EXHIBIT 10.5 STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into effective as of the
____ day of August, 2002 (the "Effective Date"), by and between,
Michael Bell ("Bell"), Encore Acquisition Corporation (the
"Corporation").
RECITALS
The Corporation desires to issue to Bell, 20,000 shares (the "Shares")
of the capital stock of the Corporation, which Shares represent twenty percent
(20%) of the shares of capital stock of the Corporation authorized, issued and
outstanding as of the closing of the acquisition of the assets of Encore
Software, Inc., subject to this Agreement.
Bell desires to receive and hold the Shares subject to this Agreement.
All Parties believe it to be in their best interests to provide for the
orderly future disposition of the Shares if certain contingencies occur.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Transfer of Interest in the Shares.
1.1 Shares. The Corporation hereby agrees to issue to Bell all right,
title, and interest in and to the Shares effective as of the Effective Date on
the terms set forth herein and in conjunction therewith agrees to execute and
deliver to Bell a stock certificate in the form of Exhibit 1.1 hereto effective
as of the Effective Date and to cause such issuance to be recorded on the books
of the Corporation effective as of the Effective Date.
2. Consideration for the Shares.
2.1 Shares. In consideration for transfer of the Shares, Bell agrees to
pay to the Corporation a total of Five Hundred and no/100 Dollars ($500.00), in
cash.
2.2 Execution of Other Documents. As further consideration and an
inducement to the Corporation to execute this Agreement, Bell agrees to execute
and deliver the following documents and to be bound by their respective terms:
2.2.1 The Encore Acquisition Corporation Stock Buy and Sell
Agreement in the form attached hereto as Exhibit 2.2.1, and
3. Representations of Subscriber: Bell hereby acknowledges, warrants, represents
and covenants as follows:
3.1 General:
3.1.1 Has been given access to full and complete information
regarding the Company (including the opportunity to meet with Company
officers and review all documents as Bell may have requested in
writing); has utilized such access to Bell's satisfaction for the
purpose of obtaining information and has attended or been given
reasonable opportunity to attend a meeting with representatives of the
Company for the purpose of asking questions of, and receiving answers
from, such representatives concerning the terms and conditions of the
offering of the Shares and to obtain any additional information, to the
extent reasonably available, necessary to verify the accuracy of
information provided in the Memorandum.
3.1.2 Bell's legal name is:_________________________________
3.1.3 Bell is a bona fide resident of (or, if an entity, is
organized or incorporated under the laws of, and is domiciled in) the
State of (INSERT NAME OF STATE)________________________.
3.1.4 Bell's Citizenship is : (Country) o USA o
Other:___________
3.1.5 Bell's Mailing Address is:
Street: ________________________
City: _________________________
State: _________________________
Zip: __________________________
3.1.6 Bell's Phone Number is: _______________________________
3.1.7 Bell's Social Security or Tax Identification No. is:
___________
3.1.8 The Shares are being purchased by Bell in Bell's name
solely for Bell's own beneficial interest and not as nominee for, on
behalf of, for the beneficial interest transfer to, any other person,
trust, or organization.
3.1.9 Bell acknowledges that an investment in the Company is a
speculative investment involving a high degree of risk including, but
not limited to the reasons described in the Memorandum and is suitable
only for persons who can afford to lose their entire investment.
3.1.10 Bell realizes that Bell will experience substantial
dilution in the per share value of the Shares purchased by Bell
immediately upon purchase.
3.1.11 Bell has, either alone or with the assistance of its
professional advisor, sufficient knowledge and experience in financial
and business matters that Bell believes Bell is capable of evaluating
the merits and risks of the prospective investment in the Shares.
3.1.12 Bell has obtained, to the extent Bell deems necessary,
professional advice with respect to the risks inherent in an investment
in the Shares, the suitability of the investment in light of Bell's
financial condition and investment needs, and legal, tax and accounting
matters.
3.1.13 Bell has been given the opportunity to discuss all
material aspects of this transaction with representatives of The
Company and any questions asked have been answered to Bell's full
satisfaction.
3.1.14 Bell recognizes that the purchase of the Shares is a
long-term investment, that, absent registration, transferability and
sale of the Shares are restricted in many ways, and that Bell could
sustain a total loss of Bell's investment.
3.1.15 Bell can bear the economic risk of an investment in the
Shares for an indefinite period of time, can afford to sustain a
complete loss of such investment, has no need for liquidity in
connection with an investment in the Shares, and can afford to hold the
Shares indefinitely.
3.1.16 Bell o has/o has not (check one) used the services of a
purchaser representative in connection with this investment. If I have
used a purchaser representative Bell has received a fully completed and
executed Purchaser Representative Questionnaire.
3.1.17 It is Bell's intention to acquire and hold the Common
Stock for Bell's own account for investment purposes and not with a
view to resale in connection with any distribution thereof.
3.1.18 Bell has no contract, undertaking, agreement or
arrangement with any person or company to sell the Shares to any such
person or company or to have any such person or company sell the Shares
on Bell's behalf.
3.1.19 Bell is not aware of any occurrence, event, or
circumstance upon the happening of which Bell intends to sell the
Shares, and Bell does not have any present intention to sell the Shares
after a lapse of any particular period of time.
3.1.20 Bell has been informed that in the view of the United
States Securities and Exchange Commission ("SEC") and state securities
commissions, a purchase now with an intent to resell, by reason of any
foreseeable specific contingency or anticipated change in market
values, or any change in the condition of the Company, or that of the
industry, or in connection with a contemplated liquidation or
settlement of any loan obtained for the acquisition of the Shares,
would represent a purchase with an intent inconsistent with the
representations set forth above, and that the SEC, and state securities
commissions might regard such resale as a deferred sale with regard to
which an exemption from registration is not available.
3.1.21 Bell is experienced and knowledgeable in financial and
business matters, capable of evaluating the merits and risks of
investing in the Shares, and does not need or desire the assistance of
a knowledgeable representative to aid in the evaluation of such risks
(or, in the alternative, has a knowledgeable representative who such
investor intends to use in connection with a decision as to whether to
purchase the Shares and who together with such investor has such
knowledge and experience in financial and business matters that they
are together capable of evaluating the merits and risks of investing in
the Shares).
3.1.22 Bell believes that the investment in the Shares is
suitable for Bell based upon Bell's investment objectives and financial
needs, and Bell has adequate means to provide for Bell's current
financial needs and personal/business contingencies and has no need for
liquidity of investment with respect to the Shares.
3.2 Accredited Investor Status.
3.2.1 Bell acknowledges that the Company is offering the Units
only to Accredited Investors as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933, as amended (the "Act").
3.2.2 Bell ois/ois not (check one) an "Accredited Investor".
This representation is based on the following (check one or more, as
applicable):
3.2.2.1 Bell has a net worth, or a joint net worth
together with my spouse, in excess of $1,000,000. [In
calculating net worth, you may include equity in personal
property and real estate, including your principal residence,
cash, short-term investments, stock and securities. Equity in
personal property and real estate should be based on the fair
market value of such property minus debt secured by such
property].
3.2.2.2 Bell is and individual with an individual
income in excess of $200,000 in each of the prior two years
and reasonably expects an income in excess of $200,000 in the
current year;
3.2.2.3 Bell is an individual (not a partnership,
corporation, etc.) who, with his or her spouse, had joint
income in excess of $300,000 in each of the prior two years
and reasonably expects joint income in excess of $300,000 in
the current year.
3.2.2.4 Bell is a director or executive officer of
the Company.
3.2.2.5 Bell, if other than an individual, is an
entity all of whose equity owners meet one of the tests set
forth above (if relying on this category alone, each equity
owner must complete a separate copy of this Agreement).
3.2.2.6 Bell (or, in the case of a trust, Bell
trustee) is a bank or savings and loan association as defined
in Sections (a)(2) and 3(a)(5)(A), respectively, of the Act
acting either in its individual or fiduciary capacity.
3.2.2.7 Bell is an insurance company as defined in
Section 2(13) of the Act.
3.2.2.8 Bell is an investment company registered
under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that
Act.
3.2.2.9 Bell is a Small Business Investment Company
licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of
1958. 3.2.2.10 o Bell is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security
Act of 1974 ("ERISA") and either (check one or more, as
applicable):
a. the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of
ERISA, which is either a bank, savings and
loan association, insurance company, or
registered investment adviser; or
b. the employee benefit plan has total assets
in excess of $5,000,000; or
c. the plan is a self-directed plan with
investment decisions made solely by persons
who are "Accredited Investors" as defined
under the Act.
3.2.2.11 Bell is a private business development
company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940.
3.2.2.12 Bell has total assets in excess of
$5,000,000, was not formed for the specific purpose of
acquiring shares of the Company and is one or more of the
following (check one or more, as appropriate):
a. an organization described in Section
501(c)(3) of the Internal Revenue Code; or
b. a corporation; or
c. a Massachusetts or similar business trust;
or
d. a partnership.
3.2.2.13 Bell is a trust with total assets exceeding
$5,000,000 which was not formed for the specific purpose of
acquiring shares of the Company and whose purchase is directed
by a person who has such knowledge and experience in financial
and business matters that he is capable of evaluating the
merits and risks of the investment in the Shares.
3.2.2.14 Other._______________________________
3.3 Restricted Nature of Securities Acquired.
3.3.1 Bell understands that the Shares to be issued have not
been registered under the Act, or under applicable state securities
acts, on the grounds that the Shares are being issued in a transaction
involving a limited group of knowledgeable investors fully familiar
with the affairs and proposed operations of the Company and not
involving a public offering and that, consequently, such transaction is
exempt from registration under the Act and the state securities acts.
3.3.2 In that regard, Bell understands that the Shares may not
be sold, transferred or otherwise disposed of except pursuant to an
effective registration statement or appropriate exemption from
registration under the foregoing securities acts and, as a result,
absent registration, it may be required to hold the Shares for an
indefinite period of time.
3.3.3 Bell understands that the Company has not agreed to
register the Shares for distribution in accordance with the provisions
of the Act or state law, and has not agreed to comply with any
exemption under the Act or state law for the resale of the Shares. Bell
understands that by virtue of the rules respecting "restricted
securities" the Shares must be held indefinitely, unless and until
subsequently registered under the Act and/or state law or unless an
exemption from such registration is available.
3.3.4 Bell acknowledges that the Company will rely on its
representations herein as a basis for the exemption from registration.
Accordingly, it acknowledges that the Company is not required to
recognize any transfer of the Shares acquired by it if, in the opinion
of counsel for the Company, such transfer would result in violation of
any federal or state law regarding the offering or sale of securities.
3.3.5 Bell agrees to indemnify, the Company for and from any
claim, liability, cost or expense, including reasonable attorneys'
fees, arising from any unlawful sale by Bell or offer by Bell to sell
or transfer any of the shares subscribed for hereby.
3.3.6 Bell acknowledges that Bell may be deemed an "affiliate"
of the Company within the meaning of Rule 144 ("Rule 144") promulgated
under the Act, although nothing contained herein should be construed as
an admission of such fact.
3.3.7 If in fact Bell were an affiliate under Rule 144, Bell's
ability to sell, assign or transfer the Shares may be restricted unless
such transaction is registered under the Act or an exemption from such
registration is available.
3.3.8 Bell understands that such exemptions are limited and
Bell has obtained advice of counsel as to the nature and conditions of
such exemptions, including information with respect to the
applicability to the sale of such securities of Rule 144.
3.3.9 Bell further represents to and covenants with the
Company that Bell will not sell, assign or transfer any of the Shares
except (i) pursuant to an effective registration statement under the
Act, (ii) pursuant to Rule 144, or (iii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to The Company
or as described in a "no-action" or interpretive letter from the Staff
of the SEC, is not required to be registered under the Act.
3.4 Legend on Certificates to be Issued. Bell understands and
acknowledges that the stock certificate representing the Shares to be issued
pursuant to this Agreement will contain substantially the following legend and
such other legends as may be required by the :
"The Common Stock represented by this Certificate has not been
registered under the Securities Act of 1933, as amended, or any state
Blue Sky law. Such Common Stock has been acquired by the registered
holder hereof for his or her own account for investment purposes and
may not be sold, transferred or otherwise disposed of for value, except
pursuant to registration under all applicable securities laws or the
receipt by The Company of an opinion of counsel, satisfactory in form
and substance to The Company, that registration is not required under
such securities laws.
3.5 Investment Decision. Bell has carefully read this letter agreement
and has discussed its requirements and other applicable limitations upon Bell's
abilities to offer to sell, transfer or otherwise dispose of Shares, to the
extent Bell felt necessary, with Bell's counsel or counsel for Company. Bell
further acknowledges that Bell has determined that an investment in the Shares
is appropriate for Bell, in view of Bell's overall financial condition.
4. General.
4.1 Benefit. This Agreement shall bind and, except as otherwise stated
herein, shall inure to the benefit of the parties hereto, their successors,
assigns, heirs and legal representatives, as the case may be.
4.2 Notices. Any and all notices provided for in this Agreement shall
be in writing and sent, by prepaid registered or certified mail, to the
respective party's address. Any party hereto may change its address by notice to
the other party given as set forth above. Any notice and any payment due
hereunder shall be deemed given or paid, as the case may be, when mailed as set
forth above.
4.3 Amendment. This Agreement may be altered, amended or terminated
only by a writing signed by Bell and the Corporation, or their appointed
representatives.
4.4 Remedy. The Parties hereby acknowledge that monetary damages would
be an inappropriate remedy for any violation of the terms of this Agreement, and
hereby agree that specific performance shall be the sole remedy for any
violation hereunder.
4.5 Construction. This Agreement shall be governed by and construed
according to the laws of the State of Minnesota without regard to the laws of
the State of Minnesota regarding choice of laws.
4.6 Severability. If any provision of this Agreement is held to be
unlawful or unenforceable in any respect by a court of competent jurisdiction,
such provision shall be severed and shall not affect the validity or
enforceability of the remaining provisions. Further, if any provision of this
Agreement is held to be over broad, such provision shall be deemed amended to
narrow the application to the extent necessary to render the provision
enforceable according to applicable law.
4.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
4.8 Attorneys Fees. In the event that any dispute between the parties
concerning this Agreement leads to legal action, the "Prevailing Party" shall be
entitled to reimbursement by the other party for all its costs and expenses
incurred in such action, including, without limitation, such party's reasonable
attorneys' fees. For purposes hereof, the "Prevailing Party" under any judgment
shall be (i) the paying party if the amount that party is ordered to pay is less
than or equal to the amount it offered in any settlement negotiations, or (ii)
the paid party if the amount that party receives is more than it offered in any
settlement negotiations.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as on the date first above stated.
Encore Acquisition Corporation
By:
--------------------------------
Address: 7400 49th Avenue North
--------------------------
New Hope, MN 55428
--------------------------
Dated:
--------------------------
Michael Bell
Address:
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Dated:
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EXHIBIT 1.1
STOCK CERTIFICATE
EXHIBIT 2.2.1
Encore Acquisition Corporation Stock Buy and Sell Agreement