Item 1.01 Entry into a Material Definitive Agreement
Stock Purchase Agreement.
On January 31, 2022, Infinite Group, Inc., a Delaware corporation (the “Buyer”), entered into a Stock Purchase Agreement (the “Agreement”), by and among Infinite Group, Inc., a Delaware corporation; the David A. Nelson, Jr. Living Trust (“Seller”); David A. Nelson, Jr. (the “Beneficiary” and, together with Seller, the “Seller Parties”); and Pratum, Inc., an Iowa corporation (the “Company” or “Pratum”) and security services firm that helps clients solve challenges and find the right balance between information security, IT support, and compliance. Pratum is based in Ankeny, Iowa.
Pursuant to the Agreement, Buyer agreed to acquire all of the issued and outstanding equity securities of the Company from the Seller Parties (the “Acquisition”) for an aggregate purchase price of $8,500,000 (the “Acquisition Consideration”), subject to customary purchase price adjustments for, among other things, indebtedness of the Company as of the closing. $8,000,000 of the Acquisition Consideration will be paid to the Seller Parties at closing and $500,000 of the Acquisition Consideration will be deposited at closing with an escrow agent to be held in escrow for a period of six months. The escrow amount may be used to account for indemnification claims and any post-closing adjustment of the Acquisition Consideration.
The Agreement contains customary representations, warranties and covenants by each of the parties, and contains indemnification provisions under which the parties have agreed, subject to certain limitations, to indemnify each other against losses resulting from certain liabilities.
The closing of the Acquisition is subject to customary conditions, including, among others, (i) receipt of any necessary regulatory approvals and licenses, (ii) the absence of any litigation or governmental order that restrains, prevents or materially alters the transactions contemplated by the Agreement, (iii) the accuracy of the parties’ representations and warranties contained in the Agreement remaining true as of closing (subject to certain qualifications), (iv) the Company’s and the Seller Parties’ material compliance with the covenants and agreements in the Agreement, and (v) the Buyer obtaining sufficient debt or equity financing to fund the Acquisition Consideration. The Buyer expects the transaction to close in the first half of 2022.
The Agreement also contains customary pre-closing covenants, including the obligation of the Company and the Seller Parties to cause the Company to conduct its business in all material respects in the ordinary course and to refrain from taking certain specified actions without the written consent of the Buyer.
The Agreement may be terminated under certain circumstances, including, among others if the Acquisition does not close by March 31, 2022. Additionally, either party may terminate the Agreement upon a breach by the other party of any representation, warranty, covenant or agreement made by such breaching party in the Agreement, such that the conditions related to the representations, warranties, covenants and agreements made by such breaching party would not be satisfied and such breach or condition is not curable or, if curable, is not cured 30 days after written notice of such breach.
The foregoing description of the Agreement and the transactions contemplated therein does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference. The representations, warranties and covenants of each party set forth in the Agreement have been made only for the purposes of, and were and are solely for the benefit of the parties to the Agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. Accordingly, the Agreement is included with this filing only to provide investors with information regarding the terms of the Agreement, and not to provide investors with any factual information regarding the Company or the Seller Parties, their respective affiliates or their respective businesses.
Certain Other Agreements
Under the terms of the Agreement, upon the closing of the Acquisition, the Company will enter into certain other agreements. Forms of these agreements are attached as exhibits to the Agreement, and the following descriptions of certain of these agreements are qualified by reference to the corresponding exhibits to the Agreement. At closing, each of Jordan Engbers, Steve Healey and Megan Soat will enter into a new employment agreement with the Company pursuant to which they will continue to serve as executives of the Company following the closing of the Acquisition. At closing, David A. Nelson, Jr. will enter into a consulting agreement with the Company pursuant to which he will provide certain consulting services, including services related to transitioning the Company’s business to Buyer.