Shareholder Loan
1. This note documents a loan arrangement between Inforte Corporation and
Xxxxxxx Xxxx, in effect as of December 31, 1998.
2. Inforte agrees to loan Xxxxx $106,191.87 on December 31, 1998.
3. The term of the loan is indefinite, and the loan can be repaid at any time.
Most likely, the loan will be repaid on or prior to the IPO date, but this is
not required.
4. There are no interest payments during the life of the loan; the repayment
amount will include all interest that accrues while the loan is outstanding.
5. The interest rate on this loan is 7.75%, the current prime rate. Interest
will accrue annually.
6. The formula below is an example of how accrued interest will be calculated.
Assume that the loan is repaid on June 30, 2000.
106,191.87 * (1 + 0.0775) /\ (547 / 365.25) = 118,751.62
where:
106,191.87 = the loan principal
0.0775 = the interest rate, 7.75% in decimal form
547 = the number of days from December 31, 1998 to June 30, 2000
365.25 = the average number of days in a year
118,751.62 = the repayment amount in this example
7. For book and tax purposes, Inforte will recognize interest income from this
loan each month. Since interest accrues annually, the monthly interest will
be the same each month within a given calendar year. The calculations below
show the monthly interest for the next 5 years (assuming the loan remains
outstanding).
Year Principal Annual Interest Monthly Interest
1999 106,191.87 8,229.87 685.82
2000 114,421.74 8,867.68 738.97
2001 123,289.42 9,554.93 796.24
2002 132,844.36 10,295.44 857.95
2003 143,139.79 11,093.33 924.44
8. The purpose of this loan is to allow Xxxxx to exercise all existing option
grants. Xxxxx has two options grants, both of which are fully vested:
Grant Date Options Exercise Price Amount to Exercise
10/26/94 1,000,000 $0.02 $20,000.00
7/31/96 1,850,000 $0.05161 $95,483.87
Total 2,850,000 $115,483.87
9. Inforte currently owes Xxxxx $9,292.00 from an outstanding loan that Xxxxx
made to Inforte. Subtracting this amount from the total amount to exercise
reduces Xxxxx's obligation to Inforte to $106,191.87 (115,483.87 - 9,292.00 =
106,191.87). This is the loan amount. Thus, three separate transactions will
occur: 1) Inforte repays its $9,292.00 loan from Xxxxx; 2)
Inforte loans $106,191.87 to Xxxxx; 2) Xxxxx pays $115,483.87 to Inforte to
exercise 2,850,000 options. No money will actually change hands as all of
the cash amounts net to 0.
10. The following transaction will occur on Inforte's books:
Account Dr Cr
1006001 AR-Employee 106,191.87
1036002 Loans from Shareholders 9292.00
1086001 Equity-Stock 115,483.87
11. Xxxxx shall have the discretion to repay the loan with cash or by selling a
portion of his stock to Inforte at the then current fair market value.
Inforte shall not be obligated to purchase more stock from Xxxxx than would
be necessary to repay the then current loan balance.
12. By signing below, Xxxxx and Inforte agree to all points in this document.
/s/ Xxxxxxx Xxxx /s/ Xxxx Xxxxxxx
_____________________________ _____________________________
Xxxxxxx Xxxx Xxxx Xxxxxxx
Chief Financial Officer
Inforte Corporation
