OF SOURCE CODE; USE OF SOURCE CODE MGEN shall, within thirty (30) days after the acceptance of NGS Version 1.0, enter into an agreement with a provider of software escrow services reasonably acceptable to Fidelity, providing that (i) MGEN shall deposit a copy of the MGEN Software into escrow; (ii) that MGEN shall maintain a current copy of the MGEN Software in escrow by refreshing such deposit at least every calendar year, or upon issuance of a major upgrade release, whichever occurs more often; and (iii) that such escrow provider shall release such deposit to Fidelity upon a reasonable showing that the NGS License has converted to a nonexclusive license. Such escrow agreement shall be in the form attached hereto as Exhibit A. Upon acquisition of the MGEN Software from the escrow agent, Fidelity shall have the unfettered right to use such MGEN Software, in any manner that it desires, including the right to create derivative works thereto, subject to the then-applicable terms of the NGS License. 5.5 FACILITY REQUIREMENTS. During the Term, Fidelity will provide to MGEN, at no cost to MGEN except as specified below, access to and use of all of the facilities wherein any computing or telecommunications resources are located and where such access is necessary for MGEN to provide the Services hereunder. Any Member may limit such access in any reasonable manner to allow for the smooth operation of such Member. 5.6 THIRD PARTY SERVICES. During the Term, Fidelity will provide to MGEN contact information regarding access to and use of all of the third party services governed by the Third Party Services Contracts to enable MGEN to fulfill its obligations hereunder. MGEN shall provide Fidelity with similar contact information regarding Third Party Services Contracts, Third Party Software, and Third Party Systems. 6. ACCESS RIGHTS AND PROHIBITED CHANGES 6.1 FIDELITY SYSTEM ACCESS. Fidelity grants to MGEN a nonexclusive, royalty-free right to use the Fidelity Systems or Developed Systems to the extent necessary to verify, analyze and troubleshoot problems on Fidelity owned or controlled Equipment as part of performing its Maintenance obligations hereunder. Nothing in this Section 17 shall grant MGEN the right to use any Fidelity System or Developed System for any other purpose. 6.2 PROHIBITED CHANGES TO SOFTWARE. Except as may be approved by Fidelity, MGEN shall not make any changes or modifications to MGEN Software or to the Third Party Software that would alter the functionality of any Fidelity System or degrade the performance of the Fidelity Systems or Services, except as may be necessary on a temporary basis to maintain the continuity of the Services. 7. FIDELITY OBLIGATIONS 7.1 Fidelity will, on a timely basis: 7.1.1 Appoint a Project Coordinator and Project Managers as set forth in this Agreement. 7.1.2 Maintain any procedures manuals provided to Fidelity by MGEN by distributing and inserting updates provided by MGEN. 7.1.3 Use commercially reasonable efforts to provide MGEN with reasonable notification of, and lead time, to respond to service requests, including changes to the number or format of required management reports, study requests, and requests to modify or Enhance any Systems. 8. SAFEGUARDING FIDELITY DATA, CONFIDENTIALITY AND AUDIT RIGHTS 8.1 SAFETY AND SECURITY PROCEDURES. 8.1.1 Fidelity shall maintain and enforce at the Fidelity Service Locations reasonable physical safety and security procedures. Fidelity shall be responsible for any failures of Fidelity or its agents to comply with reasonable Fidelity physical safety and security procedures then in effect at the applicable Fidelity Service Locations or reasonable physical safety and security procedures then in effect at the applicable MGEN Service Locations, to the extent that such non-compliance causes damages to MGEN. 8.1.2 MGEN shall maintain and enforce at the MGEN Service Locations reasonable physical safety and security procedures. MGEN shall be responsible for any failures of MGEN or its agents to comply with reasonable MGEN physical safety and security procedures then in effect at the applicable MGEN Service Locations or reasonable physical safety and security procedures then in effect at the applicable Fidelity Service Locations, to the extent that such non-compliance causes damages to Fidelity. 8.1.3 MGEN shall comply at the Fidelity Service Locations with Fidelity's physical safety and security procedures. MGEN shall be responsible for any failures of MGEN or its agents to comply with Fidelity's physical safety and security procedures then in effect at the applicable Fidelity Service Locations, to the extent that such non-compliance causes damages to Fidelity. 18 8.1.4 Fidelity shall comply at MGEN Service Locations with MGEN's physical safety and security procedures. Fidelity shall be responsible for any failures of Fidelity or its agents to comply with MGEN's physical safety and security procedures then in effect at the applicable MGEN Service Locations, to the extent that such non-compliance causes damages to MGEN. 8.2 DATA SECURITY. Except to the extent otherwise agreed by the Parties in a Project Scope Document, MGEN shall establish and maintain good and sound safeguards against the destruction, loss or alteration of the Fidelity Data in the possession of MGEN. In the event MGEN or MGEN agents, representatives and subcontractors, discover or are notified of a breach or potential breach of security relating to the Fidelity Data, MGEN shall immediately (1) notify the Fidelity Project Coordinator and Project Manager, as the case may be, of such breach or such potential breach and (2) if the applicable Fidelity Data was in the possession of MGEN or MGEN agents, representatives and subcontractors, at the time of such breach or such potential breach, MGEN shall (a) investigate such breach or such potential breach and (b) inform Fidelity of the results of such investigation. 8.3 SECURITY RELATING TO SHARED MGEN ENVIRONMENTS. If MGEN provides the Designated Services to Fidelity from an MGEN Service Location that also provides services to or processes data for any other MGEN customer, MGEN shall, in addition to its obligations under Section 2.13.2, at Fidelity's request, demonstrate to Fidelity's reasonable satisfaction that Fidelity's Confidential Information and Fidelity Data will not be disclosed to any such other MGEN customer. 8.4 CONDUCT OF MGEN PERSONNEL. While at any Fidelity Service Location, the Project Staff shall (1) comply with the requests, rules and regulations of Fidelity regarding personal and professional conduct (including the wearing of an identification badge or personal protective equipment and adhering to Fidelity's facilities regulations and general safety practices or procedures) applicable to such Fidelity Service Locations and (2) otherwise conduct themselves in a professional and businesslike manner. MGEN shall cause the Project Staff to maintain and enforce the confidentiality provisions of this Agreement and any confidentiality provisions of any applicable Project Scope Document. In addition, as soon as reasonably practicable after the Effective Date, MGEN shall cause each of its employees to execute a confidentiality agreement covering the Confidential Information in a form substantially similar to that attached hereto as Exhibit B. In the event that Fidelity determines that a particular member of the Project Staff is not conducting himself or herself in accordance with this Section 8.4, Fidelity may notify MGEN of such conduct. Upon receipt of such notice, MGEN shall promptly (a) investigate the matter and take appropriate action which may include (i) removing such employee from the Project Staff and providing Fidelity with prompt notice of such removal and (ii) replacing such employee with a similarly qualified individual or (b) take other appropriate disciplinary action to prevent a recurrence. In the event there are repeat violations of this Section by a particular member of the Project Staff, MGEN shall promptly remove the individual from the Project Staff as set forth above. 8.5 FIDELITY DATA. Fidelity Data shall be and remain the property of Fidelity, and shall be "Confidential Information" under Section 8.6. Upon the termination of this Agreement for any reason, or on such date that the same shall no longer be required 19 by MGEN in order to provide the Services, Fidelity Data shall be either erased from the data files maintained by MGEN or, if Fidelity so elects, returned to Fidelity by MGEN at MGEN's expense. Fidelity Data shall not be used by MGEN for any purpose other than that of providing Services, nor shall such data or any part of such data be disclosed, sold, assigned, leased or otherwise disposed of to third parties by MGEN or commercially exploited by or on behalf of MGEN, its employees or agents. MGEN hereby acknowledges that disclosure of some such data may be governed by various state and federal laws and regulations, and MGEN hereby agrees to comply with all such laws and regulations. 8.6 DEFINITION OF CONFIDENTIAL INFORMATION. The term "Confidential Information" shall mean all (a) non-public information and materials (in any medium), including but not limited to any business, financial or strategic plans and information and software Source Code, in each case, of the Disclosing Party (as defined in Section 8.7) or its Affiliates; (b) information subject to an obligation of confidence to a third party of which the Receiving Party (as defined in Section 8.7) has been advised in writing; and (c) any information marked confidential, restricted or proprietary by either Party or any other person to whom such party has an obligation of confidence; provided, however, that the failure of either Party to so mark any material shall not relieve the Receiving Party of the obligation to maintain the confidentiality of any unlegended material which the Receiving Party knows or should reasonably know contains Confidential Information. Each Party's know-how, network design and equipment configurations and techniques relating to network and network management developed or utilized during the course of this Agreement are Confidential Information of such Party. The terms of this Agreement, including pricing and financial data, discussions, negotiations and proposals from one Party to the other Party related directly hereto; and invoices and service records shall be Confidential Information of both Parties. 8.7 DISCLOSURE OF CONFIDENTIAL INFORMATION. In carrying out the Services contemplated by this Agreement, each party (the "Disclosing Party") may from time to time during the term of this Agreement disclose to the other party (the "Receiving Party") certain information regarding the Disclosing Party's business, delivery mechanisms, personnel, technical, marketing, financial, employee, planning, and other confidential or proprietary information ("Confidential Information"). 8.8 PROTECTION OF CONFIDENTIAL INFORMATION. The Receiving Party will not use any Confidential Information of the Disclosing Party for any purpose not expressly permitted by this Agreement, and will disclose the Confidential Information of the Disclosing Party only to those employees or contractors of the Receiving Party who have a need to know such Confidential Information for purposes of this Agreement and who are under a duty of confidentiality no less restrictive than the Receiving Party's duty hereunder. The Receiving Party will protect the Disclosing Party's Confidential Information from unauthorized use, access, or disclosure in the same manner as the Receiving Party protects its own confidential or proprietary information of a similar nature and with no less than reasonable care. 8.8.1 EXECUTION OF NON-DISCLOSURE AGREEMENTS BY MGEN EMPLOYEES. In addition, MGEN shall insure that each of its employees who qualifies as a "Restricted Position Employee" under Section 3.3 shall execute a non- 20 disclosure agreement in a form reasonably satisfactory to Fidelity's counsel prior to commencing work on any Project. 8.9 EXCEPTIONS. The Receiving Party's obligations hereunder with respect to any Confidential Information of the Disclosing Party will terminate if and when the Receiving Party can document that such information: (a) was already known to the Receiving Party at the time of disclosure by the Disclosing Party; (b) was disclosed to the Receiving Party by a third party who had the right to make such disclosure without any confidentiality restrictions; (c) is or through no fault of the Receiving Party has become, generally available to the public; or (d) is independently developed by the Receiving Party without access to, or use of, the Disclosing Party's Confidential Information. In addition, the Receiving Party will be allowed to disclose Confidential Information of the Disclosing Party to the extent that such disclosure is (i) approved in writing by the Disclosing Party, (ii) necessary for the Receiving Party to enforce its rights under this Agreement in connection with a legal proceeding; or (iii) required by law or by the order of a court or similar judicial or administrative body, provided that the Receiving Party notifies the Disclosing Party of such required disclosure promptly and in writing and cooperates with the Disclosing Party, at the Disclosing Party's reasonable request and expense, in any lawful action to contest or limit the scope of such required disclosure. 8.10 RETURN OF CONFIDENTIAL INFORMATION. The Receiving Party will return to the Disclosing Party or destroy all Confidential Information of the Disclosing Party in the Receiving Party's possession or control promptly upon the written request of the Disclosing Party on the earlier of the expiration or termination of this Agreement. At the Disclosing Party's request, the Receiving Party will certify in writing that it has fully complied with its obligations under this Section. 8.11 AUDIT RIGHTS. Fidelity shall have the right to have an independent certified public accounting firm conduct an audit at any time during the Term hereof, or within three years thereafter, to verify any of the Fees or charges hereunder. If such audit determines that MGEN has overcharged Fidelity, MGEN shall immediately credit or pay (as directed by Fidelity) Fidelity the amount of the overcharge. If the audit determines that MGEN has undercharged Fidelity, Fidelity shall immediately pay MGEN the amount of the undercharge. If the audit discloses an underpayment or overpayment of more than five percent in any month covered by the audit, MGEN shall pay for the cost of the audit. In all other cases, the cost of any audit hereunder shall be borne by Fidelity. 8.12 THIRD PARTY DISCOVERY. If any governmental agency or any third party shall seek in any way to discover or otherwise gain access to, ("Discovery") any System, Confidential Information or any other data or records of one party that may be in the possession of the other party, the other party shall immediately notify the first party and shall, at the first party's written request and at the first party's expense, and cooperate with the first party in the first party's efforts to preclude, quash, limit or impose protective orders or similar restrictions on such Discovery. 9. PAYMENTS TO MGEN 21 9.1 FEES. With respect to each Project, Fidelity shall pay Fees to MGEN commencing upon the Effective Date of the relevant Project Scope Document. A Project Scope Document may, at Fidelity's election, contain provisions for the determination of the amount of Fees in respect of Services performed for a specific Project and such provisions shall be controlling; provided, however, the methodology for such determination shall not be inconsistent with this Section. In the absence of an applicable Project Scope Document, the amount of Fees owing to MGEN shall be determined as set forth below. 9.1.1 HOURLY RATES. Fees for Consulting Services, Out of Scope Services and Design Services shall be computed based on the hourly rates of each MGEN employee or contractor performing the underlying Services. Such hourly fees shall be in accordance with the Rate Schedule, attached as Schedule 8. MGEN shall track and record hours expended in performing such Services, and shall include a breakdown of such hours on its invoices, as provided in Section 9.3. 9.1.2 FIXED ANNUAL CHARGES. Fees relating to Maintenance and Support Services shall be fixed and shall be based on the number of users during the billing period in question, irrespective of the actual Services rendered during such period. Maintenance and Support fees under this Section 9.1.2 for Year One shall be as specified on Schedule 9. Fees for Website Hosting shall similarly be fixed for the billing period in question, and such fees for Year One shall be as specified on Schedule 10 9.1.3 DEVELOPMENT QUOTES. Fees relating to Systems Development Projects (other than Design Services, which shall be billed and paid as Consulting Services under 9.1.1) shall be determined in accordance with the Bid Procedure set forth in Section 2.6.4. 9.2 TIME AND MANNER OF PAYMENT. Unless otherwise provided, at Fidelity's option, in an applicable Project Scope Document, Fidelity will pay MGEN, by wire transfer to a bank account designated in writing by MGEN any sum due MGEN hereunder or pursuant to a Project Scope Document on or before the thirtieth calendar day after receipt by Fidelity of an invoice from MGEN for such sums, such invoices to be submitted to Fidelity in accordance with Section 9.3 and no sooner than the end of the calendar month to which the invoiced sums apply. Any sum due MGEN that is not paid within the time specified above shall accrue interest until paid at a rate of interest equal to the lesser of nine tenths of one percent (0.9%) per month, or the maximum rate of interest allowed by applicable law. For purposes of this Section 9.2, "day of receipt" shall be the day the invoice is delivered by hand or transmitted electronically to Fidelity's premises, the next business day after it is deposited with an overnight delivery service, or three business days after it is deposited in the U.S. mail. 9.3 DETAILED INVOICES. MGEN shall provide invoices that include sufficient pricing detail to enable Fidelity to validate the Fees charged. Notwithstanding the foregoing, each invoice shall conspicuously reference the applicable Project and contain a detailed narrative of the Services actually rendered. Upon Fidelity's request, MGEN shall provide customized invoices to satisfy individual billing 22 requirements of Fidelity, such requirements to be reasonably determined by Fidelity in its sole discretion. 9.4 EXPENSES. Neither Party shall be responsible for any expenses incurred by the other Party in connection with the provision of the Services, unless specifically set forth in this Agreement, any Project Scope Document or as agreed in advance by the Party to be charged. If the Parties agree that Fidelity shall be responsible for any of MGEN's out-of-pocket expenses incurred in connection with this Agreement or any Project Scope Document, all reimbursements shall be made in accordance with Fidelity's reimbursement policy. 9.5 PRICING ADJUSTMENTS. MGEN shall have the right on an annual basis (a) to adjust the hourly rates for the Project Staff and other employees performing Services hereunder or pursuant to any Project Scope Document, and (b) to adjust the annual charge for Maintenance and Support (as provided in Schedule 9) and/or for Website Hosting (as provided in Schedule 10) provided that any such increases during the Initial Term shall be limited to the cumulative percentage increase in the U.S. Consumer Price Index for all prior years since the last rate increase or since the execution of this Agreement, whichever is later. In the event that MGEN can demonstrate that industry-wide price increases are greater than increases permissible under the previous sentence, then the parties shall negotiate in good faith to determine an appropriate price level. During any Renewal Term MGEN may adjust rates to its then-current standard rates. 9.6 MOST FAVORED CUSTOMER PRICING. The prices that MGEN shall charge Fidelity with respect to any Services rendered or to be rendered hereunder, or under any Project Scope Document, shall be no higher than those offered to any direct competitor of Fidelity for substantially similar Services. In the event MGEN is in breach of the foregoing, such lower prices shall apply to Fidelity effective as of the date such lower rate were first offered to such other customer, and appropriate adjustments shall thereafter be reflected on all appropriate Project invoices. 9.7 TAXES. Fidelity shall pay, or reimburse MGEN for payment of, any taxes or amounts paid in lieu of taxes, including privilege or excise taxes based on the gross revenue of MGEN, however designated or levied, based upon this Agreement, the charges of MGEN or the Systems, the Services or materials provided under this Agreement. MGEN is only responsible for the payment of franchise taxes, state and local personal property taxes, employment taxes for its employees and taxes based on the net income of MGEN. 9.8 PRORATION. All periodic charges under this Agreement are to be computed on a calendar month basis, and will be prorated for any partial month. 9.9 RIGHTS OF SET-OFF. With respect to any amount to be reimbursed or paid by one Party to the other pursuant to this Agreement, the Party owing such reimbursement or payment may, at its option, pay or reimburse that amount offsetting amounts already owed to such Party under this Agreement. 10. REPRESENTATIONS AND WARRANTIES 23 10.1 BY FIDELITY. Fidelity represents and warrants to MGEN as follows. 10.1.1 CORPORATE POWER. Fidelity and each Member (a) is a corporation duly incorporated, validly existing and in good standing under the State of Delaware (for Fidelity) or under the laws of the state of incorporation of such other Member and (b) has full corporate power to own, lease, and operate its properties and assets, to conduct its business as such business is currently being conducted, and to consummate the transactions contemplated by this Agreement. 10.1.2 AUTHORITY. This Agreement has been duly authorized, executed and delivered and constitutes a valid and binding agreement, enforceable against Fidelity in accordance with this Agreement's terms, subject to the effect of bankruptcy, insolvency, moratorium and other laws now or hereafter in effect relating to and affecting the rights of creditors generally and to equitable principles of general application. 10.1.3 NO BREACHES. Neither the execution or delivery of this Agreement, nor the consummation of any of the transactions contemplated herein, will result in the breach of any term or provision of, or constitute a default under, any charter provision or bylaw, or material agreement (subject to any applicable required consent), order, law, rule or regulation to which it is a party or which is otherwise applicable to it. 10.2 BY MGEN. MGEN represents and warrants to Fidelity as follows: 10.2.1 CORPORATE POWER. MGEN (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation and (b) has full corporate power to own, lease, and operate its properties and assets, to conduct its business as that business is currently being conducted, and to consummate the transactions contemplated by this Agreement. 10.2.2 AUTHORITY. This Agreement has been duly authorized, executed and delivered and constitutes a valid and binding agreement, enforceable against MGEN in accordance with this Agreement's terms, subject to the effect of bankruptcy, insolvency, moratorium and other laws now or hereafter in effect relating to and affecting the rights of creditors generally and to equitable principles of general application. 10.2.3 NO BREACHES. Neither the execution or delivery of this Agreement, nor the consummation of any of the transactions contemplated herein, will result in the breach of any term or provision of, or constitute a default under, any charter provision or bylaw, or material agreement (subject to any applicable required consent), order, law, rule or regulation to which it is a party or which is otherwise applicable to it. 10.2.4 COMMERCIAL PRACTICE WARRANTY. The Services shall be rendered by qualified MGEN personnel, and shall be consistent with the highest commercial practice. 24 10.2.5 WARRANTY OF COMPLIANCE. In addition to fulfilling the warranties set forth in Section 10.2.4, all Services and Developed Systems shall comply in all material respects to (a) the Technology Proposal (as it may be amended from time to time), (b) Specifications, (c) Documentation, (d) applicable Service Levels, and (d) the Parties' discussions, as embodied in written and approved design and functional layout documents. 10.2.6 NON-INFRINGEMENT. The Software shall not infringe the Intellectual Property Rights of any third party as may now or in the future exist and MGEN has the right to grant all of the licenses to Fidelity hereunder, free from all claims, liens, security interests or other encumbrances. To the best of MGEN's knowledge, the Software shall not infringe the Intellectual Property Rights of any third party as may now or in the future exist. MGEN shall not place on any of such Software any liens, security interest or other encumbrances that would in any manner affect Fidelity's licenses under this Agreement. 10.2.7 NO VIRUSES. The Software does not and shall not contain, at the time of installation, any timer, clock, counter, or other limiting design or routine, nor (to the best of MGEN's knowledge) any virus, that causes or could cause any Fidelity Systems, Developed System or Fidelity Data (or any portion thereof) to become erased, inoperable, impaired, or otherwise incapable of being used in the full manner for which it was designed and licensed (including, without limitation, any design or routine that would impede copying thereof) after being used or copied a certain number of times, or after the lapse of a certain period of time, or after the occurrence or lapse of any similar triggering factor or event, or for any other reason. Furthermore, the Software does not and shall not contain any virus, limiting design or routine that causes or could cause any of them to become erased, inoperable, impaired, or otherwise incapable of being used in the full manner for which it was designed and licensed pursuant to this Agreement because it has been installed on or moved to a hardware unit or system that has a serial number, model number, or other identification different from the identification of the one on which it was originally installed. 10.2.8 COMPLIANCE. In performing its obligations hereunder, MGEN shall comply in all material respects with requirements all applicable Federal, state and local statutes, regulations and ordinances, including, without limitation, the Gramm-Leach-Bliley Act. 10.3 DISCLAIMER. EXCEPT AS SPECIFIED IN THIS SECTION 10, NEITHER PARTY MAKES ANY OTHER WARRANTIES AND EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A SPECIFIC PURPOSE. 10.4 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY, OR ANY OF ITS AFFILIATES, PARTNERS, OFFICERS, EMPLOYEES, DIRECTORS, AGENTS, CONTRACTORS, REPRESENTATIVES, SUCCESSORS OR ASSIGNS, AS SUCH, BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INCIDENTAL, INDIRECT, 25 CONSEQUENTIAL OR SPECIAL DAMAGES UNDER OR IN CONNECTION WITH THIS AGREEMENT. IN ANY EVENT, THE TOTAL LIABILITY OF EITHER PARTY, AND ITS AFFILIATES, PARTNERS, OFFICERS, EMPLOYEES, DIRECTORS, REPRESENTATIVES, SUCCESSORS AND ASSIGNS, TO THE OTHER PARTY FOR ANY LOSSES, IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE TOTAL COMPENSATION PAID BY FIDELITY TO MGEN FOR THE SERVICES, DURING THE CONSECUTIVE THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING THE OCCURRENCE OF THE EVENT(S) GIVING RISE TO SUCH LIABILITY, PROVIDED, HOWEVER, THAT SUCH LIMITATION SHALL NOT APPLY TO MGEN BREACHES OF SECTIONS 5.2.4, 5.2.5, 8, 9.6, 10.2.6 AND 10.2.8. 11. TERM AND TERMINATION 11.1 TERM. This Agreement shall begin on the Effective Date and unless sooner terminated pursuant to the terms hereof, shall expire on three years from the Effective Date ("Expiration Date") ("Initial Term"), except as provided in this Section 11.1. Fidelity shall enjoy an irrevocable option to elect to extend the Initial Term for an additional three-year period, and Fidelity shall exercise this option by giving MGEN written notice of such election no later than thirty (30) days before the expiration of the Initial Term (the "Optional Term"). After expiration of the Optional Term, or expiration of the Initial Term (if Fidelity elects not to exercise its option to extend), this Agreement shall automatically renew for up to three terms of one year each (each, a "Renewal Term"), unless (a) in the case of notice by Fidelity, at least ninety days prior to the expiration of the Term Fidelity notifies MGEN in writing of its decision not to renew, or (b) in the case of notice by MGEN, at least six (6) months prior to the expiration of the Term MGEN notifies Fidelity in writing of its decision not to renew. It is agreed and understood that "Term" shall refer to the Initial Term, the Optional Term, Renewal Terms, or some combination, or all, of these items, as the context permits. 11.2 TERMINATION FOR CAUSE. If either party materially or repeatedly defaults in the performance of any of its duties or obligations under this Agreement (except for a default in payments to MGEN, which is governed by Section 11.3), which default is not substantially cured with fifteen (15) days after written notice is given to the defaulting party specifying the default, or, with respect to those defaults which cannot reasonably be cured within such fifteen (15) days, if the defaulting party fails to proceed within such fifteen (15) days to commence curing said default and to proceed with all due diligence substantially to cure the default, then the party not in default may, by giving written notice of termination to the defaulting party, terminate this Agreement as of a date specified in the notice of termination and no termination charge shall be due or payable in such event. 11.3 TERMINATION FOR NONPAYMENT. If Fidelity defaults in the payment when due of any amount due to MGEN and does not, within fifteen (15) days after being given written notice, cure such default, or, if Fidelity in good faith disputes the amount due, but does not deposit the disputed amount in escrow in a major U.S. commercial bank to be designated by MGEN, with interest to be allocated to the party entitled to the principal upon resolution of the dispute, then MGEN may, by giving written 26 notice to Fidelity, terminate this Agreement as of a date specified in the notice of termination. 11.4 TRANSITION ASSISTANCE ON TERMINATION. Upon termination of this Agreement for any reason, including the breach hereof by Fidelity, MGEN shall, if so requested by Fidelity, provide assistance to Fidelity as hereinafter set forth. 11.4.1 TRANSITION ASSISTANCE. MGEN shall provide Fidelity with reasonable training and other assistance to minimize disruption in the transition of the Services to Fidelity or a third-party. Training may be provided from the time of Fidelity's request to the date of termination or expiration and for up to six additional months (the "Transition Period") following termination or expiration. All such training services shall, for purposes of this Agreement, be deemed Consulting Services, and shall be compensated in accordance with Section 9.1.1. If the termination was caused by Fidelity's breach, at MGEN's request, Fidelity shall pay to MGEN prior to the commencement of such transition services the reasonable estimated costs of such services. 11.4.2 FIDELITY'S RIGHT TO HIRE MGEN EMPLOYEES. MGEN acknowledges that the persons who may be most valuable to Fidelity upon any termination or expiration of this Agreement are members of the MGEN Project Staff. MGEN agrees that upon termination or expiration of this Agreement or any applicable Project Scope Document, Fidelity shall have the right to solicit members of the MGEN Project Staff for employment by Fidelity. MGEN agrees that it shall not interfere with any such solicitation efforts by Fidelity and shall cooperate by executing appropriate waivers with respect to any contractual or other non-solicitation or non-competition rights it might have with respect to its Project Staff, or other documents reasonably requested by Fidelity. 11.5 RIGHT OF IMMEDIATE PAYMENT. If MGEN terminates this Agreement for Fidelity's default, and Fidelity has not disputed such breach, Fidelity shall immediately pay MGEN for all Services rendered and Equipment procured through the termination date. Notwithstanding anything to the contrary, the failure of Fidelity to make any payments hereunder shall not relieve MGEN from its required performance after the termination of this Agreement. 11.6 SURVIVAL. The following provisions shall survive the termination or expiration of this Agreement: Section 5.1, Section 5.2, Section 5.4, , Section 8.8, Section 8.11, Section 10.2, Section 10.3, Section 10.4, Section 12, and Section 13. 12. INDEMNITIES 12.1 INDEMNITY BY FIDELITY. Fidelity agrees to indemnify, defend and hold harmless MGEN, and its respective officers, directors, shareholders, employees, agents, successors and assigns, in accordance with the procedures described in Section 12.3, from any and all Losses arising from or in connection with: 12.1.1 The inaccuracy as of the Effective Date of any of the representations or warranties by Fidelity set forth in this Agreement; and 27 12.1.2 Any claims of infringement made against MGEN of any United States letters patent, or a trade secret, or any copyright, trademark, service mark, trade name or similar proprietary rights conferred by contract or by common law or by any law of the United States or any state, alleged to have occurred because of Systems or other resources or items provided to MGEN by Fidelity. 12.2 INDEMNITY BY MGEN. MGEN agrees to indemnify, defend and hold harmless Fidelity and its officers, directors, shareholders, employees, agents, successors and assigns, in accordance with the procedures described in Section 12.3, from any and all Losses arising from or in connection with: 12.2.1 The breach of any representation, warranty or covenant by MGEN set forth in this Agreement; 12.2.2 Any claims of infringement made against Fidelity of any United States letters patent, or a trade secret, or any copyright, trademark, service mark, trade name or similar proprietary rights conferred by contract or by common law or by any law of the United States or any state, arising from Fidelity's use of MGEN Software or the NGS System or other resources or items provided to Fidelity by MGEN; and 12.3 INDEMNIFICATION PROCEDURES. 12.3.1 NOTICE. Promptly after receipt by any person entitled to indemnification under Sections 12.1 or 12.2 (an "Indemnified Party") of notice of the commencement (or threatened commencement) of any civil, criminal, administrative or investigative action or proceeding involving a claim in respect of which the Indemnified Party will seek indemnification, the Indemnified Party shall notify the party which is obligated to provide such indemnification (an "Indemnifying Party") of such claim in writing. 12.3.2 EFFECT OF FAILURE TO PROVIDE TIMELY NOTICE. No failure to notify the Indemnifying Party shall relieve it of its obligations under this Agreement except to the extent that it can demonstrate damages attributable to the Indemnified Party's failure to notify. 12.3.3 CONTROL BY INDEMNIFYING PARTY. The Indemnifying Party shall be entitled to have sole control over the defense and/or settlement of such claim, provided that, within 15 days after receipt of such written notice, the Indemnifying Party notifies the Indemnified Party of its election to so assume full control, and provided further that the Indemnifying Party can demonstrate to the reasonable satisfaction of the Indemnified Party that the Indemnifying Party has the financial capability to indemnify the Indemnified Party (such satisfactory demonstration is sometimes hereinafter referred to as "Demonstrated Fiscal Ability"). In that event: (1) the Indemnified Party shall be entitled to participate in the defense of such claim and to employ counsel at the Indemnifying Party's reasonable expense to assist in the handling of such claim; (2) the Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into any 28 settlement of such claim or ceasing to defend against such claim if such settlement or cessation would cause injunctive or other relief to be imposed against the Indemnified Party; and (3) the Indemnified Party shall be free to enter direct discussions with some or all claimants for purposes of settlement, and shall be free to enter into such settlement(s) on terms agreeable to the Indemnified Party (upon provision of reasonable notice to and consultation with the Indemnifying Party); provided, however, that Fidelity as the Indemnifying Party shall not be required to reimburse MGEN's expenses if Fidelity has assumed control over the defense, and provided further that if MGEN is the Indemnified Party it shall not engage in or consummate any settlement discussions without the written approval and authority of Fidelity. 12.3.4 PARTICIPATION BY INDEMNIFIED PARTY. If the Indemnifying Party does not assume sole control over the defense of such claim as provided in this Section 12.3, the Indemnifying Party may participate in such defense and the Indemnified Party shall have the right to defend the claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party. The Indemnifying Party shall promptly reimburse the Indemnified Party for such costs and expenses, in accordance with the applicable Section of this Section 12. An Indemnifying Party shall not be required to indemnify any Indemnified Party for any amount paid or payable by such Indemnified Party in the settlement of any such claim which was agreed to without the written consent of the Indemnifying Party. 12.3.5 FINANCIAL CAPACITY. The Indemnified Party may request, from time to time, that the Indemnifying Party demonstrate that it continues to have the financial capability to indemnify the Indemnified Party, and if the Indemnifying Party is unable to demonstrate such to the Indemnifying Party's reasonable satisfaction, the Indemnified Party may assume full control of the defense of such claim, but the Indemnifying Party shall continue to be responsible for indemnifying the Indemnified Party. 12.4 SUBROGATION. In the event that an Indemnifying Party shall be obligated to indemnify an Indemnified Party pursuant to Section 12.1 or Section 12.2, the Indemnifying Party shall, upon payment of such indemnity in full, be subrogated to all rights of the Indemnified Party with respect to the claims to which such indemnification relates. 12.5 NON-EXCLUSIVE REMEDIES. The rights (where applicable) of either Party (a) to indemnification under this Section 12, (b) to terminate this Agreement under Section 11, (c) to Performance Credits under Section 4; or (d) to other remedies set forth in this Agreement, are not exclusive, and are in addition to and not in place of any other rights and remedies that one Party may have against the other Party for any act, failure to act, or breach of this Agreement. 13. INSURANCE 13.1 INSURANCE MAINTAINED BY MGEN. During the term of this Agreement, MGEN shall maintain at its own expense, and require MGEN agents, representatives and 29 subcontractors, to maintain at their own expense or MGEN' expense, commercial general liability insurance (including contractual liability insurance), business interruption insurance, and insurance appropriate to cover risks presented by the Websites, the Software, the Systems, and Fidelity Data (collectively "Insurance Coverage"). Such Insurance Coverage during the Term shall be in an amount not less than $50,000,000. MGEN shall maintain insurance for such period after the Term, and in such amount as Fidelity may reasonably determine, in light of continuing insurable risks (if any) presented by MGEN's services hereunder. 13.2 INSURANCE DOCUMENTATION. MGEN shall, upon Fidelity's request, furnish Fidelity with certificates of insurance and other appropriate documentation (including evidence of renewal of insurance) evidencing all coverage referenced herein. Such certificates and other documentation shall include a provision whereby 30 days' notice must be received by Fidelity prior to coverage cancellation or material alteration of the coverage by MGEN or the applicable insurer. Such cancellation or material alteration shall not relieve MGEN of its continuing obligation to maintain insurance coverage in accordance with this Section 13. 14. GENERAL PROVISIONS 14.1 BINDING NATURE AND ASSIGNMENT. This Agreement shall bind the parties and their successors and permitted assigns. Neither party may assign this Agreement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed. Any other assignment attempted without the written consent of the other party shall be void. 14.2 NOTICES. When one party is required or permitted to give notice to the other, such notice shall be deemed given when delivered by hand or when mailed by United States mail, registered or certified mail, return receipt requested, postage prepaid, and addressed as follows: MGEN: Micro General Corporation 2510 Red Hill Avenue, Suite 200 Santa Ana, CA 92705 Attn: John R. Snedegar Joseph E. Root Fidelity: Fidelity National Financial, Inc. 4050 Calle Real Santa Barbara, CA 93110 Attn: Edward Dewey Peter Sadowski Either party may change its address for notification purposes by giving the other party written notice of the new address and the date upon which it will become effective. 30 14.3 COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one single agreement between the parties. 14.4 RELATIONSHIP OF PARTIES. MGEN in furnishing services to Fidelity under this Agreement is acting only as an independent contractor. Except where this Agreement expressly provides otherwise, MGEN does not undertake by this Agreement or otherwise to perform any obligation of Fidelity, whether regulatory or contractual, or to assume any responsibility for Fidelity's business or operations. MGEN has the sole right and obligation to supervise, manage, contract, direct, procure, perform or cause to be performed, all work to be performed and resources used by MGEN under this Agreement, except where it is specifically stated that Fidelity must give approval or consent. 14.5 APPROVALS AND SIMILAR ACTIONS. Where agreement, approval, acceptance, consent or similar action by either party is required by any provision of this Agreement, such action shall not be unreasonably delayed or withheld, unless specifically permitted by this Agreement. 14.6 FORCE MAJEURE. Each party shall be excused from performance under this Agreement and shall have no liability to the other party for any period it is prevented from performing any of its obligations (other than payment obligations), in whole or in part, as a result of delays caused by the other party or by an act of God, war, civil disturbance, court order, labor dispute, third party performance or nonperformance, or other cause beyond its reasonable control, including failures or fluctuations, in electrical power, heat, light, or telecommunications, and such nonperformance shall not be a default under, or grounds for termination of, this Agreement. 14.7 SEVERABILITY. If any provision of this Agreement is held to be unenforceable, then both parties shall be relieved of all obligations arising under such provision, but only to the extent that such provision is unenforceable, and this Agreement shall be deemed amended by modifying such provision to the extent necessary to make it enforceable while preserving its intent or, if that is not possible, by substituting another provision that is enforceable and achieves the same objective and economic result. If such unenforceable provision does not relate to the payments to be made to MGEN, and if the remainder of this Agreement is capable of substantial performance, then the remainder of this Agreement shall be enforced to the extent permitted by law. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTIES, INDEMNIFICATION OR EXCLUSION OF DAMAGES OR OTHER REMEDIES IS INTENDED TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND TO BE ENFORCED AS SUCH. FURTHER, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT IN THE EVENT ANY REMEDY UNDER THIS AGREEMENT IS DETERMINED TO HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL LIMITATIONS OF LIABILITY AND EXCLUSIONS OF DAMAGES OR OTHER REMEDIES SHALL REMAIN IN EFFECT. 14.8 WAIVER. No delay or omission by either party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by either party of any covenant or breach shall not be construed to 31 be a waiver of any succeeding breach or of any other covenant. All waivers must be in writing and signed by the party waiving its rights. 14.9 ATTORNEYS' FEES. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled. 14.10 MEDIA RELEASES. All media releases, public announcements and public disclosures by Fidelity or MGEN or their employees or agents relating to this Agreement or its subject matter, including promotional or marketing materials shall be coordinated with and approved by the other party prior to release. This restriction does not apply (1) to any announcement intended solely for internal distribution within Fidelity or within MGEN or (2) any disclosure required by legal, accounting or regulatory requirements beyond the reasonable control of the disclosing party. 14.11 NO THIRD PARTY BENEFICIARIES. The parties agree that this Agreement is for the benefit of the parties hereto and is not intended to confer any legal rights or benefits on any third party and that there are no third party beneficiaries to this Agreement or any part or specific provision of this Agreement, except for any Member. 14.12 ENTIRE AGREEMENT. This Agreement, including all of its Schedules, each of which is incorporated into this Agreement, is the entire agreement between the parties with respect to its subject matter, and there are no other representations, understandings or agreements between the parties relative to such subject matter. No amendment to, or change, waiver or discharge of any provision of this Agreement shall be valid unless in writing and signed by an authorized representative of the party against which such amendment, change, waiver or discharge is sought to be enforced. 14.13 GOVERNING LAW AND DISPUTE. This Agreement shall be governed by the laws, other than choice of law rules, of the State of California. IN WITNESS WHEREOF, MGEN and Fidelity have each caused this Agreement to be signed and delivered by its duly authorized representative. FIDELITY: FIDELITY NATIONAL FINANCIAL, INC. By: ----------------------------- Name: Patrick F. Stone Title: President and COO MGEN: MICRO GENERAL CORP. 32 By: ----------------------------- Name: John R. Snedegar Title: CEO and President 33 EX-10.17 8 a79556ex10-17.txt EXHIBIT 10.17 ================================================================================ EXHIBIT 10.17 SYSTEM DEVELOPMENT, MAINTENANCE AND INFORMATION TECHNOLOGY SERVICES AGREEMENT BETWEEN FIDELITY NATIONAL INFORMATION SOLUTIONS, INC. AND MICRO GENERAL CORPORATION ================================================================================ i TABLE OF CONTENTS 1. Definitions and Construction ......................................................1 1.1 Definitions .......................................................................1 1.2 References ........................................................................6 1.3 Headings ..........................................................................6 1.4 Interpretation of Agreement and Project Scope Documents ...........................6 1.5 Agreement and Schedules ...........................................................6 2. Scope of Work; Services and Commitments ...........................................7 2.1 Execution of Project Scope Documents ..............................................7 2.2 Maintenance and Support ...........................................................7 2.3 Website Hosting ...................................................................7 2.4 Out-of-Scope Services .............................................................8 2.5 Systems Development Projects ......................................................8 2.6 Consulting ........................................................................9 2.7 Equipment Procurement .............................................................9 2.8 Acceptance Procedure .............................................................10 2.9 Change Orders ....................................................................10 2.10 Subcontracting ...................................................................11 2.11 Licenses and Permits .............................................................11 2.12 Service Locations ................................................................11 2.13 Data Migration ...................................................................12 2.14 Third-Party Services .............................................................12 3. Contract Administration and Project Team .........................................12 3.1 Project Coordinators .............................................................12 3.2 Project Staff ....................................................................13 3.3 Restricted Positions .............................................................13 3.4 Performance Review ...............................................................13 3.5 Dispute Resolution ...............................................................13 4. Service Levels ...................................................................13 4.1 Service Levels ...................................................................13 4.2 Measurement and Monitoring Tools .................................................14 4.3 Service Level Failures ...........................................................14 4.4 Critical Failures ................................................................14 4.5 Continuous Improvement and Best Practices ........................................14 5. License and Other Grants .........................................................14 5.1 License to MGEN Software and Intellectual Property Rights ........................14 5.2 Third Party Software .............................................................15 5.3 Delivery of Source Code; Use of Source Code ......................................15 5.4 Facility Requirements ............................................................15 5.5 Third Party Services .............................................................16 6. Access Rights and Prohibited Changes .............................................16 6.1 FNIS System Access ...............................................................16 6.2 Prohibited Changes to Software ...................................................16 7. FNIS Obligations .................................................................16

ii 8. Safeguarding FNIS Data, Confidentiality and Audit Rights .........................16 8.1 Safety and Security Procedures ...................................................16 8.2 Data Security ....................................................................17 8.3 Security Relating to Shared MGEN Environments ....................................17 8.4 Conduct of MGEN Personnel ........................................................17 8.5 FNIS Data ........................................................................18 8.6 Definition of Confidential Information ...........................................18 8.7 Disclosure Of Confidential Information ...........................................18 8.8 Protection of Confidential Information ...........................................19 8.9 Exceptions .......................................................................19 8.10 Return of Confidential Information ...............................................19 8.11 Audit Rights .....................................................................21 8.12 Third Party Discovery ............................................................20 9. Payments to MGEN .................................................................20 9.1 Fees .............................................................................20 9.2 Time and Manner of Payment .......................................................20 9.3 Detailed Invoices ................................................................21 9.4 Expenses .........................................................................21 9.5 Pricing Adjustments ..............................................................21 9.6 Most Favored Customer Pricing ....................................................21 9.7 Taxes ............................................................................21 9.8 Proration ........................................................................22 9.9 Rights of Set-off ................................................................22 10. Representations And Warranties ...................................................22 10.1 By FNIS ..........................................................................22 10.2 By MGEN ..........................................................................22 10.3 Disclaimer .......................................................................24 11. Term And Termination . ...........................................................24 11.1 Term .............................................................................24 11.2 Termination for Cause ............................................................24 11.3 Termination for Nonpayment .......................................................25 11.4 Transition Assistance on Termination .............................................25 11.5 Right of Immediate Payment .......................................................25 11.6 Survival .........................................................................25 12. Indemnities ......................................................................26 12.1 Indemnity by FNIS ................................................................26 12.2 Indemnity by MGEN ................................................................26 12.3 Indemnification Procedures .......................................................26 12.4 Subrogation ......................................................................27 12.5 Non-Exclusive Remedy .............................................................27 13. Insurance ........................................................................28 13.1 Insurance Maintained by MGEN .....................................................28 13.2 Insurance Documentation ..........................................................28 14. General Provisions ...............................................................28 14.1 Binding Nature and Assignment ....................................................28 14.2 Notices ..........................................................................28

iii 14.3 Counterparts .....................................................................29 14.4 Relationship of Parties ..........................................................29 14.5 Approvals and Similar Actions ....................................................29 14.6 Force Majeure ....................................................................29 14.7 Severability .....................................................................29 14.8 Waiver ...........................................................................30 14.9 Attorneys' Fees ..................................................................30 14.10 Media Releases ...................................................................30 14.11 No Third Party Beneficiaries .....................................................30 14.12 Entire Agreement .................................................................30 14.13 Governing Law and Dispute ........................................................30 Schedule 1. Support ............................................................................i Schedule 2. Hosting Services ..................................................................ii Schedule 3. Projects .........................................................................iii Schedule 4. of Existing Services ...............................................................v Schedule 5. List of Project Coordinators and Project Area Managers ............................vi Schedule 6. Labor Rates ......................................................................vii Schedule 7. Maintenance and Support Charges ...................................................ix

iv SYSTEM DEVELOPMENT, MAINTENANCE AND INFORMATION TECHNOLOGY SERVICES AGREEMENT This Agreement is made and entered into to be effective as of the 2nd day of August, 2001 (the "Effective Date"), by and between Fidelity National Information Solutions, Inc., a Delaware Corporation, and its Members, as defined below (collectively, "FNIS"), on the one hand, and Micro General Corp., a Delaware Corporation, on behalf of itself and any subsidiary performing services hereunder (collectively, "MGEN"), on the other hand. WHEREAS, FNIS is a company that provides (1) MLS organizations with system integration solutions, information for making real estate decisions to consumers, (2) real estate professionals, environmental engineers, mortgage bankers and insurance banking and legal industries, (3) web-based property valuation, (4) real estate tax information, property tax payment disbursement and delinquency, monitoring and tracking services, (5) flood determination and life-of-loan flood zone monitoring services, (6) credit reporting services, and (7) other real estate information services, including document management support services for complex litigation (the "Business"); WHEREAS, MGEN is a comprehensive provider of business communications and information technology solutions including electronic data processing, facilities management, systems integration, systems development, telecommunications and related services; WHEREAS, the purpose of this Agreement is to establish and memorialize the general terms and conditions whereby MGEN would provide certain communications and information technology services to FNIS; and WHEREAS, MGEN is willing to offer and provide to FNIS, and FNIS shall be entitled, but not obligated, to obtain from MGEN the communications and information technology services described in this Agreement on the terms and conditions set forth in this Agreement and in the accompanying Project Scope Documents (as hereinafter defined). NOW, THEREFORE, for and in consideration of the agreements of the parties set forth below, the parties hereby agree as follows: 1. DEFINITIONS AND CONSTRUCTION 1.1 DEFINITIONS "Affiliate" means any corporation, partnership, limited liability company or other entity directly or indirectly controlled by or under the common control of FNIS. Notwithstanding the foregoing, the term shall not include MGEN (or any entity controlled by MGEN). "Best Practices" shall have the meaning set forth in Section 4.5. "Business" shall have the meaning provided in the first Recital. With respect to FNIS, the term "Business" includes business areas into which FNIS may expand in the future. "Change" shall mean any modification or change to System Software, Equipment or Services that would materially alter the functionality, performance standards or technical environment of such System, Software or Equipment, the manner in which 1 the Services are provided, the composition of the Services, or the cost of the Services to FNIS. "Confidential Information" shall have the meaning provided in Section 8.6. "Deliverables" means the deliverable items (a) specified for each Milestone in an applicable Project Scope Document, or (b) otherwise identified as items to be delivered by MGEN to FNIS. "Designated Services" shall have the meaning set forth in Section 2.1. "Developed System" means any System created in connection with a Systems Development Project or for which MGEN undertakes responsibility for the development effort, pursuant to this Agreement or any Project Scope Document. "Documentation" means those operating manuals, users' manuals, programming manuals, modification manuals, flow charts, drawings and software listings designed to assist a user's understanding or application of MGEN Software, Third Party Software or such other software as the context may contemplate. "Enhancements" shall mean all improvements, additions, and any modifications to a technology. The term "Enhancements" shall include all upgrades; bug fixes; work-arounds; software patches and other fixes; Improvements; changes or additions required to integrate the technology into other applications, operating systems, or computer hardware configurations; and all works of authorship, data, know-how, technology, information, inventions and/or discoveries related thereto which are conceived, or conceived and reduced to practice by a Party, but excluding all modifications or improvements developed with third parties to the extent the right to license such modifications or improvements is not obtained, after reasonable efforts to do so. "Equipment" shall have the meaning set forth in Section 2.8. "Existing Services" means those Services that are currently being provided to FNIS and its Affiliates, and that are listed on Schedule 4. "Fees" shall mean, collectively, fees payable to MGEN in connection with its performance of Services hereunder or pursuant to a Project Scope Document, and any other amounts payable to MGEN hereunder or pursuant to a Project Scope Document. "FNIS Data" shall mean all data or information regarding FNIS's business, including information relating to customers, employees, technology, operations, facilities, consumer markets, products, capacities, systems, procedures, security practices, research, development, business affairs and finances, innovations, inventions, designs, business methodologies, improvements, trade secrets, copyrightable and patentable subject matter and other similar information obtained by or disclosed to or submitted to MGEN by or on behalf of FNIS in connection with the performance of this Agreement or any applicable Project Scope Document. It is expressly agreed and understood that FNIS Data is "Confidential Information" under Section 8.6. 2 "FNIS Regulatory Requirements" shall mean the laws, rules and regulations on an international, federal, state and local level to which FNIS is required to submit or to which it voluntarily submits. "FNIS Service Location" shall mean any site or facility owned, leased or controlled by FNIS, and where Services shall be performed in connection with this Agreement or any Project Scope Document. "FNIS Systems" means Systems that are being operated by or on behalf of FNIS immediately prior to the Effective Date. "Help Desk" means the service of telephone support for assisting in resolving information technology and communications problems of FNIS. "Hosting Environment" shall mean the physical configuration, and the database environment, which is necessary to operate the FNIS Website or a FNIS Network in accordance with the terms and conditions of this Agreement, and any applicable Project Scope Document including without limitation descriptions of the hardware and software platforms, ancillary software, site security, and telecommunications capabilities. The Specifications for the Hosting Environment shall be as set forth in the applicable Project Scope Document. "Improvement" shall mean (i) for copyrightable or copyrighted material, any modification, correction, addition, extension, upgrade, improvement, compilation, abridgement, or other form in which an existing work may be recast, transformed, or adapted; (ii) for patentable or patented material, any improvement thereon; and (iii) for material which is protected by trade secret, any new material derived from such existing trade secret material, including new material which may be protected by copyright, patent, and/or trade secret. "Intellectual Property Rights" shall mean any and all rights existing now or in the future under patent law, copyright law, industrial design rights law, semiconductor chip and mask work production law, moral rights law, trade secret law, trademark law, unfair competition law, publicity rights law, privacy rights law, and any and all similar proprietary rights, and any and all renewals, extensions, and restorations thereof, now or hereafter in force and effect worldwide. "Internet" shall mean the global Network of interconnected computer Networks (or any part thereof, using TCP/IP or such other Network interconnection or communications protocols as may be adopted from time to time, which is used to deliver data to a computer or other digital electronic device, whether such data is delivered through on-line browsers, off-line browsers, or through electronic mail, broadband distribution, satellite, wireless or otherwise. "Losses" means all losses, liabilities, damages and claims (including taxes) to third persons or entities, and all related costs and expenses (including any and all attorneys and expert witness fees and costs of investigation, litigation, settlement, judgment, interest and penalties). "Maintain" or "Maintenance" means, collectively, the activities, services and functions identified in Section 2.2. 3 "Member" means any entity that is an Affiliate of FNIS. "MGEN Service Location" shall mean any location owned, leased, or controlled by MGEN and from or at which MGEN provides services in connection with this Agreement or any applicable Project Scope Document, other than FNIS Service Locations. "MGEN Software" shall mean all Software used, useful or developed by MGEN in connection with the performance of its obligations pursuant to this Agreement or any Project Scope Document. "MGEN Tools" shall mean any software development and performance testing, know-how, methodologies, processes, technologies or algorithms used by MGEN in providing Services, and based upon trade secrets or Confidential Information of MGEN, or otherwise based on Intellectual Property Rights owned or licensed by MGEN. "Milestone" means an individual task or set of tasks to be completed by a certain date as described in any Project Scope Document. "Network" shall mean a group of computers or other digital electronic devices connected by communications facilities, either through long-term connections, such as cables, or through more temporary connections, such as by telephone, by satellite, or other communications links. The term "Network" encompasses, but is not limited to, Local Area Networks ("LANs") and Wide Area Networks ("WANs"), and includes user-to-user as well as distributed communications. "New Project" shall mean any Services to be rendered by MGEN in connection with an undertaking that is not a Project as of the Effective Date. "New Project Scope Documents" shall mean any Project Scope Document executed in connection with the rendering of Services relating to a New Project. "New System" shall have the meaning set forth in Section 2.6.1. "Out-of-Scope Services" shall have the meaning set forth in Section 2.5. "Other Service Location" shall mean any location, other than an MGEN Service Location or a FNIS Service Location, permitted in accordance with this Agreement or an applicable Project Scope Document from which, or to which, Services are provided. "Party" shall mean either FNIS or MGEN, as the case may be. "Project" means each of the discrete tasks or undertakings to be performed by MGEN pursuant to Section 2.1 of this Agreement. This term shall include, when the context allows, all New Projects. "Project Manager" shall have the meaning set forth in Section 3.1. "Project Scope Document" shall mean the various individual written documents executed by an authorized signatory of each Party documenting the deliverables, Milestones, tasks, and other relevant responsibilities with respect to a Project Area. 4 This term shall include, when the context allows, all New Project Scope Documents executed in accordance with the procedure set forth in Section 2.6. "Project Budget" shall mean a written document that contains (a) a long-range plan and budget for a Project and (b) an annual plan and budget for a Project. "Project Coordinator" shall have the meaning set forth in Section 3.1. "Service Levels" shall have the meaning set forth in Section 4.1. "Service Location" shall mean any FNIS Service Location, MGEN Service Location or Other Service Location. "Services" shall mean those services, activities, functions or undertakings to be performed by MGEN in connection with the discharge of its obligations hereunder and under any Project Scope Document, including, Designated Services and the general services, activities and functions outlined in Section 2. "Software shall mean the MGEN Software and Third Party Software, collectively. "Source Code" means computer programs, instructions and related material written in a human-readable source language in form capable of serving as the input to a compiler or assembler program, and in form capable of being modified, supported and enhanced by programmers reasonably familiar with the source language. "Specifications" means the descriptions of the technical requirements, component parts, features, functionality, performance criteria, operating conditions, interfaces, data transfer, processing parameters, and protocols, associated with the undertaking by MGEN of Services, as may be specifically set forth herein or in a Project Scope Document. "Support" shall have the meaning set forth in Section 2.2.3. "Systems" means computer programs, the tangible media on which they are recorded, their supporting documentation, including input and output formats, program listings, narrative descriptions and operating instructions, as well as the hardware upon which such computer programs are run or stored. "Systems Development Project" means, collectively, the activities, services and functions identified in Section 2.6, as well as any other work performed by MGEN with regard to a System that exceeds Maintenance or Support in terms of scope or level of effort. "Third Party Services Contracts" means the contracts pursuant to which FNIS receives services as of the Effective Date for use in providing the Existing Services or pursuant to which FNIS receives Third Party services during the Term. "Third Party Software" shall mean all software and related Documentation owned by a third party, validly licensed to, and used by, MGEN in connection with the performance of its obligations pursuant to this Agreement or any Project Scope Document. 5 "Third Party System" means any System which (1) is not a FNIS System, and (2) is acquired or licensed from a third party for operation by MGEN on behalf of FNIS under this Agreement. "Website" shall mean a series of interconnected Web Pages residing in a single directory on a single server. "Web Page" means a document or file that is intended to be accessible by Internet users. Other capitalized terms used in this Agreement are defined in the context in which they are used and shall have the meanings indicated by such use. 1.2 REFERENCES. In this Agreement and the Schedules to this Agreement, including the Project Scope Document(s) and any schedules attached thereto: 1.2.1 the Schedules to this Agreement shall be incorporated into and deemed a part of this Agreement and all references to this Agreement shall include the Schedules to this Agreement; 1.2.2 this Agreement shall be incorporated into and deemed a part of any Project Scope Documents hereafter executed by the Parties; 1.2.3 the schedules to any Project Scope Document shall be incorporated into and deemed a part of such Project Scope Document and all references to such Project Scope Document shall include the schedules to such Project Scope Document; 1.2.4 references to any law or regulation shall mean references to the law or regulation in changed or supplemented form to a newly adopted law or regulation replacing a previous law or regulation; and 1.2.5 references to the word "including" or the phrase "e.g." in this Agreement shall mean "including, without limitation." 1.3 HEADINGS. The article and Sections headings and the table of contents are for reference and convenience only and shall not be considered in the interpretation of this Agreement or any Project Scope Document. 1.4 INTERPRETATION OF AGREEMENT AND PROJECT SCOPE DOCUMENTS. The terms and conditions set forth in this Agreement shall govern MGEN's provision of Services to FNIS under the Project Scope Documents, except as otherwise expressly set forth herein. In the event of a conflict between the terms of this Agreement and any Project Scope Document, unless otherwise provided herein [or expressly stated in the Project Scope Document], the terms of this Agreement shall prevail. In the event of a conflict between a Project Scope Document and the schedules to a Project Scope Document, the terms of the Project Scope Document shall prevail. 1.5 INTERPRETATION OF AGREEMENT AND SCHEDULES. In the event of any conflict between (a) the terms of this Agreement or a Project Scope Document, on the 6 one hand, and (b) any Schedule to this Agreement on the other hand, the terms of this Agreement or the Project Scope Document shall prevail. 2. SCOPE OF WORK; SERVICES AND COMMITMENTS 2.1 EXECUTION OF PROJECT SCOPE DOCUMENTS. MGEN agrees to perform Services in connection with each Project (including any New Project) described herein or in any Project Scope Document attached hereto. Following execution of this Agreement, the Parties agree to utilize their best efforts to promptly negotiate and execute Project Scope Documents not inconsistent with the provisions of this Agreement and the Schedules hereto. Each Project Scope Document shall identify (i) the Services to be performed with respect to such Project (the Designated Services"), (ii) the time frames and Milestones for the performance of the Designated Services, (iii) any special terms and conditions applicable to Designated Services (including Service Levels and Specifications, as appropriate) and (v) such other provisions as the Parties may agree. 2.2 MAINTENANCE AND SUPPORT. MGEN shall provide the following Support and Maintenance Services for a fixed annual fee, as specified in Section 9.1.2. 2.2.1 SYSTEMS MAINTENANCE. MGEN shall update Systems in order to meet changing information requirements, including, changing data formats, fixing bugs, adapting Software to interface with new hardware devices where feasible, and performing required file maintenance. 2.2.2 Hardware Maintenance. MGEN shall maintain, support, and periodically test the Equipment , except where such obligations are the responsibility of an identified third party. 2.2.3 Support. MGEN shall provide Support with respect to Systems, Software, data Networks, voice Networks and platforms used or useful in connection with FNIS's Business. The term "Support" shall include (a) inputting, connecting, and manipulating data, (b) formulating queries, (c) designing and revising reports, (d) providing operator services, (e) administering a Help Desk, (f) dispatching technical service engineers, (g) revising and updating web pages, (h) training FNIS employees (consistent with Section 2.3) and (i) such other tasks that are customarily performed by service providers similarly situated or as specified in a Project Scope Document. In addition, such Support shall include the Services specified on the attached Schedule 1, entitled "Support." 2.3 TRAINING. The terms and conditions regarding onsite training for FNIS's Project Coordinator and other such employees or agents as FNIS may select with respect to each Project shall be mutually agreed upon in good faith by the Parties in the applicable Project Scope Documents. 2.4 WEBSITE HOSTING. MGEN shall provide and Maintain a Hosting Environment to host the FNIS Website, and shall provide website hosting services for the FNIS Website, which services may be detailed in a Project Scope Document but shall not be inconsistent with Schedule 2 ("Hosting Services"). MGEN shall be responsible for obtaining and Maintaining the computer hardware and software 7 utilized in connection with the Hosting Services hereunder. MGEN shall be entitled to a fixed annual charge for such Hosting Services, in accordance with Section 9.1.2 2.5 OUT-OF-SCOPE SERVICES. Each Party agrees and acknowledges that the performance of Maintenance and Support Services by MGEN under Section 2.2 and Hosting Services under Section 2.4 shall be provided at fixed fees pursuant to Section 9.1.2 of this Agreement. Each Party further agrees and acknowledges, however, that during the course of MGEN's performance of Maintenance and Support Services hereunder, unforeseen circumstances could compel MGEN to propose, or FNIS to request, that certain services not otherwise contemplated by the Parties as of the Effective Date be performed ("Out-of-Scope Services"). To allow FNIS to manage all such Out-of-Scope Services, MGEN agrees that (a) it shall perform no Out-of-Scope Service without first obtaining FNIS's written approval and (b) it shall detail all costs and fees for Out-of-Scope Services in accordance with Section 9.3. 2.6 SYSTEMS DEVELOPMENT PROJECTS. MGEN shall undertake Systems Development Projects in accordance with this Section 2.6. Either Party may determine that implementation of a New Project is advisable (and MGEN shall have a duty to bring such advisable New Projects to the attention of FNIS). Accordingly, upon the initiative of either Party, and upon reasonable notice, the Parties shall meet and confer, and exchange information concerning the potential New Project. Upon completion of such information exchange, the Parties shall conduct good faith negotiations concerning (a) the scope of Services to be provided by MGEN, and (b) the projected costs of such Services and Developments, in accordance with this Section 2.6. To the extent such Project rises to the level of a New Project, the Parties agree to execute appropriate additional New Project Scope Documents. 2.6.1 SYSTEMS ANALYSIS AND DESIGN. Upon FNIS's request, and in exchange for consulting fees provided under Section 9.1.1, MGEN shall analyze and assess all aspects of any project contemplating the addition of a new System (a "New System"), the Enhancement to an existing System, or the creation or substantial Enhancement to an Internet Website, including, undertaking a feasibility study, proposing a general design, prototyping, creating an architectural design, establishing Specifications, and preparing a detailed statement of work (collectively, "Design"). 2.6.2 DEVELOPMENT. Upon completion of the Design, and upon FNIS's acceptance of such Design in accordance with Section 2.9, MGEN shall prepare a Quote for the Development and Implementation (as such terms are defined below) of such Design, as provided in Section 2.6.4, below. Upon FNIS's acceptance of the Quote, MGEN shall code, develop, and test ("Development") the referenced New System that shall add the required functionality, features or Enhancements. 2.6.3 IMPLEMENTATION. Upon completion of any Development obligations it may have, MGEN shall (subject to the Quote Procedure set forth in Section 2.6.4) train appropriate FNIS employees, convert any existing Systems to the New System and install the New System ("Implementation"). 8 2.6.4 MGEN QUOTES; BID PROCEDURE. In connection with any Development or Implementation work requested by FNIS or required to complete a Systems Development Project, and notwithstanding anything to the contrary in any Schedule hereto or in any Project Scope Document, MGEN shall provide FNIS with a quote for charges it reasonably expects to incur in performing such work (a "Quote"). Consistent with Section 2.15 hereunder, FNIS shall thereafter have the option to contract for the provision of such services with any third-party in its sole and absolute discretion. In the event FNIS selects MGEN as its service provider, MGEN shall be bound by its Quote, FNIS shall be entitled to rely on such Quote, and FNIS shall be bound by such Quote under Section 9.1.3; provided, however, that adjustments to the Quote may be submitted for approval in connection with the Change Order Process specified in Section 2.10. 2.6.5 COST REDUCTION. In a situation in which MGEN is providing a fixed cost service to FNIS, and MGEN is able to sell identical or similar services to a third party such that MGEN's fixed cost of providing such service is shared by FNIS and such third party, then MGEN shall inform FNIS of such eventuality and the parties shall mutually agree to a reduction of the amount paid by FNIS for such services by an agreed amount. 2.7 CONSULTING. In addition to Maintenance, Support, Hosting, Design, Implementation and Development Services, upon FNIS's request and in exchange for the fees set out in Section 9.1.1, MGEN shall provide FNIS with Consulting Services. Such Consulting Services shall include, but not be limited to (at FNIS's direction): (a) a review of FNIS's technology needs in light of FNIS's business plan; (b) interviewing FNIS executives to determine and clarify FNIS's business objectives and associated technology needs; (c) advising FNIS on its future technology needs; (d) evaluating alternative or emerging technologies, (e) preparing a technology plan integrating FNIS Systems and Developed Systems with new technology; (f) advising FNIS with respect to its Networks,(g) identifying and advising FNIS with respect to Best Practices (as such term is defined in Section 4.5), and (h) such other Consulting Services (including Out of Scope Services, as appropriate) mutually agreed to by the Parties. 2.8 EQUIPMENT PROCUREMENT. At FNIS's request and at MGEN's reasonable and good faith discretion, MGEN shall obtain on behalf of FNIS equipment and hardware that are related to the Services ("Equipment"). 2.8.1 PROCUREMENT SERVICES. MGEN shall (1) identify suppliers with the most favorable terms (including the lowest cost supplier) for any Equipment and (2) upon FNIS's selection and approval, acquire the Equipment on FNIS's behalf or lease, or coordinate the leasing of, such Equipment to FNIS. 2.8.2 PROCUREMENT COMPENSATION. MGEN shall be compensated for such procurement services at MGEN's hourly rates, in accordance with Section 9.1.1, and FNIS shall pay to MGEN, the supplier, or any third party lessor, as applicable, the purchase or lease fees in respect of the Equipment. Except as otherwise agreed in writing by the Parties or as otherwise provided in an applicable Project Scope Document, all rights in 9 and title to any Equipment purchased by MGEN on behalf of FNIS pursuant to this Agreement or any Project Scope Document shall belong to FNIS. 2.9 ACCEPTANCE PROCEDURE. The following acceptable procedure shall apply to all Deliverables MGEN provides to FNIS under this Agreement. 2.9.1 VERIFICATION PERIOD. Following timely receipt of Deliverables from MGEN, FNIS shall have not less than thirty (30) or more than forty-five (45) calendar days (the "Verification Period") in which to review, examine and verify such Deliverables and notify MGEN (a) of any material failure thereof to meet applicable Specifications or (b) of a material failure thereof otherwise to meet FNIS's needs, as FNIS may determined in the exercise of commercially reasonable judgment (a "Deliverable Failure"). FNIS agrees to use commercially reasonable efforts to provide MGEN with all information reasonably available regarding any Deliverable Failure. 1f FNIS fails to accept or reject a Deliverable within the Verification Period specified above, the Deliverable shall be deemed accepted; provided, however, that any failure by FNIS to discover or notify MGEN of defects within any Verification Period shall not negate any of MGEN' representations or warranties, nor waive any of FNIS's rights or remedies. 2.9.2 CORRECTION BY MGEN. Upon receipt of notice regarding the Deliverable Failure, MGEN shall use its best efforts, at MGEN's sole cost and expense, to correct any such Deliverable Failure and to resubmit the corrected applicable Deliverables to FNIS as soon as commercially and technically practicable, but in all cases within forty-five (45) days or such time as the parties mutually agree, following MGEN's notice of a Deliverable Failure. Subject to FNIS's rights under Section 11 of this Agreement, MGEN shall repeat the process of correction and resubmission of an applicable Deliverable until FNIS's acceptance. 2.9.3 REMEDY. In the event MGEN is unable to provide FNIS with an acceptable Deliverable in a timely manner and in accordance with this Section 2.9, upon request MGEN shall reimburse FNIS for all fees, costs, and expenses FNIS has incurred in connection with the Deliverable and associated development. The parties further agree that failure to timely correct a Deliverable Failure shall be deemed a material breach of this Agreement. 2.9.4 ALTERATIONS TO ACCEPTANCE PROCEDURES. A Project Scope Document may specify standards, criteria and procedures relating to the acceptance of Services or Deliverables provided that such Document is not inconsistent with this Section 2.9. 2.10 CHANGE ORDERS. All Changes shall be controlled using the following formal change control process: (1) the Party proposing a Change will document it in writing, provide technical and cost justification for the Change, and specify a desired implementation date; (2) the Party receiving the proposed Change will assess the impact of the proposed Change, considering resources required, technological implementation and other contemplated and in-process changes: 10 (3) the Parties shall negotiate in good faith toward a mutually acceptable proposal, and shall memorialize such proposal in writing; (4) the completed proposal shall be presented to the Project Coordinators for written approval; (5) no Changes will be implemented without (a) such written approval and (b) a written agreement setting forth and defining Specifications, schedules, resources to be utilized, responsibilities of both Parties and the criteria for successful implementation of such Change. MGEN shall be responsible for ensuring that the Change Control Process established by this Section 2.10 is followed, and FNIS shall not be obligated to pay for Changes undertaken by MGEN which do not fully comply with this Section. Additional provisions with respect to the Change Control Process for any Project may be specified in any Project Scope Document, provided such provisions are not inconsistent herewith. 2.11 SUBCONTRACTING. Prior to subcontracting any portion of the Services, MGEN shall notify FNIS of the proposed subcontract. FNIS shall have the right to approve such subcontractor, which approval shall not be unreasonably withheld or delayed. No subcontracting shall release MGEN from its responsibility for its obligations under this Agreement or under any Project Scope Document. MGEN shall be responsible for the work and activities of each of its subcontractors, including compliance with the applicable terms and provisions of this Agreement. MGEN shall be responsible for all payments of fees and expenses, as appropriate, to its subcontractors. 2.12 LICENSES AND PERMITS. MGEN shall obtain and maintain all necessary licenses (including, but not limited to, Software licenses), consents, approvals, and permits and any authorizations required by legislative enactments and regulations applicable to it that are legally required for MGEN to provide the Designated Services. FNIS shall be primarily responsible for authorizations relating to FNIS Regulatory Requirements. Subject to the foregoing, and upon request, each Party shall cooperate with and provide reasonable assistance to the other Party in obtaining any such licenses, consents, approvals, permits and authorizations. 2.13 SERVICE LOCATIONS. Unless otherwise agreed by FNIS, the Designated Services shall be provided at (1) the FNIS Service Locations, and (2) the MGEN Service Locations. 2.13.1 OTHER SERVICE LOCATIONS. In addition, MGEN may provide the Designated Services from Other Service Locations, upon prior approval by FNIS provided that MGEN demonstrates to FNIS's reasonable satisfaction that the provision of the Designated Service from such Other Location will not result in any additional cost to FNIS and that there are no increased risks to FNIS regarding the security of FNIS Data or the disclosure of FNIS Confidential Information. If MGEN provides the Designated Services from an Other Service Location in accordance with this Agreement or any applicable Project Scope Document, such Other Service Locations shall be deemed to be a "MGEN Service Location" for purposes of this Agreement. MGEN and MGEN agents, representatives and subcontractors, may not provide or market services to a third party from a FNIS Service Location without FNIS's consent. 11 2.13.2 SHARED ENVIRONMENT. In the event that MGEN desires to migrate services or technology subject to this Agreement to a shared environment or from one shared environment to another shared environment, MGEN will, prior to migrating such services or technology, (1) advise FNIS of such desire; (2) consult with FNIS on a proposal and transition plan; (3) demonstrate to FNIS's reasonable satisfaction that the use of such shared environment will not result in any additional cost or decreased Service Levels to FNIS and that there are no increased risks to FNIS regarding security of FNIS Data or the disclosure of FNIS's Confidential Information in contravention of Section 8; (4) when commercially reasonable, operate in parallel to demonstrate that there are no such increased risks to security, confidentiality, Service Levels or user interfaces; (5) work with FNIS to mitigate any identified risks to FNIS's Business; (6) review with FNIS the effect of such migration on FNIS Regulatory Requirements and contractual obligations and (7) obtain FNIS's consent to the transition plan to the shared environment, as presented. 2.14 DATA MIGRATION. MGEN agrees that FNIS Data shall be stored in industry-standard formats, and shall be readily portable to industry-standard, off-the-shelf database applications. 2.15 THIRD-PARTY SERVICES. Notwithstanding any request made to MGEN by FNIS, FNIS shall have the right to contract with any third party for the performance of Services. In the event FNIS contracts with a third party to perform any Service, MGEN shall cooperate in good faith with FNIS and any such third party to the extent reasonably required by FNIS. To the extent such cooperation requires additional Services by MGEN, MGEN shall provide such Services and shall be compensated consistent with the provisions of this Agreement or any applicable Project Scope Document. 2.16 EMERGENCY PROJECTS. From time to time it may be necessary for FNIS to request MGEN to undertake a Project on an emergency basis. The parties understand and acknowledge that the exigencies of such situations may mandate that MGEN take action, including commitment of time, resources and effort, to address the Project. The parties shall honor commitments and actions that were reasonable under the circumstances, and shall endeavor to comply with the New Project provisions set out above as soon as practicable. 3. CONTRACT ADMINISTRATION AND PROJECT TEAM 3.1 PROJECT COORDINATORS. Each Party shall appoint an individual (the "Project Coordinator") who, from the Effective Date, shall serve on a dedicated basis as the primary representative for such Party under this Agreement. A Party's appointment of a Project Coordinator shall be subject to the other Party's reasonable approval. The Project Coordinator shall (1) have overall responsibility for managing and coordinating the performance of such Party's obligations under this Agreement and the Project Scope Documents, (2) be authorized to act for and on behalf of such Party with respect to all matters relating to this Agreement and the Project Scope Documents and (3) appoint the individuals ("Project Managers") who shall be primarily responsible for supervising performance under the Project Scope Documents. A current list of Project 12 Coordinators and Project Managers shall be maintained as Schedule 5, as such Schedule may be amended from time to time. 3.2 PROJECT STAFF. Each Party, through its Project Coordinators and Project Managers, shall only assign employees who possess the requisite training and skills to perform the Designated Services contemplated under any Project Scope Document ("Project Staff"). 3.3 RESTRICTED POSITIONS. MGEN acknowledges that certain MGEN employees, including those assigned as (i) the MGEN Project Coordinator, (ii) the MGEN Project Managers, (iii) any MGEN employee who spends over thirty percent (30%) of his or her time on FNIS matters; and (iv) such other MGEN employees as the parties may mutually designate in writing (collectively or individually, as appropriate "Restricted Positions") may result in such MGEN employees ("Restricted Position Employees") being knowledgeable of sensitive Confidential Information. MGEN shall use its best efforts to ensure that Restricted Position Employees safeguard FNIS confidential information. 3.4 PERFORMANCE REVIEW. The MGEN Project Coordinator and the FNIS Project Coordinator will meet at least monthly to review the performance of both Parties under this Agreement, and shall meet when reasonably requested by either Party to review the performance of either party under this Agreement. At the request of either Party, written or taped minutes of such meetings may be kept. 3.5 DISPUTE RESOLUTION. If there is any dispute or disagreement between the Parties either in interpreting any provision of this Agreement or about the performance of either Party, then upon the written request of either Party, each of the Parties, through their respective Project Coordinators, will meet and confer to negotiate in good faith in an effort to resolve the dispute without any formal proceeding. During the course of such negotiation(s), all reasonable requests made by one Party to the other for information, including copies of relevant documents, will be honored. The specific format for such discussions will be left to the discretion of the Project Coordinators. If the Project Coordinators are unable to resolve the dispute within 30 days after their first meeting, each Party will appoint a designated officer of its corporation to attempt to resolve the dispute. No litigation for the resolution of such disputes may be commenced until the designated officers have met and either Party has concluded in good faith that amicable resolution through continued negotiation does not appear likely (unless either party fails or refuses to schedule such a meeting of officers within a reasonable time after a request to do so by the other Party). 4. SERVICE LEVELS. 4.1 SERVICE LEVELS. Commencing on the Effective Date, MGEN shall perform the Designated Services at the performance levels and standards (collectively, the "Service Levels") (a) set forth in the applicable Project Scope Documents, provided the same are not inconsistent with this Article 4, and (b) established by the warranties set forth in Sect ions 10.2.4 and 10.2.5. 13 4.2 MEASUREMENT AND MONITORING TOOLS. MGEN shall measure and monitor its compliance with the Service Levels. Such measurement and monitoring shall permit reporting at a level of detail sufficient for FNIS to verify compliance with the Service Levels. On a schedule set by the parties in applicable Project Scope Documents, MGEN shall provide periodic performance and status reports to FNIS, in a form mutually agreed by the parties, indicating the level of achievement of the Service Levels. FNIS shall have the right to require MGEN to outsource its responsibilities with respect to monitoring any Service Level established hereunder or pursuant to any Project Scope Document. FNIS shall have the right to audit MGEN's compliance with the Service Levels hereunder at any Service Location upon reasonable written notice. 4.3 SERVICE LEVEL FAILURES. In the event that either party identifies a failure during any calendar month of the Term to provide any of the Designated Services in accordance with the applicable Service Levels (each such failure, a "Service Level Failure), the applicable MGEN Project Coordinator promptly shall arrange a meeting with the FNIS Project Coordinator and provide a plan, reasonably satisfactory to FNIS, to address and correct such failures within the timeframe set forth in such plan. Failure by MGEN to so provide and effect such plan shall be deemed a material breach of this Agreement. 4.4 CRITICAL FAILURES. In the event that a Service Level Failure either (a) has a material adverse business impact upon FNIS's Business, or (b) represents a continued failure to correct non-critical Service Failures over a three-month period (in each case a "Critical Failure"), then MGEN shall submit a written report to the FNIS Project Manager detailing the cause of such incident and the remedial measures taken with respect thereto within 15 business days of the Critical Failure. Failure by MGEN to provide and effect such remedial measures within such 15 business day period shall be deemed a material breach of this Agreement. In the event of any interruption in a Critical Service that does not cause a Critical Failure, the MGEN Project Manager shall submit a written report to the FNIS Project Manager detailing the cause of the incident and the remedial measures taken with respect thereto within 30 business days thereafter. Failure by MGEN to provide and effect such remedial measures within such 30 business day period shall be deemed a material breach of this Agreement. 4.5 CONTINUOUS IMPROVEMENT AND BEST PRACTICES. MGEN agrees to use commercially reasonable efforts to: (1) on a continuous basis, as part of the total quality management processes, identify ways to improve the Service Levels, and (2) identify and apply proven techniques and MGEN Tools from other installations within operations that would benefit FNIS either operationally or financially (collectively such efforts shall be hereinafter referred to as "Best Practices"). 5. LICENSE AND OTHER GRANTS 5.1 LICENSE TO MGEN SOFTWARE AND INTELLECTUAL PROPERTY RIGHTS. In consideration of FNIS's payment of fees and other obligations hereunder, MGEN hereby grants to FNIS during the Term and Transition Period a nonexclusive, royalty-free, irrevocable and perpetual (except as expressly limited elsewhere here in) license as follows: 14 5.1.1 to use all MGEN Software in connection with its Business; 5.1.2 to reproduce MGEN Software and Documentation for internal Business purposes, subject to charges assessed on a per-office basis and previously agreed to by the Parties in writing prior to the Effective Date for particular MGEN Software; 5.1.3 to execute MGEN Software on Equipment owned or controlled by FNIS; 5.1.4 to perform and display (whether publicly or otherwise) MGEN Software and Documentation (subject to the nondisclosure obligations contained herein) for Business purposes; 5.1.5 After the termination of this Agreement, FNIS will have the following additional rights: 5.1.5.1 to create Improvements to any MGEN Software or Documentation and to use and enjoy such Improvements; 5.1.5.2 to create translations to other computer languages or otherwise of MGEN Software for Business purposes; and 5.1.6 The licenses granted herein shall survive any termination or expiration of this Agreement, even if such termination or expiration is attributable to FNIS's breach of a provision hereunder. 5.2 THIRD PARTY SYSTEMS. MGEN grants to FNIS solely for the purposes of this Agreement a non-exclusive license to access, use, and enjoy all of MGEN's rights in the Third Party Systems and accompanying Documentation, during the Term and during the Transition Period. 5.3 DELIVERY OF SOURCE CODE; USE OF SOURCE CODE MGEN shall, within thirty (30) days after the Effective Date, enter into an agreement with a provider of software escrow services reasonably acceptable to FNIS, providing that (i) MGEN shall deposit a copy of the MGEN Software into escrow; (ii) that MGEN shall maintain a current copy of the MGEN Software in escrow by refreshing such deposit at least every calendar year, or upon issuance of a major upgrade release, whichever occurs more often; and (iii) that such escrow provider shall release such deposit to FNIS upon a reasonable showing that this Agreement has been terminated. Such escrow agreement shall be in the form attached hereto as Exhibit A. Upon acquisition of the MGEN Software from the escrow agent, FNIS shall have the unfettered right to use such MGEN Software, in any manner that it desires, including the right to create derivative works thereto. 5.4 FACILITY REQUIREMENTS. During the Term, FNIS will provide to MGEN, at no cost to MGEN except as specified below, access to and use of all of the facilities wherein any computing or telecommunications resources are located and where such access is necessary for MGEN to provide the Services hereunder. Any Member may limit such access in any reasonable manner to allow for the smooth operation of such Member. 15 5.5 THIRD PARTY SERVICES. During the Term, FNIS will provide to MGEN contact information regarding access to and use of all of the third party services governed by the Third Party Services Contracts to enable MGEN to fulfill its obligations hereunder. MGEN shall provide FNIS with similar contact information regarding Third Party Services Contracts, Third Party Software, and Third Party Systems. 6. ACCESS RIGHTS AND PROHIBITED CHANGES 6.1 FNIS SYSTEM ACCESS. FNIS grants to MGEN a nonexclusive, royalty-free right to use the FNIS Systems or Developed Systems to the extent necessary to verify, analyze and troubleshoot problems on FNIS owned or controlled Equipment as part of performing its Maintenance obligations hereunder. Nothing in this Section shall grant MGEN the right to use any FNIS System or Developed System for any other purpose. 6.2 PROHIBITED CHANGES TO SOFTWARE. Except as may be approved by FNIS, MGEN shall not make any changes or modifications to MGEN Software or to the Third Party Software that would alter the functionality of any System or degrade the performance of the Systems or Services, except as may be necessary on a temporary basis to maintain the continuity of the Services. 7. FNIS OBLIGATIONS 7.1 FNIS will, on a timely basis: 7.1.1 Appoint a Project Coordinator and Project Managers as set forth in this Agreement. 7.1.2 Maintain any procedures manuals provided to FNIS by MGEN by distributing and inserting updates provided by MGEN. 7.1.3 Use commercially reasonable efforts to provide MGEN with reasonable notification of, and lead time, to respond to service requests, including changes to the number or format of required management reports, study requests, and requests to modify or Enhance any Systems. 8. SAFEGUARDING FNIS DATA, CONFIDENTIALITY AND AUDIT RIGHTS 8.1 SAFETY AND SECURITY PROCEDURES. 8.1.1 FNIS shall maintain and enforce at the FNIS Service Locations reasonable physical safety and security procedures. FNIS shall be responsible for any failures of FNIS or its agents to comply with reasonable FNIS physical safety and security procedures then in effect at the applicable FNIS Service Locations or reasonable physical safety and security procedures then in effect at the applicable MGEN Service Locations, to the extent that such non-compliance causes damages to MGEN. 16 8.1.2 MGEN shall maintain and enforce at the MGEN Service Locations reasonable physical safety and security procedures. MGEN shall be responsible for any failures of MGEN or its agents to comply with reasonable MGEN physical safety and security procedures then in effect at the applicable MGEN Service Locations or reasonable physical safety and security procedures then in effect at the applicable FNIS Service Locations, to the extent that such non-compliance causes damages to FNIS. 8.1.3 MGEN shall comply at the FNIS Service Locations with FNIS's physical safety and security procedures. MGEN shall be responsible for any failures of MGEN or its agents to comply with FNIS's physical safety and security procedures then in effect at the applicable FNIS Service Locations, to the extent that such non-compliance causes damages to FNIS. 8.1.4 FNIS shall comply at MGEN Service Locations with MGEN's physical safety and security procedures. FNIS shall be responsible for any failures of FNIS or its agents to comply with MGEN's physical safety and security procedures then in effect at the applicable MGEN Service Locations, to the extent that such non-compliance causes damages to MGEN. 8.2 DATA SECURITY. Except to the extent otherwise agreed by the Parties in a Project Scope Document, MGEN shall establish and maintain good and sound safeguards against the destruction, loss or alteration of the FNIS Data in the possession of MGEN. In the event MGEN or MGEN agents, representatives and subcontractors, discover or are notified of a breach or potential breach of security relating to the FNIS Data, MGEN shall immediately (1) notify the FNIS Project Coordinator and Project Manager, as the case may be, of such breach or such potential breach and (2) if the applicable FNIS Data was in the possession of MGEN or MGEN agents, representatives and subcontractors, at the time of such breach or such potential breach, MGEN shall (a) investigate such breach or such potential breach and (b) inform FNIS of the results of such investigation. 8.3 SECURITY RELATING TO SHARED MGEN ENVIRONMENTS. If MGEN provides the Designated Services to FNIS from an MGEN Service Location that also provides services to or processes data for any other MGEN customer, MGEN shall, in addition to its obligations under Section 2.13.2, at FNIS's request, demonstrate to FNIS's reasonable satisfaction that FNIS's Confidential Information and FNIS Data will not be disclosed to any such other MGEN customer. 8.4 CONDUCT OF MGEN PERSONNEL. While at any FNIS Service Location, the Project Staff shall (1) comply with the requests, rules and regulations of FNIS regarding personal and professional conduct (including the wearing of an identification badge or personal protective equipment and adhering to FNIS's facilities regulations and general safety practices or procedures) applicable to such FNIS Service Locations and (2) otherwise conduct themselves in a professional and businesslike manner. MGEN shall cause the Project Staff to maintain and enforce the confidentiality provisions of this Agreement and any confidentiality provisions of any applicable Project Scope Document. In addition, as soon as reasonably practicable after the Effective Date, MGEN shall cause each of its 17 employees to execute a confidentiality agreement covering the Confidential Information in a form substantially similar to that attached hereto as Exhibit B. In the event that FNIS determines that a particular member of the Project Staff is not conducting himself or herself in accordance with this Section 8.4, FNIS may notify MGEN of such conduct. Upon receipt of such notice, MGEN shall promptly (a) investigate the matter and take appropriate action which may include (i) removing such employee from the Project Staff and providing FNIS with prompt notice of such removal and (ii) replacing such employee with a similarly qualified individual or (b) take other appropriate disciplinary action to prevent a recurrence. In the event there are repeat violations of this Section by a particular member of the Project Staff, MGEN shall promptly remove the individual from the Project Staff as set forth above. 8.5 FNIS DATA. FNIS Data shall be and remain the property of FNIS, and shall be "Confidential Information" under Section 8.6. Upon the termination of this Agreement for any reason, or on such date that the same shall no longer be required by MGEN in order to provide the Services, FNIS Data shall be either erased from the data files maintained by MGEN or, if FNIS so elects, returned to FNIS by MGEN at MGEN' expense. FNIS Data shall not be used by MGEN for any purpose other than that of providing Services, nor shall such data or any part of such data be disclosed, sold, assigned, leased or otherwise disposed of to third parties by MGEN or commercially exploited by or on behalf of MGEN, its employees or agents. MGEN hereby acknowledges that disclosure of some such data may be governed by various state and federal laws and regulations, and MGEN hereby agrees to comply with all such laws and regulations. 8.6 DEFINITION OF CONFIDENTIAL INFORMATION. The term "Confidential Information" shall mean all (a) non-public information and materials (in any medium), including but not limited to any business, financial or strategic plans and information and software Source Code, in each case, of the Disclosing Party (as defined in Section 8.7) or its Affiliates; (b) information subject to an obligation of confidence to a third party of which the Receiving Party (as defined in Section 8.7) has been advised in writing; and (c) any information marked confidential, restricted or proprietary by either Party or any other person to whom such party has an obligation of confidence; provided, however, that the failure of either Party to so mark any material shall not relieve the Receiving Party of the obligation to maintain the confidentiality of any unlegended material which the Receiving Party knows or should reasonably know contains Confidential Information. Each Party's know-how, network design and equipment configurations and techniques relating to network and network management developed or utilized during the course of this Agreement are Confidential Information of such Party. The terms of this Agreement, including pricing and financial data, discussions, negotiations and proposals from one Party to the other Party related directly hereto; and invoices and service records shall be Confidential Information of both Parties. 8.7 DISCLOSURE OF CONFIDENTIAL INFORMATION. In carrying out the Services contemplated by this Agreement, each party (the "Disclosing Party") may from time to time during the term of this Agreement disclose to the other party (the "Receiving Party") certain information regarding the Disclosing Party's business, delivery mechanisms, personnel, technical, marketing, financial, employee, 18 planning, and other confidential or proprietary information ("Confidential Information"). 8.8 PROTECTION OF CONFIDENTIAL INFORMATION. The Receiving Party will not use any Confidential Information of the Disclosing Party for any purpose not expressly permitted by this Agreement, and will disclose the Confidential Information of the Disclosing Party only to those employees or contractors of the Receiving Party who have a need to know such Confidential Information for purposes of this Agreement and who are under a duty of confidentiality no less restrictive than the Receiving Party's duty hereunder. The Receiving Party will protect the Disclosing Party's Confidential Information from unauthorized use, access, or disclosure in the same manner as the Receiving Party protects its own confidential or proprietary information of a similar nature and with no less than reasonable care. 8.8.1 EXECUTION OF NON-DISCLOSURE AGREEMENTS BY MGEN EMPLOYEES. In addition, MGEN shall insure that each of its employees who qualifies as a "Restricted Position Employee" under Section 3.3 shall execute a non-disclosure agreement in a form reasonably satisfactory to FNIS's counsel prior to commencing work on any Project. 8.9 EXCEPTIONS. The Receiving Party's obligations hereunder with respect to any Confidential Information of the Disclosing Party will terminate if and when the Receiving Party can document that such information: (a) was already known to the Receiving Party at the time of disclosure by the Disclosing Party; (b) was disclosed to the Receiving Party by a third party who had the right to make such disclosure without any confidentiality restrictions; (c) is or through no fault of the Receiving Party has become, generally available to the public; or (d) is independently developed by the Receiving Party without access to, or use of, the Disclosing Party's Confidential Information. In addition, the Receiving Party will be allowed to disclose Confidential Information of the Disclosing Party to the extent that such disclosure is (i) approved in writing by the Disclosing Party, (ii) necessary for the Receiving Party to enforce its rights under this Agreement in connection with a legal proceeding; or (iii) required by law or by the order of a court or similar judicial or administrative body, provided that the Receiving Party notifies the Disclosing Party of such required disclosure promptly and in writing and cooperates with the Disclosing Party, at the Disclosing Party's reasonable request and expense, in any lawful action to contest or limit the scope of such required disclosure. 8.10 RETURN OF CONFIDENTIAL INFORMATION. The Receiving Party will return to the Disclosing Party or destroy all Confidential Information of the Disclosing Party in the Receiving Party's possession or control promptly upon the written request of the Disclosing Party on the earlier of the expiration or termination of this Agreement. At the Disclosing Party's request, the Receiving Party will certify in writing that it has fully complied with its obligations under this Section. 8.11 AUDIT RIGHTS. FNIS shall have the right to have an independent certified public accounting firm conduct an audit at any time during the Term hereof, or within three years thereafter, to verify any of the Fees or charges hereunder. If such audit determines that MGEN has overcharged FNIS, MGEN shall immediately credit or pay (as directed by FNIS) FNIS the amount of the overcharge. If the 19 audit determines that MGEN has undercharged FNIS, FNIS shall immediately pay MGEN the amount of the undercharge. If the audit discloses an underpayment or overpayment of more than five percent in any month covered by the audit, MGEN shall pay for the cost of the audit. In all other cases, the cost of any audit hereunder shall be borne by FNIS. 8.12 THIRD PARTY DISCOVERY. If any governmental agency or any third party shall seek in any way to discover or otherwise gain access to, ("Discovery") any System, Confidential Information or any other data or records of one party that may be in the possession of the other party, the other party shall immediately notify the first party and shall, at the first party's written request and at the first party's expense, and cooperate with the first party in the first party's efforts to preclude, quash, limit or impose protective orders or similar restrictions on such Discovery. 9. PAYMENTS TO MGEN 9.1 FEES. With respect to each Project, FNIS shall pay Fees to MGEN commencing upon the Effective Date of the relevant Project Scope Document. A Project Scope Document may, at FNIS's election, contain provisions for the determination of the amount of Fees in respect of Services performed for a specific Project and such provisions shall be controlling; provided, however, the methodology for such determination shall not be inconsistent with this Section. In the absence of an applicable Project Scope Document, the amount of Fees owing to MGEN shall be determined as set forth below. 9.1.1 HOURLY RATES. Fees for Consulting Services, Out of Scope Services and Design Services shall be computed based on the hourly rates of each MGEN employee or contractor performing the underlying Services. Such hourly fees shall be in accordance with the Rate Schedule, attached as Schedule 6. MGEN shall track and record hours expended in performing such Services, and shall include a breakdown of such hours on its invoices, as provided in Section 9.3. 9.1.2 FIXED ANNUAL CHARGES. Fees relating to Maintenance and Support Services shall be fixed and shall be based on the number of users during the billing period in question, irrespective of the actual Services rendered during such period. Maintenance and Support fees under this Section 9.1.2 for Year One shall be as specified on Schedule 7. 9.1.3 DEVELOPMENT QUOTES. Fees relating to Systems Development Projects (other than Design Services, which shall be billed and paid as Consulting Services under 9.1.1) shall be determined in accordance with the Bid Procedure set forth in Section 2.6.4. 9.2 TIME AND MANNER OF PAYMENT. Unless otherwise provided, at FNIS's option, in an applicable Project Scope Document, FNIS will pay MGEN, by wire transfer to a bank account designated in writing by MGEN any sum due MGEN hereunder or pursuant to a Project Scope Document on or before the thirtieth calendar day after receipt by FNIS of an invoice from MGEN for such sums, such invoices to be submitted to FNIS in accordance with Section 9.3 and no sooner than the end 20 of the calendar month to which the invoiced sums apply. Any sum due MGEN that is not paid within the time specified above shall accrue interest until paid at a rate of interest equal to the lesser of nine tenths of one percent (0.9%) per month, or the maximum rate of interest allowed by applicable law. For purposes of this Section 9.2, "day of receipt" shall be the day the invoice is delivered by hand or transmitted electronically to FNIS's premises, the next business day after it is deposited with an overnight delivery service, or three business days after it is deposited in the U.S. mail. 9.3 DETAILED INVOICES. MGEN shall provide invoices that include sufficient pricing detail to enable FNIS to validate the Fees charged. Notwithstanding the foregoing, each invoice shall conspicuously reference the applicable Project and contain a detailed narrative of the Services actually rendered. Upon FNIS's request, MGEN shall provide customized invoices to satisfy individual billing requirements of FNIS, such requirements to be reasonably determined by FNIS in its sole discretion. 9.4 EXPENSES. Neither Party shall be responsible for any expenses incurred by the other Party in connection with the provision of the Services, unless specifically set forth in this Agreement, any Project Scope Document or as agreed in advance by the Party to be charged. If the Parties agree that FNIS shall be responsible for any of MGEN's out-of-pocket expenses incurred in connection with this Agreement or any Project Scope Document, all reimbursements shall be made in accordance with FNIS's reimbursement policy. 9.5 PRICING ADJUSTMENTS. MGEN shall have the right on an annual basis (a) to adjust the hourly rates for the Project Staff and other employees performing Services hereunder or pursuant to any Project Scope Document, and (b) to adjust the annual charge for Maintenance and Support (as provided in Schedule 6) provided that any such increases during the Initial Term shall be limited to the cumulative percentage increase in the U.S. Consumer Price Index for all prior years since the last rate increase or since the execution of this Agreement, whichever is later. In the event that MGEN can demonstrate that industry-wide price increases are greater than increases permissible under the previous sentence, then the parties shall negotiate in good faith to determine an appropriate price level. During any Renewal Term MGEN may adjust rates to its then-current standard rates. 9.6 MOST FAVORED CUSTOMER PRICING. The prices that MGEN shall charge FNIS with respect to any Services rendered or to be rendered hereunder, or under any Project Scope Document, shall be no higher than those offered to any direct competitor of FNIS for substantially similar Services. In the event MGEN is in breach of the foregoing, such lower prices shall apply to FNIS effective as of the date such lower rate were first offered to such other customer, and appropriate adjustments shall thereafter be reflected on all appropriate Project invoices. 9.7 TAXES. FNIS shall pay, or reimburse MGEN for payment of, any taxes or amounts paid in lieu of taxes, including privilege or excise taxes based on the gross revenue of MGEN, however designated or levied, based upon this Agreement, the charges of MGEN or the Systems, the Services or materials provided under this Agreement. MGEN is only responsible for the payment of 21 franchise taxes, state and local personal property taxes, employment taxes for its employees and taxes based on the net income of MGEN. 9.8 PRORATION. All periodic charges under this Agreement are to be computed on a calendar month basis, and will be prorated for any partial month. 9.9 RIGHTS OF SET-OFF. With respect to any amount to be reimbursed or paid by one Party to the other pursuant to this Agreement, the Party owing such reimbursement or payment may, at its option, pay or reimburse that amount offsetting amounts already owed to such Party under this Agreement. 10. REPRESENTATIONS AND WARRANTIES 10.1 BY FNIS. FNIS represents and warrants to MGEN as follows. 10.1.1 CORPORATE POWER. FNIS and each Member (a) is a corporation duly incorporated, validly existing and in good standing under the State of Delaware (for FNIS) or under the laws of the state of incorporation of such other Member and (b) has full corporate power to own, lease, and operate its properties and assets, to conduct its business as such business is currently being conducted, and to consummate the transactions contemplated by this Agreement. 10.1.2 AUTHORITY. This Agreement has been duly authorized, executed and delivered and constitutes a valid and binding agreement, enforceable against FNIS in accordance with this Agreement's terms, subject to the effect of bankruptcy, insolvency, moratorium and other laws now or hereafter in effect relating to and affecting the rights of creditors generally and to equitable principles of general application. 10.1.3 NO BREACHES. Neither the execution or delivery of this Agreement, nor the consummation of any of the transactions contemplated herein, will result in the breach of any term or provision of, or constitute a default under, any charter provision or bylaw, or material agreement (subject to any applicable required consent), order, law, rule or regulation to which it is a party or which is otherwise applicable to it. 10.2 BY MGEN. MGEN represents and warrants to FNIS as follows: 10.2.1 CORPORATE POWER. MGEN (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation and (b) has full corporate power to own, lease, and operate its properties and assets, to conduct its business as that business is currently being conducted, and to consummate the transactions contemplated by this Agreement. 10.2.2 AUTHORITY. This Agreement has been duly authorized, executed and delivered and constitutes a valid and binding agreement, enforceable against MGEN in accordance with this Agreement's terms, subject to the effect of bankruptcy, insolvency, moratorium and other laws now or 22 hereafter in effect relating to and affecting the rights of creditors generally and to equitable principles of general application. 10.2.3 NO BREACHES. Neither the execution or delivery of this Agreement, nor the consummation of any of the transactions contemplated herein, will result in the breach of any term or provision of, or constitute a default under, any charter provision or bylaw, or material agreement (subject to any applicable required consent), order, law, rule or regulation to which it is a party or which is otherwise applicable to it. 10.2.4 COMMERCIAL PRACTICE WARRANTY. The Services shall be rendered by qualified MGEN personnel, and shall be consistent with the highest commercial practice. 10.2.5 WARRANTY OF COMPLIANCE. In addition to fulfilling the warranties set forth in Section 10.2.4, all Services and Developed Systems shall comply in all material respects to (a) the Technology Proposal (as it may be amended from time to time), (b) Specifications, (c) Documentation, (d) applicable Service Levels, and (d) the Parties' discussions, as embodied in written and approved design and functional layout documents. 10.2.6 NON-INFRINGEMENT. The Software shall not infringe the Intellectual Property Rights of any third party as may now or in the future exist and MGEN has the right to grant all of the licenses to FNIS hereunder, free from all claims, liens, security interests or other encumbrances. To the best of MGEN's knowledge, the Software shall not infringe the Intellectual Property Rights of any third party as may now or in the future exist. MGEN shall not place on any of such Software any liens, security interest or other encumbrances that would in any manner affect FNIS's licenses under this Agreement. 10.2.7 NO VIRUSES. The Software does not and shall not contain, at the time of installation, any timer, clock, counter, or other limiting design or routine, nor (to the best of MGEN's knowledge) any virus, that causes or could cause any FNIS Systems, Developed System or FNIS Data (or any portion thereof) to become erased, inoperable, impaired, or otherwise incapable of being used in the full manner for which it was designed and licensed (including, without limitation, any design or routine that would impede copying thereof) after being used or copied a certain number of times, or after the lapse of a certain period of time, or after the occurrence or lapse of any similar triggering factor or event, or for any other reason. Furthermore, the Software does not and shall not contain any virus, limiting design or routine that causes or could cause any of them to become erased, inoperable, impaired, or otherwise incapable of being used in the full manner for which it was designed and licensed pursuant to this Agreement because it has been installed on or moved to a hardware unit or system that has a serial number, model number, or other identification different from the identification of the one on which it was originally installed. 10.2.8 COMPLIANCE. In performing its obligations hereunder, MGEN shall comply in all material respects with requirements all applicable Federal, 23 state and local statutes, regulations and ordinances, including, without limitation, the Gramm-Leach-Bliley Act. 10.3 DISCLAIMER. EXCEPT AS SPECIFIED IN THIS SECTION 10, NEITHER PARTY MAKES ANY OTHER WARRANTIES AND EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A SPECIFIC PURPOSE. 10.4 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY, OR ANY OF ITS AFFILIATES, PARTNERS, OFFICERS, EMPLOYEES, DIRECTORS, AGENTS, CONTRACTORS, REPRESENTATIVES, SUCCESSORS OR ASSIGNS, AS SUCH, BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES UNDER OR IN CONNECTION WITH THIS AGREEMENT. IN ANY EVENT, THE TOTAL LIABILITY OF EITHER PARTY, AND ITS AFFILIATES, PARTNERS, OFFICERS, EMPLOYEES, DIRECTORS, REPRESENTATIVES, SUCCESSORS AND ASSIGNS, TO THE OTHER PARTY FOR ANY LOSSES, IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE TOTAL COMPENSATION PAID BY FNIS TO MGEN FOR THE SERVICES, DURING THE CONSECUTIVE THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING THE OCCURRENCE OF THE EVENT(S) GIVING RISE TO SUCH LIABILITY, PROVIDED, HOWEVER, THAT SUCH LIMITATION SHALL NOT APPLY TO MGEN BREACHES OF SECTIONS 8, 9.6, 10.2.6 AND 10.2.8. 11. TERM AND TERMINATION 11.1 TERM. This Agreement shall begin on the Effective Date and unless sooner terminated pursuant to the terms hereof, shall expire on three years from the Effective Date ("Expiration Date") ("Initial Term"), except as provided in this Section 11.1. FNIS shall enjoy an irrevocable option to elect to extend the Initial Term for an additional three-year period, and FNIS shall exercise this option by giving MGEN written notice of such election no later than thirty (30) days before the expiration of the Initial Term (the "Optional Term"). After expiration of the Optional Term, or expiration of the Initial Term (if FNIS elects not to exercise its option to extend), this Agreement shall automatically renew for up to three terms of one year each (each, a "Renewal Term"), unless (a) in the case of notice by FNIS, at least ninety days prior to the expiration of the Term FNIS notifies MGEN in writing of its decision not to renew, or (b) in the case of notice by MGEN, at least six (6) months prior to the expiration of the Term MGEN notifies FNIS in writing of its decision not to renew. It is agreed and understood that "Term" shall refer to the Initial Term, the Optional Term, Renewal Terms, or some combination, or all, of these items, as the context permits. 11.2 TERMINATION FOR CAUSE. If either party materially or repeatedly defaults in the performance of any of its duties or obligations under this Agreement (except for a default in payments to MGEN, which is governed by Section 11.3), which default is not substantially cured with fifteen (15) days after written notice is given to the defaulting party specifying the default, or, with respect to those defaults which cannot reasonably be cured within such fifteen (15) days, if the defaulting party fails to proceed within such fifteen (15) days to commence curing said default and to proceed with all due diligence substantially to cure the default, then the party not in default may, by giving written notice of 24 termination to the defaulting party, terminate this Agreement as of a date specified in the notice of termination and no termination charge shall be due or payable in such event. 11.3 TERMINATION FOR NONPAYMENT. If FNIS defaults in the payment when due of any amount due to MGEN and does not, within fifteen (15) days after being given written notice, cure such default, or, if FNIS in good faith disputes the amount due, but does not deposit the disputed amount in escrow in a major U.S. commercial bank to be designated by MGEN, with interest to be allocated to the party entitled to the principal upon resolution of the dispute, then MGEN may, by giving written notice to FNIS, terminate this Agreement as of a date specified in the notice of termination. 11.4 TRANSITION ASSISTANCE ON TERMINATION. Upon termination of this Agreement for any reason, including the breach hereof by FNIS, MGEN shall, if so requested by FNIS, provide assistance to FNIS as hereinafter set forth. 11.4.1 TRANSITION ASSISTANCE. MGEN shall provide FNIS with reasonable training and other assistance to minimize disruption in the transition of the Services to FNIS or a third-party. Training may be provided from the time of FNIS's request to the date of termination or expiration and for up to six additional months (the "Transition Period") following termination or expiration. All such training services shall, for purposes of this Agreement, be deemed Consulting Services, and shall be compensated in accordance with Section 9.1.1. If the termination was caused by FNIS's breach, at MGEN's request, FNIS shall pay to MGEN prior to the commencement of such transition services the reasonable estimated costs of such services. 11.4.2 FNIS'S RIGHT TO HIRE MGEN EMPLOYEES. MGEN acknowledges that the persons who may be most valuable to FNIS upon any termination or expiration of this Agreement are members of the MGEN Project Staff. MGEN agrees that upon termination or expiration of this Agreement or any applicable Project Scope Document, FNIS shall have the right to solicit members of the MGEN Project Staff for employment by FNIS. MGEN agrees that it shall not interfere with any such solicitation efforts by FNIS and shall cooperate by executing appropriate waivers with respect to any contractual or other non-solicitation or non-competition rights it might have with respect to its Project Staff, or other documents reasonably requested by FNIS. 11.5 RIGHT OF IMMEDIATE PAYMENT. If MGEN terminates this Agreement for FNIS's default, and FNIS has not disputed such breach, FNIS shall immediately pay MGEN for all Services rendered and Equipment procured through the termination date. Notwithstanding anything to the contrary, the failure of FNIS to make any payments hereunder shall not relieve MGEN from its required performance after the termination of this Agreement. 11.6 SURVIVAL. The following provisions shall survive the termination or expiration of this Agreement: Section 8.8, Section 8.11, Section 10.2, Section 10.3, Section 10.4, Section 12, and Section 13. 25 12. INDEMNITIES 12.1 INDEMNITY BY FNIS. FNIS agrees to indemnify, defend and hold harmless MGEN, and its respective officers, directors, shareholders, employees, agents, successors and assigns, in accordance with the procedures described in Section 12.3, from any and all Losses arising from or in connection with: 12.1.1 The inaccuracy as of the Effective Date of any of the representations or warranties by FNIS set forth in this Agreement; and 12.1.2 Any claims of infringement made against MGEN of any United States letters patent, or a trade secret, or any copyright, trademark, service mark, trade name or similar proprietary rights conferred by contract or by common law or by any law of the United States or any state, alleged to have occurred because of Systems or other resources or items provided to MGEN by FNIS. 12.2 INDEMNITY BY MGEN. MGEN agrees to indemnify, defend and hold harmless FNIS and its officers, directors, shareholders, employees, agents, successors and assigns, in accordance with the procedures described in Section 12.3, from any and all Losses arising from or in connection with: 12.2.1 The breach of any representation, warranty or covenant by MGEN set forth in this Agreement; 12.2.2 Any claims of infringement made against FNIS of any United States letters patent, or a trade secret, or any copyright, trademark, service mark, trade name or similar proprietary rights conferred by contract or by common law or by any law of the United States or any state, arising from FNIS's use of MGEN Software or other resources or items provided to FNIS by MGEN; and 12.3 INDEMNIFICATION PROCEDURES. 12.3.1 NOTICE. Promptly after receipt by any person entitled to indemnification under Sections 12.1 or 12.2 (an "Indemnified Party") of notice of the commencement (or threatened commencement) of any civil, criminal, administrative or investigative action or proceeding involving a claim in respect of which the Indemnified Party will seek indemnification, the Indemnified Party shall notify the party which is obligated to provide such indemnification (an "Indemnifying Party") of such claim in writing. 12.3.2 EFFECT OF FAILURE TO PROVIDE TIMELY NOTICE. No failure to notify the Indemnifying Party shall relieve it of its obligations under this Agreement except to the extent that it can demonstrate damages attributable to the Indemnified Party's failure to notify. 12.3.3 CONTROL BY INDEMNIFYING PARTY. The Indemnifying Party shall be entitled to have sole control over the defense and/or settlement of such claim provided that, within 15 days after receipt of such "written notice, the Indemnifying Party notifies the Indemnified Party of its election to so 26 assume full control, and provided further that the Indemnifying Party can demonstrate to the reasonable satisfaction of the Indemnified Party that the Indemnifying Party has the financial capability to indemnify the Indemnified Party (such satisfactory demonstration is sometimes hereinafter referred to as "Demonstrated Fiscal Ability"). In that event: (1) the Indemnified Party shall be entitled to participate in the defense of such claim and to employ counsel at the Indemnifying Party's reasonable expense to assist in the handling of such claim; (2) the Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into any settlement of such claim or ceasing to defend against such claim if such settlement or cessation would cause injunctive or other relief to be imposed against the Indemnified Party; and (3) the Indemnified Party shall be free to enter direct discussions with some or all claimants for purposes of settlement, and shall be free to enter into such settlement(s) on terms agreeable to the Indemnified Party (upon provision of reasonable notice to and consultation with the Indemnifying Party); provided, however, that FNIS as the Indemnifying Party shall not be required to reimburse MGEN's expenses if FNIS has assumed control over the defense, and provided further that if MGEN is the Indemnified Party it shall not engage in or consummate any settlement discussions without the written approval and authority of FNIS. 12.3.4 PARTICIPATION BY INDEMNIFIED PARTY. If the Indemnifying Party does not assume sole control over the defense of such claim as provided in this Section 12.3, the Indemnifying Party may participate in such defense and the Indemnified Party shall have the right to defend the claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party. The Indemnifying Party shall promptly reimburse the Indemnified Party for such costs and expenses, in accordance with the applicable Section of this Section 12. An Indemnifying Party shall not be required to indemnify any Indemnified Party for any amount paid or payable by such Indemnified Party in the settlement of any such claim which was agreed to without the written consent of the Indemnifying Party. 12.3.5 FINANCIAL CAPACITY. The Indemnified Party may request, from time to time, that the Indemnifying Party demonstrate that it continues to have the financial capability to indemnify the Indemnified Party, and if the Indemnifying Party is unable to demonstrate such to the Indemnifying Party's reasonable satisfaction, the Indemnified Party may assume full control of the defense of such claim, but the Indemnifying Party shall continue to be responsible for indemnifying the Indemnified Party. 12.4 SUBROGATION. In the event that an Indemnifying Party shall be obligated to indemnify an Indemnified Party pursuant to Section 12.1 or Section 12.2, the Indemnifying Party shall, upon payment of such indemnity in full, be subrogated to all rights of the Indemnified Party with respect to the claims to which such indemnification relates. 12.5 NON-EXCLUSIVE REMEDIES. The rights (where applicable) of either Party (a) to indemnification under this Section 12, (b) to terminate this Agreement under 27 Section 11, (c) to Performance Credits under Section 4; or (d) to other remedies set forth in this Agreement, are not exclusive, and are in addition to and not in place of any other rights and remedies that one Party may have against the other Party for any act, failure to act, or breach of this Agreement. 13. INSURANCE 13.1 INSURANCE MAINTAINED BY MGEN. During the term of this Agreement, MGEN shall maintain at its own expense, and require MGEN agents, representatives and subcontractors, to maintain at their own expense or MGEN' expense, commercial general liability insurance (including contractual liability insurance), business interruption insurance, and insurance appropriate to cover risks presented by the Websites, the Software, the Systems, and FNIS Data (collectively "Insurance Coverage"). Such Insurance Coverage during the Term shall be in an amount not less than $50,000,000. MGEN shall maintain insurance for such period after the Term, and in such amount as FNIS may reasonably determine, in light of continuing insurable risks (if any) presented by MGEN's services hereunder. 13.2 INSURANCE DOCUMENTATION. MGEN shall, upon FNIS's request, furnish FNIS with certificates of insurance and other appropriate documentation (including evidence of renewal of insurance) evidencing all coverage referenced herein. Such certificates and other documentation shall include a provision whereby 30 days' notice must be received by FNIS prior to coverage cancellation or material alteration of the coverage by MGEN or the applicable insurer. Such cancellation or material alteration shall not relieve MGEN of its continuing obligation to maintain insurance coverage in accordance with this Section 13. 14. GENERAL PROVISIONS 14.1 BINDING NATURE AND ASSIGNMENT. This Agreement shall bind the parties and their successors and permitted assigns. Neither party may assign this Agreement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed. Any other assignment attempted without the written consent of the other party shall be void. 14.2 NOTICES. When one party is required or permitted to give notice to the other, such notice shall be deemed given when delivered by hand or when mailed by United States mail, registered or certified mail, return receipt requested, postage prepaid, and addressed as follows: MGEN: Micro General Corporation 2510 Red Hill Avenue, Suite 200 Santa Ana, CA 92705 Attn: John R. Snedegar Joseph E. Root FNIS: Fidelity National Information Solutions, Inc. 4050 Calle Real Santa Barbara, CA 93110 Attn: Eric Swenson 28 Either party may change its address for notification purposes by giving the other party written notice of the new address and the date upon which it will become effective. 14.3 COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one single agreement between the parties. 14.4 RELATIONSHIP OF PARTIES. MGEN in furnishing services to FNIS under this Agreement is acting only as an independent contractor. Except where this Agreement expressly provides otherwise, MGEN does not undertake by this Agreement or otherwise to perform any obligation of FNIS, whether regulatory or contractual, or to assume any responsibility for FNIS's business or operations. MGEN has the sole right and obligation to supervise, manage, contract, direct, procure, perform or cause to be performed, all work to be performed and resources used by MGEN under this Agreement, except where it is specifically stated that FNIS must give approval or consent. 14.5 APPROVALS AND SIMILAR ACTIONS. Where agreement, approval, acceptance, consent or similar action by either party is required by any provision of this Agreement, such action shall not be unreasonably delayed or withheld, unless specifically permitted by this Agreement. 14.6 FORCE MAJEURE. Each party shall be excused from performance under this Agreement and shall have no liability to the other party for any period it is prevented from performing any of its obligations (other than payment obligations), in whole or in part, as a result of delays caused by the other party or by an act of God, war, civil disturbance, court order, labor dispute, third party performance or nonperformance, or other cause beyond its reasonable control, including failures or fluctuations, in electrical power, heat, light, or telecommunications, and such nonperformance shall not be a default under, or grounds for termination of, this Agreement. 14.7 SEVERABILITY. If any provision of this Agreement is held to be unenforceable, then both parties shall be relieved of all obligations arising under such provision, but only to the extent that such provision is unenforceable, and this Agreement shall be deemed amended by modifying such provision to the extent necessary to make it enforceable while preserving its intent or, if that is not possible, by substituting another provision that is enforceable and achieves the same objective and economic result. If such unenforceable provision does not relate to the payments to be made to MGEN, and if the remainder of this Agreement is capable of substantial performance, then the remainder of this Agreement shall be enforced to the extent permitted by law. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTIES, INDEMNIFICATION OR EXCLUSION OF DAMAGES OR OTHER REMEDIES IS INTENDED TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND TO BE ENFORCED AS SUCH. FURTHER, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT IN THE EVENT ANY REMEDY UNDER THIS AGREEMENT IS DETERMINED TO HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL LIMITATIONS OF LIABILITY AND EXCLUSIONS OF DAMAGES OR OTHER REMEDIES SHALL REMAIN IN EFFECT. 29 14.8 WAIVER. No delay or omission by either party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by either party of any covenant or breach shall not be construed to be a waiver of any succeeding breach or of any other covenant. All waivers must be in writing and signed by the party waiving its rights. 14.9 ATTORNEYS' FEES. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled. 14.10 MEDIA RELEASES. All media releases, public announcements and public disclosures by FNIS or MGEN or their employees or agents relating to this Agreement or its subject matter, including promotional or marketing materials shall be coordinated with and approved by the other party prior to release. This restriction does not apply (1) to any announcement intended solely for internal distribution within FNIS or within MGEN or (2) any disclosure required by legal, accounting or regulatory requirements beyond the reasonable control of the disclosing party. 14.11 NO THIRD PARTY BENEFICIARIES. The parties agree that this Agreement is for the benefit of the parties hereto and is not intended to confer any legal rights or benefits on any third party and that there are no third party beneficiaries to this Agreement or any part or specific provision of this Agreement, except for any Member. 14.12 ENTIRE AGREEMENT. This Agreement, including all of its Schedules, each of which is incorporated into this Agreement, is the entire agreement between the parties with respect to its subject matter, and there are no other representations, understandings or agreements between the parties relative to such subject matter. No amendment to, or change, waiver or discharge of any provision of this Agreement shall be valid unless in writing and signed by an authorized representative of the party against which such amendment, change, waiver or discharge is sought to be enforced. 14.13 GOVERNING LAW AND DISPUTE. This Agreement shall be governed by the laws, other than choice of law rules, of the State of California. 30 IN WITNESS WHEREOF, MGEN and FNIS have each caused this Agreement to be signed and delivered by its duly authorized representative. FNIS: FIDELITY NATIONAL INFORMATION SOLUTIONS, INC. By: /s/ NEIL JOHNSON ------------------------------------ Name: Neil Johnson Title: Chief Financial Officer MGEN: MICRO GENERAL CORP. By: /s/ NANCY NELSON ------------------------------------ Name: Nancy Nelson Title: Chief Operating Officer 31 EX-10.18 9 a79556ex10-18.txt EXHIBIT 10.18 Exhibit 10.18 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into effective as of November 7, 2001 (the "Effective Date"), by and between MICRO GENERAL CORPORATION, a Delaware corporation (the "Company"), and NANCY POPE NELSON, a California resident (the "Employee"). This Agreement supersedes entirely the terms and conditions of any prior employment agreement or understanding between the parties. In consideration of the mutual covenants and agreements set forth herein, the parties hereto agree as follows: l. Employment and Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee to serve as Chief Operating Officer or similar executive position of the Company or in such other capacity as the Board of Directors of the Company ( the "Board") may designate, and the Employee accepts such employment and agrees to perform reasonable responsibilities and duties commensurate with aforesaid position, as directed by the Board of the Company, or as set forth in the Articles of Incorporation or the Bylaws of the Company. 2. Term. The term of employment under this Agreement shall be for a period of three (3) years (the "Term") commencing on the Effective Date, subject to termination pursuant to Section 4, below. 3. Compensation. 3.1 Annual Salary. During the Term of this Agreement, the Company shall pay the Employee an annual base salary of Three Hundred Thousands Dollars ($300,000.00) (the "Base Salary"), payable at the times and in the manner dictated by the Company's standard payroll policies. Such Base Salary may be periodically reviewed and increased at the discretion of the Board to reflect, among other matters, cost of living adjustments and performance results. 3.2. Other Compensation and Benefits. During the Term, as additional compensation, the Employee shall be entitled to participate in and/or receive the following: (a) Annual Bonus. The Employee shall be eligible for an annual bonus.: (b) Benefits. The Employee shall be entitled to participate in and receive all benefits under any employee benefit plan or program (including, without limitation, medical, dental, disability, and group life), any retirement savings plan or program (including, without limitation, 401(k) and employee stock purchase plan), and such other perquisites of office as the Company may, from time to Nelson Employment Agreement Page 2 of 8 time and in its sole discretion, make available to the Company's executives of comparable level, subject to such eligibility provisions as may be in effect from time to time. The Company shall deduct from all compensation payable under this Agreement to the Employee any taxes or withholdings the Company is required to deduct pursuant to state and federal laws or by mutual agreement between the parties. 3.3. Vacation. For and during each year of the Term, the Employee shall be entitled to four (4) weeks vacation. In addition, the Employee shall be entitled to such holidays consistent with the Company's standard policies or as the Company's Board of Directors may approve. 3.4 Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt and approval of appropriate documentation, reimburse the Employee each month for her reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses. The arrangement set forth in this Section 3.4 is intended to constitute an accountable plan within the meaning of Section 162 of the Code and the accompanying regulations, and the Employee agrees to comply with all reasonable guidelines established by the Company from time to time to meet the requirements of Section 162 of the Code and the accompanying regulations. 4. Termination. 4.1 For Cause. Notwithstanding any other provisions to the contrary contained herein, the Company may terminate this Agreement immediately for cause upon written notice to the Employee, in which event the Company shall be obligated to pay the Employee that portion of the Base Salary due her through the date of termination. For purposes of this Agreement, "cause" shall mean: (a) material default or other material breach by Employee of Employee's obligations hereunder; (b) the willful and habitual failure by Employee to perform the duties that Employee is required to perform under this Agreement or the Company's corporate policies, provided such corporate policies have been previously delivered to the Employee; or (c) misconduct, dishonesty, insubordination, or other act by Employee that in any way has a direct, substantial and adverse effect on the Company's reputation or its relationship with its customers or employees, including, without limitation, (i) use of alcohol or illegal drugs such as to interfere with the Employee's obligations hereunder, (ii) conviction of a felony or of any crime involving moral turpitude or theft, and (iii) material failure by Employee to comply with applicable laws or governmental regulations pertaining to Employee's employment hereunder. 4.2 Without Cause. Notwithstanding any other provisions to the contrary contained herein, either party may terminate this Agreement immediately without cause by giving written notice to the other. If the Company terminates this Agreement under this Section 4.2, it shall pay to the Employee her Base Salary for a Nelson Employment Agreement Page 3 of 8 period of twelve (12) months following such termination. The amount payable to the Employee hereunder shall be paid to the Employee in lump sum or as otherwise directed by the Employee. If the Employee terminates this Agreement under this Section 4.2, the Company shall only be obligated to pay to the Employee the Base Salary due her through the date of termination. 4.3 Disability. Notwithstanding any other provisions to the contrary contained herein, if the Employee fails to perform her duties hereunder on account of illness or other incapacity for a period of six (6) consecutive months, the Company shall have the right upon written notice to the Employee to terminate this Agreement without further obligation by paying the Employee the Base Salary for the remainder of the Term, in a lump sum or as otherwise directed by the Employee. 4.4 Death. Notwithstanding any other provisions to the contrary contained herein, if the Employee dies during the Term of this Agreement, this Agreement shall terminate immediately, and the Employee's legal representatives or designated beneficiary shall be entitled to receive the Base Salary to the date of the Employee's death in a lump sum or as otherwise directed by the Employee's legal representatives or designated beneficiary, whichever the case may be. 4.5 Termination by Company Following Change of Control. Notwithstanding any other provisions to the contrary contained herein, in the event the Employee's employment is terminated under this Agreement by the Company or its Successor (as defined below) following a Change of Control of the Company (as defined below) for reasons other than "for cause" (as such term is defined in Section 4.1 herein) or other than as a consequence of the Employee's death or disability (as described in Section 4.3 herein), the Company agrees to provide or cause to be provided to the Employee the same compensation as would be payable to the Employee had such termination been a termination by the Company without cause under Section 4.2 of this Agreement. As used herein, a "Change of Control" of the Company shall mean the acquisition by a "Successor," whether directly or indirectly, by purchase, merger, consolidation or otherwise, of all or substantially all of the common stock, business and/or assets of the Company. In the event of a Change of Control of the Company, the Company shall require any Successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if the Change of Control had not occurred. Upon the assumption of this Agreement by the Successor, and its agreement to perform the duties and obligations of the Company hereunder, the Company shall be released from any further liability under this Agreement. 4.6 Effect of Termination. Termination for any cause or without cause shall not constitute a waiver of the Company's rights under this Agreement as specified in Section 6 nor a release of the Employee from any obligation hereunder except her obligation to perform his day-to-day duties as an employee. Nelson Employment Agreement Page 4 of 8 5. Non-Delegation of Employee's Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer. 6. Covenants of Employee. 6.1 Confidentiality. The Employee acknowledges that in her capacity as an employee of the Company she will occupy a position of trust and confidence, and she further acknowledges that she will have access to and learn substantial information about the Company and its operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, the Company's financial position and financing arrangements. The Employee agrees that all such information is proprietary or confidential or constitutes trade secrets and is the sole property of the Company. Accordingly, during the Employee's employment by the Company and for a period of two (2) years thereafter, the Employee will keep confidential, and will not without the Company's permission reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company's methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence, or records, or any other documents used or owned by the Company, nor will the Employee advise, discuss with or in any way assist any other person or firm in obtaining or learning about any of the items described in this section, either alone or with others, outside the scope of her duties and responsibilities with the Company unless otherwise required by law or court ordered subpoena. 6.2 Competitive Activities During Employment The Employee agrees that during her employment by the Company, she will devote substantially all her business time and effort to and give undivided loyalty to the Company. The Employee will not, during her employment by the Company, engage in any way whatsoever, directly or indirectly, in any business that is competitive with the Company, nor solicit, or in any other manner work for or assist any business which is competitive with the Company. During her employment by the Company, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not, during her employment by the Company, combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity. 6.3 Non-Competition After Employment. For a period of one (1) year from and after the expiration or earlier termination of this Agreement, the Employee will not, for any reason whatsoever, directly or indirectly, for the Employee or on behalf of or in conjunction with any other person, persons, company, partnership, corporation or business of whatever nature: (a) engage as an officer, director, stockholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent Nelson Employment Agreement Page 5 of 8 contractor, consultant or advisor, or as a sales representative, in any business selling any products or services in direct competition with the current business or any related business of the Company, or any business to which it is reasonably foreseeable that the Company will enter, within 100 miles of where the Company anywhere conducts such business (the "Territory"); (b) call upon any person who is, at that time, within the Territory, an employee of the Company in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company; (c) call upon any person or entity which is, at that time, or which has been within one (1) year prior to that time, a customer of the Company within the Territory for the purpose of soliciting or selling products or services in competition with the Company within the Territory; or (d) call upon any prospective acquisition candidate, on the Employees own behalf or on behalf of any competitor, which candidate was either called upon by the Company or for which the Company made an acquisition analysis, for any purpose other than providing products or services of the Company. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit the Employee from acquiring as an investment not more than one percent (1%) of the capital stock of a competing business whose stock is traded on a national securities exchange or over-the-counter. The Employee expressly agrees that the foregoing covenants impose a reasonable restraint on the Employee in light of the activities and business of the Company on the date of the execution of this Agreement and the current plans of the Company; but it is also the intent of the Company and the Employee that such covenants be construed and enforced in accordance with the changing activities and business of the Company throughout the term of the covenants. The covenants in this Section 6.3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and this Section 6.3 shall thereby be reformed. All of the covenants in this Section 6.3 shall be construed as an agreement independent of any other provision of this Agreement, and the existence of any claim or cause of action by the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. The Employee specifically agrees that the period of one (1) year stated at the beginning of this Section 6.3 shall be computed by adding to such one (1) year period any time during which the Employee is found by a court of competent jurisdiction to have been in violation of any provision of this Section 6.3. The Employee expressly agrees that the covenants set forth in this Section 6.3 are a material and substantial part of this Nelson Employment Agreement Page 6 of 8 Agreement and the Agreement and Plan of Reorganization of which this Agreement is an Exhibit. 6.4 Remedy for Breach. The Employee acknowledges that the Company may be irrevocably damaged if all of the provisions of this Section 6 are not specifically enforced. Accordingly, the Employee agrees that, in addition to any other relief to which the Company may be entitled, the Company will be entitled to seek and obtain injunctive relief without bond from a court of competent jurisdiction for the purpose of restraining the Employee from any actual or threatened breach of this Section 6. The Employee's obligations under this Section 6 shall survive the Employee's termination of employment with the Company for the periods of time specified in this Section 6. 7. Return of Company Documents. Upon termination of this Agreement, the Employee shall return immediately to the Company all records and documents of or pertaining to the Company and shall not make or retain any copy or extract of any such record or document. 8. Improvements and Inventions. Any and all improvements or inventions which the Employee may conceive, make or participate in during the period of her employment shall be the sole and exclusive property of the Company. The Employee will, whenever requested by the Company during the period of her employment, execute and deliver any and all documents which the Company shall deem appropriate in order to apply for and obtain patents for improvements or inventions or in order to assign and convey to Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents or applications. 9. Miscellaneous. 9.1 Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the parties with respect to the Employee's employment with the Company and supersedes any and all prior or contemporaneous agreements or understandings, whether oral or written, relating to the Employee's employment. This Agreement may be amended, modified, supplemented, or changed only by a written document signed by both parties to this Agreement. 9.2 Governing Law and Venue. This Agreement, and any dispute arising from the relationship between the parties to this Agreement, shall be governed by California law. Venue for any dispute arising from the relationship between the parties to this Agreement or for any action to enforce or defend the terms of this Agreement shall be in Orange County, California. 9.3 Attorneys' Fees. In any litigation, arbitration, or other proceeding by which one party either seeks to enforce its rights under this Agreement (whether in contract, tort, or both) or seeks a declaration of any rights or obligations under this Agreement , the prevailing party shall be entitled to recover from the non-prevailing party Nelson Employment Agreement Page 7 of 8 reasonable attorney fees, together with any costs and expenses, to resolve the dispute and to enforce the final judgment. 9.4 Severability. If any section, subsection or provision hereof is found for any reason whatsoever to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Company and the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company or of the Company against the Employee, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company or the Employee of the covenants in this Agreement. 9.5 Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States certified mail, postage prepaid, with return receipt requested, to the parties at their respective addresses set forth below: To the Company: Micro General Corporation 2510 N. Redhill Avenue Santa Ana, CA 92705 Attention: John Snedegar Chief Executive Officer With a Copy to: Micro General Corporation 2510 N. Redhill Avenue Santa Ana, CA 92705 Attention: Joseph E. Root Sr. Vice President/General Counsel To the Employee: Nancy Pope Nelson 12175 Wyne Court Tustin, CA 92782 Nelson Employment Agreement Page 8 of 8 9.6 Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 9.7 Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their permitted assigns. Neither this Agreement nor any of the rights of the parties hereunder may be transferred or assigned by either party without the consent of the other party. Notwithstanding the preceding sentence, (i) the Company may assign this agreement without the consent of the Employee to any related entity in connection with a reorganization or restructuring of the Company or its sole shareholder, Fidelity National Financial, Inc.; and (ii) if there is a Change of Control of the Company and the Successor assumes, either expressly or by operation of law, the Company's obligations under this Agreement, the Company shall assign its rights and obligations hereunder to such Successor subject to the terms of Section 4.5 of this Agreement. Any assignment or transfer in violation of this Section 9.7 shall be void. 9.8 Captions and Headings. The captions and headings are for convenience of reference only and shall not be used to construe the terms or meaning of any provisions of this Agreement. 9.9 Legal Counsel/Mutual Drafting. Each party hereto acknowledges and represents that it has been represented by its own legal counsel in connection with the terms and conditions of this Agreement, with the opportunity to seek advice as to its legal rights and obligations from such counsel. This Agreement is the mutual product of the parties hereto, and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the parties, and shall not be construed for or against any party hereto. IN WITNESS WHEREOF the parties have executed this Employment Agreement as of the Effective Date set forth above. MICRO GENERAL CORPORATION By: -------------------------------------- Its: ------------------------------------- NANCY POPE NELSON ------------------------------------- EX-10.19 10 a79556ex10-19.txt EXHIBIT 10.19 EXHIBIT 10.19 LICENSE AGREEMENT This License Agreement (the "Agreement") is made on December 21, 2001 (the "Effective Date"), by and between iLumin Corporation, a Utah corporation, (the "Licensor") and Micro General Corporation, a Delaware corporation, (the "Licensee"). RECITALS A. Licensor has certain rights, interests and title to certain Technology, as defined below, which enables secure ebusiness solutions. B. Licensor desires to license to Licensee such Technology for use in the Industry (as defined below), and Licensee desires to accept such license. NOW THEREFORE, in consideration of the terms and conditions of this Agreement, the parties agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: 1.1 "COPYRIGHTS" shall mean any and all copyright rights pertaining to works subject to copyright protection under United States Copyright Law or the Berne Convention, together with any moral rights pertaining thereto, including any existing registration of claims to copyright or applications to obtain such registration, in the United States or elsewhere related to the Technology. 1.2 "DOCUMENTATION" means all documentation and information in connection with the installation, use, operation and maintenance of the Technology, including, without limitation, all manuals, schematics and instructions necessary to enable Licensee to perform the functions contemplated under this Agreement. 1.3 "FUNCTIONALITY REQUIREMENTS" mean the minimum functions and technical specifications of the Technology set forth in Exhibit A hereto. 1.4 "INDUSTRY" means all business functions relating to real estate transactions and related processes, including, without limitation, the business of real estate sales, mortgage lending and banking and real estate settlement services, real estate information services, businesses ancillary to real estate transactions, and financial service businesses supporting, involving or relating to real estate transactions 1.5 "INTELLECTUAL PROPERTY" shall mean all Copyrights, Patents, Marks, trade secrets, business plans, know-how, concepts, inventions, techniques, system designs, prototypes, ideas or other intellectual property or proprietary rights of Licensor, in connection with the Technology, including, without limitation, (i) the right to use, sell, copy, modify, exploit, and license the Intellectual Property, and (ii) the right to create derivative works of the Copyrights and retain full ownership thereof 1.6 "LICENSEE" includes Micro General Corporation and all companies controlled by Micro General Corporation. 1.7 "LICENSEE AFFILIATE" means any entity that controls, is controlled by or is under common control with Licensee. Control shall mean ownership or power to direct 50% or more of the ownership interests of any entity. 1.8 "LICENSEE CUSTOMER" means any person or company with whom Licensee, or any Licensee Affiliates or contractors, has now or in the future establishes, a relationship for the provision of products or services (whether via an Application Service Provider (ASP) offering or via direct on-site installation). 1.9 "LICENSEE SYSTEMS" means any combination of one or more computer operating systems located in one or more facilities maintained by Licensee. 1.10 "MARKS" means (i) any and all trademarks, trade names, and service marks set forth on Exhibit B, whether registered or unregistered, and (ii) such other marks as Licensor may use in commerce from time to time to promote, market, distribute or otherwise identify the Technology, both together with the goodwill appurtenant thereto. 1.11 "PATENTS" shall mean all patents, patent applications and patentable subject matter embodied the Technology, including those set forth on Exhibit B. 1.12 "PROGRAM ERROR" means any reproducible failure of the Technology to function in conformity with the Documentation or Functionality Requirements. 1.13 "PROGRAM ERROR FIXES" mean any version of the Technology providing for correction of Program Errors and other modifications of the Technology that does not constitute an Update. 1.14 "SOURCE CODE" means the human-readable source code for all aspects of the computer programs included in the Technology, as appropriate, in the appropriate programming language, and stored on electronic storage media, and which shall contain sufficient narrative. including, without limitation, detailed information in respect of the objects used in the programs, and the objectives of each portion of the source code and how each portion of the source code integrates with each other portion of the source code, so as to enable a Technology programmer having average skill and ability in computer application programming to understand, maintain and modify the source code and perform such other functions as contemplated under this Agreement based solely on the programmer's familiarity with the Technology and the source code. 1.15 "TECHNOLOGY" means the tools, programs (in executable form only), technology and other materials described in Exhibit A hereto, including, without limitation, all software embodied therein and the Documentation and Functionality Requirements, and, when obtained by Licensee pursuant to the terms of this Agreement, any Update 1.16 "TERRITORY" means the continent of North America. 1.17 "UPDATE(S)" mean, any enhancement, improvement, modification or new version of the Technology resulting in the addition of one or more functions, utility or application of the Technology not substantially set forth as a function in the Functionality Requirements. Updates specifically include new products and successor products developed by Licensor. 2 2. TECHNOLOGY LICENSE. 2.1 GRANT OF ROYALTY-FREE LICENSE. Subject to the terms and conditions set forth herein, Licensor hereby grants to Licensee under Licensor's Intellectual Property rights, a, perpetual, irrevocable, worldwide, fully paid up, royalty-free, sublicensable license to the Technology for the following purposes: (a) to install, execute, copy, reproduce, and use the Technology on the Licensee Systems; (b) to provide Licensee Affiliates with access to and use of the Technology, whether from one or more remote terminals or computers wherever located (either via the Internet or by any other means of networked communication with the Licensee Systems, including, without limitation, in an application service provider environment, or any combination thereof), and to sublicense the Technology to such Licensee Affiliates solely for the purpose of such access and use. Licensee Affiliates making use of or granting access to the Technology outside the Territory or outside the Industry shall avoid direct competition with Licensor, and in furtherance of that policy, a Licensee Affiliate seeking to make use of or grant access to the Technology outside the Territory or outside the Industry shall obtain written consent of such use from Licensor, which consent shall not be unreasonably withheld. 2.2 GRANT OF ROYALTY-BEARING LICENSE. Subject to the terms and conditions set forth herein, Licensor hereby grants to Licensee under Licensor's Intellectual Property rights, a perpetual, irrevocable, royalty-bearing, sublicensable license to the Technology to provide Licensee Customers with access to and use of the Technology, whether from one or more remote terminals or computers wherever located (either via the Internet or by any other means of networked communication with the Licensee Systems, including, without limitation, in an application service provider environment, or any combination thereof), and to sublicense the Technology to such Licensee Customers solely for the purpose of such access and use, provided that Licensee Customers' use of the Technology is limited to the Industry and the Territory. 2.3 IRREVOCABILITY. Notwithstanding anything to the contrary in this Agreement, the sublicenses granted hereunder to Licensee Customers shall be irrevocable, regardless of any termination or breach of this Agreement, so long as all royalties due to Licensor regarding such licenses are paid to Licensor. In the event, however, of termination for Licensor's breach under Section 12.2(b) or Licensor's bankruptcy under Section 12.2(c), the licenses granted to Licensee, and sublicenses granted hereunder to Licensee Customers and Licensee Affiliates, shall be irrevocable, so long as all royalties due to Licensor regarding such licenses are paid to Licensor. 2.4 OWNERSHIP. Except as expressly set forth herein, Licensor retains all rights, interests and title in and to the Technology. Licensee shall own all rights, interests and title in and to any enhancements, modifications, improvements, updates or derivative works of or to the Technology made by or for Licensee as provided for under this Agreement, subject to Licensor's underlying ownership interests in and to the Technology and related Intellectual Property rights (and provided that, for purposes of clarification, Licensor acknowledges it has no other rights to use or otherwise exploit any such modifications that include all or any portion of the Technology). It is understood 3 that rights in and to derivative works will only be applicable when Licensee acquires Source Code, as set out in Section 15.3 below. 2.5 EXCLUSIVITY. Licensor agrees that during the term of this Agreement, it shall not, without Licensee's prior written consent, which may be withheld in Licensee's sole and absolute discretion, grant any license or other right to the Technology (or any enhancements, modifications, improvements, Updates or derivative works thereof), to any third party for any use whatsoever within the Industry, nor shall Licensor make any such use in the Industry for its own benefit. 2.6 RESTRICTIONS. Licensee may not, either directly or through any person or entity, in any form or manner, copy, distribute, reproduce, incorporate, use or allow access to the Technology or modify, prepare derivative works of, decompile, reverse engineer, disassemble or otherwise attempt to derive Source Code from the Technology, except as explicitly permitted under this Agreement. 2.7 END USER LICENSE AGREEMENT. All sublicenses granted by Licensee to Licensee Customers under this Agreement must include all defined terms necessary to ensure that the provisions required by this section have the substantive meanings intended under this Agreement. All such sublicenses also must include provisions that: (a) Restrict use of the Technology to use by Licensee Customer only. (b) Restrict use of the Technology to use in object code form. (c) License the Technology exclusively for End User's internal business purposes. (d) Prohibit causing or permitting the reverse engineering, disassembly or decompilation of the Technology. (e) Prohibit title to the Technology from passing to the End User. (f) Disclaim iLumin's liability for damages, whether direct or indirect, incidental or consequential, arising in connection with the End User License Agreement. (g) State that ILumin makes no direct warranty of any kind to End User under the End User License Agreement. (h) Disclaim iLumin's liability for any taxes or duties, however designated or levied (including, but not limited to, sales, use and personal property taxes). 2.8. EXPANSION OF THE TERRITORY. Licensor shall provide to Licensee a right of first refusal on any license proposed to be granted by Licensor to any third party for use of the Technology outside the Territory but in the Industry, affording Licensee the opportunity to extend the Territory on terms and conditions at least as favorable as those proposed to be granted under the proposed transaction. In addition, Licensor shall expand the Territory upon written request of Licensee, provided (a) Licensor has not granted rights to any third party in the geographic area requested, and (b) Licensee can make a commercially reasonable showing that that Licensee has a bona fide business opportunity in such region. In the event Licensee is not successful in consummating a sublicense of the Technology hereunder in such expanded Territory, such region shall revert to Licensor in a reasonable time. 4 2.9 VAR. Transactions with customers outside the Industry shall be governed by a Value Added Reseller agreement ("VAR"), to be separately agreed by the parties. 3. DOCUMENTATION AND MARKS. 3.1 GRANT. Subject to the terms and conditions of this Agreement and subject to Licensor's prior written approval, which may be withheld in Licensor's sole and absolute discretion, Licensor hereby grants to Licensee a non-exclusive, worldwide, sublicensable license to, only within the Industry: (i) use, reproduce and display the Marks, solely in connection with the use of the Technology; and (ii) modify the Documentation solely to the extent necessary to enable Licensee Customers to access and use the Technology, and reproduce and distribute that portion of the Documentation to Licensee Customers, either as modified or unmodified, necessary for such access and use. Title to and ownership of the Marks shall remain with Licensor. Licensee shall not take any action inconsistent with Licensor's ownership of the Marks, and any benefits accruing from Licensee's use of such Marks shall automatically vest in Licensor. Licensee shall contact Licensor prior to removing, destroying, modifying, or altering any of the Marks. Licensor may terminate the foregoing trademark license if, in its reasonable discretion, Licensee's use of the Marks tarnishes, blurs, or dilutes the quality associated with the Marks or the associated goodwill and such problem is not cured within thirty (30) days of notice of breach; alternatively, instead of terminating the license in total, Licensor may specify that certain Licensee uses may not contain the Marks. 3.2 RESTRICTIONS AND OWNERSHIP. Licensee shall not modify or alter the Marks without Licensor's prior written approval. Except as expressly set forth herein, Licensor retains all rights, interests and title in and to the Marks and Documentation. 3.3 USAGE OF MARKS. The parties shall in good faith discuss an agreement pursuant to which Licensee would include a "Powered by iLumin" statement on each ASP page and include the Marks in a mutually agreeable location in (a) a "splash" screen upon each execution of the Technology and (b) an information screen (e.g. an "About" box). 4. TECHNOLOGY MAINTENANCE. 4.1 PROGRAM ERROR FIXES. Licensor shall promptly notify Licensee of any new Program Error Fixes, and upon request by Licensee, shall provide Licensee with such Program Error Fixes at no additional charge. 4.2 UPDATES. Licensor shall promptly notify Licensee of any Update as it becomes commercially available, and Licensor shall provide to Licensee upon request all Updates at no charge to Licensee. 4.3 ADDITIONAL PRODUCTS. Licensor shall promptly notify Licensee of any newly developed product or service owned by Licensor or any company affiliated with Licensor (a "New Product") as it becomes commercially available. Upon request by Licensee, Licensor shall provide Licensee the New Product on terms and conditions identical to those contained herein. 5 5. DELIVERY. Upon the Effective Date, Licensor shall deliver to Licensee at its expense and risk of loss one (1) a master copy of an executable version of the Technology, Documentation and Marks on a medium reasonably acceptable to Licensor. 6. CONSIDERATION. The rights and licenses granted herein are in consideration of the mutual promises and agreements set forth herein 7. ROYALTIES. Royalties hereunder shall be paid as follows: 7.1 PAYMENT TERMS. Licensee shall pay to the Licensor the royalties set forth on Exhibit C hereto with respect to revenues received hereunder and subject to royalty payments, as set out in Sections 2.2 and 7.3. 7.2 REPORTS, RECORDS AND INSPECTION. Licensee shall, with each payment due pursuant to Section 7.1 hereof (but no more than four (4) times per year), prepare and deliver to the Licensor a statement setting forth the total royalties payable with respect to such payment and the determination thereof (the "Statement"). No more often than one (1) time each contract year, the Licensor shall have the right, on reasonable advance notice to Licensee, during usual business hours, to cause such records of Licensee to be examined by independent public accountants selected by the Licensor and reasonably acceptable to Licensee for the period since the end of the period covered by the last previous examination, for the sole purpose of verifying the completeness and accuracy of such Statement, provided that such independent public accountants shall execute a confidentiality agreement in form reasonably specified by Licensee. In the event that such examination shall disclose that the total amount of commissions payable by Licensee for any payment period were understated on any Statement, Licensee shall promptly pay any amount underpaid, and if the amount of any such understatement was 10% or more of the amount due for such payment period, Licensee shall in addition reimburse the Licensor for its costs and expenses incurred in conducting, or having conducted, such examination. 7.3 BASIS FOR ROYALTIES. Royalty rates shall be calculated from a starting point based upon either (a) mutually agreed flat rates or (b) then-current published price. In no event shall a royalty rate be based upon the total selling price of a product or service by Licensee. Licensee may request reduced pricing in specific situations, in which event pricing shall be based upon an average price level charged by Licensor across at least three industrial classifications. Price levels shall be reviewed by the parties at least quarterly during the first year of this Agreement, and at least every six months thereafter. In determining whether revenue received by Licensee or a Licensee Affiliate shall be subject to royalty payments, the following test shall be applied: Revenue received by Licensee or a Licensee Affiliate from a third party shall be subject to royalty payments hereunder if such revenue is based upon the performance of actions by the third party for that party's own benefit, either by virtue of using software licensed directly hereunder or through access provided under an application service provider arrangement; if such revenue is based upon the performance of actions by Licensee or a Licensee Affiliate on behalf of the third party for the purpose of generating revenue from the third party, either by virtue of using software licensed directly hereunder or through access provided under an application service provider arrangement, then such revenue shall not be subject to royalty payments hereunder. 7.4 MOST FAVORED CUSTOMER. Royalty rates and any other fees or payments made by Licensee to Licensor shall be at least as favorable to Licensee as are similar rates, fees or payments made to Licensor by any other customer or licensee of Licensor, specifically including the amount of 6 any discounts applied to list prices. In the event Licensor is found to breach this Section 7.4, Licensee shall have the right to determine the amount of overpayments made to Licensor and to recoup such overpayments either by a lump-sum reimbursement by Licensor or by a reduction in future payments, at Licensee's sole discretion. 8. TRAINING AND SUPPORT SERVICES. 8.1 IMPLEMENTATION SUPPORT SERVICES. For a period of sixty (60) days after the delivery and acceptance of the Technology, Licensor will provide at no charge to Licensee, including its employees and contractors, customized technical and operational training with respect to the use of the Technology. All such support shall be provided during the hours of 8 a.m. to 5 p.m. Pacific Standard Time) telephonically, or via e-mail, or, upon Licensee's reasonable request in light of the severity and nature of the problem, at Licensee's facility. 8.2 ADDITIONAL SUPPORT TO LICENSEE AND LICENSEE CUSTOMERS. After the expiration of the sixty (60) days period set forth in Section 8.1 above, Licensor shall provide to Licensee and Licensee Customers during the term of this Agreement additional technical and operational support with respect to the use of the Technology; upon the mutual agreement of the parties based upon the number of DHS servers specified for support by Licensee. Licensor shall furnish such services according to a mutually agreed support level, to include response times of no longer than one hour for all calls during normal business hours, and one hour response times for all Severity One calls at any time. The cost for such services shall be $10,000 per supported server per month. The number of servers serviced shall be set at Licensee's sole discretion, and such number may be changed on thirty (30) days written notice. 8.3 INTEGRATION SERVICES. Licensor shall provide Integration Services to Licensee during the Term with respect to the integration of the Technology. Such Integration Services shall be provided at a discounted rate of 50% off of the standard list price of such Integration Services set forth in Exhibit A. Any such Integration Services shall be performed according to the standard iLumin Work Order process. 9. REPRESENTATIONS AND WARRANTIES OF LICENSOR. Licensor hereby represents, warrants and covenants to Licensee all of the following. 9.1 WARRANTY OF TITLE. Licensor owns or has obtained sufficient rights to grant the licenses herein. 9.2 DUE AUTHORITY/NON CONTRAVENTION. Licensor has the full corporate power to enter into this Agreement and to carry out its obligations under this Agreement. Licensor has not previously granted, and will not grant during the term of this Agreement, any right, license or interest in, to or under the Technology, or any portion thereof, which is inconsistent with the rights and licenses granted to Licensee herein or that will adversely affect any exercise by Licensee of its rights under this Agreement. There are no actions, suits, investigations, claims or proceedings pending or threatened in any way relating to the Technology. 9.3 INFRINGEMENT. The Technology, Documentation and Marks, used in accordance with this Agreement, does not and will not infringe or misappropriate any patents, copyrights, trade secrets, trademarks, trade names or other intellectual or proprietary rights of any third-party; provided, 7 however, that claims of alleged infringement in the following situations shall not be covered by this Section 9.3: (a) modifications of the Technology by Licensee; (b) any combination of the Technology with another product or element; (c) use of the Technology in breach of this Agreement; (d) use of a release of the Technology other than the most current release, when use of the most current release would avoid the claim of infringement; 9.4 YEAR 2000 COMPLIANCE. The Technology will function correctly when dealing with dates, times, and date/time (including calculating, comparing and sequencing) from, into and between the twentieth and twenty-first centuries, and the years 1999 and 2000 and leap year calculations, and with respect to the processing of date/time data, the Technology will neither contain nor create any logical or mathematical inconsistency, will not malfunction, and will not cease to function. 9.5 TRAPS AND VIRUSES. The Technology does not and will not contain any timer, clock, counter, trap, virus or other limiting design or routine (collectively a "Trap") that may cause the Technology or any data generated or used by the Technology to be erased or become inoperable or inaccessible, or otherwise incapable of being used in the full manner for which they were designed after the occurrence or lapse of any triggering event, and Licensor shall take reasonable measures to ensure that at the time of delivery of the Technology, no such Traps are contained in the Technology. The foregoing includes any Trap that is triggered after use or copying of the Technology or any component a certain number of times, or after the lapse of a period of time, or after the occurrence or lapse of any other triggering event or factor. 9.6 PRODUCT WARRANTY. The Technology shall perform substantially in accordance with the Documentation and the Functionality Requirements and be free of material Program Errors. 9.7 SERVICE WARRANTY. Any services performed by Licensor under this Agreement shall be performed in a professional and workmanlike manner by individuals well-qualified to perform such work. 9.8 MEDIA WARRANTY. The media containing the Technology, Marks or Documentation delivered by Licensor hereunder will be free from defects in material and workmanship. 9.9 DOCUMENTATION WARRANTY. The Documentation provided by Licensor hereunder will faithfully and accurately reflect the operation of the Technology in all material aspects. 9.10 DISCLAIMER. LICENSOR MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE TECHNOLOGY, INCLUDING, WITHOUT LIMITATION, ALL OTHER WARRANTIES AS TO MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE. 9.11 REMEDIES. Without limiting any remedy that Licensee may otherwise have under this Agreement, at law or in equity, and subject to the terms and conditions of Section 13.1, upon written notice of noncompliance of any of the foregoing warranties, Licensor shall use commercially 8 reasonable efforts to cure such breach with thirty (30) days. In the event any breach of the warranties in this Section 9.11 interferes with the performance of Licensee's use of Technology, and such breach is not cured within sixty (60) days (excepting instances of accused infringement under Section 9.3, Licensor shall (i) refund to Licensee any fees paid by Licensee in connection with this Agreement or the VAR Agreement, and (ii) pay any actual costs incurred by Licensee and Licensee Affiliates in order to implement replacement Technology (including any necessary modifications and installation). Nothing in this Section 9.11 shall limit or impair Licensee's right to bring any other claims or recover for any other liabilities or damages. 10. REPRESENTATIONS AND WARRANTIES OF LICENSEE. Licensee represents, warrants and covenants that it has the full corporate power to enter into this Agreement and to perform its obligations hereunder, and that it has the right to accept the rights and licenses herein. 11. LIMITATION OF LIABILITIES. EXCEPT FOR THE INDEMNITY OBLIGATIONS OF EACH PARTY SET FORTH IN SECTION 13 BELOW AND LICENSOR'S OBLIGATIONS UNDER SECTION 9.11 ABOVE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EACH PARTY'S AGGREGATE LIABILITY TO THE OTHER PARTY UNDER THIS AGREEMENT SHALL BE LIMITED TO THE LOWEST OF: (A) ACTUAL DIRECT DAMAGES INCURRED BY THE INJURED PARTY; OR (B) FIVE MILLION UNITED STATES DOLLARS (US$5,000,000). LICENSEE ACKNOWLEDGES AND AGREES THAT THESE LIMITATIONS ARE AN ESSENTIAL BASIS OF THE BARGAIN BETWEEN THE PARTIES, AND FURTHER AGREES THAT THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. 12. TERM AND TERMINATION. 12.1 TERM. This Agreement shall commence on the Effective Date and continue until terminated by the parties as set forth in this Section 12. 12.2 TERMINATION. This Agreement may be terminated in accordance with the following: (a) by Licensee, for any or no reason, upon thirty (30) days written notice to Licensor; (b) by either party upon the expiration of sixty (60) days written notice of a material breach of this Agreement and such breach is not cured within said sixty (60) day period; or (c) by either party in the event that the other party petitions for or consents to any relief under any bankruptcy, reorganization or similar statute, makes an assignment for the benefit of its creditors, or petitions for the appointment of a receiver, liquidator, trustee or custodian of all or a substantial part of its assets, or a receiver, liquidator, trustee or custodian is appointed for all or a substantial part of its assets and is not discharged within thirty (30) days after the date of such appointment. 9 12.3 EFFECT OF TERMINATION. Upon Licensee's voluntary termination of this Agreement under Section 12.2(a), termination for Licensee's breach under Section 12.2(b), or termination for Licensee's bankruptcy under Section 12.2(c), both parties' right, licenses and obligations under this Agreement will terminate, provided that Sections 2.3, 2.4, 2.6, 2.7, 7.1, 7.2, 7.3, 11, 12.3 through 14, 16 and 17, inclusive, will survive termination of this Agreement. Upon termination of this Agreement for Licensor's breach under Section 12.2(b) or Licensor's bankruptcy under Section 12.2(c), both parties' right, licenses and obligations under this Agreement will terminate, provided that Sections 2.1, 2.2, 2.3, 2.4, 2.6, 2.7, 3, 7.1, 7.2, 7.3, 11, 12.3 through 14, 16 and 17, inclusive, will survive such termination. In the event of termination by either party in accordance with the provisions of this Agreement, neither party shall be liable to the other because of such termination for compensation, reimbursement or damages on account of such termination; provided, however, termination shall not relieve either party of its obligations incurred prior to termination. 13. INDEMNIFICATION. 13.1 INDEMNIFICATION BY LICENSOR. Licensor will indemnify, hold harmless and defend Licensee, and Licensee Affiliates, against any claim, suit or proceeding and any damages or liability therefrom or settlement agreed to by Licensor thereof (including reasonable fees of attorneys and related costs) resulting from a breach, or based on a claim that, if true, would be a breach, of this Agreement by Licensor, including, without limitation, a breach of the representations, warranties and covenants of Section 9. If the use of the Technology, or any enhancement, modification, improvement, Update, or derivative work thereto, or any information or material furnished hereunder, is enjoined and Licensor is not able either to procure for Licensee the right to continue such use or to modify the Technology so that it no longer infringes any such right, Licensor will refund any fees paid by Licensee in connection with this Agreement during the sixty (60) day period immediately preceding such injunction. 13.2 INDEMNIFICATION BY LICENSEE. Licensee will indemnify, hold harmless and defend Licensor, against any claim, suit or proceeding and will pay any final judgment or other award, including all costs of suit, resulting from any judgments or settlements (including reasonable fees of attorneys and related costs) to the extent based upon (a) any claim of gross negligence or wrongful acts of employees, contractors or agents of Licensee while exercising Licensee's rights or performing Licensee's obligations under this Agreement; (b) any claim that a modification, combination or manner of use of the Technology (and not the Technology itself) infringes a patent, trademark or copyright right of a third party; (c) any claim based on a representation of the Technology by Licensee in a manner inconsistent with iLumin's representations and warranties; or (d) any claim related to any other use or distribution of the Technology by Licensee inconsistent with the terms and conditions of this Agreement. 13.3 INDEMNIFICATION PROCEDURE. The indemnifying party (the "Indemnitor") will not be obligated to indemnify, hold harmless or defend the indemnified party (the "Indemnitee") unless the Indemnitee (a) provides prompt notice of the commencement of the claim, suit or proceeding for which indemnification is sought, (b) cooperates with the Indemnitor, and (c) allows the Indemnitor to control the defense, provided that (y) the Indemnitee may, at its option and expense, participate and appear on an equal footing with Indemnitor in the claim, suit or proceeding and (z) neither party may settle a claim, suit or proceeding without approval of the other party, which approval will not be unreasonably withheld or delayed. 10 14. CONFIDENTIAL INFORMATION. "Confidential Information" of each party means information that is disclosed by such party to the other party in connection with this Agreement and conveyed (i) in written, graphic, machine-readable or other tangible form and conspicuously marked "confidential," "proprietary" or in some other manner to indicate its confidential nature, or (ii) orally, provided that such information is designated as confidential or proprietary at the time of such oral disclosure and is confirmed in writing as confidential within ten (10) days after the oral disclosure (collectively, "Confidential Information"). The Technology and Documentation do not require marking or other indicia to be deemed Confidential Information. A will hold Confidential Information in confidence and will not use, or disclose to a third party, the Confidential Information of the other party, except for the purposes contemplated by, or in exercise of the rights and licenses granted under, this Agreement. Notwithstanding the above, information will not be deemed Confidential Information if the information (a) is or becomes generally known to the public through no unlawful act of the recipient, (b) was known to the recipient at the time of disclosure, (c) was independently developed by the recipient, or (d) becomes known to the recipient from a source other than the disclosing party without breach of the disclosing party's rights. A party may also disclose Confidential Information of the other party to the extent (1) authorized in writing by the other party, or (2) required by applicable law or a court of competent jurisdiction, provided the non-disclosing party shall be notified by the disclosing party prior to disclosure so as to afford the non-disclosing party with an opportunity to enforce any rights it may have in order to protect its Confidential Information from disclosure. 15. SOURCE CODE ESCROW. 15.1 ESTABLISHMENT AND MAINTENANCE. Within ten (10) days of the Effective Date hereof Licensor shall deposit the Source Code into a source code escrow account established by Licensee with a nationally recognized source code escrow agent agreed upon by Licensor under the terms agreed upon by Licensor (subject to the terms set forth in this Section 15.1). Upon the delivery by Licensor of each Program Error Fix or Update, Licensor shall deposit the Source Code for such Program Error Fix or Update into the source code escrow account described above. 15.2 COST OF ESCROW. Licensor agrees to pay all fees due the escrow agent incurred specifically for the maintenance of the source code escrow. 15.3 TERMS OF ESCROW. The terms of the source code escrow agreement shall provide, at minimum, that (a) the Source Code shall be released to Licensee in the event that (i) Licensor is in breach of its support and maintenance obligations as set forth in Section 8 of this Agreement, provided that payments due to Licensor from Licensee for such support and maintenance are up to date; (ii) Licensor is adjudicated bankrupt, becomes insolvent, makes a general assignment for the benefit of creditors, or enters dissolution or liquidation proceedings, or (iii) a petition is filed by or against Licensor under bankruptcy law, corporate reorganization law or any other law for the relief of debtors and such petition is consented to or is not dismissed within sixty (60) days of such filing, or this Agreement is terminated by Licensee due to an uncured material breach by Licensor as provided above; and (b) Licensee may have the deposited Source Code inspected to verify that it is complete and current, that the computer programs generated from such Source Code perform in accordance with the Documentation and Functionality Requirements therefor and that such generated computer programs are the same as those comprising the Technology. 15.4 RIGHTS AND OBLIGATIONS UPON RELEASE. Upon the release from escrow to Licensee of the Source Code, all of Licensee's rights hereunder shall continue in full force. In addition, upon 11 the release of the Source Code to Licensee, Licensee may use, reproduce and modify the Source Code and may sublicense machine-readable object code generated from such modified Source Code to the same extent that it may sublicense the Technology hereunder 15.5 SUPPLEMENTAL AGREEMENT. Licensor and Licensee acknowledge that the source code escrow agreement agreed upon by the parties pursuant to this Section 15 shall be an "agreement supplementary to" this Agreement as provided in Section 365(n) of Title 11, United States Code (the "Bankruptcy Code"). Licensor acknowledges that if Licensor, as a debtor in possession or a trustee in Bankruptcy in a case under the Bankruptcy Code, rejects this Agreement or the source code escrow agreement, Licensee may elect to retain its rights under such rejected agreement or agreements as provided in Section 365(n) of the Bankruptcy Code. Upon written request of Licensee to Licensor or to the bankruptcy trustee appointed to Licensor' bankruptcy case, Licensor or such bankruptcy trustee shall not interfere with the rights of Licensee as provided in this Agreement and the source code escrow agreement, including the right to obtain the Source Code deposited with the escrow agent as provided in this Section 15. 16. ARBITRATION. Any disputes arising between the parties relating to, arising out of or in any way connected with this Agreement or any term or condition hereof, or the performance by either party of its obligations hereunder, whether before or after termination of this Agreement, shall be promptly presented to the chief executive officers of Licensee and Licensor for resolution and in the event that such officers cannot promptly resolve a dispute within ten (10) business days, then such dispute shall be finally resolved by binding arbitration. Whenever a party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other party. Any arbitration hereunder shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association. Each such arbitration shall be conducted by a panel of one or three arbitrators appointed in accordance with such Rules. Any such arbitration shall be held in Orange Country, California. The arbitrators shall have the authority to grant specific performance, and to allocate between the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. 17. MISCELLANEOUS. 17.1 GOVERNING LAW. This Agreement shall for all purposes be governed by and interpreted in accordance with the laws of the State of New York without regard to its conflict of laws principles or federal law of the United States, as applicable. 17.2 SEVERABILITY. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, the remaining provisions shall remain in full force and effect, unless the unenforceable provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the parties would not have entered into this Agreement without such provisions. 17.3 MODIFICATIONS. Any modification, amendment, supplement or other change to this Agreement must be in writing and signed by duly authorized representatives of Licensee and Licensor. 17.4 ASSIGNMENTS. Except for a transfer of all or substantially all of the assets of the Licensor, no right or obligation of Licensor under this Agreement may be assigned, delegated or 12 otherwise transferred by agreement without Licensee's express prior written consent, and any attempt to assign, delegate or otherwise transfer any of Licensor's rights or obligations without such consent shall be void. Subject to the foregoing, this Agreement shall bind each party and its permitted successors and assigns. 17.5 WAIVERS. All waivers must be in writing. The failure of either party to insist upon strict performance of any provision of this Agreement, or to exercise any right provided for herein, shall not be deemed to be a waiver for the future of such provision or right, and no waiver or any provision or right shall affect the right of the waiving party to enforce any other provision or right therein. 17.6 REMEDIES. The parties agree that any breach of Section 14 would cause irreparable injury for which no adequate remedy in law exists; therefore, the parties agree that equitable remedies, including, without limitation, injunctive relief and specific performance, are appropriate remedies to redress any breach or threatened breach of Section 14, in addition to all other remedies available to the parties. All rights and remedies under this Agreement shall be cumulative and may be exercised singularly or concurrently. If any legal action is brought to enforce any obligation under this Agreement (including under arbitration), the prevailing party shall be entitled to receive its attorneys' fees, court costs and other collection expenses, in addition to any other relief it may receive. 17.7 INDEPENDENT CONTRACTORS. It is expressly agreed that the parties hereto shall be independent contractors and that the relationship between the parties shall not constitute a partnership, joint venture or agency. Neither Licensee nor Licensor shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other, without the prior written consent of the other party to do so. 17.8 NOTICES. Any consent or notice required or permitted to be given or made under this Agreement by one of the parties hereto to the other shall be in writing, delivered personally, by facsimile (and promptly confirmed by personal delivery or courier), or by national or international courier, postage prepaid (where applicable), addressed to such other party at its address indicated below, or to such other address as the addressee shall have last furnished in writing to the addressor and shall be effective upon the earlier of receipt by the addressee or the second business day after dispatch by recognized national or international courier. If to Licensor: If to Licensee: iLumin Corporation 2510 N. Red Hill Avenue, Suite 230 11911 Freedom Drive Santa Ana, CA 92705-5542 Suite 790 Fax: (949) 477-6819 Reston, VA 20190 Attn: Fax: 703.481.8672 Attn: Dave Ellison with a copy to: with a copy to: Michael R. Lincoln, Esq. Stradling Yocca Carlson & Rauth Cooley Godward LLP 660 Newport Center Drive 11951 Freedom Drive Newport Beach, CA 92660 Reston, VA 20190 Fax: (949) 725-4100 Fax: 703.456.8100 Attn: Craig C. Carlson 13 17.9 ENTIRE AGREEMENT. This Agreement (including all exhibits referred to herein, which are hereby incorporated by reference) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between and among the parties with respect to the subject matter of this Agreement. Neither this Agreement nor any provision hereof is intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 17.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this License Agreement as of the Effective Date. LICENSEE: LICENSOR: MICRO GENERAL CORPORATION ILUMIN CORPORATION By: /s/ JOHN R. SNEDEGAR By: /s/ STEVEN SCHNEIDER ----------------------------- ----------------------------------- Print Name: John R. Snedegar Print Name: Steven Schneider ---------------------- ---------------------------- Its: CEO Its: CEO ---------------------- ---------------------------- 14 EXHIBIT A TECHNOLOGY; FUNCTIONALITY REQUIREMENTS 1. DESCRIPTION OF THE TECHNOLOGY AND ITS COMPONENTS: 2. FUNCTIONALITY REQUIREMENTS AND TECHNICAL SPECIFICATIONS OF THE TECHNOLOGY: EX-10.20 11 a79556ex10-20.txt EXHIBIT 10.20 EXHIBIT 10.20 FIRST MODIFICATION TO CREDIT AGREEMENT This First Modification to Credit Agreement (this 'Modification') is entered into by and MICRO GENERAL CORPORATION ("Borrower") and IMPERIAL BANK ("Bank") as of this 23rd day of July, 2001, at Inglewood, California. RECITALS This Modification is entered into upon the basis of the following facts and understandings of the parties, which facts and understandings are acknowledged by the parties to be true and accurate: Bank and Borrower previously entered into a Credit Agreement dated December 22, 1999. The Credit Agreement shall be referred to herein as the "Agreement." NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth below. AGREEMENT 1. Incorporation by Reference. The Recitals and the documents referred to therein are incorporated herein by this reference. Except as otherwise noted, the terms not defined herein shall have the meaning set forth in the Agreement. 2. Modifications to the Agreement. Subject to the satisfaction of the conditions precedent as set forth in Section 3 hereof, the Agreement is hereby modified as set forth below. A. Subsection 1.01 (a) of the Agreement is hereby deleted in its entirety and replaced with the following: (a) REVOLVING LINE OF CREDIT. Subject to the terms and conditions of this Agreement, provided that no event of default then has occurred and is continuing, Bank shall, upon Borrower's request make advances ("Revolving Loans") to Borrower, for general corporate purposes and the issuance of letters of credit, in an amount not to exceed Ten Million Dollars ($10,000,000) (the "Revolving Line of Credit") until July 1, 2002 (the "Revolving Line of Credit Maturity Date"). Revolving Loans may be repaid and reborrowed, subject to the provisions of the LIBOR Addendum attached to the promissory note evidencing the Revolving Line of Credit, provided that all outstanding principal and accrued interest on the Revolving Loans shall be payable in full on the Revolving Credit Maturity Date." B. Subsection 1.01 of the Agreement is hereby amended by adding the following new subsection at the end thereof: "(c) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to availability under the Revolving Line of Credit, at any time and from time to time from the date hereof through the banking day immediately prior to the Revolving Line of Credit Maturity Date, Bank shall issue for the account of Borrower such standby letters of credit ("Letters of Credit") as Borrower may request, which requests shall be made by delivering to Bank a duly executed letter of credit application on Bank's standard form; provided, however, that the outstanding and undrawn amounts under all such Letters of Credit (i) shall not at any time exceed Two Hundred Thousand Dollars ($200,000) ("Letter of Credit Sublimit") and (ii) shall be deemed to constitute Revolving Loans for the purpose of calculating availability under the Revolving Line of Credit. Unless agreed to in writing by Bank, no Letter of Credit shall have an expiration date that is later than the Revolving Line of Credit Maturity Date. All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank's form application and letter of credit agreement and other agreements required by Bank. Borrower will pay all usual issuance and other fees that Bank notifies Borrower it will be charged for issuing and processing Letters of Credit for Borrower." C. Article 2 of the Agreement is hereby amended by adding the following new section at the end thereof: "2.12 INTELLECTUAL PROPERTY COLLATERAL. Borrower is the sole owner of the Intellectual Property Collateral, except for non-exclusive licenses granted by Borrower to its customers in the ordinary course of business. Each of the Patents is valid and enforceable, and no part of the Intellectual Property Collateral has 1 been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property Collateral violates the rights of any third party. Borrower's rights as a licensee of intellectual property do not give rise to more than 5.00% of its gross revenue in any given month, including without limitation revenue derived from the sale, licensing, rendering or disposition of any product or service. As used herein, Intellectual Property Collateral shall mean all of Borrower's right, title, and interest in and to the following: (a) Copyrights, Trademarks and Patents; (b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held; (c) Any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held; (d) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation. to sue for and collect such damages for said use or infringement of the intellectual property rights identified above; (e) All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights; (f) All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and (g) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable In respect of any of the foregoing. "Copyrights" - shall mean any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held. "Patents" - shall mean all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. "Trademarks" - shall mean any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks." D. Subsection 4.05(a) of the Agreement is hereby deleted in its entirety and replaced with the following: "(a) QUARTERLY FINANCIAL STATEMENT - BORROWER. As soon as available, and in any event within sixty (60) days after the close of each quarter, either: (i) a consolidated balance sheet, profit and loss statement and reconciliation of Borrower's capital balance accounts as of the close of such period and covering operations for the portion of Borrower's fiscal year ending on the last day of such period, all in reasonable detail and reasonably acceptable to Bank, in accordance with generally accepted accounting principles on a basis consistently maintained by Borrower and certified by an appropriate officer of Borrower, or (ii) copies of the Borrower's Form 10-Q Quarterly concurrent with the date of filing with the Securities and Exchange Commission." E. Subsection 4.05(c) of the Agreement is hereby deleted in its entirety and replaced with the following: "(c) ANNUAL FINANCIAL STATEMENT - BORROWER. As soon as available, and in any event within ninety (90) days after and as of the dose of each fiscal year of Borrower, either: (i) a consolidated report of audit of Borrower, all in reasonable detail, by an independent certified public accountant selected by Borrower and reasonably acceptable to Bank, in accordance with generally 2 accepted accounting principles on a basis consistently maintained by Borrower and certified by an appropriate officer of Borrower; or (ii) copies of the Borrower's Form 10-K Annual Report concurrent with the date of filing with the Securities and Exchange Commission." F. Section 4.05 of the Agreement is hereby amended by adding the following new subsection at the end thereof: "(h) INTELLECTUAL PROPERTY. Within thirty (30) days of the last day of each month, a report signed by Borrower, in form reasonably acceptable to Bank, listing any applications or registrations that Borrower has made or filed in respect of any Patents, Copyrights or Trademarks and the status of any outstanding applications or registrations, as well as any material change in Borrower's Intellectual Property Collateral, including but not limited to any subsequent ownership right of Borrower in or to any Trademark, Patent or Copyright not specified in Exhibits A, B, and C of the intellectual property security agreement entered into by Borrower in connection with this Agreement." G. Section 4.06 of the Agreement is hereby deleted in its entirety and replaced with the following: "4.06 OUT OF DEBT PERIOD. To repay any advances in full, and not to draw any additional advances on its Revolving Line of Credit, for a period of at least 30 consecutive days in each line-year. "Line-year" means the period between the date of this Modification and July 1, 2002, and each subsequent one-year period (if any). For the purposes of this paragraph, "advances" does not include undrawn amounts of outstanding letters of credit." H. Article 4 of the Agreement is hereby amended by adding the following new sections at the end thereof: "4.12 TANGIBLE NET WORTH. Maintain at all times a Tangible Net Worth (defined as stockholder's equity less any value for goodwill, trademarks, patents, copyrights, leaseholds, organization expense and older similar intangible items, and any amounts due from stockholders, officers and affiliates) of not less than Fourteen Million Dollars ($14,000,000). 4.13 WORKING CAPITAL. Maintain at all times working capital, meaning current assets minus current liabilities of not less than Two Million Dollars ($2,100,000). 4.14 DEBT TO TANGIBLE NET WORTH. Maintain at all times a ratio of total liabilities to Tangible Net Worth of not greater than 3.00 to 1.00. 4.15 DEBT SERVICE COVERAGE RATIO. Maintain at all times, a ratio of (a) EBITDA, meaning the sum of the Borrower's net income before taxes, interest expense, accrued federal and state income taxes, and accrued depreciation and amortization expense, to (b) the sum of current portion of long term debt, capital lease expense, and interest expense, of not less than 1.20 to 1.00. This ratio will be calculated at the end of each fiscal quarter, using the results of that quarter and each of the three immediately preceding fiscal quarters. The current portion of tong term liabilities will be measured as of the last day of the calculation period. 4.16 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS. (a) Register or cause to be registered on an expedited basis (to the extent not already registered) with the United States Patent and Trademark Office or the United States Copyright Office, as applicable: (i) those intellectual property rights listed on Exhibits A, B and C to the intellectual property security agreement entered into by Borrower In connection with this Agreement, within 30 days of the date hereof, (ii) all registerable intellectual property rights Borrower has developed as of the date of this Agreement but heretofore failed to register, within 30 days of the date of this Agreement, and (iii) those additional intellectual property rights developed or acquired by Borrower from time to time in connection with any product, prior to the sale or licensing of such product to any third party, and prior to Borrower's use of such product (including without limitation major revisions or additions to the Intellectual property rights listed on such Exhibits A, B and C). Borrower shall give Bank notice of all such applications or registrations. (b) Execute and deliver such additional Instruments and documents from time to time as Bank shall reasonably request to perfect Bank's security interest in the Intellectual Property Collateral. 3 MICRO GENERAL CORPORATION IMPERIAL BANK By: /s/ JOSEPH E. ROOT By: /s/ JAMES COOPER ------------------------- ------------------------------------ Joseph E. Root James Cooper First Vice President Title: Senior Vice President 5 EX-10.21 12 a79556ex10-21.txt EXHIBIT 10.21 SOFTWARE SERVICES AGREEMENT EXHIBIT 10.21 This Software Services Agreement (the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corporation certain monthly payments in consideration for Micro General Corporation's agreement to provide Fidelity National Financial, Inc. services, including, but not limited to, software and data processing services, and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount ( the "Payment") and the period over which the Payments are to be made (the "Transaction") are specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below.
Term Monthly Payment Amount Payment Commencement Date ---- ---------------------- ------------------------- ~~24 Months 59,656.11 3/15/01~~
This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. AGREED TO: AGREED TO: FIDELITY NATIONAL FINANCIAL, INC. MICRO GENERAL CORP By: /S/ PATRICK F. STONE By: /S/ JOHN SNEDEGAR ---------------------------- ---------------------------- Authorized signature Authorized signature Name: /S/ PATRICK F. STONE Name: JOHN SNEDEGAR -------------------------- -------------------------- Date: March 5, 2001 Date: 02/28/01 -------------------------- -------------------------- Agreement: GEC-SSA-001 Page 1 of 3 SOFTWARE SERVICES AGREEMENT PART 1- DEFINITIONS 1.0 DEFINITIONS Term is 24 months and it is the number of payment periods of the Transaction. The Term of the Transaction begins on the date of this Agreement. It ends on the last day of the last payment period. PART 2 - PAYMENT 2.1 FIDELITY NATIONAL FINANCIAL, INC.'S OBLIGATION TO PAY Payments specified in the table set forth above shall be made monthly on the 30th calendar day of each month. Fidelity National Financial, Inc. acknowledges and understands that the terms and conditions of this Agreement enables Micro General Corp to sell and assign it's interest in, or grant a security interest in, this Agreement and the Payments payable hereunder, in whole or in part, to GE Capital ("GE Capital" to secure Micro General Corp's obligations to GE Capital and that GE Capital has extended certain financing to Micro General Corp in reliance on Fidelity National Financial, Inc.'s unconditional obligation to make the Payments and Micro General Corp's assignment of Micro General Corp's interest in such Payments to GE Capital. Fidelity National Financial, Inc.'s obligation to make the Payments shall be absolute and unconditional and shall not be affected by any right of set-off, defense or counterclaim of any kind whatsoever against Micro General Corp or GE Capital or by the termination of any service, or any dispute Fidelity National Financial, Inc. may have with respect to any service, Micro General Corp may provide to Fidelity National Financial, Inc. 2.2 PAYMENT COMMENCEMENT Payment starts on the Payment Commencement Date specified above. 23 DELINQUENT PAYMENTS If Fidelity National Financial, Inc. does not make a payment by its due date, Fidelity National Financial, Inc. agrees to pay Micro General Corp, on demand, an additional 2% per month late charge or the maximum allowed by law, whichever is less. The late charge will accrue on a cumulative basis until the outstanding payments and late charges are paid PART 3 - GENERAL 3.1 EVENTS OF DEFAULT Fidelity National Financial, Inc. will be in default if 1. Fidelity National Financial, Inc. does not pay any amount within seven days after its due date; 2. Fidelity National Financial, Inc. makes an assignment for the benefit of creditors, or Fidelity National Financial, Inc. consents to the appointment of a trustee or receiver, or either is appointed for Fidelity National Financial, Inc. or for a substantial part of Fidelity National Financial, Inc.'s property without Fidelity National Financial, Inc.'s consent; 3. any petition or proceeding is filed by or against Fidelity National Financial, Inc. under any bankruptcy, insolvency, or similar law; 4. Fidelity National Financial, Inc. breaches any other provision of this Agreement and that breach continues for fifteen days after Fidelity National Financial, Inc. receives written notice from Micro General Corp; or 5. Fidelity National Financial, Inc. makes a bulk transfer subject to the provisions of the Uniform Commercial Code or otherwise disposes of substantial assets without receiving equivalent value. Page 2 of 3 SOFTWARE SERVICES AGREEMENT 3.2 REMEDIES If Fidelity National Financial, Inc. is in default, We may do one or more of the following: 1. declare the Transaction and all associated Transactions to be in default; 2. immediately recover from Fidelity National Financial, Inc. all amounts that are or will be due; 3. immediately recover from Fidelity National Financial, Inc. reasonable attorney's fees and legal expenses incurred in exercising any of Micro General Corp's rights under this Agreement. We may pursue any other remedy available at law or in equity. 3.3 ASSIGNMENT 1. Fidelity National Financial, Inc. may not assign this Agreement or Fidelity National Financial, Inc.'s rights under it, or delegate Fidelity National Financial, Inc.'s obligations. Any attempt to do so is void; 2. Micro General Corp shall sell and assign all of Micro General Corp's interests or grant a security interest in all of Micro General Corp's right, title and interest under this Agreement to GE Capital to secure Micro General Corp's obligations to GE Capital. 3. Fidelity National Financial, Inc. and Micro General Corp agree that neither of us may do any of the following without the prior written consent of GE Capital, and that any attempt to do so shall be void and of no force or affect against GE Capital: (a) make, or accept, any payment or pre-payment of the Payments other than as specified in this Agreement; (b) amend, supplement or otherwise modify the terms of this Agreement or grant or accept any waiver of compliance with, or release of any of Fidelity National Financial, Inc.'s obligations under this Agreement; 4. Fidelity National Financial, Inc. agrees that upon notice from GE Capital that Micro General Corp is in default of it's obligations to GE Capital, Fidelity National Financial, Inc. shall make all Payments hereunder directly to GE Capital as specified by GE Capital in such notice. 3.4 GENERAL If any provision of this Agreement becomes invalid or unenforceable, all other provisions remain in effect. Micro General Corp's failure to require full performance or Micro General Corp's waiver of any provision in this Agreement does not prevent Micro General Corp from requiring full performance of all provisions in the future. 3.5 NOTICES All notices under this Agreement will be delivered in person or mailed, to Fidelity National Financial, Inc. at Fidelity National Financial, Inc.'s address or to Micro General Corp at Micro General Corp's address or to such other address as Micro General Corp, or Micro General Corp's assignee may specify to Fidelity National Financial, Inc. GOVERNING LAW The laws of the State of California govern this Agreement. Page 3 of 3 Equipment and financing Description in support of SSA Agreement dated 2/28/01 for monthly payments of $59,656.11 for 24 months: Financing through GE Capital for 24 months, CISCO Servers CISCO Firewall equipment CISCO sensors CISCO Catalyst equipment CISCO High-end Routers and related software, other hardware, and services Above equipment being acquired through third party vendor, Network Catalyst, who's invoices for the above equipment will be paid directly by GE Capital. Total amount financed is $1,293,000. EX-10.22 13 a79556ex10-22.txt EXHIBIT 10.22 EXHIBIT 10.22 SOFTWARE SERVICES AGREEMENT This Software Services Agreement (called the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corp certain monthly payments in consideration for Micro General Corps agreement to provide Fidelity National Financial, Inc. certain services and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount ("Payment") and the period over which the Payments are to be made (called the "Transaction") is specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below.
Payment Monthly Commencement Term Payment Amount Date ---- -------------- ------------ ~~36 months $ 49,575.32 June 30, 2000~~
This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. Agreed to: Agreed to: --------------------- ---------------------- Fidelity National Financial, Inc. Micro General Corp By: /S/ PATRICK F. STONE By: /S/ DALE CHRISTENSEN ---------------------------- ---------------------------- Authorized signature Authorized signature Name: Patrick F. Stone Name: Dale Christensen -------------------------- -------------------------- (type or print) (type or print) President & COO Date: June 14, 2000 Date: 6/14/00 -------------------------- -------------------------- SOFTWARE SERVICES AGREEMENT This Software Services Agreement (called the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corp certain monthly payments in consideration for Micro General Corp's agreement to provide Fidelity National Financial, Inc. certain services and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount ("Payment") and the period over which the Payments are to be made (called the "Transaction") is specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below.
Payment Monthly Commencement Term Payment Amount Date ---- -------------- ------------ ~~36 months $ 49,575.32 June 30, 2000~~
This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. Agreed to: Agreed to: --------------------- ---------------------- Fidelity National Financial, Inc. Micro General Corp By: By: /S/ DALE CHRISTENSEN ---------------------------- ---------------------------- Authorized signature Authorized signature Name: Name: Dale Christensen -------------------------- -------------------------- (type or print) (type or print) Date: Date: 6/14/00 -------------------------- -------------------------- SOFTWARE SERVICES AGREEMENT Part 1 - Definitions 1.0 Definitions Term is 36 months and it is the number of payment periods of the Transaction. The Term of the Transaction begins on the date of this Agreement. It ends on the last day of the last payment period. Part 2 - Payment 2.1 Fidelity National Financial, Inc.'s obligation to Pay Payments specified in the table set forth above shall be made monthly on the 30th calendar day of each month. Fidelity National Financial, Inc. acknowledges and understands that the terms and conditions of this Agreement enables Micro General Corp to sell and assign its interest in, or grant a security interest in, this Agreement and the Payments payable hereunder, in whole or in part, to IBM Credit Corporation ("IBM Credit") to secure Micro General Corp's obligations to IBM Credit and that IBM Credit has extended certain financing to Micro General Corp in reliance on Fidelity National Financial, Inc.'s unconditional obligation to make the Payments and Micro General Corp's assignment of Micro General Corp's interest in such Payments to IBM Credit. Fidelity National Financial Inc.'s obligation to make the Payments shall be absolute and unconditional and shall not be affected by any right of set-off, defense or counterclaim of any kind whatsoever against Micro General Corp or IBM Credit or by the termination of any service, or any dispute Fidelity National Financial, Inc. may have with respect to any service, Micro General Corp may provide to Fidelity National Financial, Inc. 2.2 Payment Commencement Payment starts on the Payment Commencement Date specified above. 2.3 Delinquent Payments If Fidelity National Financial, Inc. does not make a payment by its due date, Fidelity National Financial, Inc. agrees to pay Micro General Corp, on demand, an additional 2% per month late charge or the maximum allowed by law, whichever is less. The late charge will accrue on a cumulative basis until the outstanding payments and late charges are paid. Part 3 - General 3.1 Events of Default Fidelity National Financial, Inc. will be in default if: 1. Fidelity National Financial, Inc. does not pay any amount within seven days after its due date; 2. Fidelity National Financial, Inc. makes an assignment for the benefit of creditors, or Fidelity National Financial, Inc. consents to the appointment of a trustee or receiver, or either is appointed for Fidelity National Financial, Inc. or for a substantial part of Fidelity National Financial, Inc.'s property without Fidelity National Financial, Inc.'s consent; 3. any petition or proceeding is filed by or against Fidelity National Financial, Inc. under any bankruptcy, insolvency, or similar law; SOFTWARE SERVICES AGREEMENT 4. Fidelity National Financial, Inc. breaches any other provision of this Agreement and that breach continues for fifteen days after Fidelity National Financial, Inc. receives written notice from Micro General Corp; or 5. Fidelity National Financial, Inc. makes a bulk transfer subject to the provisions of the Uniform Commercial Code or otherwise disposes substantial assets without receiving equivalent value. 3.2 Remedies If Fidelity National Financial, Inc. is in default, Micro General Corp may do one or more of the following: 1. declare the Transaction and all associated Transactions to be in default; 2. recover from Fidelity National Financial, Inc. all amounts that are or will be due; 3. recover from Fidelity National Financial, Inc. reasonable attorney's fees and legal expenses incurred in exercising any of Micro General Corp's rights under this Agreement. Micro General Corp may pursue any other remedy available at law or in equity. 3.3 Assignment 1. Fidelity National Financial, Inc. may not assign this Agreement or Fidelity National Financial, Inc's rights under it, or delegate Fidelity National Financial, Inc.'s obligations. Any attempt to do so is void; 2. Micro General Corp shall sell and assign all of Micro General Corp's interests or grant a security interest in all of Micro General Corp's right, title and interest under this Agreement to IBM Credit to secure Micro General Corp's obligations to IBM Credit. 3. Fidelity National Financial, Inc. and Micro General Corp agree that neither of us may do any of the following without the prior written consent of IBM Credit, and that any attempt to do so shall be void and of no force or affect against IBM Credit: (a) make, or accept, any payment or pre-payment of the Payments other than as specified in this Agreement; (b) amend, supplement or otherwise modify the terms of this Agreement or grant or accept any waiver of compliance with, or release of any of, Fidelity National Financial, Inc.'s obligations under this Agreement; 4. Fidelity National Financial, Inc. agrees that upon notice from IBM Credit that Micro General Corp is in default of it's obligations to IBM Credit, Fidelity National Financial, Inc. shall make all Payments hereunder directly to IBM Credit as specified by IBM Credit in such notice. 3.4 General If any provision of this Agreement becomes invalid or unenforceable, all other provisions remain in effect. Micro General Corp's failure to require full performance or Micro General Corp's waiver of any provision in this Agreement does not prevent Micro General Corp from requiring full performance of all provisions in the future. SOFTWARE SERVICES AGREEMENT 3.5 Notices All notices under this Agreement will be delivered in person or mailed, to Fidelity National Financial, Inc. at Fidelity National Financial, Inc. 's address or to Micro General Corp at Micro General Corp's address or to such other address as Micro General Corp, or Micro General Corp's assignee may specify to Fidelity National Financial, Inc. Governing Law The laws of the State of California govern this Agreement. EX-10.23 14 a79556ex10-23.txt EXHIBIT 10.23 SOFTWARE SERVICES AGREEMENT EXHIBIT 10.23 This Software Services Agreement (the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corporation certain monthly payments in consideration for Micro General Corporation's agreement to provide Fidelity National Financial, Inc. certain services and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount ( the "Payment") and the period over which the Payments are to be made (the "Transaction") are specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below.
Term Monthly Payment Amount Payment Commencement Date - ---- ---------------------- ------------------------- ~~24 Months $24,688 8/1/00~~
This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. Agreed to: Agreed to: FIDELITY NATIONAL FINANCIAL, INC. MICRO GENERAL CORP By: /S/ PATRICK F. STONE By: /S/ DALE CHRISTENSEN ---------------------------- ---------------------------- Authorized signature Authorized signature Name: Patrick F. Stone Name: Dale Christensen -------------------------- -------------------------- (type or print) (type or print) Date: August 21, 2000 Date: August 18, 2000 -------------------------- -------------------------- Page 1 of 3 INSTALLMENT PAYMENT SUPPLEMENT Date Prepared: 01/17/01 PAGE 1 OF 2 NAME AND ADDRESS OF CUSTOMER INSTALLED AT LOCATION MICRO GENERAL CORP MICRO GENERAL CORP 2510 N REDHILL AVE 2510 N REDHILL AVE SUITE 230 SUITE 230 SANTA ANA, CA 92705-5542 SANTA ANA, CA 92705-5542 SINGLE EQUIPMENT LOCATION CSO LOCATION ADDRESS IBM/IPMA CUSTOMER NUMBER PHOENIX CSO 5796371/5796-494 PO BOX 10349 PHOENIX, AZ 85064-0349 CUSTOMER REFERENCE CUSTOMER NO: 5796371 IBM CSO LOCATION: PAH INSTALLMENT PAYMENT MASTER AGREEMENT NO: PHXAG08 IPMA AMENDMENT NOS: QUOTE VALIDITY DATE: 01/30/01 REFERENCED QUOTE LETTER NO: Q0221276901 SUPPLEMENT NO: ID0020179 REFERENCED PURCHASE AGREEMENT NO: HQ12291 REFERENCED LICENSE AGREEMENT NO: REFERENCED TRADE-IN AGREEMENT NO: ASSOCIATED SUPPLEMENT NO:
IBM PLANT LOCATION MACHINE ORDER OR PURCHASE PRICE CUSTOMER OR LPM MES OR OR ONE-TIME LINE NUMBER TYPE/MODEL SERIAL CHARGES OR NO. IBM/IPMA* FEATURE NUMBER DESCRIPTION OTHER AMOUNT - ------ -------- ---------- --------- ------------------------- --------------- ~~001 5796371 9994/002 Vendor Sourced Non-IBM SW 120,332.50 5796494~~

ESTIMATED INSTALLATION DATE OR INTENDED CREDIT FINANCING DATE OR (FROM IBM TRADE-IN EFFECTIVE DATE OF STATE AND AGREEMENT) AND/OR AMOUNT INTEREST PAYMENT TERM (NUMBER OF ADDITIONAL LICENSE LOCAL TAXES DOWN PAYMENT FINANCED RATE AMOUNT OPTION PAYMENT PERIODS) PLANNING DATE - ----------- ------------------ ---------- -------- -------- ------ ---------------- ---------------------- ~~120,332,50 9.67 3,864.17 T 36 1/31/01~~

FISCAL YEAR INTEREST TOTAL PAYMENT PERIOD START DATE SUPPLIER NAME COMMENCEMENT PAYMENT 1. Monthly [X] 01/01 NETWORK CATALYST INC 3,864.17 Annual [ ] Month/Day Supplier Customer no. 2. Other (specify): 6405958 Schedule attached (check): [ ]
TOTAL FROM ALL PAGES: PURCHASE PRICE OR ONE-TIME CHARGES OR OTHER AMOUNT $120,332.50 TRADE-IN/CREDIT DOWN PAYMENT STATE OR LOCAL TAXES AMOUNT FINANCED $120,332.50 *TAX ON FINANCE CHARGE (WHEN APPLICABLE THIS TAX IS PAYABLE WITH FIRST INSTALLMENT) ================================================================================ THE INSTALLMENT PAYMENT MASTER AGREEMENT REFERENCED ABOVE, THIS SUPPLEMENT AND ANY APPLICABLE ATTACHMENTS OR ADDENDA ARE THE COMPLETE EXCLUSIVE STATEMENT OF THE AGREEMENT. THESE DOCUMENTS SUPERSEDE ANY PRIOR ORAL OR WRITTEN COMMUNICATIONS BETWEEN THE PARTIES. BY SIGNING BELOW, BOTH PARTIES AGREE TO THE TERMS REPRESENTED BY THIS SUPPLEMENT. DELIVERY OF AN EXECUTED COPY OF ANY OF THESE DOCUMENTS BY FACSIMILE OR OTHER RELIABLE MEANS SHALL BE DEEMED TO BE AS EFFECTIVE FOR ALL PURPOSES AS DELIVERY OF A MANUALLY EXECUTED COPY. CUSTOMER ACKNOWLEDGES THAT WE MAY MAINTAIN A COPY OF THESE DOCUMENTS IN ELECTRONIC FORM AND AGREES THAT COPY REPRODUCED FROM SUCH ELECTRONIC FORM BY ANY OTHER RELIABLE MEANS (FOR EXAMPLE, PHOTOCOPY, IMAGE OR FACSIMILE) SHALL IN ALL RESPECTS BE CONSIDERED EQUIVALENT TO AN ORIGINAL. Accepted by: Initial here MICRO GENERAL CORP ------------ to request IBM Maintenance for equipment By: By: /s/ Dale Christensen ----------------- --------------------- Authorized Authorized Signature Signature Dale Christensen - -------------------- --------------------- Name (Type or Print) Name (Type or Print) 2/01/01 - -------------------- --------------------- Date Date Supplement Number.ID0020179 OPTION CODES OPTION I - Transaction for a Machine or a Modification. OPTION IG - Transaction for a Machine or a Modification financed with Tax Exempt Interest. OPTION R - Transaction for a used Machine supplied by IBM Credit Corporation. OPTION RG - Transaction for a used Machine supplied by IBM Credit Corporation financed with Tax Exempt Interest. OPTION S - Transaction for an IBM one-time charge or a Machine or a Modification supplied by IBM Credit Corporation. OPTION S' - Transaction for an IBM one-time charge or a Machine or a Modification supplied by IBM Credit Corporation financed with Tax Exempt Interest. OPTION T - Transaction for a non-IBM one-time charge. OPTION T' - Transaction for a non-IBM one-time charge financed with Tax Exempt Interest. TAX EXEMPT REQUIREMENTS (FOR OPTIONS IG, RG, S' AND T') THE RATES IN THIS AGREEMENT ARE BASED ON YOUR UNDERLYING DEBT OBLIGATION QUALIFYING TO PAY INTEREST WHICH IS EXEMPT FROM FEDERAL INCOME TAX UNDER SECTION 103(a) OF THE INTERNAL REVENUE CODE (Code). Accordingly, you represent that you qualify as a State or political subdivision of a State for purposes of Section 103(a). You agree that any misrepresentation of your status under Section 103(a) is an event of default under this agreement. You further agree to comply promptly with all information reporting requirements of Code section 149(e) and Treasury Regulations thereunder. You also agree to file internal Revenue Service Form 8038-G or 8038-GC whichever appropriate, for this transaction. If you do not file the above IRS form on a timely basis or are unable upon request to demonstrate that the IRS has determined you are qualified under Section 103(a) of the Code, then you shall pay us on demand a sum to be determined by us that will return to us the economic results we would otherwise have received. PREPAYMENT FEE The Prepayment Fee is charged to recover administrative expense and changes in funding cost associated with the early liquidation of a Transaction. Changes in funding costs will only be incurred if interest rates, based on the 3-year Treasury Rate averages as published by the Federal Reserve, decline from the date interest starts to the date of the liquidation. The cost will be determined using a factor of 2.8 multiplied by the change in the 3-year Treasury Rates and then multiplied by the remaining Transaction principal. The 2.8 factor will decrease with the number of months remaining in the original term of the contract. Administrative expense will be determined using a factor of 2.50% multiplied by the remaining Transaction principal. The Prepayment Fee will be the sum of these numbers. FOR FINANCED MACHINES, MODIFICATIONS, OR ADDITIONS FOR COMMERCIAL CUSTOMERS LOCATED IN: 1. Ohio, Maryland, Mississippi, Virginia, or West Virginia, you must be a corporation as defined by the applicable state law; 2. Pennsylvania, you must be a business corporation as defined by Pennsylvania laws; and 3. Alabama or Wisconsin, the Machines, Modifications, or Additions may not be purchased for agricultural purposes. WARRANTY DISCLAIMER: Any warranties associated with Products or Services chosen by you and financed by us may be available to you under the terms of any applicable agreement between you and the provider of such Products or Services. UNDER THIS AGREEMENT, WE MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, THE CAPABILITY OF THE MACHINES OR PROGRAMS TO CORRECTLY PROCESS, PROVIDE AND/OR RECEIVE DATE DATA WITHIN AND BETWEEN THE 20TH AND 21ST CENTURIES, AND THE IMPLIED WARRANTIES OF MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE, AND YOU TAKE THE PRODUCTS AND/OR SERVICES "AS IS". IN NO EVENT WILL WE HAVE ANY LIABILITY FOR, NOR WILL YOU HAVE ANY REMEDY UNDER THIS AGREEMENT AGAINST US FOR CONSEQUENTIAL DAMAGES, ANY LOSS OF PROFITS OR SAVINGS, LOSS OF USE, OR ANY OTHER COMMERCIAL LOSS. The following amend the Installment Payment Master Agreement referenced on page 1. 1. Section 1.1 - Definitions - Date of Installation for a Program - replace item b. with the following: "the second business day after the Program's standard transit allowance period." TERMS FOR NON-IBM EQUIPMENT AND FOR EQUIPMENT NOT SOURCED FROM IBM; WHERE NON-IBM EQUIPMENT AND/OR A SUPPLIER OTHER THAN IBM IS SPECIFIED ON THE FRONT OF THIS SUPPLEMENT, THESE TERMS APPLY. 2. Section 2.1 - Machines - replace the first sentences with the following: "We finance charges for Machines you purchase from us or your supplier." 3. Section 2.2 - Modifications and Additions - replace the first sentence with the following: "We finance charges for Modifications and Additions you purchase from IBM, IBM Credit or your supplier." 4. Section 2.3 - Other Charges - add the following to the end of the section: "We may agree to finance one-time charges from your supplier." 5. Section 2.4 - Discounts, Allowances and Adjustments - replace the first sentence with the following "The purchase price or one-time charge we finance is the same amount that you would have paid us or your supplier after all discounts and adjustments." 6. Section 3.2 - Interest Commencement - replace the entire section with the following: "Unless otherwise specified in the Supplement, Interest starts on (for OPTIONS IG, RG, S' and T' transactions, interest starts on the first day of the month following) the acceptance date you indicate on a certificate of acceptance executed by you." IBM LOGO CREDIT CORPORATION CERTIFICATE OF ACCEPTANCE PAGE 1 OF 1 AGREEMENT NUMBER: PHXAG08 Customer Number:5796371 Name and Address MICRO GENERAL CORP 2510 N REDHILL AVE SUITE 230 SANTA ANA, CA 92705-5542 BRANCH OFFICE ADDRESS PO BOX 10349 PHOENIX, AZ 85064-0349
Location Leased/Financed Item Plant Order Contract Serial No. Manufacturer's Customer Type Model or MES No. Description Serial No. - ------------------------------------------------------------------------------- ~~5796371 9994 002 Vendor Sourced Non-IBM SW~~
- ------------------------------------------------------------------------------- Supplier Invoice Information (Invoices Must be Attached) - -------------------------------------------------------------------------------
Supplier Invoice Number Invoice Date Invoice Amount 1. NETWORK CATALYST 0015596 12/05/00 37180.00 2. NETWORK CATALYST 001598 12/05/00 61300.00 3. NETWORK CATALYST 0015643 12/11/00 21852.50 4. 5. 6. - ------------------------------------------------------------------------------- TOTAL 120,332.50 - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- THE UNDERSIGNED ("CUSTOMER") IS A LESSEE OR CUSTOMER UNDER THE MASTER LEASE OR INSTALLMENT PAYMENT MASTER AGREEMENT REFERENCED ABOVE ("MASTER AGREEMENT") WITH EITHER IBM CREDIT CORPORATION OR INTERNATIONAL BUSINESS MACHINES CORPORATION (IN EITHER CASE, "IBM"). CUSTOMER REPRESENTS AND CERTIFIES THAT THE ITEMS LISTED ABOVE OR ITEMIZED ON AN ATTACHMENT TO THIS CERTIFICATE OF ACCEPTANCE ("ACCEPTED ITEMS") HAVE BEEN ACCEPTED BY CUSTOMER ON THE ACCEPTANCE DATE INDICATED BELOW AND LABELS, IF SUPPLIED, HAVE BEEN AFFIXED TO EACH ACCEPTED ITEM OF EQUIPMENT. CUSTOMER AUTHORIZES IBM TO PAY CUSTOMER'S SUPPLIER FOR THE ACCEPTED ITEMS. IF CUSTOMER IS SUBJECT TO PROCUREMENT OR APPROPRIATION LAWS OR REGULATIONS, CUSTOMER REPRESENTS AND CERTIFIES THAT IBM'S DIRECT PAYMENT TO CUSTOMER'S SUPPLIER FOR THE INVOICE AMOUNTS INDICATED ON THIS CERTIFICATE OF ACCEPTANCE WILL BE IN FULL COMPLIANCE WITH ANY AND ALL RELEVANT STATE LAWS AND REGULATIONS OR ANY OTHER LEGAL REQUIREMENTS RELATING TO CUSTOMER'S PROCUREMENT OR APPROPRIATION ACTIVITIES. IN ORDER FOR THIS CERTIFICATE OF ACCEPTANCE TO BE EFFECTIVE, CUSTOMER MUST PROVIDE IBM WITH SERIAL NUMBERS FOR EACH ACCEPTED ITEM OF EQUIPMENT. CUSTOMER AUTHORIZES IBM TO COMPLETE OR UPDATE ANY EQUIPMENT IDENTIFICATION INFORMATION ON THE REFERENCED SUPPLEMENT TO THE MASTER AGREEMENT FOR ANY ACCEPTED ITEM OF EQUIPMENT WITHOUT FURTHER ACTION OR CONSENT BY CUSTOMER. DELIVERY OF AN EXECUTED COPY OF THIS CERTIFICATE OF ACCEPTANCE BY FACSIMILE OR ANY OTHER RELIABLE MEANS SHALL BE DEEMED TO BE AS EFFECTIVE FOR ALL PURPOSES AS DELIVERY OF A MANUALLY EXECUTED COPY. CUSTOMER UNDERSTANDS THAT IBM MAY MAINTAIN A COPY OF THIS CERTIFICATE IN ELECTRONIC FORM AND AGREES THAT A COPY PRODUCED FROM SUCH ELECTRONIC FORM OR BY ANY OTHER RELIABLE MEANS (FOR EXAMPLE, PHOTOCOPY, IMAGE OR FACSIMILE) SHALL IN ALL RESPECTS BE CONSIDERED EQUIVALENT TO AN ORIGINAL. ACCEPTED BY: MICRO GENERAL CORP ------------------- CUSTOMER ACCEPTANCE DATE: 2/1/01 BY: /s/ DALE CHRISTENSEN -------------------- ---------------------- (MUST BE COMPLETED) Authorized Signature Dale Christensen ---------------------- Name (type or Print) PLEASE RETURN TO BRANCH OFFICE ADDRESS LISTED ABOVE North Castle Drive IBM CREDIT CORPORATION Armonk, NY 10504-1785 914/499-1900 www.financing.ibm.com - -------------------------------------------------------------------------------- ADDENDUM TO INSTALLMENT PAYMENT SUPPLEMENT Installment Payment Enterprise No. 0201500 Master Agreement No.______________ Customer No. 5796371 Supplement No.______________ We and MICRO GENERAL CORP (You) agree that for the purposes of the referenced Supplement only, the Installment Payment Master Agreement between the parties is hereby modified as follows: Section 4.1 Events of Default - in item 6 delete "or" and in item 7 delete "." at the end of the sentence. - add items 8, and 9 which reads as follows: "(8) Fidelity National Financial Inc. ("Fidelity") is in default of the terms and conditions of the Software Services Agreement number SSA105 between You and Fidelity (the "SSA"), the original of which is attached to this Addendum, after the expiration of any applicable cure periods; or (9) the SSA, or any term or condition thereof, shall be deemed unenforceable, or Fidelity shall deny or contest the enforceability of the SSA, or any term or condition thereof. Section 4.2 Remedies - add item 6. which reads as follows: "exercise any and a11 of our rights as a secured party with respect to the SSA." Section 4.3 Security Interest - at the beginning of the Section, add the following new sentence: "To secure the full and punctual payment and performance of Your obligations to Us hereunder, whether now owing or hereafter arising, when due, You hereby grant Us a security interest in all of Your right, title and interest in and to the SSA, whether now owned or hereafter acquired or existing, including, without limitation, to the Payments (as defined in the SSA), and in all substitutions, replacements and proceeds of the foregoing (collectively, the "Collateral"). You represent and warrant to Us that there is only one original of the SSA. You agree to provide us with the original SSA along with this Addendum. Once all of Your obligations to Us under this Agreement have been satisfied, we agree to return to You the SSA. You further represent and - -------------------------------------------------------------------------------- NO CHANGES TO THIS ADDENDUM ARE AUTHORIZED Dec 15, 2000 1 Addendum No. Q02190848-02 IBM Credit Corporation - -------------------------------------------------------------------------------- warrant to Us that the security interest granted to Us in the SSA constitutes a valid and enforceable first priority perfected security interest in all of Your right, title and interest in the SSA and that, except for the security interest granted hereunder, You own all of Your right, title and interest is the SSA free and clear of any lien, security interest or encumbrance in favor of any third party." In the second paragraph in line three after "covering, Machines, Modification," insert "the SSA,". Section 4.6 General- at the end of the Section, add the following new paragraphs: "You agree that you shall not do any of the following without the prior written consent of IBM Credit, and that any attempt to do so shall be void and of no force or affect against IBM Credit: (i) make, or accept, any payment or pre-payment of the payments under the SSA other than as specified in the SSA; (ii) amend, supplement of otherwise modify the terse of the SSA or grant or accept any waiver of compliance with, or release of any of, Fidelity's obligations under the; In addition to any [other remedies available to Us, and without limiting any such remedies, You agree that upon notice from Us that You are in default of Your obligations to Us, We may direct Fidelity to make all payments under the SSA directly to Us. Prepared by: C COLEMAN Accepted by: IBM Credit Corporation MICRO GENERAL CORP by by /S/ DALE CHRISTENSEN ---------------------------- --------------------------- Authorized Signature Authorized Signature Dale Christensen 2/1/01 - ------------------------------- ------------------------------ Name (Type or Print) Date Name (Type or Print) Date A190848B/BP2 - -------------------------------------------------------------------------------- NO CHANGES TO THIS ADDENDUM ARE AUTHORIZED Dec 15, 2000 2 Addendum No. Q02190848-02 EX-10.24 15 a79556ex10-24.txt EXHIBIT 10.24 EXHIBIT 10.24 Software Services Agreement This Software Services Agreement (called the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corporation certain monthly payments in consideration for Micro General Corp's agreement to provide Fidelity National Financial, Inc. certain services and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount (the "Payment") and the period over which the Payments are to be made (the "Transaction") are specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below.
TERM MONTHLY PAYMENT AMOUNT PAYMENT COMMENCEMENT DATE - ---- ---------------------- ------------------------- ~~36 Months $24,175.00 September 28, 2000~~
This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. Agreed to: Agreed to: FIDELITY NATIONAL FINANCIAL, INC. MICRO GENERAL CORPORATION By: /s/ PATRICK F. STONE By: /s/ DALE CHRISTENSON -------------------------------- --------------------------------- Name: Patrick F. Stone Name: Dale Christenson -------------------------------- --------------------------------- (type or print) (type or print) Date: September 28, 2000 Date: September 28, 2000 -------------------------------- --------------------------------- Software Services Agreement PART I - DEFINITIONS 1.0 DEFINITIONS Term is 36 months and it is the number of payment periods of the Transaction. The Term of the Transaction begins on the date of this Agreement. It ends on the last day of the last payment period. PART 2 - PAYMENT 2.1 FIDELITY NATIONAL FINANCIAL, INC.'S OBLIGATION TO PAY Payments specified in the table set forth above shall be made monthly on the 30th calendar day of each month. Fidelity National Financial, Inc. acknowledges and understands that the terms and conditions of this Agreement enables Micro General Corp to sell and assign it's interest in, or grant a security interest in, this Agreement and the Payments payable hereunder, in whole or in part, to IBM Credit Corporation ("IBM Credit") to secure Micro General Corp's obligations to IBM Credit and that IBM Credit has extended certain financing to Micro General Corp in reliance on Fidelity National Financial, Inc.'s unconditional obligation to make the Payments and Micro General Corp's assignment of Micro General Corp's interest in such Payments to IBM Credit. Fidelity National Financial, Inc.'s obligation to make the Payments shall be absolute and unconditional and shall not be affected by any right of set-off, defense or counterclaim of any kind whatsoever against Micro General Corp or IBM Credit or by the termination of any service, or any dispute Fidelity National Financial Inc. may have with respect to any service, Micro General Corp may provide to Fidelity National Financial, Inc. 2.2 PAYMENT COMMENCEMENT Payment starts on the Payment Commencement Date specified above. 2.3 DELINQUENT PAYMENTS If Fidelity National Financial, Inc. does not make a payment by its due date, Fidelity National Financial, Inc. agrees to pay Micro General Corp, on demand, an additional 2% per month late charge or the maximum allowed by law, whichever is less. The late charge will accrue on a cumulative basis until the outstanding payments and late charges are paid. PART 3 - GENERAL 3.1 EVENTS OF DEFAULT Fidelity National Financial, Inc. will be in default if: 1. Fidelity National Financial, Inc. does not pay any amount within seven days after its due date; 2. Fidelity National Financial, Inc. makes an assignment for the benefit of creditors, or Fidelity National Financial, Inc. consents to the appointment of a trustee or receiver, or either is appointed for Fidelity National Financial, Inc. or for a substantial part of Fidelity National Financial, Inc.'s property without Fidelity National Financial, Inc.'s consent; 3. Any petition or proceeding is filed by or against Fidelity National Financial, Inc. under any bankruptcy, insolvency, or similar law; 4. Fidelity National Financial, Inc. breaches any other provision of this Agreement and that breach continues for fifteen days after Fidelity National Financial, Inc. receives written notice from Micro General Corp; or 5. Fidelity National Financial, Inc. makes a bulk transfer subject to the provisions of the Uniform Commercial Code or otherwise dispose of substantial assets without receiving equivalent value. Software Services Agreement 3.2 REMEDIES If Fidelity National Financial, Inc. is in default, We may do one or more of the following: 1. declare the Transaction and all associated Transactions to be in default; 2. recover from Fidelity National Financial, Inc. all amounts that are or will be due; 3. recover from Fidelity National Financial, Inc. reasonable attorney's fees and legal expenses incurred in exercising any of Micro General Corp's rights under this Agreement. We may pursue any other remedy available at law or in equity. 3.3 ASSIGNMENT 1. Fidelity National Financial, Inc. may not assign this Agreement or Fidelity National Financial, Inc.'s rights under it, or delegate Fidelity National Financial, Inc.'s obligations. Any attempt to do so is void; 2. Micro General Corp shall sell and assign all of Micro General Corp's interests or grant a security interest in all of Micro General Corps right, title and interest under this Agreement to IBM Credit to secure Micro General Corp's obligations to IBM Credit. 3. Fidelity National Financial, Inc. and Micro General Corp agree that neither of us may do any of the following without the prior written consent of IBM Credit, and that any attempt to do so shall be void and of no force or affect against IBM Credit: (a) make, or accept, any payment or pre-payment of the Payments other than as specified in this Agreement; (b) amend, supplement or otherwise modify the terms of this Agreement or grant or accept any waiver of compliance with, or release of any of, Fidelity National Financial, Inc.'s obligations under this Agreement; 4. Fidelity National Financial, Inc. agrees that upon notice from IBM Credit that Micro General Corp is in default of it's obligations to IBM Credit, Fidelity National Financial, Inc. shall make all Payments hereunder directly to IBM Credit as specified by IBM Credit in such notice. 3.4 GENERAL If any provision of this Agreement becomes invalid or unenforceable, all other provisions remain in effect. Micro General Corps failure to require full performance or Micro General Corp's waiver of any provision in this Agreement does not prevent Micro General Corp from requiring full performance of all provisions in the future. 3.5 NOTICES All notices under this Agreement will be delivered in person or mailed, to Fidelity National Financial, Inc. at Fidelity National Financial, Inc.'s address or to Micro General Corp at Micro General Corp's address or to such other address as Micro General Corp, or Micro General Corp's assignee may specify to Fidelity National Financial, Inc. GOVERNING LAW The laws of the State of California govern this Agreement. EX-10.25 16 a79556ex10-25.txt EXHIBIT 10.25 EXHIBIT 10.25 Software Services Agreement This Software Services Agreement (the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corporation certain monthly payments in consideration for Micro General Corporation's agreement to provide Fidelity National Financial, Inc. certain services and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount ( the "Payment") and the period over which the Payments are to be made (the "Transaction") are specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below.
TERM MONTHLY PAYMENT AMOUNT PAYMENT COMMENCEMENT DATE - ---- ---------------------- ------------------------- ~~24 Months $77,500 10/30/00~~
This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. Agreed to: Agreed to: FIDELITY NATIONAL FINANCIAL, INC. MICRO GENERAL CORPORATION By: /s/ PATRICK F. STONE By: /s/ DALE CHRISTENSON -------------------------------- --------------------------------- Authorized signature Authorized signature Name: Patrick F. Stone Name: Dale Christenson -------------------------------- --------------------------------- (type or print) (type or print) Date: 11-1-00 Date: October 31, 2000 -------------------------------- --------------------------------- Page l of 3 Software Services Agreement PART 1- DEFINITIONS 1.0 DEFINITIONS Term is 24 months and it is the number of payment periods of the Transaction. The Term of the Transaction begins on the date of this Agreement. It ends on the last day of the last payment period. PART 2 - PAYMENT 2.1 FIDELITY NATIONAL FINANCIAL, INC.'S OBLIGATION TO PAY Payments specified in the table set forth above shall be made monthly on the 30th calendar day of each month. Fidelity National Financial, Inc. acknowledges and understands that the terms and conditions of this Agreement enables Micro General Corp to sell and assign it's interest in, or grant a security interest in, this Agreement and the Payments payable hereunder, in whole or in part, to IBM Credit Corporation ("IBM Credit") to secure Micro General Corp's obligations to IBM Credit and that IBM Credit has extended certain financing to Micro General Corp in reliance on Fidelity National Financial, Inc.'s unconditional obligation to make the Payments and Micro General Corp's assignment of Micro General Corp's interest in such Payments to IBM Credit. Fidelity National Financial, Inc.'s obligation to make the Payments shall be absolute and unconditional and shall not be affected by any right of set-off, defense or counterclaim of any kind whatsoever against Micro General Corp or IBM Credit or by the termination of any service, or any dispute Fidelity National Financial, Inc. may have with respect to any service, Micro General Corp may provide to Fidelity National Financial, Inc. 2.2 PAYMENT COMMENCEMENT Payment starts on the Payment Commencement Date specified above. 2.3 DELINQUENT PAYMENTS If Fidelity National Financial, Inc. does not make a payment by its due date, Fidelity National Financial, Inc. agrees to pay Micro General Corp, on demand, an additional 2% per month late charge or the maximum allowed by law, whichever is less. The late charge will accrue on a cumulative basis until the outstanding payments and late charges are paid. PART 3 - GENERAL 3.1 EVENTS OF DEFAULT Fidelity National Financial, Inc. will be in default if. 1. Fidelity National Financial, Inc. does not pay any amount within seven days after its due date; 2. Fidelity National Financial, Inc. makes an assignment for the benefit of creditors, or Fidelity National Financial, Inc. consents to the appointment of a trustee or receiver, or either is appointed for Fidelity National Financial, Inc. or for a substantial part of Fidelity National Financial, Inc.'s property without Fidelity National Financial, Inc.'s consent; 3. any petition or proceeding is filed by or against Fidelity National Financial, Inc. under any bankruptcy, insolvency, or similar law; 4. Fidelity National Financial, Inc. breaches any other provision of this Agreement and that breach continues for fifteen days after Fidelity National Financial, Inc. receives written notice from Micro General Corp; or 5. Fidelity National Financial, Inc. makes a bulk transfer subject to the provisions of the Uniform Commercial Code or otherwise disposes of substantial assets without receiving equivalent value. Page 2 of 3 Software Services Agreement 3.2 REMEDIES If Fidelity National Financial, Inc. is in default, We may do one or more of the following: 1. declare the Transaction and all associated Transactions to be in default; 2. recover from Fidelity National Financial, Inc. all amounts that are or will be due; 3. recover from Fidelity National Financial, Inc. reasonable attorney's fees and legal expenses incurred in exercising any of Micro General Corp's rights under this Agreement. We may pursue any other remedy available at law or in equity. 3.3 ASSIGNMENT 1. Fidelity National Financial, Inc. may not assign this Agreement or Fidelity National Financial, Inc.'s rights under it, or delegate Fidelity National Financial, Inc.'s obligations. Any attempt to do so is void; 2. Micro General Corp shall sell and assign all of Micro General Corp's interests or grant a security interest in all of Micro General Corp's right, title and interest under this Agreement to IBM Credit to secure Micro General Corp's obligations to IBM Credit. 3. Fidelity National Financial, Inc. and Micro General Corp agree that neither of us may do any of the following without the prior written consent of IBM Credit, and that any attempt to do so shall be void and of no force or affect against IBM Credit: (a) make, or accept, any payment or pre-payment of the Payments other than as specified in this Agreement; (b) amend, supplement or otherwise modify the terms of this Agreement or grant or accept any waiver of compliance with, or release of any of, Fidelity National Financial, Inc.'s obligations under this Agreement; 4. Fidelity National Financial, Inc. agrees that upon notice from IBM Credit that Micro General Corp is in default of it's obligations to IBM Credit, Fidelity National Financial, Inc. shall make all Payments hereunder directly to IBM Credit as specified by IBM Credit in such notice. 3.4 GENERAL If any provision of this Agreement becomes invalid or unenforceable, all other provisions remain in effect. Micro General Corp's failure to require full performance or Micro General Corp's waiver of any provision in this Agreement does not prevent Micro General Corp from requiring full performance of all provisions in the future. 3.5 NOTICES All notices under this Agreement will be delivered in person or mailed, to Fidelity National Financial, Inc. at Fidelity National Financial, Inc.'s address or to Micro General Corp at Micro General Corp's address or to such other address as Micro General Corp, or Micro General Corp's assignee may specify to Fidelity National Financial, Inc. GOVERNING LAW The laws of the State of California govern this Agreement. Page 3 of 3 EX-10.26 17 a79556ex10-26.txt EXHIBIT 10.26 EXHIBIT 10.26 Software Services Agreement This Software Services Agreement (the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corporation certain monthly payments in consideration for Micro General Corporation's agreement to provide Fidelity National Financial, Inc. certain services and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount (the "Payment") and the period over which the Payments are to be made (the "Transaction") are specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below. Term Monthly Payment Amount Payment Commencement Date 24 Months $54,096.80 2/28/01 This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. Agreed to: Agreed to: FIDELITY NATIONAL FINANCIAL, INC. MICRO GENERAL CORP By: By: ---------------------------- ---------------------------- Authorized signature Authorized signature Name: Name: ---------------------------- ---------------------------- (type or print) (type or print) Date: Date: ---------------------------- -------------------------- Agreement: SSA106 Page 1 of 3 Software Services Agreement PART 1 -- DEFINITIONS 1.0 DEFINITIONS Term is 36 months and it is the number of payment periods of the Transaction. The Term of the Transaction begins on the date of this Agreement. It ends on the last day of the last payment period. PART 2 - PAYMENT 2.1 FIDELITY NATIONAL FINANCIAL, INC.'S OBLIGATION TO PAY Payments specified in the table set forth above shall be made monthly on the 30th calendar day of each month. Fidelity National Financial, Inc. acknowledges and understands that the terms and conditions of this Agreement enables Micro General Corp to sell and assign it's interest in, or grant a security interest in, this Agreement and the Payments payable hereunder, in whole or in part, to IBM Credit Corporation ("IBM Credit") to secure Micro General Corp's obligations to IBM Credit and that IBM Credit has extended certain financing to Micro General Corp in reliance on Fidelity National Financial, Inc.'s unconditional obligation to make the Payments and Micro General Corp's assignment of Micro General Corp's interest in such Payments to IBM Credit. Fidelity National Financial, Inc.'s obligation to make the Payments shall be absolute and unconditional and shall not be affected by any right of set-off, defense or counterclaim of any kind whatsoever against Micro General Corp or IBM Credit or by the termination of any service, or any dispute Fidelity National Financial, Inc. may have with respect to any service, Micro General Corp may provide to Fidelity National Financial, Inc. 2.2 PAYMENT COMMENCEMENT Payment starts on the Payment Commencement Date specified above. 2.3 DELINQUENT PAYMENTS If Fidelity National Financial, Inc. does not make a payment by its due date, Fidelity National Financial, Inc. agrees to pay Micro General Corp, on demand, an additional 2% per month late charge or the maximum allowed by law, whichever is less. The late charge will accrue on a cumulative basis until the outstanding payments and late charges are paid. PART 3 - GENERAL 3.1 EVENTS OF DEFAULT Fidelity National Financial, Inc. will be in default if: 1. Fidelity National Financial, Inc. does not pay any amount within seven days after its due date; 2. Fidelity National Financial, Inc. makes an assignment for the benefit of creditors, or Fidelity National Financial, Inc. consents to the appointment of a trustee or receiver, or either is appointed for Fidelity National Financial, Inc. or for a substantial part of Fidelity National Financial, Inc.'s property without Fidelity National Financial, Inc.'s consent; 3. any petition or proceeding is filed by or against Fidelity National Financial, Inc. under any bankruptcy, insolvency, or similar law; 4. Fidelity National Financial, Inc. breaches any other provision of this Agreement and that breach continues for fifteen days after Fidelity National Financial, Inc. receives written notice from Micro General Corp; or 5. Fidelity National Financial, Inc. makes a bulk transfer subject to the provisions of the Uniform Commercial Code or otherwise disposes of substantial assets without receiving equivalent value. Page 2 of 3 Software Services Agreement 3.2 REMEDIES If Fidelity National Financial, Inc. is in default, We may do one or more of the following: 1. declare the Transaction and all associated Transactions to be in default; 2. recover from Fidelity National Financial, Inc. all amounts that are or will be due; 3. recover from Fidelity National Financial, Inc. reasonable attorney's fees and legal expenses incurred in exercising any of Micro General Corp's rights under this Agreement. We may pursue any other remedy available at law or in equity. 3.3 ASSIGNMENT 1. Fidelity National Financial, Inc. may not assign this Agreement or Fidelity National Financial, Inc.'s rights under it, or delegate Fidelity National Financial, Inc.'s obligations. Any attempt to do so is void; 2. Micro General Corp shall sell and assign all of Micro General Corp's interests or grant a security interest in all of Micro General Corp's right, title and interest under this Agreement to IBM Credit to secure Micro General Corp's obligations to IBM Credit. 3. Fidelity National Financial, Inc. and Micro General Corp agree that neither of us may do any of the following without the prior written consent of IBM Credit, and that any attempt to do so shall be void and of no force or affect against IBM Credit: (a) make, or accept, any payment or pre-payment of the Payments other than as specified in this Agreement; (b) amend, supplement or otherwise modify the terms of this Agreement or grant or accept any waiver of compliance with, or release of any of, Fidelity National Financial, Inc.'s obligations under this Agreement; 4. Fidelity National Financial, Inc. agrees that upon notice from IBM Credit that Micro General Corp is in default of it's obligations to IBM Credit, Fidelity National Financial, Inc. shall make all Payments hereunder directly to IBM Credit as specified by IBM Credit in such notice. 3.4 GENERAL If any provision of this Agreement becomes invalid or unenforceable, all other provisions remain in effect. Micro General Corp's failure to require full performance or Micro General Corp's waiver of any provision in this Agreement does not prevent Micro General Corp from requiring full performance of all provisions in the future. 3.5 NOTICES All notices under this Agreement will be delivered in person or mailed, to Fidelity National Financial, Inc. at Fidelity National Financial, Inc.'s address or to Micro General Corp at Micro General Corp's address or to such other address as Micro General Corp, or Micro General Corp's assignee may specify to Fidelity National Financial, Inc. GOVERNING LAW The laws of the State of California govern this Agreement. Page 3 of 3 EX-10.27 18 a79556ex10-27.txt EXHIBIT 10.27 EXHIBIT 10.27 Software Services Agreement This Software Services Agreement (the "Agreement") covers the terms and conditions under which Fidelity National Financial, Inc. will pay Micro General Corporation certain monthly payments in consideration for Micro General Corporation's agreement to provide Fidelity National Financial, Inc. certain services and for other good and valuable consideration, the receipt and sufficiency of which Fidelity National Financial, Inc. hereby acknowledges. The specific monthly payment amount (the "Payment") and the period over which the Payments are to be made (the "Transaction") are specified in the table below. Fidelity National Financial, Inc. agrees to the terms of this Agreement by signing below. Term Monthly Payment Amount Payment Commencement Date 36 Months $17,977.51 2/28/01 This Agreement is the complete agreement regarding the Transaction and replaces any prior oral or written communications between both parties. By signing below, both parties agree to the terms of this Agreement. There shall be only one original of this Agreement. Agreed to: Agreed to: FIDELITY NATIONAL FINANCIAL, INC. MICRO GENERAL CORP By: By: ----------------------------- ----------------------------- Authorized signature Authorized signature Name: Name: ----------------------------- --------------------------- (type or print) (type or print) Date: Date: ----------------------------- --------------------------- Agreement: SSA106 Page 1 of 3 Software Services Agreement PART 1 -- DEFINITIONS 1.0 DEFINITIONS Term is 36 months and it is the number of payment periods of the Transaction. The Term of the Transaction begins on the date of this Agreement. It ends on the last day of the last payment period. PART 2 - PAYMENT 2.1 FIDELITY NATIONAL FINANCIAL, INC.'S OBLIGATION TO PAY Payments specified in the table set forth above shall be made monthly on the 30th calendar day of each month. Fidelity National Financial, Inc. acknowledges and understands that the terms and conditions of this Agreement enables Micro General Corp to sell and assign it's interest in, or grant a security interest in, this Agreement and the Payments payable hereunder, in whole or in part, to IBM Credit Corporation ("IBM Credit") to secure Micro General Corp's obligations to IBM Credit and that IBM Credit has extended certain financing to Micro General Corp in reliance on Fidelity National Financial, Inc.'s unconditional obligation to make the Payments and Micro General Corp's assignment of Micro General Corp's interest in such Payments to IBM Credit. Fidelity National Financial, Inc.'s obligation to make the Payments shall be absolute and unconditional and shall not be affected by any right of set-off, defense or counterclaim of any kind whatsoever against Micro General Corp or IBM Credit or by the termination of any service, or any dispute Fidelity National Financial, Inc. may have with respect to any service, Micro General Corp may provide to Fidelity National Financial, Inc. 2.2 PAYMENT COMMENCEMENT Payment starts on the Payment Commencement Date specified above. 2.3 DELINQUENT PAYMENTS If Fidelity National Financial, Inc. does not make a payment by its due date, Fidelity National Financial, Inc. agrees to pay Micro General Corp, on demand, an additional 2% per month late charge or the maximum allowed by law, whichever is less. The late charge will accrue on a cumulative basis until the outstanding payments and late charges are paid. PART 3 - GENERAL 3.1 EVENTS OF DEFAULT Fidelity National Financial, Inc. will be in default if: 1. Fidelity National Financial, Inc. does not pay any amount within seven days after its due date; 2. Fidelity National Financial, Inc. makes an assignment for the benefit of creditors, or Fidelity National Financial, Inc. consents to the appointment of a trustee or receiver, or either is appointed for Fidelity National Financial, Inc. or for a substantial part of Fidelity National Financial, Inc.'s property without Fidelity National Financial, Inc.'s consent; 3. any petition or proceeding is filed by or against Fidelity National Financial, Inc. under any bankruptcy, insolvency, or similar law; 4. Fidelity National Financial, Inc. breaches any other provision of this Agreement and that breach continues for fifteen days after Fidelity National Financial, Inc. receives written notice from Micro General Corp; or 5. Fidelity National Financial, Inc. makes a bulk transfer subject to the provisions of the Uniform Commercial Code or otherwise disposes of substantial assets without receiving equivalent value. Page 2 of 3 Software Services Agreement 3.2 REMEDIES If Fidelity National Financial, Inc. is in default, We may do one or more of the following: 1. declare the Transaction and all associated Transactions to be in default; 2. recover from Fidelity National Financial, Inc. all amounts that are or will be due; 3. recover from Fidelity National Financial, Inc. reasonable attorney's fees and legal expenses incurred in exercising any of Micro General Corp's rights under this Agreement. We may pursue any other remedy available at law or in equity. 3.3 ASSIGNMENT 1. Fidelity National Financial, Inc. may not assign this Agreement or Fidelity National Financial, Inc.'s rights under it, or delegate Fidelity National Financial, Inc.'s obligations. Any attempt to do so is void; 2. Micro General Corp shall sell and assign all of Micro General Corp's interests or grant a security interest in all of Micro General Corp's right, title and interest under this Agreement to IBM Credit to secure Micro General Corp's obligations to IBM Credit. 3. Fidelity National Financial, Inc. and Micro General Corp agree that neither of us may do any of the following without the prior written consent of IBM Credit, and that any attempt to do so shall be void and of no force or affect against IBM Credit: (a) make, or accept, any payment or pre-payment of the Payments other than as specified in this Agreement; (b) amend, supplement or otherwise modify the terms of this Agreement or grant or accept any waiver of compliance with, or release of any of, Fidelity National Financial, Inc.'s obligations under this Agreement; 4. Fidelity National Financial, Inc. agrees that upon notice from IBM Credit that Micro General Corp is in default of it's obligations to IBM Credit, Fidelity National Financial, Inc. shall make all Payments hereunder directly to IBM Credit as specified by IBM Credit in such notice. 3.4 GENERAL If any provision of this Agreement becomes invalid or unenforceable, all other provisions remain in effect. Micro General Corp's failure to require full performance or Micro General Corp's waiver of any provision in this Agreement does not prevent Micro General Corp from requiring full performance of all provisions in the future. 3.5 NOTICES All notices under this Agreement will be delivered in person or mailed, to Fidelity National Financial, Inc. at Fidelity National Financial, Inc.'s address or to Micro General Corp at Micro General Corp's address or to such other address as Micro General Corp, or Micro General Corp's assignee may specify to Fidelity National Financial, Inc. GOVERNING LAW The laws of the State of California govern this Agreement. Page 3 of 3 EX-10.28 19 a79556ex10-28.txt EXHIBIT 10.28 EXHIBIT 10.28 MASTER SECURITY AGREEMENT (dated as of March 21, 2001 ("Agreement") THIS AGREEMENT is between GENERAL ELECTRIC CAPITAL CORPORATION (together with its successors and assigns, if any, "SECURED PARTY") and MICRO GENERAL CORPORATION ("DEBTOR"). Secured Party has an office at Katella Avenue, Suite 800, Anaheim, CA 92806. Debtor is a trust organized and existing under the laws of the state of Delaware. Debtor's mailing address and chief place of business is 2510 N. Redhill Avenue., Suite 230, Santa Ana, CA 92705. 1. CREATION OF SECURITY INTEREST. Debtor grants to Secured Party, its successors and assigns, a security interest in and against all property listed on any collateral schedule now or in the future annexed to or made a part of this Agreement ("COLLATERAL SCHEDULE"), and in and against all additions, attachments, accessories to such property, all substitutions, replacements or exchanges, therefore,, and all insurance and or other proceeds thereof (all such property is individually and collectively called the "COLLATERAL"). This security interest is given to secure the payment and performance of all debts, obligations and liabilities of any kind whatsoever of Debtor to Secured Party, now existing or arising in the future, including but not limited to the payment and performance of certain Promissory Notes from time to time identified on any Collateral Schedule (collectively "NOTES" and each a "NOTE"), and any renewals, extensions and modifications of such debts, obligations and liabilities (such Notes, debts, obligations and liabilities are called the "INDEBTEDNESS"). Notwithstanding anything to the contrary contained in this Agreement, to the extent that Secured Party asserts a purchase money security interest in any items of Collateral ("PMSI COLLATERAL"): (i) the PMSI Collateral shall secure only that portion of the Indebtedness which has been advanced by Secured Party to enable Debtor to purchase, or acquire rights in or the use of such PMSI Collateral (the "PMSI INDEBTEDNESS"), and (ii) no other Collateral shall secure the PMSI Indebtedness. 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OR DEBTOR. Debtor represents, warrants, and covenants as of this date of this Agreement and as of the date of each Collateral Schedule that: (a) Debtor is, and will remain, duly organized and in good standing under the laws of the State set forth in the preamble of this Agreement, has its chief executive offices at the location specified in the preamble, and is, and will remain, duly qualified and licensed in every jurisdiction wherever necessary to carry on its business operations, (b) Debtor has adequate power and capacity to enter into, and to perform its obligations under this Agreement, each Note and any other documents evidencing, or given in connection with, any of the Indebtedness (all of the foregoing are called the "DEBT DOCUMENTS"); (c) This Agreement and the other Debt Documents have been duly authorized, executed and delivered by Debtor and constitute legal, valid and binding agreements enforceable in accordance with their terms, except to the extent that the enforcement of remedies may be limited under applicable bankruptcy and insolvency laws; (d) No approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into, or performance by Debtor of any of the Debt Documents, except any already obtained. (e) The entry into, and performance by, Debtor of the Debt Document will not (i) violate any of the organizational documents of Debtor or any judgement, order, law or regulation, applicable to Debtor, or (ii) result in any breach of or constitute a default under any contract to which Debtor is a party, or result in the creation of any lien, claim or encumbrance on any of Debtor's property (except for liens in favor of Secured Party) pursuant to any indenture, mortgage, deed of trust, bank loan, credit agreement or other agreement or instrument to which Debtor is a party; (f) There are no suits or proceedings pending in court or before any commission, board or other administrative agency against or affecting Debtor which could, in the aggregate, have a material adverse effect on Debtor,its business or operations, or its ability to perform its obligations under the Debt Documents, nor does Debtor have reason to believe that any suits or proceedings are threatened; (g) All financial statements delivered to Secured Party in connection with the Indebtedness have been prepared in accordance with generally accepted accounting principles, and since the date of the most recent financial statement, there has been no material adverse change in Debtors financial condition; (h) The Collateral is not, and will not be, used By Debtor for personal, family or household purposes; (i) The Collateral is, and will remain, in good condition and repair and Debtor will not be negligent in its care and use; (j) Debtor is, and will remain, the sole and lawful owner, and in possession of, the Collateral, and has the sole right and lawful authority to grant the security interest described in this Agreement; and (k) The Collateral is, and will remain, free and clear of all liens, claims and encumbrances of any kind whatsoever, except for (i) liens in favor of Secured Party, (ii) liens for taxes not yet due or for taxes being contested in good faith and which do not involve, in the judgement of Secured Party, any risk of the sale, forfeiture or loss of any of the Collateral, and (iii) inchoate, materialmen's, mechanic's, repairmen's and similar liens arising by operation of law in the normal course of business for amounts which are not delinquent (all of such liens are called "PERMITTED LIENS"). 3. COLLATERAL. (a) Until the declaration of any default, Debtor shall remain in possession of the Collateral; except that Secured Party shall have the right to possess (1) any chattel paper or instrument that constitutes a part of the Collateral, and (ii) any other Collateral in which Secured Party's security interest may be perfected only by possession. Secured Party may inspect any of the Collateral during normal business hours after giving Debtor reasonable prior notice. If Secured Party asks, Debtor will promptly notify Secured Party in writing of the location of any Collateral. (b) Debtor shall (i) use the Collateral only in its trade or business, (ii) maintain all of the Collateral in good operating order and repair, normal wear and tear excepted, (iii) use and maintain the Collateral only in compliance with manufacturers recommendations and all applicable laws, and (iv) keep all of the Collateral free and clear of all liens, claims and encumbrances (except for Permitted Liens). (c) Debtor shall not, without the prior written consent of Secured Party, (i) part with possession of any of the Collateral (except to Secured Party or for maintenance and repair), (ii) remove any of the Collateral from the continental United States, or (iii) sell, rent, lease, mortgage, grant a security interest in or otherwise transfer or encumber (except for Permitted Liens) any of the Collateral. (d) Debtor shall pay promptly when due all taxes, license fees, assessments and public and private charges levied or assessed on any of the Collateral, on its use, or on this Agreement or any of the other Debt Documents. At its option, Secured Party may discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral and may pay for the maintenance, insurance and preservation of the Collateral and effect compliance with the terms of this Agreement or any of the other Debt Documents. Debtor agrees to reimburse Secured Party, on demand, all costs and expenses incurred by Secured Party in connection with such payment or performance and agrees that such reimbursement obligation shall constitute indebtedness. (e) Debtor shall, at all times, keep accurate and complete records of the Collateral, and Secured Party shall have the right to inspect and make copies of all of Debtor's books and records relating to the Collateral during normal business hours, after giving Debtor reasonable prior notice. (f) Debtor agrees and acknowledges that any third person who may at any time possess all or any portion of the Collateral shall be deemed to hold, and shall hold, the Collateral as the agent of, and as pledge holder for, Secured Party. Secured Party may at any time give notice to any third person described in the preceding sentence that such third person is holding the Collateral as the agent of, and as pledge holder for, the Secured Party. 4. INSURANCE. (a) Debtor shall at all times bear the entire risk of any loss, theft, damage to, or destruction of, any of the Collateral from any cause whatsoever. (b) Debtor agrees to keep the Collateral insured against loss or damage by fire and extended coverage perils, theft, burglary, and for any or all Collateral which are vehicles, for risk of loss by collision, and if requested by Secured Party, against such other risks as Secured Party may reasonably require. The insurance coverage shall be in an amount no less than the full replacement value of the Collateral, and deductible amounts, insurers and policies shall be acceptable to Secured Party. Debtor shall deliver to Secured Party policies or certificates of insurance evidencing such coverage. Each policy shall name Secured Party as a loss payee, shall provide for coverage to Secured Party regardless of the breach by Debtor of any warranty or representation made therein, shall not be subject to co-insurance, and shall provide that coverage may not be canceled or altered by the insurer except upon thirty (30) days prior written notice to Secured Party. Debtor appoints Secured Party as its attorney-in-fact to make proof of loss, claim for insurance and adjustments with insurers, and to receive payment of and execute or endorse all documents, checks or drafts in connection with insurance payments. Secured Party shall not act as Debtors attorney-in-fact unless Debtor is in default. Proceeds of insurance shall be applied, at the option of Secured Party, to repair or replace the Collateral or to reduce any of the indebtedness. 5. REPORTS. (a) Debtor shall promptly notify Secured Party of (i) any change in the name of Debtor, (ii) any relocation of its chief executive offices, (iii) any relocation of any of the Collateral, (iv) any of the Collateral being lost, stolen, missing, destroyed, materially damaged or worn out, or (v) any lien, claim or encumbrance other than Permitted Liens attaching to or being made against any of the Collateral. (b) Debtor will deliver to Secured party Debtors complete financial statements, certified by a recognized firm of certified public accountants, within ninety (90) days of the close of each fiscal year of Debtor. If Secured Party requests, Debtor will deliver to Secured Party copies of Debtors quarterly financial reports certified by Debtors chief financial officer, within ninety (90) days after the close of each of Debtors fiscal quarter. Debtor will deliver to Secured Party copies of all Forms 10-K and 10-Q, if any, within 30 days after the dates on which they are filed with the Securities and Exchange Commission. 6. FURTHER ASSURANCES. (a) Debtor shall, upon request of Secured Party, furnish to Secured Party such further information, execute and deliver to Secured Party such documents and instruments (including, without limitation, Uniform Commercial Code financing statements) and shall do such other acts and things as Secured Party may at any time reasonably request relating to the perfection or protection of the security interest created by this Agreement or for the purpose of carrying out the intent of this Agreement. Without limiting the foregoing, Debtor shall cooperate and do all acts deemed necessary or advisable by Secured Party to continue in Secured Party a perfected first security interest in the Collateral, and shall obtain and furnish to Secured Party any subordinations, releases, landlord, lessor, or mortgagee waivers, and similar documents as may be from time to time requested by, and in form and substance satisfactory to, Secured Party. (b) Debtor irrevocably grants to Secured Party the power to sign Debtor's name and generally to act on behalf of Debtor to execute and file applications for title, transfers of title, financing statements, notices of lien and other documents pertaining to any or all of the Collateral; this power is coupled with Secured Party's interest in the Collateral. Debtor shall, if any certificate of title be requested or permitted by law for any of the Collateral, obtain and promptly deliver to Secured Party such certificate showing the lien of this Agreement with respect to the Collateral. (c) Debtor shall indemnify and defend the Secured Party, its successors and assigns, and their respective directors, officers and employees, from and against all claims, actions and suits (including, without limitation, related attorneys' fees) of any kind whatsoever arising, directly or indirectly, in connection with any of the Collateral. 7. DEFAULT AND REMEDIES. (a) Debtor shall be in default under this Agreement and each of the other Deb Documents if: (i) Debtor breaches its obligation to pay when due any installment or other amount due or coming due under any of the Debt Documents; (ii) Debtor, without the prior written consent of Secured Party, attempts to or does sell, rent, lease, mortgage, grant a security interest in, or otherwise transfer or encumber (except for Permitted Liens) any of the Collateral; (iii) Debtor breaches any of its insurance obligations under Section 4; (iv) Debtor breaches any of its other obligations under any of the Debt Documents and fails to cure that breach within thirty (30) days after written notice from Secured Party; (v) Any warranty, representation or statement made by Debtor in any of the Debt Documents or otherwise in connection with any of the Indebtedness shall be false or misleading in any material respect; (vi) Any of the Collateral is subjected to attachment, execution, levy, seizure or confiscation in any legal proceeding or otherwise, or if any legal or administrative proceeding is commenced against Debtor or any of the Collateral, which in the good faith judgment of Secured Party subjects any of the Collateral to a material risk of attachment, execution, levy, seizure or confiscation and no bond is posted or protective order obtained to negate such risk; (vii) Debtor breaches or is in default under any other agreement between Debtor and Secured Party; (viii) Debtor or any guarantor or other obligor for any of the Indebtedness (collectively "GUARANTOR") dissolves, terminates its existence, becomes insolvent or ceases to do business as a going concern; (ix) If Debtor or any Guarantor is a natural person, Debtor or any such Guarantor dies or becomes incompetent; (x) A receiver is appointed for all or of any part of the property of Debtor or any Guarantor, or Debtor or any Guarantor makes any assignment for the benefit of creditors; (xi) Debtor or any Guarantor files a petition under any bankruptcy, insolvency or similar law, or any such petition is filed against Debtor or any Guarantor and is not dismissed within forty-five (45) days; or (xii) At any time during the term of this Agreement the ownership of Debtor changes such that Fidelity National Financial, Inc. does not own more than 50% of the outstanding shares or other ownership interest of Debtor or Guarantor, as the case may be, without the prior written consent of Secured Party. (b) If Debtor is in default, the Secured Party, at its option, may declare any or all of the Indebtedness to be immediately due and payable, without demand or notice to Debtor or any Guarantor. The accelerated obligations and liabilities shall bear interest (both before and after any judgment) until paid in full at the lower of eighteen percent (18%) per annum or the maximum rate not prohibited by applicable law. (c) After default, Secured Party shall have all of the rights and remedies of a Secured Party under the Uniform Commercial Code, and under any other applicable law. Without limiting the foregoing, Secured Party shall have the right to (i) notify any account debtor of Debtor or any obligor on any instrument which constitutes part of the Collateral to make payment to the Secured Party, (ii) with or without legal process, enter any premises where the Collateral may be and take possession of and remove the Collateral from the premises or store it on the premises, (iii) sell the Collateral at public or private sale, in whole or in part, and have the right to bid and purchase at said sale, or (iv) lease or otherwise dispose of all or part of the Collateral, applying proceeds from such disposition to the obligations then in default. If requested by Secured Party, Debtor shall promptly assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Secured Party may also render any or all of the Collateral unusable at the Debtor's premises and may dispose of such Collateral on such premises without liability for rent or costs. Any notice that Secured Party is required to give to Debtor under the Uniform Commercial Code of the time and place of any public sale or the time after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to constitute reasonable notice if such notice is given to the last known address of Debtor at least five (5) days prior to such action. (d) Proceeds from any sale or lease or other disposition shall be applied: first, to all costs of repossession, storage, and disposition including without limitation attorneys', appraisers', and auctioneers' fees; second, to discharge the obligations then in default; third, to discharge any other Indebtedness of Debtor to Secured Party, whether as obligor, endorser, guarantor, surety or indemnitor; fourth, to expenses incurred in paying or settling liens and claims against the Collateral; and lastly, to Debtor, if there exists any surplus. Debtor shall remain fully liable for any deficiency. (e) Debtor agrees to pay all reasonable attorneys' fees and other costs incurred by Secured Party in connection with the enforcement, assertion, defense or preservation of Secured Party's rights and remedies under this Agreement, or if prohibited by law, such lesser sum as may be permitted. Debtor further agrees that such fees and costs shall constitute Indebtedness. (f) Secured Party's rights and remedies under this Agreement or otherwise arising are cumulative and may be exercised singularly or concurrently. Neither the failure nor any delay on the part of the Secured Party to exercise any right, power or privilege under this Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise of that or any other right, power or privilege. SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT, INSTRUMENT OR PAPER SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING AND SIGNED BY SECURED PARTY. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. (g) DEBTOR AND SECURED PARTY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THE WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 8. MISCELLANEOUS. (a) This Agreement, any Note and/or any of the other Debt Documents may be assigned, in whole or in part, by Secured Party without notice to Debtor, and Debtor agrees not to assert against any such assignee, or assignees, any defense, set-off, recoupment claim or counterclaim which Debtor has or may at any time have against Secured Party for any reason whatsoever. Debtor agrees that if Debtor receives written notice of an assignment from Secured Party, Debtor will pay all amounts payable under any assigned Debt Documents to such assignee or as instructed by Secured Party. Debtor also agrees to confirm in writing receipt of the notice of assignment as may be reasonably requested by assignee. (b) All notices to be given in connection with this Agreement shall be in writing, shall be addressed to the parties at their respective addresses set forth in this Agreement (unless and until a different address may be specified in a written notice to the other party), and shall be deemed given (i) on the date of receipt if delivered in hand or by facsimile transmission, (ii) on the next business day after being sent by express mail, and (iii) on the fourth business day after being sent by regular, registered or certified mail. As used herein, the term "business day" shall mean and include any day other than Saturdays, Sundays, or other days on which commercial banks in New York, New York are required or authorized to be closed. INITIALS_____ (c) Secured Party may correct patent errors and fill in the blanks in this Agreement or in any Collateral Schedule consistent with the agreement of the parties. (d) Time is of the essence of this Agreement. This agreement shall be binding, jointly and severally, upon all parties described as the "Debtor" and their respective heirs, executors, representatives, successors and assigns, and shall inure to the benefit of Secured party, its successors and assigns. (e) This Agreement and its Collateral Schedules constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior understandings (whether written, verbal or implied) with respect to such subject matter. THIS AGREEMENT AND ITS COLLATERAL SCHEDULES SHALL NOT BE CHANGED OR TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING SIGNED BY BOTH PARTIES. Section headings contained in this Agreement have been included for convenience only, and shall not affect the construction or interpretation of this Agreement. (f) This Agreement shall continue in full force and effect until all of the Indebtedness has been indefeasibly paid in full to Secured Party. the surrender, upon payment or otherwise, of any Note or any of the other documents evidencing any of the Indebtedness shall not affect the right of Secured Party to retain the Collateral for such other indebtedness as may then exist or as it may be reasonably contemplated will exist in the future. This Agreement shall automatically be reinstated if Secured Party is ever required to return or restore the payment of all or any portion of the Indebtedness (all as though such payment had never been made). (g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUCTED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE). INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT. IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally bound hereby, have duly executed this Agreement in one or more counterparts, each of which shall be deemed to be an original, as of the day and year first aforesaid. SECURED PARTY: DEBTOR: General Electric Capital Corporation Micro General Corporation /s/ LEAH A. SMITH /s/ DALE CHRISTENSEN By: -------------------------------- By:--------------------------- Leah A. Smith Dale Christensen Name:------------------------------- Name:-------------------------- Operations Manager Chief Financial Officer Title:------------------------------ Title:------------------------- ================================================================================ (2 party) MASTER SECURITY AGREEMENT - ACCOUNTS RIDER This ACCOUNTS RIDER (this "Rider") is entered into as of the 21st day of March, 2001, between General Electric Capital Corporation, a New York corporation ("SECURED PARTY") and Micro General Corp. a Delaware corporation ("DEBTOR") with its chief executive offices at 2510 N. Redhill Ave., Suite 230, Santa Ana, California 92705-5542, and is hereby made a part of and incorporated into that certain Master Security Agreement, dated March 21, 2001, (the "AGREEMENT"). Capitalized terms not otherwise defined herein shall have the meaning described to them in the Agreement. WITNESSETH: Secured Party and Debtor agree as follows: 1. SECURITY As additional security for the Indebtedness, Debtor hereby grants Secured Party a security interest in, and assigns to Secured Party all of Debtor's right, title and interest in, to and under, that certain Software Services Agreement, dated February 28, 2001 between Debtor and Fidelity National Financial, Inc. (OBLIGOR"), including all amounts payable thereunder by Obligor and all substitutions, replacements and proceeds of the foregoing and any lien or other security interest that secures or may secure any of the foregoing (collectively, the "ACCOUNT" and such Account shall constitute "COLLATERAL" as that term is defined in the Agreement). 2. COVENANTS, WARRANTIES AND REPRESENTATIONS With respect to the Account, Debtor covenants, warrants, and represents to Secured Party that: (a) such Account is genuine and in all respects what it purports to be and is enforceable against Obligor in accordance with its terms; (b) all names, addresses, amounts, signatures, dates and other facts set forth in the Software Services Agreement are true, accurate and complete; (c) pursuant to the Account, Obligor is obligated to pay to Debtor or its assigns, 24 payments, each in the amount of $59,656.11, commencing March 15, 2001 and continuing on the same day of each of the next 23 months thereafter, and the obligation of Obligor to make such payments is unconditional and not subject to any right of set-off, defense, claim or counterclaim of any kind whatsoever; (d) Debtor is not in breach of or default under any of its obligations with respect to the Account, and Debtor agrees to comply with and perform all of its obligations with respect to the Account; (e) Debtor shall not in any manner amend, modify or waive, or agree to amend, modify or waive, any term or provision (including but not limited to the payment terms) of the Account without the prior written consent of Secured Party; (f) the Account is free of all liens, claims, encumbrances or security interests (except for the security interest of Secured Party), and shall remain so as long as any indebtedness remains outstanding under the Agreement; (g) the Software Services Agreement complies with all applicable laws and evidences the entire agreement of Debtor and Obligor with respect to the subject matter thereof; (h) there is only one original of the Software Services Agreement and that original has been delivered to Secured Party; (i) no amounts payable with respect to the Account have been or will be prepaid, and Obligor is not holding any security deposits with respect to the Account. 3. COLLECTIONS Notwithstanding anything to the contrary contained herein, Debtor is authorized and permitted to collect the Account unless and until a default has occurred under the Agreement. Upon a default under the Agreement, Secured Party may enforce payment and collect, by legal proceedings or otherwise, the Account in the name of Debtor or Secured Party and take control in any manner any cash or non-cash items of payment or proceeds of the Account. Without limiting the generality of the foregoing, at any time following a default under the Agreement, Secured Party may, without notice to Debtor, notify Obligor of Debtor's default under the Agreement and instruct Obligor to make all future payments directly to Secured Party. Debtor shall, upon the signing of this Rider, deliver to GE Capital a "Notice of Assignment of Account" in the form of Exhibit A hereto, bearing Debtor's original signature, and with the date and address of the obligor left blank. Upon a default under the Agreement, Secured Party is authorized to date the Notice, insert the then current address of Obligor, and send such Notice to Obligor. Any amounts received by Debtor after a default under the Agreement shall be (i) held by Debtor in trust for Secured Party, (ii) kept separate and apart from Debtor's own funds so that they are capable of identification as the property of Secured Party, and (iii) immediately delivered to Secured Party. 4. POWER OF ATTORNEY Debtor hereby irrevocably makes and appoints Secured Party (and any person designated by it) as Debtor's true and lawful attorney with full power to (a) demand payment, enforce payment and otherwise exercise all of Debtor's rights and remedies with respect to the collection of the Account; (b) settle, adjust, compromise, extend or renew the Account; (c) settle adjust or compromise any legal proceeding brought to collect the Account; (d) sell or assign the Account upon such terms, for such amounts and at such time or times as Secured Party may deem advisable; (e) discharge and release the Account; (f) prepare, file and sign Debtor's name on any Proof of Claim in Bankruptcy or similar document against Obligor; (g) prepare and file any notice of lien, claim of lien, assignment or satisfaction of lien or similar document in connection with the Account and sign Debtor's name thereon; (h) endorse the name of Debtor upon any of the items of payment with respect to the Account and credit the same to the account of Secured Party; (i) endorse the name of Debtor upon any chattel paper, document, negotiable instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Account; and (j) sign the name of Debtor to verifications of Account and notices thereof to Obligor. The power of attorney granted by this Section is coupled with an interest and is irrevocable so long as any Indebtedness remain outstanding. NOTWITHSTANDING THE FOREGOING, UNLESS AND UNTIL A DEFAULT HAS OCCURRED UNDER THE AGREEMENT, SECURED PARTY AGREES NOT EXERCISE ANY OF ITS POWERS PURSUANT TO THE FOREGOING POWER OF ATTORNEY. 5. CONTINUING REQUIREMENTS Debtor shall, so long as any Indebtedness remains outstanding: (a) not permit or agree to any extension, compromise, waiver or settlement with respect to the Account or make any change or modification of any kind or nature with respect to the Account, including any of the terms relating thereto; (b) immediately upon Debtor's receipt or learning thereof, furnish to and inform Secured Party of all adverse information relating to the financial condition of Obligor; (c) upon a default under the Agreement and at all times thereafter, affix appropriate endorsements or assignments upon all such items of payment and proceeds so that the same may be properly deposited by Secured Party to Secured Party's account; (d) deliver a monthly report to Secured specifying whether or not payment has been made on the Account by Obligor, and the date and amount of such payment; and (e) execute and deliver to Secured Party, and perform such other acts, as Secured Party requires to protect, perfect and maintain the security interests granted herein (including but not limited to executing a UCC Financing Statement) and to enable Secured Party to collect the payments due under the Accounts following a default under the Agreement, and to carry out the terms and conditions of this Agreement. 6. RELEASE Debtor releases Secured Party from any and all claims and causes of action which Debtor may now or hereafter have for any loss or damage to it claimed to be caused by or arising out of any exercise by Secured Party of any of its rights set forth in this Rider or the Agreement. 7. BOOKS AND RECORDS Debtor represents and warrants that it keeps and maintains all books and records pertaining to the Accounts at its principal place of business specified in the Agreement and agrees to give Secured Party at least ten (10) days prior written notice before moving any thereof to any other location. Secured Party shall have the right, from time to time. to inspect the books and records of Debtor with respect to the Account, and to verify directly with Obligor the validity, amount or any other matter relating to the Account by mail, telephone or otherwise, in the name of Debtor or Secured Party. Except as otherwise expressly provided herein, all terms and conditions of the Agreement shall remain in full force and effect. GENERAL ELECTRIC CAPITAL CORPORATION MICRO GENERAL CORPORATION By: /s/ LEAH A. SMITH By: /s/ DALE CHRISTENSEN -------------------------- ---------------------------- Name: Leah A. Smith Name: Dale Christensen ------------------------ -------------------------- Title: Operations Manager Title: Chief Financial Officer ----------------------- ------------------------- EX-10.30 20 a79556ex10-30.txt EXHIBIT 10.30 EXHIBIT 10.30 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTOR SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. REALEC TECHNOLOGIES, INC. (A Delaware Corporation) Note No. 1 Santa Ana, CA Amount: $3,780,000 October 25, 2001 CONVERTIBLE PROMISSORY NOTE For value received REALEC TECHNOLOGIES, INC., a Delaware corporation ("Borrower"), promises to pay Micro General Corporation, a Delaware corporation, or its assigns ("Lender") the principal sum of $3,780,000 with simple interest on the outstanding principal amount at the rate of 7% per annum. Interest shall commence with the date hereof and shall be payable quarterly commencing December 31, 2001. The principal amount of this Note, as of the date hereof, represents a portion of the principal amount outstanding as of the date of this Note under that certain Line of Credit between the parties hereof. 1. Outstanding principal amount and unpaid accrued interest shall be due and payable on July 31, 2003 (the "Maturity Date"); provided, however, that the principal amount of this Note and accrued interest thereon may be prepaid in whole or in part at any time without penalty. Any prepayment will be applied first to the payment of the accrued and unpaid interest and second to the payment of principal. 2. Subject to the conversion provision set forth below, all payments of interest and principal shall be in lawful money of the United States of America at the principal office of the Borrower, or at such other place as the holder hereof may from time to time designate in writing to the Borrower, not later than 5:00 p.m. Pacific Time on the Maturity Date. All payments shall be applied first to accrued interest and thereafter to principal. 3. At the election of Lender, all or any portion of the then outstanding principal amount and unpaid interest under the Note may be converted into shares of Series B Preferred Stock of Borrower at any time at a price per share equal to One Dollar and Thirty and One-Half Cents ($1.305) by delivering to the Borrower written notice thereof. 4. If this Note is converted as set forth in Section 3 above, the provisions of this Note relating to the obligation of the Borrower to pay principal and interest to the Lender, set forth above, shall be null and void as to such converted portion and no payment of principal and interest as to such converted portion shall be owed or paid by Borrower as to such converted amount. 5. The Borrower and Lender intend to contract in compliance with all state and federal usury laws governing this Note. The Borrower and Lender agree that none of the terms of the this Note shall be construed as a contract for, or requirement to pay interest at a rate in excess of, the maximum interest rate allowed by any applicable state or federal usury laws. In the event that the interest rate under this Note exceeds or is deemed to exceed the maximum interest allowed by applicable law, such interest rate and this Note shall be automatically amended to provide for interest in compliance with such applicable law without requirement of any registration or permit. If the Lender receives sums which constitute interest that would otherwise increase the effective interest rate on the Note to a rate in excess of that permitted by any applicable law, then all such sums constituting interest in excess of the maximum lawful rate shall, at Lender's option, either be credited to the payment of principal or returned to the Borrower. 6. This Note shall not entitle the Lender to any voting rights or other rights as a stockholder of the Borrower. 7. This Note may be transferred only (i) in compliance with applicable federal and state securities laws, (ii) in compliance with the restrictions herein, (iii) upon the written consent of Borrower and (iv) only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Borrower. Thereupon, a new promissory note for like principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of the Note. The Lender agrees to provide a form W-9 to the Borrower on request. 8. This Note is full recourse and a general unsecured obligation of the Borrower and the Lender acknowledges and agrees that the payment of the principal and interest on this Note will be subordinated in right of payment to the prior payment of any and all indebtedness that is senior to this Note, whether such senior indebtedness is presently outstanding or is hereafter incurred. 9. Any amendment hereto or discharge, termination or waiver of any provision hereof may be made only with the written consent of the Borrower and Lender; provided, that Borrower and Lender may individually waive any provision of this Note with respect to their rights, but not their obligations, hereunder. This Note shall inure to the benefit of and bind the successors, permitted assigns, heirs, executors, and administrators of the parties hereto. 10. This Note shall become immediately due and payable upon the occurrence of an Event of Default (as defined below), whereupon (i) this Note and all such interest shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower; and (ii) the Lender, at its option, may proceed to enforce all other rights and remedies available to the Lender under applicable law. For 2 purposes hereof, the occurrence of any of the following shall constitute an "Event of Default" under this Note: (a) the failure to make any payment of principal or any other amount payable hereunder when due under this Note or the breach of any other condition or obligation under this Note, and the continuation of such failure or breach for thirty (30) days; or (b) (i) the institution by Borrower of proceeding to be adjudicated as bankrupt or insolvent, or consent by it to the institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of Borrower, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by Borrower in furtherance of any such action, or, (ii) if, within sixty (60) days after the commencement of an action against Borrower (and service of process in connection therewith on Borrower), seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of Borrower or all orders or proceedings thereunder affecting the operations or the business of Borrower stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without consent or acquiescence of Borrower or of all or any substantial part of the properties of Borrower, such appointment shall not have been vacated. 11. This Note is made in accordance with and shall be construed under the laws of the State of Delaware, other than the conflicts of law principles thereof. 12. Borrower agrees to pay all reasonable costs of collection of any amounts due hereunder arising as a result of any default hereunder, including without limitation, attorneys' fees and expenses. The Borrower hereby expressly waives presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and any other formality. REALEC TECHNOLOGIES, INC. By: --------------------------------- Name: John R. Snedegar, Chief Executive Officer 3 EX-21.1 21 a79556ex21-1.txt EXHIBIT 21.1 EXHIBIT 21 MICRO GENERAL CORPORATION LIST OF SUBSIDIARIES 1. Real EC Technologies, Inc. 2. MGEN Services Corporation 3. SoftPro Corporation EX-23.1 22 a79556ex23-1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Micro General Corporation: We consent to the incorporation by reference in the registration statements (no. 2-85485, 2-94290, 333-22240, 333-64289 and 333-95913) on Form S-8 of Micro General Corporation of our report dated February 27, 2002, relating to the consolidated balance sheets of Micro General Corporation as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2001, and the related schedule, which report appears in the December 31, 2001 annual report on Form 10-K of Micro General Corporation. Our report refers to a change in accounting principle for goodwill and intangible assets resulting from business combinations consummated after June 30, 2001. /S/ KPMG LLP Los Angeles, California March 28, 2002 -----END PRIVACY-ENHANCED MESSAGE-----


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

		For the Fiscal Year Ended December 31, 2001

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)


Delaware		95-2621545
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2510 N. Red Hill Avenue, Suite 230 Santa Ana, California		92705
(Address of principal executive offices)		(Zip Code)


Title of each class		Name of each exchange on which registered

Common Stock, $.05 Par Value		NASDAQ


		Page
		No.

PART I
Item 1.	Business		2
Item 2.	Properties		15
Item 3.	Legal Proceedings		15
Item 4.	Submission of Matters to a Vote of Security Holders		15
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		16
Item 6.	Selected Financial Data		17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 7A.	Quantitative and Qualitative Disclosure about Market Risk		27
Item 8.	Financial Statements and Supplementary Data		28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		56
PART III
Item 10.-13.			56
PART IV
Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		56


		High		Low

Year Ended December 31, 2000
	First Quarter	$	39.55	$	13.86
	Second Quarter		24.55		8.41
	Third Quarter		14.32		8.75
	Fourth Quarter		10.45		4.55
Year Ended December 31, 2001
	First Quarter	$	9.32	$	6.02
	Second Quarter		16.40		6.59
	Third Quarter		18.90		7.00
	Fourth Quarter		14.30		8.71


PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosure about Market Risk
	Item 8. Financial Statements and Supplementary Data
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Through 13.
PART IV
	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EXHIBIT 3.2
EXHIBIT 3.3
EXHIBIT 10.1
EXHIBIT 10.7
EXHIBIT 10.16
EXHIBIT 10.17
EXHIBIT 10.18
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 10.21
EXHIBIT 10.22
EXHIBIT 10.23
EXHIBIT 10.24
EXHIBIT 10.25
EXHIBIT 10.26
EXHIBIT 10.27
EXHIBIT 10.28
EXHIBIT 10.30
EXHIBIT 21.1
EXHIBIT 23.1


	*Inefficiencies in the Real Estate Transaction Settlement Process.*



			Year Ended December 31,

			2001			2000			1999			1998			1997

Operating Results Data:
Management, support and consulting revenues — related parties			$	94,147,290		$	54,511,284		$	10,884,822		$	7,627,772		$	2,547,781
Management, support and consulting revenues — third parties				3,260,678			592,491			6,830,035			2,934,065			1,043,482

		Total management, support and consulting revenues		97,407,968			55,103,775			17,714,857			10,561,837			3,591,263

Software, maintenance and other revenues — related parties				17,763,682			14,051,342			16,216,711			13,442,669			9,112,096
Software, maintenance and other revenues — third parties				2,779,369			2,981,020			2,557,655			2,805,756			1,120,275

		Total software, maintenance and other revenues		20,543,051			17,032,362			18,774,366			16,248,425			10,232,371

Total revenues				117,951,019			72,136,137			36,489,223			26,810,262			13,823,634
Management, support and consulting cost of sales				62,621,223			35,228,221			7,581,167			5,623,887			2,529,407
Software, maintenance and other cost of sales				10,836,759			9,039,274			14,029,205			15,893,689			8,452,283

	Total cost of sales			73,457,982			44,267,495			21,610,372			21,517,576			10,981,690

Gross profit				44,493,037			27,868,642			14,878,851			5,292,686			2,841,944
Selling, general and administrative				22,601,090			14,760,053			15,621,936			8,854,765			2,984,812
Amortization of goodwill				797,505			1,806,402			1,834,078			471,794			146,329

	Operating income (loss)			21,094,442			11,302,187			(2,577,163	)		(4,033,873	)		(289,197	)
Joint venture loss				—			578,045			42,189			—			—
Interest (income) expense, net				586,559			900,041			1,668,498			664,375			(15,130	)

Income (loss) from continuing operations before taxes				20,507,883			9,824,101			(4,287,850	)		(4,698,248	)		(274,067	)
Income tax expense (benefit)				6,150,895			26,618			4,000			2,400			(64,126	)

Income (loss) from continuing operations				14,356,988			9,797,483			(4,291,850	)		(4,700,648	)		(209,941	)
Loss from discontinued operations, net of tax				(4,192,883	)		(7,804,138	)		(2,854,589	)		(146,155	)		—
Loss on disposal of discontinued operations, including provision for shutdown costs, net of tax				(3,426,216	)		—			—			—			—

Net income (loss)			$	6,737,889		$	1,993,345		$	(7,146,439	)	$	(4,846,803	)	$	(209,941	)

Per Share Data:
Income (loss) from continuing operations per share — basic			$	0.96		$	0.68		$	(0.50	)	$	(0.72	)	$	(0.04	)
Income (loss) from continuing operations per share — diluted				0.85			0.61			(0.50	)		(0.72	)		(0.04	)
Net income (loss) per share — basic				0.45			0.14			(0.83	)		(0.74	)		(0.04	)
Net income (loss) per share — diluted				0.40			0.13			(0.83	)		(0.74	)		(0.04	)

Number of shares used in per share computations — basic				14,911,511			14,303,831			8,587,326			6,549,400			5,056,700
Number of shares used in per share computations — diluted				16,801,560			15,582,684			8,587,326			6,549,400			5,056,700

Balance Sheet Data:
Cash and cash equivalents			$	10,902,386		$	4,340,409		$	1,344,257		$	193,251		$	830,784
Total assets				77,785,293			46,292,562			24,598,933			21,444,843			9,864,129
Amounts and notes payable to affiliates				5,265,408			5,265,408			5,265,408			16,729,411			5,431,417
Preferred stock of consolidated subsidiary, held by outside parties				7,062,173
Total liabilities				30,945,482			28,125,450			11,967,198			20,860,255			7,732,738
Stockholders’ equity				39,777,638			18,167,112			12,631,735			584,588			2,131,391



		Quarter Ended

		March 31,			June 30,			September 30,			December 31,

2001
Revenues — related parties		$	25,500,341		$	26,747,549		$	28,334,877		$	31,328,206
Revenues — third parties			945,036			691,471			1,344,045			3,059,494

	Total revenues		26,445,377			27,439,020			29,678,922			34,387,700
Gross profit			10,341,977			10,037,787			10,619,372			13,493,901
Income from continuing operations			3,783,838			3,675,185			3,948,202			2,949,763
Loss from discontinued operations			(975,996	)		(1,056,304	)		(894,287	)		(1,266,296	)
Net income (loss)			2,807,842			2,618,881			3,053,915			(1,742,749	)
Income from continuing operations per share — basic			.26			.25			.26			.19
Income from continuing operations per share — diluted			.24			.22			.23			.17
Net income (loss) per share — basic			.19			.18			.20			(.11	)
Net income (loss) per share — diluted			.17			.16			.18			(.11	)
2000
Revenues — related parties		$	8,198,525		$	16,676,506		$	18,362,499		$	25,325,096
Revenues — third parties			535,891			1,247,666			870,988			918,966

	Total revenues		8,734,416			17,924,172			19,233,487			26,244,062
Gross profit			3,228,336			6,503,394			7,382,293			10,754,619
Income (loss) from continuing operations			(418,002	)		1,568,887			2,772,140			5,874,458
Loss from discontinued operations			(1,197,382	)		(1,560,690	)		(1,640,048	)		(3,406,018	)
Net income (loss)			(1,615,384	)		8,197			1,132,092			2,468,440
Income (loss) from continuing operations per share — basic			(.03	)		.11			.18			.41
Income (loss) from continuing operations per share — diluted			(.03	)		.10			.16			.37
Net income (loss) per share — basic			(.12	)		—			.08			.17
Net income (loss) per share — diluted			(.12	)		—			.07			.15



		Payments Due By Period

				Less Than		1 to 3		4 to 5		After 5
		Total		1 Year		Years		Years		Years


		(In millions)
Contractual Cash Obligations:
	Long Term Debt	$	10.0	$	3.5	$	6.5	$	—	$	—
	Lines of Credit		1.6		1.6		—		—		—
	Capital Lease Obligations		0.3		0.1		0.2		—		—
	Operating Leases		5.7		1.7		2.6		0.9		0.5

Total Contractual Cash Obligations		$	16.0	$	5.3	$	9.3	$	0.9	$	0.5


	Page
	No.

Independent Auditors’ Report		29
Consolidated Balance Sheets as of December 31, 2001 and 2000		30
Consolidated Statements of Operations for the years ended December 31, 2001, 2000, and 1999		31
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2001, 2000 and 1999		32
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999		33
Notes to Consolidated Financial Statements		34
Schedule II — Valuation and Qualifying Accounts and Reserves		60


			2001			2000

ASSETS
Current assets:
	Cash and cash equivalents		$	10,902,386		$	4,340,409
	Trade accounts receivable, less allowance for doubtful accounts of $580,314 in 2001 and $341,132 in 2000			1,221,806			185,730
	Trade accounts receivable due from affiliates			14,511,887			14,033,919
	Inventories			143,958			—
	Prepaid and other current assets			2,093,112			2,924,010
	Net assets from discontinued operations			—			288,130
	Income tax receivable			1,483,645			—
	Deferred tax assets			4,326,636			—

		Total current assets		34,683,430			21,772,198
Property and equipment, net				28,382,040			13,511,134
Capitalized software development costs, less accumulated amortization of $4,403,899 in 2001 and $4,288,535 in 2000				2,356,554			—
Goodwill, less accumulated amortization of $5,198,289 in 2001 and $4,400,784 in 2000				9,979,350			4,897,545
Other intangible assets, less accumulated amortization of $62,133 in 2001				869,867			—
Deferred tax assets				1,514,052			—
Net assets from discontinued operations				—			4,450,792
Investments				—			1,660,893

Total assets			$	77,785,293		$	46,292,562

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	7,157,437		$	10,246,688
	Accrued compensation expenses			2,201,850			1,434,893
	Accounts payable and accrued expenses — affiliates			607,700			326,244
	Income and other taxes payable			197,092			1,338,554
	Deferred tax liabilities			—			361,726
	Deferred revenue			2,565,043			612,955
	Current portion of notes payable			5,114,115			4,804,734
	Current portion of capital leases with affiliate			104,739			55,675
	Accrued liabilities for discontinued operations			1,971,141			—

		Total current liabilities		19,919,117			19,181,469
Capital leases with affiliate				150,612			175,787
Deferred revenue				3,574,639			1,530,527
Notes payable				1,196,266			1,972,259
Amounts and notes payable to affiliates				5,265,408			5,265,408
Accrued liabilities for discontinued operations				839,440			—
Commitments and contingencies
Preferred stock of consolidated subsidiary, held by outside parties				7,062,173			—
Stockholders’ equity:
	Preferred stock, $0.05 par value. Authorized 1,000,000 shares, none issued and outstanding			—			—
	Common stock, $0.05 par value. Authorized 50,000,000 shares at December 31, 2001 and 20,000,000 shares at December 31, 2000; issued and outstanding 15,499,139 and 13,222,553 shares at December 31, 2001 and 2000, respectively			774,957			661,128
	Treasury stock (17,302 shares at December 31, 2001)			(213,397	)		—
	Additional paid-in capital			56,298,854			28,809,431
	Accumulated deficit			(17,082,776	)		(11,303,447	)

Total stockholders’ equity				39,777,638			18,167,112

Total liabilities and stockholders’ equity			$	77,785,293		$	46,292,562



	Common Stock				Additional								Total
					Paid-in		Treasury			Accumulated			Stockholders’
	Shares		Amount		Capital		Stock			Deficiency			Equity

Balance at December 31, 1998		7,546,666	$	377,333	$	6,357,608	$	—		$	(6,150,353	)	$	584,588
Note conversion		4,677,771		233,889		18,046,111								18,280,000
Acquisition of Interactive Associates		50,000		2,500		191,500								194,000
Shares issued in connection with employee stock purchase plan		50,000		2,500		117,766								120,266
Stock options exercised		211,201		10,560		588,760								599,320
Net Loss											(7,146,439	)		(7,146,439	)

Balance at December 31, 1999		12,535,638		626,782		25,301,745		—			(13,296,792	)		12,631,735
Stock options exercised		577,477		28,875		2,095,832								2,124,707
Warrants exercised		48,529		2,426	$	—								2,426
Contributions in connection with the employee stock purchase plan						288,416								288,416
Earnout payment to Interactive Associates, Inc.		50,000		2,500		661,058								663,558
Share issuance in exchange for software purchase		10,909		545		104,455								105,000
Compensation expense related to options granted to non-employees						357,925								357,925
Net Income											1,993,345			1,993,345

Balance at December 31, 2000		13,222,553		661,128		28,809,431		—			(11,303,447	)		18,167,112
Stock options exercised		404,275		20,213		1,716,582								1,736,795
Shares issued in connection with employee stock purchase plan		50,000		2,500		366,630								369,130
Tax benefit from exercise of stock options						5,853,912								5,853,912
Purchase of treasury stock								(326,800	)					(326,800	)
Treasury stock issued to employee stock purchase plan						24,606		113,403						138,009
Compensation expense related to options granted to non-employees						465,000								465,000
Stock dividend		1,331,619		66,581		12,450,637					(12,517,218	)
Earnout payment to Interactive Associates, Inc.		765		38		10,450								10,488
Acquisition of RealEC Technologies		153,893		7,695		1,567,782								1,575,477
Acquisition of SoftPro, Inc.		336,034		16,802		5,033,824								5,050,626
Net Income											6,737,889			6,737,889

Balance at December 31, 2001		15,499,139	$	774,957	$	56,298,854	$	(213,397	)	$	(17,082,776	)	$	39,777,638


	2001			2000

Computer equipment	$	127,888		$	222,546
Telecommunications equipment		30,000			89,143
Less reserve		(13,930	)		(311,689	)

	$	143,958		$	—


Income from continuing operations	$	6,150,895
Discontinued operations		(3,685,348	)
Goodwill, for initial recognition of acquired tax benefits that previously were included in the valuation allowance		(1,809,869	)
Stockholders’ equity, for compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes		(5,835,912	)

	$	(5,180,234	)


	SIMON.


	Net Global Solutions.


	Professional Services.


	Product Development.


			Operating		Capital
			Leases		Leases

Year ending December 31:
	2002		$	1,683,305	$	136,157
	2003			1,390,058		97,874
	2004			1,156,992		51,863
	2005			487,857		—
	2006			502,493		—
	Thereafter			517,568		—

Total minimum lease payments			$	5,738,273		285,894
Less amount representing interest						30,543

Present value of net minimum capital lease payments						255,351
Less current portion						104,739

		Capital lease obligations, excluding current portion			$	150,612


2002	$	5,114,116
2003		1,187,245
2004		5,274,429
2005		—
2006		—

	$	11,575,790


	Micro General		Softpro			RealEc			Total

Total revenues	$	114,744,351	$	2,388,020		$	818,648		$	117,951,019
Related party revenues		111,662,020		—			248,952			111,910,972
Operating income (loss)		21,117,606		296,111			(319,275	)		21,094,442
Interest (income) expense net		546,208		(3,333	)		43,684			586,559
Income (loss) before income taxes		20,571,398		299,444			(362,959	)		20,507,883
Depreciation and amortization		4,503,788		152,873			106,741			4,763,402
Total assets	$	58,362,941	$	9,061,213		$	10,361,139		$	77,785,293



	Options Outstanding						Options Exercisable

			Weighted-
	Number		Average		Weighted-		Number		Weighted-
	Outstanding		Remaining		Average		Exercisable		Average
	as of		Contractual		Exercise		as of		Exercise
Range of Exercise Prices	12/31/01		Life		Price		12/31/01		Price

$0.01 - $ 4.32		1,279,030		7.25	$	3.26		1,264,364	$	3.27
$4.37 - $ 7.45		2,172,728		8.22		5.65		1,441,528		4.81
$7.65 - $27.61		1,601,783		8.89		11.80		559,584		12.26

$0.01 - $27.61		5,053,541		8.19	$	7.00		3,265,476	$	5.49


Current assets		$	1,808,071
Property and equipment			360,492
Customer list			932,000
Capitalized software development			989,000
Goodwill			4,900,884

	Total assets acquired		8,990,447
Current liabilities assumed			(2,096,821	)

	Net assets acquired	$	6,893,626


Current assets		$	3,463,420
Property and equipment			1,734,423
Capitalized software development costs			1,482,918
Long-term deferred tax asset			1,273,066
Goodwill			2,685,504

	Total assets acquired		10,639,331
Current liabilities assumed			(4,290,308	)
Series A and B preferred stock held by outside parties			(7,062,173	)
Series A preferred stock held by Micro General			(1,491,373	)

	Net deficiency acquired	$	(2,204,523	)



	For the Proforma Year Ended

	December 31,		December 31,
	2001		2000

Net revenues	$	125,017,928	$	77,112,393
Net income (loss)		1,858,562		(281,445	)
Net income (loss) per share — basic	$	0.12	$	(0.02	)
Net income (loss) per share — diluted	$	0.11	$	(0.02	)


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*


Exhibit
Number		Description

	3.1	Restated Certificate of Incorporation of Micro General incorporated by reference to Micro General’s Annual Report on Form 10-K, as amended for the year ended December 25, 1988.
	3.2	Certificate of Amendment of Certificate of Incorporation of Micro General, as amended on February 12, 2002.
	3.3	Amended and Restated Bylaws of Micro General.
	10.1	1995 Stock Option Plan.*
	10.2	1998 Stock Incentive Plan, incorporated by reference to Micro General’s Registration Statement on Form S-8 filed on September 25, 1998 and Micro General’s Proxy Statement on Form 14A, filed on July 1, 1999.*
	10.3	1998 Employee Stock Purchase Plan, incorporated by reference to Micro General’s Registration Statement on Form S-8 filed on September 25, 1998.*
	10.4	1999 Stock Incentive Plan, incorporated by reference to Micro General’s Registration Statement on Form S-8, filed on February 1, 2000 and Micro General’s Proxy Statement on Form 14A, filed on April 30, 2001.*


Signature	Title	Date

/s/ JOHN R. SNEDEGAR John R. Snedegar	President, Chief Executive Officer and Director	March 28, 2002

/s/ DALE W. CHRISTENSEN Dale W. Christensen	Executive Vice President, and Chief Financial Officer (Principal Financial and Accounting Officer)	March 28, 2002

/s/ WILLIAM P. FOLEY, II William P. Foley, II	Director	March 28, 2002

/s/ PATRICK F. STONE Patrick F. Stone	Director	March 28, 2002

/s/ DWAYNE WALKER Dwayne Walker	Director	March 28, 2002

/s/ JOHN M. MCGRAW John M. McGraw	Director	March 28, 2002

/s/ RICHARD H. PICKUP Richard H. Pickup	Director	March 28, 2002

/s/ CARL A. STRUNK Carl A. Strunk	Director	March 28, 2002



		Years Ended December 31,

				Additions
		Balance at		Charged to				Balance at
		Beginning		Costs and		Amounts		End of
Classification		of Period		Expenses		Written-off		Period

Year ended December 31, 2001:
	Allowance for doubtful accounts	$	341,132	$	239,672	$	490	$	580,314
Year ended December 31, 2000:
	Allowance for doubtful accounts	$	255,828	$	122,000	$	36,696	$	341,132
Year ended December 31, 1999:
	Allowance for doubtful accounts	$	482,820	$	251,929	$	478,921	$	255,828