EXHIBIT 10.11
STOCK TRANSFER AGREEMENT
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COMMON STOCK OF DIGITAL FUSION, INC.
This Stock Transfer Agreement is made and entered into by and among Digital
Fusion, Inc. ("the Company"), Madison Run, LLC (the "Transferor") and AABBRR,
LLC (the "Transferee") with respect to the transfer by the Transferor of common
stock, par value $.001 per share (the "Common Stock") of the Company pursuant
hereto.
PRELIMINARY STATEMENT
1. The Transferor and the Company have previously entered into an
Additional Subscription Agreement dated as of October 21, 2004 whereby the
Transferor purchased from the Company 1,650,000 shares of Common Stock (the
"Subscription Agreement").
2. Transferor desires to transfer to Transferee, and Transferee desires to
acquire from Transferor, 100,000 shares of Common Stock acquired pursuant to the
Subscription Agreement (the "Stock"), on the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the Transferee's agreement to accept the
Transferor's transfer of shares of the Common Stock upon the terms and
conditions set forth in this Stock Transfer Agreement, the Transferor and the
Transferee agree and represent as follows:
A. TRANSFER OF THE STOCK
Upon the terms and conditions set forth in this Stock Transfer Agreement,
Transferor shall sell, assign, transfer, convey and deliver to Transferee and
Transferee shall acquire from Transferor, the Stock and all of Transferor's
respective right, title and interest in the Stock in exchange for an aggregate
payment of ONE HUNDRED THOUSAND DOLLARS ($100,000) (the "Purchase Price"). The
Stock will be transferred to the Transferee concurrent with the payment of the
Purchase Price and the Purchase Price shall be paid to the Transferor concurrent
with the execution of this Stock Transfer Agreement.
B. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR AND THE COMPANY
1. The Transferor has all requisite corporate power and authority to enter
into and perform its obligations under this Stock Transfer Agreement. The
execution, delivery and performance by the Transferor of this Stock Transfer
Agreement has been duly authorized by all necessary action.
2. The Transferor has good, valid and marketable title to the Stock and
such Stock is, to the best of the Transferor's knowledge, free and clear of any
and all liens and encumbrances.
3. The Company acknowledges its representations, warranties and obligations
in the Subscription Agreement, and agrees that the Transferee is entitled to
rely thereon in respect to the Stock acquired by Transferee under this Stock
Transfer Agreement.
C. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE
1. The initial offer and sale of the Stock was intended to be exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, (the
"Securities Act") and/or Regulation D promulgated under the Securities Act. As a
result, the Transferor made certain representations and warranties to the
Company in the Subscription Agreement. In furtherance of the transfer of Stock
as contemplated by this Stock Transfer Agreement, the Transferee represents and
warrants to the Transferor and the Company as follows:
(a) The Stock is being purchased for the account of the Transferee for
investment purposes only and not for the account of any other person, and
not with a view to distribution, assignment or resale to others or to
fractionalization in whole or in part.
(b) No other person has or will have a direct or indirect beneficial
interest in the Stock and the Transferee will not sell, hypothecate or
otherwise transfer the Stock except in accordance with the registration
provisions of the Securities Act and applicable state securities laws,
unless an opinion of counsel acceptable to the Company and the Transferor
and their respective counsel is provided which states that an exemption
from the registration requirements of the Securities Act and applicable
state securities laws is available.
(c) In evaluating the suitability of an investment in the Stock, the
Transferee has not relied upon any representations or other information
(whether oral or written) from the Transferor, the Company or any of their
respective agents other than as set forth in the Company's periodic reports
filed pursuant to the Securities Exchange Act of 1934, as amended, (the
"Periodic Reports"), in this Stock Transfer Agreement and in documents
provided pursuant to Section C.1.(d) of this Stock Transfer Agreement. No
oral or written representations have been made, or oral or written
information furnished to, the Transferee or its advisors, if any, in
connection with the offering of the Stock which were in any way
inconsistent with the Periodic Reports.
(d) The Company and the Transferor have made available to the Transferee
the opportunity to ask questions of the Company's officers and all
documents and information that the Transferee has requested relating to the
purchase of the Stock.
(e) The Transferee recognizes that an investment in the Company involves
substantial risks and represents that the Transferee has taken full
cognizance of and understands all of the risks related to the purchase of
the Stock. The Transferee can bear the economic risk of losing the entire
investment in the Stock.
(f) The Transferee has carefully considered and has, to the extent he, she
or it believes such discussion to be necessary, discussed with his, her or
its professional legal, tax and financial advisers the suitability of an
investment in the Company, and the Transferee has determined that the Stock
is a suitable investment for the Transferee.
(g) The statements and information set forth in the Entities Investor
Qualification Questionnaire (the "Questionnaire") and attached to this
Stock Transfer Agreement as Exhibit A, are true, accurate and complete. All
information which the Transferee has provided to the Transferor and the
Company concerning the Transferee and the Transferee's financial position
is correct and complete as of the date set forth below, and if there should
be any change in such information prior to the transfer of the Stock, the
Transferee will immediately provide such information to the Company and the
Transferor and will promptly send confirmation of such information to the
Company and the Transferor.
(h) The Transferee's overall commitment to investments which are not
readily marketable is not disproportionate to the Transferee's net worth,
and the Transferee's investment in the Stock will not cause such overall
commitment to become excessive.
(i) The Transferee has adequate means of providing for its current needs
and personal contingencies and has no need for liquidity in its investment
in the Stock.
(j) If this Stock Transfer Agreement is executed and delivered on behalf of
an entity, the person executing and delivering this Stock Transfer
Agreement has been duly authorized and is duly qualified to (i) execute and
deliver this Stock Transfer Agreement and all other instruments executed
and delivered on behalf of the Transferee in connection with the transfer
of the Stock, and (ii) purchase and hold the Stock. The signature of the
person executing and delivering this Stock Transfer Agreement is binding
upon such entity and such entity has not been formed for the specific
purpose of acquiring the Stock.
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2. The foregoing representations and warranties are true and accurate as of
the date of this Stock Transfer Agreement, shall be true and accurate as of the
date of the acceptance of this Stock Transfer Agreement by the Company and the
Transferor and shall survive thereafter. If such representations or warranties
shall not be true and accurate in any respect, the Transferee will, prior to
such acceptance, give written notice of such fact to the Company and the
Transferor specifying which representations and warranties are not true and
accurate and the reasons therefor.
3. The Transferee shall indemnify and hold harmless the Transferor and the
Company and any of its respective officers, employees, registered
representatives, directors or control persons who were or are a party to, or are
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of, or arising from any actual or alleged misrepresentation or
misstatement of facts, or omission to represent or state facts, made by the
Transferee to the Transferor and the Company, concerning the Transferee or its
financial position, in connection with the offering and sale of the Stock,
against losses, liabilities and expenses actually and reasonably incurred by the
Transferor, the Company or any of their respective officers, employees,
registered representatives, directors or control persons (including attorneys'
fees, judgments, fines and amounts paid in settlement) in connection with such
action, suit or proceeding.
D. TRANSFEREE INFORMATION
The Transferee and each of its members is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D promulgated under the Securities
Act ("Accredited Investor"). In furnishing the information set forth in the
Questionnaire, the Transferee acknowledges that the Transferor and the Company
will be relying thereon in determining, among other things, whether there are
reasonable grounds to believe that the Transferee and its members qualify as an
Accredited Investor under the Securities Act.
E. TRANSFEREE UNDERSTANDINGS
1. The Transferee understands, acknowledges and agrees with the Transferor
and the Company as follows:
(a) The Transferee through each of its members has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Company and of making
an informed investment decision.
(b) The Transferee through each of its members has by reason of its
business or financial experience, the capacity to protect its own interest
in connection with this transaction.
(c) Except as set forth herein, the Company is under no obligation to
register the Stock on behalf of the Transferee or to assist the Transferee
in complying with any exemption from registration. The certificate
representing the Stock shall be marked with the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS
2. The foregoing understandings, acknowledgments and agreements in this
Stock Transfer Agreement are true and accurate as of the date of this Stock
Transfer Agreement, shall be true and accurate as of the date of the acceptance
of this Stock Transfer Agreement by the Company and shall survive thereafter.
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F. REGISTRATION RIGHTS
1. At any time, and from time to time, that the Transferor exercises its
right to require the Company to register shares of Common Stock issued to it
under the Subscription Agreement for offer and sale under applicable securities
laws, (whether a Company Registration or a Demand Registration) (the
"Registration Rights") the Company and the Transferor agree to include the
Stock, in whole or in part, at the Transferee's option, in such registration
(the "Add-on Registration").
(a) If the managing underwriter of the registered offering determines in
good faith that marketing factors (including pricing) require a limitation
of the number of shares of Common Stock to be underwritten, the underwriter
may exclude some or all of the Stock from such registration and
underwriting. The Company shall so advise the Transferor and the
Transferee, and the number of shares of Common Stock to be included in such
registration shall be allocated as follows: first, for the account of the
Company, all shares of Common Stock proposed to be sold by the Company;
second, for the account of the Transferor, the number of shares of Common
Stock owned by the Transferor requested to be included in the registration
up to the amount of the limitation imposed by the managing underwriter;
third, for the account of the Transferee, pro rata with shares of Common
Stock transferred by the Transferor to any other transferee, the number of
shares of Stock requested to be included in the registration up to the
amount of the limitation imposed by the managing underwriter; and fourth,
for the account of any other investor that has been granted registration
rights with respect to shares of Common Stock on the terms and conditions
of any agreement pertaining to such registration rights.
(b) If the Transferee disapproves of the terms of any such underwriting,
the Transferee may elect to withdraw therefrom by written notice to the
Company, the Transferor and the managing underwriter. Any shares of Stock
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
2. At any time that the Transferor determines to exercise the Registration
Rights, the Transferor will give written notice thereof (the "Invitation
Notice") to the Transferee and the Transferee will, within 5 days of receipt of
the Invitation Notice, deliver to the Transferor and the Company, a notice
indicating whether or not the Transferee will participate in such registration
and the number of shares of Stock that it wishes to include in such registration
(the "Intention Notice"). If the Transferor and the Company do not receive the
Intention Notice within the 5 days after delivery of the Invitation Notice, the
Transferee shall have no right to participate in the registration.
3. If the Transferee delivers the Intention Notice pursuant to paragraph 2
above, the Company agrees to permit the Transferor to increase the number of
shares of Common Stock to be included in a registration, subject to the
limitations in paragraph 1(a) above.
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4. In the event of any Add-on Registration, the Transferee will be subject
to all obligations of the Transferor set forth in the Subscription Agreement
pertaining to the Registration Rights, including, but not limited to,
obligations pertaining to indemnification, compliance with registration
procedures as set forth in the Subscription Agreement and payment of selling
expenses.
5. The Transferee shall be entitled to receive indemnification from the
Company and shall have the same obligations to indemnify the Company as does the
Transferor in the Subscription Agreement.
G. EXPENSES
All expenses incurred relating to the transfer of the Stock from the
Transferor to the Transferee pursuant to this Stock Transfer Agreement,
including reasonable legal expenses and the cost of any required federal or
state securities filings, shall be borne by the Transferee.
H. CONSENT
The Company hereby consents to the transfer of the Stock as contemplated
herein and waives all transfer restrictions applicable to the Stock. The Company
agrees to direct its transfer agent and registrar to remove any restrictive
legends and release any stop-transfer order pertaining to the Stock for the sole
purpose of transferring the Stock and to register the transfer of the Stock
pursuant to this Stock Transfer Agreement and any stock power or other documents
pertaining to the Stock and executed by the Transferor to transfer the Stock to
the Transferee. The Company further agrees to direct its transfer agent and
registrar to replace any restrictive legend on the Stock after such Stock has
been transferred to the Transferee.
I. MISCELLANEOUS
1. Neither this Stock Transfer Agreement nor any provisions of this Stock
Transfer Agreement shall be waived, modified, changed, discharged, terminated,
revoked or cancelled except by an instrument in writing signed by the party
against whom any change, discharge or termination is sought.
2. The failure of the Transferor or the Transferee to exercise any right or
remedy under this Stock Transfer Agreement or any other agreement between the
Transferor and the Transferee, or otherwise, or delay by the Transferor or the
Transferee in exercising such right or remedy, will not operate as a waiver of
any such right or remedy. No waiver by the Transferor or the Transferee will be
effective unless and until it is in writing and signed by the Transferor or the
Transferee as the case may be.
3. Notices required or permitted to be given under this Stock Transfer
Agreement shall be in writing and shall be deemed to be sufficiently given when
personally delivered or sent by Federal Express, UPS or other nationally
recognized overnight delivery service, postage pre-paid, and addressed to the
Transferee at the address set forth in the Questionnaire, to the Transferor at
0000 X Xxxxxx, X.X., 00xx Xxxxx, Xxxxxxxxxx X.X. 00000 and to the Company at
0000-X Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000.
4. This Stock Transfer Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of Delaware (without
giving effect to principles of conflicts of laws). This Stock Transfer Agreement
shall be binding upon and inure to the benefit of the Transferee and its
successors and assigns and shall be binding upon and inure to the benefit of the
Transferor and its successors and assigns.
5. In the event that any provision of this Stock Transfer Agreement is held
to be invalid, illegal, or unenforceable, in whole or in part, such invalidity
shall not affect any otherwise valid provision, and all other valid provisions
shall remain in full force and effect.
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6. This Stock Transfer Agreement supersedes all previous agreements,
negotiations, or communications between the parties to this Stock Transfer
Agreement with respect to the subject matter of this Stock Transfer Agreement,
and contains the complete and exclusive expression of the understanding between
the parties. This Stock Transfer Agreement cannot be amended, modified, or
supplemented in any respect except by a subsequent written agreement entered
into by both parties.
7. Time is of the essence of this Stock Transfer Agreement.
8. All representations and warranties of the Transferor and the Transferee
contained herein shall survive the date of this Stock Transfer Agreement, the
transfer of the Stock and the termination or expiration of the rights hereunder
and shall terminate on the applicable statute of limitations. All agreements of
the Company, the Transferor and the Transferee contained herein shall survive
indefinitely until, by their respective terms, they are no longer operative.
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IN WITNESS WHEREOF, the Company, the Transferee and the Transferor have
executed this Subscription Agreement to be effective as of the 2nd day of
December, 2004.
MADISON RUN, LLC
By: Madison Run Holdings, LLC,
its Managing Member
By:/s/ Xxxxxxx Xxxx
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Xxxxxxx Xxxx, Managing Member
AABBRR, LLC
By:/s/ Xxxxxxx X. Xxx
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Xxxxxxx X. Xxx, General Manager
DIGITAL FUSION, INC.
By:/s/ Xxx X. Xxxxxxx, III
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Xxx X. Xxxxxxx III, CEO
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EXHIBIT A
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DIGITAL FUSION, INC. (THE "COMPANY")
INVESTOR QUALIFICATION QUESTIONNAIRE
Entities
EACH INVESTOR MUST COMPLETE PART A AND PART B BELOW. The purpose of this section
is to aid in determining whether an investor is an accredited investor pursuant
to Rule 501(a) under Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
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PART A: General Information
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Name of Subscriber State of Organization
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Address of Principal Place of Business Nature of Business
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Was the Investor created for the specific purpose of investing in the Company?
|_| Yes |_| No
If the Investor is a partnership or a trust, do its individual partners or
beneficiaries have the right to make a decision whether or not to participate in
the proposed investment?
|_| Yes |_| No |_| Not Applicable
If the answer to either of the two preceding questions is "Yes," Item (m) of
Part B of this Questionnaire must be checked, if true. If Item (m) of Part B is
not applicable, the information required by Part A and Part B must be furnished
with respect to each owner of an equity interest in the entity (or each
beneficiary of a trust, if applicable) on separate pages that are validly signed
and dated on behalf of each such owner or beneficiary. Alternatively, each such
owner or beneficiary may complete and execute a separate copy of this
Subscription Agreement.
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Has the Investor ever been charged with, convicted of, or pleaded guilty, nolo
contendere or no contest to, any crime or civil offense (excluding only minor
traffic offenses).
|_| Yes |_| No
If yes, please give the details, including relevant dates and locations:
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To the Investor's knowledge, has the investor ever been the subject of an
investigation by any law enforcement or other governmental agency (other than
routine background checks).
|_| Yes |_| No
If yes, please give the details, including relevant dates and locations.
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A-1
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PART B: Accredited Investor Qualification Standards
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The financial information and representations in this section are intended to
permit the Company to determine whether the Investor qualifies as an accredited
investor under Regulation D of the Securities and Exchange Commission.
The Investor represents and warrants that it is (check one or more):
|_| (a) A bank, as defined in Section 3(a)(2) of the Securities Act of
1933, as amended (the "1933 Act");
|_| (b) A savings and loan association or other institution, as defined in
Section 3(a)(5)A) of the 1933 Act;
|_| (c) A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended (the "1934 Act");
|_| (d) An insurance company, as defined in Section 2(13) of the 1933 Act;
|_| (e) An investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), or a business development
company as defined in Section 2(a)(48) of the 1940 Act;
|_| (f) 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;
|_| (g) A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, that has
total assets in excess of $5,000,000;
|_| (h) An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 ("ERISA"), and either (i)
investment decisions are 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,
(ii) the employee benefit plan has total assets in excess of
$5,000,000, or (iii) if a self-directed plan, investment decisions
are made solely by persons that qualify as accredited investors
either under this paragraph (1) or paragraph (2);
|_| (i) A private business development company, as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
|_| (j) An organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, with total assets in excess of
$5,000,000, that was not formed for the specific purpose of
acquiring the Stock;
|_| (k) A corporation, Massachusetts or similar business trust, or
partnership with total assets in excess of $5,000,000, that was not
formed for the specific purpose of acquiring the interests;
|_| (l) A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Stock, 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 purchasing the Stock;
|_| (m) An entity in which all of the equity owners qualify as accredited
investors as defined in Rule 501(a) of Regulation D; or
|_| (n) None of the above.
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A-2
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PART B: Accredited Investor Qualification Standards (con't)
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I certify that I have answered the foregoing questions to the best of my
knowledge and that my answers thereto are complete and accurate. I understand
that the Company will be relying on the accuracy and completeness of my
responses to the foregoing questions. I will notify the Company immediately of
any material change in any statement made herein occurring prior to the
effective date (after today) of any acquisition or exchange by me of stock of
the Company.
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SUBSCRIBER Date
AABBRR, LLC
By: Xxxxxxx X. Xxx, General Manager
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Print or Type Name Signature
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