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EXHIBIT 2.3
STOCK PURCHASE AND ASSUMPTION AGREEMENT
THIS STOCK PURCHASE AND ASSUMPTION AGREEMENT (this "Agreement"), dated as
of September 15, 1997 between INSpire Insurance Solutions, Inc., a Texas
corporation ("Seller"), AQS, Inc., a Wisconsin corporation ("Purchaser"), Xxxxxx
X. Xxxxxxx ("Xxxxxxx") and Applied Quoting Systems, Inc., a Wisconsin
corporation ("AQS").
WHEREAS, AQS was formerly owned by Fleager and other stockholders until AQS
was acquired by Strategic Data Systems, Inc. ("SDS") pursuant to the terms of
that certain Agreement and Plan of Merger dated August 27, 1991 (the "SDS
Agreement") by and among AQS, AQS Acquisition Corp. and SDS; and
WHEREAS, SDS was acquired by Seller and thereafter merged with and into
Seller resulting in AQS becoming a wholly-owned subsidiary of Seller; and
WHEREAS, Seller and Fleager have entered into a letter of intent dated July
1, 1997 contemplating the sale by Seller of all of the issued and outstanding
capital stock of AQS to Fleager, of which Purchaser is the assignee of Fleager;
and
WHEREAS, Seller desires to sell to Purchaser 100 shares of the common stock
par value $.01 per share of AQS (the "Shares") on the terms and conditions set
forth herein, which Shares constitute all of the issued and outstanding shares
of common stock of AQS; and
WHEREAS, Purchaser desires to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, AQS has determined that the sale of the Shares to Purchaser is in
the best interest of AQS and AQS has agreed to assume and perform certain
obligations of Seller as an additional inducement for Seller to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Purchase and Sale of Shares.
(a) Purchase Price. Subject to the terms and conditions hereof, Seller
hereby sells and transfers to Purchaser, and Purchaser hereby purchases
from Seller, the Shares. The aggregate purchase price ("Purchase Price") to
be paid by Purchaser for the Shares shall be $2,500,000. Upon the execution
and delivery of this Agreement, Seller shall deliver to Purchaser a
certificate representing the Shares which shall be accompanied by a duly
executed stock power transferring the Shares to Purchaser. Purchaser hereby
acknowledges receipt of the stock certificate evidencing the Shares.
(b) Payment of Purchase Price. The Purchase Price shall be paid to
Seller by wire transfer to Seller's account upon the execution of this
Agreement. Seller has heretofore delivered wire instructions to Purchaser.
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(c) Closing. The closing of the purchase and sale of the Shares shall
take place at the offices of Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.,
Dallas, Texas concurrently with the execution of this Agreement by the
parties hereto.
2. Termination of Employment Contract Guaranty Agreement and Release
by Fleager. Fleager hereby agrees that (i) this Agreement shall terminate
effective July 1, 1997 that certain Employment Contract Guaranty Agreement
between SDS and Purchaser dated as of September 25, 1991 (the "Employment
Contract Agreement") and that certain Employment and Consulting Agreement
between AQS and Fleager dated as of August 29, 1991 (the "Employment
Agreement"); (ii) Seller shall have no further obligation under the Employment
Contract Agreement from and after July 1, 1997, (iii) AQS shall have no further
obligation under the Employment Agreement from and after July 1, 1997, and (iv)
Fleager, for himself, his heirs, personal representatives, successors and
assigns, does hereby release, acquit, discharge and covenant not to xxx Seller
and AQS, their officers, directors, agents, attorneys, employees, successors and
assigns, with respect to all past, present and future claims, expenses, losses,
liabilities and obligations of any nature whatsoever, relating to the Employment
Contract Agreement and the Employment Agreement, whether accrued or contingent,
known or unknown, whether sounding in contract, tort or otherwise.
3. Release by AQS. AQS hereby releases, acquits, discharges and
covenants not to xxx Seller, its officers, directors, agents attorneys,
employees, successors and assigns with respect to all past, present and future
claims, expenses, losses, liabilities and obligations of any nature whatsoever,
whether accrued or contingent, known or unknown, whether sounding in contract,
tort or otherwise, based in whole or in any material part upon facts and
circumstances in existence as of the Closing Date; provided however, that
nothing herein shall be deemed to release Seller from any breach of any
representation, warranty or express obligation of Seller under this Agreement.
4. Seller's Activities. Purchaser acknowledges that the business of
Seller includes and will continue to include commercial policy processing,
including, but not limited to, quoting, rating and policy issuance and that
Seller may continue to compete with AQS.
5. Indemnification.
(a) Purchaser, AQS and Fleager jointly and severally agree to defend,
indemnify and hold harmless Seller and its affiliates, successors and
assigns (and their respective directors, officers and other employees and
all other persons or entities acting on behalf of or under control of any
of them) from and against any and all (i) liabilities, losses, costs or
damages ("Loss") and (ii) reasonable attorneys' fees and expenses, costs of
investigation and defense, court costs and all other reasonable
out-of-pocket expenses ("Expense") incurred by Seller and its affiliates,
successors and assigns (and their respective directors, officers and other
employees and all other persons or entities acting on behalf of or under
control of any of them) in connection with or arising from any breach by
Purchaser, AQS or Fleager of any of, or any failure of Purchaser, AQS or
Fleager to perform, any of their covenants, agreements or obligations in
this Agreement.
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(b) Seller agrees to defend, indemnify and hold harmless Purchaser,
AQS and Fleager and their affiliates, successors and assigns (and their
respective directors, officers and other employees and all other persons or
entities acting on behalf of or under control of any of them) from and
against any and all (i) liabilities, losses, costs or damages ("Loss") and
(ii) reasonable attorneys' fees and expenses, costs of investigation and
defense, court costs and all other reasonable out-of-pocket expenses
("Expenses") incurred by Purchaser, AQS and Fleager and their affiliates,
successors and assigns (and their respective directors, officers and other
employees and all other persons or entities acting on behalf of or under
control of any of them) in connection with or arising from any breach by
Seller of any of, or any failure of Seller to perform, any of its
covenants, agreements or obligations in this Agreement.
(c) For purposes of Sections 6 and 7 hereof, the party or parties
against whom a claim for indemnification is made pursuant to Sections 6 and
7 hereof are called the Indemnifying Party and the party or parties
claiming indemnification are called the Indemnified Party.
6. Notice of Claims. If an Indemnified Party believes that it has
suffered or incurred any Loss or Expense and is entitled to indemnity from an
Indemnifying Party under this Agreement, the Indemnified Party shall so notify
the Indemnifying Party promptly in writing describing such Loss or Expense, the
amount thereof, if known, and the method of computation of such Loss or Expense.
If any action at law or suit in equity is instituted by or against a third party
with respect to which any Indemnified Party intends to claim any liability or
expense as Loss or Expense under this Agreement, any such Indemnified Party
shall promptly notify the Indemnifying Party of such action or suit. The amount
to which an Indemnified Party shall be entitled under this Agreement shall be
determined: (i) by the written agreement between the Indemnified Party and the
Indemnifying Party (ii) by a final judgment, decree, decision or award of any
court, arbitration board or administrative agency of competent jurisdiction,
(iii) by a settlement of the claim or (iv) by any other means to which the
Indemnified Party shall agree. The judgment or decree of a court shall be deemed
final when the time for appeal, if any, shall have expired and no appeal shall
have been taken or when all appeals taken have been finally determined. The
Indemnified Party shall have the burden of proof in establishing the amount of
the Loss and Expense suffered by the Indemnified Party.
7. Third Party Claims.
(a) Subject to paragraph (b) of this Section 7, an Indemnifying Party
under this Agreement shall have the right to conduct and control, through
counsel of its choosing reasonably satisfactory to the Indemnified Party
any third party claim, action or suit, and such party may compromise or
settle the same without cost, obligation or liability of the Indemnified
Party. The Indemnifying Party shall permit the Indemnified Party to
participate in the defense of any such action or suit through counsel
chosen by it, provided that the fees and expenses of such counsel shall be
borne by the Indemnified Party unless (i) the Indemnifying Party shall have
failed, within a reasonable time after having been notified by the
Indemnified Party of the existence of such claim as provided in Section 6
hereof, to assume the defense of such claim, (ii) the employment of such
counsel has been specifically authorized by the Indemnifying Party, or
(iii) the named parties to any such action (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party and
such Indemnified Party shall have been advised in writing by such
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counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Indemnifying
Party.
(b) The Indemnifying Party shall have 15 business days after receipt
of the notice referred to in Section 6 to notify the Indemnified Party that
it elects to conduct and control such action or suit. If the Indemnifying
Party does not give the foregoing notice, the Indemnified Party shall have
the right to defend, contest, settle or compromise such action or suit in
the exercise of its exclusive discretion, and the Indemnifying Party shall,
upon request from the Indemnified Party, promptly pay to such Indemnified
Party in accordance with the other terms of this Agreement the amount of
any Loss resulting from its liability to the third party claimant and all
related Expense. If the Indemnifying Party gives the foregoing notice, the
Indemnifying Party shall have the right to undertake, conduct and control,
through counsel of its own choosing reasonably satisfactory to the
Indemnified Party and at the sole expense of the Indemnifying Party, the
conduct and settlement of such action or suit, and the Indemnified Party
shall cooperate with the Indemnifying Party in connection therewith;
provided that (x) the Indemnifying Party shall not thereby permit to exist
any lien, claim or encumbrance upon any asset or property of Indemnified
Party; (y) the Indemnifying Party shall permit the Indemnified Party to
participate in such conduct or settlement through counsel chosen by the
Indemnified Party, but the fees and expenses of such counsel shall be borne
by the Indemnified Party except as provided in clause (z) below; and (z)
the Indemnifying Party shall agree promptly in writing to reimburse to the
extent required under this Agreement the Indemnified Party for the full
amount of any Loss resulting from such action or suit and all related
Expense incurred by the Indemnified Party, except fees and expenses of
counsel for the Indemnified Party incurred after the assumption of the
conduct and control of such action or suit by the Indemnifying Party unless
otherwise provided under Section 7(a) hereof. So long as the Indemnifying
Party is conducting any such action or suit in good faith and without
increasing the potential liability of the Indemnified Party by more than
$100,000 the Indemnified Party shall not pay or settle any such action or
suit. Notwithstanding the foregoing, the Indemnified Party shall have the
right to pay or settle any such action or suit, provided that no
Indemnifying Party shall be liable to indemnify any Indemnified Party for
any settlement of any such action or claim effected without the consent of
the Indemnifying Party, but if settled with the written consent of the
Indemnifying Party, or if there be a final judgment for the Plaintiff in
any such action, then the Indemnifying Party shall, indemnify and hold
harmless each Indemnified Party from and against any Loss or Expense by
reason of such settlement of judgment.
8. Representations and Warranties of Seller.
(a) Ownership of Shares. Seller hereby represents and warrants that
Seller is the record and beneficial owner of the Shares free and clear of
all liens, claims and encumbrances.
(b) Seller Authority and Binding Obligation. Seller represents and
warrants that (i) it is a corporation validly existing under the laws of
the State of Texas, (ii) it has the corporate power to execute, deliver and
perform this Agreement, (iii) the execution, delivery and performance by it
of this Agreement has been duly and validly authorized by all necessary
corporate action and (iv) this Agreement constitutes the legal, valid and
binding obligations of Seller, enforceable in accordance with its terms,
except as the same may be limited by
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bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditor's rights generally.
(c) Liens or Encumbrances. Seller represents and warrants that all of
the properties and assets on the June 30, 1997 balance sheet of AQS (the
"Recent Balance Sheet"), a copy of which has been initialed by Seller and
delivered to Purchaser, and all assets and properties as of the date
hereof, are free and clear of all mortgages, liens, security interests,
claims, pledges, licenses, options, conditional sales contracts,
assessments, levies, covenants, changes or encumbrances of any matter
whatsoever (collectively "Liens"), but only to the extent such Liens were
specifically authorized by Controlling Persons (as hereinafter defined).
For the purposes of this Agreement, "Controlling Persons" shall mean Seller
and the officers and directors of AQS who were not officers, directors or
employees of AQS prior to the acquisition of AQS by Seller.
(d) Absence of Undisclosed Liabilities. Except (i) as disclosed in the
Recent Balance Sheet (ii) as incurred under any contract listed on the
Exhibits hereto and (iii) as may have arisen in the ordinary course of
business to the date hereof, AQS has not incurred liabilities, commitments
or obligations (secured or unsecured, and whether accrued, absolute,
contingent, direct, indirect or otherwise) (herein called "Undisclosed
Liabilities") specifically authorized by Controlling Persons.
(e) AQS Contracts and Commitments. Seller represents and warrants that
it has executed no contracts or other documents, or taken any action or
suffered any inaction, committing AQS to any contracts, agreements,
commitments or obligations, except as set forth on Schedule 10 attached
hereto.
(f) Provision for Taxes. Seller represents and warrants that the
provision made for taxes on the Recent Balance Sheet is sufficient for the
payment of all federal, state, foreign, county, local and other income, ad
valorem, excise, profits, franchise, occupation, property, payroll, sales,
use, gross receipts and other taxes (and any interest and penalties) and
assessments, whether or not disputed, at the date of the Recent Balance
Sheet and for all years and periods prior thereto. Since the date of the
Recent Balance Sheet, AQS has not incurred any taxes other than taxes
incurred in the ordinary course of business consistent in type and amount
with past practices of AQS.
(g) Tax Returns Filed. Seller represents and warrants that all
federal, state, foreign, county, local and other tax returns required to be
filed by or on behalf of AQS have been timely filed and when filed were
true and correct in all material respects, and the taxes shown as due
thereon were paid or adequately accrued. Except as otherwise disclosed
herein, true and complete copies of all tax returns or reports filed by AQS
for each of its five (5) most recent fiscal years have been delivered to
Purchaser. Purchaser acknowledges that the tax returns for the year ended
December 31, 1996 have not been filed and that an extension for filing such
returns has been filed through September 15, 1997. AQS has duly withheld
and paid all taxes which it is required to withhold and pay relating to
salaries and other compensation heretofore paid to the employees of AQS.
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(h) Tax Audits. Seller represents and warrants that to the knowledge
of the Controlling Persons, AQS has not received from the Internal Revenue
Service or from the tax authorities of any state, county, local or other
jurisdiction any notice of underpayment of taxes or other deficiency which
has not been paid nor any objection to any return or report filed by AQS.
There are outstanding no agreements or waivers extending the statutory
period of limitations applicable to any tax return or report.
(i) Consolidated Group. Seller represents and warrants that Schedule
8(i) lists every year after the acquisition of AQS by SDS during which AQS
was a member of an affiliated group of corporations which filed a
consolidated tax return on which the statute of limitations does not bar a
federal tax assessment, and each corporation that has been part of such
group. No affiliated group of corporations of which AQS has been a member
has discontinued filing consolidated returns during the past five years.
Seller represents and warrants that AQS shall not be responsible for any
federal or state income taxes of any other member of the affiliated group
of corporations for any periods ending on the date hereof.
(j) No Changes. Seller represents and warrants that since the date of
the Recent Balance Sheet, there have been no material adverse changes in
the business, operations or financial condition of AQS except as may have
occurred in the ordinary course of business of AQS since such date, but
only to the extent any such changes (other than those made in the ordinary
course of business) were the result of actions specifically authorized by
the Controlling Persons.
9. Representations and Warranties of Purchaser, AQS and Fleager.
(a) Unregistered Shares. Purchaser hereby acknowledges and agrees that
the Shares have not been registered under the Securities Act of 1933, as
amended, and that certain restrictions on their transfer may exist.
(b) Purchaser Binding Obligation. Purchaser hereby represents and
warrants that this Agreement constitutes the legal, valid and binding
obligations of Purchaser enforceable in accordance with its terms, except
as the same may be limited to bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of creditors' rights generally.
(c) AQS Authority and Binding Obligation. AQS represents and warrants
that (i) it is a corporation validly existing under the laws of the State
of Wisconsin, (ii) it has the corporate power to execute, deliver and
perform this Agreement, (iii) the execution, delivery and performance by it
of this Agreement has been duly and validly authorized by all necessary
corporate action and (iv) this Agreement constitutes the legal, valid and
binding obligations of AQS, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, reorganization
or other laws affecting the enforcement of creditor's rights generally.
(d) Purchaser Knowledge. Purchaser and Fleager acknowledges that
Fleager has acted as Purchaser's representative in connection with the
negotiation and preparation of this Agreement and Purchaser's review and
investigation of AQS. Purchaser and Fleager
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acknowledge that Fleager has previously owned and managed AQS and is
familiar with the business, contracts, financial condition and prospects of
AQS and possesses all such knowledge and has made all such investigations
of AQS on behalf of Purchaser as Purchaser deems necessary, appropriate and
proper for Purchaser to execute and perform into this Agreement. Purchaser
hereby acknowledges and agrees that Seller makes no representations,
warranties or covenants of any kind or nature other than as expressly set
forth in Section 8 of this Agreement.
10. Continuing Obligations.
(a) Intercompany Payables and Receivables. Within 15 days after the
date of this Agreement, Seller shall pay to AQS, or AQS shall pay to
Seller, as the case may be, the net amount owed, if any, upon settlement as
of the date of this Agreement of all payables and receivables between
Seller and AQS.
(b) Contract with Providence Washington Group. The parties hereto
agree that they shall use their best efforts to separate or split up the
current contract between SDS and the Providence Washington Group into two
separate contracts to provide for the separate obligations and
responsibilities of AQS and SDS. Pending any such split into separate
contracts, Seller agrees to continue to pay $9,416.67 per month to AQS as
its share for services performed by AQS under such contract, provided that
Seller is not required to pay such amount to AQS to the extent Seller has
not received such amount from Providence Washington Group with respect to
any payments otherwise due AQS.
(c) Contracts for AQS Software. As additional consideration to induce
Seller to enter into this Agreement, AQS assumes, guarantees and agrees to
discharge all liabilities and obligations and perform all duties and
responsibilities of SDS or Seller under the contracts executed by SDS and
which provide for the provision of AQS software, a listing of which
contracts is attached hereto as Schedule 10(c), and Seller hereby delivers
assignments of such contracts to AQS. Purchaser agrees to use its best
efforts to cause AQS to enter into new contracts with the opposite parties
to the contracts listed in Schedule 10(c), completely releasing and
replacing SDS as a party to such contracts.
(d) Contracts for SDS and AQS Software. The parties hereto represent
that the contracts listed in as Schedule 10(d)-1 hereto have been executed
by SDS and provide for the supplying of SDS and AQS software to the clients
under such contracts. The parties hereto agree to use their best efforts to
separate or split such contracts to provide for the separate obligations
and responsibilities of AQS and SDS. Pending the separation or split up of
such contracts, (i) AQS agrees to provide a copy of AQS' clients' software
to Seller for testing, (ii) Seller agrees to provide access to SDS'
clients' software to AQS for testing, (iii) Seller and AQS agree to
implement separate contracts at the request of a client under such
contracts, (iv) AQS agrees to hold Seller harmless from and against any and
all liabilities and obligations resulting from the action or inaction of
AQS under such contracts, and (v) Seller agrees to hold AQS harmless from
and against any and all liabilities and obligations result from the action
or inaction of SDS under such contracts. It is specifically agreed between
the parties hereto that the obligations of Seller and AQS in subparagraphs
(i) and (ii) above shall also apply to contracts with clients where there
may be separate agreements between the client and AQS and
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SDS, but where there is a bridge in place for these clients. A listing of
such contracts is contained in Schedule 10(d)-2 attached hereto. Neither
party shall have authority to renew or extend the obligation of the other
party after the date of this Agreement under any of the contracts listed on
Schedule 10 and the obligations of the parties under this Section 10 shall
not apply to any contract (including extensions or renewals of existing
contracts) entered into after the date of this Agreement.
(e) Employee Benefits. Seller and Purchaser shall cooperate to enable
AQS to replace the current employee benefit packages at AQS as quickly as
possible and AQS shall be liable for any premiums or payments from the date
hereof until the respective employee benefit has been replaced.
Notwithstanding the foregoing, all AQS employees shall be terminated from
the Seller's pension, profit-sharing and 401(k) plans as of the date
hereof. Seller shall cooperate to transfer assets in its 401(k) plan to a
separate plan to be implemented by AQS.
(f) Tax Status of AQS. To the extent permitted by applicable tax laws
and regulations, Purchaser shall treat AQS as a new corporate entity for
federal income tax purposes from and after the Closing Date.
(g) Execution of Additional Documents and Access to Records. Each
party hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions as may be
reasonably required in order to effectuate the purposes of this Agreement
and to consummate the transactions contemplated hereby. After the Closing,
and upon reasonable advance notice from Seller, Purchaser and AQS shall
give Seller access to the books and records of AQS relating to periods
prior to the Closing to the extent necessary for Seller to comply with the
requests or orders of governmental authorities or courts, or for any other
valid purpose relating to Seller's ownership of, or the operations of, AQS
prior to the Closing.
(h) Taxes. Seller shall prepare and file final federal income tax
return and annual proportional state tax returns and pay the federal and
state income taxes of AQS from January 1, 1997 through the date hereof.
Seller shall submit its computation of taxes for the period from January 1,
1997 through the date hereof based upon an effective tax rate of 40 percent
of book net income to Purchaser and Seller and Purchaser shall cooperate in
good faith to estimate the amount of such taxes. Purchaser agrees to
promptly pay to Seller the amount of such taxes upon its review of the
computation. Seller has settled all tax years prior to fiscal 1997 as of
the date hereof.
(i) Software Source Code. Neither Seller nor any affiliate of Seller
shall use the AQS software source code for the purpose of developing any
new products.
11. Miscellaneous.
(a) Books and Records. To the extent not in AQS' possession, Seller
shall deliver the AQS minute book and stock record book to Purchaser,
together with all the records,
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accounts and contracts of AQS, including, specifically, the general ledger
and all other accounting records.
(b) Notices. All notices or other communications required or permitted
by this Agreement shall be sufficiently given if in writing and personally
delivered or telecopied and mailed by registered or certified mail, return
receipt requested, to the address of each party set forth below or to such
other addresses as the parties may designate.
If to Purchaser, AQS or Fleager: Applied Quoting Systems, Inc.
000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000)000-0000
Attention: Xxxxxx X. Xxxxxxx
If to Seller: INSpire Insurance Solutions, Inc.
000 Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000-0000
Telecopy: (000)000-0000
Attention: F. Xxxxxx Xxxxxx, III
(c) Amendment and Waiver. This Agreement shall not be amended, except
pursuant to a written instrument executed by all of the parties hereto. Any
term or provision of this Agreement may be waived pursuant to a written
instrument executed by the party entitled o the benefit hereof.
(d) Severability. If any provision of this Agreement, or the
application of any such provision to any person or circumstance, shall be
held invalid by a court of competent jurisdiction, the remainder of this
Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid, shall not be affected
thereby.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.
(f) Entire Agreement. This Agreement sets forth the entire
understanding and agreement between the parties as to the matters covered
herein and supersedes any prior understanding, agreement or statement
(written or oral) of intent. No provision of this Agreement shall be
construed to confer any rights or remedies on any person other than the
Seller, Purchaser or AQS.
(g) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Governing Law. This Agreement shall be construed in accordance
with and governed by, the laws of the State of Texas.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
SELLER
Applied Quoting Systems, Inc. INSpire Insurance Solutions, Inc.
By: By:
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Name: Name:
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Title: Title:
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PURCHASER
AQS, Inc.
By:
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Xxxxxx X. Xxxxxxx Name:
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Title:
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